2018 (2) TMI 1213 - HC - Income Tax

Treating entire share capital of the assessee/appellant as its income - unaccounted income - Held that - In the light of the provisions of Section 68 of the Act and the legal position referred to above, we are of the opinion that the assessee has failed to discharge its initial burden to prove that the money of ₹ 48,58,000/- was collected through share capital. Therefore, the A.O. is wholly justified in rejecting the stand of the assessee and treating the sum of ₹ 48,58,000/- as the income from undisclosed sources and accordingly charging the same to tax. Both the lower appellate fora and in our view rightly confirmed the order of the A.O. - Decided against assessee

Summary

Issues:
1. Whether the Assessing Officer was correct in treating a sum as the assessee's income from undisclosed sources.
2. Whether the Income Tax Appellate Tribunal was right in sustaining the order confirming the treatment of the entire share capital as the assessee's income without conducting any inquiry.

Analysis:

Issue 1:
The first issue revolves around the correctness of the Assessing Officer's decision to treat a specific sum as the assessee's income from undisclosed sources. The assessee claimed that the amount was collected through share capital from 464 persons. However, despite multiple opportunities, the assessee failed to provide essential documents such as books of accounts, vouchers, and confirmation letters of shareholders to substantiate this claim. The Assessing Officer, therefore, concluded that the sum should be treated as income from undisclosed sources. This decision was upheld by the Commissioner of Income Tax (Appeals-II) and the Income Tax Appellate Tribunal.

Issue 2:
The second issue questions whether the Income Tax Appellate Tribunal was correct in affirming the order treating the entire share capital of the assessee as income without conducting any inquiry. The appellant argued that the Assessing Officer should have conducted a necessary inquiry before reaching a conclusion on the nature of the amount. Reference was made to judgments from the Delhi High Court and a Division Bench of the High Court. On the contrary, the representative of the Income Tax Department argued that the burden lies on the assessee to prove that the cash credit is not chargeable to income tax. Despite several opportunities, the assessee failed to provide substantial evidence, such as books of accounts or vouchers, to support the claim that the amount was collected as share capital.

In conclusion, the High Court analyzed the provisions of Section 68 of the Income Tax Act and the legal precedents cited by both parties. It was determined that the assessee failed to discharge its initial burden of proving that the amount in question was collected through share capital. Therefore, the Assessing Officer's decision to treat the sum as income from undisclosed sources was deemed justified. The court upheld the orders of the lower appellate fora and dismissed the appeal, ruling against the assessee on the substantial question of law raised.