2018 (3) TMI 1530 - HC - Income Tax

Addition u/s 69 - unexplained source of investment - Held that - In the present matters, the assessee are running their business. The nature of investment in the bank accounts has not been explained. On the contrary, inconsistent explanations were given, which were not found satisfactory by all the authorities. As the same was unexplained investments, the authorities were right in deeming the same to be the income of the assessee. Whether they had maintained the books of account was never an issue before the authorities below, as the same was never raised. It would not be permissible for the appellants to contend it for the first time in the present appeals, as these appeals can only be considered on the substantial questions of law. - Decided against assessee.

Summary

Issues:
Assessment of unexplained cash deposits in bank accounts under Sec. 69 of the Income Tax Act for the assessment year 2005-2006.

Analysis:
1. The assessing officer treated cash deposits in bank accounts as unexplained investments under Sec. 69 of the Income Tax Act due to unsatisfactory explanations from the appellants.
2. The appellants appealed to the Commissioner Appeals, then to the Income Tax Appellate Tribunal, Pune, which upheld the addition of the cash deposits as income.
3. The substantial questions of law raised by the appellants included the applicability of Sec. 69 of the IT Act when books of account are not maintained, citing relevant judgments from the Bombay High Court.
4. The appellants argued that Sec. 69 can only be invoked if books of account are maintained, relying on legal precedents from the Orissa High Court and the Bombay High Court.
5. The respondents contended that Sec. 69 deals with unexplained investments, and inconsistent explanations from the appellants warranted deeming the cash deposits as income.
6. The High Court noted that the appellants had not previously raised the issue of not maintaining books of account, and consistent unsatisfactory explanations led to the dismissal of the appeals.
7. The High Court clarified the distinction between Sec. 68 and Sec. 69 of the IT Act, emphasizing that Sec. 69 applies when the source of investment is unexplained and not recorded in maintained books of account.
8. As the appellants failed to provide a satisfactory explanation for the cash deposits, the authorities were justified in deeming them as income, and the issue of maintaining books of account was not raised before, making it impermissible to argue in the present appeals.
9. Ultimately, as no substantial question of law was found, the appeals were dismissed without costs.