2018 (9) TMI 1251 - HC - Income Tax

Addition u/s 68 - Held that - The assessee cannot simply provide some details such as Permanent Account Number, business address, the account which was maintained and a Bank Statement, or a Company s Master Data maintained by the Registrar of Companies. The assessee is obliged to explain the surrounding circumstances and the backdrop in which the transactions took place. In the case of five entities, the Tribunal referred to these details and concluded that the assessee has failed to discharge the burden. When three out of the five assessee could not be served. The rest did not either give a reply, or gave a reply which was not at all satisfactory. The reasons assigned of the order under challenge do not suffer from such legal infirmity or perversity as would enable us to entertain this appeal. The concurrent findings of fact, therefore, are based on appreciation and appraisal of the evidence before the authorities. We cannot take a different view. All the more, when there are no errors of law apparent on the face of the record, particularly in understanding the ambit and scope of Section 68 of the I.T. Act. - Decided against assessee.

Issues:
Assessment of total income for the year under consideration, validity of adding back a sum to the total income under Section 68 of the Income Tax Act, burden of proof on the assessee to explain transactions with entities providing loans without security, failure to discharge burden of proof by the assessee, legal infirmity in the reasons assigned by the authorities, concurrent findings of fact based on evidence, understanding the ambit and scope of Section 68 of the Income Tax Act.

Analysis:

1. Assessment of Total Income: The appeal challenges an order by the Income Tax Appellate Tribunal for the Assessment Year 2009-10, where the total income was assessed at a higher amount than initially shown in the return. The Assessing Officer doubted transactions with entities providing loans without security and added a significant sum to the total income under Section 68 of the Income Tax Act.

2. Burden of Proof on the Assessee: The Tribunal, after considering the details provided by the assessee, concluded that the burden of proof was not discharged satisfactorily. Merely providing basic details such as PAN, business address, and bank statements was not sufficient. The assessee was expected to explain the circumstances and background of the transactions, which was deemed lacking in this case.

3. Failure to Discharge Burden of Proof: The Tribunal found that out of the entities involved, some could not be served notices, and the responses received were unsatisfactory. The failure to adequately explain the transactions and provide convincing evidence led to the confirmation of the assessment made by the authorities.

4. Legal Infirmity and Concurrent Findings: The Court rejected the appeal, stating that the reasons provided by the authorities did not exhibit any legal infirmity or perversity. The findings were based on a thorough evaluation of the evidence, and no errors of law were apparent. The Court upheld the concurrent findings of fact and declined to entertain the appeal.

5. Understanding Section 68 of the Income Tax Act: The judgment emphasized the importance of understanding the ambit and scope of Section 68 of the Income Tax Act, which deals with unexplained cash credits. The Court reiterated that the assessee must meet the burden of proof required by this section to avoid additions to the total income.

In conclusion, the appeal challenging the assessment of total income and the addition made under Section 68 of the Income Tax Act was dismissed due to the assessee's failure to discharge the burden of proof and provide satisfactory explanations for the transactions with entities providing loans without security. The judgment highlighted the necessity for the assessee to substantiate transactions with comprehensive evidence and background details to avoid adverse assessments.

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