2020 (3) TMI 1015 - AT - Income Tax

Unaccounted income - Advances received - deemed income of the assessee - HELD THAT - In the present case, the source of the credit is Shri N. Elamaran and Shri Elamaran has confirmed the advance. Therefore, the question of the said advance or the credit being treated as a deemed income of the assessee no more survives. It is also an admitted fact that Shri N. Elamaran has himself offered the amount of ₹ 1.00 crore as his undisclosed income relating to the assessment years 2012-13 and 2013-14. The fact that Shri Elamaran has offered the amount has never been intimated to the assessee and consequently the assessee would under normal circumstances accept the said amount to be his income. That does not make it the income of the assessee. Assessee is very well entitled to prove that it is not his income. In the present case, much more than the assessee proving that it is not his income, it is the Revenue which has produced evidences to show that it is not the income of the assessee. It is the Assessing Officer who has accepted the claim that the amount of ₹ 1.00 crore in respect of which the promissory notes have been issued and found in the course of search is in fact the advance given to the assessee by Shri N. Elamaran. The purpose for which Shri N. Elamaran has given the advance, is also brought out by AO being for the supply of uniform and materials for M/s. Sree Balaji Medical College and Hospital, Chennai. It is the AO who has brought out the fact that Shri N. Elamaran has also offered the said amount of ₹ 1.00 crore as his undisclosed income for the assessment years 2012-13 and 2013-14. When so much of evidences has been produced by the Revenue which is in favour of the assessee, the same cannot be wished away by saying that the amount of ₹ 1.00 crore has been offered by the assessee in his statement and that the said amount should be assessed as the undisclosed income of the assessee also. Further, even the claim of Shri Elamaran that the advances was for the supply of materials for M/s. Sree Balaji Medical College and Hospital, Chennai has not been considered by the Assessing Officer or the learned CIT(A). Thus addition as unaccounted income of the assessee is unsustainable - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against order of Commissioner of Income Tax for Assessment Years 2012-13 & 2013-14 regarding treatment of advances received as undisclosed income.

Detailed Analysis:

1. Background and Submissions:
The appellant, a Director and proprietor of various businesses, received advances from Shri N. Elamaran for supplying goods to a medical college. The Assessing Officer treated these advances as income for the appellant for the respective assessment years. The appellant contended that the advances were properly recorded in his books once goods were supplied, supported by ledger extracts and confirmation from the medical college.

2. Contentions of the Department:
The Department argued that the appellant failed to prove that the advances were not his income. They maintained that the undisclosed advances should be considered as the appellant's income, as assessed by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals).

3. Judicial Analysis:
The Tribunal reviewed the evidence and noted that Shri N. Elamaran had disclosed the advances as his undisclosed income for the relevant years. The Tribunal emphasized that the burden of proof lay with the appellant to establish the source of the credits. However, since Shri Elamaran confirmed the advances, the Tribunal held that the advances could not be treated as the appellant's income.

4. Decision and Rationale:
The Tribunal found that the advances were clearly established as credits from Shri Elamaran for supplying goods to the medical college. As Shri Elamaran had disclosed the advances as his income and the purpose of the advances was for specific supplies, the Tribunal concluded that the additions made by the Assessing Officer were unsustainable. Therefore, the Tribunal allowed the appeals of the appellant, directing the deletion of the additions of undisclosed income for the assessment years in question.

5. Conclusion:
The Tribunal's decision highlighted the importance of substantiating the source of credits and considered the confirmation by Shri Elamaran crucial in determining the nature of the advances. The judgment emphasized that undisclosed advances from third parties, when properly evidenced, cannot be arbitrarily treated as the income of the recipient without due consideration of the circumstances and corroborating evidence.