2021 (5) TMI 131 - AT - Income Tax

Unexplained income - transaction in the bank account of the assessee made by his landlord and related to family members of the landlord - HELD THAT - From the very beginning, the assessee had made solitary explanation that the said bank account was opened at the instance of Abhishek Agarwal and all the deposits and withdrawals were made by the said Abhishek Agarwal. We found that explanation given by the assessee was not fanciful and sham story. It was plausible and should have been accepted by the revenue authorities, unless there was justification or ground to hold to the contrary. More particularly when the entire explanation was supported by statement of Shri Abhishek Agarwal coupled with bank transactions and affidavit of said Abhishek Agarwal. The revenue authorities should have given due regard and latitude to human conduct and behaviour while considering the validity and truthfulness of an explanation. One should not consider and reject an explanation as concocted and contrived by applying prudent man s behaviour test. The principle of preponderance of probability as a test is to be applied and is sufficient to discharge onus. Probability means likelihood of anything to be true. Probability refers to appearance of truth or likelihood of being realized which any statement or event bears in light of the present evidence (Murray s English Dictionary). Evidence can be oral even then the same cannot be discarded. More particularly, in the present case, when the assessee has fully discharged his onus by calling Shri Abhishek Agarwal who appeared before the A.O. and got recorded his admission statement coupled with affidavit and the bank statements to the effect that all transactions in the bank account 909010036473994 were of Shri Abhishek Agarwal which have not been rebutted by the department. Therefore, in our view, there was no reason to discard the admission of Shri Abhishek Agarwal. Therefore, keeping in view the totality of facts and circumstances of this particular case, we are of the view that the assessment order and the appellate order falls foul and have disregarded the preponderance of probability test. See JAYA AGGARWAL VERSUS INCOME TAX OFFICER 2018 (3) TMI 1358 - DELHI HIGH COURT - Thus we direct the A.O. to delete the addition - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?11,31,800/- to the assessee's income.
2. Validity of the order passed under Sections 147/144 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of ?11,31,800/- to the Assessee's Income:
The primary issue pertains to the addition of ?11,31,800/- made by the Assessing Officer (A.O.) to the assessee's income as unexplained income. The assessee argued that he was a student at Birla Institute of Technology and had no significant income, thus did not file an income tax return. The assessee maintained a savings account for receiving monthly expenses from his father. The contentious bank account was opened at the behest of Shri Abhishek Agarwal, who used it for his real estate business transactions. Abhishek Agarwal admitted to using the account for his business, supported by his affidavit and bank statements. The Tribunal noted that the transactions in the account involved Abhishek Agarwal's family and friends, not the assessee. The Tribunal found the explanation plausible and supported by evidence, thus directed the A.O. to delete the addition.

2. Validity of the Order Passed Under Sections 147/144 of the Income Tax Act, 1961:
The assessee challenged the validity of the order under Sections 147/144, arguing it was perverse and baseless. The Tribunal observed that the A.O. initiated proceedings under Section 147 after discovering the assessee had deposited ?29,90,300/- in his bank account without filing a return. Despite the assessee's non-compliance, the A.O. completed the assessment under Section 144, adding ?11,31,800/- as unexplained income. The Tribunal found that the A.O. did not adequately consider the evidence provided by the assessee, including the affidavit and statements from Abhishek Agarwal. The Tribunal concluded that the revenue authorities failed to apply the preponderance of probability test and disregarded the assessee's plausible explanation, supported by substantial evidence. Consequently, the Tribunal directed the deletion of the addition and allowed the appeal.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the addition of ?11,31,800/- to the assessee's income. It held that the revenue authorities failed to consider the evidence and explanation provided by the assessee, supported by Abhishek Agarwal's admission and affidavit. The Tribunal emphasized the importance of considering human conduct and the principle of preponderance of probability in such cases. The revenue was given the liberty to initiate action against Abhishek Agarwal based on his admission and evidence.