1988 (7) TMI 88 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of the addition of Rs. 1,05,000 u/s 69A of the Income-tax Act, 1961.
2. Applicability and interpretation of section 69A.
3. Burden of proof and standard of evidence required under section 69A.

Summary:

1. Legitimacy of the Addition of Rs. 1,05,000 u/s 69A:
The Commissioner of Income-tax (Appeals) [CIT (A)] deleted an addition of Rs. 1,05,000 made by the Income-tax Officer (ITO) u/s 69A of the Income-tax Act, 1961, to the total income of the assessee from undisclosed sources. The assessee, an individual with income from salary and shares of profit from firms, was found in possession of Rs. 1,05,000 during a search operation u/s 132. The assessee claimed that the money belonged to seven other individuals, providing their affidavits and statements to support this claim. The ITO rejected the assessee's explanation, questioning the credibility and conduct of the alleged depositors. However, the CIT (A) found the assessee's explanation satisfactory and corroborated by evidence, thus canceling the addition.

2. Applicability and Interpretation of Section 69A:
Section 69A states that if an assessee is found to be the owner of any money, bullion, jewelry, or other valuable article not recorded in the books of account, and fails to offer a satisfactory explanation about its nature and source, such money may be deemed to be the income of the assessee for that financial year. The Tribunal emphasized that the term "found to be the owner of" should not be equated with "found to be in possession of." The ownership must be established by the revenue, and the burden initially lies on the revenue to prove that the assessee was the owner of the money, bullion, etc.

3. Burden of Proof and Standard of Evidence Required Under Section 69A:
The Tribunal noted that the proceedings under tax law are civil in nature, requiring decisions based on the preponderance of probabilities rather than beyond all reasonable doubt. The assessee's spontaneous statement during the search, supported by affidavits and corroborative evidence, was found credible. The Tribunal concluded that the assessee had satisfactorily explained the possession of the money, and the ITO had no material to prove the ownership of the seized amount. The CIT (A)'s decision to cancel the addition was upheld, as the explanation was reasonable and supported by evidence.

Conclusion:
The appeal by the revenue was dismissed, upholding the CIT (A)'s order that the addition of Rs. 1,05,000 to the assessee's income u/s 69A was not justified. The Tribunal agreed with the CIT (A) that the assessee had provided a satisfactory explanation for the possession of the money, and the ITO's rejection of this explanation was not supported by sufficient evidence.