2024 (10) TMI 598 - HC - Income Tax

Ex-parte assessment u/s 144 - unexplained cash deposits treated as undisclosed and unexplained income and it was added to the total income of the assessee u/s 68 r/w Section 69A - HELD THAT - Where any sum is found credited in the books of an assessee maintained for any previous year, same may be charged to income-tax as the income of the assessee of that previous year, and if the explanation offered by the assessee about the nature and source of sums found credited in the books is not satisfactory, in such cases, there is, prima facie, evidence against the assessee, viz., the receipt of money, and then the burden is on the assessee to rebut the same, and if he fails to rebut, it can be held against the assessee that it was a receipt of an income nature. In the instant case, despite number of notices having been issued by the AO to explain and to furnish the nature and source of the cash deposits in the bank account of the appellant herein / assessee, the appellant chose not to appear and did not furnish any explanation either before the AO or before the appellate authority i.e. the CIT (Appeals), NFAC, however, the appellant has furnished some explanation in shape of additional documents holding that it is the amount of M/s. Shriram Transport Finance Company Limited stating that the amount was collected by him (appellant/assessee) as a recovery agent from its borrowers who were located in naxal affected areas and deposited in his account. However, this explanation, for the reasons mentioned in the shape of affidavit, has not been found to be the reasonable explanation and the ITAT has rightly come to the conclusion that the assessee has failed to substantiate the nature and source of the cash deposits in his bank account. In our considered opinion, the AO CIT (Appeals), NFAC; and the ITAT, all, have concurrently and correctly concluded that the assessee did not produce any evidence to rebut the presumption drawn under Section 68 r/w Section 69A and in light of the decision of the Supreme Court in Vijay Kumar Talwar 2010 (12) TMI 2 - SUPREME COURT we are of the considered opinion that the finding of the ITAT is the correct finding of fact based on record and the appellant has failed to demonstrate any substantial question of law in this appeal and as such, no substantial question of law arises from the order of the ITAT requiring formulation for consideration. This appeal stands dismissed at the admission stage itself without notice to the other side.

Summary

Issues Involved:

1. Legality of the ex-parte assessment under Section 144 of the Income Tax Act, 1961.
2. Applicability and interpretation of Sections 68 and 69A of the Income Tax Act regarding unexplained cash deposits.
3. Evaluation of additional evidence submitted by the appellant.
4. Determination of whether a substantial question of law arises from the findings of the lower authorities.

Issue-wise Detailed Analysis:

1. Legality of the Ex-parte Assessment under Section 144 of the Income Tax Act, 1961:

The appellant was served multiple notices under Sections 148 and 142(1) of the Income Tax Act, 1961, which were not responded to, leading to an ex-parte assessment under Section 144. The Assessing Officer completed the assessment by treating Rs. 11,44,070/- as undisclosed income due to the appellant's failure to explain the source of the cash deposits in his bank account. The court upheld the legality of this ex-parte assessment, noting that the appellant did not participate in the proceedings despite several opportunities.

2. Applicability and Interpretation of Sections 68 and 69A of the Income Tax Act:

Sections 68 and 69A were central to the judgment. Section 68 deals with cash credits where the assessee fails to satisfactorily explain the nature and source of the credited sums, while Section 69A pertains to unexplained money or valuables not recorded in the books of account. The court reiterated the Supreme Court's interpretation that the burden of proof lies on the assessee to provide satisfactory explanations for such credits. The appellant's failure to provide a convincing explanation led to the sum being added as income under these sections.

3. Evaluation of Additional Evidence Submitted by the Appellant:

During the appeal before the Income Tax Appellate Tribunal (ITAT), the appellant submitted additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. However, the ITAT found that these documents did not inspire confidence or substantiate the appellant's claims regarding the nature and source of the cash deposits. The court agreed with the ITAT's assessment, emphasizing that the additional evidence failed to rebut the presumption of unexplained income.

4. Determination of Whether a Substantial Question of Law Arises:

The appellant argued that the findings of the Assessing Officer, CIT (Appeals), and ITAT were perverse and raised a substantial question of law. However, the court found that the concurrent findings of fact by these authorities were based on evidence and did not involve any misapplication of legal principles. Citing the Supreme Court's decision in Vijay Kumar Talwar, the court held that no substantial question of law arose from the ITAT's order, as the appellant failed to demonstrate any error in the factual findings.

In conclusion, the court dismissed the appeal at the admission stage, affirming the decisions of the lower authorities and holding that the appellant did not produce sufficient evidence to challenge the presumption of unexplained income under Sections 68 and 69A of the Income Tax Act.