2025 (4) TMI 657 - AT - Income Tax

Addition in respect of Debtors of assessee u/s 69A r.w.s 115BBE - assessee has failed to prove the genuineness/identity of debtors and that it was own capital of the assessee which has been given the colour of debtors so that the story of cash deposited during demonitization may be explained - HELD THAT - As it is the amount of the sundry debtor already recorded in the books of account are not any money bullion jewellery or other valuable article therefore considering that fact provision of section 69A of the Act is not applicable. Now coming to the finding of the CIT(A) wherein case law relied specifically deals that If an assessee fails to prove satisfactorily the source and nature of certain amount received during the accounting year the assessing officer is entitled to draw the inference that the receipts are of assessable nature. here we note from the fact the amount of sundry debtor neither received during the year nor accounted in the year under consideration as is evident from the chart reproduced herein above which was not been disputed by the ld. AO through the ld. DR. Therefore we are of the considered view that the addition of the sundry debtor of the year 2013 and 2014 could not be made in the year under consideration i.e. A. Y. 2015-16. Based on this discussion ground no. 2 raised by the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment is whether the addition of Rs. 12,00,000/- as unexplained income under Section 69A of the Income Tax Act was justified. The core legal question revolves around the applicability of Section 69A to the sundry debtors recorded in the books of accounts and whether these debtors could be deemed unexplained income.

2. ISSUE-WISE DETAILED ANALYSIS

Legal Framework and Precedents:

The relevant legal framework involves Section 69A of the Income Tax Act, which deals with unexplained money, bullion, jewelry, or other valuable articles not recorded in the books of account. The provision allows the assessing officer to deem such unexplained items as income if the assessee fails to provide a satisfactory explanation for their source and nature.

The judgment also references the precedent set by the Supreme Court in Kale Khan Mohammad Hanif Vs CIT, which allows assessing officers to infer that unexplained receipts are of assessable nature if the assessee fails to prove their source satisfactorily.

Court's Interpretation and Reasoning:

The Tribunal examined whether Section 69A could be applied to the sundry debtors recorded in the assessee's books. It concluded that Section 69A pertains to items not recorded in the books, such as unexplained money or valuable articles, and does not apply to sundry debtors already accounted for.

The Tribunal also considered the precedent from Kale Khan Mohammad Hanif but distinguished it based on the fact that the sundry debtors in question were not received during the accounting year under scrutiny.

Key Evidence and Findings:

The assessee presented evidence that the sundry debtors were consistent with the previous years' records, with no changes in the opening and closing balances. The Tribunal noted that the debtors were carried forward from earlier years and not transactions of the current year under assessment.

Additionally, the assessee provided confirmations from the debtors and argued that the debtors were genuine and not unexplained income.

Application of Law to Facts:

The Tribunal applied the legal framework of Section 69A and determined that it was inapplicable to the sundry debtors since they were recorded in the books and not unexplained assets. The Tribunal found that the addition of Rs. 12,00,000/- under Section 69A was based on a misinterpretation of the provision, as the debtors were neither received nor accounted for during the assessment year 2015-16.

Treatment of Competing Arguments:

The Tribunal considered the arguments from both parties. The assessee argued that the debtors were old and recorded in the books, while the Revenue contended that the assessee failed to prove the genuineness of the debtors. The Tribunal sided with the assessee, noting the lack of evidence from the Revenue to support its claims and the consistent recording of debtors in the books.

Conclusions:

The Tribunal concluded that the addition of Rs. 12,00,000/- as unexplained income under Section 69A was unjustified. It held that the provision did not apply to sundry debtors recorded in the books and that the Revenue's reliance on the Kale Khan Mohammad Hanif case was misplaced.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

The Tribunal stated, "As it is the amount of the sundry debtor already recorded in the books of account are not any money, bullion, jewellery or other valuable article therefore, considering that fact provision of section 69A of the Act is not applicable."

Core Principles Established:

The judgment establishes that Section 69A applies to unexplained assets not recorded in the books of account and does not extend to sundry debtors already accounted for. It emphasizes the need for the Revenue to provide substantial evidence when challenging the genuineness of recorded debtors.

Final Determinations on Each Issue:

The Tribunal allowed the appeal, determining that the addition of Rs. 12,00,000/- was incorrect and should be reversed. It found that the debtors were not unexplained income and that the assessee's records and explanations were consistent and satisfactory.

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