Where unexplained income cannot be entangled in the clutches of The Section 69 family

[Vivek Jalan]

Sections 68, 69, 69A, 69B, 69C and 69D may be called as Section 68 & 69 Family. However, they differ in as far as Burden of Proof is concerned. In sec 68, the onus is wholly upon the Assessee to explain the source of the entry. But in cases falling under sec 69, 69A, 69B and 69C, the words used show that before any of these sections are invoked, the condition precedent as to existence of investment, expenditure, etc. must be conclusively established by material on record/ evidence.

Section 101 of The Indian Evidence Act, 1872 specifies that Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.

In Mad HC in COMMISSIONER OF INCOME TAX VERSUS N. SWAMY - 1998 (9) TMI 27 - MADRAS HIGH COURT relied by Chennai ITAT in OMEGA ESTATES. VERSUS INCOME-TAX OFFICER, WARD VII(2) - 2006 (4) TMI 232 - ITAT MADRAS-B, it was held that The burden of showing that the assessee had undisclosed income is on the revenue.

In INCOME TAX OFFICER WARD 1 (2) , MEERUT VERSUS MRS. DEEPALI SEHGAL - 2014 (9) TMI 1073 - ITAT DELHI, the AO noted that assessee had withdrawn huge cash from bank account and the same amount had been deposited to the same account after lapse of substantial time. The AO rejected the explanation and held that the assessee hadcash deposit of Rs.24,38,000/- as unexplained money and the assessee found to be the owner of the money as he had not offered any acceptable and cogent explanation. AO, in his remand report could not bring out any fact that the cash withdrawn from Saving Bank Account and partnership overdraft account was used for other purpose anywhere else then, merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount cannot be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. Hence, the addition made by AO without any legal and justified reason was rightly deleted by the CIT (A).

The provisions of section 115BBE of the Income Tax Act are applicable where addition is made under section 68, 69, 69A, 69B, 69C & 69D i.e. from residuary category w.e.f. 01/04/2017.

Where the assessee includes surrendered amount of excess stock and excess cash in the return of income filed in response to notice u/s 153A of the Act and it was accepted, no further addition u/s 69A or 69B of the Act can be made against the assessee.

In the case of ACIT- CENTRAL-1, INDORE VERSUS SHRI ANOOP NEEMA INDORE - 2022 (1) TMI 683 - ITAT INDORE, the alleged excess stock was admitted as a part of the total business stock found at the assessee’s business premises. It was considered as sufficient to indicate that the alleged investment in excess stock is part of the business income and that allege excess stock accepted by the assessee as part of unaccounted business and source thereof stated during the course of search itself and no other incriminating material was found during the search proceedings and, thus, the same cannot be treated as income from undisclosed source of income and the Ld. CIT(A) was right in holding that the provisions of section 115BBE of the Act are not applicable on the surrendered income on account of excess stock valuing found during the course of search.

Where the assessee has successfully explained that the excess stock & excess cash was nothing but business income of assessee and The CIT(DR) could not dislodge the contention and observations that the surrendered amount was pertaining to excess stock & excess cash which was business income of the assessee, the impugned income will not be entangled in the clutches of Section 69/69A/69B of the Act and therefore do not warrant application of Section 115BBE of the Act at all. The same was held in the case of DCIT (CENTRAL) -2 INDORE VERSUS SHRI KRISHNA KUMAR VERMA - 2023 (2) TMI 639 - ITAT INDORE