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2015 (6) TMI 938 - HC - Income TaxUnexplained deposit in the bank account - Held that - When the burden is on the assessee to prove the aforesaid factual question, it was the assessee s burden to make available Sri.Francis Joseph for cross examination. In this context, we should also record that the assessing officer had repeatedly issued summons to Sri.Francis Joseph, and that though he stood by his statement, he declined to appear for cross examination for one reason or the other. This was despite the fact that the burden was that of the assessee to produce him for examination. Therefore, in the facts of this case, we are unable to find fault with the Department for not making available Sri.Francis Joseph for cross examination. However, the contention of the assessee that by Annexure G assessment order,Sri.Francis Joseph himself was assessed to income tax for the year 1997-98, merits consideration. That assessment order also makes reference to the aforesaid bank account in the name of Sri.Francis Joseph and the amounts available therein. According to the assessee, Annexure G assessment order has also become final. Assessee has placed reliance on the judgment of the Apex Court in Income Tax Officer, A Ward, Lucknow v. Bachu Lal Kapoor Kewal Ram 1965 (12) TMI 24 - SUPREME Court and submitted that the Act does not envisage taxation on the same income twice over. The principle that assessment should be in the hands of the right person and that there cannot two assessments for the same income, are too well settled. Therefore, if, as contended by the counsel for the assessee, Annexure G assessment order has become final against Sri.Francis Joseph, the very same amount cannot again be assessed in the name of the assessee also. We find that this issue was neither raised nor considered by the assessing officer nor was this issue properly dealt with by the Tribunal. Since, prima facie, there is force in what is argued, this is an issue that needs to be considered by the Assessing Officer, who will reconsider the liability of the assessee on this account, duly adverting to Annexure G order in the name of Sri.Francis Joseph and with notice to the assessee. Deposit of ₹ 5,60,000/- in the name of the assessee in the capital account of the firm Hotel Mariya, of which he is a partner - Held that - Though this addition was confirmed by the Appellate Commissioner and the Tribunal, contention raised by the counsel for the appellant is that when ₹ 5,60,000/- was shown to the credit of the assessee in the accounts of the firm, it is for the firm to explain such a credit and the assessee cannot be called upon to explain the same. In support of this contention, he placed reliance of a judgment in Commissioner of Income Tax v. Shiv Shakti Timbers 1996 (5) TMI 21 - MADHYA PRADESH High Court . However,as rightly contended by the learned Standing Counsel for the Department, ₹ 5,60,000/- was shown as the deposit made by the assessee in the capital account of the firm and this amount was not reflected in the cash flow statement filed by him before the assessing officer. This, therefore, shows that ₹ 5,60,000/- deposited by him in his capital account is an unexplained investment made by the assessee attracting Section 69 of the Income Tax Act. Facts being so, we do not find any illegality in the order of the Tribunal confirming the said addition. Addition of ₹ 4,00,000/- allegedly borrowed by the assessee from one George Joseph - Held that - It is true that Section 68 talks about books of accounts and it is also true that in so far as this case is concerned, the assessee was not maintaining books of accounts. It is on this basis that the counsel contended that Section 68 could not have been invoked. We are unable to agree. If this logic is accepted, it will be possible for any defaulting assessee to escape from the payment of tax. In our view, Tribunal was perfectly justified in its finding that in case of this nature the cash flow statement could be treated as the account of the assessee. Therefore, in such circumstances, we cannot accept the case of the assessee.
Issues involved:
1. Addition of deposit in bank account of brother-in-law. 2. Addition of unexplained credit in firm's capital account. 3. Addition of loan allegedly borrowed from an individual. Analysis: Issue 1: Addition of deposit in bank account of brother-in-law The assessee challenged the addition of a deposit made in the bank account of his brother-in-law, which was added to his income during the assessment year. The brother-in-law confirmed that the account was operated by the assessee using blank cheques. The assessee claimed to have operated the account on behalf of the brother-in-law. The court held that the burden to prove this assertion was on the assessee, and since the brother-in-law refused to appear for cross-examination despite summons, the Department was not at fault. The court emphasized that the assessee admitted to operating the account, shifting the burden of proof to him. The court directed the assessing officer to reconsider the issue in light of an assessment order against the brother-in-law. Issue 2: Addition of unexplained credit in firm's capital account The addition of a significant amount in the capital account of a firm, where the assessee was a partner, was challenged. The assessee argued that it was the firm's responsibility to explain the credit. However, the court found that the amount deposited by the assessee was unexplained and not reflected in the cash flow statement. Therefore, the addition was deemed a legitimate investment attracting Section 69 of the Income Tax Act. The court upheld the Tribunal's decision confirming the addition. Issue 3: Addition of loan allegedly borrowed from an individual The assessee contested the addition of a loan borrowed from an individual, claiming the source was explained by the lender. The lender stated that part of the amount was borrowed from a bank and the rest from personal savings. However, no evidence was produced to substantiate this claim. The court found it improbable that a lender would lend without interest if they had borrowed on interest. Despite the assessee not maintaining books of accounts, the court upheld the addition under Section 68 of the Income Tax Act, emphasizing that the cash flow statement could serve as the account of the assessee. The court rejected the argument that Section 68 could not be invoked due to the lack of bookkeeping. In conclusion, the court set aside the addition related to the bank account deposit but directed a reassessment based on an assessment order against the brother-in-law. The court confirmed the additions in the firm's capital account and the loan borrowed from an individual.
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