2016 (8) TMI 219 - HC - Income Tax

Addition under section 68 - source of amount deposited into the bank account - whether the Tribunal was justified in invoking the provisions of section 68 of the Act, although the assessment order and the order of CIT(A) were based on section 69-A? - applicability of section 292-B - Held that - As rightly held by the CIT(A) the fact that there were several other transactions in Dhruv Parti s account does not carry the assessee s case any further for there is nothing to indicate the source of such funds, namely, whether the funds belonged to Dhruv Parti or that he was acting as a conduit for others. It is the assessee who claims to have received the amount as a loan. The burden, therefore, was on him to establish the same. The assessee has failed to discharge this burden. The authorities have infact established that the facts and circumstances of the case militate against the assessee s case that the amounts were lent and advanced to him by said Dhruv Parti. On facts, therefore, the inference drawn by the authorities under the Act cannot be faulted. In these circumstances, the direction issued by the CIT(A) for the addition of ₹ 30 lacs to be made to the assessee s return is well founded. The Tribunal upheld the findings of the CIT(A) on facts. For the reasons already stated these findings cannot be held to be absurd or perverse. The assessee has not been prejudiced in any manner whatsoever on account of the Assessing Officer having mentioned the wrong section. Where in the assessment proceedings the enquiries are made by the Assessing Officer of facts and the Assessing Officer after considering the facts and circumstances of the case including the assessee s response, if any, thereto, makes an addition, which is justified and permissible under the provisions of the Act but inadvertently or even wrongly mentions a wrong provision of the Act, the assessment order cannot be set aside on that ground. It is open in such circumstances to the Appellate Authority or to CIT(A) or the Tribunal to uphold the addition under the correct section. This ofcourse would be in circumstances where the error has not prejudiced the assessee in any manner whatsoever. At the cost of repetition it is not even the assessee s case that during the assessment proceedings he was given to understand that the queries were raised by the Assessing Officer and/or that he responded to the same only on the basis of the provisions of section 69-A of the Act. In this view of the matter, it is not necessary to consider the applicability of section 292-B of the Act.

Issues Involved:
1. Delay in re-filing the appeal.
2. Applicability of section 68 vs. section 69-A of the Income Tax Act, 1961.
3. Examination of facts and evidence by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)].
4. Procedural fairness and natural justice.
5. Perverse findings by the Tribunal.

Issue-wise Detailed Analysis:

1. Delay in re-filing the appeal:
The court condoned a delay of 690 days in re-filing the appeal, accepting the reasons mentioned in the application.

2. Applicability of section 68 vs. section 69-A of the Income Tax Act, 1961:
The main legal issue was whether the Tribunal was justified in invoking section 68 instead of section 69-A, as initially cited by the AO and CIT(A). The court noted that section 68 pertains to unexplained credits in the books of an assessee, while section 69-A deals with unexplained money, bullion, etc., not recorded in the books of account. Despite the AO and CIT(A) referencing section 69-A, the Tribunal applied section 68, which was deemed appropriate given the circumstances. The court held that the jurisdictional facts for invoking section 68 existed and that the mere mention of the wrong section in the assessment order did not prejudice the assessee.

3. Examination of facts and evidence by the AO and CIT(A):
The AO had added ?19.30 lacs to the assessee’s income under section 69-A due to unexplained deposits. The CIT(A) enhanced this addition to ?30 lacs, noting the absence of any confirmation from the alleged lender, Dhruv Parti, and the lack of documentary evidence supporting the loan. The court agreed with the CIT(A)'s findings, emphasizing the improbability of such a large loan being advanced without documentation and the absence of any effort by the assessee to trace or contact Dhruv Parti over the years.

4. Procedural fairness and natural justice:
The appellant argued that the Tribunal could not invoke section 68 without prior notice, thus violating natural justice principles. The court dismissed this argument, stating that the enquiries made during the assessment were factual and not tied to any specific section of the Act. The court held that the assessee was not prejudiced by the AO’s mention of the wrong section, as the factual basis for the addition remained unchanged.

5. Perverse findings by the Tribunal:
The appellant contended that the Tribunal's findings were perverse. The court disagreed, stating that the Tribunal's conclusions were reasonable and supported by evidence. The Tribunal upheld the CIT(A)'s findings that the assessee failed to prove the loan's legitimacy and that the facts pointed to the inherent improbability of the loan claim.

Conclusion:
The court dismissed the appeal, affirming the Tribunal's decision. It held that the assessee failed to discharge the burden of proof regarding the loan and that the addition to income was justified under section 68. The court also noted that the appellant could pursue further evidence if obtained, but did not remand the case based on speculative future evidence.

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