2018 (3) TMI 1358 - HC - Income Tax

Additions u/s 68 - deposit of cash out of cash withdrawn by appellant from the same bank account for purchase of immoveable property - Additional evidence in a form of a certificate issued by M/s. S.G. Realtors was filed. However the appeal was dismissed observing that the certificate given by M/s. S.G. Realtors was not conclusive proof that the cash deposited was out of the 2, 00, 000/- withdrawn earlier. - Onus to prove. Held that - Due regard and latitude to human conduct and behaviour has to be given and accepted when we consider validity and truthfulness of an explanation. One should not consider and reject an explanation as concocted and contrived by applying prudent man s behaviour test. Principle of preponderance of probability as a test is to be applied and is sufficient to discharge onus. Probability means likelihood of anything to be true. Probability refers to appearance of truth or likelihood of being realised which any statement or event bears in light of the present evidence (Murray s English Dictionary). Evidence can be oral and cannot be discarded on this ground. Assessment order and the appellate orders fall foul and have disregarded the preponderance of probability test. Additions deleted - Decided in favor of assessee.

Summary

Issues:
1. Restoration of appeal dismissed in default and for non-prosecution.
2. Substantial question of law regarding addition under section 68 of the Income Tax Act.
3. Rejection of explanation for deposit of cash in bank account.
4. Dismissal of appeal by Tribunal and justification of the decision.

Analysis:
1. The judgment begins with an application for restoration of an appeal that was dismissed in default and for non-prosecution. The appellant filed the application shortly after the dismissal, explaining that the appeal had been pending for about 12 years, and they were unaware of the hearing dates on which the dismissal occurred. The court, after considering the reasons stated in the application, allowed the restoration of the appeal to its original number.

2. The appeal in question related to the assessment year 1998-99 and raised a substantial question of law regarding the addition under section 68 of the Income Tax Act. The appellant's explanation for a cash deposit of ?1,60,000 in the bank account was that it was from cash withdrawn to purchase immovable property. However, the Assessing Officer rejected this explanation, leading to a series of appeals and dismissals based on the appellant's failure to prove the source of the deposited cash.

3. The Tribunal's order dismissing the appeal was based on the reasoning that no prudent person would keep a large amount of cash at home for a property deal when it could be withdrawn from the bank when needed. The High Court found this reasoning flawed, emphasizing the need to consider the entire explanation and material on record. The court highlighted the plausibility of the appellant's explanation and the importance of applying the principle of preponderance of probability to discharge the onus of proof.

4. Ultimately, the High Court allowed the appeal, answering the substantial question of law in favor of the appellant and directing the deletion of the addition of ?1,60,000. The court ordered a remand for deeper examination by the tribunal but decided to conclude the matter due to its age and the amount involved. The appeal was allowed with no order as to costs, bringing a resolution to the legal dispute.