2020 (10) TMI 515 - HC - Income Tax

Additions u/s 68 - burden of proof - Whether explanation offered by the assessee to be non satisfactory? - HELD THAT - Onus is on the assessee to explain the sums credited in the books of the assessee. If the explanation offered by the assessee about the nature and source is acceptable to the AO, then there can be no additions. If the AO finds the explanation offered by the assessee to be non satisfactory, the sum so credited may be charged to income tax as an income of the assessee. Admittedly in the instant case, the assessee has provided the explanation, such explanation was found acceptable by the AO for the previous and subsequent Assessment Years. AO did not record a specific note of his satisfaction / dissatisfaction with regard to those three persons. Assessee is non-suited solely on the ground that Mr.Naninar Mohammed did not appear and other two persons did not respond. The fact remains that the notice sent by the AO to Mr.Naninar Mohammed returned with a postal endorsement 'left' and there appears to have been no attempt made to summon the said person by following other modes of substituted service - Appropriate view that should have been taken is to take note of the genuinity of the assessee and the decision of the Assessing Officer in the assessee's own case for the earlier and subsequent assessment years. - Decided in favour of the appellant / assessee.

Summary

Issues:
1. Confirmation of additions under Section 68 of the Income Tax Act relating to specific individuals.
2. Justification of additions made after a significant lapse of time.
3. Upholding additions without granting an opportunity to the appellant.

Analysis:

Issue 1:
The appeal challenged the order passed by the Income Tax Appellate Tribunal confirming additions under Section 68 of the Income Tax Act for the assessment year 1993-1994. The Appellate Tribunal upheld the additions related to specific individuals, despite the initial burden of proof being discharged by the assessee. The Tribunal's decision was based on the failure of the Department to issue summons and allow cross-examination as previously ordered. The Court analyzed the case history, where the Assessing Officer initially did not provide an opportunity for examination or cross-examination of the persons in question. Despite the Tribunal's remand order, the Assessing Officer failed to summon the individuals, leading to a dispute over the justification of the additions.

Issue 2:
The second issue revolved around the justification of confirming additions after a significant lapse of time, specifically more than a decade. The appellant argued that the Assessing Officer had deleted the addition related to one individual in a subsequent assessment year, and failed to issue summons and allow cross-examination for the other two persons. The Court noted discrepancies in the treatment of the same individuals across different assessment years, raising questions about the consistency and justification of the additions made for the assessment year under consideration.

Issue 3:
The third issue focused on upholding the additions without granting the appellant an opportunity, as ordered by the Tribunal in previous instances. The Tribunal's decision to uphold the additions without providing the appellant with a fair chance to present their case raised concerns about procedural fairness and adherence to legal principles. The Court emphasized the importance of assessing the genuineness of transactions based on consistent treatment across different assessment years, highlighting the Assessing Officer's acceptance of the entries in the appellant's account for the same individuals in other years.

In the final judgment, the Court allowed the Tax Case Appeal, setting aside the Tribunal's order and answering the Substantial Questions of Law in favor of the appellant. The Court emphasized the Assessing Officer's duty to consider the genuineness of transactions based on consistent treatment and appropriate explanations provided by the assessee, ultimately ruling in favor of the appellant based on the principles of fairness and consistency in tax assessments.