2023 (3) TMI 659 - AT - Income Tax

Addition u/s 68 - assessee HUF suffered heavy loss from speculation business for which payment of the heavy losses the assessee had shown excess income in his ITR from undisclosed sources - HELD THAT - AO did not reject the books of account of the assessee. The assessee had filed complete details and discharged his primary burden and the AO had not made further enquiry. It is also noteworthy to mention that in the case of CIT vs P.K. Noorjahan 1997 (1) TMI 6 - SUPREME COURT held that if explanation is dissatisfactory even though the addition is not sustainable and that provision of Section 68 is discretionary and discretion must be used as per law and decided judgements and not according to the presumption. Since the assessee has submitted the entire details, books of accounts etc. and the AO did not reject the books of account of the assessee, hence the addition so made on presumption basis does not support in view of the decision of Hon ble Supreme Court in the case of CIT vs P.K. Noorjahan (supra). Therefore, we do not concur with the findings of the ld. CIT(A) and this Ground No. 2 of the assessee is allowed. Addition u/s 68 - undisclosed source - assessee filed affidavit relating deposit of Khem Chand Khatri HUF but considered Rs.1,00,000/- in name of Khem Chand Khatri (Ind.) and remaining not considered and ld. CIT(A) sustained addition - HELD THAT - As in the case of Shweta Goyal 2021 (4) TMI 398 - ITAT JAIPUR wherein the Bench has observed once the AO has examined the documents so produced by the assessee and recorded his satisfaction regarding the identity of the donors, the genuineness of the gifts and the source of such gifts, the assessee has discharged the necessary onus cast on her and no addition can be made in her hand - hence, the addition so made is deleted. Hon ble Supreme Court in the case of M/s. Mehta Parikh Co. 1956 (5) TMI 4 - SUPREME COURT wherein the head note is Income Tax Income from undisclosed sources- assessment assessee s explanation based on accounts supported by affidavit, Accounts accepted as genuine and statements in affidavits not controverted- Finding based on no evidence- Inference from proved or admitted facts-If question of law Principle of interference from Income Tax Act- Indian Income Tax Act (XI of 1922, ss 62(3), 26A. The Bench taking into consideration the submissions of the assessee and the case laws cited above do not concur with the findings of the lower authorities in disallowing the addition so made amounting u/s 68. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the assessment order dated 13-12-2018.
2. Addition of Rs. 3,39,631/- under Section 68 as income from undisclosed sources.
3. Addition of Rs. 7,63,000/- under Section 68 as undisclosed income from unsecured loans.

Issue-wise Detailed Analysis:

1. Legality of the Assessment Order:
The first ground raised by the assessee was general in nature and did not require any adjudication.

2. Addition of Rs. 3,39,631/- under Section 68:
The facts emerging from the order of the CIT(A) indicated that the assessee engaged in transactions on MCX, NCDEX, and BSC, declaring a speculation loss of Rs. (-)51,77,385/- and business income of Rs. 1,52,160/-. The Assessing Officer (AO) issued a notice under Section 148 after receiving information about share transactions. The assessee filed a revised return showing an income of Rs. 4,91,791/-. The AO added the difference of Rs. 3,39,631/- as income from undisclosed sources under Section 68, as the assessee could not provide documentary evidence for the difference amount during appellate proceedings.

During the hearing, the assessee argued that the AO taxed the amount without specific notice, violating principles of natural justice. The assessee had provided complete details and discharged the primary burden of proof. The AO did not reject the books of accounts nor made further inquiries. The Tribunal referred to the Supreme Court decision in CIT vs P.K. Noorjahan, emphasizing that Section 68 is discretionary and should not be applied based on presumption. Since the assessee submitted all details and the AO did not reject the books, the Tribunal allowed Ground No. 2, deleting the addition of Rs. 3,39,631/-.

3. Addition of Rs. 7,63,000/- under Section 68:
The CIT(A) noted that the assessee had made cash deposits totaling Rs. 40,55,300/- in two bank accounts. The assessee explained the source as receipts from e-banking services, house rent, agricultural income, and unsecured loans. However, the AO found the explanation partly unsatisfactory and added Rs. 7,63,000/- as unexplained cash deposits under Section 68. The AO observed that the assessee failed to prove the genuineness and creditworthiness of the lenders, particularly for loans from minors and a deceased individual.

During the hearing, the assessee provided affidavits and explanations for the loans, including the sale of ancestral gold by the father and small savings of minor children. The Tribunal referred to the ITAT Jaipur Bench decision in Shweta Goyal vs ITO and the Supreme Court decision in M/s. Mehta Parikh & Co. vs CIT, emphasizing that once the AO examines the documents and records satisfaction about the identity and genuineness of transactions, no addition can be made. The Tribunal found the lower authorities' disallowance unjustified and allowed Ground No. 3, deleting the addition of Rs. 7,63,000/-.

Conclusion:
The Tribunal partly allowed the appeal, deleting the additions of Rs. 3,39,631/- and Rs. 7,63,000/- made under Section 68 of the Income Tax Act. The decision emphasized the importance of proper examination and documentation in assessing undisclosed income.