Facts of the Case

The assessee was subjected to scrutiny assessment under Section 143(3) of the Income-tax Act for the relevant assessment year. During the assessment proceedings, the Assessing Officer examined financial records, bank transactions, and supporting documents and made additions to the returned income on the ground that certain transactions were not satisfactorily explained.

The assessee challenged the assessment order before the Commissioner (Appeals), who affirmed the additions made by the Assessing Officer. Aggrieved by the appellate decision, the assessee preferred an appeal before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the additions made during scrutiny assessment were legally sustainable.
  2. Whether the assessee had adequately explained the nature and source of the disputed transactions.
  3. Whether the lower authorities correctly evaluated the evidence on record.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the additions were made without proper appreciation of facts and evidence.
  • It was argued that relevant explanations and supporting documents had been furnished during assessment proceedings.
  • The assessee maintained that the transactions were genuine and duly recorded.
  • It was further submitted that the assessment order was based on presumptions rather than concrete proof. 

Respondent’s (Revenue’s) Arguments

  • The Revenue supported the orders of the Assessing Officer and Commissioner (Appeals).
  • It was submitted that the assessee failed to provide credible documentary evidence to substantiate the explanations offered.
  • The Department argued that the burden of proof lies on the assessee to explain the nature and source of transactions.
  • Therefore, the additions made during scrutiny assessment were justified.

Court Order / Findings (ITAT)

  • Scrutiny assessment must be based on objective evaluation of evidence.
  • The assessee bears the initial burden to satisfactorily explain disputed transactions.
  • Where explanations are unsupported or evidence is inadequate, additions may be sustained.

Important Clarification

The Tribunal emphasized that tax liability must be determined on the basis of reliable evidence. Mere assertions without documentary support cannot rebut findings of the Assessing Officer in scrutiny proceedings.

Link to download the order –

https://itat.gov.in/public/files/upload/1626416239-18%20of%202020%20Dileep%20Kumar%20Khaitan%20(Assessee%20Appeal)%20143%20Order.pdf

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