Facts of the Case

The assessee, an individual taxpayer, was subjected to assessment proceedings during which the Assessing Officer noticed certain cash deposits and/or investments that were not satisfactorily explained. The officer concluded that the assessee had failed to establish the nature and source of these amounts with credible evidence. Accordingly, the sums were treated as unexplained income and added to the total income under the relevant provisions of the Income-tax Act.

The assessee disputed the additions, asserting that the amounts represented genuine funds derived from identifiable sources and that explanations had been furnished during the assessment

Issues Involved

  1. Whether the cash deposits or investments could be treated as unexplained income under Sections 68/69/69A.
  2. Whether the assessee had discharged the burden of proving the source of the funds.
  3. Whether the Assessing Officer was justified in making additions without disproving the explanation.
  4. Whether the additions were legally sustainable on the facts of the case

Petitioner’s Arguments (Revenue)

  • The assessee failed to produce adequate documentary evidence supporting the source of deposits/investments.
  • The explanations furnished were incomplete, inconsistent, or unverified.
  • The Assessing Officer was justified in invoking the provisions relating to unexplained income.
  • The additions were necessary to bring undisclosed income to tax.

Respondent’s Arguments (Assessee)

  • The funds originated from legitimate and identifiable sources.
  • Necessary details and explanations were provided during the assessment proceedings.
  • The additions were made on assumptions without proper inquiry or verification.
  • No adverse material was brought on record to contradict the explanation.

Court Order / Findings (ITAT)

  • The initial onus lies on the assessee to explain the nature and source of the amounts.
  • Once a reasonable explanation supported by evidence is furnished, the burden shifts to the Revenue to rebut it.
  • Additions cannot be sustained merely on suspicion, conjecture, or absence of further inquiry.
  • The Assessing Officer must base conclusions on objective material rather than presumptions.

Important Clarification

  • Proper documentation and a plausible explanation are crucial to counter additions under Sections 68/69.
  • The Assessing Officer must conduct meaningful verification before drawing adverse conclusions.
  • Additions cannot rest solely on doubts or assumptions.
  • The burden of proof may shift depending on the evidence produced by the parties.

Link to download the order –

https://itat.gov.in/public/files/upload/1640331272-ITA%20No.%2006%20Alld%202021%20Seema%20Devi.pdf

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