Facts of the Case

The assessee, serving as an Executive Engineer, was subjected to scrutiny assessment by the Assessing Officer for the relevant assessment years. During the assessment proceedings, certain receipts, deposits, or financial transactions appearing in the assessee’s accounts were questioned.

The Assessing Officer treated the disputed amounts as unexplained income on the ground that satisfactory explanation regarding their source and nature was not furnished. Consequently, additions were made to the taxable income of the assessee.

The Commissioner of Income Tax (Appeals) upheld the assessment order. Aggrieved by the confirmation of additions, the assessee filed appeals before the Income Tax Appellate Tribunal, Agra Bench. 

Issues Involved

  1. Whether the additions made by the Assessing Officer were legally sustainable.
  2. Whether the assessee had adequately explained the nature and source of the questioned amounts.
  3. Whether the appellate authority correctly appreciated the evidence on record.
  4. Whether additions could be sustained in the absence of concrete material.

Petitioner’s Arguments (Assessee)

  • The impugned additions were made without proper appreciation of facts and evidence.
  • The amounts in question were not unexplained income but had identifiable sources.
  • Relevant documents and explanations were furnished during assessment proceedings.
  • The Assessing Officer adopted an arbitrary approach and ignored material evidence.
  • The CIT(A) erred in confirming the additions without independent evaluation.

Respondent’s Arguments (Department)

  • The assessee failed to satisfactorily establish the source and genuineness of the disputed amounts.
  • Supporting evidence was insufficient or unreliable.
  • The additions were made in accordance with law after due examination of records.
  • The appellate authority rightly confirmed the assessment order.

Court Order / FINDINGS (ITAT)

  • The burden of proving the source of unexplained receipts or deposits lies on the assessee.
  • However, additions cannot be sustained merely on suspicion or conjecture.
  • Tax authorities must base conclusions on credible evidence and proper inquiry.
  • Each transaction must be evaluated on its facts before treating it as taxable income.
  • The findings of lower authorities were upheld/modified/deleted to the extent justified by the evidence on record.

Important Clarification by the Tribunal

  • Unexplained money provisions apply only when the assessee fails to provide a satisfactory explanation.
  • Where plausible explanations supported by evidence exist, arbitrary additions are not justified.
  • Proper documentation is essential, particularly in cases involving substantial deposits or receipts.

 

Link to download the order –

https://itat.gov.in/public/files/upload/1616134713-ITA%20%2043%20to%2046%20of%202020%20%20Executive%20Engineer.pdf

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