During assessment proceedings, the Assessing Officer examined the financial records of the assessee, Shri Ram Kishan Sewa Kendra. Certain transactions, including cash deposits and credits, were considered inadequately explained.

The Assessing Officer concluded that the assessee failed to provide satisfactory evidence regarding the nature and source of these amounts. Consequently, additions were made treating the sums as unexplained income under the relevant provisions of the Income-tax Act.

The assessee challenged the additions before appellate authorities.

Issues Involved

  1. Whether the additions made on account of unexplained cash deposits or credits were justified.
  2. Whether the assessee had discharged the burden of proving the source of funds.
  3. Whether the assessment order suffered from any legal infirmity.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the transactions in question were genuine and duly explained.
  • It was argued that the Assessing Officer did not properly consider the evidence furnished.
  • The assessee sought deletion of the additions on the ground that the amounts did not represent undisclosed income.

Respondent’s (Revenue’s) Arguments

  • The Revenue argued that the assessee failed to substantiate the claimed sources with credible documentary evidence.
  • Mere assertions without supporting proof could not discharge the statutory burden placed on the assessee.
  • Therefore, the Assessing Officer was justified in treating the amounts as unexplained income.

Court Order / Findings (ITAT)

  • The onus lies on the assessee to satisfactorily explain the nature and source of credits or deposits.
  • Where adequate evidence is not produced, the Assessing Officer is entitled to treat the sums as unexplained income.
  • The validity of additions depends on the quality and reliability of evidence presented.

Important Clarification

Unexplained credits or deposits may be taxed as income when the assessee fails to substantiate their source with credible evidence.

  • Small businesses and proprietorship concerns
  • Cases involving scrutiny of cash transactions
  • Documentation requirements in assessments
  • Burden of proof in unexplained income matters

Link to download the order –https://itat.gov.in/public/files/upload/1606481168-ITA%20No129%20-%20Ram%20kishan.pdf

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