Facts of the Case

The assessee, Shri Baldev Singh, was subjected to scrutiny assessment under Section 143(3) of the Income-tax Act. During the assessment proceedings, the Assessing Officer noticed certain investments/assets for which the assessee could not satisfactorily explain the source of funds. The amount was treated as unexplained investment under the relevant provisions of the Act. The CIT(A) confirmed the addition, leading the assessee to file an appeal before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the addition made for unexplained investment was justified in law.
  2. Whether the assessee had satisfactorily explained the nature and source of the investment.
  3. Whether the findings of the lower authorities required interference by the Tribunal.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the investments were made from explained sources.
  • It was argued that the Assessing Officer did not properly consider the explanations and evidence furnished.
  • The addition was claimed to be excessive and unjustified.
  • The assessee sought deletion of the addition sustained by the CIT(A).

 Respondent’s (Revenue’s) Arguments

  • The Revenue submitted that the assessee failed to discharge the burden of proof regarding the source of investment.
  • No satisfactory documentary evidence was produced to substantiate the claim.
  • Therefore, the Assessing Officer rightly treated the investment as unexplained income under the Act.
  • The order of the CIT(A) was justified and required no interference.

 Court Order / Findings (ITAT Allahabad)

The Tribunal observed that where an assessee makes investments and fails to offer a satisfactory explanation regarding the source, the provisions relating to unexplained investments are attracted. The burden of proof lies squarely on the assessee.

In the present case, the explanations provided were not supported by credible evidence sufficient to establish the source of funds. Accordingly, the Tribunal upheld the findings of the Assessing Officer and the CIT(A), sustaining the addition.

Important Clarification

The Tribunal reiterated that mere assertions or unsubstantiated explanations cannot discharge the statutory burden. Documentary evidence demonstrating availability of funds and genuineness of the source is essential. Failure to do so empowers the tax authorities to treat the investment as undisclosed income.

 

Link to download the order –https://itat.gov.in/public/files/upload/1604653667-ITA%20smc%20%20315%20Shri%20Baldev%20Singh.pdf

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