Facts of the Case

The assessee, Purushottam, was subjected to assessment proceedings in which the Assessing Officer (AO) made additions to income on the ground that certain receipts, transactions, or amounts were not satisfactorily explained. These were treated as undisclosed or unexplained income.

The assessee challenged the assessment before the Commissioner of Income-tax (Appeals) [CIT(A)], but relief was not granted. Aggrieved by the appellate order, the assessee preferred an appeal before the Income Tax Appellate Tribunal (ITAT). 

Issues Involved

  1. Whether the additions made by the AO were justified in law.
  2. Whether the assessee had provided sufficient explanation regarding the disputed amounts.
  3. Whether the CIT(A) erred in sustaining the additions. 

Petitioner’s Arguments (Assessee)

  • The additions were arbitrary and unsupported by reliable evidence.
  • Adequate explanations and supporting documents had been furnished.
  • The AO failed to conduct proper investigation before making the additions.
  • The CIT(A) did not properly appreciate the factual and legal position. 

Respondent’s Arguments (Revenue)

  • The assessee failed to satisfactorily explain the nature and source of the impugned amounts.
  • The AO was justified in drawing adverse inference based on available information.
  • The order of the CIT(A) sustaining the additions was legally valid. 

Court Order / Findings (ITAT)

  • Additions under the Income-tax Act must be supported by cogent and tangible evidence.
  • Mere suspicion, conjecture, or inadequate inquiry cannot justify treating amounts as undisclosed income.
  • The AO did not conclusively establish that the disputed amounts represented taxable income.
  • The findings of the lower authority were not supported by sufficient material on record.

 Important Clarification

  • Burden of proof lies on the Revenue to substantiate additions.
  • Assessment cannot be based solely on presumptions or doubts.
  • Proper inquiry and evidence are essential before treating income as unexplained.
  • Appellate authorities can intervene where additions are unsustainable in law.

Link to download the order – https://itat.gov.in/public/files/upload/1574673840-PURUSHOTTAM-360.pdf

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