Facts of the Case

The assessee, Smt. Sita Devi of Allahabad, was subjected to assessment proceedings by the Income Tax Officer, Range-1(4), Allahabad. During the assessment, certain investments, assets, or monetary amounts were identified which, according to the Assessing Officer, were not satisfactorily explained.

Consequently, the Assessing Officer treated these amounts as unexplained income under the relevant provisions of the Income-tax Act, 1961 and made additions accordingly. The assessee challenged the additions through appellate proceedings.

Issues Involved

Whether the impugned amounts or assets could be treated as unexplained income under Sections 69/69A due to failure of the assessee to establish the nature and source of the funds with adequate and reliable evidence.

Petitioner’s (Assessee’s) Arguments

The assessee contended that the additions were unwarranted and based on incorrect appreciation of facts. It was submitted that the funds or investments had legitimate sources and that explanations along with supporting documentation had been furnished during the assessment. The assessee argued that the Assessing Officer had disregarded relevant evidence and relied on assumptions.

 Respondent’s (Revenue’s) Arguments

The Revenue argued that the assessee had failed to discharge the burden of proof required under the deemed income provisions. According to the department, the explanations provided were either unsupported by credible evidence or insufficient to establish a genuine source. Therefore, the Assessing Officer was justified in treating the amounts as unexplained income.

Court Order / Findings (ITAT)

The Tribunal examined the evidence on record and the explanations offered by the assessee. It reiterated the settled legal principle that under Sections 69 and 69A, the burden lies on the assessee to satisfactorily explain the nature and source of investments or money found.

Where the explanation lacks credibility or supporting evidence, the Assessing Officer is empowered to treat the amount as income of the assessee for the relevant year. The Tribunal adjudicated the matter based on whether the assessee had successfully discharged this burden.

Important Clarification

The ruling emphasizes that deemed income provisions apply when the assessee cannot provide a credible explanation regarding the source of funds or assets. Mere statements without corroborative documentation are insufficient to avoid additions. Proper financial records and evidence are essential to establish legitimacy of transactions.

Link to download the order –https://itat.gov.in/public/files/upload/1582193329-SITA-182.pdf

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