2013 (8) TMI 196 - HC - Income Tax

High Court overturns deletion of additions due to lack of evidence, emphasizes burden of proof on assessee.

The High Court found the decisions to delete the additions of Rs. 4,74,681/- and Rs. 42,78,717/- as perverse due to the lack of supporting evidence from ... Unexplained credits - additions u/s 68 - onus to prove - Held that:- the assessee, by merely furnishing a list, did not discharge her burden. Acceding to the contention of the learned counsel would amount to laying down a rule that it is for the Revenue to find out whether the assessee has or may have an explanation to offer. When an explanation is called for from the assessee, he or she must take care to substantiate her explanation by such supporting evidence as may be in his or her power to produce. Who are the buyers; how or in what circumstances did they advance the sum of Rs. 4,74,681/- and who are the sellers ? How and in what circumstances did the sum of Rs. 42,78,717/- become payable to them was in the special knowledge of the assessee. It was, therefore, her obligation to disclose cogent evidence in that regard. She claims to be a commission agent. The column 5 of GTI-1 provides for deduction of commission. Therefore it should not have been difficult for the assessee to disclose the relevant evidence about the transactions allegedly made by the assessee on behalf of suppliers of fish or the trawler owners. Her failure to do so even prima facie amounts to no explanation at all. Following decision of Hindusthan Tea Trading Co. Ltd. v. Commissioner of Income-Tax [2003 (3) TMI 53 - CALCUTTA High Court], Collector of Customs v. D. Bhoormal [1974 (4) TMI 33 - SUPREME COURT OF INDIA] and CIT. v. Mohanakala [2007 (5) TMI 192 - SUPREME Court] - Decided in favour of Revenue. Issues Involved:1. Whether the decision to delete the addition of Rs. 4,74,681/- is perverse.2. Whether the decision to delete the addition of Rs. 42,78,717/- is perverse.Issue 1: Deletion of Rs. 4,74,681/-The respondent-assessee, a commission agent dealing in fishes, had an ice factory. During the assessment for the year 2006-07, a survey led to the seizure of books of accounts, including a register (GTI-1) showing a receivable sum of Rs. 4,74,681/- advanced to sellers of fish. This amount was not reflected in the assessee's books. The Income Tax Officer (ITO) assessed the income at Rs. 59,70,687/-, including the unexplained cash credit of Rs. 4,74,681/-. The Commissioner of Income Tax (Appeals) disallowed this addition, which was upheld by the Income Tax Appellate Tribunal (ITAT).The High Court disagreed with the Tribunal's decision, emphasizing that the assessee failed to produce supporting materials to substantiate her claim. The court referenced the principle that the burden of proof lies with the assessee to provide cogent evidence. The assessee's mere submission of a list without supporting evidence was insufficient. The court cited precedents, including Hindusthan Tea Trading Co. Ltd. v. Commissioner of Income-Tax, which stressed the need for the assessee to substantiate claims with evidence before the burden shifts to the Assessing Officer.Issue 2: Deletion of Rs. 42,78,717/-The same register (GTI-1) revealed a receivable sum of Rs. 42,78,717/- from buyers of fish, also not reflected in the books. The ITO included this as undisclosed income. The Commissioner of Income Tax (Appeals) disallowed this addition, which was upheld by the ITAT.The High Court found the Tribunal's decision perverse, noting that the assessee did not provide any supporting materials for the claim that the amount was receivable on behalf of suppliers of fish. The court highlighted that the assessee must substantiate her explanation with relevant evidence. The court referenced the judgment in CIT. v. Mohanakala, which clarified that an explanation must be proper, reasonable, and acceptable. The court concluded that the assessee's failure to provide prima facie evidence meant no explanation was offered.Conclusion:The High Court held that both decisions to delete the additions of Rs. 4,74,681/- and Rs. 42,78,717/- were perverse due to the lack of supporting evidence from the assessee. The appeal was allowed in favor of the Revenue.