2016 (6) TMI 1024 - HC - Income Tax

High Court affirms Tribunal's ruling favoring assessee in Tax Appeal, finding compliance with burden of proof

THE INCOME TAX OFFICER, WARD 2 (3) Versus SHANTI ENTERPRISE

The High Court upheld the Income Tax Appellate Tribunal's decision in favor of the assessee, dismissing the Tax Appeal by the revenue. The Court found ... Additions u/s 68 - Undisclosed Cash credits - Burden of proof - Held that:- All the aforesaid 23 persons, except Shri Kailashbhai Tulsibhai Patel, from whom deposits were received are the income tax assessees. They are having PAN numbers. The amounts have been received through the banking channels. Copies of accounts of each depositor were duly filed. The assessee has duly explained in respect of each of the depositors and the circumstances under which deposits were received by the assessee. The deposited money represents the amounts towards booking received initially through M/s.Siddharth Corporation along with which the assessee has engaged in joint venture of developing the project on the land which was allotted from Surat Municipal Corporation. This is an admitted fact that the assessee has not carried out any business during the year under consideration. No evidence on record has been brought that the assessee had earned income during the year. It is rightly found by the tribunal that the assessee has duly discharged its burden of proof. In the case of Deputy Commissioner of Income Tax v. Rohini Builders reported in [2001 (3) TMI 9 - GUJARAT High Court ], amounts were received by the assessee by account payee cheques and initial burden of proving the credits was discharged. It is held that the assessee need not prove the source of the credits and the fact that the explanation was not satisfactory would not automatically result in deeming amounts as income of the assessee - Decided in favour of assessee Issues:1. Challenge to the order of the Income Tax Appellate Tribunal by the revenue.2. Reopening of assessment by the Assessing Officer under Section 148 of the Income Tax Act, 1961.3. Appeal before the CIT (A) by the assessee.4. Appeal before the Income Tax Appellate Tribunal by the assessee.5. Deletion of addition by the Tribunal and subsequent appeal by the department.6. Question of law framed by the Court regarding the deletion of the addition made by the Assessing Officer.Issue 1:The revenue challenged the order of the Income Tax Appellate Tribunal, which allowed the appeal filed by the assessee. The Tribunal confirmed the addition of a certain amount and deleted the remaining addition in the name of 20 creditors, leading to the department's appeal.Issue 2:The Assessing Officer reopened the assessment under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2000-01 after the assessee filed a return declaring 'nil' income. Subsequent notices were issued under Sections 143(2) and 142(1) of the Act, leading to the determination of the total income of the assessee and initiation of penalty proceedings.Issue 3:The assessee appealed before the CIT (A) against the order of the Assessing Officer, which was partly allowed, leading to the deletion of a certain amount from the addition made by the Assessing Officer.Issue 4:Feeling aggrieved by the order of the CIT (A) confirming the addition made by the Assessing Officer, the assessee preferred an appeal before the Income Tax Appellate Tribunal, resulting in the Tribunal allowing the appeal and confirming a partial addition while deleting the remaining addition in the name of 20 creditors.Issue 5:The Tribunal's decision to delete a significant portion of the addition led to the revenue's appeal before the High Court, which framed a question of law regarding the Tribunal's decision to delete a substantial sum added by the Assessing Officer and confirmed by the CIT (A).Issue 6:The High Court analyzed the evidence presented during the assessment proceedings, where it was found that the deposits received by the assessee were from various individuals, most of whom were income tax assessees with PAN numbers. The deposits were received through banking channels, and the assessee provided explanations for each depositor and the circumstances of the deposits. The Tribunal found that the assessee had discharged its burden of proof, citing precedents where the initial burden of proving credits was considered sufficient without the need to prove the source of the credits. The Court upheld the Tribunal's decision, dismissing the Tax Appeal in favor of the assessee.This detailed analysis of the judgment provides a comprehensive overview of the legal issues involved and the subsequent decisions made by the authorities and the Court.