2020 (3) TMI 50 - HC - Income Tax

High Court overturns tribunal decision on unexplained income under Income Tax Act, 1961, emphasizing burden of proof.

Principal Commissioner of Income Tax – 16, Kolkata Versus Shri Jaswant Singh

The High Court of Calcutta set aside the tribunal's decision regarding unexplained income under the Income Tax Act, 1961, emphasizing the assessee's ... Unexplained income of the assessee under section 68 read with section 69A - AO and CIT-A held that it was unexplained income - Tribunal held otherwise stating “the assessee has been mis-utilized by his employer to route the cash through his bank account” - HELD THAT:- What was the source of this money, to whom this amount was transferred immediately after it was deposited, the manner of transfer, the way the transferred fund was utilised have not been discussed at all by the tribunal. The onus is on the assessee to explain, otherwise it would be treated as unexplained income in his account. A speculative assertion by the tribunal that since the money came in and went out simultaneously would not absolve the assessee, in our opinion, unless substantial evidence is led by him to show the source of the fund and the application thereof. The question arises whether the order of the tribunal is perverse. In our opinion, it would be in the interest of justice if the said order of the tribunal with regard to the above issue is set aside and the matter is remanded for fresh determination.Direct the tribunal to rehear the matter and pronounce a reasoned decision within four months of communication of this order. Issues involved: Determination of unexplained income under section 68 read with section 69A of the Income Tax Act, 1961.Analysis:The High Court of Calcutta was presented with a case involving an amount of Rs. 3,86,49,700, with the central issue being whether this sum constituted unexplained income under the relevant sections of the Income Tax Act, 1961. The Assessing Officer and the Commissioner of Income Tax (Appeals) concluded that the amount qualified as unexplained income, while the tribunal took a different stance, suggesting that the individual had been utilized by their employer to channel cash through their bank account. However, the tribunal failed to delve into crucial aspects such as the source of the money, the immediate transfer of the amount post-deposit, the method of transfer, and the utilization of the transferred funds. The High Court emphasized that the burden of proof lay with the assessee to provide a satisfactory explanation; otherwise, the funds would indeed be treated as unexplained income in their account.The High Court criticized the tribunal's speculative assertion that simultaneous inflow and outflow of money did not absolve the assessee from proving the source and application of the funds with substantial evidence. The Court highlighted the necessity for the assessee to present concrete evidence regarding the source and utilization of the funds to avoid being categorized as unexplained income. The Court raised concerns about the tribunal's decision, questioning whether it was perverse in nature.In the interest of justice, the High Court decided to set aside the tribunal's order concerning the issue at hand and remand the matter for fresh determination. The Court directed the tribunal to rehear the case and deliver a well-reasoned decision within four months of the communication of the order. Additionally, the tribunal was granted the freedom to remand the matter back to the lower adjudicating authorities if deemed necessary. The appeal and application were disposed of based on the above order, with the consent of the involved parties and the exclusion of formalities.