2021 (9) TMI 301 - HC - Income Tax

High Court upholds tax assessment reopening under Section 148 for unexplained income, stresses importance of evidence

The High Court dismissed the Tax Case Appeal challenging the reopening of assessment under Section 148 for assessing deemed income under Section 69 ... Reopening of assessment u/s 147 - addition of 'deemed income' u/s.69 - unexplained investment of the amount spent out on the purchase of shares - eligible reason to believe the escapement of 'real income' - Tribunal upholding the reopening by issue of notice u/s.148 - HELD THAT:- Tribunal had considered the factual matrix and taken note of all the grounds urged by the assessee and concurred with the factual findings recorded by the Assessing Officer as well as the CIT(A) that the assessee could not furnish any details regarding the payments received from the Sundry Debtors and that even their names could not be furnished, and that apart, the Tribunal has recorded that the assessee had admitted that income details are available with the assessee and in the absence of any details, the Tribunal rightly held that it is impossible to believe the theory that the assessee had received the payments from its old Sundry Debtors after a gap of two to three years, and accordingly, the appeal was dismissed - No substantial question of law. Issues:1. Reopening of assessment under Section 148 for assessing deemed income under Section 69 without reason to believe escapement of real income.2. Addition of unexplained investment under Section 69 for purchase of shares when the source remains undisputed.Analysis:Issue 1:The Tax Case Appeal challenged the reopening of assessment under Section 148 of the Income Tax Act for assessing a 'deemed income' under Section 69 without establishing the escapement of 'real income.' The appellant contended that there was no valid reason to believe that there was any undisclosed income. The Assessing Officer had requested details regarding payments made to a company for share purchases, but the appellant failed to provide satisfactory explanations. The Tribunal upheld the reopening, emphasizing the lack of cooperation and evidence from the appellant. The High Court concurred with the lower authorities, noting the appellant's failure to provide essential details, leading to adverse inferences by the Assessing Officer.Issue 2:The second issue involved the addition of Rs. 70,13,506 under Section 69 as unexplained investment in share purchases. The appellant claimed that the source of the investment was legitimate and formed part of their accounts. However, the appellant could not substantiate the source of payments made to the company for share purchases despite repeated requests. Both the CIT(A) and the Tribunal found the appellant's explanations lacking credibility and dismissed the appeal. The High Court affirmed the lower authorities' decisions, highlighting the appellant's inability to provide necessary details and evidence, leading to the rejection of their claims.In conclusion, the High Court dismissed the Tax Case Appeal, stating that no substantial question of law arose from the case. The judgment emphasized the importance of providing complete and credible information during assessment proceedings to avoid adverse inferences and uphold tax regulations.