1984 (3) TMI 90 - AT - Income Tax

Tribunal upholds deletions by Commissioner, dismisses department's appeals, burden of proof on benami transactions.

The Tribunal dismissed the department's appeals and upheld the deletions of various additions made by the Commissioner (Appeals). The cross-objections by ... Appellate Assistant Commissioner, Unexplained Money Issues Involved:1. Validity of proceedings under section 147(a) of the Income-tax Act, 1961.2. Validity of service of notices under section 148.3. Ownership and source of various drafts and remittances.4. Estimation of unaccounted sales and profits.5. Burden of proof regarding benami transactions and remittances.Issue-wise Detailed Analysis:1. Validity of Proceedings under Section 147(a):The Income Tax Officer (ITO) initiated proceedings under section 147(a) on the basis of information received post a search operation, indicating that the assessee's income had escaped assessment due to failure to disclose all material facts. The Commissioner (Appeals) upheld the initiation of these proceedings, finding the factual information from the Director of Revenue Intelligence to be prima facie correct. However, the Tribunal did not find it necessary to address the validity of these proceedings in detail, given the conclusions on other issues.2. Validity of Service of Notices under Section 148:The assessee challenged the validity of the service of notices under section 148, arguing that the notices were vague and lacked necessary details. The Commissioner (Appeals) rejected this contention, stating that the notice, despite its deficiencies, could not be termed as vague as there was no evidence of another assessee with the same name to whom the notice could have been issued. The Tribunal did not find it necessary to delve into this issue further.3. Ownership and Source of Various Drafts and Remittances:The ITO attributed several drafts and remittances to the assessee, concluding that these were used for purchasing foreign watches. The Commissioner (Appeals) found that the ITO failed to link 98 drafts to the assessee, noting the lack of evidence such as statements from bankers or recipients of the drafts. The Tribunal agreed, emphasizing that the department had not collected sufficient evidence to prove that the drafts were purchased by the assessee or its representatives. The Tribunal noted that the burden of proof lay with the department, which it failed to discharge.4. Estimation of Unaccounted Sales and Profits:The ITO estimated unaccounted sales and profits based on the remittances made by the assessee. For example, in the assessment year 1972-73, the ITO estimated unaccounted sales at Rs. 6,40,000 and a net profit of Rs. 64,000. Similar estimations were made for the assessment years 1973-74 and 1974-75. The Commissioner (Appeals) deleted these additions, finding no legal material to link the drafts to the assessee. The Tribunal upheld this deletion, noting that the ITO's reasons for attributing the drafts to the assessee did not stand the test of legal scrutiny.5. Burden of Proof Regarding Benami Transactions and Remittances:The Tribunal emphasized that the burden of proving benami transactions lay with the department. Citing various legal precedents, it noted that the department needed to provide legal evidence of a definite character to prove that the drafts were purchased by the assessee or its representatives. The Tribunal found that the department failed to meet this burden, as there was no evidence from handwriting experts, bankers, or recipients of the drafts to link them to the assessee. The Tribunal also rejected the department's request for a remand to make further enquiries, stating that the appellate authorities should not make roving enquiries to strengthen the ITO's order.Conclusion:The Tribunal dismissed the department's appeals and upheld the deletions of the various additions made by the Commissioner (Appeals). The cross-objections by the assessee regarding the validity of the proceedings under section 147 and the service of notices under section 148 were dismissed as infructuous.