1984 (8) TMI 94 - AT - Income Tax

Tribunal overturns deletion of unexplained income, emphasizes burden of proof.

The Tribunal set aside the deletion of Rs. 25,000 added as unexplained income, emphasizing the burden of proof on the assessee and the application of ... - Issues:1. Deletion of Rs. 25,000 added as unexplained income of the assessee.2. Existence and authenticity of the exercise book containing transactions.3. Burden of proof on the assessee regarding unexplained income.4. Interpretation of Sections 68 and 69 of the Income Tax Act.Analysis:Issue 1: Deletion of Rs. 25,000 added as unexplained incomeThe appeal involved the deletion of Rs. 25,000 added by the ITO as unexplained income of the assessee. The AAC initially deleted the addition citing scanty evidence, but the Tribunal set aside this decision and directed the AAC to reconsider the case. The AAC again deleted the addition, stating that the ITO lacked independent and corroborative evidence to justify the addition. However, the Tribunal found that the AAC did not consider the direction given earlier and failed to address the burden of proof on the assessee regarding the unexplained income. The Tribunal concluded that the AAC's decision was not sustainable due to the failure to apply the provisions of Sections 68 and 69 of the IT Act.Issue 2: Existence and authenticity of the exercise bookThe case revolved around the existence and authenticity of the exercise book containing transactions. The ITO found extracts from the exercise book showing business outside the books, leading to the addition of Rs. 25,000 as unaccounted income. The Tribunal observed that the exercise book was found during a search, contained detailed transactions with parties the assessee dealt with, and the dates of entries matched the assessment year. The Tribunal rejected the assessee's claim that the exercise book did not exist, emphasizing the detailed nature of the entries and the lack of evidence supporting the claim that it was planted during the search.Issue 3: Burden of proof on the assesseeThe AAC initially accepted the assessee's contention that the addition lacked evidence, leading to the deletion of Rs. 25,000. However, the Tribunal found that the burden of proof was on the assessee to explain the unexplained income, as per Sections 68 and 69 of the IT Act. The Tribunal noted that the assessee denied the existence of the exercise book and failed to provide a satisfactory explanation for the credited amounts, shifting the burden back to the assessee.Issue 4: Interpretation of Sections 68 and 69 of the IT ActThe Tribunal emphasized the importance of Sections 68 and 69 of the IT Act in cases involving unexplained income or investments. The Tribunal highlighted that the burden of proof lies with the assessee to explain any unexplained credits or investments in their books of account. The Tribunal criticized the AAC for not considering this legal aspect and for placing undue burden on the ITO to prove the disputed amount as the income of the assessee. The Tribunal stressed the need for a thorough consideration of the legal provisions while deciding on additions of unexplained income.In conclusion, the Tribunal allowed the Departmental appeal for statistical purposes and dismissed the cross objection filed by the assessee, emphasizing the importance of correctly applying the legal provisions and burden of proof in cases involving unexplained income. The matter was remanded back to the AAC for re-decision in accordance with the Tribunal's directions and legal principles.