2010 (5) TMI 172 - HC - Income Tax

Court Upholds Deletion of Additions: Evidence Rules, Burden of Proof Emphasized

The court upheld the decision to entertain additional evidence under Rule 46A of the Income Tax Rules, leading to the deletion of additions amounting to ... Unexplained expenditure u/s 69C – Income from undisclosed sources u/s 68 – Additional evidence before CIT(A) under rule 46A – Held that: - where the difference in the cost of construction estimated by the DVO and the one proffered by the assessee is less than 10% then such a difference has to be ignored for the purpose of making addition to the income of the assessee - no exception is provided to entertain the appeal because once additional evidence of impeccable character has been lawfully entertained by the CIT(A) by confronting it to the Assessing Officer and the donors have come forward by confirming the donations by disclosing their Permanent Account Numbers and balance sheets etc. then doubts entertained by the Assessing Officer with regard to donations are rendered merely conjectures. If there was any suspicion then the Assessing Officer could have opened the assessment of the donors and not that of the assessee-respondent. - The version of the Assessing Officer that it was assessee’s own money which was routed through various donors has been found to be conjectural. Issues:1. Entertaining additional evidence under Rule 46A of Income Tax Rules.2. Deletion of addition on account of unexplained expenditure under section 69C.3. Deletion of addition on account of income from undisclosed sources under section 68.Entertaining Additional Evidence:The appeal filed by the revenue challenged the order of the Income Tax Appellate Tribunal (ITA) upholding the CIT(A)'s decision to entertain additional evidence under Rule 46A of the Income Tax Rules. The Tribunal allowed the additional evidence, including donor details, which led to the deletion of additions amounting to Rs. 15,00,000. The Tribunal found the evidence to be of impeccable character, with donors confirming donations through legitimate means like Account Payee Cheques. The court emphasized that once such evidence is lawfully entertained and donors provide necessary documentation, doubts raised by the Assessing Officer become mere conjectures. The court held that if there were suspicions, the Assessing Officer should have scrutinized the donors' assessments, not the assessee's.Unexplained Expenditure under Section 69C:Regarding the deletion of the addition of Rs. 5,55,751 on account of unexplained expenditure under section 69C, the Tribunal based its decision on sound principles. It cited precedents where a difference of less than 10% between valuations was deemed insignificant for income addition. The court referred to judgments from various benches, emphasizing that when the variance in valuations is minimal, it should not lead to income additions. The court highlighted the importance of consistency in accepting previous tribunal decisions unless appealed, citing relevant cases to support this principle.Income from Undisclosed Sources under Section 68:The court also addressed the deletion of the addition of Rs. 15,00,000 on account of income from undisclosed sources under section 68. It noted that the assessee failed to discharge the burden of proving the genuineness of the donors. However, the Tribunal's acceptance of additional evidence led to the deletion of this addition. The court reiterated that once credible evidence is presented and doubts dispelled, there is no legal basis for challenging the decision. Ultimately, the court dismissed the appeal, finding it without merit and not raising any substantive questions of law under Section 260A of the Income-tax Act, 1961.This judgment underscores the importance of credible evidence, lawful consideration of additional evidence, and adherence to established legal principles in determining income tax liabilities. The court's decision emphasizes the need for consistency in accepting tribunal decisions and the burden of proof on taxpayers to substantiate income sources.