2025 (6) TMI 904 - HC - Income Tax

High Court Validates Tax Assessment on Unexplained Bank Deposits, Affirming Rs. 55.32 Lakh Income Addition Under Section 68

P. Srinivasa Goud Versus The Income Tax Officer, The Commissioner of Income Tax (Appeals) -5, The Commissioner of Income Tax (Appeals) -5, The Commissioner of Income Tax (Appeals) -5.

HC upheld tax authorities' order adding Rs. 55,32,222 to assessee's income due to unexplained bank deposits. Despite multiple opportunities, the assessee ... Unexplained bank deposits - ITAT rejected the prayer made on behalf of the assessee to grant one more opportunity to adduce evidence as already eight adjournments have already been granted to the assessee to adduce the material, thus confirmed addition - HELD THAT:- Despite adjournment being granted, the assessee neither furnished any details nor produced any evidence in respect of the deposits made by the assessee. The appeal relates to assessment year 2007-08. Therefore, in the facts and circumstances, in the absence of any explanation from the assessee, the Tribunal rightly inferred that the assessing officer has correctly added a sum in the order of assessment. The impugned order dated 06.12.2019, passed by the Tribunal does not suffer from any infirmity and the findings recorded by the Tribunal, by no stretch of imagination, be termed as perverse - Decided against assessee. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this appeal under Section 260A of the Income Tax Act, 1961, pertaining to the assessment year 2007-08, are:Whether the Assessing Officer was justified in adding the sum of Rs. 55,32,222/- to the total income of the assessee on account of unexplained bank deposits.Whether the assessee was entitled to be granted further opportunity to produce evidence and explain the source of the deposits despite multiple opportunities and adjournments already granted.Whether the orders passed by the Assessing Officer, Commissioner of Income Tax (Appeals), and the Income Tax Appellate Tribunal suffer from any legal infirmity or perversity warranting interference by the High Court.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Legitimacy of Addition of Rs. 55,32,222/- to Income on Account of Unexplained Bank DepositsRelevant Legal Framework and Precedents: Under the Income Tax Act, 1961, unexplained cash credits or unexplained deposits in bank accounts can be added to the total income of the assessee as income under Section 68 or related provisions, if the assessee fails to satisfactorily explain the nature and source of such deposits. The principle is that the burden lies on the assessee to explain the source of such deposits, failing which the Assessing Officer is entitled to make an addition.Court's Interpretation and Reasoning: The Court noted that the Assessing Officer observed deposits totaling Rs. 55,32,222/- in three bank accounts held by the assessee. The assessee did not provide any explanation or documentary evidence regarding the source of these deposits during the assessment proceedings. Consequently, the Assessing Officer added the entire sum to the total income.Key Evidence and Findings: The absence of any explanation or documentary proof from the assessee in respect of the deposits was a crucial finding. The Assessing Officer's order was affirmed by the Commissioner of Income Tax (Appeals) and later upheld by the Tribunal, which found no evidence to rebut the addition.Application of Law to Facts: Given the failure of the assessee to explain the source of the deposits despite repeated opportunities, the addition was justified under the statutory provisions. The Court found that the Assessing Officer's action was in accordance with the law and facts.Treatment of Competing Arguments: The assessee contended that further opportunity should have been granted to produce evidence. However, the Court balanced this against the fact that multiple chances had already been provided without any compliance from the assessee.Conclusion: The addition of Rs. 55,32,222/- to the total income on account of unexplained deposits was legally sustainable.Issue 2: Entitlement to Further Opportunity to Adduce EvidenceRelevant Legal Framework and Precedents: The principles of natural justice require that an assessee be given a reasonable opportunity to present evidence. However, this right is not absolute and can be denied if the assessee is found to be deliberately non-compliant or has been granted sufficient opportunities.Court's Interpretation and Reasoning: The Court observed that the Commissioner of Income Tax (Appeals) had granted multiple opportunities on various dates (08.04.2013, 06.05.2013, 08.07.2013, 31.07.2013, and 19.08.2013). Furthermore, the Tribunal had granted eight adjournments during the appellate proceedings. Despite these, the assessee failed to submit any evidence or explanation.Key Evidence and Findings: The repeated failure of the assessee to furnish details or appear despite numerous chances was a critical factor. The Tribunal's refusal to grant yet another opportunity was based on this history.Application of Law to Facts: The Court held that in the facts and circumstances, the Tribunal was justified in refusing further adjournments or opportunities. The principle that natural justice cannot be used as a tool for delay was implicitly applied.Treatment of Competing Arguments: The assessee's plea for one more opportunity was rejected on the ground that ample chances had already been extended without compliance.Conclusion: No further opportunity to adduce evidence was warranted in this case.Issue 3: Validity and Correctness of the Orders Passed by the Authorities BelowRelevant Legal Framework and Precedents: The High Court's jurisdiction under Section 260A is to examine whether the Tribunal's order suffers from any substantial question of law or is perverse or illegal.Court's Interpretation and Reasoning: The Court found that the Tribunal's order dated 06.12.2019 was well reasoned and based on the facts and law. There was no perversity or illegality in upholding the additions made by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals).Key Evidence and Findings: The consistent failure of the assessee to provide evidence despite multiple opportunities was the factual matrix supporting the orders. The Tribunal's order was a reasoned decision based on this conduct.Application of Law to Facts: The Court applied the principle that appellate authorities must uphold the assessment if the assessee fails to discharge the burden of proof and no legal infirmity is shown.Treatment of Competing Arguments: The appellant's contention that the orders were flawed was dismissed due to lack of any substantial legal or factual error.Conclusion: The orders passed by the Assessing Officer, Commissioner of Income Tax (Appeals), and the Tribunal were upheld as valid and legally sustainable.3. SIGNIFICANT HOLDINGS'In the absence of any explanation from the assessee, the Tribunal rightly inferred that the assessing officer has correctly added a sum of Rs. 55,32,222/- in the order of assessment.''The impugned order dated 06.12.2019, passed by the Tribunal does not suffer from any infirmity and the findings recorded by the Tribunal, by no stretch of imagination, be termed as perverse.''Needless to state that the appellant is at liberty to claim under the Direct Tax Vivad se Vish