2025 (6) TMI 958 - AT - Income Tax

Unexplained investment claims rejected under Section 69A after contradictory explanations during demonetization period

Shashi Rani. Versus Income-tax Officer, Ward 1 (2) (4), Agra.

Shashi Rani. Versus Income-tax Officer, Ward 1 (2) (4), Agra. - TMI 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Appellate Tribunal (AT) in this appeal are:Whether the addition of Rs. 18,00,200/- made by the Assessing Officer (AO) under section 69A of the Income-tax Act, 1961 ('the Act') as unexplained investment/credits is justified and sustainable in law.Whether the assessee's inconsistent and contradictory explanations regarding the source of the deposited amounts during the demonetization period undermine the credibility of her claim and justify the rejection of her submissions.Whether the onus lies on the revenue to prove that the investment made by the assessee is her undisclosed income, and whether the AO has discharged this onus adequately.Whether the CIT(Appeals) erred in confirming the addition by not considering the submissions and evidence (such as the cash book) filed by the assessee during appellate proceedings.Whether the principles of natural justice and fair adjudication were followed by the CIT(Appeals) in disposing of the appeal.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Addition under Section 69A of the ActRelevant Legal Framework and Precedents: Section 69A of the Income-tax Act empowers the AO to make additions to income where any investment or credit is found to be unexplained. The burden initially lies on the assessee to explain the source of such investment or credits. If the explanation is not satisfactory, the AO may treat the amount as income of the assessee.The Court referred to the principle that an assessee cannot take contradictory stands in the same case. The Supreme Court in Amar Singh vs. Union of India (2011) held that a litigant must go with clean hands and cannot prevaricate by taking inconsistent positions. Similarly, in Joint Action Committee of Airline Pilots Association of India vs. DG of Civil Aviation (2011), the doctrine of election and estoppel was emphasized, stating that a party cannot approbate and reprobate by taking inconsistent pleas.Court's Interpretation and Reasoning: The Court noted that the assessee initially admitted depositing Rs. 18,00,200/- during the demonetization period, claiming the amount comprised demonetized currency notes kept since her marriage in 2008, received as gifts from relatives and friends. Subsequently, the assessee changed her stance, claiming engagement in the shoe business since 2008-09 as the source of income for the deposits.The Court found these two explanations to be contradictory and inconsistent, reflecting an artificial stand taken by the assessee. The first explanation did not provide any cogent or convincing reason why the cash was kept unaccounted for such a long period. The second explanation was an afterthought, introduced only during the assessment proceedings.Key Evidence and Findings: The assessee did not file any return of income, nor did she respond to statutory notices under section 142(1) adequately. The Assessing Officer issued a show cause notice and a query letter seeking details of bank accounts, PANs of relatives and friends, sources of income, household expenses, and assets, but the responses were inconsistent. The cash book submitted during appellate proceedings was not considered by the CIT(Appeals), but the Court found no merit in the submissions given the contradictory nature of the explanations.Application of Law to Facts: Given the inconsistency and failure to provide a reasonable and credible explanation for the deposits, the AO's addition under section 69A was justified. The onus was on the assessee to explain the source of investment satisfactorily, which she failed to do.Treatment of Competing Arguments: The assessee argued that the addition was illegal and bad in law, that the CIT(Appeals) did not consider her submissions or cash book, and that the revenue failed to discharge its burden. The Court rejected these arguments, emphasizing the inconsistent and artificial nature of the assessee's claims and the principle that the assessee cannot blow hot and cold by taking contradictory stands.Conclusions: The Court upheld the addition of Rs. 18,00,200/- under section 69A as unexplained investment, confirming the orders of the AO and CIT(Appeals).Issue 2: Whether CIT(Appeals) Erred in Confirming Addition without Considering SubmissionsRelevant Legal Framework: The CIT(Appeals) is required to consider all submissions and evidences filed by the assessee during appellate proceedings before passing an order. Principles of natural justice require that the assessee's explanations be duly considered.Court's Interpretation and Reasoning: The assessee contended that the CIT(Appeals) did not consider the cash book and other submissions. However, the Court observed that the CIT(Appeals) had recorded the facts and found the explanations to be inconsistent and artificial. The absence of any explicit mention of the cash book does not imply non-consideration, especially when the submissions themselves were contradictory and lacking in credibility.Application of Law to Facts: The Court held that the CIT(Appeals) was justified in confirming the addition, given the nature of the evidence and the contradictory explanations. There was no violation of natural justice or procedural irregularity.Conclusions: No error was found in the CIT(Appeals) order confirming the addition.Issue 3: Onus on Revenue to Prove Unexplained IncomeRelevant Legal Framework: Under section 69A, the initial burden lies on the assessee to explain the source of investment or credits. If the explanation is unsatisfactory, the AO may treat the amount as income.Court's Interpretation and Reasoning: The Court emphasized that the assessee failed to provide a consistent and credible explanation for the deposits. The initial explanation of gifts kept since 2008 was not supported by any evidence or reasonable justification. The subsequent claim of business income was inconsistent with the earlier stand and was not substantiated adequately.Application of Law to Facts: The AO discharged his burden by pointing to the inconsistent explanations and lack of credible evidence. The onus shifted back to the assessee, who failed to discharge it. Hence, the addition was justified.Conclusions: The AO and CIT(Appeals) rightly made the addition under section 69A given the assessee's failure to explain the source of deposits satisfactorily.3. SIGNIFICANT HOLDINGSThe Court made the following crucial legal observations and determinations:'An assessee can take different stands at different times but cannot take contrary stands in the same case. The litigant who goes to court and invokes its writ jurisdiction must go with clean hands. He cannot prevaricate and take any consistent positions.''The doctrine of election is based on the rule of estoppel - the principle that one cannot approbate and reprobate inheres in it. Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily.'The Court concluded that the addition of Rs. 18,00,200/- made under section 69A was justified and sustainable, as the assessee failed to provide a consistent, explicit, cogent, convincing, and reasonable explanation for the deposits made during the demonetization period.The Court found no infirmity or illegality in the orders of the AO and CIT(Appeals), and dismissed the appeal accordingly.