Deemed income under Section 69A: unexplained withdrawals from introducer operated accounts treated as assessee's income; addition upheld.

Addition under Section 69A was sustained where the Assessing Officer established that numerous bank accounts were opened by introducers, withdrawals were effected by those introducers and purported account-holders were untraceable or disclaimed knowledge. The assessee's cheque discounting explanation and claim that sums were passed to workers for commission lacked documentary proof and failed to explain the nature and source of the funds. Consequently, unexplained withdrawals were treated as deemed income under Section 69A and the addition was upheld in revenue's favour.

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Issues: (i) Whether the addition of Rs. 5,49,98,884/- made by the Assessing Officer under Section 69A of the Income-tax Act, 1961 on account of amounts withdrawn from bank accounts opened by introduction should be deleted by the Commissioner of Income Tax (Appeals).

Analysis: The Assessing Officer recorded evidence that 9,165 accounts were opened by introduction, withdrawal vouchers showed signatures and withdrawals were received by the introducers, a sample of supposed account-holders were not traceable or denied any knowledge of the accounts, and the bank manager confirmed withdrawals were effected on behalf of the introducer by signature on withdrawal slips. The Assessing Officer applied Section 69A of the Income-tax Act, 1961 where unexplained money found in the possession of the assessee and not recorded in books may be treated as deemed income if the assessee does not offer a satisfactory explanation. The assessee claimed a legitimate business of cheque discounting and that amounts were passed on to genuine workers for a commission. The appellate authority accepted the cheque-discounting explanation without adequately confronting the AO's evidence that the account-holders were not genuine and that the introducer operated the accounts and received the amounts. The evidence before the Assessing Officer established ownership of the withdrawn sums by the introducer and absence of documentary proof from the assessee to show the money belonged to others. Where the assessee fails to discharge the burden to explain the nature and source of the money found in his possession, Section 69A permits treating such amounts as deemed income.

Conclusion: The addition under Section 69A of the Income-tax Act, 1961 of Rs. 5,49,98,884/- is upheld. This is against the assessee (in favour of Revenue).

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