INCOME TAX ACT, 1961

Section 68 Section 41(1)

Income from undisclosed sources - Addition under section 68 read with section 41(1) - Burden of proof not discharged by assessee on unclaimed and unexplained deposits/receipts -

Assessee company was engaged in the business of Mutual Fund Distribution and Marketing Promotional Services. Since assessee could not prove genuineness of the depositors of the unclaimed receipts, the same was being disallowed under section 41 and added back to the total income of the assessee. Also, assessee vide order sheet entry was required to produce complete address of the parties from whom securities deposits were received by the assessee with their copy of account and, confirmation. The assessee did not produce any address, copy of account and confirmation of the parties. Assessee vide submission however, had furnished the detail of security deposits received from various parties/individual. As merely submitting the list of depositors/creditors was not sufficient to discharge the onus and burden of proof cast on the assessee. It opted not to furnish any details or clarification to this office though it was given sufficient opportunities to do so. Accordingly, the amount Rs. 2,44,40,054 was being added to the income of the assessee-company as 'unexplained' credits/deposits under section 68. CIT(A) confirmed the order of AO but both receipts/deposits were added under section 68.Held: CIT(A) rightly held that the addition under section 41 of Rs. 15,50,000 shown as unreconciled/unclaimed receipts by the appellant at the end of the year. The appellant had not provided details of the persons to whom these receipts of Rs. 15,50,000 were attributable - their names, addresses, PANs, etc., to prove their identities or copies of their I.T. returns, bank statements and balance sheets in support of their creditworthiness and the genuineness of the transactions. The onus was on the assessee to establish the identities and creditworthiness of these parties as also the genuineness of the transactions which it failed to do both at the assessment and appellate stage. Accordingly, the impugned addition to income made by the AO was upheld, but under a different section, namely, section 68. Further, the appellant had also filed copies of TDS certificates as proof that the parties from whom security deposits were received were agents of the assessee. But this, in no way proves the source of the security deposits claimed to have been received. It may be possible that a relatively small payment, say Rs. 10,000 was made to an agent from whom security deposit of substantial amount, e.g. Rs. 1 lac was shown to have been received. In other words, payment to an agent and deduction of tax from such payment does not prove the creditworthiness of that agent or the genuineness of the purported security deposit from that agent. Assessee had not been able to discharge the initial onus which lay on it as per section 68 in respect to the security deposits aggregating Rs. 2,44,40,054. Hence, the action of the AO in adding these amounts to the assessee's income under section 68 was, therefore, confirmed. CIT(A) had given detailed reasons for his decision on merits in the impugned appellate Order, dated 8-8-2016 CIT(A) during appellate proceedings in the Tribunal ('ITAT') no material had been brought for consideration to persuade to take a view different from the view taken by the CIT(A) in the impugned order on merit. CIT(A) had passed speaking order on merits and accordingly, this appeal was dismissed.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2008-09

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