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2020 Supreme(SC) 321
SUPREME COURT OF INDIA
A.M. Khanwilkar, Dinesh Maheshwari, JJ.
Basir Ahmed Sisodiya – Appellant
Versus
The Income Tax Officer – Respondent
Civil Appeal No. 6110 of 2009
Decided on : 24-04-2020
For the Appellant(s) :P.V. Yogeswaran, Advocate
For the Respondent(s):Anil Katiyar, , Advocate
IMPORTANT POINT
When the transactions and concerned dealers are established and accepted by tribunal, tax assessment by addition of the transaction amount cannot be justified.
Headnote:
Income Tax Act, 1961 - Section 143 - Assessing officer imposing penalty Rs.2,26,000/- considering purchases of marbles from unregistered dealers as bogus on account of appellant-assessee failing to prove the correctness and genuineness of his claim in respect of such purchases - However, in penalty proceeding before CIT(A) appellant proving genuineness of such transactions by producing those dealers who established their identity and genuineness of the transactions - Addition of amount of Rs.2,26,000/- cannot be justified, much less, maintained. (Para 15)
Facts of the case:
the appellant/assessee was served with a notice under Section 143(2) of the Income Tax Act, 1961 by the Assessing Officer for the assessment year 1998-1999, pursuant to which an assessment order was passed. The Officer, inter alia, while relying on the Balance Sheet and the books of account, took note of the credits amounting to Rs. 2,2 6,000/-(Rupees two lakhs twenty-six thousand only). The Officer treated that amount as "Cash credits" under Section 68 of the 1961 Act and added the same in declared income of the assessee. The Officer then proceeded to compute the income of the assessee for the concerned assessment year.
The appellant/assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Jodhpur. The appeal was partly allowed.
The High Court dismissed the appeal.
Finding of the Court:
Addition of amount of Rs.2,26,000/- cannot be justified, much less, maintained.
Result: Appeal allowed.
JUDGMENT
A.M. Khanwilkar, J.
This appeal takes exception to the final judgment and order dated 21.8.2008 passed by the High Court of Judicature for Raj as than at Jodhpur (for short, "the High Court") in Income Tax Appeal No. 69 of 2006, whereby the appellant's appeal was dismissed and the order of Income Tax Appellate Tribunal, Jodhpur Bench (for short, 'the ITAT) came to be upheld.
2. In short, the appellant/assessee was served with a notice under Section 143(2) of the Income Tax Act, 1961 (for short, 1961 Act') by the Assessing Officer (for short, 'Officer') for the assessment year 1998-1999, pursuant to which an assessment order was passed on 30.11.2000. This appeal involves limited challenge to certain addition made under the heads - "Trading Account" and "Credits" in the assessment order. The Officer, inter alia, while relying on the Balance Sheet and the books of account, took note of the credits amounting to Rs. 2,2 6,000/-(Rupees two lakhs twenty-six thousand only). The Officer treated that amount as "Cash credits" under Section 68 of the 1961 Act and added the same in declared income of the assessee (for short, 'second addition'). The Officer then proceeded to compute the income of the assessee for the concerned assessment year. The relevant part of the computation is mentioned below: -
"Credits:
On examining the balance-sheet and accounts books of assessee, it is apparent that the assessee has shown credit amount of Rs.2,26,000/- in the names of the following 15 persons:
..... ..... .....
Accordingly, sufficient time and opportunity was granted to prove the veracity of credits of Rs. 2,26,000/- as shown by assessee. However false/wrong particulars or explanation were submitted with respect to credits shown by assessee. In this manner, the credits of Rs.2,26,000/- shown in the name of 15 persons, is not correct and any correct proof/evidence has not been produced by assessee with respect to income of creditors and source of income. Besides this, the credits of Rs. 2,26,000/- as shown in the name of 15 persons is held as unexplained under Section 68 and added in declared income of assessee.
Accordingly, the computation of income of assessee for assessment year 1998-99 is as follows:
| Income shown in the Returns | 87500/ | ||
| 1. Disallowed deduction U/s.24(1) as per discussion | 7200/ | ||
| 2. Additions in gross profit | 10000/ | ||
| 3. Additions on the basis of less Household expenses withdrawals | 18000/ | ||
| 4. Unexplained credits as per discussions | 226000/ | 261200/ | |
| Total taxable Income Tax | 348700/ |
Assessment was made. Necessary forms were issued. Notic be issued separately for imposition of penalty under Section 272(1)(c).”
3. Aggrieved, the appellant/assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Jodhpur (for short, 'CIT(A)'). The appeal was partly allowed vide order dated 9.1.2003. However, as regards the Trading Account and Credits in question, the CIT(A) upheld the assessment order.
4. The appellant/assessee then preferred further appeal to the ITAT. Having noted the issues and objections raised by the Department and the appellant/assessee, the ITAT partly allowed the appeal vide order dated 4.11.2004. However, the order relating to the second addition (under consideration in the present civil appeal) regarding credits of Rs.2,26,000/- (Rupees two lakhs twenty-six thousand only) came to be upheld.
5. The appellant/assessee then filed an appeal before the High Court under Section 260A of the 1961 Act. The appeal was admitted on 27.4.2006 on the following substantial question of law: -
'Whether claim to purchase of goods by the assessee could be dealt with under Section 68 of the Income Tax as a cash credit, by placing burden upon the assessee to explain that the purchase price does not represent his income from the disclosed sources?'
The principal argum
