The court upheld the necessity for adequate evidence in tax claims while allowing partial modifications to the income assessment based on reasonable estimations.

Headnote:(A) Income Tax Act, 1961 - Section 147, 144B, and 143(3) - Appeal by Revenue against order of Ld. CIT(A) deleting additions made by Ld. AO - Assessee engaged in LC discounting business, with substantial bank credits - Ld. AO rejected claims for lack of evidence, while Ld. CIT(A) accepted the business activity upon verification of bank documents - Ld. CIT(A) sustained additional income of Rs.22 lakhs offered by the assessee - Court found Ld. AO's rejection of claims based on conjecture and upheld Ld. CIT(A)'s findings with modifications. (Paras 2-6)

(B) Burden of Proof - It is incumbent upon the assessee to substantiate claims with adequate evidence, failing which the AO's findings may be upheld. (Para 6.1)

(C) Estimation of Income - In absence of sufficient evidence, income may be estimated based on comparable instances and market rates. (Para 6.1)

Facts of the case:
The appeal arises from the assessment of an individual who declared total income of Rs.39,81,780/- but had significant bank credits. The AO made substantial additions due to alleged unsubstantiated claims of discounting business, which the Ld. CIT(A) partly overturned.

Findings of Court:
The court found that the Ld. CIT(A) correctly accepted the discounting activity based on bank documents and previous assessments, but also deemed it appropriate to add Rs.10 lakhs to the declared income for the discounting business.

Issues: The main issues were whether the assessee substantiated her claim of engaging in LC discounting business and the appropriateness of the income estimation by the AO.

Ratio Decidendi: The court emphasized the importance of evidence in tax assessments and the necessity for the AO to provide a logical basis for any rejections of claims.

Result: Appeal of the Revenue is partly allowed.

आदेश/ORDER

PER MADHUSUDAN SAWDIA, A.M.:

This appeal is filed by the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 22.01.2024 for the A.Y. 2016-17.

2. The brief facts of the case are that, Mamta Jain (“the assessee”) is an individual, filed her Return of Income (“ROI”) on 17.10.2016 declaring total income of Rs.39,81,780/-. The Learned Assessing Officer (“Ld. AO”) found that the assessee had credit transactions of Rs.3,26,38,65,273/- in her bank account during A.Y. 2016-17.

Therefore, he issued notice u/s.148 of the Income Tax Act, 1961 (“the Act”) on 29.03.2021 and in response to the notice, the assessee declared the same income as declared in ROI dated 17.10.2016. During the assessment proceedings, the assessee submitted that the total credit of Rs.3,26,38,65,273/- in bank account consist of Rs.1,06,40,40,426/- on account of receipt from steel trading business and the balance of Rs.2,19,98,24,847/- pertains to the receipt on account of LC discounting transaction (discounting business). Before the Ld. AO, the assessee filed revised computation of income by showing additional income of Rs.22 lakhs, to settle the litigation on account of credit found in the bank account. However, the Ld. AO was not satisfied with the submission of the assessee, that the balance of Rs.2,19,98,24,847/- was pertaining to the receipt on account of discounting business, contending that necessary evidences were not produced by the assessee in support of such claim. Finally, the Ld. AO rejected the book results and estimated the income of the assessee at Rs.2,15,99,185/-, making addition of Rs1,74,67,401/- u/s.147 r.w.s. 144B of the Act on 30.03.2022.

3. Aggrieved with the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) verified the bank documents related to discounting business on sample basis. The Ld. CIT(A) also found that in the very next year also the assessee had shown the discounting business in her ROI and the Ld. AO in the assessment u/s.143(3) of the Act accepted the discounting business of the assessee. The Ld. CIT(A) finally accepted the claim of the assessee and deleted the additions made by the Ld. AO. However, the Ld. CIT(A) sustained the addition of Rs.22 lakhs, which the assessee herself had offered before the Ld. AO.

4. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before us. The Learned Department Representative (“Ld. DR”) submitted that, the assessee failed to produce licence with regards to her discounting business, invoices raised for commission received from the said business and the contract / agreement with other entities to substantiate her claim. Further there was no TDS made by the other party on the commission income of the assessee. Hence, the assessee failed to substantiate her claim and there is no infirmity in the order passed by the Ld. AO. Therefore, the Ld. DR prayed before the bench to allow the appeal of revenue.

5. Per contra, the Learned Authorised Representative (“Ld. AR”) submitted that, no licence is required to carry on the discounting business. Further, he submitted that, no invoice is required to be issued for the said activity, as the customer make the payment through banking channel including their charges on account of bill discounted. He also submitted that, the charges received by them is in the nature of bill discount and not the commission, hence no TDS has been deducted by any customer. Finally, the Ld. AR vehemently relying on the order of Ld. CIT(A), prayed before the bench to uphold the order of Ld. CIT(A).

6. We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have gone through the order of Ld. CIT(A). The Ld. CIT(A) at para nos.5.7 and 5.8 has categorically given his findings and accepted the discounting business of the assessee which is to the following ef

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2025 Supreme(Online)(ITAT) 2800

INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)SHRI LALIET KUMAR, J, SHRI MADHUSUDAN SAWDIA, ACJDY. COMMISSIONER OF INCOME TAX CIRCLE-1(1) HYDERABAD – AppellantVersusMAMTA JAIN HYDERABAD – RespondentITA 250/HYD/2024

The court upheld the necessity for adequate evidence in tax claims while allowing partial modifications to the income assessment based on reasonable estimations.

INCOME TAX APPELLATE TRIBUNAL (HYDERABAD BENCH)
SHRI LALIET KUMAR, J, SHRI MADHUSUDAN SAWDIA, ACJ
DY. COMMISSIONER OF INCOME TAX CIRCLE-1(1) HYDERABAD – Appellant
Versus
MAMTA JAIN HYDERABAD – Respondent
ITA 250/HYD/2024