The Allahabad High Court (HC) has held that an Addition based on an unexplained deposit becomes valid when Three conditions required under section 68 of the Income Tax Act,1961 are not proved.
Sri Shubham Agarwal, counsel appeared for the appellant- assessee and Sri Krishna Agarwal, counsel appearing for the respondent-Revenue.
Under Section 68 of the Income Tax Act,1961 if any sum is found credited in the Books of account of Mrs Rupal Jain, the assessee and the assessee do not explain the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income tax as to the income of the assessee of that previous year.
The Assessing Officer has to inquire intothe nature and source of the deposit. If the explanation about the nature and source is found unsatisfactory, only then the amount so credited may be treated as income.
It was noted that considering the provision of Section 68, the assessee has to prove three conditions i.e.(i) identityofthecreditor;(2) capacityofsuchcreditortoadvance money; and (iii) genuineness of the transactions. It is held therein that if all the aforesaid three conditions are proved, the burden shifts on the revenue to prove that the amount belongs to the assessee.
It was evident that the assessee though has disclosed the source of the deposit but could not establish the nature thereof. Three conditions which are required to be proved by the assessee as per Section 68 of the Income Tax Act, 1961, could not be proved by him.
Justice Sunita Agarwal and Justice Vipin Chandra Dixit observed that the assessee has failed to prove the transaction as per Section 68 of the Income Tax Act,1961 and the appeal filed by the assessee was dismissed.
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