While upholding an Assessment order for unexplained credit under section 69 of the Income Tax Act, 1961, the Chennai bench of the ITAT held that it is the duty of the assessee to satisfactorily explain the credit appeared in the books of accounts with necessary evidenceand the Assessing officer was right in confirming the addition if such duty is not fulfilled.
The assessee approached the Tribunal challenging the addition in respect of unexplained credits appeared in the name of Mr. Sivaraman& Mr. K.Murugesan amounting to Rs.1,55,12,283/-. The Assessing Officer made additions towards credits on the ground that the assessee could not file any evidence to explain the credits. During the second round of litigation, the Assessing Officer has made additions towards credits on very same basis and observed that except general statement, the assessee could not furnish any specific evidence to justify credits in the name of both the parties.
The two-Member bench comprising Shri V. Durga Rao, Judicial Member and Shri G. Manjunatha, Accountant Memberobserved that the assessee claims to have filed all necessary details to justify credits and also explainedgenuineness of transaction and creditworthiness of the parties.
“However, on perusal of various facts brought out by the Assessing Officer during the assessment proceedings, what we could notice is that both parties have categorically agreed in the statement recorded during the course of search that they had worked as agents for the assessee and also received monthly income of Rs.10,000/-. They further stated that they have opened bank accounts as per direction of Mr. S.Mohan Kumar, present assessee. From the above, what is clear is that credits appeared in the name of the above two persons are not satisfactorily explained to the Assessing Officer with necessary evidence to prove genuineness of transaction and creditworthiness of parties, although, the assessee has filed certain evidences to prove identity of the persons,” he bench said.
Upholding the addition, the ebnch held that“It is well settled principles of law that when a credit appeared in the books of account of the assessee, then it is for the assessee to satisfactorily explain the credit with necessary evidence. Unless the assessee discharges its burden and explain credit, the Assessing Officer may treat the same as unexplained income of the assessee. In this case, the assessee failed to file necessary evidence to establish credits appearing in the names of abovetwo persons in the books of account of the assessee as genuine transactions.”
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