K.O. Mohandurai vs The Assistant Commissioner of Income Tax

V. Ramasubramanian, J.—This is an appeal filed by the assessee under Section 260-A of the Income Tax Act, 1961, questioning the correctness of the order passed by the Tribunal.

Heard Mr. J. Balachander, learned counsel for the appellant and Mr. T.R. Senthil Kumar, learned Standing Counsel for the Department.

In a search and seizure action initiated by the Department in the premises of a company by name M/s. Sakthi Mayil Finance (P) Ltd. on 29.9.1995, it was found that the appellant assessee had made substantial investments towards share capital and fixed deposits. Therefore, a notice under Section 158-BD of the Act was issued on 16.8.1996 and the assessee filed a return of income for the block period on 10.9.1996 admitting the undisclosed income.

Thereafter, notices were issued under Sections 143(2) and 142(1) calling for the sources of investments. Though the assessee furnished a statement of affairs, the sources could not be established.

The appellant claimed that there were loans and liabilities to the extent as follows:

On the basis of the claim made by the appellant, summons were issued to the so-called creditors. They returned unserved with the endorsement that no such assessee was found. Since no explanation could also be offered as to why the summons could not be served successfully on the creditor, the Assessing Officer passed an order dated 26.8.1997, treating a total amount of Rs. 77,62,070/- as undisclosed income for the block period. However, what was invoked was Section 68.

The assessee filed a statutory appeal before the Income Tax Appellate Tribunal. The Tribunal also gave an opportunity to the appellant to establish that the money was received from those creditors. But, the appellant was not able to produce any evidence. Therefore, the Tribunal held against the assessee insofar as item relating to credit borrowed from Beauty Apparels is concerned. Aggrieved by the order of the Tribunal treating the amount received by the assessee from Beauty Apparels as part of the income, the assessee is before us.

The appeal was admitted on the following questions of law on 07.7.2007:

"(i) Whether the Tribunal is correct is sustaining the action of the Assessing Officer in taking the amount of Rs. 10,00,000/- appearing the name of M/s. Beauty Apparels as undisclosed income?

(ii) Whether the Tribunal is right in coming to the conclusion that the said credit entry was not proved even though the confirmation letter from the creditor was placed on record?"

There is no dispute about the fact that during the search and seizure operation conducted against the company in Namakkal, it was found that the appellant had made substantial investments in that company. When called upon to explain, the appellant claimed that a sum of Rs. 10,00,000/- out of the total amount that was unearthed, was received from a company by name Beauty Apparels. The summons issued to Beauty Apparels could not be served on them. The appellant was not able to produce the creditor. The assessee was given an opportunity to furnish the correct address, but that also could not be done. Even before the Tribunal, the assessee had an opportunity to prove the credit received from Beauty Apparels, but the assessee could not prove it.

It is needless to point out that when an investment made by a person is claimed to have come from a particular source, it is up to the assessee to prove it. In this case, the assessee did not and could not discharge the burden cast upon him. Therefore, the Assessing Officer as well as the Tribunal were right in holding the issue against the appellant insofar as the amount claimed to have been received from Beauty Apparels is concerned. Therefore, both the questions of law are answered against the appellant. No costs.