The Chhattisgarh High Court carried an ex-parte assessment u/s 144 of the Income Tax Act, 1961, against a taxpayer who failed to take part in assessment proceedings or describe the cash deposit source of ₹11,44,070 in his bank account.
The bench Justices Sanjay K Agrawal and Amitendra Kishore Prasad remarked that under sections 68 and 69A if a taxpayer does not furnish an effective explanation for the unexplained credits then those amounts could be regarded as taxable income. The appellant failed to respond or appear before the authorities despite receiving several notices from the Assessing Officer, resulting in the issuance of an ex-parte assessment order.
Against the appellant, The Assessing Officer, Commissioner of Income Tax (Appeals), and Income Tax Appellate Tribunal (ITAT) ruled citing that he is not able to substantiate his claims with credible documentary evidence.
The decision of the ITAT has been contested by the appellant claiming that he was not liable to keep the books of account under section 44AA of the IT Act and furnishes reasons pertinent to the recoveries incurred from clients of a third party.
The court upheld the ITAT’s decision, highlighting that the appellant’s failure to clarify the origin of the cash deposit justified the assumption that it was income.
The judgment authored by Justice Agrawal kept that, a cautious perusal of the above-mentioned provision shall cite that where any sum is discovered credited in the books of the taxpayer that is carried for any former year it might get levied to income tax as the taxpayer income of that former year and if the explanation proposed via the taxpayer for the nature and the source of sums found credited in the books does not sufficient.
Against the taxpayer in the case, there is a prima facie proof viz the receipt of money and then the load is on the taxpayer to rebut it and if he is not able to rebut then it may be ruled against the taxpayer that it was the receipt of an income nature.
The claim of the appellant is been dismissed by the Chhattisgarh High Court that a cash deposit in his bank account is of the third party for whom he acted as a collection agent. It was observed by the court that the appellant must ask the third party to elaborate on the deposit.
Quoting the judgment of the Apex court in Commissioner of Income Tax, Salem v. K. Chinnathamban (2007), it was said by the court that when deposits are in the name of the third party that individual is needed to be asked to elaborate the fund’s source. The obligation for establishing the deposit sources is within the person whose name appears on the account.
The court cited the case of Vijay Kumar Talwar vs. Commissioner of Income Tax, Delhi (2011), in which the Supreme Court upheld earlier rulings stating that unexplained cash credits could be treated as taxable income if the taxpayer fails to furnish proof to rebut the assumption u/s 68 of the Income Tax Act.
“Reverting to the facts of the present case in the light of the aforesaid principles of law laid down by their Lordships of the Supreme Court in the aforementioned decisions, it is quite vivid that in the instant case, despite a number of notices having been issued by the Assessing Officer to explain and to furnish the nature and source of the cash deposits of 11,44,070/- in the bank account of the ₹ appellant herein / assessee, the appellant chose not to appear and did not furnish any explanation either before the Assessing Officer or before the appellate authority i.e. the CIT (Appeals), NFAC, however, the appellant has furnished some explanation in the shape of additional documents holding that it is the amount of M/s. Shriram Transport Finance Company Limited stating that the amount of ₹ 11,44,070/- was collected by him (appellant/assessee) as a recovery agent from its borrowers who were located in naxal affected areas and deposited in his account. However, this explanation, for the reasons mentioned in the shape of affidavit, has not been found to be the reasonable explanation and the ITAT has rightly come to the conclusion that the assessee has failed to substantiate the nature and source of the cash deposits in his bank account.”, the court mentioned.
The appeal was dismissed, subsequently.
| Case Title | Shri Dinesh Singh Chouhan Vs. The Income Tax Officer |
| Citation | TAXC No. 179 of 2024 |
| Date | 12.09.2024 |
| For Appellant | Mr Siddharth Dubey |
| For Respondents | Mr. Amit Chaudhari |
| Chhattisgarh High Court | Read Order |
