Facts of the Case

The assessee, Smt. Usha Rani Gupta, was subjected to scrutiny assessment proceedings wherein the Assessing Officer made additions to the declared income on account of alleged unexplained amounts and discrepancies. The assessment was completed under Section 143(3) of the Income Tax Act, 1961. The assessee challenged the additions before the Commissioner of Income Tax (Appeals), but the same were sustained, leading to further appeals before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the additions made by the Assessing Officer were legally sustainable.
  2. Whether the Assessing Officer had discharged the burden of proof before making additions.
  3. Whether the explanations and evidence furnished by the assessee were properly considered.
  4. Whether the order of the Commissioner (Appeals) required interference by the Tribunal.

Petitioner’s Arguments (Assessee)

  • The additions were made without adequate supporting material.
  • The assessee had provided explanations and documentary evidence regarding the transactions questioned by the department.
  • The Assessing Officer relied on presumptions rather than conducting proper inquiry.
  • The appellate authority failed to appreciate the evidence on record.
  • Therefore, the additions were unjustified and liable to be deleted.

Respondent’s Arguments (Revenue)

  • The Assessing Officer acted within statutory authority based on discrepancies observed during assessment.
  • The explanations furnished by the assessee were insufficient or not satisfactorily substantiated.
  • The Commissioner (Appeals) had examined the matter and confirmed the additions.
  • Accordingly, the assessment order deserved to be upheld.

Court Order / Findings

  • Additions must be supported by cogent material and proper verification.
  • Suspicion, assumptions, or incomplete inquiry cannot justify additions.
  • When the assessee furnishes plausible explanations supported by documents, the burden shifts to the Revenue.
  • Failure of the department to rebut such explanations renders the additions unsustainable.

Important Clarification / Legal Principle

  • Income-tax additions cannot be sustained solely on suspicion or conjecture.
  • The Revenue bears the burden to substantiate allegations with credible material.
  • Assessment proceedings must adhere to principles of natural justice and reasonableness.
  • Appellate authorities must independently evaluate whether additions are evidence-based.

Link to download the order –

https://itat.gov.in/public/files/upload/1623753060-373%20and%20374%20Smt.%20Usha%20Rani%20Gupta.pdf

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