Benefit of doubt needs to go in favour of assessee when tested on the touchstone of preponderance of probabilities, the explanation offered appears fairly reasonable.
In a recent judgment, ITAT Delhi deleted addition under section 69A and held that benefit of doubt needs to go in favour of the assessee when tested on the touchstone of preponderance of probabilities the explanation offered appears fairly reasonable.
ABCAUS Case Law Citation:
4546 (2025) (05) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition towards unexplained investment under section 69A and unexplained investment towards purchase of commercial vehicle u/s 69 of the Income Tax Act, 1961 (the Act).
The appellant assessee was doing ‘Kabadi business’ wherein old batteries were purchased from scrap holders and after short processing etc. the same were sold to the unregistered kabadi’s.
During the previous Year, due to surveillance on account of Uttar Padesh Poll, police seized from the possession of the assessee cash amounting to Rs. 12 lakhs.
During the year under consideration, the assessee had declared receipts and offered income under section 44AD of the Act.
The assessee stated that the full amount of Rs. 12 lakhs did not belong to him exclusively and the amount belonged to two other assessee. It was stated that the aforesaid amount was payment collected from different persons against the scrap batteries supply. An affidavit of the other suppliers was filed before the lower authorities wherein other parties deposed on oath that a part of the amount belonged to them.
However, the Assessing Officer made the impugned addition for the full amount to the income of the assessee. The CIT(A) confirmed the addition.
It was the contention of the assessee that an affidavit had been filed to submit that part of the cash belonged to other parties. The facts mentioned in the affidavit had not been refuted and therefore, should be believed. Reliance was placed in on the judgment of the Hon’ble Supreme Court and Co-ordinate Bench of the ITAT.
It was further contented that certain turnover declared in return of income (‘ROI’) also included the remaining cash transaction in Kabadi business. Likewise, past years savings adequately covers source of purchase of commercial vehicle.
The ITAT observed that having regard to the smallness of amount involved and attendant circumstances, the explanation offered cannot be disbelieved and held implausible. The Tribunal opined that when tested on the touchstone of preponderance of probabilities, explanation offered appeared fairly reasonable.
The ITAT further observed that the assessee had declared turnover of approx. Rs. 20 lakhs and also offered an income of approx. 4 lakhs which encompassed the cash attributable to the assessee i.e. cash belonging to the assessee. The remaining amount claimed to be belonging to other parties was supported by affidavits of respective parties.
Accordingly, the Tribunal held that the benefit of doubt needs to go in favour of the assessee. The explanation towards source of purchase of commercial vehicle was also plausible. Consequently, the additions made by the AO were deleted.
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