AO Can't Draw An Adverse Inference For Mere Non-Response From Directors To Notices: Calcutta High Court

The Calcutta High Court, while deciding whether the addition made under Section 68 of the Income Tax Act, 1961, was justified or not, held that only because the directors failed to respond to the notices issued, the Assessing Officer could draw an adverse inference.

The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the assessing officer failed to comment on the veracity or admissibility of any of the details or documents produced by the assessee to prove the identity, the creditworthiness of the share subscribers, and the genuineness of the transaction.

Section 68 aims to ensure individuals and corporations transparently disclose their income by addressing unexplained cash credits in their books of accounts, placing the responsibility on the taxpayer to prove the legitimacy of such credits.

The issue raised was whether the addition made under Section 68 of the Income Tax Act was justified. The Tribunal has done an elaborate examination of the factual matrix, which ought to have been done by the Commissioner of Income Tax (Appeals) when the appeal was decided.

In the order passed by the Commissioner of Income Tax (Appeals), none of the grounds raised by the assessee were considered, and it is totally a non-speaking order without application of mind.

The Tribunal has examined the facts produced by the assessee not before the Tribunal for the first time but the facts that were already placed before the Assessing Officer. The Tribunal noted that the Assessing Officer did not comment on the veracity or admissibility of any of the details or documents produced by the assessee to prove the identity, the creditworthiness of the share subscribers, or the genuineness of the transaction.

The court upheld the order passed by the tribunal, stating that the tribunal has done an elaborate examination of the factual matrix, which ought to have been done by the Commissioner of Income Tax (Appeals) when the appeal was decided. The matter was decided in favour of the assessee.

Counsel For Petitioner: Tilak Mitra

Counsel For Respondent: Sourav Chunder

Case Title: Principal Commissioner Of Income Tax Vs Atlantic Dealers Pvt. Ltd.

Case No.: ITAT/41/2024

Click Here To Read The Order