M/S. DEEPAK EXTRUSIONS PVT. LTD., V. THE DEPUTY COMMISSIONER OF INCOME TAX

WP/33125/2017

AI Insights

The case involves M/s. Deepak Extrusions Pvt. Ltd., which filed a writ petition against the Deputy Commissioner of Income Tax, Central Circle 1(4), challenging an assessment order and a demand notice issued under Sections 143(3) and 144 of the Income Tax Act, 1961, for the assessment year 2014-15. The primary contention was regarding the addition of 'unexplained cash credits' amounting to Rs. 10.49 Crores under Section 68 of the Act. The Income Tax Department had rejected the assessee's explanation for these cash credits, citing lack of documentary evidence and discrepancies found during third-party verification. The High Court of Karnataka, after preliminary hearing, directed the petitioner to seek redress through the appellate authority rather than through writ jurisdiction, highlighting the principle of exhaustion of statutory remedies.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 697838 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-02-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI
• Assessee Lawyers: HARISH
• Keywords: Assessment Order; Burden of Proof; Extraordinary jurisdiction; Income Tax; Unexplained cash credits
• Section: 144; 143(3); 68; 145(3); 246A

Judgement Text

" 1/7 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20th DAY OF FEBRUARY, 2018 BEFORE THE HON’BLE Dr.JUSTICE VINEET KOTHARI W.P.No.33125/2017 (T-IT) BETWEEN M/S. DEEPAK EXTRUSIONS PVT. LTD., A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING ITS OFFICE AT: NO.180/780, YERANDHALLI VILLAGE JIGANI HOBLI, ANEKAL TALUK BEHIND BOMMASANDRA INDUSTRIAL AREA BANGALORE-560 058. REPRESENTED BY ITS DIRECTOR MR. DEEPAK BETHALA S/O. PRAKASH BETHALA AGED ABOUT 43 YEARS. ... PETITIONER (By Mr. HARISH V.S. ADV.,) AND: THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(4) C.R. BUILDING, QUEENS ROAD BANGALORE-560 001. ... RESPONDENT (By Mr. JEEVAN J. NEERALGI, ADV.,) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE Date of Order 20-02-2018 W.P.No.33125/2017 M/s. Deepak Extrusions Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax 2/7 IMPUGNED ORDER OF ASSESSMENT PASSED BY THE RESPONDENT U/S.143(3) READ WITH SECTION 144 OF THE INCOME TAX ACT DTD.29.12.2016, FOR THE ASSESSMENT YEAR 2014-15 VIDE ANNE AND THE CONSEQUENTIAL DEMAND NOTICE ISSUED BY THE RESPONDENT IN FORM NO.7 DTD.29.12.2016 FOR THE ASSESSMENT YEAR 2014-15 VIDE ANNEX. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Mr. Harish V.S. Adv. for Petitioner. Mr. Jeevan J. Neeralgi, Adv. for Respondent. The writ petition has been filed by the petitioner- M/s.Deepak Extrusions Pvt. Ltd., against the Assessment Order passed by the Respondent-Deputy Commissioner of Income Tax, Central Circle 1(4), Bengaluru, U/s. 143(3) read with Section 144 of the Income Tax Act, 1961, for A.Y. 2014-15. 2. The impugned additions have been made in the declared income of the petitioner-assessee inter alia Date of Order 20-02-2018 W.P.No.33125/2017 M/s. Deepak Extrusions Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax 3/7 on the ground of ‘unexplained cash credits’ U/s. 68 of the Act amounting to ` ` ` ` 10.49 Crores. The relevant extract of the impugned order giving the reasons for the same is quoted below for ready reference: 3.8 Going through the above, it is seen that in spite of giving several opportunities, the assessee has not proved the sources for the cash receipts totaling Rs.10,49,73,975-00 credited to the books of account from the above said on various dates, which the assessee claimed to be the proceeds from cash sale of goods. No documentary evidences like the confirmation from the party paying the cash to this effect, cash receipts bearing the signature of payer or his authorized person/s etc. were produced till dated. Hence, as discussed above, it was proposed to reject the book results under the provisions of Section 145(3) of the Income Tax Act, 1961, for the following reasons. a. Primary documents are not reliable. Date of Order 20-02-2018 W.P.No.33125/2017 M/s. Deepak Extrusions Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax 4/7 b. More than 50% of the total sales declared are cash sales and these are not verifiable. c. Confirmation for credit of cash into the books are not available. d. Data furnished by the assessee not verifiable and not supported by any documentary evidence. e. On third party verification, the assessee’s claim is found to be false as the alleged payers of the money disowned for having made any payments to the assessee. 4.6 The onus of proving the genuineness of the transaction, source of sum of money found to have been received by an assessee is on the assessee. If the disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Revenue is entitled to treat it as taxable income. Merely making the claim without furnishing supporting evidences does not absolve the assessee of the responsibility in discharging the onus with regard to the sources for credit of cash into books as cash sales. The burden of proof squarely lies on the Date of Order 20-02-2018 W.P.No.33125/2017 M/s. Deepak Extrusions Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax 5/7 assessee. In view of the various shortfalls discussed above and in view of the various judicial pronouncements regarding the discharge of onus with respect to the burden of proof, I am constrained to hold that the assessee has not discharged its burden of proof. The onus squarely lies with the assessee to prove the genuineness of the cash credits with supporting documentary evidences and the assessee has failed in discharging the above liability. 4.11 In the backdrop of these pronouncements and in the light of the failure of the assessee to prove its case as discussed above, I arrive at the following reasonable conclusion. All the particulars filed by the assessee in respect of the claim of sources for cash credits have been verified. After examination and verification, the assessee’s submission that the sources for cash credited into the books on various dates, is from sales to six parties, is hereby rejected. Accordingly, an amount of Rs.10,49,73,975-00 being the total amount of alleged cash sales recorded in the books of accounts of the assessee against the names of the above six parties, is hereby brought to tax as Date of Order 20-02-2018 W.P.No.33125/2017 M/s. Deepak Extrusions Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax 6/7 unexplained credit u/s 68 of the Income Tax Act, 1961 and added to the taxable income of the assessee company. 3. The petitioner-assessee has an effective alternate remedy by way of an appeal before the Commissioner of Income Tax (Appeals) U/s. 246A of the Act against the said order and in view of the same, the petitioner-assessee is not entitled to invoke the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. 4. The writ petition is disposed of with liberty and direction to the petitioner-assessee to file regular appeal before the Commissioner of Income Tax (Appeals), Bengaluru. If such an appeal is filed by the petitioner-assessee within 30 days from today, the same shall be entertained without raising any objection of bar of limitation against the petitioner-assessee as prayed by the learned Date of Order 20-02-2018 W.P.No.33125/2017 M/s. Deepak Extrusions Pvt. Ltd., Vs. The Deputy Commissioner of Income Tax 7/7 counsel for petitioner but however subject to the petitioner-assessee complying with the other conditions for maintaining such appeal before the said Commissioner of Income Tax (Appeals), Bengaluru. Sd/- JUDGE TL "