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Basir Ahmed Sisodiya v. The Income Tax Officer

Civil Appeal · 2020 INSC 352Decided 24 Apr 2020
Civil Appeal No. 6110 of 2009
Justice A.M. Khanwilkar · Justice Dinesh Maheshwari

Background

A marble trader was assessed for 1998-99 and the Income Tax Officer added Rs. 2,26,000 to his income as unexplained "cash credits" under Section 68, after treating certain purchases from unregistered dealers as bogus. This addition was upheld by the CIT(Appeals), the Income Tax Appellate Tribunal, and the Rajasthan High Court. However, in later penalty proceedings for the same assessment year, the assessee produced affidavits and recorded statements of 12 of the 13 unregistered dealers, who confirmed the credit purchases, and the appellate authority accepted this explanation, cancelled the penalty, and the related criminal prosecution was also dropped.

Decision Breakdown

The Supreme Court held that the factual basis for the original addition had been dispelled by the later evidence accepted in the penalty proceedings, which the Department itself had allowed to become final (including refunding the penalty amount with interest). Since the identity and credentials of the unregistered dealers were no longer in doubt, and there was no denial of the actual purchase and resale of marble, the addition of Rs. 2,26,000 as unexplained cash credit could not be sustained. The Court allowed the appeal and set aside only that addition, leaving the rest of the assessment order undisturbed.

Lesson Learnt

A tax addition based on an assessee's failure to prove a transaction at one stage can later be undone if credible evidence accepted in connected proceedings (like penalty proceedings) establishes the genuineness of that very transaction: tax authorities and courts must look at the full, final factual picture rather than treating an early adverse finding as permanently conclusive.

Official source (sci.gov.in)View Judgment (PDF)

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