Direct Evidence needed for adding cash Income to the Assessee

The case was heard by the Income Tax Appellant Tribunal between the ACIT of the eighth circle of Mumbai henceforth to be referred as Revenue and Ms. Katrina Rosemary Turcotte henceforth to be referred as Assessee. Learned Counsels of both parties argued over the case which was heard by both Judicial and Accountant Members of the bench represented by Shri Saktijit Dey and Shri Rajesh Kumar, respectively.

A Brief History of the Case

The case has been drawn out over several years of assessments of income of the assessee. The financial years in question in the case were each year from 2006 to the end of 2011 concluding to six financial years in total. Separate appeals were filed by the office of the ACIT over Domestic Tax codes with matters relating to cash credited to the assessee and the undisclosed income that came along with it. Revenue felt there were grounds for further assessments and subsequential tax revenue against which judgments were given by the office of the CIT of Appeals. The case was filed by the revenue to appeal against the aforementioned decisions.

What was the case based on?

In the six different appeals filed by revenue against six separate orders which were earlier in favor of the assessee, arguments were made over several cash payments that were received by the assessee for appearing in several events, cash payments received for performing in events, extrapolation over amounts received and one instance for taxes not being paid at the source.

The evidence of the case was obtained via search and seizure conducted by the department at the home of Ms. Sandhya Ramchandra and the establishment of Matrix India Entertainment Pvt. Ltd. Several printouts were obtained related to the said cash payments and a notice was issued to the assessee over the matter. Message Backups and analysis sheets along with other things were also obtained pertaining to the case.

In the hearing, the revenue challenged the decision of deleting the additions that were made by the Assessing officer regarding these cash payments made to the assessee. The basis of the appeals was Section 68 of the Income Tax Act related to Tax Treatment of Cash Credits.

Judgment of the Court

The court decided to uphold the decisions of the learned Commissioner of Income Tax and dismissed the grounds raised by the counsel of the Revenue Department. All of the evidence furnished could not directly corroborate the fact that any payments were actually received by the assessee or the assessee was in default of any taxes to be paid.

Based on the evidence collected by the Department, there was no direct link in proving the disputed cash credits which were allegedly received by the assessee over a period of six financial years. The Income Tax Appellate Tribunal decided to dismiss the appeals on the grounds of lack of direct evidence and direct link with the cash payments and found in the favor of the assessee.