Thaslim Jackson Vs ITO (Kerala High Court)
“Ends of Justice” Cannot Justify a Ballpark Addition: Section 68 Dispute Must Be Decided on Evidence
Background of the Dispute
The assessee challenged an order of the Cochin Bench of the Income Tax Appellate Tribunal sustaining a lump-sum addition of ₹25 lakh in a dispute concerning cash deposits for AY 2017-18.
His explanation was that he had withdrawn money from his own bank accounts in 2015 and redeposited it in 2016 after a gap of approximately six months. He also claimed to have received a gift of nearly ₹30 lakh from his brother, who had similarly withdrawn money earlier and handed it over subsequently.
According to the assessee, the funds were initially intended for investment in a family business. When that proposal did not materialise, he considered purchasing land and constructing a house with financial assistance from his brother.
He therefore maintained that the deposits could not be treated as unexplained cash under section 68.
Explanation Rejected by the First Appellate Authority
The Assessing Officer made additions, and the first appellate authority rejected the assessee’s explanation as “implausible”.
The dispute centred on whether the earlier withdrawals sufficiently explained the later deposits. The assessee relied on the withdrawals as evidence of the source, while the Revenue questioned whether the money deposited after several months was actually the same money.
When the matter reached the Tribunal, it did not fully accept either side’s submissions. It observed that the assessee was required to furnish cogent supporting details, but also noted that the Revenue had not disputed his explanation in principle.
Instead of resolving the evidentiary dispute through definite findings, the Tribunal sustained ₹25 lakh on a lump-sum basis, stating that this would meet the ends of justice.
Tribunal Attempted to Strike a Compromise
The Tribunal’s reasoning was that neither party’s case could be accepted in its entirety.
On one hand, the assessee had sought to explain the deposits through earlier cash withdrawals and therefore bore the obligation to produce supporting material. On the other, the Revenue had not satisfactorily displaced his submissions in principle.
Faced with this position, the Tribunal fixed the addition at ₹25 lakh, deleting the remaining ₹15,94,600.
It also directed that its estimation should not be treated as a precedent.
However, the order did not explain how the figure of ₹25 lakh followed from the evidence, which deposits remained unexplained, or why that amount represented the legally sustainable addition.
Assessee Challenged the Absence of a Reasoned Finding
Before the High Court, the assessee argued that the source of the deposits had been established through the earlier withdrawals. He contended that treating the money as unexplained was impermissible and that a lump-sum addition lacked legal justification.
He also questioned the Tribunal’s treatment of the burden of explaining the source.
The Revenue submitted that proving an earlier withdrawal was insufficient unless the later deposits were properly explained. It emphasised the intervening period of approximately six months.
The Revenue further argued that the Tribunal ought to have sustained the entire disputed amount. Its counsel stated that the Department had not filed an appeal because the matter fell below the monetary threshold referred to during the hearing.
Absence of Evidence Does Not Permit an Arbitrary Figure
The High Court found itself unable to understand how the Tribunal had arrived at ₹25 lakh.
The essential issue was whether the disputed sums constituted unexplained cash under section 68 and whether the assessee’s explanation was cogent in law.
That question required adjudication on the evidence. The Tribunal could not replace that exercise with a compromise figure merely because it considered both sides’ cases incomplete.
The Court held that absence of evidence, even if assumed, does not authorise an authority to fix a ballpark addition on the justification that it would meet the ends of justice.
The Tribunal’s statement that the estimation would not constitute a precedent did not provide the missing evidentiary foundation.
Matter Remanded Without Deciding the Source Explanation
The High Court allowed the appeal at the admission stage and set aside the Tribunal’s order dated 23 October 2024.
It directed the Tribunal to reconsider ITA No. 786/Coch/2023 on merits and in accordance with law, after providing necessary opportunities to both sides.
The Court expressly refrained from answering the questions of law because the Tribunal’s unexplained approach prevented proper consideration.
Therefore, the judgment does not finally accept the earlier withdrawals or the brother’s gift as the source of the deposits. Nor does it conclusively decide the disputed burden-of-proof question. Those matters remain for fresh adjudication.
Author’s Comments
Tax liability cannot be settled by splitting the difference between competing claims. A reasonable-looking figure still requires a legal and evidentiary basis.
The decision is particularly useful where an appellate order grants partial relief through a lump-sum adjustment without identifying why the surviving amount is taxable. The authority must explain the connection between the evidence, its findings and the addition sustained.
At the same time, the assessee has obtained reconsideration, not final deletion on merits. The earlier withdrawals, intervening cash availability and claimed gift must still be examined.
A time gap between withdrawal and redeposit may invite scrutiny, but the Tribunal must evaluate the actual explanation and supporting records. It cannot resolve uncertainty by selecting an unsupported amount.
The practical principle is clear: “ends of justice” is a conclusion to be supported by reasoned adjudication, not a substitute for it.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
It is the case of the appellant that he had withdrawn certain sums of money in the year 2015 from his own accounts and redeposited them in the year 2016, with a six months gap; and further, that he had received a gift from his brother of nearly Rs.30 lakhs, which was also drawn by him from his account in the year 2015, to be given to him after six months, in the year 2016.
2. The appellant explains that he wanted to invest his money in a family business, but that when it did not fructify, he thought of constructing a house for himself by purchasing land with help from his brother. He maintains that the afore sums cannot, therefore, be treated as ‘unexplained cash’, within the ambit of Section 68 of the Income Tax Act, 1961 (‘IT Act’, for short).
3. The appellant alleges that, however, the Assessing Authority made assessment against him, making certain additions; against which, when he approached the statutory First Appellate Authority, it was also concluded against his afore explanation, holding that it is ‘implausible’. He says that he, thereupon, approached the learned Income Tax Appellate Tribunal, Cochin Bench (‘Tribunal’ for short), which, however, did not express any opinion on the rival contentions, but went on to fix an addition of Rs.25 lakhs in lumpsum, saying that this would meet the ‘ends of justice’.
4. The appellant prays that the impugned order of the learned Tribunal be, therefore, set aside; and asserts that two questions of law arise: namely, (i) if the learned Tribunal had committed an error in making lumpsum addition of Rs.25,00,000/-, even though the cash withdrawals in the previous years by him had been accepted; and (ii) whether the learned Tribunal is right in holding that it was he who had to discharge the onus of explaining the source of cash.
5. Sri.M.P.Shameem Ahamed – learned counsel for the appellant, argued that, when his client has proved the source of the sums, construing it as ‘unexplained cash’ under Section 68 of the ‘IT Act’ is legally impermissible; and hence that the course adopted by the learned Tribunal, to add a lumpsum figure of Rs.25 lakhs, is wholly unheard of. He reiteratingly prayed that this Appeal be, therefore, allowed; and that the questions of law framed by his client be answered in his favour by this Court.
6. Sri.G.Keerthivas – learned Standing Counsel for the respondent, in response, submitted that it is not sufficient that the appellant had proved that he or his brother had withdrawn certain amounts in the past; but what is crucial is that the amounts in question had been properly explained. He insisted that, even when the appellant says that he and his brother had withdrawn the amount in September 2015, the credits in his account happened nearly six months later; and hence that the source of it has not yet been established. He argued that, in such circumstances, the learned Tribunal, in fact, ought to have reckoned the entire amount in question, but not a lumpsum figure of Rs.25 lakhs, as has been done; but that his client decided not to file an Appeal because it is below the threshold figure of Rs.1 crore.
7. We have gone through the impugned order of the learned Tribunal, but must confess that we are unable to fathom how it has arrived at a lumpsum figure of Rs.25 lakhs, saying that “it would meet the ends of justice” (sic).
8. What is crucially relevant in this case is whether the sums detected, are ‘unexplained cash’ under Section 68 of the ‘IT Act’; and if the explanation offered by the appellant is cogent in law.
9. It is pertinent that the First Appellate Authority has found the explanation to be ‘implausible’; while, the learned Tribunal seems to hold both sides in error and to thus fix a ballpark figure.
10. This is limpid from the findings of the learned Tribunal in paragraph No.4 of the impugned order, which is as under:
4. We have given our thoughtful consideration to the rival arguments and find no reason to express our concurrence to either party’s submissions in entirety. This is for the precise reason that once the assessee has sought to explain the cash deposits to the earlier cash withdrawals, and more particularly in FY 2014-15, it was incumbent upon him to discharge the onus by filing all the cogent supporting details on the one hand whereas the Revenue has also not able to dispute assessee’s submissions in principle. Faced with this situation, we are of the considered view that a lump sum amount of Rs. 25,00,000/- only would meet the ends of justice. Ordered accordingly subject to a rider that the instant estimation shall not be treated as a precedent. We make it clear that we have deleted the impugned addition of Rs.15,94,600/- in other words. Ordered accordingly.
11. One cannot gather how the learned Tribunal has concluded in such manner because, the absence of evidence – even assuming it to be true – would not vest Authorities to fix ballpark figures, under the justification “would meet the ends of justice” (sic).
12. Since we are at a loss to understand how the learned Tribunal has adopted the course it has, in the impugned order, we cannot answer any of the questions of law framed.
13. We are, therefore, constrained to remit the matter to the learned Tribunal for reconsideration of the Appeal on its merits. Consequently, we allow this Appeal at the stage of admission and set aside the impugned order; with a direction to the learned Tribunal to reconsider ITA No.786/Coch/2023, filed before it by the appellant, in terms of law, after affording necessary opportunities to both sides.
