Reaffirming That Once an Assessee Discharges the Initial Onus under Section 68, the Burden Shifts to Revenue; and That Estimations under Section 145(3) Cannot Be Pure Conjecture The High Court of Chhattisgarh (DB) held that – once an assessee proves identity, receipt and creditworthiness for share application money, the Assessing Officer must bring independent incriminating material to make an addition under Section 68 (affirming Lovely Exports (SC) and Chain House (MP HC & SC)), and – an addition under Section 145(3) based on mere guesswork of production yield is impermissible (following Dhakeswari Cotton Mills (SC)) This decision is binding on income-tax authorities and tribunals under this High Court and is persuasive elsewhere.
Summary
| Category | Data |
|---|---|
| Case Name | TAXC No. 57 of 2022 of THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL) vs M/S ABHISHEK STEEL INDUSTRIES LTD. |
| CNR | CGHC010190302022 |
| Decision Date | 02-09-2025 |
| Disposal Nature | Dismissed |
| Judgment Author | Hon’ble Shri Justice Sanjay K. Agrawal |
| Court | High Court of Chhattisgarh at Bilaspur |
| Bench | Hon’ble Shri Justice Sanjay K. Agrawal and Hon’ble Shri Justice Sanjay Kumar Jaiswal |
| Precedent Value | Affirms existing Supreme Court and High Court precedents under Sections 68 and 145(3) |
| Overrules / Affirms | Affirms |
| Type of Law | Direct Tax – Income Tax Act, 1961 |
| Questions of Law |
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| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon | The HC endorsed the tribunal’s view that suspicion alone cannot sustain additions under Section 68; once initial onus is met, Revenue must bring incriminating evidence. It reiterated that Section 145(3) estimations cannot be pure guesses (Dhakeswari). |
| Facts as Summarised by the Court | The assessee, a re-rolled steel manufacturer, was subjected to search on 21-06-2011. For AY 2006-07, the AO added ₹ 8.8 Cr under Section 68 for unexplained share application money and ₹ 78.7 Lakh under Section 145 for presumed unaccounted sales based on an 89% yield estimate. CIT(A) and ITAT deleted both additions. |
| Citations |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | All income‐tax authorities and tribunals within the jurisdiction of the High Court of Chhattisgarh |
| Persuasive For | Other High Courts, Supreme Court |
| Follows |
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What’s New / What Lawyers Should Note
- Reaffirms that once an assessee proves identity, receipt and creditworthiness of share application money under Section 68, the burden shifts entirely to Revenue to produce independent incriminating material.
- Clarifies that additions under Section 145(3) cannot be based on mere conjecture or estimated yields without tangible evidence.
- Confirms that concurrent findings of fact by CIT(A) and ITAT—if supported by record—are neither perverse nor open to interference.
- Lawyers can cite this decision to resist Revenue’s attempt to reopen concluded assessments under Section 153A with additions lacking independent evidence.
Summary of Legal Reasoning
- Section 68 Additions
- AO made addition of ₹ 8.8 Cr for unexplained cash credit.
- CIT(A) held assessee discharged onus by producing ITRs, bank statements, audit reports, board minutes, MOA/AOA, investor assessments.
- Relying on Lovely Exports and Chain House, CIT(A) and ITAT held no incriminating material existed; burden shifted to Revenue.
- HC endorsed concurrent findings as correct and not perverse.
- Section 145(3) Estimation
- AO estimated unaccounted sales of ₹ 78.7 Lakh based on assumed 89% yield.
- CIT(A) and ITAT relied on Dhakeswari Cotton Mills to hold that AO cannot make a pure guess without evidence.
- HC affirmed deletion, finding no material to impugn books or declared yield.
- Section 153A Jurisdiction
- Third question held academic in view of answers to Questions 1 and 2; no separate adjudication needed.
Arguments by the Parties
Petitioner (Revenue)
- CIT(A) and ITAT wrongly reversed additions made by AO under Sections 68 and 145.
- Assessee failed to satisfactorily explain source of share application money.
- Unaccounted production and sales could be inferred from yield discrepancy.
Respondent (Assessee)
- Produced comprehensive documentary evidence satisfying the requirements of Section 68.
- No incriminating material linked share money to undisclosed income.
- Yield declared was reasonable; AO’s estimate was pure conjecture.
Factual Background
The assessee, incorporated on 23-05-1988, manufactures re-rolled steel products. A search under Section 132 on 21-06-2011 led to an assessment for AY 2006-07 under Sections 153A and 143(3). The AO added ₹ 8.8 Cr under Section 68 for unexplained share application money and ₹ 78.7 Lakh under Section 145 for alleged unaccounted sales based on an 89% yield estimate. The CIT(A) and ITAT deleted both additions, prompting the Revenue’s appeal to the High Court, which was dismissed.
Statutory Analysis
- Section 68, IT Act: Requires an assessee to explain identity, creditworthiness, genuineness and source of cash credits. Once explained, the onus shifts to Revenue to disprove with independent material.
- Section 145(3), IT Act: Permits estimation of income when accounts are unreliable, but estimates must be based on tangible evidence; mere conjecture is impermissible as held in Dhakeswari Cotton Mills.
Alert Indicators
- ✔ Precedent Followed – Existing Supreme Court and High Court rulings under Sections 68 and 145(3) are affirmed.
Citations
- High Court Judgment: 2025 CGHC 44584 (DB)
- Commissioner of Income-tax v. Lovely Exports (P.) Ltd., [2008] 216 CTR 195 (SC)
- Principal Commissioner of Income-tax v. Chain House International (P.) Ltd., [2019] 408 ITR 561 (MP HC); upheld [2019] 262 Taxman 207 (SC)
- Dhakeswari Cotton Mills Ltd. v. CIT West Bengal, (1954) 2 SCC 602