Income Tax Appellate Tribunal - Delhi
Rajeev Kumar Singh, New Delhi vs Acit Circle-57(1), New Delhi on 27 November, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'F' NEW DLEHI
BEFORE SHRI G.S. PANNU, VICE PRESIDENT
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
ITA.No 3125/Del/2019
Assessment Year: 2013-14
Rajeev Kumar Singh, vs ACIT, circle-57 (1)
A-95, phase-II, Vivek Vihar New Delhi
New Delhi-110095
PAN ACDPS 8082R
(Applicant) (Respondent)
Appellant by: Shri Ruchesh Sinha, Advocate
Respondent by: Sh. Surender Pal, Sr. Dr.
Date of hearing: 27/11/2019
Date of order : 27/11/2019
ORDER
PER K. NARASIMHA CHARY, J.M.
Aggrieved by the order dated 15/3/2019 in Appeal No. 35/2018-19 passed by the learned Commissioner of Income Tax (Appeals)-38, New Delhi ("Ld. CIT(A)") for the assessment year 2013-14, Mr Rajeev Kumar Singh ("the assessee") preferred this appeal.
2. Brief facts of the case are that the assessee runs a proprietorship concern in the name and style of M/s Pacific Trade Links, which is engaged in Manufacturing, Processing, Finishing, Reselling and Export of 2 all kinds of shawls, stores, men and women accessories and trading in shares and foreign currency etc. For the assessment year 2013-14 he filed his return of income on 30/9/2013 declaring a total income of Rs.15,57,150/-. As per the computation submitted by the assessee, the income from salary received from SL Impex private limited was Rs. 6 Lacs, income from house property was Rs. 48,000/-, income from business/profession was Rs. 10,41,011/-and income from other sources was Rs. 1,37,571/-. Assessee claim deduction of Rs. 1,24,377/-under chapter VI-A of the Income Tax Act, 1961 (for short "the Act") and, therefore, the returned income was Rs. 15,57,150/-.
3. During the course of assessment, learned Assessing Officer noticed that a sum of Rs. 1,12,50,000/-was introduced by the assessee in the cashbook. The assessee produced the cashbook on 28/3/2016. When confronted with the entries in the cashbook of "Pacific trade links", and was asked to provide the source of the cash credits, assessee replied that such cash credits were taken from different sources and at that time he was not able to recall all of them. Assessee stated that he will furnish the information on 30/3/2016, on which date the assessee did not provide any reply. Having considered the Balance Sheet where the assessee had not shown any unsecured loans, in the light of the nature of business of the assessee, learned Assessing Officer held that the case of assessee is squarely hit by the provisions of section 68 of the Act. Since, in respect of repeated demands made and opportunities provided the assessee failed to prove prima facie the identity of his creditors, the capacity of such persons to advance money and lastly the genuineness of the transaction, 3 learned Assessing Officer treated such an amount as unaccounted income of the assessee and brought it to tax under section 68 of the act.
4. Learned Assessing Officer further noticed that the assessee had debited an amount of Rs. 12,40,182/-in his P&L Account as interest expense whereas the record revealed that the assessee had given interest-free advances to various parties such as Sagar Kumar Singh, Sanjeev Singh, Saritha Singh, and Mridul Tyagi totalling to an amount of Rs. 28, 26, 269/-. On this the learned Assessing Officer drew an inference that the assessee had taken loans from banks and given interest-free advances to the above persons and, therefore, the notional interest at 12 percent on this Rs. 28,26,269/-was to be disallowed under section 36 (1)(iii) of the Act.
5. Assessee challenged these two additions before Ld. CIT(A) and filed certain documents before her by way of additional evidence. Ld. CIT(A) received the additional evidence. In the opinion of Ld. CIT(A) there is no explanation from assessee regarding the property deal and as to why the cash receipts were there in the cashbook of "Pacific Trade Links". Ld. CIT(A) observed that if the property deal was with the assessee through bank account, then why were these mentioned as cash credits. Holding that all these discrepancies prove that this cash credits remain unexplained under S. 68 of the Act, Ld. CIT(A) confirmed the addition of Rs. 1,12,50,000/-. Ld. CIT(A) also agreed with the learned Assessing Officer in respect of the disallowance of the notional interest to the tune of Rs. 3,39,152/-on account of the loans given to Sagar Kumar Singh and others to the tune of Rs. 28, 26, 269/-.
46. Assessee is therefore before us in this appeal challenging the findings of the Ld. CIT(A). It is the submission of Ld. AR that the Ld. CIT(A) was factually incorrect inasmuch as she observed that if the property deal with the assessee was a through bank account, then there was no occasion for the cash credits and the Ld. AR submits that the agreement of sale dated 28-04-2012 clearly shows that the proposed consideration was paid in cash to the tune of Rs. 98,10,000/-and therefore it is but natural that the cash would be found in the cashbook. He further brought it to our notice that the assessee returned the advances received under the agreement of sale dated 28/4/2012 in the subsequent years as could be seen from the bank account entries of the assessee as well as the proposed buyers under the agreement of sale. Insofar as the statement of the assessee at the first instance when he was called upon to explain the entries in the cashbook, it is submitted by the Ld. AR that it was a mistake on the part of the assessee not torecollect the sources of the cash entries. Ld. AR vehemently argued that though the Ld. CIT(A) admitted the additional evidence, the impugned order is silent on the impact of those documents. He therefore prayed that the matter may be remitted back to the file of the Ld. CIT(A) to pass a reasoned order by commenting on the documentary evidence produced by the assessee before Ld. CIT(A) by way of additional evidence.
7. Per contra, it is the submission of the Ld. DR that the case of the assessee has to be approached from the circumstances available on record. He vehemently contended that throughout the assessment proceedings the assessee did not come forward with the theory of his receiving the amounts under the agreement of sale dated 28/4/2012 and 5 is only for the 1st time, before the Ld. CIT(A), the assessee developed this story. Ld. DR submitted that the agreement of sale dated 28/4/2012 is an unregistered document that could have been brought into existence at any point of time to suite the convenience of the assessee. There is no explanation in this document as to why such use amounts were parted with by the prospective buyers of the property in cash, instead of resorting to the payment by way of banking channels.
8. Insofar as the capacity of the two prospective buyers of the property Ld. DR invited our attention to the income tax returns of these 2 persons, filed by the assessee and to be found at page numbers 62 and 69 of the Papen book. Ld. DR submitted that one Panna lal Kharbanda, one of the buyers had the gross total income of Rs. 3, 79, 102/-whereas the other earlier Mahesh Kharbanda had the gross total income of Rs. 4, 19, 425/- for the assessment year 2013-14. It is not known how these persons could make cash payments to the tune of Rs. 98,10,000/-. According to him the assessee himself had the gross total income of Rs. 16,81,528/-as is reflected in the return of income filed by him for the assessment year 2013-14. In the circumstances he submits that the plea of return of such amount by the assessee in the assessment year 2016-17 does not merit consideration because that would also have been manufactured subsequent to the passing of the assessment order on 30/3/2016.
9. Ld. DR placed reliance on the decisions of the Hon'ble Apex Court in the cases of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) and Sumathi Dayal vs. CIT (1995) 214 ITR 801 (SC) and submitted that no doubt, it is true that in all cases in which a receipt is sought to be taxable 6 as income, the burden lies on the Department to prove that it is within the taxing provisions, and if a receipt is in the nature of income the burden of proving that it is not taxable because it falls within the exemptions provided by the act lies upon the assessee, but in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assessee of the previous year if the explanation offered by the assessee about the nature and source thereof is, in the open of learned Assessing Officer, not satisfactory. According to him in such a case, there is a prima facie evidence against the assessee, namely, the receipt of money, and if he fails to rebut the same, the same evidence being unrebutted, can be used against him by holding that it is a receipt of an income nature, having had the regard to the explanation of the assessee as to whether it is satisfactory are otherwise.
10. Basing on these two decisions, Ld. DR submitted that the conduct of the assessee in not speaking anything before the ld. Assessing Officer about the property deal covered by the agreement of sale and developing it for the 1st time before the Ld. CIT(A) and that too not supported by any evidence not in the control of the assessee. He submitted that the unregistered agreement of sale cannot be taken as an evidence not in the control of the assessee. Further the prospective buyers had no capacity as is revealed by their returns of income. Lastly, when the assessee was confronted with the entries in the cashbook, it is quite improbable that the assessee would not have recollected the source of such cash entries. When there is only one source for such cash entries, it is improbable that the assessee would have stated that the 7 cash credits are appearing to have taken from different sources and he was unable to recollect the same.
11. We have gone through the record in the light of the submissions made on either side. It remains an undisputed fact that when the assessee was confronted with the entries of the cashbook, which are enumerated by the assessing officer in his order and running between 28/04/2012 and 7/11/2012, the reply was very strange. He stated that,-
"These cash credits which are appearing how been taken from different sources. Right now, I'm not able to recall all of them. I will produce the same tomorrow in the morning i.e., on 30/3/2016 at 11.00 AM"
12. As a matter of fact, even according to the assessee, there are no multiple sources for these cash entries. Only source of these cash entries as pleaded by the assessee is the agreement of sale dated 28/4/2012. For an assessee with the gross annual total income of Rs. 16,81,528/-, it is quite strange not to recollect the source of cash receipt to the tune of Rs. 98.1 Lacs, that too a single source of such cash credit.
13. Though the assessee sought time till 30/3/2016, the assessee did not recollect the source of these cash credits by then also and allowed the ld. Assessing Officer to proceed with the matter. Surprisingly for the 1st time the assessee placed reliance on the agreement of sale. Though the assessee had filed the particulars of the bank accounts in support of his contention of the refund of the amount, no such attempt is made to show that as a matter of fact these two persons made the cash payments and they had in fact the capacity to make such payments. The contents of the agreement of sale dated 28/4/2012 go unverifiable, and are of little 8 help to the case of the assessee. Absolutely there is no evidence on record to show that the prospective buyers of the property under the agreement of sale dated 28/4/2012 had in fact the capacity to advance such amounts and in fact they did advance such amounts on such particular dates to correlate the entries of the cashbook as pointed out by the learned Assessing Officer.
14. It is the case of the assessee that he had entered into an agreement of sale with HUFs and received the part of sale consideration in cash and that is the source of the cash credits to be found in his books. For determination of this fact which the assessee claims to have happened, the ld. Assessing Officer is duty bound to have regard to the common course of natural events, human conduct and public and private business, in their relation to the facts of the case of the assessee. This is the law of the land and laid down by the Hon'ble Apex Court in the cases of Durga Prasad More (supra) and Sumathi Dayal (supra).
15. The suspicious circumstances, as rightly pointed out by the Ld. DR, are that even according to the assessee there is only one source for the impugned cash credits, when confronted with such cash credits assessee pleads that there are multiple sources for the same and he cannot recollect them, he pleads that if time is granted to do so, but never does so before the ld. Assessing Officer, though there is an agreement of sale according to the assessee to support the entries in the cashbook, he never produces the same before the ld. Assessing Officer nor speaks of it at any time earlier than its production before the Ld. CIT(A), such an agreement of sale is an unregistered one and undoubtedly possible to have been brought into existence at the will of the assessee, the 9 prospective buyers under the agreement of sale do not have any apparent capacity to advance such huge amounts to be found in the agreement of sale. We fail to understand what more is required to cast a serious cloud of doubt on the case of the assessee than this.
16. Though an attempt is made by the Ld. AR to explain the conduct of the assessee in terms of a mistake, we are not convinced with it because the attendant circumstances are not congenial for such a belief. Statement of the assessee is not agreeing with his conduct to inspire confidence in our mind to believe the story developed by him. We shall have to keep in mind that when a party pleads a fact stating that there are bona fides in it, then the conduct of such party is also relevant because such conduct influences the issue relating to the genuineness.
17. When the assessee sets up the plea based on the agreement of sale, naturally the genuineness of such plea depends on the conduct of the assessee during the assessment proceedings or in the 1st appellate proceedings. As already stated above, we find that it is quite improbable that the assessee would have given prevaricative answer to the learned Assessing Officer when the assessee was confronted with the entries of the cashbook. Certainly, the answer given by the assessee is a prevaricative one. Further, the conduct of assessee in not speaking anything about the agreement of sale during the assessment proceedings is also contrary to the reliance of the assessee on the agreement of sale. So also, the financial capacity of the prospective buyers as is reflected in the returns of income is militating against the statement of the assessee that they made the payments in cash. All these things viewed together, totally falsifies case of the assessee and in our considered opinion 10 assessee failed miserably to dispel these doubts raised by the learned Assessing Officer and the Ld. CIT(A), by offering cogent explanation. As a consequence of the failure to offer convincing in cogent explanation to the reasonable questions raised by the learned Assessing Officer, the case of assessee shall fail. While holding so, we find the 1st ground of appeal of the assessee as devoid of merits and accordingly dismissed the same.
18. Now coming to the addition of Rs. 3,39,152/-on account of notional interest on the interest free advances made to Sagar Kumar Singh and others, Ld. AR took us to the "Manufacturing and Trading and P&L Account for the year ended 31 March 2013" whereby it is demonstrated that the assessee obtained loans from the banks and other sources for specific purposes and, therefore, such amount borrowed was not available be diverted. He further had taken as to the cash and bank balance in scheduled-H wherein it was shown that a sum of Rs. 13,94,524/-was available with the assessee at the end of the year.
19. Ld. CIT(A), in her order, did not advert to these facts but simply proceeded to uphold the disallowance stating that merely because no interest was charged in respect of the advances made to Sagar Kumar Singh and others, though the interest was paid on loans taken by the assessee, disallowance of interest is attracted. Having regard to the facts and circumstances of the case we are of the considered opinion that the disallowance of notional interest cannot be sustained merely because the assessee had taken loans for the purposes of business and diverted his own funds for giving interest free advances. We therefore, direct the assessing officer to delete the disallowance of Rs. 3, 39, 152/-on account 11 of notional interest on Rs. 28, 26, 269/-advanced to Sagar Kumar Singh and others.
20. In the result, appeal of the assessee is allowed in part.
Pronounced in open court on this the 27th November, 2019.
Sd/- Sd/-
(G.S. PANNU) (K. NARASIMHA CHARY)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 27/11/2019
'VJ'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI