Income Tax Appellate Tribunal - Chandigarh
Labh Singh, Kaithal vs Assessee on 16 March, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIG ARH BENCH 'B', CHANDIG ARH
BEFORE SHRI T.R. SOOD, A.M AND Ms. SUSHMA CHOWLA, JM
ITA No. 565/Chd/2011
Assessment Year : 2006-07
Labh Singh V I.T.O. W ard 3, Kaithal
Kaithal
BIJPS 0123 C
(Appellant) (Respondent)
Appellant by Shri Permil Goel
Respondent by Shri N.K. Saini
Date of hearing 16.10.2012
Date of Pronouncement 31.10.2012
O R D E R
PER T.R.SOOD, A.M
This appeal is directed against the order passed by the CIT(A), Karnal dated 16.3.2011.
2. In this appeal following concise grounds have been raised:
"1 That notice u/s 148 is not a legal and valid notice.
2. Addition of Rs. 20,01,027/- u/s 69 is illegal. Arbitrary and against facts of the case as section 69 is not applicable in our case and more over the addition is not in the true spirit of section 69 because no books of account a re maintained and all the transaction appears in bank account and it is also not a case where no explanation is given, rather complete explanation was given during assessment proceedings along with complete evidences and discharged burden and shifted it to the department to prove otherwise.
(A) Addition of Rs. 14,82,942/- on account of deposits in bank u/s 69 has been made ignoring the true nature of receipts in hands of assessee is trading receipts because these amounts represents amount received from various applicants for applying of plots/flats and current income of assessee.2
(B) Addition of Rs. 4,98,775/- credited on 3.12.2005 being cheque received from Shri Jogi Ram is also illegal a s the amount was received in lieu of Cheque of Rs. 2.00 Lakhs issued on 24.8.2005 and on account of HP Shimla, flat applied through appellant on 6..12.2005.
(C) Addition of Rs. 19,310/- being cheques of Rs. 810/-
and Rs. 18,500/- credited on 22.3.2006 is also illegal as the amount was received on account of refund received from Housing Board, Haryana."
3. Ground No. 1 regarding issue of notice u/s 148 was not pressed before us, therefore the same is dismissed as not pressed.
4. Ground No. 2 - Brief facts of the case are that the assessee had filed return declaring income of Rs. 99,500/- from tuition on 29.3.2007 which was processed on 30.3.2007. Later on information was received from CIT(CIB), Chandigarh that the assessee has deposited certain cash deposit in his bank account. It was also noticed that the assessee has derived income of Rs. 8800/- as interest from his bank account in Bank of Baroda, Kaithal which was also not shown as income. On verification of the information received from CIB, it was noticed that the assessee has deposited a sum of Rs. 41,72,853/- in his bank account during the year. In view of these facts a notice u/s 148 was issued on 1..8.2008. In response to this notice return declaring income of Rs. 1,20,890/- after claiming deduction u/s 80C amounting to Rs. 41,414/- was filed. During assessment proceedings the AO asked the assessee to explain the sources of deposit in the bank account with Bank of Baroda, Kaithal. He was also asked to give the details of tuition income and evidence regarding income of the minor daughter. In response it was submitted that deposits were made either out of withdrawals made from bank or cash received from various applicants for making DDs in favour of HUDA/Haryana Housing Board and Ansals. It was stated that the assessee has received professional charges for providing services to handle cash and making of DDS from his bank account and deposit of the same with HUDA/Housing Board, Haryana etc. The AO noticed that no service charges were reflected in the original return or in the return filed in response to Section 148 of the Act. During assessment 3 proceedings it was stated that the income of Rs. 99,500/- shown under the head "income from business or profession"
included service charges also and list showing service charges giving data and name of the authority concerned in whose favour DDs were issued, was filed. The AO specifically requested the assessee vide letter dated 29.6.2009 to furnish documents for receipt of money from the said persons, copies of their accounts. The assessee was also requested to produce these persons for verification. The assessee responded that he was not in a position to supply all the names of the customers. It was further stated he has charged for the services rendered to such customers and whereabouts of the persons is not known to him. Since no details regarding receipts, names of the applicants were kept by him, the same could not be explained. He requested the AO that such details may be obtained from HIMUDA/Housing Board, Haryana. The AO further issued a letter dated 21.8.09 asking for these details and the details in the questionnaire. At this stage instead of making any response to the AO, the assessee moved an application u/s 144A of the Act to J.C.I.T., Kurukshetra Range, Kurukshetra. Simultaneously an application was moved before the AO to get the assessment proceedings pending till disposal of the application u/s 144A. Before the J.C.I.T. the assessee filed various submissions which were forwarded to the AO and the AO accordingly submitted the details vide letter No. 1360 dated 6.10.2009 which has been reproduced by the AO at para 2.5. After considering this report the J.C.I.T. Kurukshetra range, Kurukshetra issued the directions u/s 144A which read as under:-
" In this connection, . the counsel of the assessee Sh. Permit Goel. Advocate moved an application u/s 144 A in the case of the above referred assessee for the A.Y. 2006-07 on 01.09.2009. and subsequent reply submitted on 24.09.2009 which were already filed by the assessee as well as forwarded by the undersigned to your office. Your report submitted vide No. 1360 dated 6.10.2009 has been considered. Further, the assessee's counsel as per his reply dated. 9.10.2009 has surrendered peak credit and other unexplained investment of Rs.2l,90,527/- subject to no penal action. The assessee's offer of surrender of the following incomes subject to no penal action is unilateral action by which the income tax department is not bound. It is therefore, directed that the following incomes which have been surrendered by the assessee already stand detected by the Assessing Officer vide his show cause letter addressed to the assessee on 21.08.2009 hence, penalty proceedings u/s 271 (1 (c )shall be initiated for concealment of income in respect of the 4 following unexplained investment for applying for purchase of plots / flats of HUDA, HIMUDA, Chandigarh Housing Board, Ansals etc.
(i) Peak cash investment in bank a/c 16,72,442/-
no.20010462 of the assessee and bank account no.20013626 of baby Shikha (minor daughter) with Bank of Baroda, Kaithal and Kissan Credit A/c No.55225
(ii) Unexplained cheque deposit in bank account 4,98,775/-
from Shri Jogi Ram, whose creditworthiness has not been proved and surrendered by the assessee.
iii Unexplained cheque deposits in bank on 19,310/-
29.2.2006 of Rs. 810/- and on 22.3.2006 Rs.
18,500/- and surrendered by the assessee.
Total 21,90,527/-
Although, the assessee has come forward to surrender the above income, the assessment order may be further strengthened by calling for the information from the assessee in respect of plot / flats applied for allotted in the name of the assessee, his wife Smt Anita Rani and his daughter baby Shikha The surrender of the assessee amounting to Rs. 21,90,527/- is accepted subject to initiation of penalty proceedings for concealment of income u/- 271 (1) (c ) of the IT. Act. Copy of surrender letter in original as given by the counsel for the assessee is enclosed."
5 Since in the directions it is clearly stated by the J.C.I.T. that the assessment order may be further strengthened by calling for the information from the assessee in respect of plots/flats applied for and allotted in the name of the assessee, his wife Smt. Anita Rani and his daughter, Baby Shikha. The AO accordingly asked the assessee to furnish this information. The information was furnished by the assessee and it was further stated again that all other bank drafts purchased from his bank account relate to application for plots and flats by others and income from providing these services has already been declared in the return of income. Since no credible evidence was produced by the assessee for receiving cash from this which has been deposited in the bank for issuing drafts. The AO held that the flats/plots have been applied in the name of the family members or in the name of benami persons. Since no evidence was filed regarding income earned 5 for rendering services to other plot applicants and no such persons were produced despite specific request, the AO held that it can not be accepted that the assessee had rendered any services for applying the plots/flats. According to the AO in the absence of any evidence for deposit in cash and also in view of the directions u/s 144A an addition of Rs. 21,90,527/- was made.
6 On appeal before the ld. CIT(A), similar submissions were reiterated. It was further contended that there was no column in Saral Tax Return Form and hence the professional income could not be shown in the return but the complete details were filed on 22.6.2009 wherein it was clarified that income f rom tuition was Rs. 63,050/- and income from service charges was Rs. 36,450/-. It was again emphasized that once complete payment was received then there was no need to take the details of customers including his identity. It was contended that names were supplied to the AO and he could easily enquire from Government authorities like HUDA/Housing Board, Haryana and Ansals. It was reiterated that such details were provided to the AO in respect of S/Shri Gurdial Singh, Nihal Singh and Jogi Ram. It was contended that surrender of Rs. 21,90,527/- was made before the J.C.I.T. subject to the condition that no penalty would be imposed. Further this offer was accepted in part because surrender has been accepted but the direction to initiate penalty u/s 271(1)(c) of the Act has also been given. In respect of Shri Gurdial Singh, it was stated that a sum of Rs. 1,59,500/- was received from him on 9.2.2006 which was given by him to the assessee out of the cash withdrawn amounting to Rs. 2.5 lakhs from the bank account on the same day. It was contended that affidavit of Shri Gurdial Singh, copy of bank account was furnished before the AO. Similarly cheque No. 98775 dated 3.12.2005 was raised from one Shri Jogi Ramn on account of HP Shimla flat at Parwanoo. This flat was allotted to Shri Jogi Ram which was confirmed by him though affidavit. The information which was in written form were provided to the AO for his comments. The AO in his comments mainly stated that the assessee had originally filed return declaring income of Rs. 99,500/- and against column No. 17 which refers to business or profession, 6 has been clarified by Instruction No. 6. It was mainly stated that the assessee had merely declared estimated income from tuition. In any case the assessee could not explain the deposits and he has not provided the names and addresses of the persons from whom the assessee was claiming to have received the cash and made applications on behalf of such persons. In fact the assessee had tried to shift the burden by asking the AO to make inquiries from HUDA and other parties. In respect of Shri Gudial Singh, the AO reiterated that the amount receivable from Shri Gurdial Singh was Rs. 1,85,400/- and Shri Gurdial Singh had withdrawn an amount of Rs. 2,50,000/- from his bank then why should he paid Rs. 1,59,000/- instead of RS. 1,85,400/-. In respect of Shri Jogi Ram, it was stated that the assessee was specifically requested to produce Shri Jogi Ram for verification but he had failed to produce the person. It was further noted that in case of Shri Jogi Ram a sum of Rs. 4,98,592/- was credited in the bank account on 2.12.2005 and on the other hand, next day the cheque for Rs. 4,98,775/- was issued in the name of assessee. There was no indication for the source of Rs. 4,98,592/-. Regarding cheque of 18,500/- the assessee had claimed that the amount was received from Haryana Housing Board on account of refund of cash deposits in Stte Bank of India, Kurukshetra being unsuccessful draw but no evidence was filed. The comments of the AO were provided to the assessee for further comments. The assessee in his comments reiterated the submissions made earlier.
7 The ld. CIT(A) after examining the issue in detail, allowed the relief in respect of money received from Shri Gurdial Singh because there was clear evidence in the form of bank statement that Shri Gurdial Singh had withdrawn a sum of Rs. 2,50,000/- from his bank account. He also allowed a relief of Rs. 30,000/- on account of set off of the current income. The assessee has claimed a set off of Rs. 60,000/-. According to the AO income must have been consumed in household withdrawals but the ld. CIT(A) observed that no separate addition has been made on account of low household withdrawals, therefore, claim of the assessee was accepted by observing that it is difficult to believe that family comprising of 7 four persons out of which two school going children, can manage the household expenses at Rs. 5,000/- pm. After considering the entirety of the facts a relief of Rs. 30,000/- was allowed.
8 Before us, the ld. counsel of the assessee mainly relied on the written submissions which are at page A to E of the paper book in which submissions made before the lower authorities had been reiterated. The ld. counsel of the assessee further relied on the decision of Kalwa Devadattam & Others V Union of India & Others, 49 ITR 165 and another decision reported at 282 ITR 540 (after carefully going through the ITR we could not locate any decision at page 540 of ITR
282). However, proposition which was relied on by the assessee was that in these two decisions it has been clearly laid down that apparent state of affairs should be presumed to be real unless contrary is proved. He has also relied on the decision of Hon'ble Supreme Court in case of CIT V. Smt. P.K. Noorjehan, 237 ITR 570 for the proposition that the AO is not obliged to add sources of investment as income whenever explanation regarding the same, is not satisfactory.
9 On the other hand, ld. DR for the revenue strongly supported the order of AO and ld. CIT(A). He also relied on the decision of Hon'ble Supreme Court in case of 282 ITR 540.
10 We have heard the rival submissions carefully in the light of material on record as well as the decisions cited by the parties. No doubt the observation made by Hon'ble Supreme Court in case of Kalwa Devadattam & Others V Union of India & Others, 49 ITR 165 that apparent should be taken as real unless proved otherwise. However, the Hon'ble Supreme Court itself in later decision in case of CIT V. Durga Prasad More, 82 ITR 540 had observed as under:
"That though an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled look into the surrounding circumstances to find out the reality of such recitals."8
Thus it is clear that wherever a particular state does not seen to be real then the party alleging that state of affairs has to be prove the same.
11 Again in case of CIT V. Smt. P.K.Noorjehan (supra) the Hon'ble Supreme Court has held as under:
"In the corresponding clause of the Bill which was introduced in Parliament while inserting section 69 in the Income-tax Act, 1961 the word "shall" had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word "may". This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income-tax Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the Income-tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory . The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the Income-tax O f f i c e r u / s 6 9 o f t h e Ac t t o t r e a t t h e s o u r c e o f investment a s the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has tobe exercised keeping in view the facts and circumstances of the particular case."
12 In above also highlighted portion clearly shows that there is no universal rule that wherever a source investment is doubted by the AO then the same cannot be added to the income. In fact Hon'ble Court has very clearly stated that it has to be considered in the light of the facts of each case.
13 In the case before us, the assessee has stated that he was providing professional services to some persons by helping them in filling up the applications and was allowing use of his bank account in getting the drafts made in favour of the various Government authorities for making applications for allotment of plots/flats. It is highly doubtful that any person having bank account would come to the assessee and use assessee's bank account. It is possible that the assessee 9 would help other persons in preparing and filling up the applications but no person would allow his bank account to be used by receiving cash from such persons then issuing the DDs in favour of the Government authorities. For example in case of Shri Gurdial Singh and Shri Jogi Ram, it was shown that these two persons had withdrawn money from their bank accounts and given it to the assessee. W hen these persons already had bank accounts why these persons would use assessee's account. Though the ld. CIT(A) has allowed relief in case of Shri Gurdial Singh and the revenue has not filed any appeal against the relief, we would not make any further comments. Even if assuming for a second that people really gave cash to the assessee then it is impossible to believe that the assessee is not maintaining any record of such persons and not maintaining even the names and addresses of such persons. No outsider would give cash to unknown persons.
The assessee had simply not discharged his onus because no details comprising names and addresses of the persons from who cash was supposed to have been received was provided to the Department. It was simply stated that the Department should verify the details from HUDA and other Government departments on the basis of information provided by the assessee. It is settled position of law that for any cash credit, three ingredients have to be proved i.e. (i) identity of the party,
(ii) genuineness of the transaction and (iii) capacity of such party to give such money. In case before us even the first ingredient i.e. identity of the party has not been proved because the assessee has not furnished the names and addresses of such persons before the AO or the ld. CIT(A) or even before us. We do not understand how the Department can 10 verify the source in the hands of the stranger by writing to the HUDA only on the basis of name even such Government authorities may not be able to provide any information. We further find that the ld. CIT(A) has recorded the detailed finding from para 1.17 to 1.21 which is reproduced hereunder:
" 1.17 The issue is considered. The facts in brief are that the Assessing Officer received information from CIT(CIB) regarding substantial deposits made in the bank account of the appellant. The AO further noted that interest of Rs.8800/- credited in his bank account was not declared in the Return of income already filed besides details and source of deposits of Rs.41,72,853/- made in his bank account during the year were not verifiable from the Return of income. Notice u/s 148 of the Act was, therefore, issued by the AO after recording the reasons. In response to which, return declaring an income of Rs.1,20,890/- as against income of Rs.99,500/- declared in the original Return of income, was filed. The appellant claimed that he is rendering services of filing application for plots/houses with HUDA, Housing Board, Haryana, Chandigarh etc. for which he charges service charges from the person concerned. He prepared the draft from his bank account to be filed alongwith the application form which was received from person in advance/part in advance or in some cases the entire amount is received lateron. The AO asked the appellant to furnish the complete name and address of the persons, their confirmations and to produce them for verification of facts. The appellant could neither file the details of the persons nor could produce them. He however, filed name of some of .the persons but no verification could be done for want of their addresses. Subsequently the appellant filed an application u/s 144A of the Act to the Range Head for seeking directions in this regard. During the proceedings u/s 144 A of the Act, the appellant surrendered income of Rs.21,90,527/- on account of peak of the deposits made in bank Rs. 16,72,414/-, unexplained deposits in bank from Sh. Jogi Ram amounting to Rs.4,98,775/- and Rs. 19,310/- on account of unexplained cheques /deposits in the bank. The appellant as usual, surrendered the income subject to no penalty which was rejected by the JCIT in his directions issued u/s 144A of the Act which has been reproduced above also. The appellant as such was aware of the fact that his proposal of surrender of income subject to no penalty was rejected by the JCIT. It is also endorsed by the fact that the AO, on receipt of the directions of the Range Head, afforded one more opportunity to the assessee and to furnish the complete details in respect of plots/ flats applied for/ allotted in his name, in the name of his wife or daughter and any other members of his family per letter dated 21.10.2009. The plea of the appellant that on receipt of assessment order, he was surprised to see that his proposal/his offer accepted in part by the department is, therefore, not correct/ tenable.
1.18 Now coming to the merits of the submissions made by the appellant, it is noted that the same were considered by the AO in his order and in his comments filed during appeal proceedings. The plea of the appellant that credit of current income has not been given whereas credit thereof as reduced by the house hold expenses should have been given, particularly when the AO accepted house hold expenses at Rs. 30000 + 30000 by wife Anita vide reply dated 29.06.09.11
1.19 The plea of the appellant is considered. The relevant assessment records is referred. The counsel of the appellant in his letter filed on 29.06.2009 before the AO during assessment proceedings, submitted as under:-
" Rs.60000/- Approximatel y were spent on house hold expenses by me and my wife jointl y including expenses of two minor local primary school going children and we are leaving in out old house. No separate details of house hold expenses are maintained."
1.20 Since no addition was made on account of low house hold withdrawals, the appellant claimed that the AO accepted his claim of household expenses of Rs.60,000/- and hence is requested to allow the benefit of remaining income from the addition made by the AO. At the outset, it is noted that the contribution made by the wife and source thereof has not been specified. Further, it is difficult to appreciate that a family of 4 members comprising two school going children can now- a-days manage his house hold affairs within a meager sum of Rs.5000/-P.M. However, considering the entirety of facts specifically the plea of the appellant that no addition was made on this account, benefit of Rs.30,000/- is directed to be allowed out of the current year income from the addition made.
1.21 The appellant further claimed that deposit of Rs. 1,59,500/- was made in the bank on receipt of amount from Shri Gurdial Singh as was explained that the amount was paid by him out of the cash withdrawal of Rs. 2.5 lakhs from his bank account on the same day which also confirmed by him in the affidavit. This claim of the appellant was rejected by the AO, only on the ground that there was no logic to make payment ofRs. 1,59,500/- as against the amount payable was Rs. 1,85,400/-. The plea of the AO is not tenable. There is no denying the fact that the amount was available with Shri Gurdial Singh on the date of payment. It is not the case of the AO that amount was utilized by him some where else. Shri Gurdial Singh confirmed in the affidavit that out of the amount withdrawn from the bank, a sum of Rs. 1,59,500/- was paid to the appellant and hence it is to be taken as explained and is to excluded from the addition made by the AO. As far as receipt of cheque ofRs. 4,98,775/- from one Shri Jogi Ram, the appellant filed a copy of his bank account in which there was credit of Rs. 4,98,592/- on 2.12.2005 in his bank account and cheque of equivalent amount was issued in the name of the assessee on the next day. As discussed above, the appellant neither produced Shri Jogi Ram nor could file the source of credit in his bank account with documentary evidence and hence his capacity cannot be said to be established for making this payment. The consideration thereof in the addition may by the AO is, therefore, confirmed. Similar is the position w.r.t. to other amounts, inter-alia , the peak of the cash deposited in the bank. As discussed above that the appellant has not been able to explain the source of cash deposited in the bank and ultimately surrendered the peak thereof, and hence addition thereof is hereby confirmed."
14 Above clearly shows that the assessee has not been able to discharge his burden and addition has been rightly made. In any case it has to be noted that the assessee had agreed for 12 the above addition before the J.C.I.T. by surrendering the same and the directions u/s 144A are binding on the AO. It is settled position of law that if an amount is surrendered the assessee cannot be normally said to be aggrieved person. In these circumstances we do not find any thing wrong in the order of ld. CIT(A) and confirm the same.
15 In the result, appeal of the assessee is dismissed.
Order pronounced on 31.10.2012
Sd/- Sd/-
(SUSHMA CHOWLA) (T.R. SOOD)
JUDICI AL MEMBER ACCOUNTANT MEMBER
Dated : 31.10. 2012
SURESH
Copy to: The Appellant/The Respondent/The CIT/The CIT(A)/The DR 13