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Income Tax Appellate Tribunal, JABALPUR BENCH,
Before: SH. SANJAY ARORA, HONBLE & SH. MANOMOHAN DAS, HON’BLE
ORDER Per Sanjay Arora, AM Vide this Appeal the Revenue challenges the part-allowance of the Assessee’s appeal contesting his assessment for Assessment Year (AY) 2015-16 (vide order under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 13/12/2017) by the Commissioner of Income Tax (Appeals)- 1, Jabalpur (‘CIT(A)’ for short) vide order dated 28/3/2019. The assessee’s Cross Objection (CO) is supportive.
The brief facts of the case are that the assessee, a partner, along with his mother, Vinesh Rajput (VR), in a Jabalpur-based firm, M/s. Speed Point (SP), in the retail business of petroleum products, was observed to have received credits for Rs.113.50 lacs in his personal account for the relevant previous year. His returned income for the current year being only Rs. 28.76 lacs, the said 1 & CO 6/Jab/2019 (AY 2015-16) Asstt. CIT v. Alok Rajpoot return was selected for being subject to the verification procedure under the Act. The appeal involves, in the main, various additions made in assessment in respect of these credits, since deleted by the first appellate authority.
Before us, the Revenue’s case was that the ld. CIT(A) has admitted additional evidence in the appellate proceedings in violation of the mandatory provision of Rule 46A of the Income Tax Rules, 1962 (‘the Rules’). The assessee contests this, stating that all the documents were produced before the Assessing Officer (AO), and no fresh evidence has been adduced before the first appellate authority.
We have heard the parties, and perused the material on record. The assessee’s paper-book (containing 130 pages), extensively referred to during hearing, bear a certificate by the assessee’s counsel, Shri Bardia (who also represented before the ld. CIT(A)), that the same were furnished before AO. Shri Halder, the ld. Sr. DR, could not state as to which of the several documents referred to by Shri Bardia during hearing were not before the AO and, therefore, furnished before the ld. CIT(A) for the first time, save qua the assessee’s Gd. 5 (see para 9). In fact, no ground to that effect stands taken by the Revenue in the memorandum of appeal, and was urged orally during hearing. The contention by Shri Halder is therefore rejected. We are nevertheless obliged to answer each of the several grounds raised
by the Revenue, which we take up in seriatim.
5. The first ground relates to an addition of Rs.64.51 lacs, being the amount credited to the assessee’s capital account in the firm SP. The same in fact forms part of the credit of Rs.113.50 lacs to the assessee’s account in the said firm, made, with a corresponding debit to his mother’s capital account in the said firm on 15.1.2005, i.e., immediately following her death on 14.1.2005, on which date the firm stood therefore dissolved. The accounts of the firm, which became the assessee’s proprietorship w.e.f. 15.1.2005, were accordingly prepared for the period 01.04.2014 to 14.1.2005, on which date its’ accounts were closed, 2 & CO 6/Jab/2019 (AY 2015-16) Asstt. CIT v. Alok Rajpoot crediting the interest and the share of profit (for the said period) to each of the two partners, the assessee and VR. The amount of impugned addition (Rs.64.51 lacs) in fact forms part of Rs.113.50 lacs, representing the amount credited to the capital account of VR in SP during the year (PB pg. 74). The same, as borne out by the record, is, in the main, compensation received by VR from National Highway Authority of India (NHAI) on the acquisition of her land; her bank account (with OBC Bank), wherein the same stands deposited in the first instance, being also made part of the record (PB pg. 75). We are wholly unable to fathom the basis of the said addition. The amount under reference stands credited, firstly, to the bank account of VR and, then, to the bank account of SP, i.e., on the transfer of funds by her thereto (SP). The transfer (credit) to the assessee’s account in SP is through a corresponding debit to the account of VR on her death, to give effect to her Will dated 06/12/2014 (PB pgs. 69-73, 86). The impugned amount could therefore be added as unexplained bank deposit in the hands of VR (assessable through her legal representative), or of SP, i.e., u/s. 68 as unexplained credit, the nature and source of which is, rather, apparent. The transfer to the assessee’s capital account in SP (which became proprietorship w.e.f. 15.12005) on her death, is only a transfer of an existing credit in the books of SP, i.e., from one account to another. The same could be regarded as unsatisfactory where the AO challenges or otherwise expresses dissatisfaction with the stated reason for this transfer. True, the AO has doubted the Will, claiming it to have been in fact not signed by the mother (VR). The ld. CIT(A) has glossed over this aspect, observing that the credit has been passed to the assessee only after her death. It needs to be appreciated that it is only by virtue of the Will that the sum stands credited to the assessee. The only issue that could therefore possibly arise is the claim on the said balance of the other claimants, inasmuch as the same may raise doubts as to its genuineness. Sh. Bardia would during hearing, with reference the Will, explain that VR had bequeathed her capital in each of the three different partnership firms being 3 & CO 6/Jab/2019 (AY 2015-16) Asstt. CIT v. Alok Rajpoot managed by her three sons, as SP by the assessee, thereto. Further, that the Will is undisputed by any of the Class-1 legal heirs. This, we observe, stands also explained before the AO. Under the circumstances, we find no reason to doubt the genuineness of the credit and, accordingly, confirm the deletion, save the separate addition for Rs. 11.80 lacs forming part of the impugned sum of Rs. 64.51 lacs (to the extent of Rs. 11.44 lacs), and which therefore stands agitated per the assessee’s Ground 2. We decide accordingly.
6. The next addition is for Rs.11.80 lacs, representing cash deposited by VR in her bank account on 26/6/2014, transferring Rs. 11.44 lacs to SP on the same date by way of payment to its’ supplier, BPCL, Bhopal (PB pgs. 74-75). The reason for it being added separately, implying a separate consideration, as far as we can see, is that the amount has been deposited cash by VR in her bank account. Sure, the source of this sum cannot be ascribed to the consideration (for acquisition) received from NHAI. So, however, even if unexplained, the same could be added either as her income or of SP, to which the amount stands transferred as her capital. That her capital stands subsequently bequeathed to the assessee and transferred to him on her death is no reason for an addition in his hands; the doubt expressed by the AO on her Will notwithstanding, as explained qua Gd.1. We accordingly confirm the deletion, including that relatable to Gd.1.
7. The next addition is for Rs. 36.91 lacs. The same, we observe, is the difference between the opening balance of the assessee’s capital account (i.e., as on 01.4.2014), the beginning of the relevant previous year, in his personal accounts, i.e., Rs. 64.68 lacs, and Rs. 27.77 lacs, being the debit balance in his personal account in the accounts of SP as on 14.1.2005 (PB pg. 82), the date on which, as afore-stated, the accounts of SP were closed on its’ dissolution on account of the death of VR, one of the two partners in the said firm. What does the said difference signify, we fail to understand. None of the entries in the said two accounts, we observe, have been questioned by the AO. In fact, but for the 4 & CO 6/Jab/2019 (AY 2015-16) Asstt. CIT v. Alok Rajpoot fact at the same stands made explicit by the AO (refer para 10(ii)/page 6 of his order), making the snapshot of the two ledger accounts afore-noted, a part of his order, we would have been disinclined to believe Sh. Bardia that this difference, which carries no meaning, could be the subject matter of an addition, with we also confirming the balance (as on 14.01.2015) of the assessee’s capital in the firm (SP)’s audited accounts (PB pg. 81). We are completely at loss to understand the basis of the said addition, and neither was any explained to us during hearing. It is accordingly confirmed for deletion. We decide accordingly.
8. The next addition is for Rs.55.54 lacs, being the aggregate of the assessee’s debit balance in SP as on 14.1.2015 (Rs.27.77 lacs/PB pg. 81) and the credit balance of the said firm in the assessee’s personal books of account at the same sum (PB pg. 82). This is again quizzical. Are not, one may ask, the two balances supposed to be in agreement, and opposite in character, i.e., representing an asset and a liability respectively? And, further, why should the two be added? The addition is meaningless, and rightly deleted, which we hereby confirm. We decide accordingly.
9. The next addition is for Rs.5.03 lacs. The same is the credit balance, in the assessee’s personal accounts, of his mother, VR, arising, as explained with reference to the assessee’s personal accounts, upon adjustment (on 29/11/2014) of his bank overdraft (loan) of Rs. 24.75 lacs, together with interest thereon (Rs.2.17 lacs), i.e., at an aggregate of Rs. 26.92 lacs, availed against the security of his FDR as well as that of his mother (VR), i.e., to the extent of Rs. 21.89 lacs and Rs. 5.03 lacs respectively. The source of the impugned credit, as stated, is thus the sale/maturity proceeds of the assessee’s mother (VR)’s FDR/s with OBC Bank, which is stated to be duly disclosed to the Revenue; in fact, forming part of her regular accounts, interest on which stands duly returned by her, a regular assessee, from year to year. Supporting documents for the same were, however, admitted by Sh. Bardia during hearing to be not furnished before the 5 & CO 6/Jab/2019 (AY 2015-16) Asstt. CIT v. Alok Rajpoot AO, while the ld. CIT (A), before whom the same were for the first time, admitted and relied upon the same in contravention in rule 46A. Even as we find nothing amiss in the admission of the addition evidence by the ld. CIT(A), being only to substantiate the assessee’s claims, which would in fact also stand to be confirmed by/from the bank, his non-providing any opportunity to the AO to examine the same, as mandated under r.46A, particularly considering that he has himself not undertaken any verification, is inexplicable. We, under the circumstances, consider it proper to, vacating the findings by the ld. CIT(A) in the matter, restore the matter back to the file of the AO for his necessary verification and decision. The assessee shall be in the set aside proceedings at liberty to furnish not only the documentary evidences produced before the ld. CIT(A), but also any other as may be deemed proper for the purpose of proving his claim/s., or as he may be called upon to furnish by the AO. Here it needs to be appreciated that the credit is from the assessee’s mother, who has in fact subsequently (06.12.2014) bequeathed him her entire capital in SP, so that there does not appear to be any reason to doubt that the credit from stand-point of genuineness. We decide accordingly.
10. The sixth and final addition is in respect of the credit of Rs.20,800, explained as agricultural income. The same has been deleted by the ld. CIT(A) on the basis that the assessee owns 7.17 hectares of agricultural land and, further, had been returning such income in the past. The assessee’s case is sans any evidence. No evidence, we find, has been produced at any stage in respect of sale of Masoor Daal, stated to be sold, much less carrying out of any agricultural activity. Two, how, one wonders, the sale of an agricultural commodity, even if shown, would, without anything more, show the same to be cultivated by the assessee? How, again, has the income component therein been determined? The declaration of such income, or even its acceptance, both not shown, for other year/s, would not explain the income for another year, 6