Loading judgment…
No AI summary yet for this case.
आदेश/Order
PER N.K. SAINI, VICE PRESIDENT This is an appeal by the assessee against the order dt. 20/07/2018 of Ld. CIT(A)-1, Ludhiana.
Following grounds have been raised by the Assessee in this appeal:
That very initiation of proceedings u/s 147 is bad in law.
2. That the assessment order is against law and facts on the file in as much as the Ld. Assessing Officer was not justified to compute the total income at Rs. 50,45,365 as against returned income of Rs. 1,89,365/-. 3. That the Ld. Assessing Officer gravely erred in making an addition of Rs. 48,56,000/- because deposits in the bank account. 3. From the aforesaid grounds it would be clear that the only grievance of the assessee relates to the sustenance of addition of Rs. 48,56,000/- made by the A.O. on account of the amount deposited in the saving bank account of the assessee maintained with Punjab National Bank, Bahadur Ke Road, Ludhiana Branch.
Facts of the case in brief are that the A.O. on the basis of information that the assessee had deposited Rs. 48,56,000/- in his saving bank account, initiated the assessment proceedings by recording the reasons under section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). The A.O. mentioned that the assessee filed manual income tax return before ITO, Ward-2 (5) Ludhiana on 08/02/2016. The A.O. observed that when the case was fixed for hearing the Counsel for the Assessee furnished the copy of J-Form in pursuance of Agricultural income of the assessee and merely stated that the assesse had collectively deposited the amount earned in the earlier years, however no satisfactory information regarding cash deposit or cash flow was filed.
4.1 The A.O. asked the assessee about the source of deposits in his bank account. The A.O. initiated the proceedings under section 144 of the Act and observed as under:
Moreover, it is also noticed that there are other credits in your bank account also other than cash, deposits. You have mentioned in your reply that you are having agriculture income. The quantum of credits in your bank account suggests otherwise. The source of these heavy credits through cheque/RTGS/ bank transfer remain unexplained. A detail of these credits is reproduced hereby:
S N Date Narration Amount 1. 04-04-2011 By Sandhu Cold Rs. 80,00,000/- 2. 29-04-2011 By INST 184104: MICR-1 Rs. 3,00,000/- 3. 29-04-2011 By INST 184103: MICR-1 Rs. 3,00,000/- 4. 05-05-2011 By INST 184116: MICR-1 Rs. 5,00,000/- TOTAL Rs. 91,00,000/- You are therefore desired to justify the genuineness of creditors, their creditworthiness and purpose of these credits. Also, you are required to submit copy of accounts from the persons who have given these credits and also the Balance sheets of the Creditors where these advances or credits are reflected.
Therefore, you are requested to explain the cash credits of Rs. 48,60,000/- and credit entries through cheque/RTGS/ bank transfer amounting to Rs. 91,00,000/- .
In view of the above mentioned circumstances, I have been left with no opportunity but to complete the assessment to the best of my judgment under section 144 of the Income Tax Act, 1961.
4.2 The A.O. mentioned that the Counsel for the Assessee attended on 26/10/2016 and filed the final reply to the query raised vide notice under section 144 of the Act on 18/10/2016 and submitted that three cheques received by the assessee were from M/s Vikas Trades in lieu of agricultural produce. It was also stated that in the earlier years the assessee was not maintaining bank account and the amount was deposited collectively in the previous year which had been earned in the earlier years, the submissions of the assessee were as under:
“In response to the Notice u/s 148 of the I.T. Act, 1961 it is submitted that the assessee is a farmer and having only agricultural income. The assessee is a senior citizen and does not have any other income other than agricultural income. The assessee was not maintaining any bank account in the earlier years and had deposited the amount of the previous year's collectively which he had earned. Further it is submitted that the assessee's income from agricultural produce does not fall under the preview of Income Tax and he does not given have a PAN number. In view of above circumstances assessee had not filed his return.
We hope you will find the aforesaid information as per requirement."
4.3 However, the A.O. was not satisfied from the submissions of the assessee and made the addition of Rs. 48,56,000/- by observing in para 4.7 to 4.16 of the assessment order as under:
4.7 During the course of assessment proceedings submission made in the case were found to be false. On verification it is found that the assessee was maintaining bank accounts in the earlier years and had also received his sale of agricultural produce form through bank. Therefore source of cash deposit in the bank accounts during the Financial year 2011-12 were not in any way was the cash available from the cash sale of agricultural produce of the previous year's collectively as claimed by the assessee. As per record and also as per confirmations u/s 133(6) of the I T Act, assessee never received cash but received the payment through account payee cheque from the persons to whom he has sold the agricultural produce.
4.8 Thereafter counsel was specifically confronted that the assessee has received cheque against the agriculture produce sold. The contention of the assessee that the cash deposits were out of cash in hand out of cash sale of agriculture produce is not maintainable as no cash was available with the assessee as claimed vide reply dated 14.05.2015. ' 4.9 It was specifically confronted to the counsel vide order sheet entry that the persons who had paid for agriculture produce of the assessee namely M/s Vikas Trades and M/s Baldev Singh & Co. were called for u/s 133(6) of the Act. In response to which they submitted the copies of account for the relevant assessment years and submitted that payments were made through Account payees cheques. No cash was paid by them. It was also confronted to the Counsel of the assessee that he himself admitted to have received cheques vide his reply dated 24.10.2016 received on 26.10.2016.
4.10 In response to these discussions no written reply was received from the counsel of the assessee. In the absence of any reply it is presumed that counsel of the assessee has nothing more to say on this issue.
4.11 As per bank statement of the assessee it is noticed that the assessee had deposited Rs.48,56,000/- in his saving bank account No 4766000100024592 during the A.Y 2012-13 of Punjab National Bank Bahadur Ke Road Ludhiana. During the course of assessment proceedings credits entries of all cash credits remained unexplained. Therefore, unexplained cash deposits are required to be added in the total income of the assessee. . As discussed above Hon'ble Supreme Court in the case of CIT vs Durga Das More, (1971) 82 ITR 540 (SC) has categorically held that revenue is entitled to look into surrounding circumstances to find out the reality of recitals made in the documents. In the case of Sumati Dayal vs CIT 214 ITR 801 (SC), the Hon'ble Supreme Court has also held that the matter has to be considered in light of the human probabilities. "It is a story that does not accord with human probabilities". The case of the assessee satisfies the above parameter and conditions laid down by the Hon'ble Apex Court.
4.12 As per provisions of the Income Tax Act 1961 where in the financial year immediately preceding the. assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 4 13 Assessee has not offered any satisfactory explanation about the nature and "Source of the cash credit entries in his saving the bank account. Therefore total credit amount of cash deposits of Rs. 48,56,000/- remained unexplained and the information provided by the assessee regarding the source of cash deposit was found to be false and contradictory. 4.14 In view of above mentioned detailed discussion Rs. 48,56,000/- is required to be added to the income of the assessee.
4.15 For the above addition an academic issue of PEAK OF CASH DEPOSITS is discussed. In this case the benefit of peak of cash deposits is not given because benefit of peak of cash deposits is given when it can be inferred that the cash deposits were from the cash in hand out of the earlier cash withdrawals. In this case assessee has made .cash withdrawal of Rs. 6,00,000/- only on 11.05.2011 whereas major entry of cash deposit of Rs. 48,00,000/- was on 12.08.2011. Thus, cash withdrawal of Rs. 6,00,000/-about three months prior to cash deposit: cannot explain cash deposit of Rs. 48,00,000/-. Therefore, cash entry of Rs. 48,00,000/- is altogether taken as different entry and liable to be treated as unexplained. Moreover the assessee has also not claimed to have redeposited the cash out of the cash in hand available with him.
4,16 In view of above mentioned detailed discussion on the subject Rs. 48,56,000/- is added to the total income of the assessee.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that the assessee is a senior citizen engaged in agricultural activities with no other source of income except agriculture income from agricultural land measuring 44.5 acres. The assessee also furnished copy of J-Form suggesting agriculture income and stated that he had collectively deposited the amount in question i.e; Rs. 48,56,000/- which was earned in earlier years. It was stated that the assessee because of his ill health, could have not provided the details of another bank account maintained with State Bank of Patiala at Hosiery Branch, Bahadur Ke Road, Ludhiana (now SBI) before the A.O. during the course of assessment proceedings, from the said bank account the assessee had withdrawn cash amounting to Rs. 30,00,000/- & Rs. 38,00,000/- on 25th & 26th of October, 2010 respectively. It was further stated that the assessee also received cash from commission agent against sale of agricultural produce and adduced a xerox copy of account with M/s Kahlon & Co. for the year ending 31/03/2010 which revealed earning of Rs. 3,45,212/-. It was submitted that the aforesaid amount of cash after meeting the household expenditure and cash expenditure relating to agricultural income were deposited in the bank account maintained with PNB in the denomination of Rs. 56,000/- on 24/04/2011 and Rs. 48,00,000/- on 12/08/2011.
5.1 The Ld. CIT(A) after considering the submissions of the assessee observed that the assessee’s contention of being an agriculturist and an illiterate senior citizen, not having PAN at the time of the issuance of notice under section 148 of the Act was neither denied nor disputed. However, when the A.O. on the basis of information in his possession to the effect that the assessee had deposited a substantial amount of cash in his bank account, sought to enquire the sources of said deposit to satisfy himself about non escapement of any income from taxation, no satisfactory explanation could be given, constraining the hands of the A.O. to issue notice under section 148 of the Act on a prima facie belief of escapement of income from taxation, and that the A.O. had followed the due procedure in this regard.
5.2 The Ld. CIT(A) further observed that the A.O. on verification, found that the assessee had been receiving sale proceeds of agricultural produce by account payee cheque from two commission agents who confirmed the same and that at the beginning of the year in the month of April & May 2011, the assessee received a substantial amount of Rs. 91,00,000/- through banking channels.
5.3 The Ld. CIT(A) also observed that though no adverse opinion was formed by the A.O. regarding the taxability of the aforesaid receipt represented by credit entries in the bank account of the assessee, it was certain that the assessee’s bank account was regularly being used for deposits of cheques. He pointed out that on 04/04/2011, a credit entry of Rs. 80,00,000/- was seen with the narration “By Sandhu Cold Storage”, the said entry did not appear to be any part of agricultural income but no adverse view was taken by the A.O. of the said amount on the basis of subsequent withdrawals out of that deposits. He also observed that the rest of the deposits by cheque amounting to Rs. 11,00,000/- had been found to be the sale proceeds of Agricultural produce.
5.4 As regards to the withdrawal of Rs. 68,00,000/- (Rs. 30,00,000/- & Rs. 38,00,000/- on 25th & 26th of October, 2010 respectively) in the immediately preceding year which alongwith other cash in hand was re-deposited in the denomination of Rs. 56,000/- and Rs. 48,00,000/- in the subsequent years on 24/04/2011 and 12/08/2011 was concerned. The Ld. CIT(A) observed that the assessee could not explain as to why the said amount of Rs. 68,00,000/- was withdrawn in quick succession on 25th and 26th of October 2010 and retained for being deposited after a lapse of almost a year. According to the Ld. CIT(A) the assessee may be an agriculturist and may not have any other source of income than agriculture but the amount of cash deposited in his bank account or the use of his bank account by any other person needed to be explained by the assessee and in the absence of any cogent and relevant explanation, the operation of law with regard to the treatment of unexplained credit in the bank account as deemed income has to be effected with its full rigours.
5.5 The Ld. CIT(A) also observed that there had been substantial deposits both in cash and cheque and the agriculture income had been found to be deposited in the assessee’s bank account by means of account payee cheques, in these circumstances, there was an onus on the assessee to explain the sources of deposits in cash which had not been cogently done. He therefore sustained the addition of Rs. 48,56,000/- made by the A.O.
Now the assessee is in appeal.
Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee deposited the amount of Rs. 56,000/- on 22/04/2011 out of the earning of Rs. 3,45,212/- received from the commission agent M/s Kahlon & Company against the sale of agriculture produce and the remaining amount of Rs. 48,00,000/- was deposited on 12/08/2011 out of the withdrawal of Rs. 30,00,000/- & 38,00,000/- on 25th & 26th October 2010 respectively. It was submitted that the Department did not bring any material on record to substantiate that the aforesaid amount withdrawn by the assessee was utilized elsewhere other than in making the deposit in the bank account of the assessee, therefore the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified.
In his rival submissions the Ld. Sr. DR strongly supported the orders of the authorities below and further submitted that when the assessee regularly deposited cheque and cash in his bank account against the sale of agriculture produce then it was unbelievable that the amount of Rs. 48,00,000/- was kept in cash for about 10 months, therefore, the Ld. CIT(A) was fully justified in sustaining the addition made by the A.O.
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is not in dispute that the assessee is a senior citizen, holding agriculture land of about 44.5 acres and his source of income was only the agricultural income. In the instant case the A.O. has not doubted the receipt of Rs. 3,45,212/- by the assessee on account of sale of agriculture produce from M/s Kaholon & Co. during the year ending on 31/03/2010. The assessee claimed that a sum of Rs. 56,000/- out of the said amount was deposited on 24/04/2011 in his bank account. The said explanation of the assessee appears to be plausible. In the present case it is also not in dispute that the assessee had withdrawn cash amounting to Rs. 30,00,000/- on 25/10/2010 and Rs. 38,00,000/- on 26/10/2010 which is evident from the copy of statement of bank account maintained with SBI, Bahadur Ke Road, Ludhiana Branch which is placed at page no. 74 of the assessee’s paper book, out of the said withdrawals, it was claimed that a sum of Rs. 48,00,000/- was deposited in cash on 12/08/2011 which has been reflected in the copy of the bank account placed at page no. 73 of the assessee’s paper book. In the instant case, nothing is brought on record to substantiate that the amount of Rs. 48,00,000/- out of the aforesaid withdrawal of Rs. 68,00,000/- claimed to be used for depositing in the Bank Account of the assessee, was utilized elsewhere and not in depositing in the bank account maintained with PNB Bahadur Ke Road, Ludhiana Branch. We therefore considering the totality of the facts, particularly this fact that the assessee was an aged person who was an agriculturist at the relevant time and was selling the agriculture produce therefore his source of income was only the agricultural income which has been accepted by the Department. The assessee was not having any other source of income or doing any other business / profession, therefore the explanation given by the assessee for depositing the amount of Rs. 48,56,000/- out of withdrawals of Rs 68,00,000/- appears to be plausible. In that view of the matter the impugned addition made by the A.O. and sustained by the Ld.CIT(A) is deleted.
In the result, appeal of the Assessee is allowed.
(Order pronounced in the open Court on 12/04/2021)