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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R PER RAJPAL YADAV, VICE PRESIDENT :- The assessee is in appeal before the Tribunal against the order of the learned CIT(A)-4, Ahmedabad dated 30th November 2016 passed for Assessment Year 2008-09. The assessee has taken four grounds of appeal, out of which ground nos. 1 and 4 are general grounds of appeal which do not call for recording of any specific findings.
2. In ground no.2, the assessee has challenged reopening of assessment by issuance of notice under Section 148 of the Income-tax Act.
The brief facts of the case are that the assessee has filed his return of income electronically on 30th September 2008 declaring total income at Rs.4,30,830/-. The learned Assessing Officer has recorded reasons for reopening and thereafter issued notice under Section 148 of the Income-tax
Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 2 Act on 01.03.2013. The reasons recorded by the Assessing Officer are available on page no. 30 of the paper-book. Relevant part has also been reproduced by the learned First Appellate Authority on page no. 3 of the impugned order, which reads as under:-
“The Ld. A.O. has recorded reasons for reopening of assessment is reproduced here under. Information was received from ITO Ward 14(2), Ahmedabad that during the course of assessment proceedings in the case of his assessee Smt. Sharmishthaben M Bhavsar, it was noticed that AIR information was received in her case regarding purchase of immovable property I her name, her husband Shri Mahendra M Bhavsar who is practicing advocate has made payment of Rs. 12 lacs out of cash available with him. It was also reported by the ITO Ward (2), Ahmedabad that Shri Mahendra B. Bhavsar along with his wife and son Chanakva M Bhavsar is maintaining an SB account No. 701520100557698 with Syndicate bank, Khokhara Branch, Ahmedabad. On verification of the said SB account it is noticed that the assessee has made cash deposit of Rs. 23,47,927/- during F.Y. 2007-08 relevant to A.Y. 2008- 09. On verification of ITS data it is noticed that assessee has not disclosed the above, joint bank account with Syndicate bank, Khokhara branch, Ahmedabad to the department. Therefore the cash deposit of Rs. 23, 47,927/- during the F.Y. 2007-08 in SB account no.70152010055769 is nothing but the undisclosed income of the assessee which the assessee never intended to disclose to the department."
The learned Counsel for the assessee, while impugning the orders of the Revenue Authorities, contended that against the reopening of the assessment, assessee has filed objections vide letter dated 20th January 2014. Such objections are being placed on page no. 31 to 37 of the paper-book. He pointed out that these objections have been considered by the learned Assessing Officer, but rejected. Taking us through the objections as well as copy of the reasons, he contended that basically learned Assessing Officer observed that a sum of Rs. 23,47,927/- were found to be deposited in cash in a savings bank account with Syndicate Bank. The Assessing Officer was of the view that this bank account was not disclosed by the assessee and,
Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 3 therefore, it is an undisclosed income and assessee has never any intention to disclose it to the Department. Qua this reasoning, learned Counsel for the assessee submitted that it is factually incorrect. For the present year of assessment i.e. the assessment year under consideration, assessee could only disclose one bank account in which he entitled to get his refund. There was no requirement to disclose all the bank accounts. In the audited accounts, the assessee has disclosed all the bank accounts and copy of such audit report is available in the paper-book. He drew our attention to page no. 61 of the paper-book wherein following details are mentioned:- Mahendra bhavsar & Co – (From 1-Apr-2007) 201, to 204, ATMA HOUSE, Opp. La-Gajjar Ashram Road, Ahmedbad-380009 Bank Accounts Group Summary 1-Apr-2007 to 31-Mar-2008 Closing Balance Debit Credit DENA Bank A/c. 111-1706 [Current] 86,057.50 Gujarat Mer Bank A/c – 2023 [Current] 11,378.00 Punjab National Bank – 21/684 3,186.50 Syndicate Bank A/c 101/2314 [Current] 64,107.00 Syndicate Bank A/c 55679 – Client A/c 25,989.21 Grand Total 1,90,718.21
A copy of account No. 55679 has duly been disclosed along with closing balance. Thus, according to the learned Counsel for the assessee, it was incorrect at the end of the Revenue to say that the assessee has no intention to disclose this account and that assessee has not disclosed this account to the Revenue. According to the required rules, he has disclosed this account. He accordingly submitted that the reopening of the assessment is bad in law and it is required to be quashed.
Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 4
On the other hand, learned Departmental Representative relied upon the assessment order as well as order of the learned CIT(A). He contended that the Assessing Officer has reopened the assessment after due verification of the income-tax data of the assessee.
We have duly considered the rival contentions and gone through the record carefully. A perusal of the reasons would indicate that a sum of Rs.23,47,927/- were deposited in one of the joint savings bank accounts in cash. A cash deposit in the bank would not a per se escaped income. It can be from explained sources. Therefore, merely some cash was deposited in the bank the Assessing Officer cannot harboured a belief that the income has escaped assessment. The question in this case is that the Assessing Officer has verified this cash deposit with ITS data and on the perusal of that data he found that volume of transactions and these transactions are not reflecting in ITS data of the assessee. When the assesse has filed objections before the Assessing Officer against the reopening of the assessment, then while considering the objections learned Assessing Officer has observed that on perusal of bank account vis-à-vis audited accounts, it revealed that there are voluminous transactions. The assessee has shown gross receipt of Rs.16,32,166/- as professional receipts; as against that Rs.79 lakhs were found to be credit entries in different bank accounts. Thus, he has a prima facie opinion that income has escaped assessment. After going through these reasons, we are of the view that it is not simply the information obtained from the bank about the cash deposit which goad the Assessing Officer to form a belief of escapement of income - rather this is based on comparative analysis of the record. Otherwise, the Assessing Officer would have dropped the re-opening proceedings. Therefore, after due consideration of the above details, we do not find any merits in this Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 5 ground of appeal raised by the assesse challenging reopening of assessment. This ground of appeal is rejected.
7. In Ground No.3 of appeal, the grievance of the assessee is that learned CIT(A) has erred in confirming the addition of Rs.63,50,000/- which was added by the Assessing Officer with the aid of Section 69 of the Income-tax Act.
8. The brief facts of this case are that the assesse was maintaining a joint savings bank account with Syndicate Bank, Khokhara Branch. Cash deposits were made in this account which were withdrawn or used for payments. Complete bank statements has been placed on page no. 235 and onwards. The summary of transactions totaling to Rs.63.50 lakhs has been placed on page no.282-283 of the paper-book. The case of the Assessing Officer is that it is unexplained investment at the end of the assessee. In other words, he failed to disclose source of deposits in this bank account and therefore, it is to be treated as undisclosed income of the assessee. On the other hand, case of the assessee is that being a lawyer he has received these amounts in fiduciary capacity. It was just similar to escrow account where he has deposited these amounts of his client related land transactions. The copy of the agreement to sale has been placed before us at page nos. 157 to 165 of the paper-book. A translated copy of this agreement has also been placed on page nos. 298 to 301 of the paper-book. Shri Keshavlal K Patel is the vendor of the land; whereas Shri Giriraj Singhji Zala is the purchaser of the land. Some civil suits were pending between the vendor and his co-owner late Shri Shivaji Hemaji. It has been provided in the agreement that vendors shall get the title clearance certificate from the assessee. In other words, with the help of the assessee, the title was required to be cleared. Clause 5 of the agreement provided as under:-
Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 6 “5. The amount payable under this agreement for sale shall be paid as per the Escrow arrangement above mentioned and shall be paid for getting title clear and as per the instruction of the Vendor. In respect to the payment agreed herein as on today the Party of the Second Part, i.e. the Purchaser has paid in the Escrow Account with M/s Mahendra Bhavsar & Co. Rs. 500,000 (Rupees Five Lakhs only) in cash which amount shall be treated as a part of the payment payable under this Agreement for Sale for the Said Land.”
On the strength of this clause, it was alleged by the assessee that amounts were used to pay to him, which were ultimately remitted to the vendor. He gave confirmation from all these parties. This version of the assesse was disputed by the Revenue Authorities and learned CIT(A) has observed following findings while rejecting the contention of the assessee:-
“7.3.5 Regarding remaining cash deposits of Rs.63,50,000/- the appellant submitted that this amount was received by him in fiduciary capacity on behalf of his client. The appellant stated that being an advocate, one of Shri Giriraj Singhji Zala who purchased land worth Rs.8,51,00,001/- from Shri Kishorelal K Patel, given case to him and he deposited the same in his bank account as escrow account. The appellant filed copy of 'Banakhat' between Shri Keshavlal K. Patel and Shri Giriraj Singh, in which it is mentioned in para 4 that 10% percent of the transaction value will be kept with the appellant. The appellant thus submitted that the cash of Rs.63.50 lakh deposited in his account belong to Shri Giriraj Singh. Therefore, additions in his hands should be deleted. The Assessing Officer mentioned in the Remand Report that the appellant had account in joint name with his other two family members. The bank account with joint name cannot be considered as escrow account. The appellant deposited other money i.e. his professional receipts etc. in the same account. The A.O. further mentioned that the copy of 'Banakha’ produced by the appellant is not reliable evidence as the signature of Shri Giriraj Singh Zala on all pages do not tally with each other. The A.O. further mentioned that Shri Zala obtained his PAN AAFPZ1988H in 2004 and it cannot be believed that he does not have any bank account. Therefore, the A.O. reiterated that additions made by him be sustained. Contentions of both sides have been carefully examined. It cannot be believed that a person who is buying land worth Rs.8,51,00,001/- does not have any bank account. It is not clear why the 10% amount was to be given to the appellant. The condition that 10% of the transaction value be kept with the appellant is unusual and such conditions are not found in Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 7 "Banakhats" made for land transactions. The appellant had many bank accounts. If for any reason, escrow account is opened, it should have been separate account and only the money belong to the specific purpose, for which escrow account is opened, should have been deposited in that account. The appellant being a senior advocate must be knowing this. However, he keep the cash received in the same account, in which other money has been deposited. The account has been found in joint names with two other family members of the appellant, which also against the procedure of maintaining escrow account. These facts clearly prove that the appellant tried to explain the cash deposits in this accounts by creating documents which is an afterthought. Onus is upon the appellant to explain the credits in his accounts. Onus increased, when the amount deposited is in cash and to the extent of Rs.63.50 lacs. The facts of this case prove that the cash of Rs.63.50 deposited in the appellant’s bank account remain unexplained. Thus, it is income of the appellant for the year under consideration. Therefore, the addition of Rs. 63,50,000/- made by the AO are confirmed.”
On due consideration of the above facts and circumstances, we are of the view that addition of Rs.63.50 lakhs has been confirmed by the Revenue Authorities by assigning peripheral reasons that an escrow account cannot be opened in the joint name if assessee was a professional while he has joined his family members in savings account. It has also been observed that why the assesse has made other deposits in this account as well as it was doubted whether a person going to purchase the land of having value of Rs.8.5 crores was not maintaining account. To our mind, these are not directly to the transactions. The assesse has been alleging that in his professional capacity he kept certain amount which periodically paid to vendor. This fact has been confirmed by the purchaser in his confirmation. The question whether Shri Giriraj Singhji Zala was having bank account was never enquired; more so, his having bank account is an irrelevant question; because once the parties are settling the terms and providing certain arrangements, then those terms and action followed under those terms cannot be doubted simply under a reasoning that these transactions could be conducted in a different manner namely Shri Giriraj Singhji Zala
Shri Mahendra Bhikhalal Bhavsar Vs. ITO AY : 2008-09 8 could have given the amounts directly from his bank account. It is to be appreciated that sometime the parties to the agreement do not believe each other, cheques can be bounced, litigation could arise; they only follow a particular method that amount should go to the mediator to whom both have faith. Thus, the Revenue Authorities ought to have appreciated the facts by keeping in mind that these deposits have been taken by the assessee in his professional capacity. Summary of the receipts and payments have been placed on page no. 282 of the paper-book; these are reflecting in the bank account. Considering the above, we are of the view that the assessee has explained the source of deposits in the bank and, therefore, the addition made under Section 69 cannot be made. We, therefore, allow this ground of appeal of the assesse and delete this addition.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 29th January 2020 at Ahmedabad.