SH. RAJNEESH THAKUR,LUDHIANA vs. ACIT, C-VII, LUDHIANA

आदेश/ORDER

Per Annapurna Gupta, Accountant Member:

The above appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-3, Ludhiana [(in short referred to as ‘CIT(A)’] dated 01/09/2018, relating to assessment year 2011-12, passed u/s 250(6)of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).

2. Ground no. 1& 2, it was pointed out by the Ld.Counsel for the assessee, related to the same issue of addition made under 69A of the Act on account of alleged unexplained cash deposits in bank amounting to Rs. 16,49,000/-,and the grounds are as under:

2. That the Ld. CIT(A) has failed to appreciate the bonafide explanation for deposit of cash and various other facts as reproduced by her in the order.

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4.4 I have carefully considered the facts of the case and judicial pronouncements relied upon by the assessee. After going through the facts of the case and explanation of the assessee during the course of assessment proceeding as well as in assessment proceedings, I am not inclined to agree with the contention of the assessee. Firstly the assessee had completely failed to disclose his saving bank account maintained with IDBI, to the Department, when he was specifically asked to file his complete Bank statements by the assessing

1565-Chd/2018- Rajneesh Thakur, Ludhiana 3 officer. The assessing officer was already in possession of the information received through AIR, that the assessee had got deposited cash of Rs.16,50,000/- in December 2010. When the assessee was specifically asked for nondisclosure of this bank account, then the assessee pleaded that, due to ongoing cancer treatment of his father the staff of the assessee was dealing with the matter who forgot to mention and disclose this bank account to the Department. This plea of the assessee could not be relied upon , as the assessee is an old assessee and his accounts have been audited by a competent chartered accountant and was having a team of assistants who were dealing the matter as per his claim in his absence.

Secondly the explanation of the assessee with regard to deposit of this cash amounting to Rs. 16,50,000/- in December 2010 , in IDBI Bank account is also not tenable. The assessee has claimed ,that the assessee had received Rs. 1,650,000 to Rs. 16,50,000/- in the month of March ,ass a loan from ShriBalKishan .which was got deposited on 12/03/2010. In this regard the assessee has filed confirmation from Shr iBalKishan. I find myself in agreement with the view of the assessing officer, wherein the assessing officer has not doubted about the source of cash deposit in the month of March 2010 as the assessee has received Rs.16,50,000/- from Shri BalKishan through cheque which was got deposited by him in the bank account maintained with IDBI bank. However thereafter the assessee's submission with regard to the claim, that the same amount was withdrawn by the assessee and which was later on deposited back on 20/12/2010is not acceptable. As rightly mentioned by the assessing officer the cash in handavailablewith the assessee as on 31 March 2010 does not confirm the claim ofassessee, that the assessee was having sufficient cash in hand which was later on got deposited in the IDBI bank account of the assessee. The assessing officer hasmentionedthat the assessee had withdrawn Rs. 16 lakh by 29 March 2010 from thisIDBI bank account. Therefore the assessee's claim of getting deposited the same amount of Rs. 16,50,000/- on 20th and 21st December 2010 ,is not satisfactory. Theassessing officer has very rightly mentioned that the as against the claim of theassessee that the amount of Rs. 16,49,000/- pertains to the amount withdrawn inMarch 2010, however very importantly this amount remained with the assessee,out of books, is not tenable as the same has not been entered by the assessee inhis regular books of accounts at any point of time. The assessing officer has veryrightlymentioned, that the assessee in its balance sheet for the financial yearending on 31 March 2010 had shown cash in hand of Rs. 6,75,307/- only andtherefore the assessees claim for getting the same cash withdrawal deposited inthe bank on 20th and 21st December 2000 , is not believable. This explanation ofthe assessee also defies the human probability as discussed by the assessingofficer in the case of CIT v/s Durga Prasad more 82 ITR 540 and in the case of Sumati Dayal 214 ITR 801 where honourable Supreme Court has decided,that the taxing authorities are entitled to look into the surrounding circumstances to find outthe reality and the matter has to be considered by applying the test of humanabilities. Here in this case the assessee has completely failed to explain its conductand the explanation of the assessee is beyond human probability as the corporateand surrounding circumstances does not explain the assessee is contention withregard to explanation of cash deposit amounting to Rs. 1,649,000/- in lDBI bank. Accordingly it is held that the assessee has failed to explain the source of cash deposit amounting to Rs. 1,649,000/- therefore the addition made by the assessing officer on this account is ordered to be confirmed. With the result this ground of appeal is dismissed.

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S. No. Nature of Relevance of document Page No. of Paper Book Document 1. Copy of bank Statement Evidencing the amount 1 of paper book of IDBI Bank Entry dated 12.03.2010 credited in the bank account Entries dated 27.03.2010, by way of loan, by way of 29.03.2010 a 01.05.2010 cheque from Sh. Balkrishan Entries dated 20.12.2010 a who confirmed the same. The amount of cash 21.12.2010 withdrawn by the appellant on various dates The subsequent deposit of the withdrawn cash by the appellant.

5.1 Ld. Counsel for the Assessee contended that the fact that the assessee had taken loan for Shr iBalkrishan to the tune of 16,50,000/- and subsequently withdrawn cash from the bank aggregating the same amount has not been doubted.Further no material has been brought on record to show that the amount so withdrawn had been utilized elsewhere by the assessee.Therefore,Ld. Counsel for the Assessee pleaded that the source of the cash deposit stood suitably explained as being from the cash withdrawn out of the loan taken from Shri Balkrishan .Ld. Counsel for the Assesseethereaftercontend that the basis for upholding the addition was not in accordance with the fact of the case. Drawing ourattention to the finding of the Ld.

1565-Chd/2018- Rajneesh Thakur, Ludhiana 5 CIT(A),Ld. Counsel for the Assessee contended that the ld. CIT (A) had upheld the addition for the reason that: a)the assessee had failed to disclose the saving bank account maintained with IDBI to the department when asked to file his complete bank statements by the AO. b) That the cash in hand available withthe assessee as on 31/03/2010 as reflected in his books of accounts was too small and belied the explanation of the assessee that the cash withdrawn from the IDBI account in the month of March 2010,was retained by him and later on redeposited. c)That the explanation of the assessee defied all human probability.

5.2 Ld. Counsel for the Assessee contended that it had been explained to the authorities belowthatthe IDBI bank account detail had not been submitted during assessment proceedings since it was not related to the business of the assessee but was his personal saving account and even otherwise it had subsequently been submitted during assessment proceedings and therefore non submission at the first instance caused no prejudice to the department. He further pointed out that the cash balance reflected in the books of assessee related to that in his business operations carried out and therefore had nothing to do with the cash withdrawals made from his personal saving account. He further contended that it is a settled legal position that no addition is tenable if cash deposit is made out of cash withdrawn by the appellant and reliance in this regard was placed on the following judgment.

• ITO Vs. Ashok Kumar Jain in A.Y 2008-09, order dt. 03/11/2015 • The ACIT Vs. Joginde rPaul in ITA No. 734/Chd/2014, A.Y. 2010-11,orderdt. 12/01/2015 • Shri Ravinder Singh Negi Vs. DCIT in ITA No. 811 & 812/Chd/2014, A.Y. 2009- 10 & 2010-11, order 08/11/2016 5.3 Ld. Counsel for the Assessee therefore pleaded that the addition made on account of unexplained cash deposit of Rs. 16,49,000 therefore be deleted.

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The explanation of the assessee supported with documentaryevidences is to the effect that it was the loan taken from one Shri Balkrishan Sood by way of cheque which was deposited in this bank account and subsequently withdrawn in cash in the preceding year, which cash was redeposited in the bank account in the impugned year. The chronology of the aforesaid events as brought out from the copy of Bank Statement placed before us at P.B 1 is as under:

Value date Chq. No. Withdrawal Deposit Balance Narration 21-12-2010 022613 8,00,000 Dr 4387.00 Cr RTGS/iBKLH10355003251/BAL KRISHAN 21-12-2010 7,99,000 Cr 8,04,387 Cr Ludhiana : CASH RECEIPT 20-12-2010 22612 8,50,000 Dr 5,387 Cr RTGS/iBKLH10355001936/BAL KRISHAN 20-12-2010 8,50,000 Cr 8,55,387 Cr Ludhiana : CASH RECEIPT 30-09-2010 387 Cr 5,387 Cr 2701040000046710: Int Pd:01-04- 2010 to 30-09-2020 07-05-2010 22607 45,000 Dr 5,000 Cr Ludhiana : CASH RECEIPT 01-05-2010 22605 50,000 Dr 50,000 Cr Ludhiana : CASH RECEIPT 29-03-2010 22604 5,00,000 Dr 1,00,000 Cr Ludhiana : CASH RECEIPT 29-03-2010 22603 3,00,000 Dr 6,00,000 Cr Ludhiana : CASH RECEIPT 27-03-2010 22502 8,00,000 Dr 9,00,000 Cr Ludhiana : CASH RECEIPT 12-03-2010 50,000 Cr 17,00, 000 Cr A/c opening by Cash Deposit 12-03-2010 16,50,000 Cr 16,50,000 Cr Initial amount deposit

GroundNo. 1& 2 of the appeal are allowed.

3. That the Ld. CIT(A) has erred in confirming the addition of Rs. 61 lacs received during the year by invoking the provisions of section 68 and treating the same as income from undisclosed sources. 13. In the above ground the assessee has challenged the addition of Rs. 61,00,000/- made under section 68 of the Act by treating the amount of advance taken from M/s Jamna Das Nikkamal Jain and Saraf Pvt. Ltd. and Shri Chandrakant Jain as assesses own income from undisclosed sources.

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5.7 I have gone through the assessment order where in as per Annexure-A and B, the AO has annexed confirmation from M/s Jamna Dass Nikkamal Jain Saraf and Chander Kant Jain. Both of them have confirmed that the amount of Rs. 61 lakh, as claimed by the assessee as pending advance with the assessee, has been received by them, way back in financial year 2010-2011, on 24/11/20110. Both of M/s Jamna Dass Nikkamal Jain Saraf and Chander Kant Jain , have confirmed that this amount, is no longer pending with the assessee as the same have been received back by them in financial year 2010- 2011 meaning thereby that in this financial year no such liability was pending with the assessee as claimed by him. The relevant part of the confirmation filed by the above parties are being reproduced in above paragraphs. Accordingly it is undoubtedly clear that the assessee has completely failed rather has been misleading the Department by claiming that advance were still pending with him, whereas as evident from the facts as discussed above the same had already been given back to the respective persons by the assessee in this financial year itself. Accordingly I am in agreement with the contention of the assessing officer wherein he has treated this amount of Rs. 61 lakh as unexplained and added back to the income of the assessee under section 68 of the income tax act 1961 as the assessee has not explained it at all during the course of assessment proceedings.

5.8 I have also carefully considered the assessee's written submission filed through his counsel at the time of appellate proceedings, wherein it has been reiterated that the amount was still pending and since the amount pertain to old advances, no addition under section 68 can be made. The assessee also reiterated, that in the scrutiny assessment of assessee for the assessment year 2008-2009 was completed u/s 143(3 , wherein the impugned advances received

1565-Chd/2018- Rajneesh Thakur, Ludhiana 10 have been accepted by the department, therefore on account of these old advances, no addition can be made in this year. In support of his contention the assessee has relied upon few judicial pronouncements also. I have gone through the detailed facts of the case laws, relied upon by the assessee and the facts of the case. However in view of the explicit statement filed by the above parties during the course of their respective assessment proceedings which have been reproduced in above Paras and the same is part of the assessment order as Annexure A and annexure -B. It is undoubtedly clear; that the said advances have already been returned to the said parties, during this financial year itself, therefore the assessee's claim with regard to these advances received from earlier years is not tenable. In view of the above glaring facts it is held, that the assessee has not come forward with the satisfactory explanation with regard to these advances and accordingly the addition made by the assessing officer on account of unexplained trade advances received from M/s Jamna Dass Nikkamal Jain Saraf and Chander Kant Jain, is treated as unexplained and addition on this account by learned AO is hereby confirmed. Accordingly these ground of appeal are dismissed.

15. Before us, the contention raised by the Ld. Counsel of the assessee were to the effect that the impugned addition pertained to outstanding advances received in earlier years from the two parties and appearing in the balance sheet of the assessee right from F.Y. 2007-08 onwards when the said advances were received as under:

Jamna da snikkamal jain saraf - Rs. 50,00,000/- Chandrakant jain - Rs. 11,00,000/- 15.1 Ld. Counsel of the assesseecontended that since the impugned amount was received in earlier years it could not be treated as unexplained credit of the impugned year for the purpose of making addition under section 68 of the Act.

15.2 Our attention was drawn to the provisions of section 68 in this regard and reliance was also placed on the following decisions in support of the contention that under section 68of the Act addition can be made only in respect of advances received in the year itself and not that received in earlier years.

•Dy. CIT v. Amod Petrochem (P.)Ltd. [2008] 307 ITR 265 (Guj.) •CIT v. Usha Stud Agricultural Farms Ltd. [2008] 301 ITR 384/[2009] 183 Taxman 277 (Delhi) •CIT Vs. Prameshwar Bohra, 301 ITR 404, Rajasthan High Court •Mahabir Prasad Prem Chand Jain v. ITO [1988] 40 Taxman 35 (Mag.)(Delhi) •Nuchem Ltd. v. Dy. CIT [2004] 87 TTJ 166 (Delhi - Trib.)

1565-Chd/2018- Rajneesh Thakur, Ludhiana 11 •Shri Vardhman Overseas Ltd.'s case [2008] 24 SOT 393 (Delhi) •ACIT Vs. Smt. N. Sasikala 92 TTJ 1196 (Chennai) (Trib.)

It was also pointed out that for the A.Y. 2008-09 (relevant to F.Y. in which the advance was received) the said advance had been assessed under section 143(3) of the Act and no adverse view was taken against the assessee. In this regard our attention was drawn to the financial statements / audited balance sheet of the assessee for F.Y. 2007-08,2008-09, 2009-10 and 2010-2011 placed at PB No. 4 to 39 relevant pages being 7,15,24, and 35, reflecting the impugned advance in all these years. Copy of the assessment order for A.Y. 2008-09 was also filed before us to show that no adverse view was taken with respect to the said advances in assessment framed under section 143(3) of the Act. Ld. Counsel of the assessee therefore contended that the said amount cannot be treated as unexplained because no amount had been received in the year under consideration and had been accepted in scrutiny assessment for the year in which received.

Thereafter Ld. Counsel of the assessee contended that the revenue had treated the same as unexplained for the reason that the said two parties had stated that the amount advanced had been received back during the impugned year and there was no balance outstanding, while the assessee on the other hand had reflected the outstanding balances. Ld. Counsel for the assessee contended that the reasons for the aforesaid contradiction stood duly explained by the letters submitted by the impugned parties in course of enquiry conducted from them,duly substantiated with evidences. Referring to the letter filed by them placed at Paper Book Page No 40-45 d. Counsel for the assessee contended that the said parties had explained that the amount of Rs.61,00,000/- stood outstanding in their names since they had advanced Rs. 50,00,000/- each to the assessee which included 39,00,000 in cash and the balance by way of cheque to the assessee, for acquiring a property on their behalf which inturn had been advanced by the assessee to a third party for the said purposes in F.Y. 2007-08 itself but subsequently due to some dispute the transaction was shelved and the third party had refunded the entire Rs. 1 Crore directly to the said two parties. For which reason the said two parties had stated that no amount was outstanding on account of the same.That

1565-Chd/2018- Rajneesh Thakur, Ludhiana 12 the assessee had not made relevant accounting entries in his books of account with respect to the same refund and therefore also the amount stood reflected as outstanding in its books. Ld. Counsel of the assesseedrew our attention to the letter submitted bythe said parties to the AO explaining the transaction ,placed at P.B 46-48 as under ,alongwith documents to substantiate this explanation.

“To The Assistant Commissioner of Income-tax Circle-VII Ludhiana Sub: Assessment proceedings in the case of M/S Jamna Dass Nikka Mai Jain Saraf (P) Ltd. 455, The Mall, Ludhiana..Assessment Year 2011-12.

Sir, Reference discussion on the last hearing.

During the assessment proceedings, Your Honour have observed that Sh. Rajneesh Thakur had received a sum of Rs. 50.00 lacs as advance from the assessee company and as per the details given by the assessee company in respect of loans and advances, there is no such advance. Your Honour have further desired the assessee to explain as to why this advance be not treated as unexplained investment u/s 69:

In reply, it is respectfully submitted that the assessee company is engaged in the business of manufacturing and trading of gold and diamond jewellery and is also a dealer in real estate. On 14.04.2007, the assessee company and one of its Directors viz. Sh. Chande Kant Jain had entered into a Memorandum of Understanding (copy enclosed) with Sh. Rajneesh Thakur S'/o Sh. Ram Pal Thakur S/o Sh. Munshi Ram resident of 545, College Road, Ludhiana for purchase of immoveable property at Plot No. 1-H, bearing Municipal No. B-XX-4049, measuring 995 sq. yds.at Kartar Singh Sarabha Nagar, Ludhiana and had advanced a sum of R& 50.00 lacs each to Sh. Rajneesh Thakur as earnest money. Sh. Rajneesh Thakur, on the other hand had entered into an agreement of sale dated 26.02.2007 (copy enclosed) with Sh. Jeet Amol Singh son of Sh. Kuldip Singh resident of 69-K, Sarabha Nagar, Ludhiana (3/4m share) and Daljit Kaur W/o Sh. Jeet Amol Singh Gill (1/4lh share) for the purchase of this property as these were the owners of this property. He had already paid Rs. 1 crores to the owners as earnest money for purchase of this property. The matter of execution of sale deed was linger on and developed some dispute between Sh. Rajneesh Thakur and the owners of the property. As a result, both the 1565-Chd/2018- Rajneesh Thakur, Ludhiana 13 parties filed legal suits against one another and as such the property could not be purchased either by the assessee company or by Sh. Chander Kant Jain. To recover the amount of Rs. 1 crore from Sh. Rajneesh Thakur, both Sh. Rajneesh Thakur and the assessee company entered an assignment to get the amount of Rs. 1 Crore from Sh. Jeet Amol Singh and his wife Smt. Daljit Gill. It was in the financial year 2010-11, the owners of the property returned the money by way of two bank transfers of Rs. 75.00 lacs and Rs. 25.00 lacs. The bank transfer of Rs. 75.00 lacs on 24.11.2010 was out of account no. 4450000100002633 in PNB, Sunder-Nagar, Ludhiana in the name of Sh. Jeet Amol Singh and the other bank transfer of Rs. 25.00 lacs on 24.11.2010 was out of account no. 4450000100002642 in same bank in the name 3f Daljit Kaur Gill W/o Jeet Amol Singh. But fact of the matter, as stated above, only Rs. 50.00 lacs was advanced by the assessee company and the balance Rs. 50.00 lacs was advanced by Sh. Chander Kant Jain. On receipt of the entire amount of Rs. 1.00 crore, the assessee company returned Rs. 50.00 lacs to Sh. Chander Kant Jain.

With regard to above, the following documents are enclosed for Your Honor's kind perusal:-- a) Copy of account of Sh. Rajneesh Thakur in the books of M/s Jamna Das Nikkamal Jain Saraf P. Ltd. and Sh. Chanderkant Jain from A:Y: 2008-09 to the assessment year under consideration, b) Copy of bank account no. 0765008700032141 in PNB, Bharat Nagar Chowk, Ludhiana in the name of M/s Jamna Dass Nikkamal Jain Saraf P. Ltd. (the assessee company) showing the credits of bank transfers received from the owners of property as mentioned above and also payment of Rs. 50 lacs to Sh. Chanderkant Jain. c) Copy of bank account no. 4450000100002633 in PNB, Sunder Nagar, Ludhiana in the name of Sh. Jeet Amol Singh showing the bank transfer of Rs. 75 lacs, d) Copy of bank account no. 4450000100002642 in PNB, Sunder Nagar, Ludhiana in the name of Daljit Gill W/o Jeet Amol Singh showing the bank transfer of Rs. 25 lacs e) Copy of bank account no. 0765000106695711 in PNB, Bharat Nagar Chowk, Ludhiana in the name of Sh. Chanderkant Jain showing the receipt of Rs. 50 lacs from the assessee company. f) Copy of 'ASSIGNMENT' from Sh. Rajneesh Thakur for receipt of Rs. 1 crore as earnest money from the Assessee Company and Sh. Chanderkant Jain. This 'ASSIGNMENT was given on the back side of agreement of sale dated 26.02.2007 (copy enclosed) entered into by Sh. Rajneesh Thakur with Sh. Jeet Amol Singh son of Sh. Kuldip

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Singh resident of 69-K, Sarabha Nagar, Ludhiana (3/4th share) and DaljitKaur W/o Sh. Jeet Amol Singh Singh(1/4* share) for the purchase of this property. g)Copy of confirmation given by Sh. Rajneesh Thakur on 16.11.2010 for receipt of Rs. 50 lacs from Sh. Chanderkant Jain, which was also filed during the assessment proceedings, of Sh. Chanderkant Jain for assessment year 2008-09.

H)Copies of some of the documents relating to legal proceedings between Sh. Rajneesh Thakur and the owners of the property.

In view of the above, there is no such advance which has not been disclosed/accounted for by the assessee company. As such, the provisions of Sec. 69 are not attracted at all under such circumstances.

Hope Your Honour will find the position explained with respect to the query raised and shall proceed to finalize the assessment accordingly.

Thanking you,