KAMAL JOSHI,DELHI vs. ITO WARD 41(5), NEW DELHI

PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These are appeals filed by the assessee against the respective orders of the ld. CIT (Appeals) for the assessment years 20089-09 and 2009-10 pertaining to quantum as well as penalty order. these are being disposed off by this common order.

ITA NO.2427/DEL/2019 (AY 2008-09)

“ During the year there is one deposit of Rs.1,65,20,000/- on 13.03.2008 on account of clearing from HDFC Bank, Gurgaon. On equity from bank it was found that the said deposit was received by him from M/s. Albina Properties Ltd. Enquiry was made from the said company and it was found that the said receipt was received by him from M/s. Albina Properties Ltd. on account of sale of land at Village Pawla, Kushropur, Tal & Distt. Gurgaon on 12.03.2008. Since Sh. Kamal Joshi has not filed any return of income for this year nor has been able to explain the source of the said deposit of Rs.1,65,20,000/- in his bank account. After giving several opportunities of hearings, the assessee did not attend any hearing even not filed return of income, I therefore add this deposit of Rs.1,65,20,000/- to the income of the assessee u/s 68 of the IT Act treating the same as unexplained deposit. During the investigations it was found that during the year following credits were found in the account of Sh. Kamal Joshi on account of cash deposits :-

Date Particulars Cr. Amount in Rs. 05.02.2008 Cash 500 -do- -do- 12,00,000 05.03.2008 -do- 5,00,000 -do- -do- 63,000 Total : 17,63,500 In the absence of any documents furnished by the assessee, the cash deposits of Rs.17,63,500/- are unexplained and add this amount of Rs.17,63,500/- u/s 68 of the IT Act in the income of the assessee treating the same as unexplained.”

“From a perusal of the above, the assessee’s contention in the statement of facts that the notice was sent at wrong address cannot be accepted. As regards reference to the inspectors report dated 8.03.2016, stating that one of the properties was demolished, there are no details as to which property was demolished and when in the assessment order nor the report has been filed. But it apparently is with reference to service of show cause notice on the mother of assessee on 8.03.2016 mentioned on page 1 of the assessment order. Therefore, the mention in the report, if at all, that on 8.03.2016, the property was demolished by the DLF Company does not help the case of the assessee as far as the validity of notice u/s 148 of the I.T. Act is concerned as the said notice was issued much earlier. In fact, the assessee had responded to the summons issued, at the stage of enquiries before investigation, at the address on which the mobile phone was registered. Therefore, without prejudice to the fact that the assessee has not raised only specific ground of appeal on the validity of proceedings u/s 148 of the I.T. Act and therefore no adjudication is required in respect of the same, the contentions of the assessee in statement of facts have been found to be untrue that the notice was sent at wrong address or not served on the assessee.” assessee’s explanations and sustained part of the additions. He rejected the assessee’s claim of the sale of land being agricultural in nature but he granted relief for cost of purchase claimed. As regards cash deposits, the source explained by the assessee before the ld. CIT (A) was that Rs.8,00,000/- was gift received in ring ceremony, Rs.4,00,000/- was savings, Rs.2,50,000/- was gifts, Rs.63,000/- was loan and Rs.2,50,000/- was civil construction work. Ld. CIT (A) did not find cogency in these submissions. He completed his appellate order as under :-

“18.3 Therefore, total income is computed as under:

(a) Business profit from land transaction 1,65,00,000 - 11,50,000 - 6,00,000- 69,000 (stamp duty) - 36,000(stamp duty) = 1,47,14,000/- (b) Addition u/s 68/69A/69C Cash deposits - 17,63,500 Stamp duty paid Rs. 69,000 + 36,000 (Registration date is before cash withdrawal of 45 lakh from Bank account Rs.) - 1,05,000 1,65,82,500 Therefore, the total assessed income comes to Rs. 1,65,82,500/-, against assessed income by AO at 1,82,63,500/-. So the appeal is treated as partly allowed but technically enhanced as land transactions have been assessed on business income. 18.4 No enhancement of Rs. 3,27,490/- showed as income from civil construction in letter before Investigation Wing has been made, as no evidence of civil construction work has been furnished and it was only an attempt to explain cash deposits in bank account. Same was the attempt before wing regarding claim of accommodation entries given as no evidence of that has been furnished. Cash flow statement filed at appellate level is also rejected. Para 7 of appellate order for A.Y. 2009-10, decided today applies to this appeal also.”

None has appeared on behalf of the assessee despite issuance of notice.

Upon consideration of the impugned orders, we note that as regards cash deposit of a sum amounting to Rs.17,63,500/-, the explanation for the same given before the Revenue authorities is noted by the ld. CIT (A) as noted above. The explanation of receipt of gift and past savings has rightly been rejected by the authorities below for cryptic evidence. As regards the claim of sale of land being agricultural receipt, we note that in the statement of facts before us, assessee himself has admitted that there is no evidence whatsoever of agricultural activity having been done in the said land by assessee itself. Assessee has submitted that land was purchased from persons who were doing agricultural activity. If the land was purchased from persons who were doing agricultural activities and assessee has not been performing any agricultural activities in the said land, then said land cannot be said to be agricultural land in the hands of the assessee. Also, as noted by the authorities below, the purchase and sale has been done in a short period of time. In this view of the matter, the location of the land cannot come to the rescue of the assessee de hors any evidence of agricultural activity. Accordingly, we do not find any the order of the ld. CIT (A) and the appeal of the assessee is dismissed.

ITA NO.2429/DEL/2019 (AY 2009-10)

9. In this appeal also, assessee is aggrieved for the part additions sustained by the ld. CIT (A). In the assessment order, as in the earlier year noted above, the AO noted that there was no compliance by the assessee. He made following additions :-

Unexplained cash deposits as discussed Rs.50,00,000/- Unexplained credits by clearing from Canara Bank Kashmiri Gate as discussed Rs. 3,00,000/- Unexplained deposits in bank from Smt. Anil Kumar and Smt. Ram Pyari as discussed Rs.25,00,000/- Unexplained deposits from Smt. Anita Rana as discussed Rs. 8,00,000/- Undisclosed bank interest as discussed Rs. 81,917/- Total Income Rs.86,81,917/-

“7. Construction receipts of 30 lakh being cheque deposits could not be established to be construction receipts. However, the assessee claimed opening cash balance of Rs.36,14,500/- out of cash withdrawals of 49 lakh made in A.Y. 2008- 09. Though house hold expenses of only 30,000/- have been shown in A.Y. 2008-09, the claim of receipt of 8 lakhs on "Sagai" as not been accepted in "A.Y. 2008- 7 to 2430/Del./2019 09. Therefore, the claim of refund of "Sagai" money of 5,01,000/- is also not accepted. Estimating house hold expenses of 2,40,000/- against 30,000 claimed, opening cash balance is estimated as under: Claimed - 30,14,500 Add: claim of "Sagai' money refunded in A. Y. 2008-09 5,01,000 Less : House hold expenses A.Y. 2008-09 (2,40,000 - 30,000) 2,10,000 39,05,500 8. In A.Y. 2009-10 also there are cash withdrawals of substantial amounts, totaling Rs.71 lakh before deposit of 50 lakh. So addition for cash deposit of 50 lakh is deleted.

We note that there is no appeal of the Revenue against the deletion of addition of Rs.50,00,000/- of cash deposit by the ld. CIT (A). As regards other additions, the same have been sustained by the ld. CIT (A) on reasonable reasoning. Civil work claimed to have been done by the assessee has already been rejected as there was no evidence for the same.

Accordingly, we do not find any infirmity in the order of the ld. CIT (A) in sustaining the above additions. Hence, we confirm the same and the appeal filed by the assessee is dismissed.

The reasoning given by the AO in levying the penalty was that assessee has not given any reply, hence the assessee has furnished inaccurate particulars of his income. Thereafter, he also held that the assessee is in default of concealment of income. Ld. CIT (A) passed a rather cryptic order. He did not fully reject the bonafide of the explanations of the assessee but held that they were questionable. Operative part of his order is dealt with as under :-

“6. As evident from quantum appellate order, it is a case where neither full material facts were disclosed before the AO nor any return of income was filed though the assessee was aware of the enquiries by investigation wing as he had filed reply in the said proceedings. The bonafides of the assessee's explanation are also questionable. Therefore, the penalty levied by the AO is confirmed to the extent of 100% of tax sought to be evaded in respect of assessed total income as per quantum appellate order.”

We note that the AO has passed the penalty order before the ld. CIT (A) passed the order in the quantum proceedings. The addition in this case sources of deposits. In our considered opinion, assessee has made a claim and the same has been rejected by the Revenue authorities. Mere rejection of a claim cannot ipso facto fasten rigours of penalty upon the assessee. This has been so held by Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. - 322 ITR 158 (S.C.). We are conscious that we have upheld the addition on agricultural income on the grounds of absence of cogent evidence of agricultural activities done on the said land. In this view of the matter, the said addition does not fasten upon the assessee liability for penalty. Other addition has also been sustained by us for not having any cogent evidence. We are of the opinion that penalty u/s 271(1)(c) is not exigible on these additions also.

Hence, we set aside the orders of the authorities below and delete the penalty levied in this regard. Therefore, the appeal of the assessee is allowed.

(AY 2009-10) 16. In this case also, assessee is aggrieved by the part sustenance of penalty by the ld. CIT (A).

“6. As evident from quantum appellate order, it is a case where neither full material facts were disclosed before the AO nor any return of income was filed though the assessee was aware of the enquiries by investigation wing as he had filed reply in the said proceedings. The bonafides of the assessee's explanation are also questionable. Therefore, the penalty levied by the AO is confirmed to the extent of 100% of tax sought to be evaded in respect of assessed total income as per quantum appellate order.”

We note that as regards the major addition of Rs.50,00,000/- and the penalty imposed thereupon no longer survives as ld. CIT (A) has deleted the addition and the Revenue has not filed any appeal. As regards other additions, assessee has given explanations for the same. Assessee has mentioned persons from whom he received the money but the same has been rejected by the authorities below for lack of cogent evidence. It is not the case that Revenue has made enquiries from the concerned persons from whom loan has been taken and who had denied the same and hence the penalty on such addition cannot be sustained. Similar is the position of the assessee’s claim for receipt from civil work, the same has been rejected for absence of cogent evidence. As held by us in the earlier penalty order, the rejection of assessee’s claim cannot ipso facto fasten liability of penalty upon the assessee. Hence, relying on the decision of Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. the appeal of the assessee.