ITO, JAIPUR vs. BHAGWAN SINGH POSWAL, JAIPUR

PER VIJAY PAL RAO, J.M. These two cross appeals are directed by the revenue and assessee respectively against the order dated 27.12.2013 of ld. CIT (Appeals)-I, Jaipur for the assessment year 2009-10. First, we take up the revenue’s appeal wherein the revenue has raised the solitary ground as under :- Shri Bhagwan Singh Poswal, Jaipur.

“ 1. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in deleting the addition of Rs. 1,02,00,000/- made by the AO u/s 68 of the I.T. Act in the hands of the assessee on protective basis.”

The appellant craves the indulgence to modify, alter, add any other ground of appeal.

material on record. The only issue raised in the revenue’s appeal is regarding No. 179/JP/2014 has confirmed the said addition in para 4 as under :-

“4. Ground Nos. 7 to 9 are regarding the addition made under section 69 of the IT Act. The AO noted that in the bank account maintained with the PNB, Muhana Road, Jaipur various deposits were made. The AO asked the assessee to explain the source of deposit and further necessary confirmations from M/s. Sidhant Buildcom and M/s. Radient Buildcom from whom the assessee claimed to have received the deposits. The assessee did not furnish the requisite confirmations and, therefore, the AO was of the view that the assessee has failed to establish the source of Rs.1,02,07,000/- given to Shri Bhagwan Singh Poswal and Rs. 23,47,000/- given to M/s. Birbal Medical Education Society. Further, the confirmations filed by the assessee were not found to be genuine. Accordingly, the AO made addition of Rs. 1,25,54,000/- under section 69 of the Act. The assessee challenged the action of the AO before ld. CIT (A) and contended that the source of the said amount is the money received from M/s. Sidhant Buildcom and M/s. Radient Buildcom which was credited in the assessee’s bank account. The ld. CIT (A) did not accept the contention of the assessee on the ground that both these concerns were not found to be genuine. Accordingly, the addition made by the AO was Shri Bhagwan Singh Poswal, Jaipur.

confirmed. The relevant part of the finding of ld. CIT (A) on this issue is in para 11.2 and 11.3 as under :-

“ 11. 2. At the appellate stage, the main contention of the appellant is that M/s. Sidhant Buildcom and M/s. Radient Buildcom had given the money by cheque which was credited in the appellant’s bank. This argument cannot help the appellant as both these concerns have not been found to be genuine. Merely because an amount has been paid by cheque does not necessarily discharge the onus lying on the appellant. An assessee has to prove the identity of the creditor, the genuineness of the transactions as well as financial capacity of the creditor to discharge the burden lying on him u/s 69. In the present case the appellant has been able to furnish only two certificates which were not found to be reliable evidences. Merely because an amount had been paid by cheque does not mean that the transaction is genuine.

Thus the assessee was asked to produce the persons for examination with identity proof but the assessee failed to produce those persons during the remand proceedings, accordingly the assessee has not discharged its onus to prove the genuineness of the transaction and creditworthiness of the creditor. Shri Bhagwan Singh Poswal, Jaipur.

In the absence of any contrary facts or material, we do not find any reason to interfere with the impugned order of ld. CIT (A). The same is upheld.”

Therefore, the addition of Rs. 1,25,54,000/- including the sum of Rs. 1,02,07,000/-

“ 1(a) That the ld. AO has grossly erred in law and facts in framing assessment u/s 143(3) without juri iction because the juri iction lies with the ITO ward 1(4), not with the ITO ward 2(4). Hence the order passed and confirmed by the authorities below is liable to be set aside/cancelled.

(b) That the assessment order made u/s 143(3) without proper and valid service of notice u/s 143(2) is without juri iction, hence bad in law and void ab-initio.

A. That the authorities below have considered a sum of Rs. 26,38,500/- received from students and their relatives on behalf of M/s. Birbal Medical Education Society as unexplained investment.

B. That authorities below has grossly erred in law and facts in considering a sum of Rs. 36,08,500/- as unexplained investment where as this amount was withdrawn from the banks and the same Shri Bhagwan Singh Poswal, Jaipur.

amount was again deposited in the bank and therefore question of unexplained investment does not arise.

C. Authorities below has grossly erred in law and facts in considering a sum of Rs. 3,60,000/- as unexplained investment which was opening cash balance in hand with the assessee at the beginning of the year.

That the appellant reserves his rights to add, amend or alter the grounds of appeal on or before date of appeal hearing.”

no. 1(a) of the assessee is dismissed as not pressed. Accordingly, the ground no. 1

(a) of the assessee’s appeal is dismissed being not pressed.

Ground No. 1(b) is regarding validity of the assessment for want of valid service of notice under section 143(2) of the IT Act.

under section 143(2) was not served upon the assessee. Therefore, the assessment Shri Bhagwan Singh Poswal, Jaipur.

framed is bad in law and void ab initio. In support of his contention, he has relied

upon the decision of Hon’ble Supreme Court in case of ACIT vs. Hotel Blue Moon,

321 ITR 362 (SC) and submitted that the Hon’ble Supreme Court has held that if an assessment is to be completed under section 143(3), notice under section 143(2)

should be issued within one year from the date of filing of return. Omission on the part of the Assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable. Therefore, the requirement of notice under section 143(2) cannot be dispensed with. The ld. A/R has further

contended that the assessee has filed an affidavit to state that the notice issued

under section 143(2) was not served upon the assessee. He has contended that the provisions of section 292BB are not applicable when there is no valid notice under section 143(2) of the Act.

this issue before the ld. CIT (A) which is not permissible and, therefore, the case is covered under the provisions of section 292BB of the Act. He has relied upon the order of the ld. CIT (A).

issued subsequent notice under section 142(1) and finally on 15.07.2011 the ld. A/R Shri Bhagwan Singh Poswal, Jaipur.

of the assessee appeared before the AO and furnished the details. The assessee

thereafter also filed the confirmation regarding the unsecured loans of Rs.

26,38,500/- from 124 persons. Thus it is clear that the assessee has participated in the assessment proceedings and never raised any objection about the service of notice issued under section 143(2). The AO has also recorded the statement of the assessee during the assessment proceedings and, therefore, it is manifest from the record that the assessee has contested the assessment proceedings but till the assessment was completed, no such objection was raised by the assessee. We find

that the notice under section 143(2) was issued at the correct address and,

therefore, it is not a case of complete absence of the notice itself. Once the assessee has participated in the assessment proceedings and not raised such objection, then the notice issued under section 143(2) would be deemed to be valid

even if there is some inferaction in the service of the said notice but the same would

be covered by the provisions of section 292BB of the Act. Once the notice is emanated from the department, then if there is any infirmity in the manner of service of notice and assessee has not raised the objection during the assessment

proceedings, then such defect in the service of notice would not render the assessment invalid. Accordingly, in the facts and circumstances of the case the decision of Hon’ble Supreme Court in case of ACIT vs. Hotel Blue Moon (supra)

would not support the case of the assessee. The ld. CIT (A) has decided this issue

in para 5 as under :-

“ 5. I have considered facts of the case. It is seen that the return of income in this case was filed on 16/04/2009 and notice u/s 143(2) was issued on 23.08.2010. Thereafter, notice u/s 142(1) was also issued on Shri Bhagwan Singh Poswal, Jaipur.

So far as the issue of notice u/s 148 is concerned, suffice it to say that the AO has framed the order u/s 143(3). A notice u/s 148 even if issued inadvertently would not vitiate the original proceedings which were initiated correctly.

In view of the above discussion, the appeal on this ground fails.” considered this issue in para 3 as under :-

“3. We have heard the ld. D/R and carefully perused the relevant material on record. Ground No. 1 to 6 are regarding the validity of Shri Bhagwan Singh Poswal, Jaipur.

reassessment order passed under section 147 read with section 144 of the IT Act. The main contention of the assessee challenging the order passed under section 147 read with section 144 is that the notice under section 143(2) was not served upon the assessee. We find that the AO has issued number of notices, however, the assessee never responded to any of the notices issued by the AO under section 142(1). The ld. CIT (A) has considered this issue in para 7 and 7.1 as under :-

“ 7. I have considered facts of the case. It is seen that the main contention of the appellant is that since notice u/s 143(2) was not served on him, the assessment proceedings were vitiated and liable to be quashed. In this regard it may be mentioned that the main idea behind service of notice u/s 143(2) is to provide an opportunity of being heard to the appellant before an order u/s 143(3) is passed. This section only provides the statutory basis to the principle of natural justice that nobody shall be condemned unheard. It is apparent from the assessment order itself that a number of opportunities were given to the appellant who failed to appear before the AO or file any details before him. The Inspectgor of the ward also served a notice on the appellant but even then neither anybody appeared before the AO nor any reply was filed. It is also noted that the appellant had filed his return of income in response to notice issued u/s 148. However, thereafter he did not file any reply before the AO nor appeared before him. It is further seen from the assessment order that in response to summons issued u/s 131 the appellant had filed a letter on 11/11/2011 giving reply to the questions asked by the AO. Thereafter, rthe appellant again furnished a reply on 07.12.2011 in response to a letter issued to him on 02.12.2011. From these details, it is Shri Bhagwan Singh Poswal, Jaipur.

obvious that not only the appellant was given several opportunities of being heard, he had also availed the opportunity at least on two occasions. Hence, it cannot be said that the order has been passed without hearing the appellant. Thus, the purpose for which notice u/s 143(2) is issued stands served.

In the absence of controverting the factual aspects of the matter that the notice issued by the AO to the assessee were responded on two occasions by the assessee, it goes to show that the assessee was served with the notice issued by the AO. Accordingly, in the absence of any contrary material, we do not find any error or illegality in the finding of the ld. CIT (A). As regards the issue of not giving proper opportunity of hearing, we find that when the assessee was given various notices by the AO and further the ld. CIT (A) has decided all Shri Bhagwan Singh Poswal, Jaipur.

these issues after considering the contentions and affording the opportunity of hearing to the assessee, then the said objection raised by the assessee is devoid of any substance or merits.”

Accordingly, in view of the above discussion, we do not find any merit or substance

in ground no. 1(b) of the assessee’s appeal.

Ground No. 2 is regarding addition made under section 69 on account of cash deposit in the bank account of the assessee of Rs.

62,89,400/-.

and income from house property of Rs. 2,52,000/- during the year under consideration. The AO further noted that the assessee has also received interest

other than securities of Rs. 44,455/- and cash deposited in the bank account of Rs.

62,89,400/-. The assessee was asked to furnish the details of the said deposit made

in the bank account. In response, the assessee furnished the confirmations of unsecured loans totaling to Rs. 26,38,500/- from 124 persons. The AO conducted

the enquiry from all 124 persons by issuing notice, however, only 8 of them

responded and after recording their statement, the AO has made the addition being

unexplained deposit made in the bank account. The assessee challenged the action

of the AO before the ld. CIT (A) but could not succeed.

and submitted that out of the total deposit of Rs. 62,89,400/-, a sum of Rs.

26,38,500/- was received from students and their relatives on account of fees on behalf of Shree Birbal Medical Education Society and the balance amount of Rs.

36,08,500/- represents the withdrawal made from the bank and a sum of Rs.

3,60,000/- being opening cash balance in the hands of the assessee. He has referred to the impugned order of the ld. CIT (A) and submitted that all these facts

were duly explained before the ld. CIT (A) but neither the AO nor the ld. CIT (A) has considered the correct facts regarding the source of this deposit. The ld. A/R has further submitted that the AO has also examined the assessee and in his statement

recorded by the AO, the assessee explained that the confirmations furnished were not correct but the correct fact is that it was received as fees from the students or their relatives on behalf of Shree Birbal Medical Education Society. However, the said fees mistakenly were deposited in the bank account of the assessee who is also the Chairman of the Society as well as Principal of Shree Birbal Medical Education

Society. The ld. A/R has referred to the details of the deposit and transfer of the money from the bank account of the assessee to the account of Shree Birbal Medical

Education Society. Thus the ld. A/R has submitted that if wrong facts were stated

before the AO but subsequently the assessee has explained the correct facts, then

the same should have been considered by the AO as well as by the ld. CIT (A). In support of his contention he has relied upon the decision dated 3rd April, 2018 of the Hon’ble Juri ictional High Court in case of PCIT vs. Shri Bhupendra Choudhary in DB IT Appeal No. 329/2017. The ld. A/R has further pointed out that the amount

received on this account is only Rs. 26,38,500/- and the balance is the cash

withdrawal of Rs. 36,08,500/- and opening balance of Rs. 3,60,000/-. The AO as Shri Bhagwan Singh Poswal, Jaipur.

well as the ld. CIT (A) has not considered this factual aspect of the matter while

making the addition. Thus the ld. A/R has pleaded that the matter may be remanded to the record of the AO for proper verification of facts as available on record.

below and submitted that when the AO has conducted due enquiry by issuing the summons under section 131 to all 124 persons whose confirmations were produced

by the assessee, though only 8 persons responded to the summons issued by the AO and in their statements they denied to have given any loan to the assessee, then

the explanation of the assessee was found to be false. Thereafter, the assessee has changed his stand and came out with another explanation that part of the amount

was received from the students as fees on behalf of Shree Birbal Medical Education

Society. The ld. D/R has thus contended that the assessee has mis-lead and mis-

represented the fact before the AO and when he was not succeeded, then he has changed the stand.

when the AO examined some of the persons who responded to the summons issued

under section 131, it was found that they did not advance any loan to the assessee.

Then the AO also examined the assessee and in his statement under section 131,

the assessee has explained the source as fees received from the students. The relevant part of the statement of the assessee reproduced by the AO is at page 24

As regards the withdrawal of cash by the assessee and the opening balance of cash

as a source of deposit in the bank, we find that the assessee has explained the source to the extent of Rs. 36,08,520/- being cash withdrawal from the bank during

the year and Rs. 3,60,000/- as opening cash balance. This fact is recorded by the ld. CIT (A) in para 6 of the impugned order as under :-

“ 6. Ground no. 2 challenges addition of Rs. 62,89,400/- u/s 68. In this regard it is submitted : “Addition u/s 69 of the IT Act 1961 Rs. 62,89,400/- Contra 3608520 Receipt 2638500 Opening Balance 360000

Rs. 36,08,500/- was withdrawn and again deposited, which is apparent from the banks statement the same was filed with the Assessing Authority. There was opening balance Rs. 360000/- as cash in hand with the assessee at the beginning of the year.

Rs. 26,38,500/- was received from the students and their relatives on behalf of M/s. Birbal Medical Education Society and the same was transferred to the society through bank, which is apparent from the order of the ld. ITO ward 2(4), Jaipur itself. As such the contributors are neither related to me nor do I have any interest therein. But as I Shri Bhagwan Singh Poswal, Jaipur.

was the chair person of the society hence my staff had wrongly deposited the said amount in my bank account.

That the ld. ITO ward 2(4), Jaipur has issued notices to the depositors and statements of 8 depositors were recorded, but without informing the appellant for cross examination which make the whole proceedings illegal. It is also very surprising that the statements were recorded of 8 persons but whole of the amount so deposited by 124 persons was added in my income . Hence the addition so made is arbitrarily & bad in law.

Because the amount not related to the appellant because the same was either related to dishonor of cheque, cash withdrawn and deposited in the bank or the amount received for/on behalf of the M/s. Birbal Medical Education Society. Hence the same cannot be taken as income from undisclosed sources, but the same added in the appellant’s income from other sources is absolutely wrong and illegal, liable to be quashed in toto. R.M. Lodha & Dr. Vineet Kothari, JJ (2007) 211 CTR (Raj) 509. Statements so recorded were not cross examined

That the ld. ITO ward 2(4), Jaipur recorded the statement of some of the depositors but the statements so recorded were not cross examined hence cannot be used against the appellant.

In this regard the appellant relied upon the following cases : Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360 State of Kerala vs. K.T. Shaduli Yusuff (1977) STC 478 (SC).”

In view of the above, it is argued that the additions deserved to be deleted.”

However, the ld. CIT (A) while confirming the addition of Rs. 62,89,400/- has not considered this explanation of source of deposit. Once the explanation of the assessee can be verified from the record, then the same cannot be rejected merely Shri Bhagwan Singh Poswal, Jaipur.

on the ground that initially the assessee has tried to give a false explanation.

Accordingly, in the facts and circumstances of the case, this issue is set aside to the record of the AO for proper verification of the facts as explained by the assessee and then decide the same after giving an opportunity of hearing to the assessee.

Ground No. 3 is regarding rejection of claim of deduction under section 80C on account of LIC premium.

material on record. At the outset, we note that though the assessee has claimed the deduction under section 80C of Rs. 70,474/- on account of LIC premium, however,

neither before the AO nor before the ld. CIT (A) the assessee has produced any documentary evidence in support of the claim. Even before the Tribunal, the assessee has not produced any documentary evidence in support of the claim. The ld. A/R of the assessee has fairly conceded this fact that the assessee is not having

any documentary evidence in support of the said claim. Accordingly, we do not find

any error or illegality in the orders of the authorities below qua this issue.

Order pronounced in the open court on 04/09/2019. ¼ fot; iky jkWo ½ ¼foØe flag ;kno½ (Vikram Singh Yadav) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 04/09/2019. das/ Shri Bhagwan Singh Poswal, Jaipur.

आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-The ITO Ward 1(4)/2(4), Jaipur. 2. izR;FkhZ@ The Respondent-Shri Bhagwan Singh Poswal, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File {ITA No. 105 & 190/JP/2014}

vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत