Loading judgment…
No AI summary yet for this case.
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the Assessee against the order of the Ld. CIT(A)-II, Chandigarh dt. 13/12/2018.
Following grounds have been raised in this appeal:
The impugned order in the case cited as subject is against the facts and law.
2. On the facts and circumstances of the case in law, the CIT (A) erred in confirming the addition made by learned Assessing Officer through restriction under section 80IC to 25 percent instead of 100 percent. 3. On the facts and circumstances of the case and in law, the CIT (A) erred in confirming the addition made by Id. Assessing Officer of Rs. 5,75,000/- on account of unexplained cash deposit without referring the merits of case. 4. Appealing on the facts and circumstances of the case and in law, the CIT (A) erred in confirming the addition made by learned Assessing of Rs. 1,71,719/- on account of interest income from bank guarantee. 5. The appellant craves leaves to amend or alter the grounds of appeal
before the same are heard and disposed off.
6. It is prayed that the addition shall kindly be deleted.
3. Ground No. 1, 5 and 6 are general in nature, so do not require any comment on our part.
4. Vide Ground No. 2 the grievance of the assessee relates to the confirmation of addition made by the A.O. by restricting the deduction under section 80IC of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’) to 25 % instead of 100% claimed by the assessee.
The facts related to this issue in brief are that the assessee filed his return of income on 26/09/2015 declaring an income of Rs. 63,050/- after claiming deduction of Rs. 2,32,74,367/- under section 80IC of the Act. The said return was processed under section 143(1) of the Act, later on the case was selected for scrutiny.
During the course of assessment proceedings the A.O. noticed that the assessee started claiming deduction under section 80IC of the Act from the A.Y. 2008-09 and claimed 100% deduction for five years. He further observed that the assessee again claimed 100% deduction under section 80IC of the Act during the 7th year on the basis of substantial expansion made in the F.Y. 2011-12. The A.O. restricted the deduction under section 80IC of the Act to 25%.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) who upheld the view taken by the A.O.
Now the assessee is in appeal.
Ld. Counsel for the assessee submitted that now the issue has been settled by the Hon'ble Apex Court in the case of Pr. CIT, Shimla Vs. M/s Aarham Softronics in Civil Appeal No(s). 1784 of 2019 order dt. 20/02/2019 wherein it has been held that objectives for which Section 80IC was enacted and irresistible conclusion would be to grant 100% deduction of the profits and gains even from the year when there is substantial expansion in the existing unit, after all, this substantial expansion involves great deal of investment which has been atleast 50% in the plant and machinery of the book value thereof before taking depreciation in any year.
In his rival submissions the Ld. CIT DR strongly supported the orders of the authorities below.
We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the assessee had carried out its substantial expansion and this fact has also been admitted by the A.O. , now this issue has been settled by the Hon'ble Apex Court in the case of Pr. CIT Vs. Aarham Softronics (supra) wherein it has been held as under:
“Objectives for which Section 80-IC was enacted, an irresistible conclusion would be to grant 100% deduction of the profits and gains even from the year when there is substantial expansion in the existing unit. After all, this substantial expansion involves great deal of investment which has to be, at least 50% in the plant and machinery, of the book value thereof before taking depreciation in any year. With an expansion of such a nature not only there would be increase in production but generation of more employment as well, which would benefit the local populace. It is for this reason, carrying out substantial expansion by itself is treated as 'initial assessment year'. It would mean that even when an old unit completes substantial expansion, such a unit also becomes entitled to avail the benefit of Section 80-IC. If that is the purpose of the legislature, we see no reason as to why 100% deduction of the profits and gains be not allowed to even those units who had availed this deduction on setting up of a new unit and have now invested huge amount with substantial expansion of those units.”
We therefore by keeping in view the ratio laid down by the Hon'ble Apex court in the aforesaid referred to order, set aside the impugned order passed by the Ld. CIT(A) and direct the A.O. to allow the claim of the Assessee for deduction under section 80IC of the Act.
Ground No. 3 relates to the sustenance of addition of Rs. 5,75,000/- made by the A.O. on account of unexplained cash deposit.
The facts related to this issue in brief are that the A.O. during the course of assessment proceedings noticed that as per the ITS information available with the Department the assessee had deposited cash as per following details:
Name of the Account holder Name of the Bank Date of Amount deposit Subash Chand and Santosh Punjab National Bank, CO, 08/05/2014 2,00,000/- Khanna Hamirpur -do- -do- 08/11/2014 3,75,000/- Subash Chand UCO Bank, ZO, Solan 13/11/2014 2,00,000/- He asked the assessee to file the details of the aforesaid cash deposit. In response, the assessee submitted as under:
“ During the assessment year 2015-16 relevant to financial year 2014-15, the assessee held joint account in Punjab National Bank with his wife Santosh Kumari Khanna and made cash deposit amounting to Rs. 2,00,000/- on 08/05/2014 and Rs. 3,75,000/- on 08/11/2014. Also the assessee held another account with UCO Bank and made cash deposit amounting to Rs. 2,00,000/-. The UCO Bank account held has duly been accounted in the books of accounts of the assessee.”
14.1 The A.O. was not satisfied from the submissions of the assessee by observing that the assessee could not file any plausible explanation for deposit of Rs. 2,00,000/- and Rs. 3,75,000/- in his joint bank account with PNB Hamirpur, therefore, the same remained unexplained. Accordingly the addition of Rs. 5,75,000/- was made to the return of income of the assessee.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) and submitted that the A.O. had not given the opportunity to explain the deposit of Rs. 5,75,000/-. He therefore, furnished the additional evidence under Rule 46A of the Income Tax Rules and submitted as under:
“ In respect of the same it is hereby submitted that the assessee lives in a joint ^ family along with his wife, son and daughter in law. Since the assessee was living in the joint family the household expenses are met jointly by the family members. Moreover the expenses incurred by the assessee in the nature of household expenses are very reasonable and in liaison with his earnings. The needs of the assesse and his family are reasonably met by his income in view of his family's living style and spending habits. The withdrawals made by the assessee are sufficient to meet his expenditure requirements. The Assesse' wife has her own regular sources of income and also the assesse's son and daughter in law are also regularly assessed under Income Tax Act. The cash deposit made by the assesse's wife in the joint account held with the assesse in the Punjab National Bank Account on 08.05.2014 amounting to Rs. 2,00,000/- were out of her old savings and out of rental income received in cash of previous years. The assesse's wife made another cash deposit amounting to Rs. 3,75,000/- on 08.11.2014 the Learned Assessing Officer made addition of the same without appreciating the fact that the cash withdrawal made by the assesse's wife amounting to Rs. 2,00,000/- on 10.09.2014. The cash deposit made on 08.11.2014was out of cash withdrawal made earlier and out of rental income received in cash. Hence the cash deposits were made in the Bank account jointly held by the assesse and his wife out of old savings and rental income of the assesses wife. The Learned Assessing officer erred in making the addition of cash deposit made and termed the same as unexplained.
The copy of Income Tax Return of the assesse's wife Mrs. Santosh Khanna along with computation for the Assessment year 2014-15 & 2015-16 depicting the sources of income has been enclosed herewith for your ready reference. Also, the copy of bank account statement held jointly by the assesse and his wife has been enclosed herewith for your ready reference.
Since the addition was made without appreciating the above facts and without giving assesse an opportunity to produce the documents in support of his claim. Considering the above submissions made and additional documents produced under Rule 46A of the Income Tax Act, 1961. I hereby request you consider my submission submitted above and delete the addition made by the Assessing Officer in respect of cash deposit made."
15.1 The Ld. CIT(A) forwarded the submissions of the assessee alongwith documentary evidence including account ledger copy and copy of the assessee’s wife ITR for the A.Y. 2014-15 and 2015-16 to the A.O. for her comment. In response the A.O. submitted as under:
"In this regard, it is submitted that total addition of Rs.1,82,81,385/- was made under different sections, while passing order u/s 143(3) of I T . Act, 1961. Out of which 5,75,000/- was made on account of unexplained cash deposits. When the assessee was confronted on the issue vide order sheet entry dated 27.09.2017 (copy enclosed), he filed his reply as under:-
"During the assessment year 2015-16 relevant to financial year 2014-15, the assessee held joint account in Punjab National Bank with his zoife Santosh Kumari Khanna and made cash deposit amounting to Rs.2,00,000/- on 08.05.2014 and Rs.3,75,000/ on 08.11.2014. Also the assessee held another account with UCO Bank and made cash deposit amounting to Rs.2,00,000/-. The UCO Bank account held has duly been accounted in the books of accounts of the assessee." It is evident from the above reply that plausible explanation for deposit of Rs. 2,00,000/- & Rs. 3,75,000/- in Punjab National Bank was not given by the assessee, whereas due explanation was given by the assessee regarding deposit in UCO Bank. So, addition of unexplained cash deposit in Punjab National Bank was made and explanation given about UCO Bank was accepted. The assessee was therefore given sufficient opportunity to submit details or any other evidence in the support of its claim. But the assessee could not submit any detail or any supporting evidence then, thereafter addition of Rs. 5,75,000/-was made. Hence contention of the assessee regarding the admissibility of additional evidence is not acceptable.
Regarding the merits of the additional evidence, it is stated that the total income shown by Smt. Santosh Kumari Khanna, w/o the assessee for the A.Y. 2015-16 is Rs. 1,83,311/-only, whereas ledger account of the joint bank account of the assessee' and his wife (copy enclosed) shows cash deposit of Rs.7,74,500/-, out of which self withdrawal of Rs. 2,00,000/- and balance cash deposit of Rs. 5,75,000/-.Explanation given by the assessee such as her old savings and out of rental income received in cash of previous years is devoid of merit both on the principal of human probabilities and also on account of being not supported by any documentary evidence. The Hon'ble Punjab & Haryana High Court in the case of CIT Vs Lalchand Tirath Ram 225 ITR 675 has observed that mere offering explanation is not sufficient - explanation is to be substantiated by cogent and reliable evidences. Therefore, the additional evidence is also not sufficient in merits to hold the contention of the assessee. To conclude, it is submitted that the additional evidence submitted by the assessee to your good self is not acceptable both in regard to admissibility as well as merits.”
15.2 The Ld. CIT(A) after considering the submissions of the assessee and the remand report of the A.O. observed that the assessee had not furnished any documentary evidence vis; the rent receipt, copy of bank statement to prove that the impugned cash deposits were made out of previous year rent receipt and cash withdrawn earlier. He further observed that the onus to prove the source of the impugned cash deposit was on the assessee but he had failed to discharge his onus on the said front. Ld. CIT(A) accordingly confirmed the addition 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 held joint bank account with his wife Smt. Santosh Kumari Khanna and made cash deposit amounting to Rs. 2,00,000/- on 08/05/2014 and Rs. 3.75 Lacs on 08/11/2014. It was further stated that the assessee was living in the joint family therefore the household expenses were met jointly by all the family members. It was further stated that the assessee’s wife had her own regular source of income and that the amount of Rs. 2,00,000/- deposited was out of old savings of his wife and the rental income received in cash in the preceding years. It was further submitted that the assessee’s wife withdrew the sum of Rs. 2,00,000/- on 10/09/2014 which was deposited again on 08/11/2014 therefore the addition made by the A.O. and sustained by the Ld. CIT(A) was not justified. He also furnished the copy of ITR and the computation of income of his wife which are placed at page no. 71 & 72 of the assessee’s compilation.
In his rival submissions the Ld. DR strongly supported the orders of the authorities below.
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the wife of the assessee had shown rental income of Rs. 2,16,000/- for the year under consideration which has been accepted by the Department. In our opinion the wife of the assessee could have saved some amount out of the aforesaid rental income, at the same time, the amount of Rs. 2,00,000/- was deposited on 08/05/2014 , so it cannot be presumed that that the total rental income for the whole year was received by the wife of the assessee before that date, particularly when no evidence was furnished to substantiate the same. Therefore, we are of the view that the said deposit of Rs. 2,00,000/- was unexplained.
As regards to the another deposit of Rs. 3,75,000 on 08/10/2014 the submission of the assessee that his wife had withdrawn an amount of Rs. 2,00,000/- on 10/09/2014 and same was deposited on 08/11/2014 appears to be plausible, out of the another deposit amounting to Rs. 1,75,000/-, some of the rental income could have been deposited, if she was receiving the rent monthly. It is noticed that the total rental income for the whole year was shown at Rs. 2,16,000 i.e Rs. 18,000/- per month, therefore the rental income of the assessee’s wife from April 2014 to October 2014 i.e; for the seven years came to Rs. 1,26,000/- therefore at the most a deposit of Rs. 1,25,000/- may be considered as a part of the deposits amounting to Rs. 3,75,000/- on 08/11/2014. We, therefore by considering the totality of the facts are of the view that the wife of the assessee was having a sum of Rs. 3,25,000/- ( Rs. 2,00,000/- + Rs. 1,25,000/-) which could have been a part of the deposit of Rs. 3,75,000/-. Accordingly the addition of Rs. 3,25,000/- is deleted and the remaining addition of Rs. 2,50,000/- (Rs. 5,75,000 – Rs. 3,25,000) is sustained.
As regards to the Ground No. 4 the Ld. Counsel for the assessee submitted that he has the instructions not to press this ground considering the smallness of the amount involved and gave in writing as under:
“ Ground No. 4 is not pressed and accepted the Pr. CIT order”