RANJIT SINGH,NEW DELHI vs. ITO WARD-65(2), NEW DELHI

O R D E R PER KUL BHARAT, JM:

This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-32, New Delhi, dated 08.02.2019, pertaining to the assessment year 2008-09.

Ranjit Singh Vs. ITO 3. The assessee has raised following grounds of appeal: On the facts and in the circumstances of the case, the order passed by “1. The id. Assessing Officer u/s 147/144 on 17.03.2015 is bad in law.

2. On the facts and in the circumstances of the case, the notice issued by the Id. Assessing Officer u/s 142(1) and 148. is without jurisdiction and bad in law.

3. From the above it is submitted that the learned assessing officer made the addition in the hand of appellant without adjudicating the true fact of the case that the cash deposited in the bank of the appellant was pertained to Mr. Mahipal and he is the beneficial owner of the money and not the appellant. It is further submitted that under the provision of section 68 to 69D of the income tax 1961, the sum in the form of cash credit unexplained investment, money, bullion, expenditure etc as envisaged in the above mentioned sections, has been treated to be an income of the person if such person could not able to explain the source of such amount to the satisfaction level of the assessing officer. However, the before treating the income of the assessee/ person the twin condition must have been satisfied that (a) such person/ assessee should be the beneficial person of such sum, money , bullion, expenditure etc and (b) such person could not able to explain/furnish the evidences to satisfy the assessee officer. After fulfilling of these mentioned twin conditions there is further rider under the provision that it is in the circumference of the power of the designated assessing officer to exercise such power mentioned under the section and treat such sum as assessee income after due application of mind keeping the whole facts of the case in to consideration In the appellant case also it is submitted that the appellant was not the beneficiary of the above mentioned amount and it was Mr. Mahipal who has deposited the money in the appellant account by way of fraud to use the bank account of the appellant as conduit to convert his cash into bank the above mentioned fact the appellant was not the beneficial owner of the money is being proved by the inferential fact that after debiting the amount of Rs. 900000/- in the favour of Mr. Mahipal, such amount was never ever come under the possession of the appellant so he can use such cash for his own benefit. For the above mentioned purpose we would like to place the copy of bank statement upto 25/03/2009 which itself was a proof that such amount never being again come under the possession of the appellant, Ranjit Singh Vs. ITO meaning thereby he was not the beneficial owner of the money. It is also being submitted that from the perusal of the fact of the case and bank statement of the appellant it has been propounded that the assessee do not have any income except the income received in the form of small pension which was received by him from his previous employer. There is no stretch of imagination the retired school teacher having the age of 70 has a huge sum of money in cash without having any business/profession/vocation and suddenly deposited the cash in the bank with his undisclosed source of income. There is no finding of the facts by the learned assessing officer that the appellant has a any other source of income through which he might have generated such income which remain untaxed/ however such finding are missing in the assessment order.

4. On the facts and in the circumstances of the case, the Ld. Assessing Officer erred in making addition of Rs. 10,14,900 in respect of cash deposit in bank account.

5. On the facts and circumstances of the case, the Ld. A.O has failed to appreciate the fact that assessee age is nearest 70

6. On the facts and circumstances of the case, the Ld. A.O. has erred in initiating penalty proceedings u/s 271(1)(c)of the Act.

7. The appellant reserves the right to raise any other ground before the disposal of the appeal.”

Ranjit Singh Vs. ITO against it the assessee preferred appeal before the learned CIT(Appeals), who, after considering the submissions, dismissed the appeal of the assessee. Now the assessee is in appeal before the Tribunal.

Submissions of the Appellant (a) “The impugned assessment order passed by the learned Assessing officer without considering the fact that the cash amounting to Rs. 9,00,000/- (Rs. Nine Lakh only) which was credited as on 01/06/2007(Friday) into the bank account of the appellant (maintained with bank of Rajasthan having an account number: 3590101415592), is withdrawn on the very next business day (04/06/2007). The most important fact which remain to be adjudicated by the Learned assessing officer that the said amount was debited in the name of Shri Mahipa.l son of Shri Ram Mouaji resident of Flat no. 293, Shivani CGHS Ltd, Plot no: 18, Sector 12, Dwarka, New Delhi-

Ranjit Singh Vs. ITO 110078(current residential address). (b) At this juncture, it is important to note that appellant first met with Mr. Mahipal by some common family friend. This meeting would get converted into know how and later into a friendship. As appellant saddled with the age and had suffered with various chronical diseases, so Mr. Mahipal helped him to take care his well being. As a matter of fact on a day by day the appellant relied on Mr. Mahipal emotionally as well as financially Firstly, As the appellant due to his old age could not able to visit the bank to take care of his financial so he trusted Mr. Mahipal and handed over all the necessary documents including signed blanked cheque, pass book of bank etc to him to meet out the obligation as suggested by the appellant such as operates appellant's bank account for withdrawn ', of funds etc for the appellant. This mentioned situation continued for a while however later on, the scenario has changed and Mr. Mahipal breaches the trust of the Appellant and use appellant’s bank account for his own benefit. He deposited his money in the form of cash amounting to Rs. 9,00,000/- in the appellant bank account and on the very next date withdraw the same by using the signed blank cheque as handed over to him by the appellant. This kind of act breaches the trust of the appellant and extinguishes the faith which has been cast by the appellant on him. Apart from the above amount Rs. 1,14,900/- there is small amount of amount of money which was deposited by the appellant m the bank account with the money which was left with him after expended his pension for - s customary needs and medical ailments. (c) it is further submitted that immorality of human behavior on such heights which had broken all social and economic barriers/faith of the appellant, as the above mentioned transaction executed by Mr. Mahipal did not even communicated by him to the appellant even after execution of the same. The mentioned fact came to the notice of the appellant when the notice of the income tax department has been served on the appellant to examine the source of cash. When appellant try to communicate to Mr. Mahipal to enquire such transaction he did not attend the appellant and after that even did not bother to receive the call of the appellant.

(d) From the above it is submitted that the learned assessing officer made the addition in the hand of appellant without adjudicating the true fact of the case that the cash deposited in the bank of the appellant was pertained to Ranjit Singh Vs. ITO Mr. Mahipal and he is the beneficial owner of the money and not the appellant. It is further submitted that under the provision of section 68 to 69D of the Income tax 1961, the sum in the form of cash credit, unexplained investment, money, bullion, expenditure etc as envisaged in the above mentioned sections, has been treated to be an income of the person if such person could not able to explain the source of such amount to the satisfaction level of the Assessing officer. However, the before treating the income of the assessee/person the twin condition must have been satisfied that (a) such person/ assessee should be the beneficial person of such sum, money, bullion, expenditure etc and (b) such person could not able to explain/furnish the evidences to satisfy the assessee officer. After fulfilling of these mentioned twin conditions, there is further rider under the provision that it is in the circumference of the power of the designated assessing officer to exercise such power mentioned under the section and treat such sum as assessee income after due application of mind keeping the whole facts of the case in to consideration.

(e) In the appellant case also, it is submitted that the appellant was not the beneficiary of the above mentioned amount and it was Mr. Mahipal who has deposited the money in the appellant account by way of fraud to use the bank account of the appellant as conduit to convert his cash into bank. The above mentioned fact that appellant was not the beneficial owner of the money is being proved by the inferential fact that after debiting the amount of Rs 9,00,000/- in the favour of Mr. Mahipal, such amount was never ever come under the possession of the appellant so he can use such cash for his own benefit. For the above mentioned purpose we would like to place the copy of bank statement upto 25/03/2009 which itself was a proof that such amount never being again come under the possession of the appellant, meaning thereby he was not the beneficial owner of the money.

(f) It is also being submitted that from the perusal of the fact of the case and bank statement of the appellant it has been propounded that the assessee do not have any income except the income received in the form of pension which was received by him from his previous employer. There is no stretch of imagination the retired school teacher having the age of 70 has a huge sum of money in cash without having any business/profession/vocation and suddenly deposited the cash in the bank with his undisclosed source of income. There is no finding of the facts by the learned assessing officer that Ranjit Singh Vs. ITO the appellant has a any other source of income through which he might have generate such income which remain untaxed/. However such findings are missing in the assessment order. (g) In the case of Commissioner of Income-tax v. Smt. P.K. Noorjahan [1999] 103 TAXMAN 382 (SC), to the Honourable Apex court held that exercise of power confirmed under section 68 to 69D is discretionary in nature and should be use according to the facts of the case with due application of mind. It was held as under: Fact of the case: The appeals relate to the assessment years 1968-69 and 1969-70 The assessee is a Muslim lady who was aged about 20 years during the previous year relevant for the assessment year 1968-69. On 15-11-1967 she had purchased 16 cents of land in Emakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase was Rs. 34,628. On 27.11.1968, she purchased another 12 cents of land at Emarkulam and the total investment for this purchase was Rs. 25,902, the explanation of the assessee regarding the source of the purchase money for these investments was that the same were financed from out of the savings from the income of the properties which were left by her mother’s first husband. The said explanation offered by the assessee was rejected except to the extent of Rs. 2,000 by the ITO who made an addition of Rs. 32,628 as income from other sources in the assessment year 1968-69 and an addition of Rs.25,902 in the assessment year 1969-70. The said orders were affirmed in appeal by the AAC. The Tribunal, however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case, it was not possible for the assessee to earn the amount invested in the properties and that by the stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year or was even in a position to earn it for a decade or more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected. Section 69 of the Income-tax Act, 1961 (‘the Act’) conferred only a discretion on the ITO to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the income as income of the assessee as soon as the latter’s explanation happened to be rejected. On that view the Tribunal allowed the appeals of Ranjit Singh Vs. ITO the assessee and cancelled the assessment made by the ITO. Thereafter the Tribunal at the instance of the revenue referred the question abovementioned to the High Court for its opinion. The High Court has agreed with the said view of the Tribunal and has held that in the instant case, it could not be said that the Tribunal was wrong in having differed from the ITO and the AAC in the matter of exercising judicial discretion as to whether even after rejecting the explanation of the assessee the value of the investments were to be treated as the income of the assessee. According to the High Court, the Tribunal had not committed any error in taking into account the complete absence of resources of the assessee and also the fact that having regard to her age and the circumstances in which she was placed she could not be credited with having made any income of her own and in these circumstances, the Tribunal was right in refusing to make an addition of the value of the investments to the income of the assessee.

SC held as under: the learned counsel appearing for the revenue, has urged that the Tribunal as well as the High Court were in error in their interpretation of section 69. The submission is that once the explanation offered by the assessee for the sources of the investments found to be non- acceptable the only course open to the ITO was to treat the value of the investments to be the income of the assessee. The submission is that the word ‘may’ in section 69 should be read as ‘shall’. We are unable to agree. As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in the Parliament, the word ‘shall’ had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word ‘may ’. This clearly indicates that the intention of the Parliament in enacting section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case.

Ranjit Singh Vs. ITO 4. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. We also do not find any error in the said finding recorded by the Tribunal. There is, thus, no merit in these appeals and the same are, accordingly, dismissed. No order as to costs. Appeal dismissed. (h) In the Income Tax Officer-V(4), Ludhiana vs Sains Engg. Works [2013] 31 taxmann.com 84 (Chandigarh - Trib.), honourable tribunal held that if there is plausible explanation has been tendered by the assessee then no addition shall be made in the hand of the assessee.

4. In this case, AO, made an addition of Rs.28,00,000/-, in respect of advances received from M/s Jot Agro Processors Pvt. Ltd. at Rs. 25 lacs and M/s Madura Agro Food Industries at Rs. 3 lacs/-. The main addition made by the AO pertains to non-furnishing of PAN and bank account number. However, in the course of appellate proceedings, appellant filed detailed submission which was found plausible explanation within the meaning of provisions of Section 68 and having regard to the factual matrix of the case. CIT(A) deleted the impugned addition, as is evident from para 3 of his findings, reproduced hereunder: "3. I have carefully considered the contention of the Ld. Counsel for the appellant, report of the A.G. and perused the relevant record. The A.O. has m.ade addition of Rs. 28 lac in respect of advances of Rs. 25 lac shown to be received from M/s Jotgro Processors Pvt. Ltd. and Rs. 3 lac from M/s Madura Agro Food Inds.. As far as the advance received from M/s Jot Agro Pvt. Ltd. is concerned, even as per the inquiries made by the AO have been discussed in the assessment order the company was not to be non-existent. The only fact was that the information called for by the A.O. some how could not be received. The main objection of the L A.O. in not accepting this advance to be genuine, was that the PAN of this/company was not mentioned in the Ranjit Singh Vs. ITO confirmations filed by the appellant. However during appeal proceedings the appellant has filed evidence being copies of various documents including confirmed copy of account of the appellant in the books of that company and wherein PAN of the company has been duly indicated. This evidence was admitted as additional evidence for the reasons already discussed in the letter dated 22.2.2010 which has been reproduced in the preceding paragraphs. Accordingly even in the report of the A.O. dated 10.3.2010 as has also been pointed out by the Ld. Counsel, after filing of the additional evidence indicating PAN of M/s Jot Agro Processors Pvt. Ltd., he has not commented adversely about the advance received by the appellant from the said company. In view of the above position there would not remain any ground for making addition in respect of Rs. 25 lac shown to be received by the appellant from the said company. (d) Coming to the amount of Rs.3 lac claimed to be received from M/s Madura Agro Food Inds., as rightly pointed out by the Ld. Counsel, the A.O. made the addition in respect of only the cash amount of Rs.3 lac shown to be received from the said company on 7.3.2006. As far as this entry is concerned, this duly matches with the entries recorded in the books of that company in the account of the appellant which has been referred to by the A.O. and reproduced in the preceding paragraphs. Therefore, the entry of Rs.3 lac having been cross checked with the entries in the books of that company again there is no cause left for making this addition of Rs. 3 lac in the hands of the appellant on the ground that the sources of the same had not been explained. Further though the other transactions recorded in the copy of account of the appellant in the books of M/s Madura Agro Food Inds. had not been made the subject matter of any addition in this case by the A.O., he has pointed out certain discrepancies with respect to these entries in his report dated 10.3.2010. However as explained in the submissions of the Ld. Counsel dated 15.03.2010 which have been reproduced above, Rs.2 lac received by the appellant due to an inadvertent error were posted in the account of M/s Nestle India Ltd. by the appellant. This mistake has however subsequently been rectified.

Ranjit Singh Vs. ITO Coming to the journal entry of Rs. 16.38 lac, this is explained to be the amount in respect of term loan from the bank. As further explained, in view of the normal practice in this regard the draft was made by the banker of M/s Madura Agro Food Inds. in the name of the appellant during the preceding year whereas the appellant had supplied the machinery in the subsequent year and the payment was also received at the time of supply. Accordingly the relevant entry was made by the appellant in the subsequent year when the draft was actually received by it. Therefore, both these entries have been accounted for by the appellant and the discrepancies what-so- ever pointed out in the report of the A.O. have been fully explained. Accordingly in respect of the amount claimed to be received from this company also no addition what-so-ever could be validly made. Addition of Rs. 3 lac is, therefore, also deleted. 3.3 In view of the above discussions addition of Rs. 28 lac made to the income of the appellant is deleted and these grounds of appeal of the appellant are allowed. " (e) We have perused the findings of the AO, and that of the CIT(A) and found that findings of the CIT(A) are in consonance with the relevant provisions of Section 68 of the Act, having regard to the facts of the case. The addition made by the AO is based upon non-application of mind to the facts of the case and non-appreciation of the provisions of Section 68 of the Act Consequently, ground, of appeal of the revenue is dismissed. (f) In the result, appeal of the revenue is dismissed.

(i) The facts of the appellant case is almost identical in the case Commissioner Income Tax vs Bhawana Makhijani Thru.Natural Guardian Smt.Indumakhijani INCOME TAX APPEAL No.-341 of 2008

Fact of the case: While assessing Mr. Deepak Gupta, the A.O. noticed a bank/ account in the name of the respondent-assessee, in which heavy sums of money were deposited in her name. A notice under Section 148 was issued on 31.3.2003 and was served upon the assessee, who was minor, at that time, through her natural guardian Smt. Indu Makhijani. Initially the assessee did not file any return. She, however, filed return on 13.8.2004, disclosing ’nil income. In the course of assessment proceedings statement of the assessee was also recorded on 23.12.2004 under Section 131 of the Act.

Ranjit Singh Vs. ITO She stated that she was a minor studying in Class- XII. Her father was ill and was admitted to hospital, where the father of Shri Deepak Gupta was also admitted. She came in contact with Mr. Deepak Gupta, who promised her to help her in starting export business. An account was opened in her name on the assurance given by him. She did not know any person by the name of Rahul Gupta, and that no forgery case was filed against her by any government department. She stated that she was not given the cheque book by Shri Deepak Gupta. The A.O. found that Rs.33,90,038/- was deposited in cash in the account in the name of the assessee in Citizen's Cooperative Bank, Sector 39, Noida, in which large number of transactions took place of deposits in cash between 25.9.2001 to 2.3.2003 and that almost the entire amount was withdrawn. Keeping in view the circumstances it was found that the onus of proving source of deposit in the bank account lies with the assessee and same has not been discharged by the assessee. The entire unexplained amount in the bank account was treated in the hands of the assessee under Section 68 of the Act on protective measures and on substantive basis in the hands of Deepak Gupta for the assessment year 2002- 03. The CIT (A) dismissed the appeal against which the department went in appeal before the Income Tax Appellate Tribunal. The Tribunal has held as follows:- "4.1 From the findings of the AO, it is clear that the assessee or his family members did not have any source of income from which the impugned amounts could be credited in her bank account. Further, the utilization of various amounts from the bank account was made by Shri Deepak Gupta by transferring money to various concerns. In the case of CIT v. P.K. Noorjahan (1999) 237 ITR 571, Hon'ble Supreme Court referred to the findings of the Tribunal that discretion u/s 69 was not properly exercised by the ITO and the AAC by taking into account the circumstances in which the assessee was placed, namely, that the assessee had no source of income from which investment could be made. Thus, the Tribunal came to the conclusion that the investment could not be taken as income of the assessee and the High Court agreed with this finding. The Hobble Court held that there was no error in the order of the Tribunal that the provisions contained in section 69 could not be invoked in respect of the investment. We find that the facts of that case and this case are similar. The assessee does not have any source of income. The money was not utilized by her. Therefore, if the Ranjit Singh Vs. ITO circumstances in which the assessee is placed are appreciated properly, it cannot be said that the impugned amount of Rs. 33,90.040/- was the income of the assessee. Respectfully, following the ratio of the decision in the case of P.K. Noorjahan (supra), the addition is deleted and the appeal is allowed. This order was pronounced in the open Court on 26.10.2007.” We do not find any error of fact or law in the order of the Tribunal. The authorities have recorded findings that the assessee did not have any source of income, and tht money was not utilized by her. In the circumstances, the protective assessment made against her and the substantive assessment against Shri Deepak Gupta does not call for any interference by the High Court. We do not find any question of law arise for consideration by the high Court under Section 260A of the Act. The income tax appeal is dismissed.

Keeping the above facts into consideration it is humble submitted that the case of the appellant was duly covered by the above mentioned case and the addition of Rs. 10,14,900/- should be liable to be deleted.”

6.2 During the course of appellate proceedings, appellant had moved an application for admission of additional evidence which was sent to AO for his comments. Report of AO has been obtained and a copy has been handed to the appellant. Appellant has filed his comments on the remand report submitted by the AO.

6.3 Ground no. 1 and 2 pertain to reopening the case u/s 147. Appellant has submitted chat the issue of notice u/s 142(1) and 148 is without jurisdiction and bad in law. During the course of appellate proceedings, appellant has not made any submission on the grounds of appeal taken

Ranjit Singh Vs. ITO regarding reopening the case u/s 147. Therefore, it is apparent that appellant has no submission to make in this regard. AO in the remand report has stated that assessee had entered into transaction of cash deposit of Rs. 1014900/- during A.Y. 2008-09 but assessee had not filed his ITR. Therefore, AO had reason to belief that income chargeable to tax had escaped assessment. Notice u/s 148 was issued after recording the reasons and obtaining the approval from the competent authority. I have carefully considered the grounds taken by appellant and observations of AO. On perusal of the facts of the case it is held that there is no basis in the claim of appellant and accordingly, ground no. 1 & 2 are dismissed.

6.4 Ground no. 3, 4 and 5 pertain to addition of Rs. 10,14,900/- in respect of cash deposit in bank account. AO in the remand report has stated that assesseedid not comply with statutory notice and as such failed to comply with the condition laid down under Rule 46A and, therefore, he was not entitled to file additional evidence. In rejoinder to the remand report appellant has made his submission which has been considered. From the perusal of the grounds of appeal, it is seen that appellant has claimed that cash has been deposited out of past savings which was kept due to old age. However, in the submissions made during the course of appellate proceedings, appellant has stated that the cash was deposited by one Sh. Mahipal Singh. Therefore, there is apparent contradiction in the ground of appeal taken by appellant and the submission made during the course of appellate proceedings. Appellant has not filed any confirmation from Sh. Mahipal Singh, neither any evidence regarding creditworthiness and genuineness of transaction for the claim that the money was received from one Sh. Mahipal Singh has been submitted. Appellant has also not submitted any evidence in support of the ground of appeal that money was out of past savings. Therefore, there is no basis in the claim of appellant. Accordingly, ground no. 3, 4 and 5 are dismissed.”

Order pronounced in open Court on 22.02.2022.