M/S VERMA SERVICE STATION,FIROZABAD vs. D.C.I.T., RANGE-5, FIROZABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA

BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER,AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER I.T.A No.349/Agra/2018 (ASSESSMENT YEAR: 2009-10)

Verma Service Station Bye Pass Vs. DCIT, Circle 2(2)(1), Road, Firozabad. Firozabad. PAN: AAAFV0442K (Appellant) (Respondent)

S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) (ASSESSMENT YEAR: 2009-10)

Verma Service Station Bye Pass Vs. DCIT, Circle 2(2)(1), Road, Firozabad. Firozabad. PAN: AAAFV0442K (Appellant) (Respondent)

Appellant by Shri R. K. Agarwal & Rahul Agarwal, Advs. Respondent by Shri Waseem Arshad, Sr. DR.

Date of Hearing 18.07.2019 Date of Pronouncement 12.09.2019

ORDER Per Dr. M.L. Meena, A.M.:

This appeal has been filed by the assessee is directed against the order dated

28.03.2018passed by the Commissioner of Income Tax (Appeals)-2, in respect of

A.Y. 2009-10 wherein the assessee has raised the following grounds of appeal:

I.T.A No. 349/Agra/2018 2 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) “1. Because Ld. Commissioner of Income Tax (Appeals) hereinafter referred to as Ld. CIT (A) grossly erred both in law and on facts in sustaining penalty of Rs. 28,43,000/- levied by the Assessing Officer under section 271 (1)(c). The Ld. CIT(A) failed to appreciate that the appellant having furnished all the material facts, legally required, the order as passed by the Ld. CIT(A) is wholly erroneous and illegal in the eyes of law.

I.T.A No. 349/Agra/2018 3 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) scrutiny under CASS and the assessment was completed at a total income of Rs.1,01,55,498/-. In the process of making additions, the AO disallowed a sum of

Rs 92,00,000/- introduced as capital of the partners of the firm and stated that in the assessment order the appellant conceded for the addition. The AO also disallowed interest of Rs.2,85,984/- and Rs.1,83,248/- for which, it was stated that

the authorized representative of the assessee conceded.

CIT(A) dismissed the appeal in limine by holding that no appeal is maintainable since the assessment order was passedon the confession of the assessee. vide ITA No. 189/Agra/2011 dated 12.08.2015 this bench has restored the matter back to

AO holding that since the additions are based on the confession of the counsel of the assessee without investigation the facts, AO should make the assessment again after affording opportunity to the assessee.In the reassessment made by AO

assessee again could not explain the source of capital introduction of Rs.92,00,000/- and hence the same was again treated as unaccounted income of the assessee under section 68 and added to the total income of the assessee. In the 2nd round of assessment,the assessee again could not explain the 4. source of capital introduction of Rs.92,00,000/- and hence the same was again treated as unaccounted income of the assessee under section 68 and added to the total income of the assessee.

I.T.A No. 349/Agra/2018 4 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) 5. Aggrieved by such addition in total income of the assessee, assesses has filed this appeal before CIT(A) -II, Agra in 2nd round where she has after going

through the affidavit of both the partners regarding source of receipts of deposits and written submissions filed by the assessee confirmed the addition of Rs.92,00,000/- unexplained capital introduction by observing as follows:

5.3 I have gone through the assessment order, submissions of the assessee and legal position in this regard. It is seen that the two partners Sri Naveen Chandra Verma & Smt. Bharti Verma have deposited Rs.65,00,000/- and Rs.27,00,000/- in cash. It was explained that this cash has been received against advance for sale of land in individual hands. During the course of assessment proceedings AO has specifically asked for the evidence of holding of land, agreement with the purchasers and date / mode / source of receipts.However, the assessee could not furnish any details before the assessing officer, it was further seen that AO has issue summons dated 10.05.2016 for attendance on 18.05.2016 and thereafter, on 14,07.2016 and 23.08.2016 but no compliance to any summons was made and no documents in support of contention that these amounts are received from sale of land were filed by the assessee.

5.4 During the course of appellate proceedings assessee was again asked that the partner should be produced with all these documentary proofs for receipt of cash against advance for sale of land. However, during the appellate proceedings also could not file any evidence regarding cash received against advance as also the partners were not produced to give their statement. In this connection, emphasis on

I.T.A No. 349/Agra/2018 5 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) production of the partners during appellate proceedings was made as before the ITAT, the counsel of the assessee has accepted that these are unaccounted income in the hands of the assessee but it was held that the confession of the counsel of the assessee is not valid in law and the case has been set aside to the file of the Assessing Officer.In the renewed opportunities provided to the assessee, assessee did not file any details of land sold or agreement to sale etc., and hence the acceptance of the counsel of the assessee was correct, though not accepted by assessee.

5.4.1 To verify the nature and source of these transactions AO has again allowed opportunity to the assessee. The nature of these deposits were that Rs.1,00,000/- was deposited in cash everyday or every alternate day. In the absence of any agreement to sell/purchase, these kind of deposits could not have been in the nature of any land advance. In spite of providing opportunities at both assessment and appellate stage, assessee could not produce any agreement to sell, name and address of the purchaser, existence and details of any land that was proposed to be sold.

5.5 In this connection, in the case of Venus Auto which is a sister company of the assessee, it is seen that in the A.Y. 2009-10 that is the same assessment year the transactions that were explained by the assessee before the AO were that the M/s Venus Auto has transferred Rs.62,00,000/- to M/S Krishna Bulk Movers (P) Ltd. and thereafter M/s Krishna Bulk Movers (P) Ltd. has transferred this amount to M/s Verma Service Station (P) Ltd. Copy of all these accounts were available in the case of Venus Auto and hence, assessee's contention that this amount has now come from some advance for land sold seems to be after thought not

I.T.A No. 349/Agra/2018 6 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) supported by any documentary evidence. Under these circumstances, AO is correct in holding these credits as unexplained in the hands of the assessee and imposed penalty u/s 271(1)(C).

In this case assessee has made a claim which is wholly without any basis and the explanation furnished to explain the cash deposits in terms of advance for sale of land is also found to be wrong as assessee could not file any details of land that was sold or any agreement to sell or the name of any party to whom the land was sold. Moreover, the deposits that are there in the bank account are such that are generally not given in land deals. In the land deals generally, an initial advance is five and then there can be payments at regular interval or a final payment. In this case cash of Rs.1,00,000/- is deposited in cash everyday nature and source of which could not be explained by the assessee.

In view of the foregoing AO is correct in imposing this penalty after analyzing section 271(1)(c) and its explanation and after relying on various case laws.

Hence imposition of penalty of Rs.28,42,800/- under section 271(1)(c) of the Income Tax Act is hereby confirmed.

submitted that the partners have made deposits in the firm. The AO did not accept

the deposit as belonging to the partners and made addition in the firm, ld. CIT(A)

has upheld the order of A.O. The addition in firm is contrary to judgment of

jurisdictional High Court. He has filed affidavits balance sheets etc. documents of

I.T.A No. 349/Agra/2018 7 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) partners of the firms as additional evidence in Rule 29 of ITAT Rules, is admitted. (APB-pg.1-20).

Para-21 “Thus, from the aforesaid decisions, it is settled that if an entry of cash credits is found in the books of account of a firm, it is for the firm to give explanation regarding identity and source of such deposits and if the explanation is disbelieved then it is to be added as an income under section 68 of the Act in the hands of the firm. Similarly, if an assessee, who is a partner in the partnership firm, has made investments which are not recorded in the books of account maintained by him for any source of income and the explanation given by the partner or individual regarding source of deposits is disbelieved, then such deposits

I.T.A No. 349/Agra/2018 8 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) which are invested can be brought to tax as income from undisclosed sources.”

lacs in the balance sheet whereas advance of Rs.62,00,000/- was shown to be received against the said land by the partners Sh. Naveen Chandra Verma and Smt. Bharti Verma. It is seen that the two partners Sri Naveen Chandra Verma & Smt. Bharti Verma have deposited Rs.65,00,000/- and Rs.27,00,000/- in cash.During the course of assessment proceedings AO has specifically asked for the evidence of holding of land, agreement with the purchasers and date / mode / source of receipts.In appellate proceedings assessee was again asked that the partner should be produced with all these documentary proofs for receipt of cash against advance for sale of land as before the ITAT, the counsel of the assessee has accepted that these are unaccounted income in the hands of the assessee

I.T.A No. 349/Agra/2018 9 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) but it was held that the confession of the counsel of the assessee is not valid in law and the case has been set aside to the file of the Assessing Officer. Earlier the transactions that were explained by the assessee before the AO were that the M/s Venus Auto has transferred Rs.62,00,000/- to M/S Krishna Bulk Movers (P) Ltd. and thereafter M/s Krishna Bulk Movers (P) Ltd. has transferred this amount to M/s Verma Service Station (P) Ltd. assessee's contention that this amount has now come from some advance for land sold seems to be after thought not supported by any documentary evidence is logical and justified.

that though he has meagre income of Rs.4,21,280/- with opening balance of Rs.1,00,000/- to deposit in the firm as on 01.04.2008 and further payment of Rs.50,00,000/- to the credit of following accounts as on 06.05.2008 make it clear that the financial status of the creditor doesn’t warrant such deposits, detailed as under:

Debit Credit Verma Service Station Ch. No. 258042, From Rama Rama Rs.8 lacs Rs.50,00,000/- Hara Hara Rs.12, lacs 06.05.2008 Krashna Krashna Rs.10 lacs

I.T.A No. 349/Agra/2018 10 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) Venus Automative Services Pvt. Ltd. Rs.10 lacs Verma Service Station Pvt. Rs.10 lacs

in the original assessment that Rs.92,00,000/- andadded as unexplained income in respect of unexplained capital deposit made by the partner and that in the 2nd round of assessment proceeding’s in compliance to the directions of the Agra Bench, the assessee failed to explain source of deposit of partners’ capital of Rs. 92, 00,00,000/- and merely, filing of an affidavit of the partner would not sufficient to discharge the assessee primary onus of cash credit liability.

I.T.A No. 349/Agra/2018 11 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) 13. The case law referred by the ld. AR for the assessee does not apply to the peculiar facts of the present case. The facts involved therein a credits appearing on the very first day of accounting year whereas in the present case the credits have been introduced by the partners during the year being explained by the assessee before the AO that the assessee sister concern M/s Venus Auto has transferred Rs.62 lacs to M/s Krishna Bulk Movers (P) Ltd. and thereafter M/s Krishna Bulk Movers P. Ltd. has transferred this amount to M/s Verma Service Station P. Ltd. In the first round of proceedings and in the second round proceedings assessee’s contention has changed to have received some advanced for land sold was not supported by any documentary evidence except self-certified evident of advance receipts against sale of land which are contrary to the value of the sale of land shown in the balance sheet as above. None of the cases relied by the ld. AR are applicable to the peculiar facts of the case at hands.

I.T.A No. 349/Agra/2018 12 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) (P) Ltd. and thereafter M/s Krishna Bulk Movers (P) Ltd. has transferred this

amount to M/s Verma Service Station (P) Ltd. Copy of all these accounts were

available in the case of Venus Auto and hence, assessee's contention that this

amount has now come from some advance for land sold held to be after thought

were being not supported by any documentary evidence and these concerns were

having zero sales turnover. Again, the value of the land has been shown to be sold

as Rs.10 lacs as evident from the balance sheet of the firm M/s Verma Service

Station as above. Under these circumstances, AO was correct in holding these

credits as unexplained in the hands of the assessee and the ld. CIT(A)was justified

in confirming the addition as unexplained capital of the assessee firm u/s 68 of the

Act and so the Tribunal confirmed the addition of Rs.92,00,000/- is confirmed as

unexplained capital u/s 68 of the Act in the hands of the firm.

initiated or not during the course of the assessment proceedings and the Assessing

Officer is not required to record his satisfaction in a particular manner or reduce it

into writing. The scope of section 271(1)(c) has also been elaborately discussed by

this court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) ; [2008] 13 SCC 369 and CIT v. Atul Mohan Bindal [2009] 317

ITR 1 (SC) ; [2009] 9 SCC 589." (Emphasis supplied). The Assessing Officer, in

our view, has recorded a categorical finding that he was satisfied that the assessee

I.T.A No. 349/Agra/2018 13 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) had concealed true particulars of income and is liable for penalty proceedings under section 271 read with section 274 of the Income-tax Act, 1961.

Next the Hon’ble Jurisdictional Allahabad High Court in the case of Smt. 17. Sheela Ahuja Vs. CIT [2018] 99 taxmann.com 406 (Allahabad) held that Section 68 of the Income-tax Act, 1961 - Cash credit (Gift) - Whereas per information received from DIT (Investigation) assessee had received certain bogus gifts and assessee had failed to produce donors as well as creditworthiness of donors despite various opportunities, amount was rightly added to assessee's income under section 68 [In favour of revenue].

I.T.A No. 349/Agra/2018 14 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) amount which, in fact, was the income of the assessee introduced in her funds in

the shape of the gifts. As the assessee was not able to produce said persons for

confirmation of gift and the creditworthiness of the donors could not be proved by

the assessee, the Assessing Officer made addition under section 68 which was

confirmed in appeal.

Held that since the assessee failed to prove the creditworthiness of the donors there

was no illegality in the orders of the authorities below. The same proposition of

law is applicable to the facts of the present case as the assessee failed to prove the

creditworthiness of the cash deposits (Capital)in the partnership firm and therefore

was no illegality in the orders of the authorities below as well in the present case.

the orders of the authorities below as well as in the impugned order of the Tribunal

and since the assessee/ appellant has failed to prove the creditworthiness of the

partners as well as failed to place any evidence in support of its contention in

respect of the issues which are raised before the Tribunal, therefore, we find no

error in the order of the ld. CIT(A). The order of the ld. CIT(A)is confirmed and

the appeal filed by the appellant is dismissed as the ld. CIT(A) has recorded a

categorical finding of facts.

I.T.A No. 349/Agra/2018 15 & S.A. No.06/Agra/2018 (in I.T.A No. 349/Agra/2018) Following the jurisdictional Hon’ble Allahabad High Court in the case of 20.

Jagmohan Ram Chandra Vs. CIT (supra), and Smt. Sheela Ahuja(Supra) we

hereby upheld the order the ld. CIT(A) and confirmed the levy of penalty u/s

271(1)(c) of the Act. The ground of appeal rejected.

S.A. No.06/Agra/2018

disposed of by us, therefore, the stay applicable become infructuous.

dismissed.

Order pronounced in the open court on 12/09/2019.

Sd/- Sd/- (Laliet Kumar) (Dr. M.L. Meena) JUDICIAL MEMBER ACCOUNTANT MEMBER *AKV* Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT Sr. Private Secretary, ITAT, Agra