ADNAN SHERWANI,ALIGARH vs. IMNCOME TAX OFFICER, ALIGARH

At the outset, I find there is delay in filing of appeal by the assessee before this Tribunal by 288 days. Considering the reasons adduced in the condonation petition, I hold that assessee was prevented from sufficient cause in not filing the appeal in time. In the interest of substantial justice, I am inclined to condone the delay and admit the appeal of the assessee for adjudication.

Though the assessee has raised several grounds of appeal, I find the only effective issue to be decided in this appeal is as to whether the ld Page | 1 CIT(A) was justified in restricting the addition in the sum of Rs. 9,50,000/- on account of cash deposits made during demonetization period.

I have heard the rival submissions and perused the material available on record. The return of income for the AY 2017-18 was filed by the assessee on 16.03.2019 declaring total income of Rs. 2,47,430/-. The assessee is carrying on the business of property dealing on commission basis. The ld AO noted the facts based on submissions of the authorized representative of the assessee that assessee is mainly dealing in cash as the nature of the business involves cash. It is not in dispute that assessee had deposited cash of Rs. 18,25,000/- during demonetization period in ICICI Savings Bank Account. The ld AO resorted to examine the source of such deposit. The assessee submitted that only a sum of Rs. 11,75,000/- stood deposited in specified bank notes during the demonetization period and not Rs. 18,25,000/- as alleged in the show cause notice. The assessee submitted that Rs. 9,50,000/- was received from Md. Kamran Ali Khan and Rs. 2,25,000/- of cash was deposited out of past savings. The ld AO however not satisfied with this reply and proceeded to add the entire sum of Rs. 11,75,000/- as unexplained money u/s 69A r.w.s. 115BBE of the Act and completed the assessment u/s 143(3) of the Act dated 24.12.2019.

The assessee always submitted that he is engaged in property dealing business on commission basis. Further, he had taken gold loan from ICICI Bank amounting to Rs. 5,50,000/- in February 2014 and the same has been invested in his business which he was doing with his friend Md. Kamran Ali Khan. It was submitted that the assessee along with his friend Md. Kamran Ali Khan for doing the real estate business on commission basis in a larger scale wanted to float a company M/s. Ocean Forts Real Estate Pvt. Ltd and since demonetization was announced by the Govt. of India, the funds that was made ready by the assessee to make investment was deposited in the bank account. The assessee also submitted affidavit and confirmation from Md. Kamran Ali Khan for the monies received in the sum of Rs. 9,50,000/- and confirmation from assessee’s father Mr. Zaffar Moshin Sherwani for the amount received of Rs. 1,50,000/-. The assessee also enclosed the bank statement wherein a sum of Rs. 5 lakh stood withdrawn in cash. Apart from that, the assessee had cash balance of Rs. 2,25,000/- in hand. All these monies collectively contribute for explaining the entire source of cash deposit made in the bank. Based on all these documents and explanation, the ld CIT(A) granted relief of Rs. 2,25,000/- to the assessee and sustained the remaining addition of Rs. 9,50,000/- on the ground that Md. Kamran Ali Khan does not have sufficient creditworthiness to pay Rs. 9,50,000/- cash to the assessee. Aggrieved, only the assessee is in appeal before me.

I find that the following documents were submitted by the assessee for explaining the source of cash deposit:- a. affidavit of Md. Kamran Ali Khan for receipt of Rs. 9,50,000/- b. cash summary c. bank statement d. partnership deed evidencing business relationship e. property sale/ purchase documents evidencing property dealing activity. 7. The assessee submitted that in the partnership firm styled as M/s. Ocean Fort Construction which was created vide partnership deed executed on 07.02.2009, wherein the said firm carried out the business of real estate and the assessee along with Md. Kamran Ali Khan were equal partners in the said firm. The said partnership firm was carrying on business of real estate and had duly offered business income in their return. The assessee’s partnership share was given by Md. Kamran Ali Khan to the assessee in the sum of Rs. 9,50,000/-. The assessee also placed on record the copies of the property documents relating to Md. Kamran Ali Khan to prove the fact that Md. Kamran Ali Khan was actively engaged in property transactions and his explanation regarding property dealing business is not artificial or imaginary. The assessee even submitted that there were property transactions carried out by Md. Kamran Ali on 13.07.2015 for Rs. 6 lakhs and on 21.01.2016 for Rs. 15 lakhs. These monies were very much available in the hands of Md. Kamran to advance monies to the assessee. Hence, the creditworthiness of Md. Kamran Ali Khan to advance Rs. 9,50,000/- is also duly established by the assessee. The affidavit of Md. Kamran Ali Khan placed on record has not been found to be false by the revenue and same could not be controverted by the revenue by bringing on record contrary evidences. After the filing of affidavit of Md. Kamran Ali Kan, no action was taken by the revenue either by issuing notice u/s 133(6) of the Act or issuing summons u/s 131 of the Act or the assessee was called upon to produce Md. Kamran Ali Khan etc. The affidavit filed by Md. Kamran Ali Khan was not even sought to be tested by the revenue. Hence, in my considered opinion, the contents of the affidavit had to be accepted as true and correct when it is not sought to be put to test by the revenue in the manner known to law. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Mehta Parikh and Co Vs. CIT reported in 30 ITR 181. Accordingly, the creditworthiness of Md. Kamran Ali Khan cannot be doubted in the facts and circumstances of the instant case. Since the evidence of creditworthiness of Md. Kamran Ali Khan stands established, I hold that no part of the cash deposit made by the assessee could be treated as unexplained. Hence, I direct the ld AO to delete the addition made in the sum of Rs. 9,50,000/-. Accordingly, grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.