SHARANJIT SINGH vs. COMMISSIONER OF INCOME TAX LUDHIANA

The delay in refiling the appeal is condoned.

This appeal has been preferred by the appellant-assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 24.8.2012, Annexure A28 passed by Income Tax Appellate Tribunal, Chandigarh Bench 'A', Chandigarh (in short, “the Tribunal') in ITA No.65/CHD/2012, for the assessment year 2007-08, claiming following substantial questions of law:- “i) Whether under the facts and circumstances of the case, the Tribunal order is sustainable for recording erroneous findings of facts being contrary to respondent report dated 27.8.2009 No.DDIT/Inv.1/Ldh/09-10/356? GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh ii)Whether under the facts and circumstances of the case, the action for cash credit additions are sustainable, while returning findings for there being requiring mandatorily an agricultural income of the purchaser, within the State of Punjab before making any investment for purchase in agricultural land? iii)Whether under the facts and circumstances of the case, the addition under section 68 is sustainable while accepting fulfillment of the requirements of provisions of law and while adversely interpreting the undertaking signed before Western Union?

A few facts relevant for the decision of the controversy involved as available on record may be noticed. The assessee is running a resort in the name of 'Royal Resort' at Ludhiana. The assessee filed his return of income declaring total income of ` 254760/- on 12.3.2008, which was processed under section 143(1) of the Act. The case was selected for scrutiny. Notice under section 143(2) of the Act was issued on 26.9.2008 to the assessee asking him the source of investments made in the fixed assets and immovable property for ` 24 lacs. Written submissions were furnished before the Assessing officer dated 14.9.2009 inter alia stating the purchase of land at Village Dewatwala in Punjab measuring 60 kanals 17-1/2 marlas for ` 38,77,000/- including registration expenses wherein the share of the assessee was half. The said land was purchased from Shri Gurtej Singh son of Shri Avtar Singh, resident of Village Dewatwala, Sub Tehsil Mullanpur, Dakha, District Ludhiana. The source for investment were evident from withdrawals of ` 24 lacs made from books of Royal Resorts. There was initiation of enquiry proceedings by the Assistant Director of Income Tax (Investigation) 1, Ludhiana for explaining the source of purchase of land. Not being satisfied, the proceedings were concluded determining the taxable GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh income at an amount of ` 33,50,288/- vide order dated 29.12.2009. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which was dismissed vide order dated 28.12.2011, Annexure A.

The assessee filed further appeal before the Tribunal which was also dismissed vide order dated 24.8.2012, Annexure A.

Hence the instant appeal by the appellant-asesssee.

Learned counsel for the appellant submitted that there is misreading of evidence. The report of the Deputy Director of Income Tax (DDI) in respect of purchase of agricultural land for ` 38,77,000/- was in favour of the assessee. It was further urged that by furnishing the source, he had demonstrated regarding the other transactions which were also genuine.

After hearing learned senior counsel for the assessee, we are not impressed with the submissions.

The assessee had declared ` 2,54,760/- in the return of income filed on 12.3.2008. The Assessing Officer finalised the assessment at ` 33,50,288/-. The following additions were made by the Assessing Officer in the returned income which are subject matter in the present appeal:- a) Receipt from father which remained 14,77,000/- unsubstantiated. b) Amount introduced as cash credit 7,20,000/- but source not proved and added under Section 68 of the Act.

Taking up the first addition of ` 14,77,000/-, the assessee had furnished the explanation as under:- “Amount withdrawn in the books of 24,00,000/- M/s Royal Resorts. Copy of agriculture GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh land a/c attached. Amount withdrawn from Saving Bank 10,00,000/- Account No.4032 with Iob on 26.3.2007 maintained by Shgri Jagdev Singh- father and Sharanjit Singh. Copy of bank statement attached. Amount received from M/s Garg Seeds Corp. 4,00,000/- by Shri Jagdev Singh against sale of agriculture produce. Amount spent by Shri Jagdev Singh out 77,000/- 4,77,000/- of his income shown in his income tax ------------------------- return. 38,77,000/-” The perusal of the report of the DDI (Inv.)-I on which reliance has been placed by learned counsel for the assessee (appended as Annexure A.16 with appeal) clearly spells out that the explanation furnished before the assessing authority and the DDI (Inv.)-I is identical. The Assessing Officer had rejected the explanation of the assessee with the following observations:- “I have considered the reply of the assessee which is not acceptable due to the following reasons: i) The assessee has not declared any agricultural income in his return of income. ii)The assessee has claimed, the receipt of ` 14.77 lacs from his father, the relevant entry does not appear in the balance sheet of the assessee. Further the entry shown in the bank account of Shri Jagdev Singh appears on 26.3.2007. As per the sale deed the seller has received the full amount of consideration before the date of transfer/date of registration. In this case date of registration was 26.3.2007. iii)The assessee has claimed to have received a sum of ` 4,00,000/- and ` 77000/- from M/s Garg Seeds Corporation, a proprietary concern of Shri Rajinder Kumar on behalf of his father Shri Jagdev Singh out of agricultural income of his father. The assessee failed to produce the concerned person. GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh Entry of this amount also not appearing on the balance sheet of the concern M/s Royal Resort.

1 In view of the above discussion source of investment of `147000/- made in purchase of agricultural land is not satisfactory. An addition of ` 1477000/- is made to the total income of the assessee on account of the unexplained investment made in purchase of agricultural land. The assessee has filed inaccurate particulars in respect of his income of ` 1477000/-.” On appeal, it was affirmed by CIT(A). The Tribunal on further appeal, endorsed it with the under quoted findings:- “5. We have carefully perused the rival submissions, facts of the case and relevant records, including the paper book and brief synopsis filed by the learned AR of appellant. In this case, in the course of assessment proceedings, it was found by the AO that assessee had added the fixed assets of agriculture land, to the tune of ` 24,00,000/-. The Assessing officer sought justification and details of fixed assets and immovable assets including the source of investment in such assets. The appellant declared that he had purchased agricultural land for ` 38,77,000/-. However, value of agricultural land in the books of account of the assessee was shown at ` 24,00,000/-. The Assessing officer sought explanation for such difference in the investment made in the purchase of agricultural land. On appreciation of the submissions filed by the assessee, the Assessing officer found the explanation as not acceptable on the ground that the assessee had not declared any agricultural income in the return of income. It was further observed by the Assessing officer that the assessee had claimed receipt of ` 14.77 lacs from his father and the relevant entry does not appear in the balance sheet of the assessee. Further, the entries shown in the bank account of Shri Jagdev Singh appears on 26.3.2007. As per the sale deed, the seller had received the full amount of consideration before the date of transfer/date of GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh registration i.e. 26.3.2007. The assessee claimed to have received a sum of ` 4,77,000/- from M/s Garg Seeds corporation, a proprietary concern of Shri Rajender Kumar, on behalf of his father Shri Jagdev Singh, out of agricultural income of his father. However, the assessee failed to produce the concerned person. Entries of this amount were also not appearing in the balance sheet of M/s Royal Resorts. In view of this, the Assessing officer made the addition of ` 14,77,000/- treating the investment in the purchase of land as unexplained investment. Learned CIT(A) on appreciation of the submission filed before him upheld the addition.....” No satisfactory explanation was furnished to rebut the findings of the Assessing Officer, CIT(A) and the Tribunal. Thus, the reliance on the report of DDI (Inv)-I by the learned counsel is of no assistance to the assessee.

Examining the addition of ` 7,20,000/- which had been introduced as unexplained cash credit, the Assessing Officer had added the same under Section 68 of the Act as no acceptable explanation was furnished by the assessee. The CIT(A) had affirmed the additions with the following observations:- “6. I have gone through the contention of the appellant's counsel and also perused relevant submissions of the appellant. The assessee has not shown any agriculture income in his return of income. But the assessee had a credit balance of ` 33,97,623/- of agriculture income in the balance sheet of his proprietary firm M/s Royal Resorts. The assessee claimed that the said income represented agriculture income of his father's HUF, Shri Jagdev Singh Grewal HUF, who has sold the agriculture produce through the assessee and payments have been received in assessee's bank accounts. It has not been clarified by the assessee as to why agriculture income of HUF was not received in the saving account of the HUF. The saving account in which the said receipts have been received belonged GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh to assessee and even account was operated by the assessee. Since the assessee did not have any source of agriculture income, hence these credit entries of ` 7,20,000/- would have to be considered as assessee's income from his resort business.

Lastly, the addition of ` 8,98,528/- made by the Assessing Officer on account of unsecured loan from non-resident friends of the assessee/relatives also remained uncorroborated. The Assessing Officer decided this issue against the assessee and recorded as under:- “5. The assessee has introduced a sum of ` 8,98,528/- as unsecured loan from his non resident friends/relatives. The assessee was asked to produce the source of these credits. All the entries in his bank account came from Western Union Money Transfer. The money transferred has obtained an undertaking from the assessee wherein it has been undertaken by the assessee that these receipts are not in shape of loan and advance. Relevant extracts of the certificate are reproduced as under:- 'I undertake that the above mentioned remittance received by me is in no way commercial or trade related or purchase of property, investment or for credit to the sender's/remitters' NRE/FCNR accounts etc. nor for donation of any kind. I undertake that the above remittance is purely personal in nature towards family maintenance etc. Certain terms and conditions governing the money transfer service you have selected are set forth on the back of this form. By signing this form, you are agreeing to those terms and conditions. In addition to the transfer fee, western union and its agents also GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh make money from the exchange of currencies, please see important information regarding currency exchange set forth on the back of this form.'

1 In view of the above it is clear that the money was not received for the purchase of property and it has been received for maintenance of the family. Further this is not a mode of receipt of loan from any person. Section 269SS of IT Act, 1961 allows acceptance of any loan of deposit by way of payee account cheque or payee account draft only if the amount of such loan or deposit or aggregate amount of such loan or deposit exceeds ` 20000/-. I am not satisfied with the explanation of the assessee and an addition of ` 898528/- is made to the returned income to the assessee.” The CIT(A) and the Tribunal also accepted the aforesaid conclusion which was not shown to be erroneous or perverse in any manner.

In the light of the aforesaid, the only attempt of the appellant was to reappraise the evidence and draw a different conclusion which does not fall within the domain of Section 260A of the Act. The view taken by the authorities below is plausible view on appreciation of material on record and the findings recorded by the Assessing officer, CIT(A) and the Tribunal cannot be faulted. No substantial question of law arises. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal) Judge August 19, 2014 (Fateh Deep Singh) Judge ‘gs GURBAX SINGH 2014.10.28 11:53 integrity of this document High Court Chandigarh