CHARANJIT SINGH vs. COMMISSIONER OF INCOME TAX

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 26.9.2013, Annexure A.10 passed by Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh (in short, “the Tribunal') in ITA No.788/CHD/2011, for the assessment year 2007-08, claiming following substantial question of law:- “Whether under the facts and circumstances of the case, the action for penalty levied under section 271(1)(c) is unreasonable, while rendering interpretation to statutory law vis a vis judicial decision qua the provisions of section 68 of GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh the Income Tax Act, 1961?

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The appellant is an individual. An agreement was entered between West Point Properties Private Limited, Rajouri Garden New Delhi on 27.2.2006 through Shri Harish Bhasin, Director and second party namely S.S.Empires Pvt. Limited, Pritam Singh and Harjinder Kaur etc. for the purchase of 50 acres of agricultural land at Village Rampur Kalan, Tehsil Derabassi, District Mohali at the rate of ` 15.25 lacs per acre. An amount of ` 75 lacs was transferred by West Point Properties Private Limited on 19.4.2006 through cheque No.4263 favouring Pritam Singh s/o Shri Dalbir Singh from UTI Bank Limited, Delhi and received by Pritam Singh. An amount of ` 4,87,27,000/- had already been paid as per one of the terms of the agreement to S.S. Empires Pvt. Limited, Pritam Singh and Harjinder Kaur. On 9.4.2006, Pritam Singh entered into mutual agreement with the appellant for a consideration of ` 1,00,000/- in lieu of the services qua the help in arranging as mutually agreed the said purchase of 50 acre land and the payment was received from Shri Rajwant Singh on 3.8.2006 through cheque No.4226 and credited in the appellant’s saving account. Pritam Singh out of the amount of ` 75 lacs received on 19.4.2006 from West Point Properties Pvt. Limited transferred the said amount of ` 75 lacs to the appellant’s bank account in Axis Bank. The appellant withdrew the amount on 21.4.2006 from the saving account for the purpose of starting the mutually agreed purchase of land and similarly an additional amount of ` 45 lacs was transferred by the West Point Properties Private Limited to Shri Pritam GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh Singh through cheque No.4262 on 22.4.2006 which was also received by him. On 10.8.2006, search under section 132 of the Act was conducted on various companies and individuals whereby the appellant was covered under it. The Axis bank account of the appellant was closed on 12.8.2006. Except for these transactions, there was no other transaction in the said account. There being disputes amongst the parties, it was mutually agreed and decided in compromise deed to refund an amount of ` 3.65 crores out of which ` 1.20 crores was in the hands of the appellant and the said amount was returned by the appellant in cash. Thereafter, juri iction of the appellant’s case was transferred to Deputy Commissioner of Income Tax (DCIT) Central Circle I Chandigarh through order dated 20.3.2007 under section 127 of the Act being effective w.e.f 20.3.2007. Notice under section 142(1) of the Act was issued on 10.10.2007 to the appellant asking the details qua the aforesaid transactions of Shri Pritam Singh. The appellant filed the return on 14.10.2008 declaring income of `1,62,653/- containing commission income of `1,62,653/- and agricultural income of ` 1,80,900/-. The written pleadings were furnished on 24.12.2008. After examining the matter, addition of ` 1.20 crores was made vide order dated 30.12.2008 and penalty proceedings were initiated. The revision petition under Section 264 of the Act filed by the assessee against the assessment order was dismissed on 31.3.2010 which became final. The Assessing Officer vide order dated 30.6.2009 (Annexure A.5) levied penalty of ` 40,48,400/-. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal vide order dated 2.6.2011, Annexure A.

The appellant filed further appeal before the GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh Tribunal. Vide order dated 26.9.2013, Annexure A.10, the Tribunal dismissed the appeal. Hence the instant appeal by the appellant-assessee.

Learned counsel for the appellant with reference to copy of bank statements and affidavits of the appellant Charanjit Singh and Pritam Singh, three receipts issued by Director of West Point Properties Pvt. Limited, compromise deed, affidavits of Directors of West Point Properties Pvt. Limited and copy of MOU, submitted that the finding recorded by the Tribunal that the assessee had failed to produce any material to justify the genuineness of the entries amounting to ` 1.2 crores in the books of account was against the record. It was argued that the findings recorded were perverse and no penalty could be levied under section 271(1) (c) of the Act.

After hearing learned counsel for the appellant, we do not find any merit in the appeal.

The assessee had not disclosed the bank account maintained with UTI Bank, Sector 8, Chandigarh (now Axis Bank) during the assessment proceedings. On calling information from the said bank, the Assessing Officer noticed that the assessee had deposited ` 1,20,00,000/- in the said account on 19.4.2006 and 22.4.2006 which remained unexplained. On scrutiny of bank statement, it was found that ` 1,19,90,000/- was transferred from the account of Shri Pritam Singh on 19.4.2006 and 22.4.2006 and there was an entry of ` 1,01,000/- of cash deposited on 3.8.2006 in the said account of Pritam Singh. The explanation of the assessee was that he had received some advances from one Shri Pritam Singh for purchase of agricultural land on behalf of the company named M/s West Point Properties Pvt. Limited. It was claimed that as the assessee had GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh failed to arrange agricultural land for West Point Properties Pvt. Limited, therefore, the entire amount of ` 1.20 crores was returned back to them. The assessee was not able to substantiate his version as he had failed to provide any material to show that amount was received by Pritam Singh from M/s West Point Properties Pvt. Limited. The Assessing Officer had thus added the aforesaid amount as unexplained income of the assessee. The revisional authority had confirmed the said addition under Section 264 of the Act. The reference to various documents as contended by learned counsel does not establish the genuineness or the capacity of Shri Pritam Singh or availability of funds with M/s West Point Properties Pvt. Limited. The self serving affidavits or memorandum of understanding, compromise deed and statement of account of Pritam Singh from Axis Bank does not help the appellant as the assessee had failed to produce the alleged Shri Pritam Singh or furnish his address or PAN and establish the credentials of the company M/s West Point Properties Pvt. Limited. The Assessing Officer had thus rightly imposed penalty under Section 271(1)(c) of the Act for concealment of income amounting to ` 40,48,800/.-. This was affirmed by CIT(A) on an appeal by the assessee. The Tribunal in para 21 of its order dated 26.9.2013, Annexure A.10, while rejecting the plea of the assessee and upholding the order of the CIT(A) had noticed as under:- “21. The learned CIT(A) after extracting above observation further observed that MOU was signed by Shri Rajiv Kumar and not by any other party including the assessee i.e. Charanjit Singh. Further witnesses who have signed the documents are same those who signed three receipts. Interestingly though the above documents i.e. MOU, compromise deed and receipts were issued on different dates and entry made on different GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh locations but the same were signed by the same Notary public at Khanna (Punjab) on 28.8.2007. After this observation, the learned CIT(A) has decided the issue vide para 5 which is as under:- ‘5. It is clear from the detailed order passed by CIT(C) under section 264 that the assessee could not explain the credits appearing in his bank account despite having more than sufficient opportunity both at the time of assessment proceedings as well as at the time of appellate proceedings. The explanation given by the assessee that the said money had been received as advance from Pritam Singh who in turn had received it from West Point Properties Pvt.Limited could have been very easily proved as genuine if the said persons i.e Pritam Singh or West Point Properties Pvt. Limited had been produced before the AO to confirm the claim of assessee. However, it is seen that the assessee could not even give the detailed address of the said persons making it impossible for the AO to cross verify the claim made by the assessee. The provisions of section 68 clearly require the assessee to discharge the onus cast upon him in order to prove identity, genuineness and creditworthiness of the person from whom the amounts had been received. However, the assessee apart from giving the name of the persons who allegedly gave the money could not provide any further details to establish the identity. The copy of the affidavit filed before the AO wherein one Mr. Harish Bhasin claiming to be Director of West Point Properties Pvt. Limited does not contain any reference to the permanent account number of the company or the address of the company or the juri ictional Assessing officer. Therefore, it becomes abundantly clear that the assessee has failed miserably in establishing the identity. It is further seen that no GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh evidence had been filed to prove that the amount withdrawn in cash to the tune of `1,20,00,000/- has been credited in the books of account of West Point Properties Pvt. Limited. There was nothing to prevent the assessee from filing the necessary evidence in this regard, had the claim been genuine. Therefore, assessee could also not establish the creditworthiness of the person from whom he has claimed to have received/paid the money. Further fact that the amount to the tune of `1,20,00,000/- has been deposited in assessee’s bank account on 19.4.2006 and 21.4.2006 and the same has been withdrawn in cash within one day of the deposit is not explained by theory proposed by the assessee. If the theory proposed by the assessee is to be believed,there was nothing to prevent the assessee from returning the said amount by cheque from whom it had been received by cheque. The fact that it has been withdrawn in cash clearly shows that the intention is to block the investigation into the recipient of the said amount. Therefore, assessee also fails in proving the genuineness of transaction. As such, the amount credited in the assessee’s bank account has been rightly assessed as his income from undisclosed sources and penalty on the same has been correctly imposed. The order of the AO under appeal is confirmed.’ We find nothing wrong with the order of the learned CIT(A). It is to be seen that even the PAN of the company or Shri Harish Basin was not furnished before the Assessing Officer. PAN of Shri Pritam Singh was not filed. In fact the details of PAN in the affidavit by Shri Harish Bhasin, detail of PAN of the company in the affidavit of Shri Harish Bhasin are left blank. Even the column regarding PAN of Shri Harish Bhasin is left blank. Even before us, nothing was filed to improve the case. These facts clearly show that the assessee has not been able to prove the genuineness of the transaction. In the absence of GURBAX SINGH 2014.10.28 11:54 integrity of this document High Court Chandigarh relevant address also, the Assessing Officer has been prevented to make any enquiry during the assessment proceedings.”

The effort of the learned counsel for the assessee has been to reappraise the evidence so as to record a finding other than the one recorded by the Assessing Officer, CIT(A) and the Tribunal. In our opinion, the same does not fall within the domain of section 260A of the Act as the view adopted by the authorities is a plausible view. The contention of the appellant had been dispelled by the Assessing Officer, CIT(A) and the Tribunal with the observations and findings noted herein above.

Accordingly, no substantial question of law arises. As a result,