KAILASH CHAND SHARMA NEAR CHARBHUJA MANDIR, vs. COMMISSIONER OF INCOME TAX 1

Facts

The appellant, Kailash Chand Sharma, an income tax assessee, filed his return for Assessment Year 2014-15 declaring pension income. The Revenue received information about a cash deposit of Rs. 47,30,000/- in the appellant's bank account. A notice under Section 143(3) was issued. The appellant explained the deposit as belonging to Kana Ram, who allegedly sold an immovable property and lacked a bank account, with the intention of returning the amount later. Kana Ram, when summoned, provided a contrary statement. An addition of Rs. 34,50,000/- was made in the assessment order dated 26.12.2018. The first appeal was dismissed on 22.02.2019, and the Income Tax Appellate Tribunal (ITAT) also upheld the addition, leading to the present appeal.

Held

The Tribunal held that the appellant failed to discharge the onus of explaining the cash deposit. The explanation provided by the appellant was falsified by Kana Ram's denial that the cash belonged to him. Furthermore, no income tax returns of Kana Ram were produced to establish that the sale of immovable property was declared, and Kana Ram's creditworthiness was not proven. The initial explanation that the amount was to be returned to Kana Ram upon his opening a bank account was later changed to a claim that cash was transferred to various persons at Kana Ram's instance, which also remained unsubstantiated. The bank statements showed debit entries but did not indicate transfers at Kana Ram's instance. The reliance on *CIT v. Divine Leasing and Finance Ltd.* was deemed misplaced as that case dealt with subscriptions from a public issue and the Revenue's failure to prove shareholders were benamidars or fictitious, unlike the present case where the source of cash deposited in the appellant's account was not explained. Consequently, no substantial question of law arose, and the appeal was dismissed.

Key Issues

1. Whether the ITAT erred in law and facts by confirming the addition of Rs. 10,15,921/- as cash credit levied by the Assessing Officer under Section 68 of the Income Tax Act. 2. Whether the facts presented by the assessee in an affidavit could be disregarded without material to disprove the assessee's position. 3. Whether the ITAT was justified in law by not acting as the last fact-finding authority. 4. Whether the ITAT acted perversely in the given facts and circumstances. Assessee's Contention: The appellant argued that the onus was discharged by explaining the cash deposit as belonging to Kana Ram, and it was for the Assessing Officer to prove otherwise. Account statements were submitted to show transfers at Kana Ram's instance. Reliance was placed on *CIT v. Divine Leasing and Finance Ltd.* [(2008) 299 ITR 268 (Delhi)]. Revenue's Contention: The Revenue defended the impugned order, stating that the appellant failed to explain the cash deposit.