MADAN LAL vs. COMMISSIONER OF IT & ANR

Since the Registry has not been able to send the files of this case on account of the fire incident in the concerned Branch of the Court, learned counsel for the revenue has furnished photostat copies of the paper books which are taken on record and the same are treated as reconstructed files of the appeal.

This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 10.2.2005 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “B”, in ITA No. 786/Chandi/2000, relating to the assessment year 1997-98, claiming the following substantial questions -2- of law:- “i) Whether in facts and circumstances of the case, the order of the Tribunal is perverse as it is not supported by any material on record? ii) Whether in facts and circumstances of the case, the order of the Tribunal is perverse because the Tribunal has ignored vital evidence led by the assessee in which it has been categorically proved that the assessee had a sum of Rs.1,64,000/- on 9.1.1995 and had made further withdrawals on 10.3.1995 for purchase of property and therefore it could not be held that a sum of Rs.1 lac represented undisclosed income of the assessee? iii) Whether in the facts and circumstances of the case, the order of the Tribunal is perverse as the order of the Tribunal is based on conjectures and surmises?”

Briefly stated, the facts necessary for adjudication as narrated in the appeal are that the assessee filed his return for the assessment year 1997-98 on 29.10.1997 declaring an income of Rs.19,79,343/- which was subsequently revised to Rs.19,96,228/-. The case of the assessee was taken up for scrutiny and the Assessing Officer made additions on various accounts, as under:-

Against the aforesaid additions, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”]. The CIT(A) sustained the addition of Rs.1,00,000/- on account of unexplained cash amount and modified the additions on account of low household expenses from a sum of Rs.72,000/- to a sum of Rs.60,000/- and telephone expenses from Rs.13,000/- to Rs.12,000/-. Still feeling aggrieved, the assessee filed an appeal before the Tribunal pleading that a sum of Rs.1,00,000/- added as unexplained cash was totally unwarranted as for the assessment year 1996-97, the CIT(A) in his order had accepted the factum of cancellation of sale deed and receipt of the amount of Rs.1,64,000/- by the assessee on 9.1.1995. Since the order of the CIT(A) had been accepted by the revenue for the preceding year as no further appeal was filed challenging the same, the finding of the CIT(A) had attained finality. The Tribunal held that since there were withdrawals made by the assessee on 10.3.1995 and the assessee did not possess cash amounting to Rs.1,64,000/- on the date of the search, i.e., 11.8.1995 therefore, cash deposit of Rs.1,00,000/- on 10.4.1996 was undisclosed income of the assessee. The Tribunal also upheld the disallowance of 1/5th of car expenses amounting to Rs.44,146/- on account of personal use of the vehicle and telephone expenses to the extent of Rs.12,000/-. This gave rise to the assessee to approach this Court by way of instant appeal.

We have heard learned counsel for the parties.

Learned counsel for the assessee submitted that the authorities below have failed to appreciate the material on record in right perspective and had upheld the addition of Rs.1,00,000/- on conjectures. According to the learned counsel, it was not disbelieved that the cancellation of the sale deed had taken place on 9.1.1995 and, therefore, the cash was available with the assessee on 10.4.1996. The withdrawal of cash from the bank account during the period from 9.1.1995 to 10.4.1996 would not make any difference once the availability of cash was there.

On the other hand, controverting the submissions aforesaid, learned counsel for the revenue submitted that it has been concurrently recorded by the authorities below that the source of Rs.1,00,000/- was not explained by the assessee and, therefore, it has been rightly added.

After giving thoughtful consideration to the respective submissions made by the learned counsel for the parties, we do not find any merit in the contentions raised by the learned counsel for the assessee.

The authorities below have concurrently recorded finding of fact that Rs.1,00,000/- introduced in the books of account by the assessee on 10.4.1996 was not out of Rs.1,64,000/- received by him on 9.1.1995 on cancellation of sale deed. The findings recorded by the Tribunal in paras 9 and 10 while affirming the orders of the Assessing Officer and the CIT(A), are as under:- “9. Now the next question required to be determined by -5- us is that in case the assessee has received this amount of Rs.1,64,000/- on account of the cancellation of the sale deed on 9.1.1995. Whether the impugned amount of Rs.1 lakh out of the same was available with the assessee during the assessment year 97-98 under consideration. Now according to the assessee he had purchased the land in question on 6.12.1994 and cancelled the deal on 9.1.1995 and after cancellation of the same he received back the entire investment of Rs.1,64,000/- on 9.1. 95. Further, according to him out of this amount, a sum of Rs.64,000/- was utilized for the construction of the wall before 11.8.95 and the other amount of Rs.1 lakh remained with the assessee which he reintroduced in his books of accounts on 10.4. 96. On 10.3.95, the assessee has withdrawn a cash of Rs.1 lakh for the purchase of land as is clear from the photo copy of the withdrawal filled by the assessee before the CIT(A) during appellate proceedings. The assessee also explained before the CIT(A) that this impugned amount of Rs.1 lakh was kept by him because he intend to purchase some other land and since the same was not purchased, the amount was ultimately reintroduced in the books of accounts. But it is pertinent to mention here that the assessee has made withdrawals from his books on 10.3.95 for a sum of Rs.17,700/- and Rs.1,40,000/- when a sum of Rs.1,64,000/- was already -6- available with him from the cancellation of the sale deed because the sum of Rs.64,000/- is claimed to have been utilized by the assessee for construction of the wall before 11.8. 95. It does not appeal to reason as to when the cash of Rs.1,64,000/- was available with the assessee from the cancellation of the sale deed then what was the necessity with the assessee for making withdrawals of Rs.17,700/- and Rs.1,40,000/- on 10.3.95. 10. Even before us the assessee has not been able to explain as to why the assessee withdrew this amount of Rs.17,700/- and Rs.1,40,000/- on 10.3.95 from his books of accounts when a sum of Rs.1,64,000/- in cash was already available with him. It is also important to mention here that no part of the amount of Rs.1,64,000/- was available with the assessee on the date of search i.e. 11.8.95 when it has been alleged by the assessee that this amount was kept in cash by the assessee. The non- availability of this cash further gets support from the fact that the assessee has been withdrawing the cash from his business on 10.3.95 and 15.3. 95. In our opinion no prudent person would withdrew further cash for any purpose for which the alleged available cash was to be utilized when sufficient cash is already available with that person. The assessee has also not been able to explain before us as to why this amount of Rs.1,64,000/- received -7- by the assessee on 9.1.1995 on account of the cancellation of the sale deed was not introduced in the books of accounts by the assessee till 10.4.96 when the assessee was maintaining regular books of accounts. Hence, we are of the opinion that in view of these inconsistencies as discussed here in above by us, the assessee failed to establish that impugned sum of Rs.1 lakh introduced by the assessee in its books on 10.4.96 was part of the amount of Rs.1,64,000/- which the assessee has received on account of the cancellation of the sale deed on 9.1.95 and so the tax authorities below in their well reasoned and well discussed order have rightly come to the conclusion that the amount of Rs.1,00,000/- introduced by the assessee in its books of accounts was an amount from the undisclosed sources of the assessee and accordingly the order of CIT(A) in sustaining the impugned addition of Rs.1 lakh is upheld and the ground No.1 of the appeal of the assessee is rejected.”

The counsel for the assessee was unable to justify withdrawal made by the assessee on 10.3.1995 in case any part of the amount of Rs.1,64,000/- received on 9.1.1995 on account of cancellation of sale deed was available with him. Therefore, the explanation of the assessee that the entry of Rs.1,00,000/- on 10.4.1996 was on account of reintroduction of the said amount had rightly not been accepted. The findings recorded are based on the -8- material on record and the view taken by the authorities below is a plausible one in the facts and circumstances of the case.

In view of the above, there is no merit in this appeal and the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE February 23, 2011 (ADARSH KUMAR GOEL) gbs JUDGE