DR. HARPRIT SINGH,JALANDHAR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR

आदेश आदेश /O R D E R आदेश आदेश PER O. P. MEENA, ACCOUTANT MEMBER: 1. This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-1, Jalandhar (in short “the CIT (A)”) dated 31.01.2018 pertaining to Assessment Year 2011- 12, which in turn has arisen from the assessment order passed under section 143 (3)/147 dtd. 13.01.2016 of Income Tax Act,1961 (in short ‘the Act’) by the Deputy Commissioner of Income-Tax, Central Circle- II, Jalandhar (in short “the AO”). 2. Grounds 1 to 4 are against the confirmation of addition of Rs.33,71,720 made on account of cash deposits in saving bank account and Rs. 12,528 being interest inspite of the facts to the AO

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 2 of 11

has framed assessment by applying different possibilities and there

is no specific charge against the assessee. The addition was made

under section 68 of the Act. However, same was sustained by the

CIT (A) under section 69 of the Act on the ground that investment

are not recorded in books of accounts. Since the change of section,

amounts to enhancement without giving opportunity of being heard

the assessee, hence, no sustainable in law. 3. Since above grounds of appeal related to addition of Rs.

33,71,720 being cash deposits in saving bank account and interest

thereon of Rs.12,528 , hence, same are being considered together. 4. Succinctly, facts as culled out from the orders of lower

authorities are that the assessee has filed return of income on

29.03.2012 declaring total income of Rs. 46,57,850. The assessment

was reopened u/s.147 and notice under section 148 of the Act was

issued and served on 31.03.2015 on the ground that the assessee could

not explain the cash deposits in his saving bank account with Axis

Bank in reply to notice under section 133(6) issued to him. The said

bank account was opened on 03.02.2011 in which cash of Rs.33,71,720

was deposited during the period from 03.02.2011 to 15.03.2011. The

assessee has also earned interest of Rs.12,528 on the said amount.

The assessee vide letter dated 05.10.2015 explained that bank

account is recorded in the books of accounts of M/s. Orthonovo Joint

& Trauma Hospital Pvt. Ltd. It was submitted that cash has been

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 3 of 11

deposited out of cash in hand of the company M/s. Orthonovo Joint &

Trauma Hospital Pvt. Ltd.a company in which the assessee and his

wife Smt. Jasleen Kaur are majority shares holder. The said company

had regular current account with Capital Local Area Bank, which was

duly reflected in its balance sheet. The AO has observed that the

perusal of cashbook of the company showed regular cash in hand

because of cash receipts and itis deposited in the current account

every second or third day. Therefore, the assessee was asked to show

cause as to why cash deposits in his personal bank account should not

be treated as unexplained. The assessee has explained thathe was

advised by his Astrologer to insert his name in the bank account of the

company. He approached his banker but they refused. Therefore, he

opened the bank account in his own name to deposit cash in said bank

account. The assessee is also stated that the saving bank account was

incorporated in the books of the company and the cash was withdrawn

in the month of March. However, the AO observed that the balance

sheet of the company does not reflect this bank account as on 31. 03.

2011. The interest earned on the cash deposits was Rs.12,528 has also

not been reflected in the return of income either of the assessee or in

the company. Therefore, the AO observed that the explanation of the

assessee is cooked up and he is unable to explain as to why the

account claim to belonging to the company has not been reflected in

its books of accounts. In view of these facts, the AO treated the said

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 4 of 11

amount as unexplained cash credit under section 68 of the Act.

Without prejudice to the above, the AO further observed that if at any

stage in the appellate proceedings, the higher judicial authorities,

hold that the cash deposits as explained, and cash is actually belongs

to the company, then the payment to be examined in the light of

provisions of section 2(22)(e) of the Act as deemed dividend in the

hands of the assessee. The AO further observed that the assessee is a

director and shareholder with the substantial shareholding in the

company at 50%. Therefore, the money has been given for the benefit

to the assessee for his individual benefit. There is no business

purpose. In view of such advance clearly falls within the purview of

provisions of section 2(22)(e) of the Act. In view of these facts, the AO

also taxed the same amount as deemed dividend in the hands of the

assessee. 5. Being, aggrieved, the assessee filed an appeal before the Ld.

CIT (A). The assessee has reiterated the same submissions as made

before the AO. It was argued that said account was reopened due to

astrological reasons. The addition made under section 68was

challenged on the ground that section 68 is not attracted as saving

bank account Paper Book is not books of accounts of the assessee but

are books of the bank. It was further submitted that and is made on

presumption and assumption. It was further submitted that it was not

the case of the AO that company was not having cash in hand to

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 5 of 11

justify the deposit made in the saving bank account of the assessee.

However, the Ld. CIT(A) has upheld the observation of the AO has the

plea of the assessee that the bank account was opened on the basis of

astrological advice is highly illogical and cannot be accepted. Further,

the said saving bank account of the assessee was neither incorporated

in the balance sheet of the company nor the same were declared by

the assessee while filing return of income in his individual case. The

AO has invoked section 68 by making addition on account of

undisclosed cash deposit made into bank account of the assessee.

Since the passbook maintained by the bank is not a books of accounts

of the assessee. Therefore, the Ld. CIT(A) observed that the cash

deposit in the bank account is upheld under section 69 of the Act. It

was further submitted by the assessee that after having made an

addition of Rs.33, 71, 720 as cash credit under section 68 of the Act.

The AO without prejudice to the assessment made by him propounded

alternating theories considering the possibilities of higher judicial

authorities. Such as an exercise by the AO is of no consequence. Nor it

is within his powers to pre-empt the decision of the higher judicial

authorities. Therefore, the CIT (A) has dismissed such observation

made by the AO regarding possibility of invoking provisions of section

2(22)(e) or section 269SS or 271D and 271E. 6. Being, aggrieved the assessee filed this appeal before the

Tribunal. Learned counsel submits that the addition is made on

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 6 of 11

presumption and assumption. It was not the case of the AO that

company was not having cash in hand to justify the deposit made in

the saving bank account of the assessee. Further, the CIT (A) has

changed the addition to section 69 of the Act without giving show-

cause notice to the assessee. The CIT (A) has though not accepted the

plea of the assessee that the bank account was opened on the basis of

astrological advice, but has accepted that the passbook maintained by

the bank is not a book of account of the assessee. Therefore, the Ld.

CIT(A) confirmed the addition under section 69 of the Act without

giving due opportunity of being heard to the assessee. This act of the

ld. CIT(A) amounts enhancement of income, without giving any

opportunity of hearing, which made the addition, confirmed as illegal

and bad in law. Further, section 68 and section 69 are operates in

different fields. Therefore, the addition confirmed is illegal. The

assessment is made by applying different possibilities and there is no

specific charge against the assessee.The learned counsel for the

assessee submitted that section 68 could not be attracted in the case

of the assessee in the light of decision of ITAT Amritsar in the case of

Sanjeev Kumar v. ITO Ward 6(3) Pathankot [I.T.A.No. 445 to

449/ASR/2015-dated 17.06.2016, copy placed on record. The learned

counsel for the assessee further, relied in the case of PCIT V.

Bhaichand H Gandhi [1983] 141 ITR 67 (Bombay) in support of

contention that no addition under section 68 can be made when no

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 7 of 11

books of accounts are maintained. The learned counsel for the

assessee contended that the AO has observed that when the company

was having regular current account then why the assessee has opened

saving bank account in his name to make deposit out of cash in hand

of company. The learned counsel for the assessee relying on the

decision CIT v. Dalmia Cement (Bharat) Ltd. [2002] 254 ITR 377 (Delhi)

submitted that the AO cannot guide as to how the business should be

conducted by the assessee. The assessee has opened a bank account in

which cash deposits were made out of cash in hand with the company.

The AO has not pointed out that cash deposits are not out of cash in

hand of the company, no discrepancies have been pointed out by the

AO.The learned counsel for the assessee placed reliance in the case of

Girish Bansal & Anr v. UOI [2016] 384 ITR 161 (Delhi) wherein it was

held when the cash deposits are taxed under section 68 it cannot be

taxed under section 69 of the Act nor can be brought to tax as deemed

dividend u/s. 2(22)(e) of the Act.In the light of above submission, the

learned Counsel submitted, the CIT (A) was not justified in sustaining

the addition, when the AO was not certain under which head the

addition should be made. Therefore, same may be quashed. 7. Per contra, learned CIT(D.R.) submitted decision in Kalayan

Kumar Ray v. CIT [1991] 191 ITR 634 (SC) was given in the context of

quantification of tax and interest thereon. In said case, the AO had

not quantified interest chargeable to tax and made part of assessment

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 8 of 11

order. Therefore, the Hon`ble Supreme Court held that has advised

Department to incorporate such interest calculation in ITNS 65

form,Therefore, such decision is distinguishable on facts hence, not

applicable to the assessee. It was further, submitted that as per

section 292B of the Act the CIT (A) can rechristened the head of

income. Therefore, substitution of section 69 in place of section 68 is

well within the powers of the CIT (A). Further, the AO has rightly

applied provisions of section 2(22) (e) of the Act. 8. In rejoinder to above, the learned counsel for the assessee

submitted that referring para 5.6 and 5.7 of assessment order that it

is not the case of the AOcash deposits does not relate to company or

and there was no cash in hand of the company. The learned counsel

for the assessee further relied on the decision of Co-ordinate Bench of

Delhi Tribunal in the case of Vinesh Maheswari v. ITO Ward 61(3) New

Delhi [I.T.A.No. 7210/Del/2018 dated 01.03.2019 in applying the ratio

of various decision of Hon`ble High Court and Hon`ble Supreme Court

it was held that change in section 68 to 69 was held to be sans and

addition sustained by the CIT (A) was held to be incorrect and

reversed. 9. We have heard the rival submissions and perused the relevant

material on record. We find that it is not the case of the AO that cash

deposits in saving bank account with Axis Bank has been not made out

of cash in hand balance available with M/s. Orthonovo Joint & Trauma

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 9 of 11

Hospital Pvt. Ltd. in which the assessee was director. We find that the

cash book of the company is reflecting day to day cash receipts, out of

said cash balance, the cash deposits were made in the impugned bank

account. This view is also supported by the facts that the AO has

without prejudice, also observed that the addition should be

considered u/s. 2(22)(e) of the Act as the assessee has received cash

loan from the company in which he had substantial interest and

shareholding.The learned counsel for the assessee placed reliance in

the case of Girish Bansal &Anr v. UOI [2016] 384 ITR 161 (Delhi)

wherein it was held as under:

“Examined in the light of the legal position explained in the above decisions, the Court is of the view that as far as the present case is concerned, the sum of Rs.20 lakhs received by the Assessee was in the context of the cancellation of the sale certificate and the sale deed executed in their favour in relation to an immovable property and neither the Assessee was dealing in immovable property as part of his business.While it could, if at all be said to be in the nature of capital receipt, what is relevant for the present case is that the Revenue has been unable to make out a case for treating the said receipt as of causal and non-recurring nature that could be brought to tax under Section 10 (3) read with section 56 of the Act. In the light of the clear enunciation of the law in the aforementioned decisions of the Court, it is plain that as far as the present case is concerned, the AO was in error in proceedings on the basis that a sum of Rs. 20 0, 00,000 received

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 10 of 11

by the Assessee was in the nature of a casual and non-recurring receipt which can be brought tax under section 10 (3) of the Act. Having held that it could not in the nature of capital gain, it was not open to the Revenue to seek to bring it a tax under the revenue receipt. There can be no manner of doubt that what is in the nature of capital receipt, cannot be brought to tax by resorting to Section 10 (3) read with section 56 of the Act.” Therefore, Learned Counsel argued that when the cash deposits are taxed under section 68 it cannot be taxed under section 69 of the Act nor can be brought to tax as deemed dividend u/s. 2(22)(e) of the Act.

CIT (A) was not justified in sustaining the addition, when the AO was

not certain under which head the addition should be made. This

means to the AO was some what agreed that cash deposits in said

bank account are out of cash in hand available with the said company.

However, the AO did accept that the bank opened in pertained to M/s.

Orthonovo Joint & Trauma Hospital Pvt. Ltd. On careful consideration

of facts, we are of the view that cash deposits in bank account are out

of cash in hand belonging to M/s. Orthonovo Joint & Trauma Hospital

Pvt. Ltd. hence, source of cash deposits are duly explained and same

pertained to the company as as the source of cash deposits are from

cash in hand of the impugned company.in such circumstances, we are

of the view that the AO was not justified in making addition without

bringing on record to establish that there was no cash in hand balance

Dr. Harprit Singh v. DCIT-CC-II, Jalandhar/I.T.A. No.195/ASR/2018/A.Y.:11-12 Page 11 of 11

was available with said company. Therefore, having not done so the

AO cannot added the sum belonging to company. Therefore, we hold that the addition made by the AO and sustained by the CIT (A) by

invoking section 69 is not tenable in law, hence, same is deleted. Accordingly, appeal of the assessee is allowed. 11. In the result, the appeal of the assessee stands allowed. 12. The order pronounced in the open Court on 19.12.2019.

Sd/- Sd/- (N.K.CHOUDHRY) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Amritsar: Dated: December 19, 2019/opm Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/ Guard file of ITAT. By order

Assistant Registrar