SHRI SANJIV WALIA,BATHINDA vs. THE INCOME TAX OFFICER, BATHINDA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No. 355/Asr/2014 Assessment Year: 2009-10

Sanjeev Walia, vs. Income Tax Officer, Prop. Walia Construction Co., Ward-1(1), Bathinda. Bathinda. [PAN: AABPW 2184L] (Appellant) (Respondent)

Appellant by : Sh. P. N. Arora (Adv.) Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 11.03.2019 Date of Pronouncement: 31.05.2019

ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), Bathinda ('CIT(A)' for short) dated 13.3.2014, partly allowing the assessee’s appeal contesting his assessment u/s. 144 of the Income Tax Act, 1961 ('the Act' hereinafter) dated 25.11.2011 for the Assessment Year (AY) 2009-10.

2 ITA No. 355/Asr/2014 (AY 2009-10) Sanjeev Walia v. ITO assessment proceedings despite sufficient opportunity. The Assessing Officer (AO), accordingly, following the rate approved by the Hon’ble jurisdictional High Court in such cases, applied a profit rate of 10% on the disclosed turnover of Rs.108.55 lacs. The assessee was found to have a saving bank (s/b) account with Indus Ind Bank, Bathinda, which however did not find reflection in the assessee’s balance-sheet as on 31.3.2009. The same bore deposits for Rs.31.50 lacs during the relevant year, which were explained to be the sale proceeds of the assessee’s contract business, so that a profit rate be applied thereto; the same having been inadvertently omitted to be disclosed, offering a sum of Rs.2,60,190/- toward the same. The AO, accepting the assessee’s alternate claim of the cash withdrawals in the said account as explaining the deposits (made subsequently), worked out the peak amount at Rs.17.85 lacs (at para 4, page 5 of the assessment order), and added the same. In appeal, the ld. CIT(A), in view of the cash withdrawals in the assessee’s other bank account, being a current account with the same bank, was of the view that the assessee had sufficient funds to explain the deposit of cash in the Indus Ind Bank s/b account. The addition for the peak amount would therefore not obtain. The addition to the returned income of Rs.8.13 lacs could only be for the additional assets found, and which is the bank balance with the IndusInd Bank as on 31.03.2009, i.e., Rs. 10,51,517/-. He, accordingly, directed for the addition to the returned income of Rs.8,13,290/- to that extent only, which was though directed to be assessed as business income. Aggrieved, the assessee’s is in second appeal, raising the following ground: “On the facts & in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming an addition of Rs.10,51,517/- on account of deposits remained invested in the bank account without appreciating the explanation and considering the source given as per ground of appeals and during assessment proceedings.”

3 ITA No. 355/Asr/2014 (AY 2009-10) Sanjeev Walia v. ITO 3. I have heard the parties, and perused the material on record. The assessee, during the hearing, raised a legal plea (through his counsel, Sh. Arora), i.e., his books of account having been rejected, no addition u/s. 69A could in law be made, relying on the decisions in CIT v. Aggarwal Engg. Co. [2008] 302 ITR 246 (P&H); Ram Avtar Pareek v. ITO (in ITA No. 274/2017, dated 21/12/2017); and Maddi Sudarsanam Oil Mills v. CIT [1959] 37 ITR 369 (AP), besides by the Tribunal. He, however, was unable to answer the question that the addition, sustained by the ld. CIT(A), though assessed as business income, is qua the balance in the assessee’s undisclosed bank account as at the year-end, i.e., for the asset found, unexplained u/s. 69A. In fact, the same has been, accepting the assessee’s plea, assessed by the ld. CIT(A) as income of the same business, which had though remained to be disclosed. Its’ assessment as business income, as one understands and discerns from his order, is in view of the assessee having no other (disclosed) source of income, so that the said deposits would only represent the undisclosed profit of his business. It has, therefore, nothing to do with the assessee’s accounts, not forming part thereof. As such, the proposition that no separate addition qua cash credits in accounts could be made where the accounts are rejected and the income estimated, would have no application. If the assessee’s case, on the other hand, is that the said income is to be regarded as the assesee’s business income, as he contends, the same has already been assessed as such, so that the said plea is of no consequence. That is, the addition as finally sustained, though based on the evidence of unexplained bank deposit, has been as undisclosed profit of his business, i.e., evidence in respect of which, by way of bank deposit, had been found. The assessee’s case, thus, considered either way, is without any merit, and the contention raised, not applicable on facts. In-as-much as, however, in my view, the addition is liable to be sustained u/s. 69A, it would be in order to discuss the argument advanced in some detail. The

4 ITA No. 355/Asr/2014 (AY 2009-10) Sanjeev Walia v. ITO proposition that no addition qua an unexplained cash credit in accounts could be made where the accounts are found not reliable to yield the true business income, is unsound and not tenable in law. The reason is simple. The cash credit, as explained by the Apex Court per its’s several decisions (viz. Asst. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC)), is itself an evidence of receipt of money. The same, accordingly, where not satisfactorily explained as to its nature and source, is deemed as income (sec.68). Section145(3), on the other hand, gets attracted when the assessee’s accounts are not correct and complete, or where the method of accounting followed is such as is not amenable to yield the correct profit of the assessee’s business. That does not undermine the evidence as to the admitted receipt in the form of a credit in the assessee’s accounts. Or, for that matter, bank deposits made outside the books of account. No doubt, the said proposition did not find favour with the Apex Court, as in CIT vs. Devi Prasad Vishwanath Prasad [1969] 72 ITR 94 (SC); Kale Khan Mohd. Hanif vs. CIT [1963] 50 ITR 1 (SC), as well as, following the same, by the Hon’ble jurisdictional High Court, as in Grover Fabrics India Pvt. Ltd. vs. CIT [2011] 332 ITR 312 (P&H). The Revenue, it may be appreciated, where deeming income u/s. 68 (or s. 69/69A), is under no obligation to show that the income is from a particular source (Roshan Di Hati vs. CIT [1977] 107/938 (SC); Kalekhan Mohd. Hanif (supra); Devi Prasad Vishwanath Prasad (supra)). The estimation of income upon rejection of the accounts, on the other hand, is qua a particular source/s of income. The assessee can though plead for telescoping, satisfying the assessing authority that the same is warranted in the facts and circumstances of the case, as explained in Devi Prasad Vishwanath Prasad (supra). The additional income i.e., other than the returned income, in the instant case, as I see it, is outside the books of account, i.e., qua an asset not finding reflection therein. The same, therefore, has no relation with the assessee’s

5 ITA No. 355/Asr/2014 (AY 2009-10) Sanjeev Walia v. ITO accounts, nor shown to be so, for the assessee to raise the said plea. In fact, the ld. CIT(A) in deciding the assessee’s appeal, confused the two. This is as he has, based on the assesee’s current account with the bank, duly reflected in his accounts, held the assessee to have sufficient funds to explain the cash deposits in the s/b account with Indus Ind Bank. When the cash withdrawals from the current account (with bank) are duly recorded in the assessee’s accounts, where is the question of the said cash being deposited in a bank account not reflected therein? If these cash withdrawals could explain the net cash deposit of Rs.17.85 lacs (from 15.12.2008 to 28.02.2009), the same could as well explain the reduced bank balance of Rs.10.52 lacs as on 31.3.2009 which, in fact, as apparent, is a part of Rs.17.85 lacs, the balance on 28.02.2009. There is in fact nothing to show that the undisclosed receipts – which are in cash, are of the same, i.e., contract business, the burden to establish the source of the receipt, which is on the assesee, being wholly unexplained. The ld. CIT(A) has, in deciding in the manner he does, perhaps unwittingly, converted, without evidence, a source-based income assessment into an asset-based one. Would that mean that any income spent or otherwise applied, i.e., other that for acquiring an asset, cannot be assessed as income, being not represented by an asset?

In sum 4. The ld. CIT(A) has, in upholding the rejection of accounts, assessed the addition of Rs.17.85 lacs as business income u/s. 28, at Rs.10.52 lacs, the balance in the undisclosed bank account as at the year-end. How, then, one may ask, the assessee’s plea, stating the deposits to be a part of his undisclosed turnover, valid? Further, it is surely not so, where it is opined, for the afore-stated reasons, for being regarded as assessable u/s. 69A, i.e., as assessed by the AO (at Rs.17.85 lacs). There has been no improvement in his case – the matter being primarily factual, by

6 ITA No. 355/Asr/2014 (AY 2009-10) Sanjeev Walia v. ITO the assessee before the tribunal, being in fact sans any material/evidence. I, accordingly, decline interference. The only modification that I, in consonance with the finding/s issued, direct, is of the assessment of income, to the extent of Rs.10,51,517/-, u/s. 69A. This is for the reason that there is nothing on record to hold it as business income, much less of the same business. A profit of Rs.10.52 lacs on a turnover of Rs.31.50 lacs may not be, again, reasonable, at least on the basis of the material on record. It may well represent the earnings of the business, or from allied activities, carried out by the assessee in the past, surfacing in the form of the bank deposits; the assessee having deposited a lump-sum amount of Rs.9 lacs on 15.12.2008, i.e., on opening the bank account, lost sight of by the ld. CIT(A). In this regard, it is also pertinent to note that the assessee did not, despite sufficient opportunity, produce the books of account, or even the vouchers on which the same are based, before the AO. The assessee’s businesses income, accordingly, gets assessed at the returned income of Rs.8.97 lacs. Further, in-as-much as the income is assessed on the basis of the asset/s found not recorded in accounts, there is no scope for telescoping of this income against the income disclosed per the assessee’s accounts, also noted by the ld. CIT(A). As regards the relief allowed on quantum by him, the same, even as the same has been opined as not merited, is not disturbed only in view of s. 268A of the Act; the ld. DR not raising any plea or oral ground to that effect. Coming to the assessee’s reliance on case law. The same stand perused. It has already been explained that the contention is not applicable in the facts and circumstances of the case. The decision in Aggarwal Engg. Co. (supra) is based on the decision in CIT v. Banwarilal Bansidhar [1998] 229 ITR 229 (All), which is in respect of disallowance of expenditure debited in accounts, which stand rejected for want of reliability. The addition in the instant case, on the other hand, is qua unexplained deposits in the assessee’s bank account, not forming part of his

7 ITA No. 355/Asr/2014 (AY 2009-10) Sanjeev Walia v. ITO accounts. The proposition is, even otherwise, as clarified with reference to judicial precedents by the Apex Court and the Hon’ble jurisdictional High Court, found not valid. When a cash credit, forming part of the accounts, cannot, without evidence, be regarded as part of the business income, how could the said bank deposits, being outside the books of account, be, as a matter of proposition, regarded as business income, which also implies it to be for the relevant year? Surely not. I decide accordingly.

By Order