BALDEV SINGH S/O GAJJAN SINGH,TARN TARAN vs. THE INCOME TAX OFFICER,, TARN TARAN

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. No. 178/Asr/2016 Assessment Year: 2010-11

Baldev Singh s/o Gajjan Singh, vs. Income Tax Officer, H.No. 22 VPO, Sheron, Ward 1(3), Tarn Taran Tarn-Taran [PAN: BPPPS 7783M] (Appellant) (Respondent)

Appellant by : Sh. T. S. Aurora (Adv.) Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 13.02.2019 Date of Pronouncement: 21.02.2019

ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals)-1, Amritsar ('CIT(A)' for short) dated 29.01.2016, partly allowing the assessee’s appeal contesting his assessment u/s. 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter) dated 15.03.2013 for the Assessment Year (AY) 2010-11.

2 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO produced his books of account, further stating that in a bid to show a higher turnover in account, he had re-deposited cash withdrawn from bank, entries in respect of which appear in his books of account, viz., the cash book, ledger, as produced. Further, the money returned from the borrowers was also, on receipt, deposited in bank, which again reflected in the regular books of account. The assessee was, accordingly, asked to explain the peak balance (of Rs.21.55 lacs) in his ICICI bank during the year (on 29.01.2010), and toward which the assessee furnished the following statement:

Capital of the proprietor 5,10,889/- Agrl. Income 1,00,000/- Net profit 1,68,900/- Sundry creditors 2,26,611/- Sundry creditors (sq. up) 6,85,900/- Open. Balance (ICICI) 1,90,896/- Total: 18,83,196/-

The same did not find favour with the Assessing Officer (AO), as the said detail was not supported by any documentary evidence. As against capital, the assessee had made advances, which were yielding him interest income. The sundry creditors for Rs.2.27 lacs as well as those stated to be squared up (Rs.6.86 lacs), were, again, unproved, in-as-much as mere furnishing of names was not sufficient, and the assessee was required to show the capacity of the lenders as well. He, accordingly, regarded the entire peak balance as unexplained. The HDFC bank account having been opened only on 02.02.2010, the peak credit for both the bank accounts, he observed, would amount to the same, i.e., Rs.21,54,656/-, which was brought to tax after deducting the opening balance in the ICICI bank account (Rs.1,90,896), i.e.,

3 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO at Rs.19,63,790. The explanation of agricultural income was also not accepted, and assessed as regular income, i.e., separately. In appeal, the ld. CIT(A) allowed relief of Rs.6,85,900/- toward squared-up creditors, reducing the addition to Rs.10,86,994 (i.e., 19,63,790 – 6,85,900 – 1,90,896). The addition of Rs.1 lac was also confirmed in-as-much as the assessee did not own any agricultural land. Aggrieved, the assessee is in second appeal.

4 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO based section 110 of the Evidence Act, which embodies a salutary principle of common law jurisprudence, viz., where a person was found in possession of any thing the onus of proving that he was not its’ owner was on that person. This principle could be attracted to a set of circumstances that satisfied its conditions and was applicable to taxation proceedings. The satisfactory explanation of deposits for AY 2009-10, would not imply an explanation for deposits during the current year as well, which would require being satisfactory explained. For AY 2009-10, in fact, the AO has given a categorical finding at para 2 of the assessment order, i.e., cash deposit of Rs.29.75 lacs with banks have been verified from the books of account maintained by the assessee. The decisions on principle of consistency would therefore have no application in the facts of the instant case. In fact, the assesee is not being required to explain the deposits during the year, but only the bank balance as on a particular date, i.e., with reference to the available sources, and which he should ordinarily be able to with reference to his accounts.

4.2 Coming to the merits of the case, I shall take up the issue of agricultural income first. If, as stated by the ld. counsel for the assessee, Sh. Aurora, the income is in respect of agricultural land owned by the assessee’s family, his grandfather, it is the agricultural income of the land-owner, i.e., his grandfather, and not of the assessee, who is not shown to have taken it on rent. The ‘transfer’ to the assessee by the grandfather, assuming so, would, in that case, be by way of gift from him, i.e., a capital transfer. The question of it being agricultural income in the assessee’s hands could arise only where it is in respect of agricultural operations carried on agricultural land owned or rented by him, toward which there is no claim, much less document on record. There is in fact no contention to that effect, or shown to be so, before the AO or even the ld. CIT(A). On the contrary, the assessee admits it as his income, which is inconsistent with the explanation of the

5 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO same being the distribution of the agricultural income of a relative, distributed among family members. There is, further, no discussion in the matter in the assessment order for AY 2009-10 nor, consequently, any finding by the AO in the assessment order. How, in the absence of any finding, could the principle of consistency be invoked? That the assessee does not own or has rented any agricultural land during the current year is admitted, being confirmed by Sh. Aurora, only in response to which query he explained during hearing of the agricultural land to be belonging to the assessee’s grandfather. At the same time, however, it could well be that, though not finding mention in the assessment order, the assessee’s explanation of it being a distribution of the agricultural income to the family members, had found acceptance by the AO for AY 2009-10, though he perhaps, because of tax impact, regards it as the assessee’s agricultural income, i.e., as disclosed. Where so, the acceptance of the said explanation, considering that there is no change in the circumstances, and further that the amount is nominal, deposited in the regular course at the time the two harvests are sold, should find acceptance for the current year as well. If, therefore, the assessee has furnished an explanation as to the ‘agricultural income’ being in respect of agricultural land, stated to be 25-30 acres, owned by the assessee’s grandfather, as claimed before me, it is this that is to be regarded as the basis for the acceptance of the assessee’s claim for agricultural income for that year and, likewise, adopted for the current year as well. Two, being essentially in the nature of a gift, the same cannot be regarded as his income, agricultural or otherwise. If, however, it is not so, i.e., there is no such explanation on record by the assessee for AY 2009-10, the same is to be assessed as income. Here, it may be clarified that while stating so I am conscious that, and without doubt, such a contention would be the first thing that the assessee would, in that case, make before the AO in the proceedings for the current year, which has not been shown to be so. The fore-

6 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO going, however, is only by giving the assessee a benefit of doubt. Further, it needs to be emphasized that the issue is being decided not on first principles, but only on the basis of a reasonable explanation qua facts, having been furnished in the past, which has found acceptance by the Revenue. Further still, where there is no such explanation for AY 2009-10, there is no basis or material on record to allow the assessee’s claim that the amount be regarded as agricultural income; the contention now raised, i.e., of it being a distribution of income, being only a bald assertion. That is, there is no view taken (for AY 2009-10) for the doctrine of estoppel to apply, even as the principle of res judicata is not applicable to the proceedings under the Act. The AO shall decide accordingly, clearly stating the facts. A better course, admittedly, would be to call for the assessment file (for AY 2009-10) or a remand report from the AO, and decide the same by the tribunal. However, considering the time and cost involved, it is considered expedient to require the AO to issue a finding on consulting the material on record for AY 2009-10. I decide accordingly.

4.3 The next issue is with regard to the deposit of Rs.21.55 lacs, predominantly in cash, found credited in the assessee’s bank account on 29.01.2010. The assessee’s case, in substance, is of having maintained books of account, which were not found fault with by the Revenue. That is, the entries in the regular books of account explain the source of the cash deposits in the assessee’s bank account during the year and, thus, of the balance as on a particular date (during the year). In this regard, my first observation is that that being the case, why could not the assessee draw up his balance-sheet (or trial balance) as on that date, which would at once give the source and application of funds. The assessee, despite the books of account, is unable to furnish the details of the source/s of Rs.21.55 lacs, even as, in all likelihood, he would have, apart from bank balance/s, other assets as well (on

7 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO that date). Sh. Aurora, on being asked, expressed inability to furnish the said balance-sheet or trial balance (a listing of all the account balances in the ledger), though would show the ledger maintained by the assessee. The assessee, he explained, is no longer in business and in dire financial straits; without the services of an accountant, and would therefore not be able to comply with the said direction by the Bench. For the same reason, he would submit, that no useful purpose would be served by remitting the matter back to the file of the AO. The very books of account the assessee seeks to rely upon in explanation of the cash deposit/s, thus, are being argued for being overlooked or ignored or being not referable in explanation of the same! The matter, nevertheless, has to be resolved; remitting it back would also require an active cooperation on the assessee’s part so as to lead to any improvement in his case. I am under the circumstances constrained to workout the shortfall in the assessee’s explanation toward the balance in his bank account. In this regard, in my view, the assessee needs to be, again, given the benefit of doubt with regard to the sundry creditors appearing in his books of account. This is for the reason that at no stage was he called upon to prove the genuineness of the credits appearing therein for section 68 to apply or be invoked. Further, allowing credit for the full value of the opening capital as on 01.4.2009 (Rs.5,10,889), would amount to giving credit for the opening bank balance (Rs.1,90,896) twice in-as-much as the said amount would stand to form part of the assessee’s opening capital. I, accordingly, estimate, the said shortfall, as under:

ICICI Bank Amt.(Rs.) Remarks 1 (a) Balance: (as on 29.01.2010) 21,54,686 (b) Less: opening balance (01.4.2009) 1,90,896 (c) Net accretion during the year 19,63,790 (a) – (b)

8 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO 2. Agriculture/other income/gift 1,00,000 3 (a) profit during the year 1,93,340 as per P&L account (b) profit up to 29.01.2010 (1,61,112) on pro rata basis 4 (a) Sundry creditors (6,93,340) (sqd. up) (b) Sundry creditors (2,26,611) (9,12,511) 5 (a) proprietors capital 5,10,889 (opening balance) (b) Less: represented by bank balance 1,90,896 (3,19,993) (see Note 2) (as on 01.04.2009) 6. House-hold withdrawals (50,000) (@ Rs.5000 per month) 5,30,174 (1) The figures in brackets represent negative (credit) figures, while that without represent positive (debit) balances. (2) Not deducting the opening balance of bank balance from the opening capital would amount to claiming deduction on account of opening bank balance twice, resulting in the same mistake as committed by the ld. CIT(A) in calculating the unexplained bank deposit at Rs.10,86,994.

The reduction of the entire opening capital would imply allowing credit for the opening balance in the bank account as well, and which amount has already been deducted in computing the net accretion, which is to be explained. Alternatively, the opening bank balance may not be reduced from both the bank balance (as on 29.01.2010) as well as from the opening capital. Further, as the advances as on 29.01.2010, i.e., the peak value date, cannot be taken as nil, the same are taken at a modest figure of Rs.50,000. This is so as, as it appears, the increase in the bank balance, apart from on account of creditors and capital, would also be on account of reduction in the volume of the advances. House-hold withdrawal is again taken at a reasonable sum, in keeping with that for the preceding year. The shortfall, thus, is worked at Rs. 5,80,174, or at rs. 5.80 lacs. The same is accordingly confirmed for addition. I decide accordingly.

9 ITA No. 178/Asr/2016 (AY 2010-11) Baldev Singh v. ITO 5. In the result, the assessee’s appeal is partly allowed. Order pronounced in the open court on February 21, 2019 Sd/- (Sanjay Arora) Accountant Member Date: 21.02.2019 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Baldev Singh s/o Gajjan Singh, H.No. 22 VPO, Sheron, Tarn Taran (2) The Respondent: Income Tax Officer, Ward 1(3), Tarn Taran. (3) The CIT(Appeals)-1, Amritsar (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order