VARINDER PAL SINGH,RAMPUR vs. ITO, W-4, KHANNA

आदेश/ORDER

This appeal filed by the assessee is directed against the order dated 19.2.2018 of the Commissioner of Income Tax (Appeals)-2, Ludhiana (in short CIT(A)).

“1. That the order under appeal is excessive, unjust, contrary to facts and is against law. 2. That initiation of proceedings under Section 147 and issuance of notice under Section 148 of the Income Tax Act, 1961 by the Income Tax Officer, Ward-5, Khanna is bad of law and without jurisdiction as the appellants was having its jurisdiction with Income Tax Officer Ward-1(2) Rampur (U.P) and the jurisdictions was got transferred to Khanna without affording any opportunity to the appellants thus the order below merits to be quashed on this score alone as the same has been passed without jurisdiction. Further to be mentioned that the assessment order passed by Income Tax Officer Ward-4, Khanna is also bad in law as explained above

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since Income Tax Officer Ward-5, Khanna had no jurisdiction. Thus he could not have transferred the file the Income Tax Officer Ward-4, Khanna. Thus the impugned order merits to be quashed on this score. 3. The impugned order merits to be quashed on the grounds that the Assessing Officer had wrongly issued notice under Section 147 on the assumption that the cash deposits made by the appellants constituted undisclosed income of the appellants which has not been proved by the Assessing Officer. Since it is an admitted fact that no addition have been made on the basis of the reasons recorded for re-opening the assessment under Section 148 of the Income Tax Act, thus the addition could not be made on a ground which was never the basis of the re-opening of the case. 4. The Authorities below ought to have considered the plea of the appellants that the addition of Rs.17,25,135/- made by them is unjustified as the same did not pertain to the assessment year for which the assessment proceedings were re-opened. Since the same pertained to the earlier assessment year for which balance-sheet was produced in which the closing balance of this amount was duly reflected thus the authorities below have gone beyond the jurisdiction to make the addition of the above mentioned amount when the same was not a subject matter of the relevant assessment year. 5. The authorities below have otherwise erred in making an addition of an amount of Rs.17,25,135/- which was the opening balance on the grounds that the appellants could not provide proper explanation for the same. The appellants had provided the proper explanation of the amount which was shown as opening balance and had fully discharged the onus to prove the genuineness of all the transactions made by them. Since the appellants had discharged their onus thus the authorities below could not have made any addition in the income returned by the appellant.” 3. Ground No.1 is general in nature and ground No.2 was

not pressed, so these grounds do not require any comments

on our parts.

jurisdictional of the A.O. for reopening of assessment u/s

147 of the Income Tax Act, 1961 (in short ‘the Act’) by

issuing the notice u/s 148 of the Act vide ground Nos.4

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and 5, the assessee has challenged the sustenance of

addition of Rs.17,25,135/-, which was the opening cash in

hand.

received AIR Information that the assessee had

deposited/made investment of Rs.1,06,29,400/- in his

saving bank account maintained with Oriental Bank of

Commerce, Doraha on various dates. On the basis of

information, the A.O. reopened the case u/s 148 of the Act

after recording the reasons u/s 147 of the Act. In response,

the assessee filed return of income on 9.5.2016 declaring

an income of Rs.1,44,270/-. The A.O. during the course of

assessment proceedings, asked the assessee to furnish

documentary evidence and source with respect to cash

deposited in Oriental Bank of Commerce, Doraha amounting

to Rs.1,06,29,400/-. In response, the assessee furnished

cash flow statement as under:

Also cash flow statement submitted by the assessee for the F.Y. 2008-09 relevant to the A.Y. 2009-10 is as under:- Particulars Amount(Rs.) Cash brought forward 17,25,135/- Receipts Sales 83,04,728/- Total cash withdrawal from bank 86,20,000/- Total Rs. 1,86,49,863/- Payments Total cash deposited in bank 1,06,29,400/- Capital withdrawals 36,000/- Expenses 1,63,334/- Sundry creditors 78,09,722/- Total Rs. 1,86,38.456/- Closing cash in hand 11,407/-

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brought forward amounting to Rs.17,25,135/-. In response,

the assessee explained as under:

Date Particulars Debit Credit 16.10.2007 By amount out personal saving 850000 By amount from father 350000 By amount from Surinder Singh 250000 By amount from Varinder Singh 200000 31.03.2008 By Net profit 75135 Total Rs. 1725135 Also as per balance sheet as on 31.03.2008 the assessee has shown cash in hand of Rs.17,25,135/- on the asset side.

assessee observed that the assessee had shown net profit of

Rs.75,135/- for the year ending on 31.3.2008 i.e. the

preceding year, while the cash in hand was of

Rs.17,25,135/-. He made the addition of the opening cash

in hand of Rs.17,25,135/- in the hands of the assessee.

CIT(A) and challenged the jurisdiction for reopening by the

A.O. and submitted that the assessee produced the books of

account alongwith vouchers, sale and purchase bills before

the A.O. and also explained the cash deposited amounting

to Rs.1,06,29,400/- in saving bank account and that the

A.O. was fully satisfied in regard to the sources and

deposits of cash in the saving bank account. The Ld.CIT(A),

however, was not satisfied from the reply of the assessee

and sustained the action of the A.O. in reopening the

assessment while observing as under:

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“5.2 I have considered the observations of the Assessing Officer as made by him in the assessment order while reopening the assessment in the case of the assessee. I have also considered written submissions filed by the assessee through his learned AR vide letter dated Nil on the issue under reference. I have further considered various judicial Pronouncements relied upon by the learned AR of the assessee as well as other material placed by him on record. On careful consideration of the rival contentions I am of the opinion that as there were huge cash deposits in the bank account of the assessee, the Assessing Officer was having prima facie reason to believe that the income of the assessee has escaped assessment. I am also of the opinion that at the time of reopening of assessment, the Assessing Officer has not to prove beyond doubt that the income of the assessee has escaped assessment but if circumstantial evidence in his possession prima facie indicate that the income shown by the assessee in his return is not commensurate with the evidence in his possession then he can form a belief that the income of the assessee has escaped assessment which in fact is the case of the assessee. As the source of cash deposits in the bank account of the assessee cannot be said to be prima facie explained, the Assessing Officer can easily form a belief that the income of the assessee has escaped assessment. The judicial pronouncements relied upon by the learned AR of the assessee have altogether distinguishable facts from the facts of the case of the assessee and has no application in the case of the assessee. Under such circumstances, the action of the Assessing Officer in reopening the assessment in the case of the assessee on the basis of evidence in his possession cannot be said to be unjustified. Having said so, the action of the Assessing Officer in reopening the assessment in the case of the assessee is, therefore, upheld. In the result, the grounds No. 1, 2, 3 and 4 of appeal taken by the assessee are dismissed.” 9. As regards to the merits of the case, the assessee

submitted that the assessee furnished detailed capital

account having opening balance as on 1.4.2008 amounting

to Rs.17,25,135/-, which was disclosed in the Balance

Sheet as on 31.3.2008. It was also stated that no addition

was made on the basis of the reasons recorded for

reopening the assessment u/s 148 of the Act and that the

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assessee furnished the explanation of the opening balance

with evidences, the said amount was the closing balance as

on 31.3.2008, relating to the preceding year relevant to the

assessment year 2008-09, so there was no reason to treat

the same as unexplained for the year under consideration.

It was also submitted that the A.O. at the most could have

examined the availability of cash balance as on 1.4.2008

from the Balance Sheet as on 31.3.2008 instead of adding

the opening balance of cash as unexplained. The reliance

was placed on the following cash laws:

submissions of the assessee sustained the addition by

observing in para 6.2 of the impugned order as under:

“6.2 I have considered the observations of the Assessing Officer as made by him in the assessment order while making the impugned addition, I have also considered written submissions filed by the assessee through his learned All vide letter dated Nil on the issue under reference. I have further considered various judicial pronouncements relied upon by the learned AR of the assessee as well as other material placed by him on record. On careful consideration of

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the assessment order, it has been noticed that the Assessing Officer has made the impugned addition as the assessee could not explain the source of cash deposits to the extent of addition made in his saving bank account maintained by him with OBC, Doraha to his satisfaction. The Assessing Officer was also of the opinion that the assessee also could not prove the source of opening cash in hand by proving the credit worthiness of his father and two other persons from whom he stated to have received huge amounts in cash. On the other hand, the learned AR of the assessee has submitted that the opening cash in hand cannot be added in the year under consideration as the same pertains to earlier assessment year. It has also been submitted that the Assessing Officer has incorrectly applied the provisions of section 68 of the Act as bank account of the assessee cannot be treated as part of books of account of the assessee. On careful consideration of the rival contentions, I do not find any force in the contentions of the assessee. I am of the opinion that the assessee failed to prove the source of opening cash in hand by proving the credit worthiness of his father, Sh.Surinder Pal Singh and Sh.Veer Varinder Pal Singh Shahi even during appellate proceedings. No documentary evidence to prove the creditworthiness of these persons has been produced even during appellate proceedings apart from the documents which have already been considered by the Assessing Officer. As the assessee had absolutely failed to prove the creditworthiness as well as genuineness of transaction in the case of his father as well as in the cases of Sh. Surinder Pal Singh and Sh. Veer Varinder Pal Singh Shahi with acceptable documentary evidence, the opening cash in hand shown by the assessee cannot be said to be explained. In other words, the cash deposits in the bank account of the assessee to the extent of opening cash in hand which were explained by the assessee with opening cash in hand cannot be said to be explained. However, I am of the opinion that the Assessing Officer should have made the addition under section 69A of the Act instead of section 68. The mistake of the Assessing Officer is corrected accordingly. The judicial pronouncements relied upon by the learned AR of the assessee have altogether distinguishable facts from the facts of the case of the assessee and has no application in his case. Under such circumstances, the action of the Assessing Officer in making an addition of Rs. 17,25,135/- in this case on account of unexplained cash deposits in the bank account of the assessee maintained by him with OBC, Doraha cannot be said to be unjustified. Having said so, the addition of Rs. 17,25,135/- made by the Assessing Officer in this case on account of unexplained cash deposits in the bank account of the assessee maintained by him with OBC, Doraha is, therefore, upheld. In the result, the grounds No.5 and 6 of appeal taken by the assessee are also dismissed.”

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for assessee submitted that the A.O. acted only on the basis

of the information received from the Investigation Wing and

did not apply his own mind. Therefore, the reopening was

not justified. It was further submitted that the A.O.

doubted the opening cash in hand and did not make any

addition on the basis of the reason recorded for reopening

the assessment. It was also stated that the closing cash in

hand pertaining to the preceding year was accepted by the

A.O., so there was no reason to doubt the opening cash in

hand and making the addition for the year under

consideration. Reliance was placed on the following case

law:

Signature Hotels P. Ltd. Vs. ITO & Another (2011) 338 ITR 51(Delhi) 12. In his rival submission, the Ld. Sr.DR strongly

supported the orders of the authorities below and further

submitted that specific information was in the possession of

the A.O. on the basis of which the reasons were recorded

before issuing the notice u/s 148 of the Act. It was further

submitted that the assessee did not file any return of

income, so there was a live link between the reasons

recorded and the escaped income. As such, the A.O. was

justified in reopening the assessment. It was also submitted

that the assessee could not satisfy the A.O. with regard to

the opening cash in hand. Therefore, the addition was

rightly made by the A.O. and sustained by the Ld.CIT(A).

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and perused the material available on record. In the present

case, it is an admitted fact that the A.O. issued notice u/s

148 of the Act only on the basis of the information received.

The A.O. mentioned that the assessee had deposited a sum

of Rs.1,06,29,400/- in his saving bank account. However,

no addition was made for the said amount and the

explanation of the assessee was accepted. The A.O. made

the addition of Rs.17,25,135/- which was opening cash in

hand brought forward from the preceding year. In my

opinion, when the closing balance as on 31.3.2008 i.e. the

preceding year was considered to be genuine and correct,

then there was no reason to doubt the same balance taken

by the assessee on 01.04.2008 as opening cash in hand for

the year under consideration. In that view of the matter, the

addition made by the A.O. and sustained by the Ld.CIT(A)

deserves to be deleted. Moreover, the assessment was

reopened by the A.O. on the basis of the information

received from Investigation Wing.

the case of Signature Hotels Pvt. Ltd. Vs. I.T.O. & Another

(supra) held as under:

“that the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs.5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was

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no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs.90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed.” 15. In the present case also, the A.O. acted upon the

information and recorded the reasons that the assessee had

deposited a sum of Rs.1,06,29,400/- in his saving bank

account. However, no addition was made for the said

amount and the explanation given by the assessee was

accepted, which shows that the A.O. only acted upon the

information received by him and did not apply his own

mind. Therefore, by keeping in view the ratio laid down by

the Hon'ble Delhi High Court in the aforesaid referred to

decision, the re-assessment proceedings were not valid and

were liable to be quashed. Viewed from any angle, the

addition made by the A.O. and sustained by the CIT(A) was

not justified and accordingly, the same is deleted.

Order pronounced in the Open Court on 24.04.2019.

Sd/- (N.K.SAINI) VICE PRESIDENT �दनांक /Dated: 24th April, 2019

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*रती* आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to :

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar