SH. VIKRANT KANSHAL,BATHINDA vs. THE ICNOMET-AX OFFICER,, BATHINDA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 367/Asr/2014 Assessment Year: 2008-09

Vikrant Kansal Prop. Vs. ITO Ward 1(3), V.K. Teleservices, Bathinda Bathinda [PAN: AGVPK 6899E] (Appellant) (Respondent)

Appellant by : Sh. Ashwani Kalia (C.A.) Respondent by: Smt. Parwinder Kaur, CIT-DR Date of Hearing: 12.06.2018 Date of Pronouncement: 12.07.2018

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 26.03.2014, dismissing the assessee’s appeal contesting his assessment u/s. 143(3) r/w s. 147 of the Income Tax Act, 1961 ('the Act' hereinafter) dated 23.11.2011 for the Assessment Year (AY) 2008-09.

2 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO relevant year, and which formed the basis for the assessee returning a business income of Rs.3,73,550 for the year on 23.03.2011 in response to notice u/s. 148. The basis of the said notice was the cash deposits (at Rs.11,63,500) in the bank account (with Centurion Bank of Punjab – CBOP) of one, Meenakshi Mittal (MM), proceedings u/s. 147 against whom were dropped accepting her explanation that the said money in fact belonged to the assessee, proprietor V.K. Teleservices, Bathinda. He then took us to her affidavit dated 10.12.2010 averring that she was working as a collection agent for V.K. Teleservices, and whatever cash was collected (from the ICICI Bank’s customers) was, for the sake of security, deposited in her bank account (PB pg. 11). Confirming affidavit of even date was also furnished by the assessee, also stating that the said money was subsequently withdrawn and deposited with ICICI Bank (PB pg. 10). However, proceedings u/s. 147 were initiated in the case of the assessee to bring the said amount to tax in his hands. He would then take us through the bank account of MM for the period 01.04.2007 to 31.03.2008 (PB pgs. 7-9), seeking to emphasize that the cash deposited from time to time was withdrawn. The said explanation, accepted in the case of MM, was not accepted in the case of the assessee. Not only that, rather than making an addition for the peak amount, the entire amount of cash deposited was deemed as the assessee’s income u/s. 68, leading to the impugned addition. The said section was, firstly, not applicable in-as-much as the assessee did not maintain any books of account. The addition is liable to be quashed on this score itself. Even on facts, no addition, it was contended, is called for as there is no basis to doubt the assessee’s explanation given the fact of earning commission income from ICICI Bank for the relevant year at Rs.13.61 lacs. On being asked of the basis to state that the assessee was working as a recovery agent (for ICICI Bank), and the income earned from bank was in its respect, he would adduce a copy of the standard terms and conditions (copy on record) of an agreement purportedly entered into between

3 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO ICICI Bank and the assessee, wherein it is provided that the service provider shall develop and establish a robust framework for documenting and testing business continuity and recovery procedures in relation to the services (cl. 2(xi)). Further, on being asked the basis for stating that the cash deposited in the bank account of MM was that collected from the bank’s customers, who would in fact be issued receipts for the same, for which the assessee would be specifically authorized, he would submit that the same were enclosed along with the affidavit of MM. No specific reply was given by him on being asked about the rate of commission on loan recovery. Further, on the Bench observing that even a commission rate as high as 5% would imply a total cash collection (loan recovery) of Rs.272.20 lacs (i.e., Rs.13.61 lacs x 100/5), he would state that the entire commission was not on loan recovery, and a part thereof was also on the recall of vehicles, i.e., as a coercive measure initiated to enable recovery of the vehicle loans by the Bank. He concluded by stating that, in any case, the assessee cannot be denied the telescoping benefit, so that only the peak amount, as against the entire credit in the bank account, was liable to be added, even as held by the tribunal in many a case. The ld. Departmental Representative (DR) would submit that there is nothing amiss in the Revenue dropping the reassessment proceedings in the case of MM on the assessee owning the cash deposits in her — his employee’s, bank account. Further, that did not, however, imply that the Revenue was bound to accept the assessee’s explanation as to the nature and source of the said cash deposits. It was again wholly wrong to say that the assessee, running a business, is not maintaining any books of account, having, in fact, claimed and been allowed business expenditure, including salary to employees, at Rs.9.87 lacs in-as-much as he has returned an income of Rs.3.74 lacs only as against a gross income (receipt) of Rs.13.61 lacs. The assessee’s case, even as noted by the Revenue authorities, is completely unsubstantiated.

4 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO

3.1 Ground 1 of the appeal, challenging the validity of the reassessment proceedings, was not pressed during hearing, with the ld. AR making an endorsement to that effect on the appeal memo.

3.2 We, next, consider the merits of the impugned addition, since sustained. Even as observed by the Bench during hearing, it is wholly incorrect to say, and which forms the basis of the assessee’s legal stand assumed before us, that the assessee is not maintaining any books of account. How is, then, the cash collected from (the bank’s) customers accounted for? The ld. Authorized Representative (AR) on being queried during hearing as to if the cash deposited in the bank account of MM represented the entire cash collected by V.K. Teleservices as recovery from the bank’s customers, would clarify it to be not so, the balance – and the major part, was explained as being deposited in the bank account of the said proprietary firm. In fact, this formed the basis of his stating – on merits, that the AO having accepted his explanation of the source of the cash deposited in his case, effecting no addition on that account, was not justified in not accepting the said explanation qua that deposited in the bank account of MM, an employee. Clearly, therefore, the cash collected stands presumably duly accounted for and reflected in the assessee’s books of account, with, as pointed out by the ld. DR, the assessee claiming business expenses at an aggregate of Rs.9.87 lacs, again implying maintaining books of account. That is, the assessee’s assessed business income of Rs.3.74 lacs is only as that disclosed per his accounts. Why, as noted in the impugned order (para 2.5), the assessee’s counsel before the ld. CIT(A), Shri Narender Goel, raised a specific plea that the non-production of books of account before the AO was only for the reason that he (AO) did not ask the assessee to do

5 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO so. Which only means that the books of account were maintained and, further, bore the relevant entries, explaining the nature and source of the cash under reference. The plea urged would be of no relevance or meaning otherwise? In fact, the assessee’s stand all through has been that the cash deposited in the bank account of MM forms part of that collected from the banks’ customers, parked in her account for safe deposit, and duly accounted, even as that so collected, deposited in the assessee’s bank account, has not been doubted by the AO. The plea of non- maintenance of books of account is therefore only a bogey. Further, the books of account having been admittedly not produced before the AO, it is incorrect to infer, as stated, that the balance cash collected from the banks’ customers was deposited in the firms’ bank account, or that an explanation to that effect stands accepted by the AO. There is no reference thereto in the assessment order, or anything on record to suggest such a contention, much less its acceptance. Continuing further, the money deposited in the bank account of MM admittedly belonging to the assessee, where its’ source is traced – on the basis of the material brought on record, to the collection from the banks’ customers, the money, though lying with the assessee and reflected in his accounts, is held by him under trust. Such amounts, i.e., received under trust, whether lying in the form of cash or deposited in bank, are normally credited to an appropriately titled account, as (say) ‘Money received under trust’ or ‘Collection from ICICI banks’ customers’, etc., indicating both the nature and source of the receipt (credit). In fact, all that the assessee was therefore required to do, assuming a lack of proper opportunity by the AO for the same, was to produce the books of account before the ld. CIT(A), showing the cash deposited in the bank account of MM as duly reflected therein, and which would at once explain the nature and source of the said cash. Given the assessee’s plea of the amounts being duly accounted for, which was in fact what the AO required the assessee to exhibit, giving a satisfactory

6 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO explanation as to its nature and source, we find nothing amiss in the invocation of section 68 by the AO. Further, even assuming that the same (the cash under reference), for some reason, remained to be entered in the assessee’s books of account, which were never produced or examined, the nature and the source of the cash would yet be required to be satisfactorily explained by the assessee u/s. 69A, substantiating his explanation of the same representing collection from the banks’ customers, and subsequently deposited with the bank, with evidence. We state so as there is, else, no reason for the non-production of the books of account; the assessee, rather, before us going to the extent of taking a contrary stand, i.e., vis-a-vis that before the Revenue authorities, of their non maintenance. That is, the books of account having not been produced at any stage, it may well be – and which appears likely, inasmuch as production of accounts would have rather settled the matter, that the receipt of the impugned cash is not recorded therein. The same though would not be determinative of the matter as, as explained, either way, the nature and the source of the credit or, as the case may be, acquisition of money, is required to be proved by the assessee to the AO, furnishing a satisfactory explanation in its respect. The assessee admittedly owning the amounts under reference, it is immaterial whether the assessee’s explanation would qualify as one u/s. 68 or u/s. 69A. This in fact is precisely what the Hon'ble High Court clarifies in Namdev Arora v. CIT [2016] 389 ITR 434 (P&H), reference to which was made by the Bench during hearing. In the facts of that case an addition made and sustained u/s. 69A, was confirmed by the tribunal u/s. 68. On the assessee raising the issue of legality of such an action by the tribunal, the Hon'ble jurisdictional High Court dismissed the appeal, holding as follows: ‘Held, dismissing the appeal, that it was the assessee who claimed to have received the amount as a loan. The burden, therefore, was on him to establish that fact. The assessee had failed to discharge this burden. It was impossible to believe that an amount of Rs.30 lacs was

7 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO lent and advanced by DP to the assessee. There were several facts and circumstances that established the inherent improbability of the assessee’s case of a loan. There was not a single document evidencing the loan. There was no explanation as regards the absence of any document evidencing the loan. There was nothing to suggest any special relationship between the parties on account whereof such a large loan would be advanced without the lender insisting upon any document evidencing it. The loans admittedly had not been repaid up to date. There was no explanation for that either. This was merely a case of a wrong section being mentioned in the assessment order and in the order of the Commissioner (Appeals). All the jurisdictional facts for invoking section 68 existed. The enquiries made by the Assessing Officer in the assessment proceedings were not stated to be under any particular provision of the Act. The enquiries were merely factual relating to the source of acquisition of the money. The assessee had not been prejudiced in any manner whatsoever on account of the Assessing Officer having mentioned the wrong section. The assessment was valid.’ [emphasis, ours] The legal aspect is in fact well-settled, with the facts of the instant case also, as we shall presently see, being similar to that before the Hon’ble Court, and which also explains the emphasis made by us in the extracted part. Sections 68, 69, 69A et.al. (i.e., along with sections 69B to 69D), are also rules of evidence, so that where the assessee fails to satisfactorily prove the credit (or investment, money, expenditure, etc.), the same is liable to be deemed as his income for the relevant year, i.e., on his failing to satisfactorily explain the nature and source thereof. Why, the Apex Court approved and confirmed the additions qua cash credit even under the Income Tax Act, 1922 which did not contain a provision analogous to s. 68, etc., stating that the onus to prove the source of money found to be received by the assessee is on him, i.e., is an evidence of income, and it is therefore for him to show that the same is not in the nature of income, rebutting the presumption with credible explanation/ material, proving the genuineness of the said credit (refer, inter alia, Govinda Rajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC); Sreelekha Banerjee & Othrs. v. CIT [1963] 49 ITR 112 (SC); Kalekhan Mohammed Hanif v. CIT [1963] 50 ITR 1(SC) (affirming the landmark decision reported at [1958] 34 ITR 669 (MP)); CIT v. Durga Prasad More [1971] 82 ITR 540 (SC)). As explained in Chuharmal v. CIT [1988] 172 ITR 250 (SC), these provisions only seek to provide statutory

8 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO recognition to the principles of common law jurisprudence as enshrined in the Evidence Act. Though the matter is principally factual, so that it should not give rise to any confusion, the user of one section instead of another, which may happen at times, and which is the assessee’s grievance, stands explained by the Hon'ble High Courts time and again, as in Jauharimal Goel [2005] 147 Taxman 448 (All), holding that the provisions are cognate and complimentary. Where the amount is credited in the books, it is the nature and source thereof that is to be explained. Where not, it is the form in which manifests itself, viz. cash, investment, inventory, bank account, expenditure, etc., that is to be explained. Further, the AO’s action is to be examined with reference to his power to act in the manner he does, i.e., to do what he has done, and if he has the requisite power to do so, it is immaterial if the source of that power is not mentioned or mentioned incorrectly. Reference by him to a wrong section, or even no reference to any at all, even as noted by the Hon'ble Court in Namdev Arora (supra), in-as-much as in that case the AO did not refer to section 68 while seeking the assessee’s explanation as to nature and source of receipt of money, is to no moment. The principle is in fact well-settled. Reference in this context may be made to the decision in P.K.Palanisamy vs. N. Arumugham & Anr. (arising out of SLP (Civil) No. 2308 of 2009, dated July 23, 2009), wherein the Hon’ble apex court, after referring to precedents, observed as under: ‘It is a well settled principle of law that mentioning of a wrong provision or non-mentioning of a provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefor.’

Similarly, in N. Mani v. Sangeetha Theatres & Ors. [(2004) 12 SCC 278], it stated as under: ‘9. It is well settled that if an authority has a power under the law merely because while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law.’

9 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO The matter, for a still better appreciation, may be looked at from another angle as well. Proceedings under the Act are not adversarial in nature, and the purview of an appellate authority, as the tribunal, is the correct determination of the assessee’s income and consequential tax liability (CIT v. Indian Express (Madurai) Pvt. Ltd. [1983] 140 ITR 705 (Mad); Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom-FB)), on which it is therefore incumbent to issue proper directions to the Revenue authorities (Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC)). Even rules 11 and 27 of the Income Tax (Appellate Tribunal) Rules, 1963 are not exhaustive of the powers of the tribunal, as explained in Hukumchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC). The assessee has placed some decisions by the tribunal in its’ compilation, which was, without referring to them, stated as being in support of the legal proposition being advanced. We have nevertheless perused the same. The same stand rendered relying essentially on the decision in Shanti Devi v. CIT [1988] 171 ITR 532 (P&H). We say so as it is nobody’s case that the bank account of an assessee constitutes his books of account, as clarified in CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67 (Bom), the other case principally relied upon by the tribunal in these orders. The issue in Shanti Devi (supra), as its’ reading shows, was whether the books of account of an assessee-firm could in law be considered as the books of account of a partner. A partner, it was explained with reference to the decision in CIT v. A.W. Figgies & Co. [1953] 24 ITR 405 (SC), to be a separate assessable entity. The Hon'ble Court, after a reference to the provisions of sections 68 and 69, being cognate, held that the books of account referred to in section 68 are of the assessee and not of any other (partner). The credit (to the partners’ account) being in the books of the partnership firm, addition qua the said sum (credit) could only be in the case of the firm. We are unable to see as to how the same supports the assessee’s case in the instant appeal. On the contrary, we have,

10 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO with reference to the decisions by the Hon'ble Apex Court and the jurisdictional High Court, explained the matter as well-settled to the contrary.

3.3 We may next examine the assessee’s case on merits. The assessee did not find favour with the Revenue as both the Assessing Officer and the ld. CIT(A) found his case to be wholly unsubstantiated. We can hardly disagree. Why, firstly, were the assessee’s books of account – which are in fact his explanation, not produced either before the AO in the assessment proceedings, i.e., on his own, or even subsequently before the ld. CIT(A)? Neither the source (origin) of the cash deposited in the MM’s bank account nor its destination, stated to be the banks customers and the bank respectively, is evidenced. The receipt of cash under the circumstances cannot but be without issue of receipt. In fact, proper authorization is to be issued for the purpose, so as to satisfy the customers that the amount being tendered by them is to a person authorized by the bank. No such receipt or authorization in favour of MM (or even the assessee) is on record. This is all the more surprising considering that the same are stated to have been furnished before the Revenue along with the affidavits, which have been brought on record. Then, again, why is not the cash deposited in the assessee’s bank account, but of an employee? Why, the cash would be equally safe if deposited in the assessee’s bank account! In fact, the TDS certificates do not refer to the income allowed by the bank as ‘commission’ but as ‘professional services’, so that even the nature of the job/s is not proved. Further, given the nature of the job, it is extremely unlikely that a lady would be engaged for purpose of effecting loan recovery from delinquent customers, i.e., considering the hostile response that is generally encountered or anticipated while seeking and effecting recovery. Why, again, was the cash not similarly parked in the bank accounts of other collecting agents? The cash deposited, stated to be for the safe deposit of the collection for the day, is not

11 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO withdrawn the next day. In fact, this is a rarity; the withdrawal on several occasions being after several days, extending up to 64 days. Why? Rather, it is again extremely unlikely that the bank has not issued detailed guidelines in this respect, covering all the aspects afore-referred, viz. issue of receipts on collection of money; deposit in bank account, including the identity of the bank and that of the account holder; the periodicity of the withdrawals (including the manner of transfer), etc. This is also inferable from clause 2(xi) of the standard terms and conditions afore-referred. Why, again, were the amounts not directly transferred to the bank account of V.K. Teleservices or ICICI Bank itself. Further, the withdrawals reveal no pattern, with the accumulation – even as the deposits are as low as Rs.5,000/-, extending up to Rs.3 lacs (approx.). Then, if the same stand, upon withdrawal, deposited, as stated, with ICICI Bank, the details of withdrawal and deposit (with the depositee bank) must agree, even if the amount stands changed due to inclusion of the amount withdrawn, likewise, from the assessee’s bank account. The same is not exhibited at all. There is no corroborative evidence (qua cash transactions) from ICICI Bank. It is therefore not incorrect to say that the assessee’s case is wholly unsubstantiated, comprising of bald assertions. The ld. counsel for the assessee was at this stage enquired if the assessee would be able to lead material to evidence his case, i.e., if it were to be set aside, considering his plea of having been unable to represent his case properly on account of serious ailment of his son, who ultimately expired (refer assessee’s written submissions to the ld. CIT(A), at PB pgs. 5-6). Shri Kalia would show refrain, stating that it would not be of much help as the assessee’s business stands since closed. The burden to prove that a case for being allowed telescoping benefit is made out is on the assessee, even as explained in Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC). No such case is made out – the matter being again factual. As observed by the Bench during hearing, there is nothing to show

12 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO that the assessee is into trading activity, involving rotation of funds, in which case only – in the present context, a telescoping benefit could be given. That is, the plea for telescoping benefit is again a bald plea without any basis in facts. Rather, it contradicts the assessee’s stand of the cash deposited in the bank account of MM as that collected from the principal banks’ customers, i.e., as its’ agent. The plea of peak credit, thus, is a tacit admission of the assessee having no case on merits. We, however, considering the totality of facts, including the assessee’s inability to, for compelling reasons, not to plead his case – which is principally factual, leading to no proper representation before the Revenue, as well as to give a quietus to the matter, deem it proper that the addition for the unexplained credits or, as the case may be, cash deposits by him in the bank account of one of his employees, be restricted to the peak credit in the said account, i.e., Rs.2,88,713/-, on 19.03.2008. The AO shall cause verification of the same for its veracity.

3.4 We decide accordingly.

Sd/- (Sanjay Arora) Accountant Member

As it is clearly written in the impugned order para 2.5 that the assesee’s counsel has raised a specific plea that the non-production of books of account

13 ITA No. 367/Asr/2014 (AY 2008-09) Vikrant Kansal Prop. V. K. Teleservices v ITO before the AO was only by the reason that the AO did not ask the assessee to do so. This observation has not been refuted by the assessee, which goes to show that the books of accounts were duly maintained, therefore I am in concurrence with my ld. brother that section 68 of the Act, stands rightly invoked by the Assessing Officer in the present case. Hence, once it is held that the invocation of Sec.68 by the AO has rightly been made then in my considered opinion nothing further requires to be traveled to and therefore, on the reasons stated above, I am inclined to endorse that the assessee was maintaining the books of accounts, however, the same have not been produced before the Assessing Officer on the reason as specified in the order of the Ld. CIT(A) that the assessee did not ask to do so. I further concurred with the conclusion drawn by the Hon’ble Accountant Member in para No.3.3.

Sd/- N.K. Choudhry (Judicial Member)

Date: 12.07.2018 /GP/Sr. Ps. Copy of the order forwarded to: (1) The Appellant: Vikrant Kansal, Prop. V.K. Teleservices, Bathinda (2) The Respondent: ITO Ward 1(3), Bathinda (3) The CIT(Appeals), Bathinda (4) The CIT concerned (5) The Sr. DR, I.T.A.T