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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad in Appeal no. CIT(A)-9/10325/DCIT(E)(HQ)/17-18 vide order dated 04/03/2019 passed for the assessment year 2010-11.
The Department has taken the following grounds of appeal:
Page No. 2 ITO vs. M/s. Panchdeep Consultants
“1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.27,59,700/- made on account of unexplained cash deposits in the banks.
2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 3,55,73,880/- out of Rs.4,28,00,000/- made on account of unexplained expenditure u/s. 69C of the Act.
2.1 The CIT(A) has erred in law and on facts in not appreciated the fact that there is no direct nexus of opening cash balance being utilized for payment of advance for land.
2.2 The Ld. CIT(A) has ignored that: fact that during the course of survey proceedings carried out au the business premises of the assessee, the assessee has not satisfactorily established the genuineness of the land advances to the parties amounting to Rs.4,28,00,000/- which have been claimed to be paid on the last day of the financial year.
3. The Ld. C1T(A; has erred in law and on faces in deleting the addition of Rs,85,60,000/- made u/s. 40A(3) of the Act on the addition of unexplained expenditure of lane advances without appreciating the fact that the lanes is not a capital assets in die case of assessee but a revenue expenditure.
4. On the facts and circumstances of the case, the ld. Commissioner of Income Tax (A) ought to have upheld the order of the Assessing Officer.
5. It is, therefore, prayed that the order of the ld. Commissioner of Income Tax (A) may be set aside and that of the Assessing Officer be restored.”
2.1 Further, the Department has also taken the following additional grounds of appeal:
Page No. 3 ITO vs. M/s. Panchdeep Consultants
“(i) The Ld. CIT(A) has erred in law and on facts in admitting the additional evidences ignoring the fact that the assessee has not at all co-operated at the assessment stage. (ii) Whether the CIT(A) was right in law and on facts in admitting the additional evidences, even though the AO in his remand report has categorically objected for admission of additional evidences under Rule 46A of the I.T. Rules, 1962 .”
The brief facts of the case are that the original assessment order was passed under section 143(3) r.w.s. 144 of the Act for assessment year 2002- 03 dated 26-09-2005 determining total income of the assessee at � 6,23,74,520/- as against the returned loss of � 68,979/-. The assessee filed appeal against the additions before CIT(Appeals)-IV who vide order dated 24-08-2011 dismissed the assessee’s appeal for the reason that the appeal was not filed in time. The assessee filed appeal before ITAT, Ahmedabad, which set aside the aforesaid order of the CIT(Appeals)-IV vide order dated 13-09-2013 to the file of CIT for deciding the case in merits in the interests of justice after affording reasonable opportunity of hearing to the assessee.
In the remand proceedings pursuant to the order of ITAT, Ld. CIT(Appeals) allowed part relief to the assessee, against which the Department is in appeal before us. We shall discuss the additions made in the assessment order and the consequential relief granted by Ld. CIT(Appeals) in the remand proceedings, as we shall take up the grounds of appeal filed by the Department.
Additional grounds of appeal: challenge to admission of additional evidence by Ld. CIT(Appeals)
Page No. 4 ITO vs. M/s. Panchdeep Consultants
Before we discuss the individual grounds of appeal filed by the Department, we shall first deal with the additional ground of appeal filed with the Department which is to the effect that Ld. CIT(Appeals) erred in facts and in law in admitting the additional evidence at the appellate stage, especially when the assessee did not cooperate during the course of assessment proceedings.
5.1 In our considered view, we find no merit in this ground of appeal
, as the ITAT Ahmedabad, had set aside the initial order of the CIT(Appeals)-IV vide order dated 13-09-2013 to the file of CIT for deciding the case on merits in the interests of justice after affording reasonable opportunity of hearing to the assessee. The ITAT was cognizant of the reasons why there was a delay by the assessee in filing the appeal and also the initial cause of non-appearance during the course of assessment proceedings. It was only after taking into consideration the circumstances under which the assessee could not cause appearance at the stage of initial assessment and also for the same reasons there was a delay in filing appeal before CIT in time, that the ITAT, in the interests of justice remanded the proceedings back to the file of CIT for fresh adjudication after giving due opportunity of hearing to the assessee. Further, we also observe that in the instant facts the assessee filed original return of income at a return loss of � 68,979/-, and after making additions in the assessment order, the AO passed assessment order determining total income of the assessee at � 6,23,74,520/-. Therefore, looking into the substantial quantum of additions made in the assessment, in the interests of justice, since the initial of assessment order was passed ex- parte, in our considered view, the CIT has not erred in facts and in law in Page No.
5. ITO vs. M/s. Panchdeep Consultants allowing the assessee to produce additional evidence in support of its contentions. Further, it is settled law CIT can allow admission of additional evidence, if it is necessary for determining the correct taxable income in the interest of justice. Further, we note that the Ld. CIT(Appeals) followed due process of law and admitted the additional evidence after calling for the comments of the AO in the remand report. The Gujarat High Court in the case of CIT v. Kamlaben Sureshchandra Bhatti [2014] 44 taxmann.com 459 (Gujarat) held that where Commissioner (Appeals) allowed assessee to produce additional evidence after calling remand report and permitting Assessing Officer to comment on such additional evidence, said order of Commissioner (Appeals) did not require any interference. Again in the case of CIT v Dharamdev Finance (P.) Ltd [2014] 43 taxmann.com 395 (Gujarat), the Gujarat High Court held that where Commissioner (Appeals) before admitting fresh evidence, had called for remand report from Assessing Officer and full opportunity was provided to both parties, no interference with Commissioner (Appeals)'s order was called for. In view of the above, we are of the considered view, that in the instant set of facts, Ld. CIT(Appeals) has not erred in facts and in law in permitting the assessee to file additional evidence under rule 46A of the Income Tax Rules, 1962.
6. In the result, additional grounds number (i) and (ii) of the Department’s appeal are dismissed.
Now we shall discuss the original grounds of appeal filed by the Department.
Page No. 6 ITO vs. M/s. Panchdeep Consultants Ground number 1: addition of � 27,59,700/- on account of unexplained cash deposits u/s. 69C of the Act
The brief facts in relation to this ground of appeal are that during the course of assessment the AO observed that the assessee had deposited cash the following bank accounts amounting to � 27,59,700/-:
Union Bank of India 18,75,100/- Bank of Madura Ltd. 1,60,000/- Kalupur Comm. Co. Op. Bank Ltd. 5,68,500/- Visnagar Nagrik Bank Ltd. 1,56,100/-
The AO held that since the assessee has not furnished any explanation regarding the source of above cash deposits in the bank, the same was added to the total income as unexplained cash deposits in the banks. In appeal before Ld. CIT(Appeals) in the remand proceedings pursuant to directions of ITAT, Ahmedabad, the CIT observed that these cash deposits is from the cash withdrawals from the same bank accounts which can be verified from the bank accounts filed as additional evidence. The CIT held that in the case of Saurin Nandkumar Shodhan in ITA number 2075/Ahmedabad/2012, it was held that in case the Department has not established that the cash available with the assessee was not utilised elsewhere, then on the basis of preponderance of probabilities, it can be assumed that the very cash was re- deposited in the bank. Therefore, if there is no other contrary evidence in possession of the Department about the utilisation of cash withdrawal, then the fact that there is re-deposit of the cash in the bank account out of the Page No. 7 ITO vs. M/s. Panchdeep Consultants previous withdrawals cannot be ruled out. Accordingly, the Ld. CIT(Appeals) deleted the above additions.
Before us, the Department submitted that the Ld. CIT(Appeals) has erroneously observed that the AO has not given adverse observations in its remand report, while adjudicating this ground in favour of the assessee. Accordingly, the CIT erred in facts and in law in deleting this addition. In response, the counsel for the assessee submitted that bank statement evidencing that re-deposits were made out of withdrawals from the same bank account which were furnished during the course of appellate proceedings and they are forming part of paper book (pages 48 to 57), which evidences that the deposits were made from the withdrawals. The counsel for the assessee relied upon the observations made in the CIT(A) order.
We have heard the rival contentions and perused the material on record. It has been held in a number of ITAT decisions that unless the Assessing Officer brings any material on record to show that the cash withdrawn was utilized / used for some other purpose, it could not be said that such cash withdrawals might not have been redeposited in the bank account. This proposition was upheld in the case of ITO v. M/s.Murlidhar Ice-cream & Sweet Parlour wherein it was held that the disallowance of interest should be proportionately reduced taking into account the amount not utilized for business. Again, in the case of ITO v. Shri Vishan Lal ITA No.634/LKW/2014, the Lucknow ITAT held that where the cash deposit and withdrawal in the bank account was made regularly by the assessee during the year, it is very reasonable to say that the Page No. 8 ITO vs. M/s. Panchdeep Consultants same was business turnover outside books and therefore, only gross profit addition is justified in the facts of the present case. This proposition was also upheld in the case of Shri B. Jenson Thanaraj v. ACIT [2017] 83 taxmann.com 243 (Chennai - Trib.)where it was held that where cash deposited in bank account of assessee was treated as unexplained cash credit by Assessing Officer but Commissioner (Appeals) having found that money withdrawn by assessee from bank account might be available for subsequent deposit, directed Assessing Officer to take only peak credit, there was no infirmity in order of Commissioner (Appeals). In the case of C. Vamsi Mohan v. ITO ITA.No.469/Hyd/2014the ITAT held that said withdrawal having been made by the assessee just before a week, the same can reasonably be treated as available with the assessee for cash deposit especially when there is nothing to show that the said amount was utilized by the assessee for some other purpose. In the case of ITO v. Deepali Sehgal I.T.A .No.-5660/Del/2012 it was held that merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount cannot be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. In the case of ITO v. Shri Rajeev Kumar Gupta ITA No. 273/Agra/2013, the ITAT held that held that the entire amount of deposit made in the bank account cannot be said to be unexplained because after deposit of the cash amounts, there are withdrawals. In the case of Smt. Satya Bhama Bindal v. ITO ITA No.713/Chd/2012, ITAT held that that the concept of peak theory needs to be applied both in respect of the opening introduction of cash in hand and various transactions of cash deposits and withdrawals during the year under consideration. The above proposition was also laid down in the case of ITO.
Page No. 9 ITO vs. M/s. Panchdeep Consultants Ward-51(4),Kol vs Deb Kumar Jana and also in the case of Jagdish N. Thakkar v. ITO ITA No.1475/Mum/2009.The Ahmedabad Tribunal in the case of Saurin Nandkumar Shodhan in ITA number 2075/Ahmedabad/2012, held that in case the Department has not established that the cash available with the assessee was not utilised elsewhere, then on the basis of preponderance of probabilities, it can be assumed that the very cash was re-deposited in the bank. In view of the above, we are of the considered view, that the Ld. CIT(Appeals) has not erred in facts and in law in coming to the conclusion that there is a reasonable presumption that once there are substantial withdrawals from the bank account, then in the absence of the Department being able to establish that such withdrawals were utilised by the assessee elsewhere, it can be reasonably presumed that the same were re-deposited in the bank account. Therefore, in our considered view, Ld. CIT(Appeals) has not erred in facts and in law in deleting the aforesaid addition of � 27,59,700/- on account of unexplained cash deposits.
In the result, ground number 1 of the Department’s appeal is dismissed.
Ground number 2: CIT erred in law and on facts in deleting the addition of � 3, 55,73,880/- out of � 4,28,00,000/- made on account of unexplained expenditure under section 69C of the Act:
The brief facts in relation to this ground of appeal
are during the year under consideration, assessee paid a sum of � 4,28,00,000/- for land Page No.
10. ITO vs. M/s. Panchdeep Consultants advances out of cash balance available in hand of � 4,29,05,918/-. The AO made addition of � 4,28,00,000/- treating the same as unexplained expenditure under section 69C of the Act on the ground that the assessee has not been establish as to whom the above amount was advanced as land advances. In appeal, the Ld. CIT(Appeals) gave part relief to the assessee by accepting the contention of the assessee that as on 31st March 2001, the closing balance at the end of the financial year was � 3,55,73,880/-, which is the opening cash balance as on 1st April 2001 for the year under consideration. Therefore, this cannot be added during the year under consideration, since the AO himself confirmed the opening cash balance at the start of the year at � 3,55,73,880/-. Therefore, the Ld. CIT(Appeals) gave part relief to the assessee in respect of this amount of � 3,55,73,880/- appearing as opening balance at the beginning of the year and held that this could not be added to the income of the year under consideration. The balance amount was added to the income of the assessee in absence of any explanation forthcoming from the assessee in respect of the land advances.
Before us, the Department relied upon the observations made by the AO in the assessment order in respect of this ground of appeal. In response, the counsel for the assessee submitted that the aforesaid advances were not claimed as an expenditure in either this assessment year, and nor in any subsequent assessment years. Hence, Ld. CIT(Appeals) has not erred in facts and law in allowing part relief to the assessee in respect of this ground of appeal.
Page No. 11 ITO vs. M/s. Panchdeep Consultants
We have heard the rival contentions and perused the material on record. The Lucknow ITAT in the case of Satish Chandra Pandey, Kanpur vs Department Of Income Tax in that when even the Assessing Officer himself admitted that the amount in question was shown in the cash flow statement as opening balance, it cannot be said that the assessee earned income to the above extent during the year under consideration, as the amount in question does not pertain to the year under consideration, therefore, it cannot be a subject matter of addition u/s. 68 of the Act. The Punjab and Haryana High Court in the case of CIT v V.P. Singh [2013] 40 taxmann.com 162 (Punjab & Haryana) held that where assessee had submitted balance-sheet before Assessing Officer and in balance-sheet closing balance or cash in hand was disclosed and entries in balance-sheet had not been disputed by Assessing Officer, opening balance could not be regarded to be undisclosed income. In the case of ITO Vs Rahul kantilal Shah (ITAT Mumbai) in ITA No. 6805 /Mum/2018, ITAT held that addition on the basis of the opening balance of unsecured loan treating the same as current year transaction by invoking section 68 of the Income Tax Act is unsustainable. In view of the above, we are of the considered view that the Ld. CIT(Appeals) has not erred in facts and in law in allowing part relief to the assessee to the extent � 3,55,73,880/-, which is the opening cash balance as on 1st April 2001, on the ground that the same could not be considered as income for the impugned year under consideration.
In the result, ground number 2 of the Department’s appeal is dismissed.
Page No. 12 ITO vs. M/s. Panchdeep Consultants Ground number 3: Ld. CIT(Appeals) has erred in law and on facts in deleting the addition of � 85,60,000/- made in the section 40A(3) of the Act:
The brief facts in relation to this ground of appeal are that during the course of assessment, the AO made under section 40A(3) of the Act by disallowing 20% of � 4,28,00,000/- (�85,60,000/-) for advances given for purchase of land. The assessee in appeal proceedings contended that since no expenditure has been claimed by the assessee, the provisions of 40A(3) of the Act cannot be invoked in the instant set of facts. In appeal, Ld. CIT(Appeals) accepted the assessee’s contention that the provisions of section 40A(3) of the Act are applicable when any expenditure is claimed by the assessee, but in this case no expenditure has been claimed by the assessee. Accordingly, Ld. CIT(Appeals) deleted the addition of � 85,60,000/- under section 40A(3) of the Act.
18. We observe that Ld. CIT(Appeals) has correctly applied the law that for the purpose of invoking provisions of section 40A(3) of the Act, it is a prerequisite that expenditure should have been claimed by the assessee. In the instant facts, admittedly, no expenditure was claimed by the assessee in respect of the amount of � 4,28,00,000/- for advances given for purchase of land. Accordingly, Ld. CIT(Appeals) has not erred in facts or law in deleting the additions which were made by invoking provisions of section 40A(3) of the Act.
Page No. 13 ITO vs. M/s. Panchdeep Consultants
In the result, ground number 3 of the Department’s appeal is dismissed.
Ground number 4 and 5 of the Department’s appeal are general in nature and do not require any specific adjudication.
In the combined result, the Department’s appeal is dismissed.
Order pronounced in the open court on 31-08-2022 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 31/08/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद