PANKAJ ARORA,NEW DELHI vs. ITO, WARD- 23(2), NEW DELHI

1,08,010/- which was processed under section 14143(1) of the Income Tax Act. Subsequently the case was reopened under section 147 / 148 on the basis of information received from Additional Director of Income Tax (Investigation) Unit-V, New Delhi. The assessee, in response to the notice issued under section 148 of the Income Tax Act, requested the AO to treat the original return filed earlier as return in response to notice under section 148. Subsequently the AO issued notice under section 143(2). During the course of assessment proceedings the AO noted that the assessee has made cash deposit of Rs. 4,97,452/- during the financial year 2006-07 relating to impugned assessment year. In absence of any satisfactory reply given by the assessee to substantiate the source of such deposit and since the assessment was getting time barred, the AO made addition of Rs. 4,97,452/- to the total income of the assessee.

That the assessee crave leave to add, amend, alter or forgo any or all of the grounds as may be necessary and in the interest of justice.

That orders of the lower authorities are not justified on facts and same are bad in law.”

The learned counsel for the assessee referring to page no. 1 of the paper book drew the attention of the Bench to the copy of notice issued under section 148 of the Income Tax Act dated 26th March, 2013 and submitted that there is no proper sanction or approval obtained as Clause no. 3 of the said notice is blank. Therefore, from whom the AO has obtained permission is not known. Referring to page no. 2 of the paper book, he submitted that the reasons submitted by the AO shows that there is cash deposit of Rs.4,97,452/-. Referring to the bank account of the assessee maintained with Vijaya Bank and HDFC Bank account, he drew the attention of the Bench to the various entries and submitted that there is no such cash deposit of Rs. 4,97,452/- as alleged by the AO. He submitted that out of the total deposit of Rs. 4,97,430/- during the year an amount of Rs. 2,70,900/- was deposited in cheques and the cash deposit was only Rs. 226530/-. Therefore, the reasons recorded by the AO are vague and not on proper appreciation of facts and based on reports of investigation wing without any independent application of mind. Therefore, on this ground itself, the reassessment proceeding should be quashed.

Even on merit the learned counsel for the assessee drew the attention of the Bench to the item wise deposit made in the bank account and submitted that the amount of Rs. 2,50,000/- deposited on 27.07.2006 was out of the cheque payment received on account of sale of property bearing no. 547, Block-D, Gali No. 5, Sangam Vihar, New Delhi. Similarly the cash deposit of Rs. 1,00,000/- on 18.4.2006 was out of advance amount against sale of property which was deposited in the bank account. The other deposits are either the rental income or out of the proceeds of the property no. 547. Thus the amounts stand fully explained and therefore, no addition is called for. 7. The learned DR, on the other hand, heavily relied on the order of the learned CIT(A).

I have considered the rival submissions made by both the sides and perused the orders of the authority below. I find the AO on the basis of the information received from the investigation wing of the Department that the assessee has made cash deposit of Rs. 4,97,452/- reopened the assessment by issuing notice under section 148 and thereafter made addition of Rs. 4,97,452/- to the total income of the assessee by invoking the provisions of Section 68 of the I.T. Act, 1961. I find the learned CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned counsel for the assessee that there is complete non application of mind of the AO while recording the reasons and he has not verified the facts properly and the reopening was made on the basis of report of the investigation wing. Further the deposits in the bank accounts are fully explained and therefore no addition is called for.

I find force in the above arguments advanced by the learned counsel for the assessee. A perusal of the notice issued under section 148 shows that the notice has been issued in a very casual manner, Clause 3 of the notice reads as under:- “Notice under section 148 of the Income Tax Act, 1961. 3. This notice is being issued after obtaining the necessary satisfaction of the commissioner of Income Tax ............./the Central Board of Direct Taxes.”

Similarly, a perusal of the bank account maintained with Vijaya Bank account no. 004427, copy of which has been placed at page no. 25 and 26 of the paper book, shows that an amount of Rs. 2,50,000/- was by way of clearing of Cheque No. 719443 and not cash deposit. If the same is excluded from the total deposits made during the year from the two bank accounts then there is no such cash deposit of Rs. 4,97,452/- in the two bank accounts maintained by the assessee. Therefore, I find force in the argument of learned counsel for the assessee that the reasons recorded are either vague reasons or not based on any application of mind. In any case, the assessee has explained the source of each deposit made both in cash as well as in cheque and therefore, even on merit also no addition is called for. I, therefore, set aside the order of the learned CIT(A) and direct the AO to delete the addition. The ground raised by the assessee is allowed.

In the impugned assessment year, the AO reopened the assessment on the basis of information received from the investigation wing that assessee has made cash deposit of Rs. 36,82,199/- in the bank account. After considering the reconciliation statement filed by the assessee, the AO made addition of Rs. 14,33,000/- after accepting the remaining amount as explained.

In appeal, the learned CIT(A) sustained an amount of Rs. 13,00,000/- and deleted the balance amount of Rs. 1,33,000/- by observing as under:- “4.4. I have examined the facts at hand. I find that the appellant has systemically carried business as a builder/ transacting in real Calais. The books of accounts or supporting evidence(s) were not produced before me (or even before the AO). The appellant sought to produce certain documents as additional evidence. However, the source of cash deposited in bank account remains unexplained. IN view of the fact that books of account and confirmation(s) of third parties, and even the source/confirmation(s) of credits in bank accounts have not been produced/provided such investments/credits have remained not explained satisfactorily. Merely producing some agreements of transactions does not show whether the amounts were actually received from the named persons, and what was the source thereof. As such, the additional evidence sought to be submitted by the appellant is not worthy of admission. The same is therefore not admitted. An examination of facts at hand clearly establishes that the appellant has been buying and selling properties in a systematic manner. The appellant is also in the business of being a builder. I find that the appellant is depositing cash in bank accounts as and when cheques needed to be issued. Similarly, source of cash deposited in the bank account(s) remains unexplained. The appellant is presenting a proposition that transactions carried out through banking channels are to be treated as explained. Routing a transaction through bank, in itself, does not give a certificate of the transaction being genuine. The source of cash deposits has remained unexplained. In fact, the appellant has created balance in the bank accounts by deposit of cash whenever the appellant wanted to make payments/investments (by issue of cheque or DD). The appellant did this so that the investments/expenditure is shown to have been made/incurred from the bank account. I also find that the several members of the family - Sh. Pankaj Sapra, Smt. Daya 5apra(Mother of Sh Pankaj Sapra) Sh. S.N. Sapra (also known as Sh. Soria Nath Sapra/Arora, father of Sh. Pankaj Sapra) have been systematically involved in such business activities and credits/cash deposits in their respective bank accounts have remained unexplained.

Aggrieved with such order of the learned CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds. (i) That on the facts and circumstances of the case, the Assessing Officer has wrongly assumed jurisdiction u/s. 148 without proper appreciation of facts, recording of satisfaction and requisite approval in terms of provisions of sec. 151 and CIT(A) was not justified in confirming order of AO.

I have considered the rival submissions made by both the parties and perused the orders of the authorities below. A perusal of the reasons recorded by the AO shows that Clause 3 of the notice under Section 148 is again blank and it is not known as to whether the AO has obtained approval from the higher authorities and if so from whom. Even otherwise a perusal of the details filed by the assessee shows the following reconciliation statement explaining the various deposits in the bank account.

Since neither the AO nor the CIT(A) has verified all these deposits alongwith various sale deeds or agreement to sell of properties etc., I deem it appropriate to restore this issue back to the file of the AO with a direction to verify the same and if he found correct then delete the addition. The ground raised