DCIT, NEW DELHI vs. SMT. URVASHI MITTAL, NEW DELHI

Since all the three assesses belong to the Triveni group in respect of which the search operations were conducted on 28.9.2010 giving rise to the reassessments u/s 153A the Income-tax Act, 1961 (“the Act”) and the grounds involved are more or less similar, we deem it just and convenient to dispose these of by way of this common order primarily with reference to the facts involved in ITA No.6126/Del/2014. /Del/ 2014 and CO No. 165 /Del/ 2015.

Original return of income was filed declaring a total income of Rs.2,82,271/- and subsequently, pursuant to the search that was conducted on 28.9.2010 in respect of Triveni group of which the assessee is also a part, notice u/s 153A of the Act was issued and the assessee filed the return of income on 10.12.2012 declaring as total income of Rs.7,26,490/-. Learned AO added a sum of Rs.4,90,800/- which the assessee had declared as agricultural income on the ground that the agricultural land was in the name of the deceased father of the assessee at Dholpur and the assessee had not filed any proof regarding the agricultural activity carried out on the said land. Learned AO further added a sum of Rs.5,01,90,000/-u/s 68 of the Act in respect of the cash found credited in Axis bank and the cash flow statement filed by the assessee was a self serving document without any proof in support of various cash receipts. Learned AO further observed that the assessee had also filed the cash flow statement in earlier years from which opening balance was coming on but no explanation was given in earlier years too.

Challenging the action of the learned AO, assessee preferred an appeal before the learned CIT(A) and by way of the impugned order, learned CIT(A) deleted both the additions. Hence, the revenue is before us in this appeal stating that the learned CIT(A) should not have relied upon the cash flow statement which is merely a self serving document and the source of cash deposit was not explained before the learned AO; that the learned CIT(A) erred in placing reliance on the report received by the Officer of the Directorate of Income-tax (Systems) and which has checked the returns have been filed by the partners of contributing firm when merely filing of the income tax return is neither a conclusive proof of identity nor of creditworthiness nor of genuineness of the transaction.

It is the argument of the learned DR that the assessee did not file any proof regarding the agricultural activity carried out on the agricultural land or any sale bill of the agricultural produce and since the agricultural land stands in the name of the deceased father of the assessee, learned AO is justified in adding the same.

Per contra, it is the submission of the learned AR that for a quite long time and more particularly from the Asstt. Year 1996-97, the assessee has been declaring agricultural income in their returns of income and the department has been accepting the same, as such, it has not been for the revenue to contend now that for want of evidence, such an amount has to be added back.

We have perused the record. Vide para Nos. 14 to 24 of the paper book, the assessee filed certain acknowledgements of income-tax returns and in all the years from 1996-97 to 2004-05, the assessee has been consistently declaring the agricultural income and it is not the case of the revenue that in any of the previous years, such an income was treated as the income from undisclosed sources. Learned CIT(A), therefore, rightly concluded that the khasrakhatauni indicating the annual lagan establishes that the land in dispute was put to agricultural use and the assessee has been consistently declaring the same in the return of income and the revenue has been accepting the same without raising any objection.

In the circumstances, reliance of the learned CIT(A) on the decision of the Hon’ble Apex Court in the case of Radhaswami Satsang vs CIT (1992) 193 ITR 321 (SC) in respect of the necessity of following the rule of consistency cannot be found fault with. On this aspect, the approach of the learned CIT(A) is perfect and needs to be confirmed. We accordingly decline to interfere with the same. Hence, ground No.1 of the appeal is dismissed.

Now coming to the addition u/s 68 of the Act, learned AO recorded that in the bank account of the assessee, an amount of Rs.5,05,90,000/- was found credited and that the assessee had filed the cash flow statement for the year under consideration and also for earlier years, since no proof in support of various cash receipts was filed, such cash flow statements remain self serving document and no reliance could be placed. On this premise, learned AO proceeded to make the addition.

In appellate proceedings, learned CIT(A) looked into the contentions of the assessee and also found that besides the opening cash in hand, the assessee received Rs.2.05 crores from M/s Vivek Commodities, Rs.2.65 crores from M/s Mittal Tin Container Industry, Rs.1,30,500/- from Triveni Infrastructure Development Company Ltd. (TIDCO) and Rs.75 lacs from M/s Triveni Motors. Out of the four entities, the assessee is the promoter director of TIDCO and Triveni Motors, which entities are assessed by the very same AO having PAN AACCT3870A and AACFT0256B. Further, learned CIT(A) on a perusal of the financial accounts of TIDCO and Triveni Motors noticed that the TIDCO had shareholders fund of Rs.46.57 crore and loan funds to the tune of Rs.47.04 crore and Triveni Motors had a capital orf Rs.2.89 crores and loan funds of Rs.5.35 crores. He, therefore, held that the identity, creditworthiness and genuineness of M/s TIDCO and M/s Triveni Motors is above any suspicion.

In respect of the other two entities, namely, M/s Vivek Commodities and M/s Mittal Infrastructure Tin Containers Ltd., learned CIT(A) perused the copies of the income-tax return, balance sheet and profit and loss account, confirmation of accounts etc. It was submitted before the learned CIT(A) that the amounts from these two entities were received on account of pledging some of the shares of TIDCO, which were owned by the assessee pursuant to the share purchase agreement entered with those entities in view of the fact that the TIDCO was likely to come up with an IPO at a price band higher than the 20% of the present value agreed upon. Basing on this, learned CIT(A) accepted the genuineness of the transaction with these two entities.

Besides this, learned CIT(A) had taken pains to scrutinize the income-tax returns and profit and loss account of these two entities, namely, M/s Vivek Commodities and M/s Mittal Infrastructure Tin Containers Ltd. and found that both the partnership firms had shown nil income and there has been no activity worthwhile undertaken by them to show any profit earning apparatus. He further found that M/s Vivek Commodities with 17 partners and the capital of Rs.2.625 crores raised during the relevant previous year out of which they have paid a sum of Rs.2.05 crores to the assessee for purchasing the shares of TIDCO. Similarly, M/s Mittal Infrastructure Tin Containers Ltd. with 20 partners raised a capital of Rs.2.64 crores during the year and paid a sum of Rs.2.65 crores to the assessee for purchase of shares. On this, learned CIT(A) directed the assessee to prove the identity and creditworthiness of all the partners of these entities, in response to which the assessee submitted copies of return of income, computation sheet and balance sheet for each of the partners. Since these documents were submitted before the learned CIT(A) and were not available before the learned AO, learned CIT(A) transmitted the documents to the learned AO calling upon him to submit the report. Learned CIT(A) recorded that in spite of three reminders, there was no response from the learned AO. In those circumstances, learned CIT(A) in order to ascertain the authenticity of the return of income, identity and creditworthiness of each of the partners addressed a letter to the Directorate of Income-tax (Systems) and obtained the report. On analysis of the return and document, learned CIT(A) found that out of the 17 partners of M/s Vivek Commodities, the creditworthiness of one Harveer Singh was doubtful, as such, the learned CIT(A) confirmed his contribution to an extent of Rs.2,62,500/-.

Similarly, out of 20 partners of M/s Mittal Infrastructure Tin Containers Ltd., learned CIT(A) found the creditworthiness of three partnersdoubtful , namely, Gopal Dass Mangal, Sunder Gupta and one Rajni Mangal, who contributed a sum of Rs.41 lacs, as such, this amount was confirmed by the learned CIT(A) while deleting the rest of the amount.

Though the revenue assails this exercise conducted by the CIT(A) stating that thecash flow statement is a self serving documents and the report receipt from DIT (Systems) is conclusive proof of identity or creditworthiness or genuineness of the transaction, the revenue failed to establish before us as to what should be the proper course that should have been adopted by the learned CIT(A) in the given circumstances. Cash flow statement while always looksalike and it is for the learned AO to call for the documents, if any, he desires to verify to ascertain the correctness of the cash flow statement. As a matter of fact, learned CIT(A) not only stooped at the entity level of the contributors of the amounts but he went a little further and to call for the details to ascertain the identity and creditworthiness of the partners of the partnership firms and also the genuineness of the transactions. 15. The case of the assessee is that there was a proposal to issue IPO of TIDCO at a price band higher than 20% of the value which was agreed upon under share purchase agreement entered into between the Vivek Commodities and M/s Mittal Infrastructure Tin Containers Ltd.Further the other two entities M/s TIDCO and Triveni Motors are the companies of the assessee and the learned CIT(A) mentioned the PAN of TIDCO and Triveni Motors and further noted that these two entities were also assessed by the same AO, as such, in view of the fact that the assessee being the promoter director of these two entities and assessment being done by the same AO, identity and creditworthiness of these two entitles is beyond the pale of any suspicion.

In so far as M/s Vivek Commodities and M/sMittal Infrastructure Tin Containers Ltd is concerned, learned CIT(A) verified the identity and creditworthiness of the individual partners of these two entities i.e. M/s Vivek Commodities and M/s Mittal Infrastructure Tin Containers Ltd and having found that the creditworthiness of the one partner of M/s Vivek Commodities and three partners of M/s Mittal Infrastructure Tin Containers Ltd confirmed the addition to the extent of the money contributed by these partners with doubtful creditworthiness. When the learned CIT(A) transmitted the documents submitted by the assessee to the learned AO calling for the report, record speaks that there was no response from the learned AO in spite of three reminders. No explanation is forthcoming from the revenue even before us as to what prevented the learned AO to verify the documents to submit report if there is a serious objection on the identity and creditworthiness of such partners. In these circumstances, we are convinced that the reasoning of the learned CIT(A) that he addressed a letter to DIT (Systems) for the purpose of identity and creditworthiness of these partners and to proceed with the matter having analyzed the report and the documents submitted by the assessee. No other course was left open to the learned CIT(A) in view of the non response of the learned AO to the letter dated 22.5.2014 of the learned CIT(A). In these circumstances, we hold that the approach of the learned CIT(A) cannot be found fault with and the learned CIT(A) did the possible exercise that should have been done in the given circumstances. Learned CIT(A) reached the right conclusions and we do not find any reason to interfere with the same. Hence, we dismiss the revenue appeal and the CO of the assessee.

In so far as the Vivek Commodities is concerned, as stated in the preceding paragraphs, the identity, creditworthiness and genuineness of transactions of all the partners of this entity was verified by the learned CIT(A) in depth and reached the right conclusion, as we have discussed in the preceding paragraphs. Since the learned CIT(A) on thorough verification of the particulars relating to the identity, creditworthiness and genuineness of the transactions reached a right conclusion, we do not find any reason to interfere with the same, hence, the ground of appeal