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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI
ITA.No.2807/Del/2013 Assessment Year 2009-2010 The Income Tax Officer, Smt. Sumitra Devi, PAN APGPD9522B Ward-2, vs. C/o. S.K. Monga Civil Lines, Associates, 312-313, Govindpuri, Roorkee. Haridwar – 249401. (Appellant) (Respondent) For Revenue : Shri Md. Gayasuddin Ansari, Sr. D.R. For Assessee : Shri S.K. Monga And Shri Dinesh Yadav, Advocates Date of Hearing : 24.10.2018 Date of Pronouncement : 02.11.2018 ORDER PER BHAVNESH SAINI, J.M. This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-1, Dehradun, Dated 26.02.2013 for the A.Y. 2009-2010.
2 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee 2. We have heard the Learned Representatives of both the parties and perused the material available on record.
Brief facts of the case are that the assessee is an individual and filed her return of income on 11.09.2009, declaring an income of Rs.3,87,260/-. The assessee derived income from country-liquor business during the year. The A.O. made certain additions to total income of Rs.90,64,890/-. Assessee challenged the additions before Ld. CIT(A) and appeal of assessee has been partly allowed. The Revenue aggrieved against the Order of the Ld. CIT(A), filed the appeal on four grounds of appeal
which are decided as under.
4. On ground No.1, Revenue challenged the deletion of addition of Rs.3 lakhs on account of capital contributed by the assessee. 4.1. The Ld. CIT(A) noted that the assessee claimed to have opening balance of Rs.3 lakh in capital account which according to assessee represented her accumulated savings
3 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee out of her agricultural income in the past. The AO observed that she had no bank account and there was no independent evidence of holding Rs.3 lakh by her. Assessee gave a copy of land-holding but no evidence regarding agriculture or sale of agricultural produce by her was furnished. The assessee had also not shown agricultural income in her computation of income. In view of this, the AO held that the closing balance of Rs.3 lakh shown in her capital account furnished with the return of income for A.Y. 2008-2009 was only a calculated plan to generate the funds and treated the same as her income from undisclosed sources. 4.2. It was submitted by the assessee that she has 24 bighas of land in which various agricultural crops were grown. According to her, she had also dairy income in the past and furnished certificate from the Gram Pradhan in support of her contention. 4.3. The Ld. CIT(A) observed that return for the A.Y. 2008-09 was furnished by her on 10.09.2009, i.e. almost simultaneously with the return for the assessment year
4 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee under consideration. She showed opening balance of capital of Rs.3 lakhs in that return. Assessee has also showed income of Rs.1,25,000/ from dairy business and Rs.75,000/- from agricultural income. The assessee also contended that in her note that the closing balance in hand has been invested in A.Y. 2009-10 in wine shop. The Ld. CIT(A), therefore, noted that it is an admitted fact that the investment was made in A.Y. 2009-10 under appeal. According to the assessee, the amount represented opening balance of her capital account. It was noted that claim of assessee for earning the income from agriculture and dairy in the past may be doubtful but cannot be rejected without investigation. The land-holding of 24 bighas is not disputed. Dairy business in the past is also not disputed. Ld. CIT(A) accordingly accepted the explanation of assessee that she had some amount of capital and considering the fact that assessee comes from rural area and was an agriculturist, therefore, some benefit of doubt may be given to her. The addition was accordingly deleted.
5 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee 5. After considering the rival submissions, we are of the view that the matter requires reconsideration at the level of the Ld. CIT(A). The Ld. CIT(A) noted that return for the preceding A.Y. 2008-2009 have been filed simultaneously with the return of income for A.Y. 2009-2010 under appeal. Though, in assessment year under appeal A.O. has mentioned agricultural income of Rs.75,000/- on protective basis, but, mere holding of 24 Bighas of agricultural land by itself is not sufficient to show that assessee has earned agricultural income and particularly of Rs.3 lakhs. No evidence of accumulation of any agricultural income have been filed by assessee. The Ld. CIT(A) without any basis of dairy business, accepted the explanation of assessee. The Ld. CIT(A) despite noting the return for preceding assessment year 2008-2009 was filed simultaneously would show that it was filed with purpose to show opening capital balance on the assessment year under appeal. The Ld. CIT(A) merely on giving benefit of doubt, accepted the explanation of assessee, therefore, the totality of the facts and 6 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee circumstances would show that the Order of the Ld. CIT(A) cannot be sustained in law. The matter requires re- consideration. We, accordingly, set aside the impugned order and restore this issue to the file of Ld. CIT(A) with a direction to re-decide this issue strictly on the basis of merits and evidence available on record. The Ld. CIT(A) shall give reasonable and sufficient opportunity of being heard to the assessee and the A.O. Ground No.1 of appeal of Revenue is allowed for statistical purposes.
On ground No.2, Revenue challenged the Order of Ld. CIT(A) in setting aside the issue of cash payment under section 40A(3) of the I.T. Act, 1961. 6.1. It is noted in the impugned order that A.O. on enquiry with India Glycol Ltd., noted that the assessee had made payments for purchases of Rs.53,06,324/ in cash in violation of provision of section 40A(3) of the I.T. Act of the I.T. Act. The assessee submitted that she had made cash payment normally below Rs.20,000/ at a time and that payments exceeding Rs.20,000/- had been made only on 7 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee bank holidays. The AO was not satisfied with explanation of assessee and made addition of Rs.53,06,324/ under section 40A(3) of the I.T. Act. The assessee submitted before Ld. CIT(A) that the transactions were genuine and, hence, cash payments should not be objected. In certain other cases where cash payment exceeding Rs.20,000/ have been made the AO did not make such additions. The Ld. CIT(A) considering the issue in the light of explanation of assessee noted that exceptions have been provided in Rule 6DD of the I.T. Rules. The Ld. CIT(A) noted that the explanation of assessee that payments were made on Bank holidays and that payments below amount have not been considered and addition is made on routine. Therefore, directed the A.O. to examine the same and make additions as may be warranted.
The Ld. D.R. submitted that Ld. CIT(A) has no power to remand the issue to the file of A.O. He has to decide the issue himself on merit.
8 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee 8. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below.
After considering the rival submissions, we are of the view that no interference is called for in the matter. Though in assessment year under appeal, the Ld. CIT(A) has no power to set aside the issue to the file of A.O. but it is specific that the A.O. has not dealt with the submissions of the assessee as what was pleaded before him. Therefore, ultimately the matter would require reconsideration at the level of the A.O. Though we do not approve the Order of the Ld. CIT(A) in remanding the matter to the file of A.O. however, while setting aside the Order of the Ld. CIT(A), we direct the A.O. to examine this issue afresh in the light of material available on record. A.O. shall give reasonable and sufficient opportunity of being heard to the assessee. Accordingly, Ground No.2 of appeal of Revenue is allowed for statistical purposes.
9 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee 10. On ground No.3, Revenue challenged the Order of the Ld. CIT(A) in deleting the addition on account of unsecured loans of Rs.14,71,000/- and Rs.12,99,000/-.
10.1. On the issue of addition of Rs.14,71,000/- on account of unexplained cash credit, assessee, claimed to have received loan amount from various persons who had participated in liquor auction and had submitted the tender money but failed to get the contract. According to her, such tender amount was transferred to the assessee’s credit by the Excise Department at their request and she made initial purchase of liquor against such credit. She furnished affidavits of these persons confirming the transactions along with documents relating to the identity and capacity. The AO was however, not satisfied with the explanation of assessee and treated the amount paid as license fee out of the alleged loans as unexplained expenditure.
10.2. The assessee submitted before Ld. CIT(A) that the creditors had made payments to the Government as tender
10 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee money and such tender money was subsequently transferred to the credit of assessee on their request The Ld. CIT(A), therefore, noted that burden upon assessee to explain cash credit have been duly discharged. If the AO was not satisfied, he could have summon these persons and give a finding that they did not have the capacity to deposit the tender money in question. The Ld. CIT(A), accordingly, deleted the addition.
After considering the rival submissions, we are of the view that the matter requires reconsideration at the level of the Ld. CIT(A). The A.O. noted that assessee has furnished affidavits of seven persons for a sum of Rs.14,71,600/- who have deposited the money with the Excise Department. The assessee explained that since they could not get the tender approved of liquor shop, therefore, on their request, the tender amount was transferred to the account of the assessee. Except these affidavits, nothing has been produced on record to explain and substantiate the contention of assessee. The A.O. has specifically noted that assessee could not produce
11 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee any documentary evidence in respect of the adjustment of the demand drafts by the Excise Department in the name of Smt. Sumitra Devi i.e., Assessee nor the mode of re-payment of these loans to these persons. Therefore, mere filing affidavit was not sufficient to explain this issue. Since the assessee claimed that seven persons have made deposits with the Excise Department as a tender amount and since they remain unsuccessful for getting a contract of liquor shop, therefore, on their request, the amount in question was adjusted to the account of the assessee, but, this plea has not been substantiated through any evidence of Excise Department. In the absence of specific evidence of this nature, Ld. CIT(A) should not have deleted the addition. We, accordingly, set aside the Order of the Ld. CIT(A) and restore this issue to the file of Ld. CIT(A) with a direction to re-decide this issue strictly on the basis of merits and evidence available on record. The Ld. CIT(A) shall give reasonable and sufficient opportunity of being heard to the assessee and the A.O.
12 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee 12. In the same ground, Revenue challenged the deletion of addition of Rs.12,99,000/- on account of unexplained cash credit. The assessee claimed to have made initial payment of Excise Duty amounting to Rs.15,16,845/. The assessee claimed to have taken unsecured loan of Rs.12,99,700/- from her friend and relations. The assessee furnished their confirmations along with details of their land- holdings, PAN etc. The AO observed that the assessee was not in a position to show with documentary evidence and the exact date when loans had been taken. The A.O. found that all the confirmation letters bore the same date, i.e. 15.05.2008, and were written by the same person though the signatures and thumb impressions were put by different persons. A.O. accordingly made the addition.
12.1. Assessee contended before Ld. CIT(A) that assessee had furnished complete details of the lenders including the names and addresses along With confirmation letters from them. The assessee is an agriculturist and had taken
13 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee unsecured loans of small sums from her acquaintances and relations who were also agriculturists. They did not maintain regular books of account or bank accounts. The Ld. CIT(A) accepted the explanation of assessee based on confirmation letters and accordingly, deleted the addition.
After considering the rival submissions, we are of the view that the Ld. CIT(A) was not justified in deleting the addition. The assessee claimed to have received unsecured loans from several persons and in support of her claim, assessee filed copy of khasra khataunies of land holdings by the lenders, their PAN and copy of the confirmation. But, no evidence have been produced to prove the genuineness of the loan in the matter. The Ld. CIT(A) noted that the A.O. could have asked the assessee to produce these persons after preliminary enquiry, if the evidences found not to be reliable. Since A.O. failed to make preliminary enquiry, therefore, addition were deleted. The Ld. CIT(A) failed to note that burden is upon assessee to prove that she has received
14 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee genuine credits in the matter. In this case, initial burden upon assessee have not been discharged to prove the identity of the creditors, their capacity to give loan to assessee and genuineness of the transaction in the matter. The assessee in the paper book has filed list at pages 28 and 29 of the paper book, names of 67 lenders who have given loan to the assessee on 15.05.2008. The amounts are less than Rs.20,000/- in each case. This list is supported by Memorandum of Gift which were written by the same person and the signatures are mostly by thumb impressions. The language of Memorandum of Gift is same in each case. Learned Counsel for the Assessee was asked to explain whether assessee received gift or loans from these 67 persons. Learned Counsel for the Assessee stated that it was loan amount, but, was not able to explain as to why conformity letters in the form of gift deed have been filed before A.O. Even this aspect has not been considered and noted by the Ld. CIT(A) before deleting the addition. There is a difference between loan and the gift. Thus, the assessee did not produce
15 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee any evidence before authorities below to prove genuineness of the loans in the matter. Even the gift deed are not supported by any evidence to prove the capacity of these persons to give loan to the assessee. There is no question of proving the genuineness of the transaction in the matter. All the persons are the same area and it is difficult to believe that 67 persons of the same area have come forward on a particular day i.e., on 15.05.2008 to give gift or loan to the assessee. It appears to us that it is a bogus transaction and all documents are created and fabricated by assessee to rotate her unaccounted money through the alleged transactions of gift or loans. The Ld. CIT(A) without verifying the facts and circumstances of the case and evidence on record, without any justification deleted the addition. The findings of the Ld. CIT(A) are perverse in nature and are liable to be set aside. Since assessee failed to prove the identity of the creditors, their creditworthiness and genuineness of the transaction in the matter, therefore, there is no reason for the A.O. to make further enquiry into the matter. The A.O. has rightly rejected the explanation of 16 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee assessee. The Ld. CIT(A) was, therefore, not justified in deleting the entire addition without there being any evidence in support of explanation of assessee. We, accordingly, set aside the Order of the Ld. CIT(A) and restore the Order of the A.O. In the result, part of Ground No.3 of the Department is allowed.
On ground No.4, Revenue challenged the Order of the Ld. CIT(A) in deleting the addition made by A.O. on account of unexplained cash credit on account of purchases of Rs.35,444/-, application fee of Rs.11,000/- and cost of furniture and cash in hand of Rs.84,786/-.
14.1. The Ld. CIT(A) noted that source of these payments/ cash was explained from opening balance of the capital account as well as loans as discussed above. The A.O. following the logic in other grounds, treated these payments as unexplained and assessed the sum as the assessee’s income from undisclosed sources. The Ld. CIT(A) noted that since the amount of Rs.3 lakhs shown by assessee as opening
17 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee balance of her capital and loans and advance aggregating to Rs.27,70,700/- was treated as unexplained by the A.O. separately, therefore, these additions should not have been made separately. These additions are deleted.
After considering the rival submissions, we are of the view that the matter requires reconsideration at the level of the Ld. CIT(A). A.O. noted that assessee claimed adjustment of demand drafts of loaners and unsecured loans on which A.O. made additions, therefore, these additions were also made against the assessee. The Ld. CIT(A) deleted the additions because of the favourable view taken in favour of assessee on other grounds referred to above. Since the issue of opening capital balance, loans etc., have been restored to the file of Ld. CIT(A) and loan of Rs.12,90,000/- has been confirmed by us above, therefore, this issue requires reconsideration at the level of the Ld. CIT(A). The finding on the other grounds would be relevant for the purpose of disposal of this ground. We, accordingly, set aside the Order
18 ITA.No.2807/Del./2013 Smt. Sumitra Devi, Roorkee of the Ld. CIT(A) and restore this issue to his file with a direction to re-decide this ground of appeal afresh on merits by giving reasonable and sufficient opportunity of being heard to the assessee and A.O. Ground No.4 of appeal of Department is allowed for statistical purposes.
In the result, appeal of the Department is partly allowed and partly allowed for statistical purposes.
Order pronounced in the open court.