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Before: Shri Amit Shukla & Shri L.P. Sahu
ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A), Meerut dated 25.01.2018 for the assessment year 2010-11 on the following grounds : A) The order passed u/s 147 read with section 143(3) of the Act is not maintainable under Income tax Act,1961 for the following reasons: 1) That notice issued u/s 148 dt 21.03.2017 was issued merely on the basis of AIR information i.e. assessee has deposited cash of Rs 27,62,500/- in saving bank account. 2) That the Ld. AO failed to bring any material on records which shows, Income of assessee has escaped assessment.
3) That before issuance of notice u/s 148 no satisfaction was recorded by Ld. AO. Notice u/s 148 was issued on the basis of suspicion & in mechanical manner. Even there is no compliance of section 151(2) of the Act. 4) That the Ld. AO has disposed of objections to notice u/s 148 by a non-speaking order. The assessment framed deserves to be quashed as the initiation as well as framing of the assessment is arbitrary, illegal and void ab initio. B) That on facts & in law additions of Rs 15,00,000/- u/s 68 is totally wrong & unjustified. During the year under consideration assessee has not taken any unsecured loan, Ld. AO has wrongly treated sum of Rs 15,00,000/- as unexplained cash credit u/s 68 of the Act. Therefore, additions of Rs 15,00,000/- deserves to be deleted in full.
The brief facts of the case are that the assessee filed its return of income for the year under consideration on 09.03.2011 declaring total income of Rs.1,83,770/-. The assessee is engaged in the retail business of building material and filed return u/s. 44AF. She is also deriving vocational income, for which she has shown total income of Rs.1,24,144/- against gross receipts of Rs.1,95,850/-. The Assessing Officer received AIR information that the assessee has deposited cash of Rs.27,62,500/- in her S/B account maintained with PNB during the year under consideration. The Assessing Officer issued query letter on 06.01.2017 to the assessee for verification of the source of cash deposited but no compliance was made by the assessee. A reminder was also sent on 20.02.2017 for compliance of the earlier letter, but the assessee did not turn up to comply. Later on, the Assessing Officer reopened the case after recording following reasons and obtaining approval of the competent authority for issuance of notice u/s. 148 :
“As per AIR information received in this office, Assessee deposited cash Rs. 27,62,500/- in saving bank account with Punjab National Bank. A query letter dated 06.01.2017 was issued to the assessee for verification of source of cash deposit. No compliance made by the assessee. Subsequently, reminder letter dated 20.02.2017 was issued to assessee for compliance again no compliance made by him. Non compliance of the aforesaid letters clearly shows that the assessee has no explanation regarding cash deposit made by him in his saving bank account. Further, due to non- compliance, PAN of the assessee is not known, hence it is not ascertainable whether return was filed or not. Hence, assessee failed to disclose fully and truly all material facts necessary for his assessment. Therefore, I have reasons to believe that cash deposit of Rs. 27,62,500/- in saving bank account which is chargeable to tax has escaped assessment in the meaning of section 147 of IT Act, 1961 for A.Y. 2010-11. Income chargeable to tax which has escaped assessment amounting to or likely to amount to one lakh rupees or more for A.Y. 2010-11. I, therefore, consider that it is a fit case for issue of notice u/s 148 of the IT Act, 1961.”
In compliance to the notice u/s. 148 dated 21.03.2017, the assessee submitted that the original return filed on 09.03.2011 may be considered as return filed in response to notice u/s. 148. Subsequently, other statutory notices were also issued. In reply to these notices, the assessee submitted as under :
“That assessee maintained bank account with Punjab National Bank, Hastinapur. Copy of the same is already filed with you. It would be seen from such account that during the year under consideration assessee had deposited a sum of Rs. 27,62,500/- in cash. Out of such amount Rs. 11,62,500/- in on account of sale amount of retail business and Rs. 1,00,000/- (50,000+10,000+40,000) deposited on 24.09.2009, 25.09.2009 & 29.09.2009 against cash withdrawn on 23.09.2009. Further, there is cash deposited of Rs. 15 lacs on 29.09.2009, in this regard, it is submitted that Indian Oil Corporation had given advertisement in news paper Amur Ujjala on 26.08.2009for retail outlet under Kisan Sewa Kendra. In said advertisement at s.no-154 Indian Oil Corporation wanted to set up its fuel failing station at Latifpur, Hastinapur, Meerut. In process of applying retail outlet of Indian Oil at Latifpur, assessee & 3 other namely Gopal Gotam, Kuldeep & Dinesh Sharma decided to apply for this retail outlet of Indian Oil. All had agreed to contributes Rs. 5Lac each as capita! contribution towards retail Outlet at Latifpur. Thereafter assessee was desired to apply for retail outlet in individual capacity and in connection this she opened her bank account with Punjab National Bank, Hastinapur on 15.09.2909. Subsequently assessee obtained demand draft no-733324 dated 25.09.2009 for Rs. 100/- in favour of Indian Oil Corporation from Punjab National Bank towards application fee. Later on, on 25.09.2009 these three persons showed their interest in setting up retail outlet along with the assessee and they have directly deposited a sum of Rs. 15 Lac in assessee’s bank account. But assessee did not show her interest and she said that she will take call after allotment of the retail outlet by IOC and refunded the amount of Rs. 15Lacs on same date i.e. 29.09.2009 as duly evident from the bank account. In support of above facts copy of news paper dated 26.08.2009, copy of application to IOC are filed herewith for your kind perusal. Original copy of news paper is produce here for your verification. In view of above facts & submissions cash amounting to Rs. 27,62,500/- deposited in Punjab National Bank by assessee is fully explained and no adverse inference is called for . In case any other information /explanation is required the same may please be conveyed.” Statements of Shri Gopal Gautam were recorded who admitted to have deposited Rs.5 lacs in the account of assessee for the purpose as stated by the assessee, but he failed to substantiate his creditworthiness by furnishing any evidence before the Assessing Officer to support the sources narrated by him. The Assessing Officer also observed that the assessee also failed to file complete details of transactions alongwith the copy of bank statements etc. so to as to prove the identity, creditworthiness of remaining two creditors Sh. Kuldeep and Dinesh Kumar Sharma and genuineness of transactions. He, therefore, made an addition of Rs.15,00,000/- u/s. 68 of the Act out of cash deposit of Rs.27,62,500/-, as the remaining amount was considered as explained by the assessee. The assessee carried the matter before the ld.
CIT(A) in appeal and made detailed submissions with various case laws on validity of reassessment proceedings as well as on merits. The first appellate authority, however, after considering the submissions of the assessee, affirmed the action of the Assessing Officer vide impugned order. Aggrieved, the assessee is in appeal before us.
The learned AR of the assessee by way of various grounds before us has challenged the validity of reopening proceedings on the premise of issuance of notice u/s. 148 only on the basis of AIR information, which does not furnish any material for escapement of income; non-recording of satisfaction before issuance of notice u/s. 148 and non-compliance of section 151(2) and disposal of objections to notice u/s. 148 by a non-speaking order. In support the ld. AR has relied on plethora of decisions, as cited before the ld. CIT(A) and mentioned in the impugned order. On merits, it was submitted that the assessee had furnished plausible explanations supported by statements of one of the creditors and their confirmations to establish the cash credits in bank account as genuine. He relied on the submissions made before the ld. First appellate authority.
On the other hand, the ld. DR relied on the orders of the authorities below and submitted that proper procedure has been adopted by the Assessing Officer to initiate the proceedings u/s. 147/148 against the assessee and the assessee failed to establish the creditworthiness of the creditors at all. Therefore, the assessee being unable to discharge the onus that lay on him u/s. 68, the ld. Authorities below were quite justified to sustain the addition on merits also.
5. We have considered the rival submissions and have gone through the entire material available on record including the impugned order and the decisions relied by the assessee and we find no infirmity in the decision reached by the ld. CIT(A) in the attending facts and circumstances of the present case. On the legal aspect of the case as well as on merit of addition, the ld. CIT(A) has given cogent reasons to reject various pleas taken by the assessee as taken in the grounds of appeal before us. For ready reference, we reproduce the findings recorded by the ld. CIT(A) in the impugned order as under :
4.1 The AO got information that the assessee had deposited cash amounting to Rs. 27,62,500/- in S/B account maintained with PNB 2009-10. He issued query letter regarding verification of source of cash deposit. But no compliance was made, he therefore proceeded u/s 147/148 and completed assessment u/s 147/143(3) making addition of Rs. 15,00,000/-. 4.2 Ground No. 1,2,3,4&5 (1) The first contention of the AR that the AO has not brought any material on record and that Notice u/s 148 has been issued in mechanical manner and on the basis of suspicion. On going through the assessment order it is seen that AO was diligent enough to issue a query letter dt. 06.01.2017 to the assessee, for verification of the cash deposit in her bank account. It is pertinent to point out that fact regarding the issue of query' letter itself in not dispute. The ld. AR has not appreciated the fact, that till such time the AO issued letter for verification of the deposit, it was a case of suspicion and doubt on part of the AO. He was wanting satisfy himself about the correctness and veracity of the transaction. But, when no response to the query letter was received the AO was led to believe that taxable income had escaped assessment. Therefore his suspicion got converted into a bona-fide belief which was emerging from the non- compliance of the assessee, that led to belief formation on part of the AO that taxable income had escaped assessment. Thus, to say that AO had proceeded on reason to suspect or in a mechanical manner would be a misplaced argument. Thus, it is rejected.
Now coming to the meeting of objections raised by the assessee in response to Notice u/s 148 and on receipt of reasons. After perusal of record it is seen that assessee filed objections on 03.10.2017 which were dealt with and removed by the AO on 6.102017. What is noticed from the perusal of the objections is that the Id. AR instead of going to the root of the issue and bring material on record to rebut the reason to believe had chosen to raise a plethora of legal issues, citing several case laws, without drawing out the implications of the case laws and legal contentions have on the present case. It was incumbent upon the Ld. AR to factually rebut the reasons by way of proper evidence.
The AO has given reasoned factual rebuttal to the objections filed. I see no infirmity in his response. This contention and ground of the assessee thus fails.
As regards non-issuance of show cause I find that the order has been passed u/s 143(3) and sufficient opportunity has been given to the assessee. In this regard it is pertinent to note that the AO has not mechanically added the entire bank deposit after considering the evidences filed and arguments given during the assessment he has added on 15 lacs out of total deposit of 29 lacs odd. Even otherwise the Appeal proceedings are a continuation of the Assessment proceedings and the assessee has been given sufficient opportunity to make his point. Thus, the contention of the Ld. AR is of no consequence and therefore it fails.
4.3, GROUND No. 6.
On the substantive issue of deposit it is seen for the order of the A.O. that after examining the deposits and withdrawal with impugned bank account that the credit of Rs. 15,00,000/- received from Sh. Kuldeep and Gopal Gotam and Dinesh Kumar Sharma was held to be unexplained as the assessee could not prove the identity and creditworthiness of these persons from whom allegedly this deposit in bank account was received.
In appeal, the Id. AR has mechanically reproduced the arguments given before the AO the only legal objection raised is that AO had recorded the statement of Gopal Gautam. But the same was not confronted to the assessee nor any cross examination was offered or allowed.
Here, the Id. AR has failed to understand that statement of Gopal Gautam was i favor of the assessee, but Gopal Gautam did not substantiate his contention th; he was indeed a man of means who had the capacity to further a sum of R: 5,00,000/-to the Appellant. The statement was not used by the AO to drai adverse inference. Rather, it was a statement in favour of the assessee which th AO did not accept as it was a bald statement in favour of the assessee but was no corroborative evidence to support the same.
Thus, the Hon'ble SC judgment of Andeman Timber does not have implication or relevance in the matter where statement of the witness was in favour of the assessee but was not accepted by the AO as the witness could not substantiate his conformation favorable to the assessee by bringing evidence to support the same. In other two cases also no concrete evidence has been placed on record to controvert the findings of the AO that the persons claiming to have forwarded the monies had the means to do so. The AR thus, failed to bring any material on record to discount the findings of the AO with regard to unexplained deposit in the bank account of the assessee. Thus, considering the arguments of the Id. counsel, I am of the view that he has not been able to rebut the findings of the AO.
In view of the forgoing discussion the appeal is rejected and all grounds of are hereby dismissed.” It is worthwhile to point out that in the instant case, the Assessing Officer has not recorded its reason on sole receipt of AIR information without application of mind, but before initiating the proceedings u/s. 147/148, he issued query letters to the assessee to verify the cash deposits in the bank account. The assessee at no point of time has stated that the query letter were not in the notice of the assessee nor has he assigned any reason for not responding to the said verification letters. After these exercise undertaken by the Assessing Officer, it cannot be said that the reasons recorded were reason to suspect and not reason to believe escapement of income. As regards non-compliance of section 151(2) of the Act, we find that the Assessing Officer has taken requisite sanction from the competent authority to issue notice u/s. 148, which is placed at page 27 of the paper book. As regards the satisfaction of the Assessing Officer, after taking steps to verify the cash deposit, in which the assessee did not cooperate, and after recording the reason to believe, the Assessing Officer has categorically mentioned in the reasons recorded that “I, therefore, consider that it is a fit case for issue of notice u/s. 148”.
On merits of the case, the assessee has miserably failed to discharge the onus that lay on her by section 68 of the Act. The creditworthiness of the creditors does not stand proved by any cogent evidence on record. Mere bald statements of Gopal Gautam that he deposited the sum of Rs.5 lakhs to the account of assessee after getting the amount from his father or mother, is not supported by any corroborative evidence and no proof of creditworthiness of other two creditors is also available on record. In presence of all these peculiar facts and circumstances of the present case, the decisions relied by the assessee in several cases have rightly not been considered as relevant to the case of assessee. We also do not find any credible material on record from the side of assessee to discard the findings reached by the ld. Authorities below. Accordingly, the appeal of the assessee is found devoid of merits and is thus, liable to be dismissed.
In the result, the appeal is dismissed.
Order pronounced in the open court on 29th Oct., 2018.