ANUJ KUMAR,JAIPUR vs. ITO, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 62/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2009-10 cuke Shri Anuj Kumar The ITO Vs. V & PO: Matalwas Ward- 1(3) Tehsil: Kotkasim, Alwar Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: DUXPK 2498 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by: Shri P.C. Parwal CA jktLo dh vksj ls@ Revenue by :Smt. Poonam Rai, DCIT-. DR lquokbZ dh rkjh[k@ Date of Hearing : 17/04/2017 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 21 /04/2017 vkns'k@ ORDER PER BHAGCHAND, AM The assessee has filed an appeal against the order of the ld. CIT(A), Alwar dated 30-11-2016 for the assessment year 2009-10 raising therein following ground:- ‘’1. The ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 5,76,200/- of the Act.’’ 2.1 Apropos solitary ground of the assessee, the facts as emerges from the order of the ld. CIT(A) is as under:-

2 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . ‘’7.3 I have gone through the assessment order as well as submissions made by the appellant. Following facts have emerged.

3 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . 7. That the present appeal is against the addition of Rs. 25,00,000/- under section 68 of the Act.

7.3.2 I have considered the above mentioned facts of the case, I have particularly taken into accounts the facts that with regard to source of cash deposits amounting to Rs. 25 lakhs in the saving bank account of Shri Anuj Kumar, it was admitted by Shri Harpal Singh, Brother-in-law of the appellant to have advanced the amount to the appellant and that the source of such cash deposits was out of cash proceeds received from the sale of 2 agricultural plots. I have also considered the fact that total cash received by Shri Harpal Singh from sale proceeds comes to Rs. 25,87,200/-. Necessary evidence for this was filed during the assessment proceedings as well as during appellate proceedings. I have also taken into consideration that Shri Harpal Singh is having a valid PAN and assessable at Ward- 2(1), Gurgaon, Haryana.

7.3.3 Now various judicial pronouncement have laid down parameters to determine whether a cash credit can be treated as explained in the hand of the recipient or not. Some of the important judicial pronouncement are as under:-

In the High Court of Delhi at New Delhi subject: Income Tax Act, 1961, ITA No. 342 of 2011 Reserved on :December 12, 2011, Date of Decision: February 15,2012. Commissioner of Income Tax – Appellant through: Mr. Deepak Chopra, Advocate Versus Nova Promoters & Finance (P) Ltd. – Respondent Through Mr. C.S. Agarwal, Sr. Advocate with Mr. Prakash Kumar and Mr.Arta Trana Panda, Advocates, Coram: Hon'ble Mr. Justice Sanjiv Khanna, Hon'ble Mr. Justice R.V. Easwar, J.

…..36. It is not only relevant to note the above facts, which distinguish those three cases (supra) from the case before us, but it is also relevant to note that the following observations made by this Court in the above three cases: ‘’There cannot be two opinions on the aspect that the

4 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . pernicious practice of conversion of unaccounted money through the masquerade of or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessed it should not be harassed by the revenues insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the AO for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while making the tightrope of Sections 68 & 69 of the I.T. Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty bound to carryout through investigations. But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and teat the subscribed capital as the undisclosed income of the company. We may also note that a reference was made by this Court to several authorities including at least seven judgment of this Court on the question of applicability of Section 68 to share application monies, and the position was pithily summed up as follows at pages 282 of 299 ITR: ‘’In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the I.T. Act. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely whether it has been transmitted through banking or indisputable channels; (3) the creditworthiness or financial strength of the creditor / subscriber, (4) if the relevant details o the address or PAN identity of the creditor / subscriber are furnished to the Department alongwith copies of the shareholders registers, share application forms, share transfer register etc. it would constitute acceptable proof or acceptable explanation by the assessee (5) The Department would not be justified in

5 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor / subscriber denies or repudiates the transaction set up by the assessed or should the AO take such repudiation at face value and construe it, without more, against the assessee, (7) the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber the genuineness of the transaction and the veracity of the repudiation.’’ 37……Hence, we find no infirmity with the impugned judgement Subject to the above, Special Leave Petition is dismissed‘’ 38. The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and address, income tax file numbers, their creditworthiness, share application forms and share holders registers, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under section 68 and the remedy open to the revenue is to go after the share applicants in accordance with law…..’’

Thus the High Court has laid down following parameters to be discharged by the assessee on the applicability of Section 68 of the Act on share application money/ cash credits;

The assessee has to prima facie prove;

6 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar .

Thus, going by the parameters set by above mentioned judgements, in this particular case the source of the cash deposits has been proved and the creditor has accepted by way of affidavit also that he has given the amount. He has also given the source of such generation of cash amounts. He has also provided PAN details. Therefore, it is my considered view that the source of cash deposits amounting to Rs. 25 lakhs in the bank account of the appellant is reasonably explained in the hand of the appellant.

However, even if the source of the cash deposit is reasonably explained the question remains as to what is the nature of such cash receipts. It has been claimed by the appellant that the money is received in his accounts for the purpose of purchase of agricultural land in the name of the wife of the creditor Shri Harpal Singh. The claim of the appellant is examined. It is found that the money has been withdrawn from the bank account of the appellant to coincide with the advancement of money for the purchase of 3 plots of agricultural land in the name of Smt. Rajnesh Devi w/o Shri Harpal Singh. Total money advanced from his bank account to purchase land in the name of Smt. Rajnesh Devi comes to Rs. 19,23,800/- including stamp duty. This leaves a balance of Rs. 5,76,200/- in the custody of the appellant which was not given back to Shri Harpal Singh. If, we closely look at the transaction, the claim of the appellant seems to be partly

7 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . true that an amount of Rs. 19,23,800/- out of cash received from Shri Harpal Singh was indeed utilized for the purpose of purchase of land in the name of Smt. Rajnesh Devi,W/o Shri Harpal Singh. But the balance amount of Rs. 5,76,200/- was kept by the appellant, which reasonably can be inferred to have been retained by him as the commission /benefit for facilitating the purchase of land as well as for giving the facility to Shri Harpal Singh to use his bank account for parking of the cash. Even the balance sheet submitted by the appellant for financial year ending on 31-03-2009, an amount of Rs. 8,75,000/- is shown as cash in hand. Therefore, in my considered view, the amount of Rs. 5,76,200/- retained by him is taxable in the hand of Shri Anuj Kumar, the appellant as benefit/ commission income.

In view of the above mentioned facts/ discussion, in my considered view although the amount of Rs. 25 lakhs is explained and hence not justified in addition under section 68 of the Act but the amount of Rs. 5,76,200/- is assessable in his hand as commission /benefit income. Therefore, the addition is sustained for an amount of Rs. 5,76,200/-. Accordingly, the appellant’s ground of appeal on this issue is partly allowed.’’

2.2 During the course of hearing, the ld. AR of the assessee prayed for

deletion of addition of Rs. 5,76,200/- sustained by the ld. CIT(A) for

which the ld. AR of the assessee filed the written submission and the

same has been taken into consideration. Facts:-

‘’1. The assessee has no source of income except that he is doing agriculture on 14 bhigas of the land owned by his father at village Matalwas, tehsil Kotkasim, Alwar. Hitherto he neither had a PAN nor was filing any return of income. 2. The AO on the basis of the information that in the bank account of the assessee maintained with SBI, Kotkasim, there is a cash deposit of Rs. 25

8 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . lakhs on 16.10.2008, issued notice u/s 148 to the assessee. In response to this notice, it was explained that his brother-in-law, Shri Harpal Singh, sold 2 agricultural lands at village Moonpur, tehsil Kotkasim, on 16.10.2008 (PB 7-14) for Rs. 25,87,200/- out of which he gave Rs. 25 lakhs to the assessee for purchase of agricultural land in the name of his wife, Smt. Rajnesh Devi, in tehsil Kotkasim and this amount was deposited by the assessee in his bank opened on that day itself. The affidavit of Shri Harpal Singh in this connection was filed (PB 6). It was further explained that the amount so deposited was withdrawn between 06.12.2008 to 18.12.2008 for purchase of agricultural land in the name of Smt. Rajnesh Devi in support of which the copy of the receipt of payment against the sale agreements / registered sale deeds were filed (PB 20- 40). These facts are also mentioned at page 6 of the assessment order.

9 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . assessee on 16.10.2008 being the amount received from his brother-in-law, Shri Harpal Singh out of the sale proceeds of the agricultural lands. Accordingly, the addition made by the AO is rightly deleted by the Ld. CIT(A). 2. The Ld. CIT(A) also accepted the that the assessee has withdrawn Rs. 25 lakhs from his bank account between 06.12.2008 to 18.12.2008. To explain the utilisation of such withdrawal, the assessee filed a cash statement (PB 19) linking the withdrawals from the bank account with the amount advanced to various persons for purchase of land on account of Shri Harpal Singh. This is supported by the receipt of advance given to these 4 persons and also the sale deeds executed by 3 persons in the name of Smt. Rajesh Devi, wife of Shri Harpal Singh (PB 20-40). The Ld. CIT(A) after considering the same accepted the utilisation of the amount of Rs. 19,23,800/- (correct amount is Rs. 19,42,880/-) where the sale deed has been executed but without any basis failed to consider the amount of Rs. 5 lakhs advanced on 18.12.2008 to Smt. Bharti Devi and Satish Devi (PB 22) against the agreement for purchase of agricultural land. The Ld. CIT(A) further wrongly held that as per the Balance Sheet for FY ending on 31.03.2009 Rs. 8,75,000/- is shown as cash in hand, whereas assessee has not prepared / filed such balance sheet. Infact, the amount of Rs. 8,75,000/- is the total of the cash statement (PB 19). Thus, the utilisation of Rs. 25 lakhs withdrawn from the bank account for the purpose of purchase of agricultural lands for Shri Harpal Singh is fully established. In any case, there is no material with the Ld. CIT(A) to presume that the assessee has retained any amount out of the amount received from Shri Harpal Singh towards any commission / benefit for facilitating the purchase of land / use of his bank account, more particularly when Shri Harpal Singh is the brother-in-law of the assessee. It is a settled law that only real income can be taxed, hypothetical income cannot be taxed nor income cannot be taxed in vacuum as held by the Hon’ble Supreme Court in case E.D. Sasoon & Co. & Ors. vs. CIT (1954) 26 ITR 27 and Godhra Electricity Co. Ltd. vs. CIT (1997) 225 ITR 746. ‘’

2.3 On the other hand, the ld. DR relied on the order of the ld. CIT(A).

2.4 I have heard the rival contentions and perused the materials

available on record. it is noted that that the ld. CIT(A) has accepted the

source of deposit of Rs. 25 lacs made in the bank account of the assessee

being sale proceeds of the agricultural land sold by his brother-in-law,

Shri Haripal Singh. However, he still confirmed an addition of

10 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . Rs. 5,76,200/- for the reason that out of the amount of Rs. 25 lacs so

deposited only an amount of Rs. 19,23,800/- has been utilized for

purchase of land in the name of Smt. Rajnesh Devi, wife of Shri Harpal

Singh. Therefore, the balance amount of Rs. 5,76,200/- retained by the

assessee is his benefit/ commission income for the services given by the

assessee for using his bank account and facilitating the purchase of land.

This view taken by the ld. CIT(A) in my considered view is neither

factually correct nor legally tenable. This is for the reason that from the

bank account and the document placed on record from which a cash flow

statement is prepared and available at page 19 of the assessee's paper

book in which it is mentioned that the amount the of Rs. 25 lacs has been

withdrawn by the assessee from his bank account out of which Rs.

19,42,880/- is utilized for purchase of land in the name of Smt. Rajnesh

Devi and on expenses of registry. Further an amount of Rs. 5 lakh is

advanced to Smt. Bharti Devi and Satish Devi for purchase of land. Thus,

an amount of Rs. 24,42,800/- has been utilized. There is no material to

hold that any part of the withdrawn amount of Rs. 25 lacs has been

retained by the assessee as his commission for facilitating the purchase of

land/ use of his bank account. Therefore, on such hypothetical

11 ITA No.62/JP/2017 Shri Anuj Kumar vs. ITO, Ward- 1(3), Alwar . assumption, the addition cannot be sustained and thus the same is directed to be deleted. Hence, the solitary ground of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 21 /04/2017. Sd/- ¼HkkxpUn½ (Bhagchand) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 21 /04/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Anuj Kumar, Alwar izR;FkhZ@ The Respondent- The ITO, Ward- 1(3), Alwar 2. 3. vk;dj vk;qDr¼vihy½@ CIT(A). vk;dj vk;qDr@ CIT, 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 62/JP/2017 ) 6. vkns'kkuqlkj@ By order,

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