SRI SIRAJUDDIN CHAMAN MIAH SAB MULLA ,HAVERI vs. THE INCOME TAX OFFICER WARD-2 , HAVERI

Per Shri Jason P Boaz, A.M. : This appeal by the assessee is directed against the order of CIT (A), Davangere, dated 28.08.2018, for Assessment Year 2014-15.

Page 2 of 9 of the Income Tax Act, 1961 (in short ‘the Act’) as he had reason to believe that income of the assessee exigible to tax had escaped assessment. After obtaining the approval of the JCIT, the AO issued notice u/s 148 of the Act. On being required to explain the aforesaid cash deposits in his savings bank account, the assessee in written submissions before the AO submitted that the said deposits were out of savings from salary of 15 years and agricultural income earned by his father from agriculture carried out on his approx. 10 acres of irrigated land at Masur, Haveri which was given to him. The AO observing that the assessee had failed to file any supporting evidence such as sale bills for agricultural produce and taking into consideration the fact that assessee was a KSRTC employee for past 15 years, earning salary of above Rs. 2 lakhs in the year under consideration, held an amount of Rs.7,05,000/- to be unexplained cash credits u/s 68 of the Act out of cash deposits of Rs. 10 lakhs made in his savings bank account with Canara Bank, Masur. A further addition Rs.24,041/- was made on account of short declaration of interest received from savings bank account in Canara Bank. The AO accordingly concluded the order of assessment u/s 143(3) r.w.s. 147 of the Act vide order dated 04.02.2017 wherein the assessee’s income was determined at Rs.9,41,810/-.

2.2 Aggrieved by the order of assessment dated 04.12.2017 for Assessment Year 2014-15, the assessee preferred an appeal before the CIT(A), Davangere which was dismissed vide the impugned order dated 28.08.2018.

The orders of the authorities below in so far as they are 1. against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.

Page 3 of 9 The order of re-assessment is bad in law and void-ab-initio 2. for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re- assessment requires to be cancelled. The learned CIT[A] is not justified in sustaining the 3. addition of Rs. 7,05,000/- made u/s 68 of the Act in respect of cash deposits made in the bank account of the appellant under the facts and in the circumstances of the appellant's case. The learned CIT[A] ought to have appreciated that the 4. appellant had explained the source of the cash deposits made in his bank account, which was from out of the funds provided by his father, who was cultivating agricultural lands and deriving income; who had also filed an affidavit explaining and owing up the source of the cash deposits made in the appellant's bank account and thus, the addition sustained was unjustified and liable to be deleted. Without prejudice to the above, the impugned addition made 5. is highly excessive and liable to be reduced substantially. Without prejudice to the right to seek waiver with the 6. Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-B of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled. For the above and other grounds that may be urged at the 7. time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.

Page 4 of 9 5.1 In this ground (supra), the assessee denies himself liable to be charged interest u/s 234B of the Act. The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition has been upheld by the Hon’ble Apex Court in the case of Anjum H. Ghaswala (252 ITR 1) (SC) and I, therefore, uphold the action of the AO in charging the assessee the aforesaid interest u/s 234B of the Act. The AO is, however, directed to re-compute the interest chargeable u/s 234B of the Act, if any, while giving effect of this order.

6.2 In written submissions filed before the Tribunal, the assessee has contended as under: 9. Sanction not properly obtained for re-opening of assessment: It is submitted that the provisions of section 151(2) of the Act mandates that the assessing officer should obtain prior approval of the Joint Commissioner of Income Tax for reopening of assessment. It is relevant to mention that on perusal of the notice u/s 148 of the Act, it is not ascertainable whether proper sanction as contemplated u/s 151 of the Act has been obtained.

6.3 Per contra, the learned DR for Revenue supported the orders of the authorities below on this issue.

6.4.1 I have heard the rival contentions and perused and carefully considered the orders of the authorities below and submissions put forth in regard to the validity of assumption of jurisdiction u/s 147/148 of the Act by the AO. I find that the averments of the assessee (supra) to be a repetition of those put forth by the assessee before the CIT(A). As rightly observed by the CIT, the assessee has not been able to prove that sanction as required u/s 151(2) of the Act was not obtained by the AO. I also find from a perusal of the order of assessment that the assessee has participated in and corresponded with the AO in assessment proceedings and has not requested the AO to make available to him the reasons recorded for initiation of proceedings u/s 147 of the Act. This fact that the assessee has not sought the reasons recorded has been confirmed by the assessee himself in para 7 of the ‘Statement of Facts’ filed before the CIT(A) and finds mention at page 5 of the impugned order. In view of the above, I find no merit in the averments of the assessee that the AO obtained requisite sanction for re-opening the assessment as mandated u/s 151(2) of the Act as no proof to that effect has been filed before me and therefore reject the contentions raised by the assessee in ground No. 2.

Page 6 of 9 7. Ground No.s 3 and 4 – Addition of unexplained cash credits u/s 68 of the Act 7.1 In these grounds (supra), the assessee contends that the CIT(A) is not justified in sustaining the addition of Rs.7,05,000/- made u/s 68 of the Act in respect of cash deposits made in the assessee’s bank account in Canara Bank, Masur, Davangere. It is argued that the CIT(A) ought to have accepted the assessee’s explanation that the source of cash deposits in his bank account (supra) was out of funds provided by his father, who had confirmed this as being out of income derived/earned from cultivating agricultural land. In written submission filed before the Bench in this regard, the assessee contends as under: “5a. It is submitted that the appellant is drawing salary from KSRTC for the last 15 years. The appellant's father owns 10 acres of Irrigated Agricultural Lands at Masur. On an average, his annual agricultural income is about Rs. 5,00,000 /- per annum. The appellant s the only son of his father and they all reside together. Considering the size of the family and the moderate standard of living, the appellant could save substantial portion of the agricultural income. The said lands are held by his father since more than 10 to 15 years. Due to advanced age of his father and ease of bank account operations, the accumulations of agricultural income of the past were deposited to the bank account of the appellant. Thus the appellant had a clear and explainable source in respect of the deposits made to the bank accounts which could not have been: disbelieved. The appellant have furnished the proof of owning agricultural land by producing pahinis issued by the Revenue Authority and the same is marked as (Annexure E). The agricultural produce was sold locally. Further the appellant's father's income consisted of only agricultural income and hence there was no obligation to file the ROI on his part. Thus the appellant had satisfactorily explained the source of the deposits to his bank account. The AO with a pre judged perception that the agricultural income accumulations should always be deposited in a bank account (and not in the form of cash) has disbelieved the explanation for the source which is not justifiable in the facts of the case. It is prayed that the explanation of the appellant on this count be accepted and the additions of rs.7,05,000/- be set aside in the interest of justice.”

The learned AR reiterated the above arguments.

Page 7 of 9 7.2 Per contra, the learned DR supported the finding of the authorities below on this issue. It was submitted that since the averments of the assessee are mere reiteration of earlier submissions before the authorities below, not backed by documentary evidence; like filing of sale bills of agricultural produce, the assessee’s claim is liable to be rejected.

7.3.1 I have heard the rival contentions and perused and carefully considered the submissions put forth and the material on record. The assessee in the case on hand is an employee of KSRTC for the last 15 years and his income including the annual salary for the year relevant to Assessment Year 2014-15 is approx. Rs. 2 lakhs apart from bank interest of approx. Rs.63,000/-.

7.3.2 The assessee’s claim is that the source of bank deposits of Rs.10,05,000/- in his Canara Bank account was out of savings from salary and out of the agricultural income earned by his father from out of agricultural operations on approx. 10 acres of land in Hiriyur Taluk supervised by the assessee. In this regard, the assessee has filed copies of pahinis issued by Revenue authorities to show ownership of agricultural land. I have perused the details filed and find that as before the authorities below, before me also, except for making claims, the assessee has not been able to file any proof like copies of sale bills of agricultural produce to evidence that the assessee was carrying on agricultural operations. Even the copies of pahinis filed in this regard do no mention the crops grown thereon, the extent of the land used for agricultural operations, etc. I am inclined to agree with the CIT(A) that the arguments put forth by the assessee to claim the earning of agricultural income is only a theoretical basis for explaining the sources of cash credits. I, therefore, uphold the finding of the authorities below that the assessee’s explanation that agricultural income earned by his father from out of agricultural operations is untenable and therefore reject the same.

Page 8 of 9 7.3.3 The other claim put forth by the assessee in an attempt to explain the source of cash deposits of Rs.10,05,000/- in his savings bank account was that it was out of his salary earnings from KSRTC with whom he was employed for the last 15 years. The AO after considering the assessee’s explanations in this regard held on an adhoc basis that cash deposits to the extent of Rs.3 lakhs could be taken to be explained as being out of savings from salaries and brought to tax the balance amount of Rs.7,05,000/- as unexplained credits u/s 68 of the Act. In my considered view, since the assessee’s annual salary in the year under consideration is in excess of Rs.2,00,000/- and interest income is in excess of Rs.60,000/- taking into consideration the fact that the assessee is employed with KSRTC for the last 15 years, it would only be fair and reasonable to hold that an amount of Rs.5,00,000/- could be taken as savings out of salary income, to explain the source of cash deposits in Bank to the extent of Rs.5,00,000/-. Therefore, the addition of unexplained credits u/s 68 of the Act out of cash deposits in the assessee’s bank account in Canara Bank Masur, Davangere of Rs.7,05,000/- made by the AO is sustained to the extent of Rs.5,05,000/- only. Consequently, grounds raised by the assessee on this issue is partly allowed.

Order pronounced in the open court on this 2nd day of January, 2019.