MEWA SINGH BOLA,JHUNJHUNU vs. ADIT, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh Hkkxpan] ys[kk lnL; ,oa Jh dqy Hkkjr] U;kf;d lnL; ds le{k BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM

vk;dj vihy la-@ITA No. 527/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2006-07 cuke Mewa Singh Bola, A.D.I.T. (Intt. Tax.), Vs. M/s Bola Automobiles, Road No. Jaipur. 3, Jhunjhunu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHNPB 5477 E vihykFkhZ@Appellant izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 541/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2006-07 cuke Deputy Director of Income Mewa Singh Bola, Vs. Tax, (International Taxation), M/s Bola Automobiles, Road Jaipur. No. 3, Jhunjhunu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHNPB 5477 E vihykFkhZ@Appellant izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 373/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2007-08 cuke Assistant Director of Income Mewa Singh Bola, Vs. Tax, (International Taxation), M/s Bola Automobiles, Road Jaipur. No. 3, Jhunjhunu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHNPB 5477 E vihykFkhZ@Appellant izR;FkhZ@Respondent

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 2 Mewa Singh Bola Vs ADIT (Int. Tax) vk;dj vihy la-@ITA No. 374/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Assistant Director of Income Mewa Singh Bola, Vs. Tax, (International Taxation), M/s Bola Automobiles, Road Jaipur. No. 3, Jhunjhunu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHNPB 5477 E vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 274/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2008-09 cuke Mewa Singh Bola, A.D.I.T. (Intt. Tax.), Vs. M/s Bola Automobiles, Road No. Jaipur. 3, Jhunjhunu. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHNPB 5477 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Manish Agarwal & Shri O.P. Agarwal (CA) jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 09/01/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31/01/2017 vkns'k@ ORDER

PER: KUL BHARAT, J.M. This is a bunch of cross appeals filed by the assessee and by the revenue arise against the separate orders dated 12/03/2013, 16/01/2012 and 31/01/2012 passed by the ld. CIT(A)-II, Jaipur pertaining to the A.Y. 2006-07, 2007-08 & 2008-09.

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convenience and brevity, a common order is being passed.

cross appeal by the revenue being ITA N. 541/JP/2013 for the A.Y. 2006-

following grounds of appeal:

Assessee’s appeal ITA No. 527/JP/2013 “1. Under the facts and circumstances, the A.O. has wrongly issued notice U/s 148 on 08/03/2011 for the assessment year 2006-07 against the provisions of Section 149(3) of the Income Tax Act, so the notice issued U/s 148 was null and void. The Hon’ble CIT has discussed the period four years instead of 2 years as provided in Section 149(3) of the Income Tax Act in his order. 2. Under the facts and circumstances, the Hon’ble CIT has wrongly made the additions of Rs. 95,67,732.00 as due to difference in Balancesheet while the difference was explained during the course of hearing and the relevant information was produced. The Hon’ble CIT has also confirmed the addition for a sum of Rs. 84,59,385.00 without looking into the facts of the case and the record available on the file. 3. Under the facts and circumstances, the revised balancesheet was filed during the hearing of the case before the A.O. The then A.O. was satisfied with the revised balancesheet and no addition was made on the basis of revised balancesheet. Notice U/s 148 was

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issued and the A.O. has made addition of the difference of balancesheet in the income. The difference was reduction of capital account from Rs. 3,94,52,058.00 to Rs. 2,22,08,767.00 so the net reduction of capital in the balancesheet was 1,72,43,291.00 and the A.O. has made the addition on the basis of difference in the total of balancesheet and that has been explained during the course of hearing before the A.O. and during the hearing of the case before the Hon’ble CIT.” Revenue’s appeal ITA No. 541/JP/2013 “1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in reducing the addition of Rs. 95,67,732/- to Rs. 84,59,285/- despite the fact that she has herself, accepted that the assessee has not been able to fully reconcile the difference between the original and the revised balancesheet.”

Resident Indian (NRI) individual and working as a driver of Heavy

vehicles in Saudi Arabia since last 23 years. Besides this assessee is

having sub dealership of Bajaj Scooters, Motor Cycles and Spare parts

being run in name and style of M/s Bola Automobiles at Jhunjhunu. Apart

from this, assessee derives income by way of interest on loans advanced.

For the year under appeal, the return of income was filed on 31.10.2006,

declaring total income at Rs. 6,42,674/- which was processed u/s 143(1)

of the Income Tax Act, 1961 (hereinafter referred as the Act).

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Subsequently, the case was selected for scrutiny and order u/s 143(3) of

the Act dated 27.11.2008 was passed assessing the total income at

Rs.10,06,584/-. Thereafter the case of assessee was reopened u/s 147

vide issuance of notice u/s 148 dated 08.03.2011. The case was

reopened by Ld. AO on the basis of observations made in the assessment

proceedings for A.Y.2007-08 that assessee had received interest income

of Rs.63,293/- from Sh. Dilip Modi and Rs.3,58,681/- from Nirja Modi,

which was neither shown in return of income nor considered during

assessment proceedings u/s 143(3) of the Act. The AO observed the

difference in total of personal balance sheet furnished by assessee during

the course of assessment proceedings for A.Y.2006-07 and the one

furnished during the course of assessment proceedings for A.Y.2007-08,

which reflected the totals of Rs.5,56,53,391/- and Rs.6,52,21,123/-

respectively and thus there was a difference of Rs.95,67,732/-. The AO

vide notice u/s 142(1) dated 20.12.2011 sought explanation for

difference. Assessee explained through submission, however the same

was not accepted by the A.O. and addition was made. Assessment was

completed by Assessing Officer u/s 143(3) r.w.s. 147 of the Act vide

orders dated 27.12.2011 at a total income of Rs.1,09,96,290/-, wherein,

various additions to the tune of Rs. 99,89,706/- were made.

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assessee carried the matter before the ld. CIT(A), who after considering

the submissions, has partly allowed the appeal by observing as under:-

“As at the assessment and appellate proceedings the appellant has not been able to reconcile the difference in the balance sheets of AY 2006-07 filed with return at Rs 5,56,53,391/- and that filed at the time of reassessment proceedings at Rs. 6,52,21,123/-, to the extent of Rs 84,59,385/- (Rs 2,68,11,023/- informed as not reported on Liability side of the original balance sheet and Rs. 1,83,51,638/- not reported on the Assets side of the original balance sheet which means still a difference of Rs. 84,59,385/- Rs. 2,68,11,023/- - Rs. 1,83,51,638/-), therefore even during appellate proceedings there remains a difference of Rs 84,59,385/- on the liability and assets side, therefore addition of this much of amount that is Rs. 84,59,385/- is upheld out of Rs. 95,67,732/- (Rs. 6,52,21,123/- amount as per revised balance sheet on the Liability and Assets side – Rs. 5,56,53,391/- on the Liability and Assets side of the original balance sheet filed with return) made by the AO. The remaining amount is directed to be deleted.”

therefore, the same stands dismissed as not pressed.

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7.1 Regarding grounds No. 2 and 3 of the appeal, the ld. AR of the

assessee has submitted that the assessee was not into practice of

maintaining personal books of accounts. However, during the course of

assessment proceedings the AO directed to furnish personal balance

sheet. The assessee was not present in India and had no knowledge

about book keeping etc., his staff, who was not even qualified, prepared

personal balance sheet of assessee on the basis of his part knowledge

and details available. Also, without having any base from which to start,

he was unable to compile data completely and properly and in this

process certain assets as well liabilities were omitted to be incorporated

in Balance Sheet, thus same were not reflected separately in balance

sheet. He submitted that the Balance Sheet was prepared in the absence

of assessee and thus certain assets as well as liabilities were omitted to

be incorporated, effect thereof was compensated and ultimately there

was no difference in balance sheet, however the same was not as per

accounting principles. Thus, subsequently, when the mistake was

realized, balance sheet of assessee was redrafted and that was the one

submitted during the course of assessment proceedings for A.Y.2007-08.

He also submitted that the total of Balance Sheet represents total of

assets and liabilities, which being in the nature of “Capital” cannot be

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included in total income of assessee by any stretch of imagination.

Further, for a balance sheet to give true and fair view of state of affairs

of an individual, it has to include all his investments as well as liabilities

whether in his individual capacity or as a share in any concern. Further,

to hold a balance sheet as self explanatory, it is to be looked into

whether sources of all the assets are duly explained either by own funds

of assessee or represented by certain liabilities, genuineness of which is

not under doubt. In other words, addition on this account has to be

based upon evidences which prove either:

(i) Sources of assets as unexplained or (ii) Liabilities reflecting in balance sheet being not genuine

However, in the instant case, the AO has not even looked into the nature

of assets/liabilities which were not incorporated in original balance sheet

and straightaway proceeded to make addition equivalent to difference in

balance sheet, which had no basis. During appellate proceedings,

assessee furnished documentary evidences in the shape of bank

statements etc. to reconcile the differences. Ld. CIT(A) though did not

raise any doubt regarding genuineness of assets and liabilities which

remained incorporated in the original Balance Sheet yet allowed relief of

Rs.11,08,347/- only. Again, Ld. CIT(A) did not look in to the substance

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and rather confirmed addition of Rs.84,59,385/- in mechanical manner,

i.e. by computing difference between unincorporated assets and

liabilities. He submitted that both the lower authorities ignored the vital

fact that none of the unincorporated assets as well as liabilities were not

genuine and it was just that since assessee was not present in India at

the time balance sheet was prepared and further balance sheet was

prepared by non qualified person, some of the assets were written off in

capital account and some were shown under wrong head. To

substantiate the above, a reconciliation has been prepared which clearly

depicts the reasons for difference in the total of balance sheet:

Total Assets Side of revised Balance Sheet 5,56,53,391.00 Add : I) difference in Nirjamodi account ) 4,21,978.00 (Accrued Interest) (54,21,978-50,00,000) II) Balance of Bhola service Centre 6,34,940.00 (Omitted to be recorded) III) FDRs Not Considered 20,09,577.00 (Omitted to be recorded) II) Balances of OBC Banks A) OBC 960 87,97,770.40 B) OBC 030 51,037.00 C) OBC 080 1,064.00 D) OBC 510 73,344.07 89,23,215.47 (Omitted to be recorded) 6,76,43,101.47 Less: I) Balance of Vimla Devi shown in original 20,00,000.00 Smt. Vimla Devi is wife of BS assessee, whom he had advanced a sum of Rs.20,00,000/- which was

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shown as asset in original balance sheet. However, Smt. Vimla Devi being home maker, balance in gher bank account represents deposits made by assessee only. Thus in revised balance sheet, assessee has incorporated the balance in bank account of Vimla Devi, which already included the sum of Rs.20 lacs, thus Loan to Vimla Devi was not shown in Revised balance sheet) II) Difference of cash balance (Accrued interest was wrongly shown as received, now (2418846.36-1996866.36) 4,21,978.00 rectified) 6,52,21,123.47

Further, by no stretch of imagination, difference in total of balance sheet

be regarded as “Income” unless the genuineness of corresponding

liabilities is under question. In the circumstances of the case, it is humbly

prayed that addition made by AO deserves to be deleted. In the

alternative it is prayed that since the first Balance Sheet was prepared in

absence of the assessee and now the assessee is available in India and is

ready to furnish all the necessary evidences in this regard, the matter

may please be set aside to the file of the ld. AO so that the assessee

could very well explain the difference.

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submissions as made by the ld. AR and relied on the order of the

Assessing Officer.

the material available on the record and also gone through the orders of

the authorities below. It is contended by the ld. Counsel of the assessee

that the assessee is not in possession to reconcile the difference in assets

and liabilities. After considering the totality of the facts of present case

and the interest of principle justice, we deem it appropriate to set aside

the assessment and direct the Assessing Officer to make de novo

assessment, after considering the entire material and making necessary

enquiry about the genuineness of the claim of the assessee. Accordingly,

the appeal of the assessee is allowed for statistical purposes only.

9.1 Regarding cross appeal of the revenue being ITA No. 541/JP/2013,

since we have set aside the assessment order and directed the Assessing

Officer to frame de novo assessment after considering the material, the

appeal of the revenue is also allowed for statistical purposes only.

pertaining to assessment year 2007-08, wherein the revenue has raised

following grounds of appeal:

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“1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 10,19,828/- made on account of disallowances of interest paid to Bank of Baroda, by holding that it was expenditure against the interest declared by the assessee and ignoring the findings of the A.O.

was reopened and the assessment U/s 147 read with Section 143(3) of

the Act was framed vide order dated 22/12/2010. While framing the

assessment, the Assessing Officer made addition in respect of

disallowance of Rs. 10,19,828/- on account of interest paid to bank of

Baroda and undisclosed income of Rs. 20,42,216/-.

assessee carried the matter before the ld. CIT(A), who after considering

the submissions, partly allowed the appeal, thereby the ld. CIT(A)

deleted both the additions i.e. of Rs. 10,19,828/- and Rs. 20,42,216/-.

Now the revenue is in appeal before us. The 1st ground of appeal 13.

is against deletion of addition of Rs. 10,19,828/- made on account of

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disallowances of interest paid to Bank of Baroda. The ld. Sr. DR has

vehemently supported the order of the Assessing Officer and submitted

that the ld. CIT(A) was not justified in deleting the addition.

of the ld. CIT(A), reiterated the submissions as made in the written

submissions and submitted that the ld. CIT(A) has been given a finding

on fact.

the material available on the record and have also perused the orders of

the lower authorities. We find that the ld. CIT(A) has given a finding on

facts on this issue by observing as under:-

“4.1 I have duly considered the submissions of the appellant. The appellant is a non resident Indian and staying in Saudia Arabia since last 25 years. In the original return of income, interest income of Rs. 1,80,712/- was offered to tax. However the AR of the appellant had inadvertently not taken interest income of Rs 12,00,000/- received from Jhunjhunu Academy Samiti, Smt. Niraja Modi and Sh. Dilip Modi. The interest income of Rs 12,00,000/- was offered to tax through revised computation of income filed vide letter dated 07.04.2010. The appellant had invested

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an amount of Rs 1,50,00,000/- in M/s Utthan Township and Developers Pvt. Ltd on 27.10.2004 and this amount was invested out of his NRI funds. The advances to Jhunjhunu Academy Samiti, Smt. Niraja Modi and Sh. Dilip Modi were given out of loans taken from Bank of Baroda, Jhunjhunu. The appellant had paid interest of Rs 10,19,828/- to Bank of Baroda as against the interest income of Rs 12,00,000/- received from the above 3 parties. It was not the case of the AO that interest was charged from these parties at a lesser rate and on the contrary, the appellant had declared higher rate of interest. Under these circumstances, the disallowance of interest by the AO was without analyzing the proper facts and seems to have been made in haste. In the case of CIT Vs Pankaj Munjal family trust (326 ITR 286), the assessee was a family trust. For the assessment year 1983- 84, the Assessing Officer accepted the income returned by the assessee. The Commissioner exercising the power under section 263 of the Income-tax Act called for the record and noticed that the assessee had taken a loan Rs 1,75,000 at 16 percent from family concerns which was utilized by it for the purchase of 4 percent non-cumulative preference shares. The assessee had claimed a deduction for Rs. 29,277 towards the interest amount from its income which was allowed by the Assessing

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Officer. The Commissioner modified the order of assessment and directed the Assessing Officer to restrict the allowance of interest on the borrowings to the extent of the expected return on the investment made out of such borrowings and disallowed the balance interest as claimed by the assessee. The Commissioner issued a similar direction for the assessment year 1984-85. The Tribunal cancelled the orders of the Commissioner. On a reference, it was held by Hon'ble Punjab & Haryana High Court that it was not the case of the Revenue that the assessee had not paid interest to the lender. Merely because the assessee had invested the borrowed amount for the purchase of 4 percent non-cumulative preference shares, it could not be presumed that the transaction was colourable. The Revenue had not brought on record any evidence to show that the interest paid by the assessee on the borrowed amount was highly exorbitant and no such rate of interest was ever prevalent in the market. Therefore, it was held that the Tribunal was right in law in allowing interest as claimed by the assessee. The present case is on a much better footing since the interest received exceeds the interest paid. Therefore the AO was not justified in disallowing the interest. I therefore direct the AO to delete the addition of Rs 10,19,828/- on

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account of disallowance of interest made by him. This ground of appeal is allowed.”

The above finding on fact is not controverted by the revenue by placing

any contrary material on record, therefore, we do not see any reason to

interfere in the order of the ld. CIT(A) and the same is hereby affirmed.

The 2nd ground of appeal is against deletion of addition of Rs. 16.

20,42,216/- made on account of cash deposits in the cash book. The ld.

Sr. DR has vehemently supported the order of the Assessing Officer and

submitted that the ld. CIT(A) was not justified in deleting the addition.

of the ld. CIT(A), reiterated the submissions as made in the written

submissions and submitted that the ld. CIT(A) has been given a finding

on fact.

the material available on the record and have also perused the orders of

the lower authorities. We find that the ld. CIT(A) has given a finding on

facts on this issue by observing as under:-

“5.1 I have duly considered the submissions of the appellant. The AO had made the impugned addition on the ground that there were cash receipts on

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account of encashment of FDRs however the bank statement showing the encashment of FDRs was not submitted. The AO was of the opinion that no bank would give cash on the maturity of FDRs and at the time of encashment, the appellant was not in India. During the course of appellate proceeding, the counsel of appellant submitted the bank statement of Oriental Bank of Commerce, Jhunjhunu showing the encashment of FDRs on 15.07.2006 and 21.11.2006, certificate from the general manager, OBC bank, Jhunjhunu stating that the above amounts were credited to his account No. 066832500000290 on account of encashment of FDRs and copy of his passport to show that he was in India at the time of encashment of these FDRs. These additional evidences were admitted under Sub-Rule 4 of Rule 46A as these were imperative for the proper adjudication of appeal. Further the appellant was staying in Suadia Arabia being NRI and in his absence, the AR was facing difficulty in preparation & compilation of various details. These additional evidences were forwarded to the ADIT (Intl. Tax.) Jaipur for examination. In response, the AO submitted that the above addition was made on account of entry in the cash book. The certificate issued by the general manager, OBC, Jhunjhunu was examined by the AO by calling information from the concerned bank.

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However it is stated by him that amount received on the maturity of FDRs was transferred to loan account of Sh. Chaudhary Bihari Lai. On careful consideration of facts, I find that the AO had made the impugned addition on the ground of non submission of the bank statement and the fact that the appellant was not in India at the time of encashment of FDRs. However the appellant has not only filed bank statement of Oriental Bank of Commerce, Jhunjhunu but also certificate from the general manager, OBC, Jhunjhunu to this effect. It is also evident that in the absence of the appellant, the accountant had inadvertently shown cash receipts in the cash book instead of making entry in the bank book. Merely on the basis of inadvertent only in cash book, the amount reflected in the bank statement cannot be viewed adversely. Similarly the entries in books of account are not conclusive so as to decide the chargeability of a particular receipt to tax as held by Hon’ble Mumbai High Court in the case of CIT Vs Gopal Purohit (336 ITR 287). The AO had himself admitted in the assessment order that no bank would give cash on the encashment of FDRs. Therefore I hold that the amount of Rs 20,42,216/- was credited in the bank account of the appellant on account of encashment of FDRs. The sole grievance of the AO is that the amount was transferred to the loan account of one Sh Chaudhary Bihari Lai. However the

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counsel of appellant has duly explained that his name was entered as Sh Chaudhary Bihari Lai in the bank statement and passport. The appellant was also known by another name i.e. Sh Mewa Singh Bola. Since he hailed from Bola Ki Dhani, Mandrella, he also used this name. In support thereof, the copy of passport was also filed. I also find that even in the certificate issued by general manager, OBC, Jhunjhunu, it was mentioned that Sh Chaudhary Bihari Lal/Mewa Singh Bola resident of Kisan Colony, Jhunjhunu was having saving bank account No. 066832500000290 with them. Therefore it is clear that Sh Chaudhary Bihari Lai was another name of appellant. I therefore hold that the addition of Rs 20,42,216/- made by the AO is not sustainable in view of documentary evidences filed by the appellant. I accordingly direct the AO to delete the addition of Rs 20,42,216/- made by him. This ground of appeal is allowed.” The above finding on fact is not controverted by the revenue by placing

any contrary material on record, therefore, we do not see any reason to

interfere in the order of the ld. CIT(A) and the same is hereby affirmed.

Accordingly, the revenue’s appeal is dismissed.

being ITA No. 374/JP/2012 and 274/JP/2012. Firstly we take revenue’s

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appeal being ITA No. 374/JP/2012 for the A.Y. 2008-09, wherein the

revenue has taken following grounds of appeal:

“1. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition of Rs. 4,43,023/- made on account of disallowances of interest paid to Bank of Baroda, by holding that it was expenditure against the interest declared by the assessee and ignoring the findings of the A.O.

was reopened and the assessment U/s 147 read with Section 143(3) of

the Act was framed vide order dated 22/12/2010. While framing the

assessment, the Assessing Officer made various additions in respect of

interest received from M/s Jhunjhunu Academic Samiti, remittances

received from abroad amounting to Rs. 64,73,555/-, interest from Sh.

Dilip Modi and Smt. Nirija Modi amounting to Rs. 12,00,000/- and

undisclosed interest from Shri Pradeep and Sandeep Manju of Rs.

1,45,830/-.

assessee carried the matter before the ld. CIT(A), who after considering

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the submissions, partly allowed the appeal thereby the ld. CIT(A)

restricted the disallowance of sales promotion expenses, workshop

expenses and sundry expenses to Rs. 38,451/- instead of Rs. 76,904/-

made by the Assessing Officer. However, the ld. CIT(A) confirmed the

expenses in respect of telephone, vehicle registration and disallowance of

depreciation. However, he deleted the addition in respect of interest

income. Further, the ld. CIT(A) restricted the addition of Rs. 15.00 lacs

out of Rs. 64,73,555/-.

made on account of disallowances of interest paid to Bank of Baroda.

The ld. Sr. DR has vehemently supported the order of the Assessing

Officer and submitted that the ld. CIT(A) was not justified in deleting the

addition.

of the ld. CIT(A), reiterated the submissions as made in the written

submissions and submitted that the ld. CIT(A) has been given a finding

on fact. In his written submissions the ld. AR of the assessee has

submitted as under:-

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Ground raised by assessee is against the action of Ld. CIT(A) in sustaining the addition of Rs. 15,00,000/- treating the same as unexplained credit made in bank account of assessee whereas department has challenged the action of Ld. CIT(A)in deleting the addition of Rs. 49,73,555/- by holding credits in bank account as explained. Both the grounds of appeal being interrelated are dealt with together for the sake of convenience.

Brief facts pertaining to this issue are that, during the year under consideration assessee was maintaining bank account No. 006682010049870 (6345) with OBC bank wherein certain remittances received from abroad were credited, details of which are as under: Date Amount 17.10.07 6,99,234/- 24.10.07 15,00,000/- 15.11.07 21,17,136/- 07.01.08 21,57,185/- TOTAL 64,73,555/-

The assessee was directed to furnish documentary evidences in the form of certificates regarding remittances in OBC A/c, which could not be furnished by assessee being out of India for his work and the addition was made by Ld. AO.

However, during the course of appellate proceedings, the assessee was able to gather part evidences in support of his claim in the form of bank statement of OBC showing

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remittance from abroad and certificate from branch manager, the same were submitted as additional evidence, which were admitted by the Ld. CIT(A) and copy of these evidences were provided to Ld. AO for examination, who also conducted direct enquiries from Branch Manager, OBC, Jhunjhunu and it was confirmed that : (i) Receipt of Rs.6,99,234/- was inward remittance from Sh. Ahmed Hussain post box 99813, Alriyadh; & (ii) Receipts of Rs.21,57,185/- &Rs.21,17,136/- were inward remittances from Saudi Arabia through NawalJallal A Alshammari As regard to source of Rs. 15,00,000/- credited in bank account it is submitted that assessee has received a cheque from M/s Utthan Township and Land Development Private Limited on 27.10.2007 bearing No. 350562. Also, kind attention of Hon’ble Bench is invited to the fact that assessee has invested a sum of Rs. 1,50,00,000/- in M/s Utthan Township and Land Development Pvt. Ltd. on 26.10.2004 out of fund repatriated from SaudaiAriba (APB 31) and the impugned cheque of Rs. 15,00,000/- was received back in the year under consideration out of that investment. The contention of assessee is verifiable from the ledger and Balance Sheet of M/s M/s Utthan Township and Land Development Private Limited which shows credit balance of Rs. 57,54,350/- as on 31.03.2007 as unsecured loan in (APB 46). During the year under consideration assessee has received back Rs. 90,00,000/- from company on two different

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 24 Mewa Singh Bola Vs ADIT (Int. Tax)

dates, i.e. Rs. 75,00,000/-on 11.04.2007 vide ch. No. 590356 and Rs. 15,00,000/- on 24.10.2007 vide ch. No. 350562 which are deposited in OBC bank. Further opening and closing balance are matching with assessee books and company’s Balances Sheet (APB volume 1 at page 4,7& 8). The remaining receipts of Rs.49,73,555/- were the receipts from outside India for which the certificate of the banker was also filed, (copies enclosed with WS) however, the ld. AO in remand report alleged that confirmations of these persons were not filed. On receipt of copy of remand report, assessee filed a certificate from NawalJallel Alshammari, Rahima, kingdom of Saudi Arabia, confirming that Sh. Chaudhary Bihari Lal alias Sh. Mewa Singh Bola was working with them since 1992 & remittances made by them of Rs.21,57,185/- and Rs. 21,17,136/- were on account of credit balance of assessee in his Current A/c with them. Further remittance of Rs.6,99,234/- was confirmed to be made by them through their employee Sh. Ahmed Hussain out of credit balance of appellant. Copy of these documents was provided to AO, who alleged that identity creditworthiness & genuineness of impugned transaction was not proved as the copy of ledger A/c of assessee in the books of Nawal Jaleel Alshammuri was not provided.

As regard to explanation related to entries of Rs. 49,73,555/- it is submitted that credit of Rs. 6,99,234/- on 17.10.2007, Rs.

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 25 Mewa Singh Bola Vs ADIT (Int. Tax)

21,17,136/- on 15.11.2007 and Rs. 21,57,185/- on 07.01.2008 were remittance from abroad and during appellate proceedings assessee has submitted photocopy of bank statement and a certificate dated 05.10.2011 from branch stating that the above mentioned amounts were credited to his bank account on account of remittance from abroad. Further Ld. AO himself in his remand report dated 03.01.2012 clearly mentioned that as per letter received from OBC bank to Ld. AO the receipt of Rs. 21,57,185/- and Rs. 21,17,136/- were remitted from Saudia Araiba through Nawaf Jaleel Alshammari and Rs. 6,99,234/- was remitted from Sh Ahmed Hussain Post box-99813, Alriyadh., however Ld. AO has contended that since assessee has not provided the confirmation of these persons, therefore it is not possible to ascertain that these persons are old debtors or creditors, copy enclosed. In response to the reply for remand report assessee has filed a certificate from Nawab Jaleel Alshammari. Rahima, Kingdom of Saudia Arabia, wherein it is clearly mentioned that these remittance were made by him or through his employee out of credit balance of appellant with him. In this regard, kind attention of Hon’ble Bench is invited to CBDT Circular No. 5 dated 20.02.1969 which clarifies that money brought into India by non residents for investments on other purposes is not liable to Indian Income Tax, thus there is no question of a remittance into the country being subjected to tax in India. The question of assessment to tax arises only when there is

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 26 Mewa Singh Bola Vs ADIT (Int. Tax)

no evidence to show that the amount, in question, in fact represents such remittance. On perusal of facts of the case, CBDT Circular No. 5, dt. 20.12.1969, it is submitted that since it has been proved beyond doubt that the sum of Rs.49,73,555/- were received on account of foreign remittances and through banking channels, made by Ld. AO on this account may be held as bad in Law as well as on facts and order of Ld. CIT (A) may please be upheld. Therefore, in light of the facts and circumstances of the case, submission made above, it is humbly prayed that the addition of Rs. 15,00,000/- may please be deleted and the order of the ld. CIT(A) deleting the addition of Rs. 49,73,555/- deserves to be upheld . Department Ground of Appeal No. 1 Under this ground of appeal, Department has challenged the action of Ld. CIT(A) in deleting the addition of Rs. 4,43,023/- by holding that it was paid against the interest income earned by assessee. Brief facts pertaining to this ground of appeal are that, the assessee is an NRI living in Saudai Arabia since last 25 years. The assessee has not visited India from last three years and the assessment was completed in the absence of assessee through his AR. In the original return of income filed by assessee has claimed interest expenses of Rs. 4,43,023/- out of interest income of Rs. 6,16,264/-. However interest of Rs. 1,80,000/- received from Dilip Modi and Rs. 10,20,000/- from

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 27 Mewa Singh Bola Vs ADIT (Int. Tax)

Shri Nirja Modi/- was not considered in the originally return filed by assessee. Further interest of Rs. 36,821/- received from Pradeep Manju, Rs. 67,068/- received from Sandeep Manju and SB interest of Rs. 41,941/- was not considered which was offered to tax through filing of revised computation. Since the interest of Rs. 4,43,023/- was paid to Bank of Baroda against the loan taken which were given advances from which interest is received thus the same was claimed as expenses. However Ld. AO has made disallowance of expenses by stating that assessee has fail to prove the nexus that amount borrowed from bank is the same amount which was lent during the year on which interest income was earned and declared by assessee. During the course of appellate proceedings it was contended that Lo. AO has wrongly disallowed the interest of Rs. 4,43,023/- paid to Bank of Baroda on the loan taken from bank as out of that assessee has given advance of Rs. 50,00,000 to M/s Jhunjhunu Academy Samiti, Rs. 42,50,000/- to Niraja Modi and Rs. 7,50,000/- to Dilip Modi, on which assessee has received interest of Rs. 12,00,000/-. So Ld. AO has made the said addition without going into the facts of case and had wrongly made the addition of Rs. 4,43,023/-

Ld. CIT(A) after considering these facts and also appreciating that the borrowed funds were utilized for making advances having interest income has deleted the disallowance by making detailed observations at page 8 in para 431 of the

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 28 Mewa Singh Bola Vs ADIT (Int. Tax)

order which being action of the ld. CIT(A) deserves to be uphold.”

the material available on the record and have also perused the orders of

the lower authorities. We find that the ld. CIT(A) has given a finding on

facts on this issue by observing as under:-

“4.1 I have duly considered the submissions of the appellant. The appellant is a non resident Indian and staying in Saudia Arabia since last 25 years. In the original return of income, interest income of Rs 6,16,264/- was offered to tax. However the AR of the appellant had inadvertently not taken interest income of Rs 12,00,000/- received from Jhunjhunu Academy Samiti, Smt. Niraja Modi and Sh. Dilip Modi. The interest income of Rs. 12,00,000/- was offered to tax through revised computation of income. Similarly the interest income of Rs. 36,821/- received from Sh Pradeep Manju, Rs. 67,068/- received from Sh Sandeep Manju and saving bank account interest of Rs 41,941/- were offered to tax during the course of assessment proceedings. The appellant had invested an amount of Rs. 1,50,00,000/- in M/s Utthan Township and Developers Pvt. Ltd on 27.10.2004 and this amount was invested out of his NRI funds. The advances to Jhunjhunu Academy Samiti, Smt. Niraja

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 29 Mewa Singh Bola Vs ADIT (Int. Tax)

Modi and Sh. Dilip Modi were given out of loans taken from Bank of Baroda, Jhunjhunu. The appellant had paid interest of Rs. 4,43,023/- to Bank of Baroda as against the interest income of Rs. 12,00,000/- received from the above 3 parties. It was not the case of the AO that interest was charged from these parties at a lesser rate and on the contrary, the appellant had declared higher rate of interest. Under these circumstances, the disallowance of interest by the AO was without analyzing the proper facts and seems to have been made in haste. In the case of CIT Vs Pankaj Munjal family trust (326 ITR 286), the assessee was a family trust. For the assessment year 1983-84, the Assessing Officer accepted the income returned by the assessee. The Commissioner exercising the power under section 263 of the Income-tax Act called for the record and noticed that the assessee had taken a loan Rs. 1,75,000 at 16 percent from family concerns which was utilized by it for the purchase of 4 percent non-cumulative preference shares. The assessee had claimed a deduction for Rs. 29,277 towards the interest amount from its income which was allowed by the Assessing Officer. The Commissioner modified the order of assessment and directed the Assessing Officer to restrict the allowance of interest on the borrowings to the extent of the expected return on the investment

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 30 Mewa Singh Bola Vs ADIT (Int. Tax)

made out of such borrowings and disallowed the balance interest as claimed by the assessee. The Commissioner issued a similar direction for the assessment year 1984- 85. The Tribunal cancelled the orders of the Commissioner. On a reference, it was held by Hon’ble Punjab & Haryana High Court that it was not the case of the Revenue that the assessee had not paid interest to the lender. Merely because the assessee had invested the borrowed amount for the purchase of 4 percent non- cumulative preference shares, it could not be presumed that the transaction was colourable. The Revenue had not brought on record any evidence to show that the interest paid by the assessee on the borrowed amount was highly exorbitant and no such rate of interest was ever prevalent in the market. Therefore, it was held that the Tribunal was right in law in allowing interest as claimed by the assessee. The present case is on a much better footing since the interest received exceeds the interest paid. Therefore the AO was not justified in disallowing the interest. I therefore direct the AO to delete the addition of Rs. 4,43,023/- on account of disallowance of interest made by him. This ground of appeal is allowed.

The above finding on fact is not controverted by the revenue by placing

any contrary material on record, therefore, we do not see any reason to

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 31 Mewa Singh Bola Vs ADIT (Int. Tax)

interfere in the order of the ld. CIT(A) and the same is hereby affirmed.

Accordingly, the revenue’s appeal is dismissed.

The 2nd ground of appeal is against deletion of addition of Rs. 25.

49,73,555/- made on account of unexplained deposit in bank account.

The ld. Sr. DR has vehemently supported the order of the Assessing

Officer and submitted that the ld. CIT(A) was not justified in deleting the

addition.

of the ld. CIT(A), reiterated the submissions as made in the written

submissions and submitted that the ld. CIT(A) has been given a finding

on fact.

the material available on the record and have also perused the orders of

the lower authorities. We find that the ld. CIT(A) has given a finding on

facts on this issue by observing as under:-

“5.1 I have duly considered the submissions of the appellant. At the outset, it is pertinent to mention that vide letter dated 20.10.2011, the counsel of appellant stated that the appellant was an illiterate person living at Saudia Arabia since last 25 years. He was running a

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sub-dealership of Bajaj Auto for sale of motorcycles and scooters. Since the appellant was a NRI, this business was established with the co-operation of family members and relatives. The books of account for dealership business were duly maintained and audited. The appellant however did not maintain any personal books of account. It was conceded that since the entry relating to receipt of Rs 15,00,000/- credited on 24.10.2007 in the bank account with OBC, Jhunjhunu was quite old therefore due to non maintenance of personal books of account and time gap of 5 years, it was difficult to explain the sources of said credit. Since as regards the credit of Rs 15,00,000/-, the appellant has failed to furnish any explanation or submit any documentary evidence about its nature, therefore I have no hesitation in confirming the addition made by the AO. For the remittances of Rs 49,73,555/- during the course of appellate proceeding, the counsel of appellant submitted the bank statement of Oriental Bank of Commerce, Jhunjhunu and a certificate from the branch manager, OBC bank, Jhunjhunu stating that the above amounts were credited to his account No. 06682010049870 on account of remittances from abroad. These additional evidences were admitted under Sub-Rule 4 of Rule 46A as these were imperative for the proper adjudication of appeal.

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 33 Mewa Singh Bola Vs ADIT (Int. Tax)

Further the appellant was staying in Saudi Arabia being a NRI and in his absence, the AR was facing difficulty in preparation & compilation of various details. The AO has himself mentioned in the assessment order that this case was received on transfer on 17.09.2010. The first notice was issued on 23.09.2010 and the assessment was completed on 22.12.2010 i.e. within a period of three months. Since the appellant was not in India, his counsel was not in a position to file the various details at such a short notice. These additional evidences were forwarded to the ADIT (Intl. Tax.) Jaipur for examination vide my letter dated 11.10.2011. In response, the AO submitted that the branch manager, OBC, Jhunjhunu had informed vide letter dated 21.10.2011 that they were unable to inform about the nature of entries and details were being sought from the concerned branches at Mumbai and New Delhi. Subsequently the branch manager, OBC, Jhunjhunu vide letter dated 24/11/2011 informed the ADIT (Intl. Tax.), Jaipur that the receipts of Rs. 21,57,185/- and Rs. 21,17,136/- were inward remittances from Saudia Arabia through Nawaf Jaleel Alshammari. It was further informed by OBC, Jhunjhunu vide letter dated 23/12/2011 that the receipt of Rs 6,99,234/- was inward remittance from Sh. Ahmed Hussain post box-99813, Alriyadh. The AO in his remand report dated 03.01.2012 contended that

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 34 Mewa Singh Bola Vs ADIT (Int. Tax)

since the appellant had not produced his personal books of account, therefore it could not be ascertained that whether Nawaf Jaleel Alshammari and Sh Ahmed Hussain were old debtors or creditors. It was further argued that no confirmations from these persons were filed. The remand report of the AO was provided to the counsel of the appellant for rebuttal. In response, the counsel of appellant filed a certificate from Nawaf Jaleel Alshammari, Rahima, Kingdom of Saudia Arabia wherein it was confirmed that Sh Chaudhary Bihari Lai alias Sh Mewa Singh Bola was working with them since 1992 and the remittances of Rs. 21,57,185/- and Rs. 21,17,136/- were made by them as there was credit balance in his current account with them. It was further confirmed that remittances of Rs. 6,99,234/- was also made by them through their employee Sh Ahmed Hussain out of credit balance of the appellant. It was further certified that the above information was true and correct as per company’s records. The AO was further provided an opportunity vide my letter dated 20.01.2012 for his comments on the certificate from Nawaf Jaleel Alshammari. In response, the AO vide his letter dated 25/01/2012 has contended that the identity, creditworthiness and genuineness of the alleged transactions have not been established by the assessee. It is further contended that the said company namely Nawaf Jaleel Alshammari has not

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 35 Mewa Singh Bola Vs ADIT (Int. Tax)

submitted copy of ledger account of the appellant in their books of account. It was contended that in the absence of books of account, it was difficult to verify the contentions of the appellant. On careful consideration of facts, I find that the AO had made the impugned addition on the ground that the appellant had failed to show that the credits of Rs 49,73,555/- were on account of foreign remittances. However the inquiries made from Oriental Bank of Commerce, Jhunjhunu have clearly revealed that the above remittances were received from Saudi Arabia. It is an undisputed fact that the appellant was residing at Saudi Arabia since last 25 years. The appellant had also filed a certificate from his employer namely Nawaf Jaleel Alshammari to the effect that it had made remittances to the appellant out of credit balance in his current account. The remittances of Rs. 21,57,185/- and Rs. 21,17,136/- were directly made by them and remittance of Rs 6,99,234/- was made by one of their employee Sh Ahmed Hussain out of funds given by Nawaf Jaleel Alshammari. The AO on the other hand has doubted the transactions on the ground of creditworthiness of the lender and genuineness of the transaction. I am of the opinion that the appellant has satisfactorily explained the sources of inward remittances by filing confirmation from Nawaf Jaleel Alshammari, Rahima, Kingdom of

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 36 Mewa Singh Bola Vs ADIT (Int. Tax)

Saudi Arabia. The appellant in such circumstances, cannot be asked to prove the creditworthiness of his employer namely Nawaf Jaleel Alshammari which had head office at Al-Khafj and branches at Jubail and Rahima. The appellant has also explained that he was not maintaining any books of account for his personal affairs. The AO has therefore laid unnecessary emphasis on production of personal set of books of account. I therefore hold that the addition of Rs 49,73,555/- made by the AO is not sustainable in view of documentary evidences filed by the appellant. There is no dispute that the appellant is a resident of Saudi Arabia and is, admittedly, a non-resident for the purpose of Income Tax Act. Admittedly, the remittances aggregating to Rs. 49,73,555/- came from abroad i.e. Saudi Arabia. It is also clear that these remittances could not have come from local sources. In terms of the CBDT Circular No. 5, dated 20-2-1969, the remittances by an NRI through banking channel are not subjected to income tax. Even under section 5(2)(b), it could not be subjected to income tax. In the case of Smt Susila Ramaswamy Vs DCIT ( 36 DTR 418), it was held by Hon’ble Chennai ITAT that a non- resident person, having money in a foreign country, could not be called upon to pay income tax on that money which was remitted in India. The reason was obvious because in respect of that money, it would

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 37 Mewa Singh Bola Vs ADIT (Int. Tax)

not be possible for the AO to say that it was either received by him in India, or it was deemed to be received by him in India, or it accrued to him in India, or it arose to him in India, or it was deemed to accrue to him in India, or it was deemed to arise to him in India. If a non-resident person, having money in a foreign country, brought that money to India, through a banking channel, he could not be called upon to pay income tax on that money in India, firstly, for the reasons stated above and secondly, because the remittance of money into India through banking channel would make the onus on assessee under section 69, discharged. This was because what was chargeable was the first receipt of the money and not a subsequent dealing by assessee with the said money. In that event, the money was brought by assessee as his own money which he had already received and had control over it and it did not take the character of income, profits and gains after being brought into India. In the cases of remittances through banking channel the nature and source of the funds would get explained and the onus on the assessee under section 69 would stand discharged, and consequently such remittances could not be taxed under section 5(2)(b) also. It was held that once an amount was received as income, any remittance or transmission of that amount to another place did not

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 38 Mewa Singh Bola Vs ADIT (Int. Tax)

result in receipt once again at the other place, within the meaning of section 5. Therefore, if certain income, profits or gains was received by the assessee outside India it did not become chargeable to income tax in India by reason of that money having been brought into India. It was further held that merely on suspicions or doubts, conjectures or surmises, no inference could be drawn against the assessee. It is trite law that there could be no presumption in favour of any illegality of a transaction. In fact the presumption was the other way about. Respectfully following the above decision and facts of the present case, I accordingly direct the AO to delete the addition of Rs. 49,73,555/- made by him. The addition of Rs. 15,00,000/- made by the AO on account of unexplained credit on 24.10.2007 is however confirmed since the appellant has miserably failed to explain the nature and source of such credit. This ground of appeal is accordingly partly allowed.” The above finding on fact is not controverted by the revenue by placing

any contrary material on record, therefore, we do not see any reason to

interfere in the order of the ld. CIT(A) and the same is hereby affirmed.

Accordingly, the revenue’s appeal is dismissed.

assessee has taken only one ground of appeal, which is as under:-

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 39 Mewa Singh Bola Vs ADIT (Int. Tax)

“Under the facts and circumstances, the ld. CIT(A) has wrongly made addition for a sum of Rs. 15,00,000/- as the amount could not be explained due to the assessee is out of India since last three years.”

The ld. AR of the assessee has reiterated the submissions as made in the

written submissions. On the contrary, the ld Sr. DR has opposed the

submissions as made by the ld. AR of the assessee.

the material available on the record and also gone through the orders of

the authorities below. Alongwith the written brief, the ld. AR of the

assessee has enclosed a letter of Oriental Bank of Commerce

demonstrating the remittances from Saudi Arabia. After considering the

totality of the facts and circumstances of the case, this ground of appeal

is restored to the file of the ld. CIT(A) for decision afresh. The ld. CIT(A)

would seek remand report from the Assessing Officer and decide the

issue accordingly. This appeal of the assessee is allowed for statistical

purposes only.

for statistical purposes only, ITA No. 373/JP/2012 is dismissed, ITA No.

ITA 527, 541/JP/2013, 372, 373 & 274/JP/2012_ 40 Mewa Singh Bola Vs ADIT (Int. Tax) 374/JP/2012 is dismissed and ITA No. 274/JP/2012 is allowed for

statistical purposes only.

Order pronounced in the open court on 31/01/2017.

Sd/- Sd/- ¼Hkkxpan½ ¼dqy Hkkjr½ (BHAGCHAND) (Kul Bharat) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 31st January, 2016

*Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Shri Mewa Singh Bola, Jhunjhunu. 1. izR;FkhZ@ The Respondent- The A.D.I.T./DDIT (Intt. Tax.), Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 527 & 541/JP/2013, 373, 374 & 6. 274/JP/2012)

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत