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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
ORDER PER H.S. SIDHU : JM Revenue has filed these appeals against the separate impugned orders both dated 07.08.2014 passed by the Ld. CIT(A)-III, New Delhi relating to assessment years 2007-08 & 2008-09. Since some of the issues involved in these appeals are common and identical, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience. The ground no. 1 to 4 in both the appeals are common and identical except the difference in figure, therefore, we are dealing with (AY 2008-09) first for the common and identical grounds in the foregoing paragraphs.
2. The Revenue has raised the following grounds in assessment year 2007-08:-
i) On facts and in the circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs. 4,92,000/- made by AO on account of agricultural income. ii) On facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on the facts in admitting the additional evidence with respect to the assessee’s claim of agricultural income without giving an opportunity to the AO to examine the same. iii) On facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 26,90,000/- made by the AO on account of unexplained cash credits under section 68 of the Income Tax Act, 1961. iv) On facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on the facts in holding the cash flow statement to be correct when it is merely a self serving document and the source of cash deposits was not explained before the AO. v) On facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on the facts in allowing the assessee to claim business loss of Rs. 3,62,384/- when no details thereof were furnished before the AO. vi) The order of the CIT(A) is erroneous and is not tenable on facts and in law. vii) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal.
3. The following grounds have been raised in the assessment year 2008-09:-
i) On facts and in the circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs. 4,95,000/- in respect of agricultural income without giving an opportunity to the AO on account of agricultural income. ii) On facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on the facts in admitting the additional evidence with respect to the assessee’s claim of agricultural income without giving an opportunity to the AO to examine the same. iii) On facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs. 7,56,54,052/- relying on the returns filed by the parties who have contributed capital in their respective firms without even giving any opportunity to the AO to examine the same and give comments / objections thereon. iv) On facts and in the circumstances of the case the Ld. CIT(A) has erred in holding the cash flow statement to be correct when it is merely a self serving document and the source of cash deposits was not explained before the AO during the course of assessment. v) The order of the CIT(A) is erroneous and is not tenable on facts and in law. vi) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal.
4. The brief facts of the case are that assessee filed return of income on 30.9.2008 declaring an income of Rs. 3,04,188/- u/s. 139(1) of the Income Tax Act, 1961 (hereinafter referred as the Act). The assessee is having income from salary, house property, business and profession and other sources. A search and seizure operation u/s. 132 of the Act was carried out in Triveni Group on 28.9.2010. A search warrant u/s. 132(1) of the Act was issued and executed in the name of the assessee also. The assessee belongs to that group. Notice u/s. 153A of the Act was issued on 7.2.2012 and notice u/s. 142(1) of the Act was issued on 12.9.2012 requesting to file return of income for the year under consideration.
Notice u/s. 142(1) alongwith a detailed questionnaire issued to the 4 assessee on 26.9.2012 and fixed the case for hearing on 8.10.2012. Show cause notice u/s. 276CC of the Act was issued to the assessee on 7.11.2012 and fixed the case for hearing on 23.11.2012. The assessee vide letter dated 19.11.2012 had requested to allow further time to file the return of income for the year under consideration and to withdraw the show cause notice issued. The assessee filed the return of income for the year under consideration received in this office on 10.12.2012 declaring an income of Rs. 5,48,670/-. Notice u/s. 143(2) of the Act was issued on 31.12.2012 and fixed the case for hearing on 4.1.2013. During the assessee has declared income from agricultural at Rs. 4,95,000/-. The agriculture land is in the name of deceased father of the assessee at Dholpur. Assessee has not filed any proof regarding the agricultural activity carried on the agricultural land or any sale bill of the agriculture produce. Therefore, the entire agricultural income shown by the assessee is added in the taxable income of the assessee as income from undisclosed sources. AO further observed that assessee is maintaining bank account with Axis Bank and cash amounting to Rs. 7,56,54,052/- was found credited in the Axis Bank. The assessee has filed the cash flow statement which is a self serving document as no proof in support of various cash receipt is filed. The assessee has filed the cash flow statement in earlier years from which opening balance is coming, but no explanation is given in earlier year too. Therefore, the same was added to the income of the assessee u/s. 68 of the Act. Accordingly, the assessment was completed at Rs. 7,66,97,720/- u/s. 153A r.w.s. 143(3) of the I.T. Act, 1961.
4.1 Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld. CIT(A) who vide his impugned order dated 07.8.2014 deleted the addition and partly allowed the appeal of the assessee.
5. Aggrieved with the ld. CIT(A)’s order, the Revenue is in appeal.
6. Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal. In support of his contention, he filed the Written Submission, which read as under:-
“Sub: Written Submission in the above case- reg. In the above case, it is humbly submitted as follows: A. Y. 2008-09
1. Cash of RS.7,56,54,052 was found deposited in the bank account of the assessee. Before AO, the assessee filed
cash flow statement of earlier years from which opening balance was coming, but no documentary evidence was filed in its support
2. Before Ld CIT(A), the assessee submitted source of cash
deposited as follows: (i) Rs. 4,95,000 on account of agricultural income declared. (ii) Rs. 90,000 on account of rental income declared. (iii) Rs. 1,65,000 from Triveni Media Ltd. (iv) RS.2,63,40,000 from Sale of land to M & Ferrous (v) Rs. 5,09,00,000 from Veerendra Kumar AOP (vi) Rs. 73,00,000 from Triveni Motors
3. The Ld CIT(A) has erred in accepting reply of the assesseeon following grounds:
(i) The details of receipts mentioned above was not given to the AO during the assessment proceedings'
(ii) The identity and creditworthiness of Triveni Media
Ltd and Triveni Motors has been proved. However, genuineness of the transaction has not been proved. No reason has been given why the amount was advanced to the assessee in cash.
(iii) The AO has not been given adequate opportunity to examine creditworthiness of members of Veerendra.
Kumar AOP. However, genuineness of the transaction with AOP has not been proved. No reason has been given why the amount was advanced to the assessee in cash. It was claimed that the amount was received on account of pledging of some shares of TIDCO. However, no details of cash withdrawn from account of AOP and evidence of cash handed over to the assessee has been filed.
(iv) No attempt has been made to co relate cash received with the cash deposited in bank account of the assessee
A. Y. 2007-08
4. Cash of Rs.26,90,OOO was found deposited in the bank
account of the assessee. The Ld. CIT(A) has accepted contention of the assessee that cash of Rs.39,OO,OOO was received from Mittal Traders.
No evidence has been filed of cash withdrawn from Mittal
Traders. No justification has been filed as to why the amount was received in cash.
Similarly, no justification has been filed as to why the amount was received in cash from Smt Raj Kumari
In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to addition made u/s 68 of I.T. Act:
1. PCIT Vs Bikram Singh [ITA No.55/2017] (Delhi) (Copy
Enclosed) where Hon'ble Delhi High Court held that even if a 8 transaction of loan is made through cheque, it cannot be presumed to be genuine in the absence of any agreement, security and interest payment. Mere submission of PAN Card of creditor does not establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy.
2. Toby Consultants (P.) Ltd. Vs CIT [2010] 324 ITR 338
(Delhi) where Hon'ble Delhi High Court held that where assessee-company had shown in books unsecured loans of Rs.
2.68 crores and Rs. 2.45 crores from its two directors and it was explained that money belonged to its own entity and was routed through directors and Tribunal found that directors who advanced loan were admittedly not at all men of means for advancing such huge amount of loan amounting to about
Rs. 5 crores and secondly that assessee even for taking such huge amount of loan did not want to pay any interest for which creditors also agreed, Tribunal had rightly, arrived at a finding of fact, on analysis of all relevant material on record, that genuineness of transaction had not been established and 9 assessee had failed to independently prove same application money, amount so received was liable to be taxed under section 68.
3. Naresh Chandra Jain Vs OIT (ITA NO.335 of 2009)
(Allahabad) Where Hon'ble Allahabad High Court held that tribunal was justified in holding that amount of loan received by assessee was unexplained income u/s 68 in as much as identity, genuineness, creditworthiness of the transaction is not proved.
7. On the contrary, Ld. A.R. of the assessee relied upon the order of the Ld. CIT(A) and in support of his contention he filed the Synopsis, which read as under:-
1. Add!. CIT Bihar vs Hanuman Agarwal(1985) 151
ITR 151 (Patna High Court)
The assessee having furnished the correct name and address of the creditor, having confirmatory letter from the creditor, did all that it could do and these three materials showed prima facie not only the identity of the creditor but also the genuineness of the transaction and also the capacity of the creditor and as such the assessee completely discharged its initial onus under Section 68 of the LT. Act 1961.
Jalan Timber vs CIT(1997) 223 ITR 11 (Gauhati
H.C.)
In the instant case, the amounts were shown in the income tax return of the assessee. Besides, the creditor had also shown in the return about giving of the loan to the assessee. Strangely, the Income Tax Officer while making the assessment in respect of the three creditors above named accepted the returns. This itself will go to show that the amount received by the assessee was at least prima facie genuine. As the Income Tax Officer' had accepted the returns of the three creditor? it should go to mean that the amounts given by those creditors were also genuine.
Neeru Devi Kothari vs ITO(2001) 116 Taxman 224
(Jodhpur) Where the creditor was an income tax assessee and had filed confirmation letter, credit in his account could not be added to the assessee's income on the ground that assessee-has filed to prove the creditworthiness of the creditor.
Sarogi Credit Corporation vs CIT(1976) 103 ITRE
344 (Patna HC)
Once the identity of the third party is established before the Income Tax Officer and such other evuidence are 11 prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged by him. It will not, therefore, be for the assessee to explain further as to how or in what circumstances the third party obtained the money or how or why he came to make advance of the money as a loan to the assessee.
Once such identity is established and the creditors, as in the present case, have pledged their oath that they have advanced the amounts in question to the assessee, the burden immediately shifts on the department to show as to why the assessee's case could not be accepted and as to why it must be held that the entry, though purporting to be in the name of the third party, still represented the income of the assessee from a suppressed source. And, in order to arrive at such a conclusion, even the department has to be in possession of sufficient and adequate materials.
The Income Tax Officer's rejection, not of the explanation of the assessee, but of the explanation regarding the source of income of the depositors, could not by itself lead to any inference regarding the non- genuine or fictitious character of the entries in the assessee's books of account. 12
Cash credits - Burden to prove genuineness and credit worthiness of credit confined to transaction and not of sub-creditor - Sec. 68 r/w Sec. 106 of Indian
Evidence Act It is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor it is the burden of the assessee to prove that sub-creditor had creditworthiness to advance cash credit to creditor from whom cash credit has been eventually received by the assessee. It is not the business of the assessee to find out the sources from where the creditor has accumulated amount, which he has advanced in the form of loan to assessee. Section 68 cannot be read to show that in case of failure of sub-creditors to prove their creditworthiness, amount advanced as loan to assessee by creditor shall have to be treated as a corollary, as income from undisclosed sources of assessee himself. The burden of the assessee gets discharged as per the provisions of Section 106 0f the Indian Evidence Act once the assessee proves the source of the loan received and creditworthiness of the creditor.
Nemi Chand Kothari vs CIT [2004] 136 Taxman 213
(Goa)
Inability of the department to verify the explanation offered by the assessee is not sufficient
ground for rejection of explanation.
S. Hastimal vs CIT 49 ITR 272
An explanation prima facie reasonable cannot be rejected on arbitrary grounds or on mere suspicion or on imaginary or irrelevant grounds.
The ITO cannot merely reject a reasonably good explanation and convert good proof into no proof.
CIT vs K.S. Kannan Kunhi87 ITR 3958.
8. Credit in the name of close relative, the assessee
cannot be presumed to have knowledge of the source from which depositor has obtained money.
Tola Ram Daga vs CIT 59 ITR 632 (Assam) and CIT vs
Daulat Ram Rawat Mal 87 ITR 349
9. CIT vs Pithampur Conzima (P) Ud.(2000) 244 ITR
442 (MP High Court
Where in appeal before Tribunal, the assessee showed that the credit given to the assessee company were duly declared by the creditors in their respective returns, whereupon the Tribunal concluded that the investment in the assessee firm was duly explained and no addition was called for in the hands of the assessee and deleted the addition.
We have heard both the parties and perused the records, especially the impugned order and the case laws cited by both the parties. As regards ground no. 1 relating to addition of Rs. 4,95,000/- on account of agricultural income is concerned, we find that AO has made the addition alleging that the assessee had not filed any proof regarding the agricultural activity carried on the agricultural land. However, the Ld. CIT(A), has deleted the addition made by the AO after considering the fact that the assessee has been consistently showing the agricultural income in the preceding years as well, which has been accepted by the Revenue as well. We note that the agricultural land is located at District and Tehsil Dholpur. The perusal of Khasra Khatoni also indicates that the annual lagan (taxes) is also being paid on the said land, evidencing that the same is being used for agricultural purposes. Both these evidences were made available to the AO during the assessment proceedings by the assessee while contending that he was doing agricultural activities on aadbatai system i.e. revenue sharing basis. We further note that during the appellate proceedings, the assessee has further filed the evidence from which it is seen that the assessee has regularly been showing the agricultural income in his return of income filed since 1996-97 onward. 15 It is also observed that the present year is one of the years falling in the block of search assessments and no inquiry has been done by the AO to find out whether the contention made by the assessee was incorrect.
Therefore, when on one hand the Revenue is accepting continuously an agricultural income for the last more than 10 years and even during search, no evidence is there to the contrary and no inquiry is being made to show that the evidence in the form of Khasra Khatoni is not correct, in these circumstances the AO’s action in treating the agricultural income as income from undisclosed sources, appears to be against the principle of consistency, notwithstanding the fact, that the principle of estoppels and resjudicata have not application to tax proceedings. Therefore, the Ld. CIT(A) has rightly relied upon the decision of the Hon’ble Supreme Court in the case of Radhaswami Satsang vs. CIT (1992) 193 ITR 321 (SC) and accordingly treated the AO’s action in treating the agricultural income declared by assessee as income from undisclosed sources is not correct, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the ground no.
In view of above, it is established that AO’s action in treating the agricultural income as income from undisclosed sources, appears to be against the principle of consistency and therefore, is squarely covered by the decision of the Hon’ble Supreme Court in the case of Radhaswami Satsang vs. CIT (1992) 193 ITR 321 (SC), therefore, the case laws cited from both the sides are on distinguished facts.
8.1 As regards ground no. 2, 3 & 4 relating to addition of Rs. 7,56,54,052/- made on account of unexplained cash credits u/s. 68 of the Act is concerned, we find that during the year under consideration, assessee has deposited an amount of RS.7,56,54,052/- in its bank account. The bank statement of the assessee in this regard is enclosed at PB 97 -100. It was submitted by the assessee before the AO that the said deposits were out of the cash received by the assessee on various accounts, which has also been disclosed in the cash flow statement provided by the assessee to the AO, enclosed at PB 22-24. A perusal of the cash flow statement clearly shows that the cash deposited by the assessee in its bank account is out of the opening cash in hand available with the assessee for Rs.52,153/-, rental income received by the assessee amounting to RS.90,000/-, the agricultural income earned by the assessee amounting to Rs.4,92,000/-, sale proceeds of land amounting to RS.2,63,40,000/- and cash received from Triveni Media Ltd. (Rs.1,65,000/-), Triveni Motors (Rs.73,00,000/-) and Veerandra Kumar (AOP) (Rs.5,09,00,000/-). As regards the agricultural income earned of Rs.4,95,000/-, it is established that the said income has been regularly shown by the assessee in its return of income for previous years as well.
Documents in this regard are enclosed at PB 25 - 41. As regards the rental income of RS.90,000/-, the said rental income has been duly disclosed in the return of income filed by the assessee, which has also not been tinkered with by the AO himself. This facts is evident from the Computation of Income of the assessee at PB 2. It was submitted by the assessee before the AO that an amount of RS.2,63,40,000/- was received by the assessee on account of sale of agricultural land, by way of sale deed dated 01.10.2007. The copy of the said sale deed was also submitted before the AO and is enclosed at PB 85 - 92. The Ld. CIT(A) has also appreciated the fact that the said sale deed was duly registered in the office of sub-registrar. The findings of the Ld. CIT(A) in this regard are at Page 15 of the order. It was further submitted by the assessee before the AO as well as the Ld. CIT(A) that during the year under consideration assessee has received an amount of Rs.6,25,00,000/- from M/s Veerandra Kumar (AOP) in pursuance of the Share Purchase Agreement entered into between the assessee and the said party. The said agreement is enclosed at PB 42-45. It was submitted by the assessee that the said amount was received by the assessee on account of pledging of some of the shares of MIs Triveni Infrastructure Development Company Ltd. (TIDCO) which were owned by the assessee. The said pledge deed is enclosed at PB 46 - 68. The confirmation of account of the said party along with their ITR and financial statements were filed before the AO as well as the Ld. CIT(A), and are enclosed at PB 69 - 76. The assessee has also submitted before the AO the assessment order and consequent CIT(A)'s order passed in the case of Veerandra Kumar (AOP) in respect of AY. 2006-07, which are enclosed at PB 77 - 84. The assessee, before the Ld. CIT(A), has also submitted the copies of returns of income along with computation of income of the partners of the said AOP, which are enclosed at PB 125 -725. The Ld. CIT(A) has duly appreciated the fact that M/s Veerandra Kumar (AOP) was having 52 partners with a capital of RS.7,42,50,000/-, out of which the sum of Rs.5,09,00,000/- was paid to the appellant for purchasing the shares of TIDCO held by the assessee.
The said documents were also forwarded by the Ld. CIT(A) to the AO, however, even after sending 4 reminders to the AO, the AO chose not to send its report on the said documents. Therefore, the Ld. CIT(A) has accepted the said additional evidences filed by the assessee and after considering the same, has decided the case on merits. These facts are clearly evident from Page 13 - 14 of the Ld. CIT A 's order. It is also pertinent to mention here that the Ld. CIT(A) duly sent a letter to the DIT(Systems) to check the reliability of the Acknowledgment of ITRs filed by the assessee, in response to which, it was submitted that almost all the partners were regularly filing their returns of income and had sufficient funds to invest in the AOP . Therefore, in view of the above, the Ld. CIT(A) has rightly held that the assessee had duly discharged the onus of proving the source of said cash received from M/s Veerandra Kumar (AOP) deposited in the bank account. As regards the amount received from M/s Triveni Motors and Triveni Media Ltd., the assessee duly submitted the PAN details of both these parties, along with the financial statements before the AO, which is enclosed at PB 93-95. A perusal of the financial statements of M/s Triveni Motors clearly shows that the party had sufficient own funds available with it. This fact has also been appreciated by the Ld. CIT(A) at Page 12 of its order. Therefore, in view of above submissions and evidences filed by the assessee, the assessee has duly established along with evidences the source of cash deposited by the assessee, and thus, the Ld. CIT(A) has rightly deleted the addition made by the AO, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the ground no. 2 to 4 raised by the Revenue.
8.2 In view of above, the ground no. 1 to 4 raised in Assessment year 2008-09 stand dismissed and in another appeal i.e. AY 2007-08, with regard to ground no. 1 to 4, the facts are identical and even the rival contention were similar, therefore, our aforesaid findings shall apply mutatis mutandis for that appeal i.e. AY 2007-08 and accordingly, the grounds no. 1 to 4 raised therein are also dismissed.
8.3 As regards ground no. 5 raised in assessment year 2007-08, relating to allowing the claim of business loss of Rs. 3,62,384/- is concerned, we find that on perusal of the computation sheet filed with the original return of income u/s. 139(1), it is observed that this loss of Rs. 3,62,384/- comprises of depreciation on JCB (Rs. 36,494/-) and loss on business transactions (Rs.
3,70,890). From the perusal of computation sheet of the pervious assessment years i.e. 2005-06 and 2006-07, the AO himself has been allowing depreciation in earlier years and there is no reason why the same should not be allowed in the year under consideration i.e. AY 2007-08. As regards the loss on business transaction (Rs. 3,70,890), we note that the income and expenditure account and cash flow statement were filed with the AO on 22.3.2013 and after that no query has been raised by the AO. Therefore, the AO’s action in not allowing the business loss of Rs. 3,62,384/- does not appear to be correct especially when business transactions are duly been reflected in the cash book statement and income and expenditure account which were available with him, therefore, the Ld. CIT(A) has rightly allowed the loss of Rs. 3,62,384/-, which does not need any interference on our part, therefore, the ground no. 5 is rejected.
In the result, both the Revenue appeals stand dismissed.
Order pronounced on 12-07-2018.