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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’, NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against order dated 30/03/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-1, Gurgaon [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds:
1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in fact and in law in deleting the addition of Rs.64,00,000/- on account of unexplained cash deposited in bank account, although the cash flow statement was not reliable.
2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in fact and in law in deleting the addition of Rs.64,00,000/- on account of unexplained cash deposited in bank account, although there was deference in the closing cash balance as per the cash flow statement and balance sheet field during the course of assessment proceedings. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in fact and in law in deleting granting the relief of Rs.4,81,784/- being compensation received from GAIL treating the receipt as capital in nature, ignoring the fact that no rights in land have been transferred. 4. That the appellant craves for the permission to add, delete or amend grounds of appeal before or at the time of hearing of appeal. That the appellant craves for the permission to add, deleted or amend grounds of appeal before or at the time of hearing of appeal.
2. Briefly stated facts of the case are that the assessee filed return of income on 04/03/2011 declaring total income of Rs.11,24,199/-, which included income under the head “capital gain” and “income from other sources”. The case was selected for the scrutiny and notice under section 143(2) the Income-tax Act, 1961 (in short the ‘Act’) was issued and served. The Assessing Officer observed from the information collected by the Department through Annual Information Return (AIR) that the assessee deposited Rs.64,00,000/- in cash in saving bank accounts of the assessee. On first date of hearing, the case was represented by Sh. Bharat Sharma, son of the assessee, however, thereafter on subsequent two occasions no compliance was made. Then, the Assessing Officer issued show cause notice proposing various additions. In response, Authorized Representative of the assessee attended and filed part reply only and thereafter, no compliance was made. In view of the statutory limitation period in completing the assessment, the Assessing Officer completed the assessment on 28/03/2013, on the basis of the material available on record. 2.1 Aggrieved, the assessee filed appeal before the Ld. CIT(A) and submitted additional evidences, which included cash flow statement of earlier years. The assessee contested that due to hospitalization on account of hips replacement and subsequent bed rest advised by the doctor, he could not attend the assessment proceedings and, therefore, prevented by sufficient cause in producing those evidences before the Assessing Officer. The Ld. CIT(A) forwarded those additional evidences to the Assessing Officer. The Assessing Officer in the remand report dated 12/03/2015 objected the admissibility of the additional evidences. The Ld. CIT(A), however, admitted the additional evidences and after considering submission of the assessee allowed the appeal partly. 2.2 Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal, raising the grounds as reproduced above.
3. In ground No. 1 and 2 of the appeal, the Revenue has challenged addition of Rs.64,00,000/- deleted by the Ld. CIT(A), which was made by this Assessing Officer on account of unexplained cash deposited in the bank account. 3.1 Before us, the Ld. DR submitted that the Ld. CIT(A) has violated the conditions of Rule 46A(3) of the Income Tax Rules, 1962 (in short the ‘Rules’) and according to which, after admitting the additional evidences, the Assessing Officer should have been allowed opportunity to examine and rebut those evidences. According to him, the issue in dispute should be restored to the file of the Assessing Officer for examining afresh in view of the decision of the Hon’ble Delhi High Court in the case of Manish Build Well P. Ltd. (2012) 204 Taxman 106. 3.2 The Ld. Counsel of the assessee, on the other hand, submitted that before the Ld. CIT(A), the assessee submitted cash flow statement prepared on the basis of the bank statement and other documents as additional evidence and the Ld. CIT(A) has decided the issue after calling for remand report from the Assessing Officer on the additional evidences filed. According to him, the Assessing Officer has already examined the additional evidences on merit and, therefore, there is no violation of Rule 46A of the Rules. He submitted that the Ld. CIT(A) has examined the source of cash deposits on the basis of the cash flow statement and accordingly, relief has been allowed to the assessee, which may be upheld. 3.3 We have heard the rival submission and perused the relevant material on record. In the instant case, the Assessing Officer observed cash deposit of Rs. 64 lakhs in the bank account of the assessee maintained with J&K Bank. Before the Assessing Officer, no compliance was made by the assessee and, therefore, he made the addition. Before the Ld. CIT(A), the assessee filed cash flow statement for the period from 01/04/2008 to 31/03/2009 and 01/04/2009 to 31/03/2010 as additional evidences. The assessee contended that a land at village Bhondsi, Tehsil Sohna, District Gurgaon was sold by the assessee on 12/05/2008 through registered sale deed for sale consideration of Rs.2,97,00,000/- and this amount was deposited in the bank account. The assessee further submitted that out of the said bank account the assessee withdrew some of the cash in various installments and after the said cash withdrawal, the cash was re- deposited in the same bank account. The Assessing Officer objected on the admissibility of the additional evidences and also submitted that the cash in hand as on 31/03/2010 reported of Rs.20,05,524/- in the cash flow statement, was different from the cash on hand as on 31/03/2000 reported of Rs.52,26,026/- in the balance sheet filed by the assessee. The Ld. CIT(A) called for an explanation from the assessee on the issue of different amount of cash-in-hand reported in cash flow statement as well as in the balance sheet. The assessee filed one more registered sale deed of land in village Jakobpura, Gurgaon for reconciling the difference in cash-in-hand reported in cash flow statement as well as in balance sheet. After considering the explanation of the assessee, the Ld. CIT(A) deleted the addition. The relevant finding of the Ld. CIT(A) on the issue in dispute is reproduced as under:
“5.3 I have considered the facts of the case and gone through the submissions of the appellant together with the remand report of the A.O. The A.O, in the first instance made the addition of Rs. 64 Lakhs to the income of the appellant on account of the fact that cash deposits in appellant's bank account could not be explained by him. No details could be filed by the appellant explaining the source of aforesaid cash deposits as a result of which the A.O had no alternative but to make the addition of Rs. 64 Lakhs to the income of the appellant on account of unexplained cash deposits. 5.4 The appellant, however, during the course of appellate proceedings gave additional evidence which included cash flow statement, statement of cash transaction in J&K bank and the bank statement. In addition to these documents, the appellant also drew my attention to the registered sale deed of land at^ Village Bhondsi, Tehsil Sohna, Distt. Gurgaon dated 12.05.2008 for Rs. 2,97,00,000/- which was submitted at the time of assessment proceedings. The registered sale deed of the land is extremely important as it gives ultimate source of cash deposits made by the appellant subsequent to the date on which the amount of Rs. 2,97,00,000/- was received by him. As per the registered sale deed the appellant received the amount of Rs. 2,97,00,000/- by means of 36 cheques. These cheque nos. along with the corresponding amount are mentioned in the registered sale deed furnished by the appellant. The same cheque nos. are also appearing in the bank account of the appellant for the period 01.04.2008 to 31.03.2009. With the help of the registered sale deed and its bank account for the period of 01.04.2008 to 31-03-2009, the appellant could establish the fact that he received an amount of Rs. 2,97,00,000/- by various cheques which were duly deposited into his bank account. Once, having received the amount of Rs. 2,97,00,000/- on account of sale of land by cheques, the appellant withdrew some of these amount in installment on various dates. After the said cash withdrawals, cash was redeposited in the same account. In order to have an overall picture, the appellant gave a copy of cash flow statement for the period 1-4-2008 to 31-3-2009 and 1-4-2009 to 31-3-2010,. On a perusal of which it is revealed for the period 01.04.2008 to 31.03.2009, out of the amount of Rs. 2,97,00,000/- received by the appellant on account of sale of agricultural land, the appellant withdrew Rs. 2,32,00,000/- in cash on various dates during the year. Out of the cash withdrawal of Rs. 2,32,00,000/-, the appellant redeposited Rs. 1,99,00,000/- in cash on various dates during the same period. Apart from redeposit of cash withdrawn there were other purposes for which the withdrawn amount was utilized. The same has been given in the cash flow statement filed by the appellant. After considering all these transaction the appellant was left with a closing cash balance as on 31.03.2009 of Rs. 52,66,131/-. 5.5 As regards the period 01.04.2009 to 31.03.2010 in respect of which the present appeal is filed, the appellant's cash flow statement makes the picture extremely clear. The appellant, in addition to opening cash balance of Rs. 52,66,131/-, withdrew Rs. 71,00,000/- in cash from his bank account. This is corroborated by the bank statement given by the appellant of J&K Bank for the period 01.04.2009 to 31.03.2010. Thus the total cash available to the appellant during the year period was Rs. 1,23,66,131/-. Out of the said cash balance, the appellant re-deposited cash by Rs. 64,21,000/- in his bank. Apart from this there were certain other utilization of cash available by the appellant during the year. After considering all these transactions the appellant was left with a closing balance of Rs. 20,05,524/- as on 31.03.2010.Considering the facts of the case and failure of the AO to give any evidence that the cash deposited was not sourced from aforesaid cash withdrawals, it follows that appellant's explanation regarding cash deposits is on a sound footing and thus deserves to be accepted. 5.6 The A.O in his remand report has recommended that the addition made by the A.O may be sustained on account of the fact that while the closing cash balance as per appellant's cash statement was Rs. 20,05,524/-, the balance sheet figure for cash in hand was Rs. 52,26,026/-. In order to reconcile the difference between the two, the appellant in his counter reply dated 26.03.2015 submitted as under:- 1. "The assessee had opened a bank a/c in the Axis Bank dated on 21.04.2009. He was deposited the cash amount of Rs.21,000/- in this account but by the mistake that a/c was not considered in the balance sheet filled by the assessee to laid AO. The assessee was not any transaction in this account except bank interest amount of Rs.644/- & bank charges amount of Rs.3, 309- now we are rectified. On Rs.644/- we have not paid the tax.
The assessee was paid of Rs. 31, 99,502/- against purchase a land in village of Jacubpura, Gurgaon, Haryana on registry dated 30.10.2009. But this amount was not considered in balance sheet filled by the assessee to laid AO. Now we are rectified. So that difference shown in the cash balances of balance sheet filled by the assessee to laid AO & cash flow statement. Now we are entered these entry and corrected the balance sheet & capital account.
Reconciliation of Cash between deposited balance sheet & Cash flow statement Cash balance in deposited balance sheet Rs.52,26,026/- Less: - These entries not considered in the Deposited Balance sheet Cash paid for purchase Jacubpura land on dated 30.10.2009 Paid to smt. Indra Narang 29,59,000/- Stamp Amount 2,23,500/- Registration Fees 15,000/- Other Expenses 2,002/- 31,99,502/- Cash deposited in Axis Bank A/c on Date 22.04.2009 21,000/- 32,20,502/- Cash Balance as per cash flow statement Rs. 20,05,524”
5.7 The appellant also gave a copy of the registered sale deed in respect of the purchase of land in Village Jakobpura, Gurgaon. As per the registered deed dated 30.10.2009, the appellant purchased the said land for Rs. 32,59,000/- out of which an amount of Rs. 29,59,000/- was paid in cash. The appellant, by mistake, failed to reduce this amount of cash along with some minor entries in its cash balance figure prepared for balance sheet. Once, these figures are subtracted, the cash balance as per the balance sheet filed by the appellant exactly matches with the cash balance figure given by the appellant during the course of appellate proceedings. Once, the two figures are reconciled, there is no force in A.O's contention that the addition of Rs. 64,00,000/- made on account of unexplained cash deposits be sustained on the basis of this discrepancy. 5.8 Hence after a careful consideration of the facts of the case and in light of the discussion made in this order based on various documents filed by the appellant during the course of appellate proceedings, I hold that the source of Rs. 64,00,000/- deposited in cash in the appellant's bank account is satisfactorily explained. Hence there is no basis for making any addition of this ground. Accordingly, Ground No. 2 of the appeal is allowed.”
3.4 On perusal of the above finding of the Ld. CIT(A), it is evident that the submission of the assessee on the inconsistency in the cash-in-hand amount reported by the Assessing Officer has not been forwarded to the Assessing Officer for re-examination and rebuttal. We also note that along with the said explanation of inconsistency in cash-in-hand, the assessee filed copy of another registered sale deed for purchase of land in Village Jakobpura. The Ld. CIT(A) did not forward copy of the said registered sale deed to the Assessing Officer for his comment. In our opinion, the action of the Ld. CIT(A) in not forwarding the additional evidences for examination and rebuttal of the Assessing Officer has resulted in violation of Rule 46A(3) of the Rules. The said rules read as under: “46A. (1) The appellant shall not be entitled to produce before the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)], any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :— (2) ………………………………………………………… (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity— (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.”
3.5 The Hon’ble Delhi High Court in the case of Manish Buildwell P. Ltd (supra) has held that after admitting the additional evidences by the Ld. CIT(A), the evidences should be forwarded to the Assessing Officer for examination by him and for giving rebuttal, if any. Accordingly, relying on the decision of the Hon’ble High Court, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh after providing adequate opportunity of being heard to the assessee. The assessee is at liberty to file necessary evidences before the Assessing Officer in support of its claims. The ground of the appeal is accordingly allowed for statistical purposes.
In ground No. 3, the Revenue challenged addition of Rs.4,81,748/-, deleted by the Ld. CIT(A), which was made by the Assessing Officer holding the compensation received from GAIL as Revenue receipt. 4.1 Before us, the Ld. DR submitted that before the Assessing Officer the assessee did not file any justification for claiming the said amount as exempt income. According to him, the amount in question is revenue in nature and, therefore, the Assessing Officer is correct in holding the same. 4.2 The Ld. counsel of the assessee, on the other hand, relied on the decision of the Tribunal dated 05/08/2015 in the case of Jagannath Prasad and Sons HUF in for assessment year 2010-11, wherein also, the compensation received from the GAIL for laying underground pipeline in agricultural land was held as capital in nature. Accordingly, he submitted that the finding of the Ld. CIT(A) might be upheld.
4.3 We have heard the rival submission and perused the relevant material on record. We note that the amount in question has been received by the assessee from the Gas Authority of India Ltd. (GAIL) by way of compensation to lay underground pipe in the agricultural land of the assessee. This compensation received has been held by the Ld. CIT(A) as capital in nature, observing as under:
6.2 I have considered the facts of the case and gone through the submissions of the appellant. The A.O made the addition of Rs. 4,81,748/- since no evidence could be filed by the appellant. During the course of appellate proceedings, however, the appellant submitted that this amount was received from GAIL India Ltd. (A Government of India Undertaking) by way of compensation to lay an underground pipe line where the appellant's agricultural land was located. In support of his statement, the appellant also gave a copy of cheque issued by the Compensation Department of GAIL India Ltd. which makes it amply clear that the amount received was by way of compensation. Since the amount was received by way of compensation, the appellant has submitted that the same may be treated as capital receipt by relying upon the judgement in the case ofDr. (Ms.) Avimay S. Haakim (ITA No. 2923 of 2010) and the case of Vijay Ishwar Bhai Desai (ITA No. 544/Ahd/2010). On a careful examination of the case of Vijay Ishwar Bhai Desai vs. ITO, it is found that the compensation received by the assessee for laying down the underground pipeline was held to be a capital receipt not chargeable to tax. In the present case, the compensation received is of a similar nature. The A.O has, in his remand report dated 13-03-2015, acknowledged that the amount was received as a compensation for utilization of agricultural land for laying gas pipe line.
4.4 In the case of Jagan Nath Prasad, HUF (supra) also the identical compensation received has been held by the Tribunal as capital in nature. The relevant finding of the Tribunal (supra) is reproduced as under:
“8. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee received a sum of Rs. 4,75,041/- towards the damages to the land belonging to it and the AO taxed it considering the same as revenue receipt, the Id. CIT(A) upheld the view taken by the AO.
On a similar issue their lordships of the Hon'ble Bombay High Court in the Case of Dr. (Ms) Avimay S. Hakim Vs ITO (supra) observed in para 5 of the order dated 10.08.2011 as under: "The facts brought on record before the ITAT and before this Court by filing an additional affidavit clearly show that the property belonging to the assessee was damaged by Sahara India and in fact after paying compensation, neither Sahara India nor the Municipal Council have restored the land belonging to the assessee to its original position. The fact that Sahara India has removed the equipments from the plot belonging to the assessee, it cannot be said that the damage caused to the land has been set right by restoring the land to its original position. In these circumstances, in our opinion, the amount of Rs. 8,42,000/- received by the assessee towards the damage to the land belonging to the assessee cannot be said to be revenue receipt. The fact that the land has remained with the assessee and that the assessee in future may earn profits from the said land cannot be a ground to hold that the compensation received by the assessee in lieu of damage caused to the land was revenue receipt. Accordingly, we answer the question in favour of the assessee and against the revenue."
So, respectfully following the ratio laid down in the aforesaid referred to case, the impugned addition sustained by the Id. CIT(A) is deleted because the amount received towards the damage to the land belonging to the assessee cannot be said to be a revenue receipts.”
4.5 In the instant case before us is also compensation has been received by the assessee for laying underground pipe by the GAIL, thus, respectfully following the above finding of the Tribunal (supra), we uphold the finding of the Ld. CIT(A) on the issue in dispute. Accordingly, the ground of the appeal of the Revenue is dismissed. 5. In the result, the appeal of the Revenue is partly allowed for statistical purposes. The decision is pronounced in the open court on 20th June, 2018.