JATIN N. MALKAN,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX-20(1), MUMBAI

This appeal arises out of quantum proceedings. In ground No. 1 the assessee has challenged addition of Rs. 2,00,000/- made under section 68 of the Income Tax Act, 1961.

Briefly the facts are the assessee, an individual, filed his return of income for the impugned assessment year on 15.12.2011 declaring Nil income. The return of income filed by the assessee was selected for scrutiny and during the assessment proceedings, the Assessing Officer issued notices u/s 142 (1) and 143 (2) of the Act calling upon the assessee to furnish various information. As alleged by the Assessing Officer, there was no response from the side of the assessee to the statutory notices issued. It is also alleged by the Assessing Officer that subsequent notices/remindersissued by him failed to evoke any response from the assessee. Therefore, the Assessing Officer proceeded to complete the assessment to the best of his judgment as per the provisions of section 144 of the Act. From the information available on record, he found that the assessee has deposited cash of Rs. 2,00,000/- in HDFC Bank account. Since, the assessee failed to furnish any explanation with regard to the nature and source of the said cash deposit, he treated it as unexplained cash credit u/s 68 of 3 Jatin N. Malkan the Act and added back to the income of the assesee. Being aggrieved with such addition, the assessee preferred appeal before the First Appellate Authority. However, Ld. Commissioner (Appeals) also sustained the addition made by the Assessing Officer rejecting the submissions of the assessee.

The Ld. Authorised Representative submitted, the assessee had sufficient cash balance available with him to make the cash deposit of Rs. 2,00,000/- in the Bank account. In this context, he drew our attention to copy of the balance sheet as on 31.10.2010 forming part of the tax audit report. He submitted, without properly considering the submissions of the assessee the departmental authorities have made the addition.

The Ld. Departmental Representative relied upon the observations of the Assessing Officer and Commissioner (Appeals).

We have considered rival submissions and perused the material on record. It is apparent, since the assessee failed to appear before the Assessing Officer to explain the nature and source of cash deposit of Rs. 2,00,000/- made to the HDFC Bank account, the Assessing Officer treated it as unexplained cash credit u/s 68 of the Act and added back to the income of the assessee. Before the Commissioner (Appeals), the assessee has contended that the amount was deposited out of cash at hand available with him. To prove the aforesaid fact the assessee has relied upon the balance sheet as on 31.03.2010, wherein closing cash at hand of Rs. 3,65,290/- has been shown. The Ld. Commissioner (Appeals) has rejected the aforesaid contention of the assessee with the observation that instead of submitting the balance sheet as on 31.10.2010, the assesee has submitted balance sheet as 4 Jatin N. Malkan on 31.03.2010. In our view, rejection of assessee’s claim on the aforesaid reasoning is improper. The claim of the assessee that the cash deposit in the bank account was made out of cash available at hand requires verification. Accordingly, we are inclined to restore the issue to the Assessing Officer for enabling the assessee to prove its claim that cash deposit of Rs. 2,00,000/- made in the HDFC bank account is out of surplus cash available with him. The onus is on the assessee to substantiate its claim with proper supporting evidences. Needless to mention, the assessing officer must decide the issue after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

In ground no. 2 the assessee has challenged the disallowance of deduction claimed of Rs. 1,15,000/- u/s 80C/80CCA of the Act. Brief facts of the issue are, during the assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction of Rs. 1,15,000/- u/s 80C/80CCA of the Act. Stating that the assessee has not explained or furnished evidence to justify the claim, he disallowed the aforesaid deduction. Though, the assessee challenged the aforesaid disallowance before the First Appellate Authority, however, he also upheld the disallowance by observing that the assessee has not furnished the supporting evidence to justify the claim.

The ld. Authorized Representative (AR) submitted, the deduction claimed represents payment made towards LIC premium. He submitted, the entire payment was made through bank account and date wise particulars of the payment were also furnished. Thus, he submitted, the disallowance made is not proper. 9. The Ld. Departmental Representative submitted, since the assessee failed to furnish supporting evidences to demonstrate that it 5 Jatin N. Malkan has actually made the payment towards LIC premium, disallowance is justified.

We have considered rival submissions and perused the material on record. As could be seen from the facts on record, the only reason for disallowance of deduction claimed u/s 80C/80CCA of the Act is, the assessee failed to furnish the premium payment receipts etc. to prove the claim of deduction. The ld. AR has submitted before us, though premium payment receipts are not available, however, the payments were made through banking channel. He also submitted, the assessee can obtain necessary certificate from LIC to demonstrate payment of premium. Considering the aforesaid submission of ld. AR and for enabling the assessee to prove his claim of deduction under section 80C/80CCA, we are inclined to restore the issue to the Assessing Officer for deciding afresh after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes.

In ground no. 3 the assessee has challenged the disallowance of claim of set off and carry forward of loss of earlier years. In the computation of income filed along with the return of income for the impugned assessment year the assessee had claimed carry forward and set of loss relating to AY 2007-08 to AY 2009-10. While completing the assessment u/s 144 of the Act the Assessing Officer did not allow set off and carry forward of preceding years losses. Being aggrieved, the assessee raised the issue before ld. Commissioner (Appeals). Ld. Commissioner (Appeals) after considering the submissions of the assessee did not accept the claim on the reasoning that the assessee failed to furnish the required evidences to justify his claim.

The ld. Authorized Representative drawing our attention to the computation of income filed along with the return of income for the 6 Jatin N. Malkan impugned assessment year, a copy of which is at page 2 of the paper book, submitted, assessee has furnished the details of preceding years losses. He submitted, without properly examining the claim of the assessee the departmental authorities have disallowed assessee’s claim of carry forward and set off of earlier year’s losses. The ld. authorized representative submitted, assessee has filed the return of income for the impugned assessment year as well as the earlier assessment years within the time prescribed u/s 139(3) of the Act. Therefore, there is no reason to disallow assessee’s claim.

The ld. Departmental Representative submitted, assessee’s claim can be verified by the Assessing Officer.

We have considered rival submissions and perused the material on record. From the computation of income filed by the assessee, a copy of which is placed in the paper book, it appears, the assessee has claimed carry forward and set off of losses relating to assessment year 2007-08 to A.Y. 2009-10. It is also the claim of the assessee that returns of income, wherein the assessee has claimed losses both relating to the preceding assessment years as well as impugned assessment year, were filed within the time prescribed u/s 139(3) of the Act. Considering the aforesaid submissions of the assessee, we are of the view that assessee’s claim needs to be examined after verifying the assessment records for assessment years 2007-08 to 2009-10. In case, the assessee has filed its return of income for the aforesaid assessment years within the time prescribed u/s 139(3) of the Act, then assessee’s claim of carry forward and set off of loss in the impugned assessment year can be allowed if all other statutory conditions for claiming such loss have been fulfilled. For verifying the aforesaid aspects, we are inclined to restore the issue to the Assessing Officer for de novo adjudication after due opportunity of being heard to 7 Jatin N. Malkan the assessee. Ground raised is allowed for statistical purposes. In the result, assessees’ appeal is allowed for statistical purposes. (Assessment Year 2011-12)

This appeal has its genesis in the order passed by the Assessing officer imposing penalty u/s 271(1)(c) of the Act on the basis of addition made of Rs. 2,00,000/- representing the cash deposit made by the assessee in the HDFC Bank account.

While deciding ground no. 1 of the quantum appeal filed by the assessee in we have restored the issue relating to the aforesaid addition made of Rs. 2,00,000/- to the Assessing Officer for de novo adjudication.

Therefore, as a natural corollary, the order imposing penalty on the basis of such addition deserves to be set aside and restored back to the file of the Assessing Officer for initiating fresh, if warranted, depending upon the ultimate outcome of the issue relating to the addition of Rs. 2,00,000/- representing the cash deposit made into HDFC Bank account. This appeal is allowed for statistical purposes.

In the result, both the appeals are allowed for statistical purposes. Order pronounced in the open Court on 30.01.2019