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आदेश/Order
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the Assessee against the order of the Ld. CIT(A)-1, Ludhiana dt. 11/08/2017.
Following grounds have been raised in this appeal:
That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the addition of Rs. 30,23,000/- made on account of cash deposits in the bank account treating the same as deemed income u/s 68 of the Act which is arbitrary and unjustified.
2. That the Ld. Commissioner of Income Tax (Appeals) has further erred in law as well as on facts in remanding the matter back in respect of addition of Rs. 69,28,130/- received on account of compensation received on account of acquisition of agricultural land to check the non-taxability of the same which in fact is totally exempt and as such the directions given are arbitrary and unjustified. 3. That the Ld. Commissioner of Income Tax (Appeals) ahs further erred in law as well as on facts in remanding the matter back in respect of addition of Rs. 40,36,000/- received as gift from Smt. Manjit Kaur and as such the directions given are arbitrary and unjustified. 4. That the Ld. Commissioner of income Tax (Appeals) has further erred in upholding the addition of Rs. 3,50,000/- on account of cash deposit and Rs. 7,85,638/- on account of cheque deposited in the account which is arbitrary and unjustified.
5. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. 3. Ground No. 2 & 3 were not pressed and Ground No. 5 is general in nature so these grounds do not require any comment on our part.
Vide Ground No. 1 the grievance of the assessee relates to the sustenance of addition of Rs. 30,23,000/- made by the AO on account of cash deposits in the bank account treating the same as deemed income under section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
Facts of the case in brief are that the assessee filed the return of income on 29/03/2014 declaring an income of Rs. 2,11,150/-, subsequently the case was selected for scrutiny. The AO asked the assessee to furnish the source of cash/credit entries appearing in his bank account as per following details :
Sl.No. Description Name of the Bank Account Cash Date assessee No./Bank Deposits 1. Cash Deposit- Sh. Surjit Singh 01121000284513 798000/- 25.04.2012 HDFC Bank 2. Cash Deposit Sh. Surjit Singh 13411000034143 790000/- 26.04.2012 HDFC Bank 3. Cash Deposit Sh. Surjit Singh 13411000034143 535000/- 01.05.2012 HDFC Bank 4. Cash Deposit Sh. Surjit Singh 13411000034143 480000/- 03.05.2012 HDFC Bank 5. Cash Deposit Sh. Surjit Singh 13411000034143 28000/- 15.05.2012 HDFC Bank 6. Cash Deposit Sh. Surjit Singh 13411000034143 200000/- 26.05.2012 HDFC Bank 7. Cash Deposit Sh. Surjit Singh 13411000034143 200000/- 13.06.2012 HDFC Bank 8. Credit Sh. Surjit Singh 13411000034143 706158/- 10.08.2012 HDFC Bank 9. Credit Sh. Surjit Singh 13411000034143 704926/- 10.08.2012 HDFC Bank 10. Credit Sh. Surjit Singh 13411000034143 69,28,130/- 20.10.2012 HDFC Bank 11. Credit Sh. Surjit Singh 13411000034143 40,36,000/- 19.02.2013 HDFC Bank 12. Cash Deposit Sh. Surjit Singh 65007882389 3,50,000/- 17.12.2012 SBOP 13. Credit Sh. Surjit Singh 65007882389 7,85,638/- 14.05.2012 SBOP
Since no reply was filed by the assessee. The AO issued the notice under section 144 of the Act and asked the assessee to furnish the following details: i) Complete details of land and its address sold by Sh. Surjit Singh. ii) Documentary evidence of agriculture land and its income. iii) Cash flow statement of the assessee showing deposits in the bank accounts of the assessee. iv) Complete address of the property rented out during the year and name and address of the tenant. v) Complete details of FDR's in the name of Sh. Surjit Singh.
5.1 The AO observed that the assessee had not furnished any reply which showed that the assessee had nothing to say and have no explanation to explain the cash deposits and credit entries in his bank account. He therefore passed the assessment order dt. 05/02/2016 ex-parte under section 144 of the Act and made the addition of Rs. 1,65,41,850/-. The AO also worked out the agricultural income at Rs. 12,60,000/- by estimating the income @ Rs. 30,000/- per acre i.e; 42 Acre agricultural land owned by the assessee.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the additional evidences to explain the cash deposit in his bank account, which were admitted and forwarded to the AO for his comments. In response the AO furnished the Remand Report vide letter dt. 10/02/2017.
6.1 In the rejoinder the assessee furnished the cash flow statement for the period 01/04/2011 to 31/03/2012 which included brought forward cash in hand of Rs. 5 lacs as on 01/04/2011, cash withdrawals from the HDFC Ludhiana Account amounting to Rs. 16,56,500/-, from SBOP, Sirhind amounting to Rs. 11,70,000/- and rental income during the year to the tune of Rs. 2,85,000/- as reduced by cash deposit in HDFC Account of Rs. 73,000/-, household expenses estimated to be of Rs. 1,80,000/- and registration expenses of properties purchased during the year said to be amounting to Rs. 2,60,000/-.
6.2 The Ld. CIT(A) observed that as regards to the opening cash in hand of Rs. 5 lacs was concerned it would merely be an estimate for which there was no evidence and the AO in his remand report denied any record of Income Tax Return for the A.Y. 2012-13 in his office. He also observed that the level of income shown by the assessee by rental and no agricultural income during the year, the purported brought forward cash in hand was definitely a much exaggerated figure only meant to explain the deposits of cash during the year under consideration. The Ld. CIT(A) was of the view that the opening entry of the cash flow statement furnished by the asessee was entirely unreliable and lacks any evidence, evidentiary or otherwise. He further observed that cash withdrawal from the saving bank account maintained with HDFC and SBOP revealed those were sporadic and in smaller denominations, they betray the circumstances of withdrawals to be for the routine expenses or other expenses, therefore, their purported retention with the assessee and their subsequent deposit in the same saving bank account maintained with HDFC again in varying denominations spread over various dates was not only unlikely but also highly improbable. He was of the view that the explanation of the assessee was nothing but illusory aimed at anyhow explaining the deposit in the subsequent year. He therefore held that the cash deposits of Rs. 30,23,000/- remained entirely unexplained and no interference was called for in the action of the AO in treating the same amount as deemed income with in the meaning of section 68 of the Act.
Now the assessee is in appeal.
The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the assessee explained the source of deposits in the bank account which was out of the withdrawal amounting to Rs. 16,56,500/- from the HDFC Bank, Ludhiana and Rs. 11,70,000/- from the SBOP, Sirhind and that the rental income of Rs. 2,85,000/- was shown by the assessee. It was further submitted that the assessee was having opening cash in hand from the earlier years out of his rental income and agricultural income, the said opening cash in hand amounting to Rs. 5 lacs pertaining to the earlier years, therefore, the Ld. CIT(A) was not justified in ignoring the figures of the earlier years while sustaining the addition made by the AO. It was submitted that the copy of HDFC Bank Account is placed at page no. 9 to 13 for the period from 04/04/2012 to 31/03/2013, from the said bank account it would be clear that the withdrawal by the assessee were not in small denomination as alleged by the Ld. CIT(A). It was contended that the assessee redeposited the amount which was withdrawn from the said bank on various dates.
Our attention was also drawn towards page no. 14 to 15 which is the copy of bank account maintained with SBOP, Sirhind for the period from 03/05/2011 to 29/03/2013 wherein the cash amounting to Rs. 8,00,000/-, Rs. 3,50,000/- and Rs. 6,00,000/- was withdrawn on 08/02/2012, 23/02/2012 and 25/06/2012 respectively. It was stated that the amount withdrawn from the bank account was redeposited in the bank account and that an amount of Rs. 11,34,302/- was shown by the assessee as an agricultural income for the A.Y. 2012-13 in the income tax return filed on 12/06/2012, copy of which is placed at page no. 36 & 37 of the assessee’s compilation. It was accordingly submitted that the assessee was not having agricultural income in the preceding year and was not in a position to have opening cash in hand amounting to Rs. 5 lacs as on 01/04/2011.
We have considered the submissions of both the parties and perused the material available on the record. In the present case, the assessee had furnished a cash flow statement for the period from 01/04/2011 to 31/03/2012 copy of which is placed at page no. 4 of the assessee’s compilation, in the said cash flow statement the assessee had shown inflow of the cash for the year ending on 31/03/2012 at Rs. 36,11,500/- which was mainly out of the cash withdrawal amounting to Rs. 16,56,500/- from HDFC Bank, Ludhiana and Rs. 11,70,000/- from SBOP, Sirhind. The assessee had also shown opening cash in hand of Rs. 5 lacs and rental income of Rs. 2,85,000/- which had already been shown in its return of income, copy of which is placed at page no. 36 & 37 of the assessee’s compilation. The assessee redeposited Rs. 73,000/- in HDFC Bank, Rs. 1,80,000/- were spent for household expenses and Rs. 2,60,000/- were utilized for registration expenses of property purchased, in this manner Rs. 5,13,000/- were utilized and remaining amount of Rs. 30,98,500/- was claimed to be closing balance of cash in hand as on 31/03/2012. The withdrawal shown by the assessee during the year under consideration was Rs. 27,23,000/- from HDFC Bank, Ludhiana and Rs. 6,00,000/- from SBOP, Sirhind, the assessee was having rental income of Rs. 2,85,000/- which was also shown in the earlier years. Thus the total cash available with the assessee during the period 01/04/2012 to 31/03/2013 was at Rs. 6706500/- out of which the assessee deposited Rs. 3026000/- and Rs. 3,50,000/- in HDFC Bank, Ludhiana and SBOP, Sirhind respectively. The Assessee also claimed the expenses for household at Rs. 2,00,000/- thus the cash in hand as on 31/03/2013 was at Rs. 31,30,500/- copy of the said cash flow statement is placed at page no. 5 of the assessee’s compilation.
It is also noticed that the AO in the assessment order dt. 05/02/2016 for the assessment year under consideration, mentioned in the computation of income that the assessee was having agricultural income of Rs. 12,60,000/-. The said amount was also claimed to be available with the assessee for making the deposit in the bank account. However, in the present case it is not clear as to whether the cash flow statements now furnished, were furnished and explained to the AO / CIT(A) or not. In the instant case, the Ld. CIT(A) in the impugned order mentioned that the AO in his remand report stated that the return of income for the A.Y. 2012-13 claimed to be filed was not available in the record of his office while the claim of the assessee is that it was furnished on 12/06/2012 copy of which is placed at page 36 of the assessee’s paper book. We, therefore, in the absence of clear facts on record and contradictory stand of the AO and assessee, deem it appropriate to set aside this issue back to the file of the AO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
The next issue vide Ground No. 4 relates to the sustenance of addition of Rs. 3,50,000/- on account of cash deposited and Rs. 7,85,638/- on account of cheque deposited in the bank account.
The facts related to this issue in brief are that when the matter was taken to the Ld. CIT(A) against total additions made by the AO, the Ld. CIT(A) sustained the addition of Rs. 3,50,000/- i.e; cash deposited on 17/12/2012 and Rs. 7,85,638/- being the cheque deposited in SBOP on 14/05/2012 the said cheque was purported to have been received from M/s Harinder Singh Amarjeet Singh, commission agents, Sirhind. The Ld. CIT(A) sustained the said addition by observing that the assessee had not disclosed as to why the amount was received by him, therefore, in the absence of any explanation regarding the receipt, the same could be treated as taxable receipt.
Now the assessee is in appeal.
The Ld. Counsel for the Assessee submitted that the cash was deposited out of the withdrawals from the bank accounts which had been shown in his cash flow statement and as the assessee was having sufficient cash balance for making the deposits, therefore, the addition of Rs. 3,50,000/- was wrongly sustained by the Ld. CIT(A).
As regards to the cheque amount of Rs. 7,85,638/- deposited in SBOP, Sirhind on 14/05/2012, the Ld. Counsel for the assessee submitted that this cheque was received from M/s Harinder Singh Amarjeet Singh, commission agents, Sirhind Mandi and the copy of the statement of the assessee’s account in the books of the said commission agent was furnished to the Ld. CIT(A) on 16/01/2017 as an additional evidence but the Ld.CIT(A) without appreciating the facts and considering the said copy of account, arbitrarily sustained the addition. Our attention was drawn towards page no. 17 of the assessee’s paper book which is the copy of the account of the assessee in the books of M/s Harinder Singh Amarjeet Singh, commission agents in the said account the amount has been credited on account of crops and payment has been shown through cheque amounting to Rs. 7,85,638.15 on 14/05/2012 & Rs. 3,96,082.74 on 15/12/2012. However the said document was not furnished to the AO. Therefore this issue is also set aside to the file of the AO for fresh adjudication, in accordance with law, after providing due and reasonable opportunity of being heard to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes.
(Order pronounced in the open Court on 10/05/2022 )