RAMESH CHAND vs. ITO WARD-I,,

PER KULDIP SINGH, JUDICIAL MEMBER :

Appellant, the proprietor of M/s. Ramesh Chand Prem Chand, Narnaul by filing the present appeal sought to set aside the impugned order dated 25.4.2006 passed by the Commissioner of Income-tax (Appeals), Rohtak for the asstt. year 2003-04 on the grounds interalia that :-

3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. A.O. in making an addition of Rs. 50,300/- on account of alleged difference in the balance of M/s. Rattan Iron Store without any basis, material or evidence and by recording incorrect facts and findings and that too without giving an adequate opportunity of being heard.

5. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. A.O. in making additions of Rs. 7,549/- on account of alleged profit by considering the deposits in the bank account of M/s Satya Narain Dinesh Kumar as sale proceeds of the appellant by treating the said firm as benami of the appellant without any basis, material or evidence and by recording incorrect facts and findings and that too without giving an adequate opportunity of being heard. 6. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in 3 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO confirming the action of Ld. A.O. in making of additions of Rs. 108/- on account of alleged profits by considering the deposits in the bank account of M/s Rattan LaI Ravinder Kumar as sale proceeds of the appellant by treating the said firm as benami of the appellant and without any basis material or evidence and by recording incorrect facts and findings and that giving an adequate opportunity of being heard.

7. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in sustaining addition of Rs.25,98,J50/- on account of alleged peek investment as undisclosed income on the basis transactions of M/s. Chittar Mal Budh Ram, M/s Bansal Brother, M/s. Seema Trading Company and M/s Budhmal & Sons by treating such transactions as conducted by the appellant by treating the above firms as benami concerns of the a appellant and further by taking alleged profit without any basis, material or evidence and by recording incorrect facts and findings and that too without giving an adequate opportunity of being heard.

8. That having regard to the facts and circumstances of the case, Ld.CIT (A) has erred in law and on facts in sustaining the disallowance of Rs. 3,488/- out of shop expenses. Telephone expenses and Office Kitchen expenses.

9. That having regard to the facts and circumstances of the case, Ld.CIT (A) has erred in law and on facts in confirming the impugned assessment order and in making above addition and disallowances without observing the principles of natural justice and without giving adequate opportunity of being heard and without making witnesses available for cross examination and without confronting the material collecting at the back and by recording incorrect facts and by considering irrelevant material.

10. That in any view of the matter and in any case, additions and disallowances made in the assessment order are bad in law and against the facts and circumstances of the case and 4 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO

Ld. A.O. in any case ought to have allowed telescoping of the addition wherever possible. 11. That having regard to the facts and circumstances of the case, Ld.CIT (A) has erred in law and on facts in confirming the action of Ld. A.O. in charging interest U/S 234B. 12. That the appellant craves the leave to add. modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. “

2. Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee firm is into the business of sale and purchase of foodgrains and cattle feed items. A.O. noticed from the balance sheet for asstt. year 2002-03 that assets of Rs. 50,300/- are appearing in the name of M/s. Rattan Iron Store. M/s. Rattan Iron Store was called to explain who has intimated vide reply dated 14.2.2006 that no dealing took place with the assessee firm during the period 1.4.2002 to 31.3.2003 and there was no opening and closing balance during the said period. However the assessee has also further shown an amount of Rs. 50,300/- in the name of M/s. Rattan Iron Store for asstt. year 2003-04 in the balance sheet as on 31.3.2003. So the A.O. after rejecting the books of accounts

5 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO made an addition of Rs. 50,300/- to the income of assessee for asstt. year 2003-04.

Sat Narain Dinesh Kumar A.O. noticed that an amount of Rs. 34,31,234/- has been credited to its account during the period 1.4.2002 to 31.3.2003 being receipt on sale of mustard seed.

Assessee was called upon to explain the deposits in the bank.

Assessee furnished copies of the bank account in their explanation but no evidence has been produced, so the A.O. by taking profit ratio of this @0.22% as shown by the assessee observed that assessee has earned profit of Rs. 7,549/- from the aforesaid amount and made addition thereof to the income of the assessee. Similarly A.O. noticed an amount of Rs. 49,000/- credited in bank account No. 01050060366 in the name of M/s. Rattan Lal Ravinder Kumar. For lack of evidence A.O. by taking profit ratio of this amount at 0.22% as shown by the assessee worked out the profit of Rs. 108/- earned by assessee and made addition thereof to its income.

6 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO 4. A.O. further perused the bank account No. 2764 (New account No. 102764) maintained with OBC, Rewari in the name of M/s. Budh Ram Chittar Mal Rewari . A.O. noticed that in the assessment year 2001-02 one Shri Vikram Singh was examined on the direction of Ld. CIT (A) Rohtak regarding investment in the firm M/s. Rattan Iron Store and it was held by the A.O. as benami concern of Shri Ramesh Chand assessee as bank account of the same was opened in the name of his servant Shri Vikram Singh whose statement was recorded on 3.3.2005.

Shri Vikram Singh vide his statement dated 3.3.2005 recorded by A.O. disclosed that he has opened bank account in the name of M/s. Budh Ram Chittar Mal Rewari in Oriental Bank of Commerce Rewari at the instance of Shri Ramesh Chand and this fact has also been reaffirmed by Shri Vikram Singh in his affidavit dated 9.3.2005 and 28.3.2005. Then information from the aforesaid bank was called but the bank Manager vide letter dated 25.5.2005 reported that they have no such account with their branch and further intimated that the bank was having account in the name of M/s. Chittar Mal Budh Ram which has 7 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO since been closed on 22.4.2003. From inquiry and document on record A.O. proceeded to conclude that the business conducted in the name of M/s. Chittar Mal Budh Ram was controlled and owned by Shri Ramesh Chand assessee as a benami concern floated in the name of his poor employee and during the year under assessment aforesaid account is found to have an amount of Rs. 1,28,97,111/-. A.O. has separately considered credit entries for working out investment and gross profit earned.

8 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO 6. Similarly A.O. observed from account No. 444 (new number 308 of S.B. Indore, Rewari in the name of M/s. Seema Trading Co., this account also found to be benami by the A.O. being run by Shri Ramesh Chand and account opening form was signed by Mukesh brother of Shri Ramesh Chand so A.O. came to the conclusion the business conducted in the name of M/s. Seema Trading Co. through bank account 444(new trading) was controlled and owned by Shri Ramesh Chand as a benami transaction in the name of the poor employee Shri Satvir and found gross credit amount in the account at Rs. 5,21,99,513/-.

9 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO 14,94,41,494/- and Rs. 4,72,751/- respectively. A.O. made an addition as per paragraph 5A read with para 5(i) to 5(iv) at Rs. 5,91,03,848/- and assessed the income at Rs. 6,10,74,020/-.

10 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO has arisen before the coordinate bench of the Tribunal in assessee’s own case in dated 30.8.2016 for assessment year 2001-02.

Ground No. 3

Rattan Iron Store filed by assessee and return of income for asstt. year 2002-03 asset in the name of M/s. Rattan Iron Store was shown at Rs. 50,300/-. This fact is further proved from the impugned order passed by Ld. CIT(A). CIT(A) as recorded in para 6.2. Strangely enough when these assets of Rs. 50,300/- pertains to assessment year 2002-03 then how the addition thereof has been made in assessment year 2003-04. If any such addition is to be made that has to be made in assessment year 2002-03. Ld. CIT(A) has lost sight of this fact while confirming the addition of Rs. 50,300/-. So we are of the considered view that A.O./CIT(A) have erred in making of 11 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO addition of Rs. 50,300/-, which is liable to be deleted. Hence ground No. 3 is determined in favour of the assessee.

Ground No. 5,6 and 7

Chittar Mal Budh Ram, M/s. Bansal Brothers, M/s. Seema Trading Co., M/s Budh Mal & Sons by treating the same as benami concerns of the assessee.

14. Ld. AR for the assessee challenging the impugned order contended that A.O. as well as Ld. CIT(A) have erred in computing the alleged profit without any basis, material or evidence and by recording incorrect facts without providing opportunity of being heard to the assessee. Ld. AR of the assessee further contended that the amount of addition involved in ground No. 5,6 & 7 is part of the addition of Rs. 5,65,05,698/- made in asstt. year 2001-02 which has since been deleted by the coordinate bench of the Tribunal for asstt.

12 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO year 2001-02 in in assessee’s own case and such the balance addition is also liable to be deleted.

Seema Trading Company , M/s. Ratan Lal Ravinder Kumar,M/s.

Chittar Mal Budh Ram, M/s. Bansal Brothers operated through

13 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO Shri Ghanshyam, Vikram, Rohtash, Satvir, M/s. Satya Narain Dinesh Kumar, Narnaul , M/s. Gobind Ram Sat Narain, Narnaul.

“12. In the backdrop of the aforesaid facts and circumstances of the case and the record relied upon by the parties to the appeal, the first question arises for determination in this case is :-

14 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO as to whether addition of Rs. 5,65,05,698/- and Rs. 15,60,079/- made on account of peak investment and estimated profit made by the A.O. has been wrongly deleted by the CIT(A)?

13. From the undisclosed facts, arguments addressed by the authorized representatives of the parties and documents brought on record, we find no ground to interfere into the findings returned by the Ld. CIT(A) for the following reasons :- (i) that there was no prima facie material before the A.O. nor he has collected any such material to arrive at the conclusion that assessee is a benami owner of the aforesaid firms viz. (i) M/s. Santosh Kumar Vijay Kumar; (ii) M/s. Rattan Lal Ravinder Kumar; (iii) M/s. Sat Narain Dinesh Kumar; and (iv) Gobind Ram Sat Narain; (ii) that even during the remand proceedings, the A.O. has failed to lay hand on any such material to substantiate his findings that the assessee is a benami entity running business in the names of aforesaid four firms. So, there is not an iota of evidence that the assessee is benami owner of aforesaid four firms. (iii) that the A.O. has blindly relied upon the enquiry report given by Inspector that Rohtas Kumar, Prop. Of M/s. Sat Narain Dinesh Kumar is an employee of one Bishan Baniya engaged in similar business as that of assessee but has not preferred to record the statement of Rohtas Kumar himself whose bank account no. 1353 of OBC, Narmaul was opened at the introduction of Sushil Kumar, so in these circumstances, it cannot be said that M/s. Sat Narain Dinesh Kumar is the benami business of the assessee. (iv) that CIT(A) has rightly scrutinized the statements of Ghanshyam and Vikram Singh recorded by the A.O. and came to the conclusion on the basis of inherent consistencies that these are not the statement voluntarily made by them rather they have merely put their signatures without knowing their contents;

15 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO

(v) that there is not an iota of evidence on record to prove as to from where the assessee has made the purchases of mustard seed to the tune of tens of crores of rupees. A.O. has not preferred to record statement of any of the traders from the local markets to substantiate the allegation made against the assessee; (vi) that the A.O. made an addition of all the credit entries in the bank of the four firms without verifying the details of transactions in each of the bank account; (vii) that the A.O. has also failed to explain as to how and on what grounds, he has resorted to addition of peak investment on 15 days cycle; (viii) that when the very existence of aforesaid four firms being benami ownership of assessee has not been established making an addition of peak investment of 15 days cycle is without any basis; (ix) that when the assessee has himself admitted bank account no. 60349 in SBOP, Narnaul in the books of account showing turnover of Rs. 62,00,683/-, there is no question of adding the peak investment of this bank account of Rs. 26,80,750/- does not arise; (x) that so far as account no. 1927 in SBOP, Narnaul is concerned, the same is opened in the name of assessee but the transaction in the said account pertains to his brothers, Shri Pawan Kumar and Shir Mukesh Kumar. But at the same time, the assessee has given revised calculation and by applying the GP rate of 0.71%, already accepted by the A.O., the amount comes to Rs. 1,79,915/-; (xi) that the A.O. heavily relied upon the statement of Kanti Parkash who has stated that he has been doing business with Shri Ramesh Chand, the assessee, in the name of three bogus concerns namely (i) M/s. Santosh Kumar Vijay Kumar to the tune of Rs. 4,28,852/-; (ii) M/s. Rattan Lal Ravinder Kumar to the tune of Rs. 7,11,100/-; and (iii) M/s. Sat Narain Dines Kumar to the tune of Rs. 3,63,540/- on the basis of telephonic

16 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO conversation from time to time. But strangely enough, there was nothing on the file that aforesaid Kanti Parkash was conducting said business through or at the instance of the assessee; (xii) that the revenue has failed to demonstrate that the assessee is a benami/ostensible owner of the aforesaid four concerns by collecting the material that as to when and in whose name these concerns have been got registered and as to what is their states with sale-tax department and with market committee rather built up the entire case on the basis of suspicion during assessment as well as during remand proceedings; (xiii) that though the A.O. has based the assessment order on the basis of statement of Kanti Parkash but assessee has not been provided with an opportunity to cross examine Kanti Parkash which is violation of rule of natural justice and as such the statement of Kanti Parkash cannot be relied upon to sustain the addition. (xiv) that the A.O. declared the aforesaid four firms as bogus concerns merely on the ground that the assessee failed to prove that he has no interest in these details with any documentary evidence, but strangely enough this fact was to be proved by the A.O. not the assessee who is not to prove the negative; (xv) that when the enquiries conducted by A.O. itself disclosed that the bank accounts of the aforesaid alleged four benamidars of the assessee were being operated by Shri Prem Kumar, Shri Pawan Kumar and Shri Mukesh Kumar, all brothers of assessee who were independently assessed to income-tax with ITO, Ward No. 1, Narnaul, the question of making addition on the basis of bank accounts of aforesaid benamidars in the name of the assessee does not arise. If at all the addition was to be made it has to be made in the name of the aforesaid persons, who operated the said accounts;

17 ITA.No.2505/Del./2006 Shri Ramesh Chand vs. ITO (xvi) that the A.O. was at liberty to collect the complete details regarding alleged transactions from the sales tax authorities, market committee records and parties from whom the mustard seeds were purchased by the assessee for onward sale to different persons but he has not preferred to do so; (xvii) that on the basis of insufficient evidence and merely on the basis of suspicion, conjectures and surmises addition of peak investment and estimated profits from the aforesaid alleged benami concerns is not sustainable, hence rightly deleted by the CIT(A).

Order pronounced in the open Court on 19th September, 2017.