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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy
Appearances by: Shri T.P. Kar, FCA, appeared on behalf of the assessee. Shri Satyajit Mondal, Addl. CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : August 29th, 2018 Date of pronouncing the order : September 12th , 2018 ORDER Per J. Sudhakar Reddy, AM :- Both these appeals are filed by the assessee directed against separate but identical orders of the Learned Commissioner of Income Tax (Appeals)-7, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 14/11/2017, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2012-13 & dt. 05/12/2017, for the Assessment Year 2013-14.
The assessee is an individual and is in the business of trading of rejected hair. During the course of assessment proceedings, for the Assessment Year 2013-14, the Assessment Year: 2012-13 Assessment Year: 2013-14 SK. Saphiruddi Assessing Officer discovered from a statement of Mugberia Central Co-operative Bank, that the assessee as hypothecated/pledged a Fixed Deposit worth Rs.35,00,000/-, as security. This fixed deposit was made on 20/03/2012, to the Ashutia Samaai Krishi Unnayan Samity Ltd., Bhagwanpur (ASKUSL). As the assessee had not offered any interest on this fixed deposit in his return of income, he was asked to reconcile the same. The assessee submitted that the fixed deposit was held by his wife, Reshaba Bibi, along with him. As proper explanation was not filed, reasons were recorded and the assessment for the impugned Assessment Year 2012-13, was reopened u/s 147 of the Act, by issual of notice u/s 148 of the Act, on 18/03/2016. As the assessee did not comply, penalty proceedings were initiated against him. Thereafter, the assessee replied that the return filed by him on 27/07/2012, electronically, for the Assessment Year 2012-13, may be treated as a return filed by him in response to the notice u/s 148 of the Act. Notice u/s 143(2) of the Act, was issued and the assessee was asked to furnish documentary evidence in support of the source of the fixed deposit of Rs.35,00,000/- , made in the name of the assessee’s wife Reshaba Bibi and as to why this amount should not be added as income of the assessee u/s 68 of the Act. The assessee submitted that the fixed deposit belongs to and was in the name of Reshaba Bibi. He pointed out that the first name was of Reshaba Bibi and the second name was SK. Saphiruddi, the assessee and that ASKUSL, issued a certificate in the name of the first holder. He submitted that the fixed deposit is fully owned by Reshaba Bibi. The Assessing Officer sought certain documents and also the personal appearance of Reshaba Bibi, the wife of the assessee. she did not appear before him, on the grounds of ill health. The Assessing Officer was not convinced with the evidence produced by Reshaba Bibi in upport of her sources of income. The addition was made by the Assessing Officer u/s 68 of the Act, on the ground that the assessee did not disclose this income deliberately in the return of income. The accrued interest was also added. Though the Assessing Officer in the body of the assessment order stated that the addition was made u/s 68 of the Act, in the computation portion he has made an addition of Rs.35,00,000/-, under the head bogus purchases. Aggrieved the assessee carried the matter in appeal before the ld. First Appellate Authority.
Assessment Year: 2012-13 Assessment Year: 2013-14 SK. Saphiruddi 2.1. Before the ld. First Appellate Authority, the assessee submitted that the cash flow statement etc. and made the following submissions:- i. Photocopy of fixed deposit of R.35.00 lacs made with Ashutia amabay Krishi Unnayan Samity Ltd. (ASKUSL) dated 20.03.2012 with date of maturity as 20.12.2014. ii. A certificate from the Manager of Ashutia Samabay Krishi Unnyan Samity Ltd. that the said certificate was hold jointly in the name of Reshaba Bibi and the assessee, which showed the amount of interest on maturity on 23.12.2014 at Rs.10,00,738/- iii. A certificate signed by Reshaba Bibi in broken vernacular Bengali that she is maintaining her account on cash basis. iv. A certificate in vernacular Bengali issued by the Pradhan (chief), Kothbarh Gramin Panchayat, Chharabarh, Purba Medinipur, stating and roughly translated as "This is to certify that Reshaba Bibi, wife of Sk Saphiruddi of vill-Kotbberti, P.O- Ashutia, P.S-Bhagwanpur, Dist- Purba Medinipur, Bhagwanpur Block-L, have been staying in this village for the last 45 years. The above person, for 20-22 years, has been doing floriculture of different flowers like rose, marigold, etc. In "addition to the same, she also does part-time tailoring and embroidery job. I certify that I know these persons and whatsoever I have mentioned here is true to my knowledge". v. he A/R has also filed the photocopy of her income tax return for A.Y. 2015-16 showing a gross total income of Rs.11,10,690/- vi. A summery chart of income of Reshaba Bibi staring from F.Y. 1990-91 to F.Y. 2011-12 showing the break-up of agricultural income and income from stitching and embroidery and her drawings. vii. The next document submitted by the A/R of the assessee is again a summery extract of capital account of Reshaba Bibi, which is starting from F.Y. 1989-90 showing an initial capital of Rs.5.00 lacs, which according to the narration provided has been received from parents, friends and relatives and family members on the time of her marriage. In the subsequent years, starting from the seed capital of Rs.5.00 lacs, the A/R has added the agriculture income from floriculture 'for A.Y. 1991-92, 1992-93, 1993-94, 1994-95. In all these five assessment years, there was no income from stitching and embroidery jobs. Further, no drawings have also been mentioned therein. From A.Y. 1995-96 onwards, for the first time, in addition to income from floriculture, net income received from stitching and embroidery products started appearing, which is continued upto the A.Y. 2008-09. From A.Y. 2009-10 the A/R has provided the balance sheet as well as the P&L etc. which is drawn on till A.Y. 2012-13 wherein the capital account shows a final balance of Rs.35,94,841/-. viii. The A/R furnished the above and claimed that the source fixed deposits comes from this balance amount of Rs.35,94,841/-.”
Assessment Year: 2012-13 Assessment Year: 2013-14 SK. Saphiruddi 2.2. The ld. CIT(A), rejected these contentions on the ground that, the assessee failed to substantiate his claims by production of documentary evidences. He confirmed the order of the Assessing Officer. He further observed that, ideally the income disclosed for taxations by Reshaba Bibi for the Assessment Year 2015-16, should be clubbed in the hands of the assessee u/s 64 of the Act.
Further, aggrieved the assessee is in appeal before us.
The ld. Counsel for the assessee, furnished paper books running into 55 pages and made elaborate written submissions in support of his contentions. The sum and substance of his submissions are that, the fixed deposit in question belongs to the wife of the assessee and this has been confirmed by the certificate furnished by ASKUSL. It was further argued that Reshaba Bibi had filed a declaration that she is maintaining her accounts on cash basis and the fixed deposit belongs to her. It was further emphasized that the Pradhan of Kothbarh Gramm Panchayet, has given a certificate that Reshaba Bibi, is carrying out activities like floriculture and in addition she is carrying out stitching and embroidery. He submitted that under the Constitution of India, Panchayati Raj is an organization of the State and the certificate of Pradhan has to be given credence. The ld. D/R, on the other hand, opposed the contentions and pointed out that the claim of the assessee that she had kept money worth Rs.35,00,000/-, in cash over a period of 24 to 25 years, cannot be believed. He pointed out that the claim of the assessee that there are no banking facilities in the remote village and hence cash had to be kept in the house is contrary to the facts as the assessee’s had obtained a bank loan. He submitted that the village Pradhan’s certificate, cannot be relied upon and that Reshaba Bibi had no agricultural land. In reply, the ld. Counsel for the assessee pointed out to copies of the agricultural lands held by the assessee and submitted that the certificate issue by the village Pradhan of the Panchayat cannot be discarded in the matter in which it has been done. He also pleaded that, in any event, the addition cannot be made in the hand of the assessee.
Assessment Year: 2012-13 Assessment Year: 2013-14 SK. Saphiruddi For the Assessment Year 2013-14, he submitted that the ld. CIT(A) deleted the addition of interest on the ground that the assessee follows cash system of accounting and the interest should be brought to tax in the year of maturity of the fixed deposit and argued that, the interest cannot be brought to tax in the hands of the assessee as the fixed deposit does not belong to the assessee.
I have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, I hold as follows:-
Admittedly, the fixed deposit is in the name of the assessee’s wife, namely, Reshaba Bibi. She has submitted so before the Assessing Officer. The Pradhan of Kothbarh Gramm Panchayet, Dist.-Purba Mednipur, states that she was carrying on stitching and embroidery as well as agriculture in the form of floriculture etc. Under these circumstances, the question is as, whether the addition should be made in the hands of the assessee’s wife, Reshaba Bibi or the assessee himself. I am unable to appreciate the view of the ld. CIT(A) that addition should be made u/s 64 of the Act for the income disclosed by Reshaba Bibi. When an individual declares that she has done certain activity and earned income over a period of time and supports the statement with the evidence of a village Pradhan, and also files her return of income for the impugned Assessment Year, then, if the sources of investments cannot be explained by her with sufficient evidence, an addition should be made in her hands only and not in the hands of her husband, the assessee herein. A presumption has been drawn in this case that the husband of Reshaba Bibi, Sk. Saphiruddi, has earned black money and deposited the amount in the name of his wife. There is no iota of evidence in support of this presumption. It might be true that the explanation given by Reshaba Bibi, is not substantiated with adequate evidence. It may also be true that the theory of holding cash in once residence over a period of 20 years is against human behavior. Nevertheless, in my view, the addition, if any, in this case can be considered and examined only in the hands of Reshaba Bibi and not in the hands of the assessee. Hence, Assessment Year: 2012-13 Assessment Year: 2013-14 SK. Saphiruddi I delete the addition of the deposit and interest thereon. Accordingly, I allow these appeals of the assessee.
In the result, both the appeals of the assessee are allowed. 6. Kolkata, the 12th day of September, 2018.