JASWANT SINGH,HOWRAH vs. ITO, WARD-48(3), KOLKATA, KOLKATA

This appeal preferred by the assessee is against the order of Ld. CIT(A)-14, Kolkata dated 17.12.2015 for AY 2010-11.

4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that based on AIR and CIB information, the assessee’s return was selected for scrutiny and the AO after taking note that Rs.3,86,49,700/- has been deposited in his accounts, the AO issued notice to 11 persons. However, we note that the assessee for the questions asked by the AO which has been recorded by him on oath u/s. 131 of the Act, has categorically stated that he was an employee of a proprietorship concern of Mr. Manish Agarwal and was drawing a meagre salary of Rs.5000/- per month and on his (Manish Agarwal) instruction has opened a bank accounts in the name of M/s. Hemraj Distributors and another in the name of M/s. R. P. Traders and has deposited cash and withdrawn/ transferred the same simultaneously. So when the amount was deposited in the bank it was immediately thereafter transferred to other accounts. To corroborate his (assessee’s) contention, the statement of a colleague’s i.e. Shri Rakesh Kumar Gupta’ who was working along with him has been also recorded by the AO u/s. 131 of the Act which we have perused. Though in the AO’s order, the AO states that he had issued notices to 11 persons, but we note the statements of Shri Manish Agarwal and Shri Vikash Agarwal who were the employer of the assessee and who made him undergo the modus operandi i.e. (opening of bank accounts, deposit of cash and simultaneous withdrawal/transfer of the amount) has not taken place. As per the AO’s order we note that only the name of assessee’s colleague and a person acquainted by the assessee when he went to the bank has been recorded (i.e. Mukund Kumar Jha and Ajay Kr. Goyal and ICICI Bank officer’s statement has been only recorded). No serious efforts to trace Shri Manish Agarwal and Shri Vikash Agarwal who the assessee and his colleague alleges to be the master mind in the whole operations of opening bank account, deposit and withdrawal/transfer of cash/amount is not found to have taken place. The AO has built the allegation against the assessee on the strength of some selected portion of the statement of assessee recorded u/s. 131 of the Act and is silent on the facts like assessee was an employee and only received Rs.5000/- per month and on the behest of Shri Manish Agarwal he opened bank account and the cash was collected from various persons on instruction of the said employer and as per their instruction only they deposited and withdrawn/transferred the amount has not been mentioned anywhere in the AO’s order, which action/omission does not behoves well with a quasi judicial authority like the AO while discharging his duty as an assessment officer to assess the true income of the assessee. The AO ought to be fair and just in his approach and conduct. In this case the AO though has recorded the statement of assessee and his colleague and even though was aware of the fact that assessee was an employee who draws only Rs.5000/- has saddled the entire cash deposit in his bank account as his income which action of AO cannot be countenanced in the light of the facts discussed above. The AO has not enquired into the veracity of the statement of assessee. The AO had the machinery at his disposal to expose the falsity if any in the statement of assessee. Simply picking out certain contradictions in the statement of assessee the AO cannot make a finding of fact that the cash deposited in the bank account is assessee’s undisclosed income. And that too we note from the perusal of the statement of assessee, the contradiction was only in respect to fact of his opening of bank account and nothing more than that. Even if for argument sake, we agree with the AO that the bank account was opened by the assessee, the fact of him employed for Rs. 5000/- per month with Shri Manish Agarwal, which fact has been corroborated by another employee (rakesh Kumar Gupta) and which fact has not been found to be false by the AO after enquiry goes against the common sense , logic and human probability that a person who is employed for a meagre salary of Rs.5000/- per month has an undisclosed income of more than Rs. 3 crore. The AO failed to enquire into the modus operandi as stated by the assessee and his colleague before him u/s. 131 of the Act. The Ld. AR brought to our notice the RTI reply of the department, wherein the assessee has sought certain documents in respect to this case. From the documents thus received, we note from a perusal of the bank account details that cash deposited in the account was duly withdrawn/transferred to which suggest that the assessee’s account was used only to deposit and transfer money to some other accounts who may be the beneficiary or it may go in circulation and ultimately it will go into the hands of ultimate beneficiary who should be taxed and not the assessee, whose account was used as pass on platform to facilitate deposit and transfer of money. In any case, if the AO has reason to believe that cash deposited in his account is his undisclosed income then he ought to have made some field enquiry to at least expose any falsity in his statement that he was only employed for Rs. 5000/- for that purpose if the AO gets information that assessee’s life style is not in conformity with that of a person who is having an income of Rs.5000/- per month and that he owns immovable property etc, which action AO did not carry out. No effort to trace out the real beneficiary has been undertaken by the AO/Ld.CIT(A). According to the Ld. CIT(A), the assessee himself appeared before him and was conversant with the nuances of law which, according to Ld. CIT(A), cannot be that of a person with a meagre salary. We cannot accept such assumption of facts. Knowledge of law or ignorance of law of an assessee cannot be the yardstick to assume that a person is wealthy or not and the Ld. CIT(A) when making a finding of fact has to do it based on material/evidences. Rather, we note the whole addition is saddled upon the assessee on surmises and conjectures. It is not the case of the AO/Ld. CIT(A) that the averments made by the assessee has been found to be false and concocted. We note from the details of the bank account of the assessee shows that cash was deposited and within few days has been transferred to the account of Pritam Transport, Prime Consultancy, Raj Photo Shop, S. R. Industries etc. and the assessee’s bank account balance was a meagre amount of Rs. 781/- as on 30.03.2010. Other than the AIR report in respect of the bank account of the assessee which shows deposit of Rs. 3,86,49,700/-, there is no material to suggest/support the AO’s allegation of Rs.47,89,000/- as investment in M/s. Hemraj Distributors and AO has not made any addition on that account. The bank details of the assessee as provided by the department to RTI query, shows that cash deposited was transferred within few days and the assessee’s balance was ‘Nil’ as on 18.05.2010 or meagre amount of Rs. 781/- as on 30.03.2010. The status of the assessee as an employee of Shri Manish Agarwl has been corroborated by his colleague Shri Rakesh Kumar Gupta and that the assessee was an employee drawing a salary of Rs. 5000/- per month and, therefore, has acted as per the instruction of his employer and since we note that there is no balance in his bank accounts worth mentioning only points to one direction that is the cash deposited in his account cannot be the income of the assessee from his undisclosed source. The assessee has been mis-utilized by his employer to route the cash through his bank account. In such a scenario, rather than finding out the real beneficiary in the whole modus operandi, the AO failed to collect any material or at least could not expose any falsity in the averments submitted by the assessee u/s. 131 of the Act. In such circumstances making huge addition in assessee’s hand of the entire deposit of cash in his bank account which admittedly has got out of his bank account to some other beneficiary or layers through which the real beneficiary gets the ultimate benefit cannot be countenanced and not only that the department will not be able to recover the tax also from person of no means. Only if the real beneficiary is traced out the department will be able to recover the tax due to the State. So by making additions in wrong hands from whom tax cannot be recovered, help only the ultimate beneficiary and not even the department. So taking into consideration the overall facts and circumstances of the case, for the interest of justice and fair-play, we are inclined to delete the addition as ordered by the AO/Ld. CIT(A). However, the assessee’s bank account since used for deposit and transfer of cash is an activity for which a commission of 0.1% needs to be computed as the income of the assessee and the income on which the assessee has to be assessed to tax. With the aforesaid direction, we partially allow the appeal of the assessee.

Order is pronounced in the open court on 14th September, 2018. Sd/- Sd/- (Dr. A. L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 14th September, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to:

3. CIT(A)-14, Kolkata. ITO, Wd-48(3), Kolkata.