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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. N. K. Saini
ORDER This is an appeal by the assessee against the order dated 09.11.2016 of ld. CIT(A), Ghaziabad.
2. Following grounds have been raised in this appeal: “1. Because, the order of leaned commissioner of income tax (A) is bad in law and against the facts and circumstances of the case.
2. Because, the leaned commissioner of income tax (A) grossly erred in upholding the addition of Rs. 10,00,000/-, being cash deposited in bank, in whole disregard of the fact that the deposit is out of bank withdrawals and there was no shortage of cash.
3. Because, leaned commissioner of income tax (A) wholly erred in sustaining addition of Rs. 10,00,000/- with further enhancement of Rs. 32,839/-, being the maximum bank balance which even had no linkage 2 Nanak Chand with said 10,00,000/- while upholding the applicability of peak credit theory though as per that theory negative balance was NIL as per material on record and hence no addition could have been made. Therefore, It is prayed that the addition of 10,32839/- may kindly be deleted.”
3. From the above grounds, it would be clear that the grievance of the assessee relates to the addition of Rs.10,00,000/- made by the AO and enhanced by the ld. CIT(A) to Rs.10,32,839/- on account of cash deposited in bank account.
Facts of the case in brief are that the AO on the basis of AIR information that the assessee had deposited cash amounting to Rs.10,00,000/- in his saving bank account, initiated the proceedings u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act) and issued the notice u/s 148 of the Act on 16.03.2015 through Speed Post. Since, there was no compliance, the AO considered the amount of Rs.10,00,000/- deposited in the saving bank account of the assessee as unexplained cash deposit and assessed the same as income of the assessee by passing the ex-parte order u/s 144 of the Act.
5. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the assessee is a senior citizen engaged in cultivation of crops on agricultural land and generated income in the relevant assessment year through supply of sugarcane to sugar mills and direct 3 Nanak Chand sales in the market. It was further submitted that the assessee being unqualified and unaware himself, hired professional services of a consultant to represent him and attend the proceedings. However, the AO without providing the reasonable opportunity of being heard, completed the assessment proceedings and passed the assessment order hurriedly against the principles of natural justice. It was stated that the assessee’s income constituted agricultural income exempt u/s 10(1) of the Act. It was further stated that the assessee was making supply of sugarcane to sugar mills and selling balance crop in open market from where all the income generated was in cash and duly deposited in the bank account and that the frequent cash withdrawals/deposits were made in the bank account of the assessee but the AO had not considered the frequent withdrawals from bank account and made the addition. It was contended that the assessee cultivated sugarcane on 4.69 hectares of land in the capacity of a sharecropper. It was explained that the total deposits of Rs.25,50,000/- had been made in Zila Sehkari Bank during the year and Rs.23,02,000/- were withdrawn from where. It was stated that the assessee earned Rs.4,91,036/- from supply of sugarcane out of which Rs.3,17,492/- was received directly into bank and that Rs.5,25,000/- was withdrawn out of amounts received and opening account balance, available. Thus, there was no shortage of cash at any time during the year under consideration. The assessee also furnished the summary of cash deposits and withdrawals from the three bank accounts and claimed that a sum of Rs.19.45 lakhs was available with the assessee from the 4 Nanak Chand withdrawals and deposits from bank account from the previous years 2005-06 and 2006-07. It was stated that the assessee was having income only from cultivation of agricultural so it was not liable to submit returned income.
6. The reliance was placed on the following decisions of the various benches of the ITAT: � Dinesh Singh Vs ITO in & 1197/Chd/2013 (Chd.) � Shinde Narasu Shripati Vs AO in ITA No. 2159/PN/2013 (Pune) � ITO Vs Mrs. Deepali Sehgal in ITA No. 5660/Del/2012 (Del.) � CIT Vs Bhaichand H Gandhi 141 ITR 67 (Bom) � Anandram Raytani Vs CIT 223 ITR 544 (Gua) � ITO Vs M/s Murlidhar Ice-Cream & Sweet Parlour in ITA No. 531/Ahd/2012 (Ahd.) � Jagdish N. Thakkar Vs ITO in ITA No. 1475/Mum/2009 (Mum.) � Smt. Satya Bhama Bindal Vs ITO in ITA No. 713/Chd/2012 (Chd.) � ITO Vs Deb Kumar Jana in ITA No. 263/Kol/2012 (Kol.) It was contended that the AO without considering the withdraws made from the bank account wrongly considered the cash deposited as income of the assessee.
7. The ld. CIT(A) also asked the remand report from the AO on the additional evidences furnished by the assessee. The AO in his remand report stated as under:
5 Nanak Chand “5. The assessee has furnished document related to the earlier year receipt from Ganna Vikas Samiti, Mawana as well as Simbhaoli, Hapur which are as under: F.Y. 2004-05:- Rs.5,10,744/- F.Y. 2005-06:- NIL F.Y. 2006-07;- Rs. 6,33,924/- F.Y. 2007-08:- Rs. 4,9l,036/- These amount reflect the gross receipts from sale of sugar cane and hence the agricultural Income from sale of sugar cane is bound to be lower than the gross receipts. Further the assessee has tried to justify the cash deposits by preparing deposit/withdrawal account for all the three savings bank account maintained by him since 01/04/2005. As per the details furnished by the AR, heavy cash was deposited and withdrawn regularly In the accounts mainly in Zila Sahkari Bank account for which there is neither any source nor any explanation as to why when sufficient cash in hand was available with the assessee which could not be utilized by him for any purpose, why further- cash was withdrawn and kept at home in spite of having three bank accounts. The plea of the assessee that he intended to purchase other agriculture land is not supported by any documentary evidences since 01/04/2005. Moreover the land holding of the assessee is already around hundred bigha and as per the law of land he could not have holding of more agricultural land in his name. Further the A.R. has stated that there was no shortage of cash with the assessee and the deposits were made out of earlier withdrawals and hence the addition made u/s 68 and 69 of the I.T. Act 1961 is Invalid. This plea of the assessee is contradictory in itself as to why cash was withdrawn and kept 6 Nanak Chand at home when there was no purpose and further the assessee is maintaining three accounts. The documents on record reveals that the assessee has been depositing unexplained cash in his bank accounts since 01/04/2005 withdrawing heavy cash for his purposes other than agriculture and was not having any cash in hand on the day when next withdrawal was made and is in habit of concealing his true particulars of his Income which is other than agriculture. Thus the addition made by the undersigned is squarely covered by the provisions of section 68 and. 69 of the I.T. Act 1961 being unexplained cash deposit.
In compliance to above letter Shri Vipin Kumar, authorized representative and FCA appeared on 12/09/2016 and submitted the written reply/explanation which has been considered. After examination of details and as per report of I.T.I., it is found that assessee is an agriculturist having agricultural land at 0.820 Hectres at Village Mishripur, Kithor and 1.557 Hectres land at village Hakimpur Gavri during the year under consideration. The assessee had maintained three saving bank accounts during the year as per below:- a) Smt. Urmila Devi W/o Shri - Ghaziabad Zila Sahakari Nank Chand and Shri Nanak Bank, Garhmukteshwar, Chand S/o Shri Ram Dass (Joint Hapur, SB Account No.1776 Account) b) Shri Nanak Chand S/o Shri - Syndicate Bank, Ram Dass Urmila Devi W/o Shir Garhmukteshwar, SB Account Nanak Chand (Joint Account) No.23033 c) Shri Nanak Chand S/o Shri - Punjab National Bank, Ram Dass Garthmukteshwar, SB Account No.14601467 On perusal of bank accounts, it has been found that the receipt of sugar cane payment was credited only in the accounts of Syndicate Bank and Punjab National Bank through transfer entry during the year which determined the agricultural Income of the assessee. Regarding cash deposits in saving bank 7 Nanak Chand account at District Cooperative Bank Limited, Garhmukteshwar amounting to Rs.25,50,000/- it is found that not a single payment was received through cheques or transfer entry during the year. The assessee has also given the copies of bank accounts of earlier year which further established that no payment of sugar cane was received in this account As per certificates of Mawana Sahakari Ganna Vikas Samiti Limited Mawana (Meerut) and Sahakari Ganna Vikas Samiti Limited, Simbhaoli, the assessee has received payment of Rs.3,18,080/- and Rs.1,72,956/- respectively through transfer/cheques etc and deposited in Syndicate Bank and Punjab National Bank. In these circumstances it appears that these deposits are not related to agricultural Income. The necessary enquiry made by the I.T.I, is also strengthened by these facts.
The assessee has further stated that the deposits were made out of cash available in earlier year and also withdrawal made during the year from above accounts. This fact cannot be relied upon because heavy cash was deposited on 22/02/2008 at Rs.10,00,000/- which is not possible from agricultural receipts In absence of any documentary evidences in the account. However considering the cash deposit and withdrawal, it would be more fare and reasonable after if the theory of “Highest peaks cash deposit” during the year in a day will be applied then as per bank accounts submitted by the assessee, the highest peak cash credit founds at Rs.10,32,839/- on 03/07/2007. In view of above fact, the addition made by the A.O. at Rs.10,00,000/- u/s 144/147 appears to be correct.”
The ld. CIT(A) asked the assessee to furnish the rejoinder on the remand report of the AO. In response, the assessee submitted as under: "In Reference of the remand report submitted by the Ld. AO vide letter no Remand Report/ITO/Ward-3(4)/HPR/2016- 17/2198 dt. 12.09.2016 we submit our comment as under:
8 Nanak Chand 1. Para 1 & 2 are informative and therefore no comment are required.
Para 3 is the reproduction of letter of Ld. AO for enquiries during remand report Proceeding.
Para 4 is the report of the ITI on the visit to the place of residence of appellant. The facts stated in the report are based on the word of mouth of the persons of the nearby areas and cannot be relied upon in the 1st count. Further the statement of the ITI that the appellant holds nearby 100 Begha of land is true to the extent that the Appellant was having 2.377 hectare land in the ownership and cultivating 4.6900 hectares of land on share cropping basis during the period under consideration. As regards the business of Kirana store, Adath & wholesale of Gurh is concerned all these business are being run by the sons of the appellant and are being assessed to tax separately. The fact that Shri Nanak Chand also passes his time on these shops does not alter the assessability of the income of the business in the hand of the sons of the appellant. Further the sons of the assessee had not filed the income tax returns for the A. Y, 2008-09 but they are regularly filing their income tax returns for last 6-7 years, i.e. from when they are earning taxable income. The Relevant information had been explained to the Ld. AO during remand report proceeding. Therefore the report of the ITI further support the submission of the appellant that during the period under consideration he was having income from Agriculture only and no negative inference can be drawn from the report of the Ld. ITI.
4. The Ld. AO in Para 5 had stated the amount of Sugarcane supplied to Co-operative societies and states that this represents the Gross receipts of the sugarcane supplied to both the societies and income from agriculture is bound to be lower than gross receipts but ignored the written submission of the AR of the Appellant that 100% produce cannot be supplied to the co- operative Societies. Normally only 40% to 50% of the produce can be lifted by the sugar mills and rest of the produce is to be sold in 9 Nanak Chand open market. Further considering the late payments of the sugar cane by the sugar mills in the last 8-10 years also forces to the Agriculturists to sell their produce in open market. As regards the observation of the Learned AO in rejecting the plea of the Appellant "that he was to purchase further agriculture land stating that as per law of land he could not have holding of more land in his name". It is hereby submitted that observation of the Ld. AO is incorrect. The appellant was holding only 2.377 hectare of land in ownership during the relevant period & balance 4.6900 hectare land was not owned by the Appellant. He was doing cultivation on this land on share cropping basis. The evidence of which are already furnished in the paper book. The law of land permits a person to own 12.5 acre of land in ownership which is approx 5 hectares. Therefore the observation of the Ld AO that the Appellant could not purchase further agriculture land is wrong and deserves to be quashed by your lordship. In this para the Ld AO had further tries to justify the invoking of section 68 & 69 for additions made, by the Ld. AO ignored the fact that the Appellant was not maintaining any books of accounts and the banks statements cannot be treated as books of accounts of the assessee. Therefore No addition can be made under section 68 & 69 in absence of books of Accounts. Relevant Case Laws relied upon by the Appellant are available in the paper book. Therefore your Lordship are hereby prayed that the submission of the appellant may by accepted and the addition may please be deleted.
In Para 6 the Ld. AO had narrated the facts of the submission made by the AR of the Appellant. However the observation of the AO that the Claim of the appellant that the entire deposits are from Agriculture receipts is not correct. The Appellant had never claimed that the entire deposits in bank accounts are from Agriculture receipts. It is submitted by the Appellant that the deposits are made out of the cash withdrawal on earlier occasion from the banks accounts maintained by the appellant and earlier cash in hand. The summary of cash withdrawals and deposits in bank accounts had already been furnished. The law of Land does 10 Nanak Chand not prohibit holding cash in hand, and deposit in bank A/c at a later date. The Relied upon judgments of various court has already been furnished in paper book.
6. In this para again the Ld. AO had reiterated that the heavy cash cannot be deposited out of agriculture receipts after making a mention of the submission of the appellant and applied peak theory. The Ld. AO has recommended the addition of Peak credit balance in the A/C. However it is peak negative cash balance which can be subjected to taxes. The appellant had relied upon the judgment of Ahmadabad bench in ITO vs Murlidhar Icecream and sweet parlour (ITA no 531/Ahd/2012) which is squarely applicable on the appellant case. As per cash withdrawal & deposit summary submitted by the appellant there is no negative cash balances deposited in A/c. No addition is warranted. Your lordship is therefore hereby prayed that considering the above mentioned facts the additions made by the Ld. AO may please be deleted in total and your lordship may provide further relief to the appellant as deem fit. Your lordship is further requested to provide another opportunity of being heard further clarification & evidences required if any. In Reference of the show cause for enhancement of Income of the appellant by a sum of Rs 32839/- we have to submit as under: 7. That the appellant has proved the source of deposit in saving bank account beyond doubt that the amount has been deposited out of the opening cash in hand and withdrawals from the account during the year. The summary of cash deposit & withdrawals submitted by the appellant during the appellate proceedings at page no 28-31 of the paper book along with the copy of bank accounts at page no 12-27 clearly proves the submission of the appellant therefore your lordship is hereby requested to delete the additions made by the Id A.O and drop the show cause for enhancement.
11 Nanak Chand 8. The Submissions made by the appellant has not been denied by the Id A.O. in his remand Report and the Report of the ITI also supports the submission of the appellant that he was having no source of income except income from interest on saving account & agriculture and was cultivating his own land as well on share cropping basis and therefore no negative inference can be drawn . Therefore no enhancement is warranted and the additions made by the Ld. A.O are to be deleted by your lord ship in the interest of Justice.
It is not Out of place to mention here that it has been held by the various courts that no fiscal economic and banking law of the land prohibits the holding money in cash and the cash withdrawn on earlier occasions will be available to the appellant on subsequent deposits in bank the relied upon judgments has been submitted in the page no 44 to 84 of the paper book. There is no cash shortage with the appellant and therefore the additions made by the Ld. A.O deserves to be deleted by Your lord ship and no ' enhancement of Rs 32839/- based on the peak credit is warranted.
Without prejudice to what is stated and requested by the appellant in earlier paras. The appellant want to submit that even if your lordship wants to invoke the peak credit balance theory the appellant had an opening balance of Rs. 382839/- in the account and benefit of opening balance should be given to the appellant. After the date of peak credit all deposits are supported by earlier withdrawals from the same account and closing balance will have no bearing on the peak balance , therefore the appellant prays that the benefit of the opening balance in account should be given to him. Your lordship is therefore hereby prayed that considering the above mentioned facts the additions made by the Ld. AO may please be deleted in total and no enhancement to the additions 12 Nanak Chand made by the Id A.O are at all justified . Your lordship may provide further relief to the appellant as deem fit."
9. The ld. CIT(A) after considering the submissions of the assessee not only confirmed the addition made by the AO but enhanced the income by a sum of Rs.32,839/- by observing as under: “8.4 Ground No. 3: Appellant has challenged an addition of Rs. 10,00,000/- made by AO as undisclosed cash. During appellate proceedings it was submitted that the deposits in the bank account were out of cash withdrawal and part of agricultural receipts. The additional evidences submitted by appellant was examined by the AO and reported in remand report dated 12.09.2016, AO examined appellant's submissions. After enquiry and examination of records, he gave a finding that the cash Rs. 10,00,000/- has been deposited on a single day i.e. on 22.02.2008. The appellant's contention that the same is out of agricultural receipts cannot be accepted in absence of any documentary evidence to prove such a huge cash was in hand. As far as explanation that cash deposits is out of withdrawals is considered, the AO found a peak cash credit of Rs. 10,32,839/- in the bank account of appellant as on 03.07.2007. The concept of peak credit appears to be correct basis for assessing the income by way of cash deposits. Thus, a notice for enhancement of appellant's income by a sum of Rs. 32,839/- was given to the appellant on 26.10.2016. Appellant vide letter dated 27.10.2016 requested for giving benefit of opening balance of Rs. 3,82,839/-. The contention of appellant cannot be accepted as there is closing balance of Rs. 6,34,355/- in the bank. The peak credit is well recognized method for recognizing income when funds are being circulated. Thus keeping in view above facts, this ground of appeal is dismissed and the income of appellant is enhanced by a sum of Rs. 32,839/- to assess the total income at Rs. 10,32,839/- 13 Nanak Chand being the peak credit of deposits in the bank account the source of which could not explained by the appellant and direct the AO to assess the investment made by appellant of Rs. 10,32,839/- In the bank u/s 69 as his undisclosed income. Thus this ground of appeal
is dismissed with enhancement.”
10. 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 was sowing/cultivating around 100 Bigha land and in the absence of any taxable income, he was not filing the return of income. It was further submitted that the assessee filed copies of all the bank accounts, sources of cash deposit with evidences, statement of cash in hand, bank account etc. and evidences of ownership of land, which were examined by the AO in remand proceedings as well. It was further submitted that the AO himself admitted that heavy withdrawals were made, so cash in hand was available with the assessee. A reference was made to para 4 of the impugned order. It was submitted that peak credit theory is applicable only when there is shortage of cash but in the assessee’s case sufficient cash was available from the withdrawals and the agricultural income, therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. The reliance was placed on the following case laws: � ITO Vs Deepali Sehgal in order dated 05.09.2014 � S.R. Venkata Ratnam Vs CIT (1981) 127 ITR 807 (Kar.) � ACIT Vs Baldev Raj Charla (2009) 121 TTJ 366 (Del-C Bench)
14 Nanak Chand � ITO Vs Varun Kumar Saboo in (Del.) � Suraj Bhan Bajaj Vs ITO 21 SOT 22 (Del) (URO) 11. In his rival submissions the ld. DR strongly supported the impugned order passed by the ld. CIT(A) and reiterated the observations made in the said order.
I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that the assessee was an agriculturists and sowing sugarcane on the agricultural land which was sold to Sugar Co-operative Society. The assessee apart from his own land, also had taken agricultural land on lease for cultivation from other persons and this fact has not been rebutted at any stage. During the financial year 2007-08, the assessee had sold sugarcane for Rs.3,18,080/- to Mawana Co- operative Sugar Development Society Ltd., the certificate issued by the said society is placed at page no. 25 of the assessee’s paper book. The assessee had also procured sugarcane for cultivation from Co-operative Sugar Development Society Ltd., Simbhawali (Hapur), which is evident from page no. 26 of the assessee’s paper book, so it is not in dispute that the assessee was growing and selling sugarcane. He was earning income from the sale of sugar. The assessee had furnished a summary of cash withdrawals and deposits into bank accounts (copy of which is placed at page no. 24 of the assessee’s paper book) which read as under:
Summary of Cash Withdrawals and Deposits into Bank Accounts Date Zila Sehkari Bank Syndicate Bank Punjab National Bank Capital Cash in Hand Syndicate Bank Investment Joint A/c Deposit Withdrawal Deposit Withdrawal Deposit Withdrawal Deposit Withdrawal 2007-08 Opening Bal 1,189,160.00 07.04.2007 200,000.00 989,160.00 11.04.2007 200,000.00 1,189,160.00 11.04.2007 100,000.00 1,289,160.00 18.04.2007 400,000.00 889,160.00 23.04.2007 200,000.00 1,089,160.00 07.05.2007 36,000.00 1,053,160.00 Stamp for Agreement 14.05.2007 200,000.00 1,253,160.00 21.06.2007 350,000.00 903,160.00 23.06.2007 100,000.00 803,160.00 29.06.2007 200,000.00 603,160.00 03.07.2007 100,000.00 503,160.00 04.07.2007 200,000.00 703,160.00 05.07.2007 800,000.00 - 1,503,160.00 02.08,2007 200,000.00 1,703,160.00 22.09.2007 32,000.00 1,735,160.00 22.09.2007 53,000.00 1,788,160.00 01.10.2007 240,000.00 2,028,160.00 18.01.2008 15,000.00 2,043,160.00 18.01.2008 17,000.00 2,060,160.00 22.02.2008 1,000,000.00 1,060,160.00 04.03.2008 100,000.00 1,160,160.00 18.03.2008 70,000.00 1,230,160.00 24.03.2008 200,000.00 1,430,160.00 25.03.2008 200,000.00 1,630,160.00 28.03.2008 200,000.00 1,430,160.00 2,550,000.00 2,302,000.00 - 15,000.00 - 253,000.00 257,000.00 36,000.00 - 16 Nanak Chand 13. From the above said cash flow statement, it is noticed that the assessee was having opening balance of Rs.11,89,160/- and made the withdrawals on various dates which were again deposited in the bank account, the assessee was also depositing the cash received from sale proceeds in his Bank Accounts. It is clear from the aforesaid details that sufficient cash was withdrawn for re-depositing the same in the bank accounts and there is also not a large gap in between the withdrawals and deposits in Bank Accounts. In my opinion, the assessee was having sufficient cash from his withdrawals from the bank account and the agricultural income for making the deposit in Bank Account. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. In that view of the matter, the impugned addition is deleted.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Court on 30/06/2017)