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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM
This appeal filed by assessee is directed against the order of Commissioner of Income Tax (Appeals), Aurangabad dated 15.02.2016 for assessment year 2008-09.
2 ITA No.836/PUN/2016 A.Y.2008-09
The assessee has raised following grounds in appeal:
“ 1. The learned CIT(A) erred in law and on facts in confirming addition of Rs.23,00,000/- u/s.69A on account unexplained money on the ground that the appellant has not discharged the burden of proving the cash deposited in the bank account. 2. The learned CIT(A) erred in law and on facts in confirming addition of Rs.55,490/- u/s.40A(3). 3. The learned CIT(A) erred in law and on facts in confirming disallowance of Rs.34,923/- on account of disallowance of expenses debited to P & L Account which is not just and proper. 4. The learned CIT(A) erred in law and on facts in confirming addition of Rs 50,000/- on account of agricultural income. 5. The appellant craves to add, alter, modify or substitute any ground of appeal at the time of hearing.”
Further, the assessee has also raised an additional ground relating to
question of re-opening of assessment and the said additional ground reads
as under:
“On the facts and circumstances of the case, the reassessment proceedings u/s.147 being initiated in absence of material sowing escapement of income in the hands of the appellant is void and may kindly be cancelled. The material based for re-opening is vague and has no live link with escapement of income in the hands of the appellant.”
On the basis of AIR information, a notice u/s. 148 of the Income Tax
Act, 1961 (hereinafter referred to as ‘the Act’) was issued for the purpose of
verifying the sources of deposits in cash amounting to Rs.29,75,050/- in his
bank account. In re-assessment proceedings, the Assessing Officer made
the following additions:
Sr. Head Amount in Rs. 1 Unexplained money under section 23,00,000/- 69A 2 Disallowance under section 40A(3) 55,490/-
3 Disallowance from sundry expenses 34,923/-
4 Disallowance out of Agricultural 50,000/- income
3 ITA No.836/PUN/2016 A.Y.2008-09
Aggrieved with the additions made by Assessing Officer, assessee filed
appeal before CIT(A). The CIT(A) granted partial relief to the assessee. Now
the assessee is in appeal before me raising grounds extracted above.
At the outset, Ld. Counsel for the assessee submitted that the
assessee intends to not press the ground No. 2, 3 & 4 in view of smallness
of the additions. Accordingly, ground No. 2, 3 & 4 are dismissed as not
pressed.
Now, the ground No. 1 is taken up for adjudication.
Relevant facts with regard to the addition of Rs.23,00,000/- includes
that the assessee is an individual and filed return of income. Assessing
Officer reopened the assessment based on the AIR information about the
verification of the sources of the cash deposits in the bank account of the
assessee. Eventually, unsatisfied with the explanation of the assessee, the
Assessing Officer made addition of Rs. 23,00,000/- as per discussion given
in 3.1 of her order. When the details of sources of deposit was enquired by
the Assessing Officer, the assessee submitted that total aggregated sum of
Rs.12,00,000/- was received by assessee on different dates from Mr. Rizwan
Khan. Similarly, another aggregated amount of Rs.11,00,000/- was received
from Mrs. Farha Khan on various dates. On finding the assessee failed to
discharge this onus about the sources of cash deposits. Assessing Officer
proceeded to make addition of the gross amount of Rs.23,00,000/-.
Regarding repayment of the said amount to Rizwan Khan and Farha Khan
in subsequent period, Assessing Officer did not consider this fact relevant
and rejected the same. Assessing Officer dismissed the assessee’s
submission on the fact of repayment in cheques using banking channel and
held that would not after the decision of the Assessing Officer.
4 ITA No.836/PUN/2016 A.Y.2008-09
During First Appellate proceeding, on the issue of addition of Rs.
23,00,000/-, the assessee could not improve his case despite various
submissions. The CIT(A) dismissed the same as per discussion given in Para
8 of his order. In the said paragraphs, CIT(A) held that the assessee failed to
prove the genuineness of the transactions by establishing the identity and
creditworthiness of the persons i.e. Rizwan Khan and Farha Khan to
confirm the said payment in cash. The CIT(A) held that cheques were not
issued to Rizwan Khan. Relevant lines of the said paragraph extracted as
under:
“8…………… In respect of Shri Rizwan Khan, the assessee, vide submissions dated 16/06/2014, had stated that Shri Rizwan Khan had left Aurangabad during the period 2006-07 to 2013-14. However, no proof of the same was supplied. Even otherwise, there is no reason as to why the assessee could not produce the above party during the course of appellate proceedings, which has gone on till 10/12/2015 which is the last date of hearing. In respect of Smt.Farah Khan, it has been simply stated in the course of appellate proceedings that she has not given any response to come forward for giving any statement and identification proof. It is absolutely clear from the assessment order and the conduct of the assessee in appellate proceedings that he has failed miserably to establish the identity of the persons, their creditworthiness and the genuineness of the transactions. Mere production of an unregistered document stating the intention to sell the property, is not sufficient to prove the genuineness of transaction. Even though the amounts were subsequently alleged to have been paid back by cheque, in the absence of any details about the bank account in which these cheques were deposited, it cannot be stated that merely because the amounts were paid back by cheque, the transaction would be genuine. In this respect, the fact that the cheques purportedly issued to Shri Rizwan Khan was found to have been credited to an account belonging to one Shri Rizwan Ahmad is also important. It is quite obvious that the cheques were not issued to Shri Rizwan Khan. If any entry stands in the name of an independent party, the burden lies on the assessee to establish the identity of the party and also to prove to the satisfaction of the assessing officer that the entries real and not fictitious. Under the circumstances, I hold that the assessee has been unable to establish the identity of Shri Rizwan Khan and Mrs.Farah Khan and to prove that these persons actually had any funds of their own, out of which cash payments were made to the assessee and as such the addition made by the AO is justified. Thus, Ground No.1 is dismissed.”
The Ld. Counsel for the assessee requested for remitting the issue
back to the file of Assessing Officer on merits of addition of Rs. 23,00,000/-.
5 ITA No.836/PUN/2016 A.Y.2008-09
On the other hand, Ld. DR for the Revenue relied heavily on the order
of the Assessing Officer/ CIT(A).
On hearing both sides, I am of the view that the core issue raised
before me relates to the addition of Rs. 23,00,000/- involving two creditors
i.e. Rizwan Khan and Farha Khan and the discharging of the onus by the
assessee. It is undisputed fact that creditors were not produced before the
Authorities below at the relevant point of time. CIT(A) also raised the issue
about genuineness of the assessee’s submission about repayment in
cheques. It is not clear as to why the creditors paid the cash in small
portions and purpose thereof, without having any proper security or
documentation by way of promissory note etc. There is no clarification on
the nature of transactions. I also noticed that the issue of repayment was
real and undoubted by the Assessing Officer. There is third party evidence
by way of confirmation from both the persons i.e. Rizwan Khan and Farha
Khan. There cannot be any dispute on the identity of the parties due to the
undisputed fact of repayment of Rs.23,00,000/- to both the Khans (supra.).
Creditworthiness and genuineness can be issues.
Considering the same, I am of the view that for this purpose, the
matter should be examined afresh by the Assessing Officer in the remand
proceedings. The assessee needs to demonstrate the genuineness of the
transactions to the satisfaction of the Assessing Officer in the remand
proceeding apart from the creditworthiness. The Assessing Officer shall
grant reasonable opportunity of hearing heard to the assessee in accordance
with set principles of natural justice. Accordingly, ground No.1 raised in
appeal by assessee is allowed for statistical purposes. Additional
ground raised by assessee is also dismissed, at this stage.
6 ITA No.836/PUN/2016 A.Y.2008-09
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on 17th day of May, 2018.
Sd/- (डी.क�णाकरा राव/D. Karunakara Rao) लेखा सद�य / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 17th May, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals), Aurangabad. 4. The Pr. CIT-2, Aurangabad. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, पुणे / DR, ITAT, “SMC” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.