FARHATULLAH KHAN HAMEED KHAN,AURANGABAD vs. INCOME-TAX OFFICER,

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.

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“ 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.”

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.”

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.

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.

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.

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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.”

back to the file of Assessing Officer on merits of addition of Rs. 23,00,000/-.

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of the Assessing Officer/ CIT(A).

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.

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.

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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.