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PER R.K. PANDA, ACCOUNTANT MEMBER:-
These are cross appeals. First one is filed by the Revenue and the second one filed by the assessee and are directed against the order dated 31.10.2012 of the CIT(A)-II, Dehradun relating to A.Y. 2009-10.
Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 24.04.2009 declaring total income of Rs. 1,75,865/- and agricultural income of Rs. 7,50,900/-. During the course of assessment proceedings, the A.O observed from the bank account maintained with State Bank of Patiala and Agriculture Loan Account at Allahabad Bank that the assessee is having various cash deposits and withdrawals during the period. On being questioned by the A.O, it was explained that the entire agriculture receipts were deposited in the savings bank account at State Bank of Patiala. On a query regarding source of cash deposits of Rs. 4,29,000/- made on 6th December 2008 in his S.B. A/c at State Bank of Patiala, Khatima, the assessee explained that this amount pertained to agriculture produce of Rs. 2,38,500/- sold in the month of November and Rs. 2,00,000/- returned from earlier advance made to a farmer friend. From the documents filed by the assessee to substantiate the aforesaid deposit, the A.O observed that the agriculture receipt in the form
3 & 1357/DEL/2013 of 6R only contained Rs. 129600/- related with the assessee Shri Jailly Goraya. There was no evidence regarding advance received back and claimed by the assessee. The A.O, therefore, held that the assessee was not able to discharge his onus of proving the cash deposits of 06.12.2008 in his S.B. A/c at State Bank of Patiala, Khatima amounting to Rs. 4,29,000/-. After allowing credit of Rs. 129600/- as agriculture receipts, the balance amount of Rs. 3 lakhs was added as unexplained investment u/s 69 of the I.T. Act.
The A.O further noted that the assessee was having another savings bank account No. 4461000100003957 at PNB, Khatima Branch. Total deposits in the bank account amounted to Rs. 78,40,770/- during the F.Y. 2008-09 out of which cash deposits were of Rs. 63,44,770/-. The A.O asked the assessee to furnish the source of these deposits alongwith the name and address of the persons to whom these deposits were attributed to be sourced with. He was also asked to explain the source of these deposits alongwith documentary evidence in the form of ID, bank account and confirmatory letter from the persons who were claimed to be the persons from whom such deposits were attributed to.
It was submitted by the assessee that he is principally engaged in agricultural activities and he is not aware of taxation provisions and their
4 & 1357/DEL/2013 implications. He is not commercially and technically literate to provide details of bank transactions as required by the A.O. He does not maintain books of accounts like other industrialist and businessman. It was also explained that for obtaining VISA, the assessee had to maintain his bank balance in the bank account as per the guidance of travel agents. These borrowings were subsequently returned also. The assessee was at no point of time the owner of these funds. It was further submitted that the assessee does not remember and is not having any details of the persons who had given funds for deposits in the bank account. The assessee also gave details of opening balance, total deposit made and total withdrawal, closing balance, maximum balance and average daily balance.
4.1 However, the A.O was not satisfied with the explanation given by the assessee. He observed that the assessee is a regular income tax payer having services of a regular Chartered Accountant well versed with the technicalities and provisions of the Income tax Act and Income tax Rules. The assessee has two brothers residing abroad in a developed country. His elder brother Shri Daljeet Goraya is one of the leading political personalities of the town and has been an elected chairman of the Mandi Parishad Khatima. Therefore, the assertion of the assessee that he was not aware of the taxation provisions and their implications is a far-fetched idea just to furnish an excuse from the taxation tentacles. The A.O further noted that despite repeated opportunities given during the course of assessment
5 & 1357/DEL/2013 proceedings, the assessee had never come forward with the existence of the other bank account and the same came to light only through AIR information. Rejecting the various explanations given by the assessee, the A.O made addition of Rs. 78,40,770/- as unexplained cash deposit in PNB account.
Before the ld. CIT(A), the assessee challenged both the additions i.e. Rs. 3 lakhs and Rs. 78,40,770/- respectively. So far as the addition of Rs. 3 lakhs is concerned, it was argued that the A.O has mechanically added the deposits without going into the fact that withdrawals from these bank accounts could well be placed back in them and therefore, it amounted to double addition. However, the ld. CIT(A) was not satisfied with the above explanation given by the assessee. He observed that the assessee could not fully explain the cash deposit of Rs. 4,29,000/-. According to him, there is no visible error in the A.O’s actions as far as this addition is concerned since the explained portion has been given due credit. He accordingly confirmed the addition of Rs. 3 lakhs made by the A.O. The assessee is in appeal against this addition.
So far as the addition of Rs. 78,40,000/- is concerned, he observed that undisputedly the assessee has concealed one bank account from the department which came to light only because of specific information available with the A.O through AIR. It is also true that the assessee on being
6 & 1357/DEL/2013 confronted has professed complete ignorance of tax procedures and also cited forgetfulness as an excuse for not being able to explain the deposits of substantial sums of money in his bank account. He, therefore, upheld the action of the A.O in principle. However, he accepted the contention of the assessee that the withdrawals made by the assessee from time to time could have been used for making deposits again and, therefore, it is worthy of consideration. From perusal of bank statement of PNB, Khatim, he observed that the largest available balance as on 05.11.2008 is Rs. 18,51,368/-. For the purpose of maintaining a proportion and balance in the action of the A.O, he took this amount as the peak credit value for addition u/s 69A of the Act as against Rs. 78,40,770/- done by the A.O. He also directed the A.O to tax the various interest amount credited in the bank account. He accordingly directed the A.O to add only Rs. 18,51,368/- and the interest amount as against the amount of Rs. 78,40,770/- many by him. Against this part relief given by the ld. CIT(A), the assessee as well as the department are in appeal before the Tribunal.
The ld. Counsel for the assessee strongly objected to the order of the ld. CIT(A) in sustaining the addition of Rs. 3 lakhs as well as theopening balance of Rs. 18,51,368/-. Referring to para 2 at page 1 of the assessment order, he drew attention of the Bench to the agricultural land held by the assessee. He submitted that the assessee is having agricultural land at village Ulani and Village Majgami both in Tehsil Khatima. The assessee is 7 & 1357/DEL/2013 mainly engaged in agricultural activity apart from leased car income from Krishi Utpadan Mandi Samiti, Khatima. Apart from the land holding, the assessee also carries out agricultural activities on the land belonging to his brothers who are staying abroad. The assessee has also taken certain land from others on contract basis for carrying out agricultural activities. He submitted that the entire income of the assessee is from agricultural activities. Therefore, notwithstanding that the assessee was unable to explain the source of deposits, no addition could have been made. Referring to various decisions the ld. AR contended that since the entire income of the assessee is out of agricultural income, no addition could be made in the hands of the assessee.
The ld. DR, on the other hand, while supporting the order of the A.O, submitted that apart from having income from agricultural activities, the assessee is also deriving income from leasing of car from Krishi Utpadan Mandi Samiti. Therefore, it cannot be said that the entire income is from agricultural activities only. Since the assessee was unable to explain the source of deposits of Rs. 4,29,000/-, the A.O had given reasonable credit of Rs. 1,29,600/- as out of agricultural income and made addition of Rs. 3 lakhs only. So far as the relief granted by the ld. CIT(A) is concerned he submitted that the same is not warranted under the facts and circumstances of the case. It is a fact that the assessee had with held the bank account from the notice of the department which came to light only through AIR
8 & 1357/DEL/2013 information. It cannot be said that the assessee does not remember the names of the persons who had given him advance or loan for maintaining his balance in the bank account for VISA purposes. Since the assessee failed to discharge the onus cast on him, the A.O was fully justified in bringing to tax the entire deposits in the said bank which was not disclosed to the department. The ld. CIT(A) without appreciating the facts of the case properly, had allowed peak credit and sustained the amount of Rs. 18,51,368/- which is unjustified under the facts and circumstances of the case. He, accordingly submitted that the order of the A.O be restored and the order of the ld. CIT(A) be set aside.
We have considered the rival arguments made by both the sides, perused orders of the A.O and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as addition of Rs. 3 lakhs is concerned, we find the same was added by the A.O on account of cash deposit made by the assessee on 6.12.2008 in his SB Account maintained with State Bank of Patiala, Khatim. Out of total cash deposits of Rs. 4,29,000/-, it was explained by the assessee that the same relates to sale of agricultural produce of Rs. 2,38,500/- and Rs. 2 lakhs returned back from earlier advance made to a farmer friend. However, from the documents produced by the assessee, the A.O found that agricultural receipt in the form of 6R only contained Rs. 1,29,600/- related with the assessee Shri Jailly Goraya. He, therefore, gave credit to this 9 & 1357/DEL/2013 extent and made addition of Rs. 3 lakhs which has been upheld by the ld. CIT(A). Although it is the argument of the ld. AR that no addition can be made since the entire income is from agriculture, we find no merit in the same. From the copy of assessment order, it is notice that apart from agricultural income, the assessee has income from leasing of car. Therefore, it cannot be said that the entire income of the assessee is from agriculture. Since the assessee had explained before the A.O that the source of deposits of Rs. 4,29,000/- is out of agricultural produce of Rs. 2,38,500/-, we accept the source to this extent as explained. The balance amount of Rs. 1,90,500 is sustained.
So far as the addition of Rs. 78,40,770/- made by the A.O is concerned, we find that the assessee as well as the Revenue are aggrieved on the part relief granted by the ld. CIT(A). It is an undisputed fact that the bank account maintained with PNB, Khatim Branch was an undisclosed bank account which was not disclosed to the department by the assessee despite being asked by the A.O during the course of assessment proceedings. The above bank account came to light only through AIR information. Therefore, the assessee cannot explain the non disclosure of the said bank account as ignorance of law or that he was not conversant with the intricacies of accountancy or tax proceedings. However, it is also a fact that the said bank account contains both deposits as well as withdrawals. It is an accepted principle that when the assessee is unable to explain the deposits
10 & 1357/DEL/2013 in a particular bank account, the entire deposits cannot be added to the total income and only the peak credit has to be made when there are both cash deposits and cash withdrawals. In the instant case admittedly, there were both cash deposits as well as cash withdrawals on various dates. Therefore, the ld. CIT(A), in our opinion, was fully justified in sustaining the peak credit value for the addition u/s 69A of the Act. Accordingly, the same is upheld. The ground raised by the assessee as well as revenue on this issue is dismissed.