ITO, NEW DELHI vs. SH. WASIM HASSAN, NOIDA

The brief facts of the case are that the assessee is an individual who is a director in M/s JMA appliance private limited. It derives only the salary income and income from other sources. For the impugned assessment year he filed his return of income on 31st of March 2008 declaring an income of Rs. 124565/–. However, during the course of assessment proceedings it was noticed by the Ld. assessing officer that the assessee as income such a short term capital gain, interest income and dividend income, which was not shown by him in his return of income. It was also noted by the Ld.

The first ground of the appeal of the revenue is that the Ld. assessing officer was not given an opportunity to examine the additional evidences admitted by the Ld. CIT (A). The Ld. departmental representative submitted that wide para No. 9 of the order of the Ld. CIT appeal he has admitted many evidences with respect to the addition from 2 persons without giving opportunity to the Ld. assessing officer to examine such evidences. He further submitted that the Ld. CIT appeal has believed the expression of the assessee without co-relating the withdrawals shown by the previous entries and the amount deposited by the assessee in the bank account. He further submitted that without examining the veracity of the evidence submitted by the assessee he has come to a conclusion that cash flow statement filed by the assessee the total cash was out of circulating cash and hence of the appellant. He further submitted that how the assessee has come into the possession of the cash from the educational society of Rs. 1375,000 and from Md. Aliyas.

The LD Authorised Representative relied upon the order of the LD CIT (A) and submitted that after carefully considering the evidences placed has Page 3 of 8 deleted the addition. He submitted that with respect to addition of Rs. 1375000/- in case Alay Hasan Education Society, he has completely examined the evidences. Therefore, there is no error in the order of the ld CIT (A).

We have carefully considered the rival contentions. On perusal of para No. 9 while deleting the addition of Rs. 1375000/- on account of Alay Hasan Education Society the ld CIT (A) has examined certain new evidences, which are listed there. We do not find any reference to the application made by the assessee for not submitting these details before the Assessing Officer and therefore any request before him to admit these evidences and adjucate. Even otherwise, he has not obtained the comments of the Assessing Officer with respect to these evidences. In para No. 9 the ld CIT(A) has held as under:-

In view of the fact that the ld CIT(A) has considered certain evidences which are placed before him for the first time and it is apparent that no opportunity was given to the ld Assessing Officer, we set aside this ground to the file of ld CIT(A) to give an opportunity to the Assessing Officer on these evidences. Furthermore, it is also required to be established that relationship between the Alay Education Society and the assessee, for what Page 4 of 8 reason, and in what capacity the advances were given by the above society to the appellant. Furthermore, the assessing officer has also stated that that assessee has not furnished the cashbook of that society in support of his submission, the conformation provided by the society to the appellant, which was in turn submitted before the assessing officer as well as also before us at page No. 29 of the paper book. On verification of the above confirmation, it is noted that it is a dated and does not mention the permanent account number of the educational society. Furthermore, the above confirmation is also signed by chairman of a school and not the President of the Society. The conformation also does not show the amount was paid in cash or by cheque. The reason for advancing loan to appellant who is a secretary of the society as stated that the amount was given to secretary in cash for the purpose of purchase of plot at Noida and greater Noida. However, no details were available which plot was identified and what was the price of that plot etc and why consideration was required to be paid in cash only. Furthermore looking to the dates of the transaction it is apparent that on 24 /4/ 2006 a sum of Rs. 4 Lacs was provided in cash to the assessee by that society and immediately on 26/04/2006 a sum of Rs. 5 lakhs has been repaid by the appellant to that society. It is interesting to note that if the plot is not purchased then the sum was used by the assessee up to 18th may 2006 when Rs. 3 lakhs was repaid and on 3/2/2007 Rs. 5.75,000/- was repaid. The time between the sum paid by the society to the appellant and the sum repaid by the assessee to the society does not inspire confidence about the genuineness of the transaction. Similarly, another conformation was provided by the assessee that is from St Xavier School but signed by some chairman there also the permanent account number of the person who has paid cash to the assessee is missing. Furthermore we do not approve of the reasoning given by the Ld. CIT appeal that the same assessing officer who passed the order for assessment year 2007 – 08 wherein the cash withdrawal shown by previous entries before the date of cash deposited in bank account has been duly considered and accepted. According to us this reason he is full of fallacy. During the year the cash has been deposited of the magnitude of Rs. 66.98 lakhs and it is always factual exercise for the every year and for each and every transaction. Such precedents or instances cited by the CIT appeal Page 5 of 8 cannot be approved of. In view of this, it is apparent that the Ld. CIT (A) has accepted the claim of the assessee of receipt in cash from the Alay Hassan educational society of Rs. 13,75,000/-without verifying the creditworthiness of the society as well as the genuineness of the transaction. In the result ground, No. 1 of the appeal of the revenue is allowed accordingly.

Ground No. 2 of the appeal of the revenue was against deleting the addition of Rs. 24 Lacs on account of claim of loan from Mod. Ilyas by accepting the identity and creditworthiness of credit and genuineness of the transaction. The Ld. assessing officer has made addition because the assessee submitted confirmation in respect of receipt of Rs. 12 likes and 7 Lacs on 19/07/2006 and Rs. 5 lakhs on 29/07/2006 in the name of Sri Muhammad Ilyas, but according to the Ld. assessing officer the parties not an existing assessee and the evidences filed by the assessee do not establishes the identity and creditworthiness of the depositor as well as the genuineness of the transaction. The assessee could produce even before the Ld. CIT appeal and also the copy of the revenue record of the depositor. The Ld. CIT appeal was also explained that two entries appearing in the Punjab National bank account received from the same person are through account payee cheques and are not cash deposits. The CIT appeal deleted the above addition is a sum was received through account payee cheque and requisite evidence of identity, creditworthiness and genuineness of the transactions were filed.

Ld. departmental representative submitted that the 3 ingredients of identity, creditworthiness of the depositor and the genuineness of the transaction is not at all established because the assessee is merely submitted the copy of election card and the revenue records. Both of these evidences do not establish anything. He therefore vehemently supported the order of the Ld. assessing officer.

The Ld. authorized representative relied upon the order of the Ld. CIT appeal and submitted that assessee has submitted a copy of the conformation which is placed at page No. 20 of the paper book which confirms the transaction of Rs. 12 lakhs given by account payee cheques. He held as under:- “Md. Ilyas- (i) Copy of Election card no- UP/06/025/627399., (ii) Copy of Kisan Bahi (Revenue Record) of Sh. Md Ilyas.

We have carefully considered the rival contentions and also perused the order of the Ld. CIT (A) wherein the above addition has been deleted. We are of the opinion that the Ld. CIT (A) has deleted the above addition without stating that how the creditworthiness of the depositor is established when a merely land revenue record was stated to be produced. On reading of the conformation submitted by the assessee though it is of receipt by the cheque however as same is received from a person who is not assessed to tax and whether when he is an agriculturist whether the land holding of the depositor justify the deposit of the above sum. Merely holding of the land do not justify the credit less of the depositor unless there are evidences of produce of the agricultural and it sale. When the depositor has deposited the sum through account payee cheque it is also important to verify about the source of such cheques and whether they are received on sale of agricultural produce or otherwise, The Ld CIT (A) has not examined this himself and nor directed ld AO to do so. The Ld. CIT appeal has without verifying any such evidences which justifies the creditworthiness and genuineness of the about transaction has deleted the addition. Further the amount of addition is made by the assessee is Rs. 24 Lacs whereas the addition and conformation received from the depositor is just 12 lakhs therefore there is a mismatch in the amount stated. Therefore in the interest of Justice the addition of Rs. 2 400000/-is once again set aside to the file of the Ld. CIT appeal with a direction to verify the creditworthiness and genuineness of the transaction and then decide the issue on merit. In the Page 7 of 8 result ground No. 2 of the appeal of the revenue is allowed with above direction.

Ground No. 3 of the appeal of the revenue was against deletion of the addition of Rs. 2 923500/- made by the Ld. assessing officer on account of unexplained cash deposits in the bank account on the ground that the sources are past withdrawals.

Ld. departmental representative submitted that there is no evidences available of anything produced before the Ld. CIT appeal which even remotely justify the deletion of the balance amount of Rs. 2 923500/–. He referred to the submission of the assessee at para No. 7 and 8 of the order of the Ld. CIT appeal as well as the his decision at para 9 . From this is submitted that without any reference to the same the Ld. CIT appeal has deleted the whole addition of Rs. 6698500/-.

The Ld. authorized representative submitted that a complete explanation was submitted before the Ld. CIT appeal and therefore he was convinced that the amount has been wrongly added by the Ld. assessing officer.

We have carefully considered the rival contention and also gone through the order of the Ld. CIT (A) deleting the above addition and also the reasons given by the assessing officer for making the addition. The Ld. assessing officer has identified three bank accounts were a sum of Rs. 6 698500/– was deposited by the assessee in cash. During the course of assessment proceedings the assessee was asked to explain the source of such amount out of which it stated that amount of Rs. 1 375000/– is held to be made out of one society. With respect to the deposit of Rs. 1 200000/– he submitted that it has been received from Sri Muhammad Ilyas. Regarding the balance cash deposit of Rs. 4123500/- the assessee has not furnished the source of the same and therefore such amount was also added by the Ld. assessing officer. On reading the order of the Ld. CIT (A) we could not identify any reason given by him for deletion of the above sum of Rs. 4123500/- in his order. On examination of the cash flow statement submitted by the assessee at page No. 27 and 28 of the paper book wherein the opening balance of Rs. 198425/-is stated by the assessee no evidence in the form of statement of affairs of the assessee is available on record. Further the cash flow statement shown by the assessee was without the balance (the assessee after each of the transaction was furnished and the Ld. CIT appeal accepted