NEMCHANDRA BHANDARI,AGAR MALWA vs. ACIT-1(1), UJJAIN, UJJAIN
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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 22.09.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 27.06.2019 passed by learned DCIT- 1(1), Ujjain [“AO”] u/s 147 read with section 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2012-13, the assessee has filed this appeal.
The background facts leading to present appeal are such that the assessee is an individual engaged in the business of money lending. For AY
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2012-13, the assessee filed original return on 29.05.2012 declaring a total
income of Rs. 8,51,150/- which was assessed. Subsequently, the case was
re-opened u/s 147 vide notice dated 31.03.2018 u/s 148 on the basis that
the assessee had made cash deposits of Rs. 28,62,000/- in bank a/c during
the relevant year from unexplained sources which had escaped assessment.
During assessment-proceeding, the AO show-caused assessee qua the
sources of impugned deposits. In reply, the assessee made submissions
which are mentioned by AO in assessment-order. The AO has noted the
details of deposits in assessment-order as under:
S.No. Date of Deposit Amount (Rs.) Mode 1. 15.10.2011 7,00,000/- Cash 2. 17.10.2011 3,55,000/- Cash 3. 10.03.2012 5,35,000/- Cash 4. 19.03.2012 2,37,000/- Cash 5. 26.03.2012 5,35,000/- Cash 6. 31.03.2012 5,00,000/- Cash Total 28,62,000/-
The AO has noted that it was submission of assessee that the deposits had
been made out of recoveries made from ‘pawning debtors’ to whom loans
were given in the course of money lending business carried by assessee. The
assessee filed details in a PDF file which included date, names of ‘pawning
debtors’, moneys and interest received from them and names of their
villages. The assessee also submitted to AO that it was difficult to produce
debtors for statements because they were villagers and the amounts given to
them were also petty. The AO considered assessee’s reply and observed that
the assessee did not furnish full address, PAN or Voter ID Numbers of
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debtors. The AO observed that the assessee did not establish identity and
creditworthiness of a single borrower. The AO also noted that the assessee
made deposits of huge amounts only on six dates (as mentioned in the
above table) and not on regular intervals. Based on these observations, the
AO was not satisfied with the sources of deposits as explained by assessee
and made addition of Rs. 28,62,000/- in assessment-order. Aggrieved, the
assessee contested in first-appeal but could not succeed. Now, the assessee
has come in next appeal before us.
The assessee has raised following grounds:
“1. The re-opening of the assessment is bad in law and therefore the assessment should be annulled. 2. The Ld. CIT(A) erred in maintaining the addition of Rs. 28,62,000 being the deposits in the bank. 2.1 It was proved before the lower authorities that the amounts lent by the assessee has been received which were deposited in cash in the bank. The addition made as undisclosed income is bad in law and may please be deleted. 2.2 The reasoning that without turnover, the cash deposit cannot be made is itself based on surmises. The assessee produced the cash book which has not been rejected. The addition made without any basis and hence may please be deleted.” Ground No. 1: 4. During hearing, none of the learned Representatives has made any
submission qua Ground No.1. Therefore, the Ground No. 1 is treated as
non-pressed/non-pleaded and dismissed.
Ground No. 2:
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In this ground with all sub-grounds, the assessee has challenged the
addition of Rs. 28,62,000/- made/upheld by lower-authorities.
Apropos to this issue, Ld. AR for assessee drew our attention to
assessment-order as also the documents filed by assessee in a Paper-Book
and submitted as under:
(i) That the assessee has not taken any loan for making deposits in bank
a/c. The assessee has made recoveries from ‘pawning debtors’ and
deposited proceeds of those recoveries. Ld. AR contended that the
recoveries of assessee’s own money from debtors, cannot be taxed
under any provision of the act.
(ii) That the assessee filed, vide letter dated 25.06.2019, complete details
to AO in a PDF file which included date, names of concerned ‘pawning
debtors’, moneys and interest received from those persons and names
of their villages. Thus, the assessee has filed complete details as
available with him to satisfy the AO. The assessee also submitted to
AO that it was difficult to produce debtors for statements because
they were villagers and the amounts given to them were also petty.
These submissions made by assessee are clearly noted/acknowledged
by AO in assessment-order. Still the assessee has filed copy of
aforesaid letter dated 25.06.2019 and PDF files submitted to AO at
Page 14-15, 30 and 33-49 of Paper-Book.
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(iii) That the assessee had given loans to about 4,600 debtors (as
mentioned in Para No. 18 of submission made to CIT(A) – copy at Page
NO. 3 of Paper-Book). Since the assessee had given to such a large
number of persons and the amounts advanced were also petty, it was
not possible to produce those debtors before AO or to file identity
documents of those persons to AO. Therefore, the assessee has
expressed genuine difficulty to AO. Ld. AR went on submitting that
the requirement to prove identity and creditworthiness does not arise
in case of recoveries from debtors.
(iv) That the assessee’s Balance-Sheet of AY 2012-13 under consideration
as well as preceding AY 2011-12 are filed at Page 7-12 and 51-54 of
Paper-Book. Those Balance-Sheets clearly show a significant amount
of ‘debtors’ to whom loans were advanced by assessee.
Per contra, Ld. DR for revenue strongly opposed assessee’s
submissions with following contentions:
(i) That the assessee claims to have given loans to a large number of
persons, as many as 4,600 persons, then how can it be accepted that
the assessee did not have details such as address, PAN or identity
proof of those persons? He submitted that the assessee has only
supplied “village” names of debtors which is not sufficient. He
exclaimed that the assessee has not submitted document of a single
debtor from whom recovery was made!
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(ii) That the AO has categorically noted in assessment-order “On the
contrast, the assessee is claiming the genuineness of the transaction
just by furnishing fictitious name of the borrower without their proper
address and without any identity proof such as PAN/Copy of Voter
card or Aadhar Card.” This noting clearly shows that the AO had a
very high degree of dis-satisfaction made by assessee in absence of
supporting documents.
In rejoinder, Ld. AR made following submissions:
(i) That the assessee is residing and working in a small village and has
advanced loans of petty amounts to borrowers of same village or
surrounding villages. He submitted that the assessee has supplied
names of ‘villages’ to AO.
(ii) That, on one hand the AO has taxed ‘interest’ income received from
debtors as declared by assessee in computation of total income but on
other hand, the AO has doubted the recoveries consisting of principal
and interest made by assessee from those very debtors. Ld. AR
submitted that there is a contradiction in AO’s approach. He strongly
contended that once the ‘interest’ income had been taxed, how can the
recovery made from those very debtors be doubted?
We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The dispute between assessee and revenue is
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with respect to the source of cash deposits of Rs. 28,62,000/- made by assessee in bank a/c. At the outset, we note certain undisputed factual aspects, namely (i) the impugned deposits were made on 6 dates as noted in a table in foregoing para; (ii) the assessee claims that the deposits were made out of recoveries from debtors to whom loans were given; (iii) the assessee has not filed any document qua the identity of debtors to AO; and (iv) the assessee has only filed PDF files, copies at Page 30 and 33-49 of Paper-Book, to explain his stand that the deposits were made out of recoveries from debtors. Having noted thus, we firstly discuss our observations on the PDF files submitted by assessee to AO. Those PDF files are basically pages of cash-book for 6 dates on which impugned deposits were made by assessee. Ld. AR explained a few entries on receipt-side of cash-book in an attempt to show that the assessee has noted names of respective debtors from whom recoveries were made alongwith their village names and there are separate entries for recovery of principal and interest. Next Ld. AR explained entries on payment-side of cash-book which included the impugned deposits made in bank a/c. By showing these entries of receipt-side and payment-side, Ld. AR attempted to explain that the cash- book itself shows that the assessee has made recoveries from debtors and utilized the same for making deposits. After a careful examination, we find that the recoveries made from debtors on those 6 dates are much lesser than the deposits made in bank a/cs. For example, on 15.10.2011, the assessee has deposited Rs. 7,00,000/- in bank a/c but recovered only Rs. 1,90,034/- from debtors. Similar is the situation of other dates. In fact, the assessee has himself filed a summary-sheet of PDF files/Pages of Cash-Book of those 6 dates at Page 30 of Paper-Book, we re-produce below the same for an immediate reference:
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If we carefully look into the above summary-sheet supplied by assessee
himself, we find that all figures mentioned in Column No. 3 titled “Cash
received” are much lower than the figures mentioned in Column No. 5 titled
“Cash deposited in Bank”. Therefore, one thing is very clear i.e. the deposits
made on those 6 dates in bank a/c cannot not be fully sourced from
recoveries made from debtors, at the best only a part of the deposits can be.
That means, the impugned deposits would have been made from opening
balances available on those dates but the assessee has not filed any
document to AO for explaining the accumulation of opening balances.
Therefore, in the first instance, the PDF files/Page of Cash-Book of 6 dates
filed by assessee to AO are insufficient to explain assessee’s claim that the
deposits were made out of recoveries from debtors, therefore there is a
necessity to look beyond these PDF files/Pages of Cash-Book of 6 dates.
Secondly, we find that even if it is found that the impugned deposits (or any
part thereof) was made out of recovery from debtors, the revenue authorities
are very much correct in claiming that the assessee has to file some
document to prove the identity of the concerned debtors and to establish
that there was actual receipt of moneys from those debtors. In fact, section
68 also prescribes “Where any sum is found credited in the books of an
assessee……”. Admittedly, the assessee has credited sums in books of
account shown as recovery from debtors. Therefore, to say that section 68
does not apply is, in our view, not a correct interpretation of section 68. In
any case, the department is not taxing the ‘recoveries from debtors’, the
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department is simply asking the assessee to explain the source of cash-
deposits made in bank a/c and it is the assessee who is claiming that the
same were made out of recoveries from debtors. Therefore, the burden is
upon assessee to explain his claim. If a satisfactory explanation is not
coming from assessee, the department is treating the impugned deposits as
unexplained and thereby taxing it under the provisions of act, which is very
much permissible. Therefore, there is a necessity on the part of assessee to
file documentary evidences of at least some of the debtors if not all to enable
the AO to gain satisfaction qua assessee’s stand. Thirdly, we find that the
AO has taxed entire deposits of Rs. 28,62,000/- made on 6 dates although
the inflow of interest shown in assessee’s cash-book on those very dates is
separately taxed as interest income. Apparently, this might have resulted in
double taxation to the extent of interest inflow on those 6 days. Therefore,
the AO is also required to look into this critical aspect so that the assessee
is not saddled with double taxation. Thus, there are several aspects which
need examination by AO and also filing of details/documents by assessee.
Therefore, in our mindful consideration, this issue should go back to the file
of AO for a fresh adjudication after giving opportunities to assessee. We
order accordingly. Consequently, this ground is allowed for statistical
purpose.
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Resultantly, this appeal is partly allowed for statistical purpose.
Order pronounced in open court on 09.04.2024.
Sd/- sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 09.04.2024 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore
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