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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ : NEW DELHI
Before: SHRI N.K. BILLAIYA & SHRI KULDIP SINGH
Date of Hearing : 11.07.2018 Date of Order : 08.10.2018 O R D E R
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, Shri Jagat Singh(hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 21.01.2014 passed by Ld. CIT (Appeals)- XXXI, New Delhi qua the assessment year 2001-02 on the grounds inter alia that :-
“1. That the learned Commissioner of Income Tax (Appears) has erred both on facts and in law in upholding the initiation of proceedings u/s 147 of the Income Tax Act, 1961 where he failed to appreciate that, the notice u/s 148 of the Income Tax Act, 1961 was untenable in law since the proceedings have been initiated without satisfying the pre-requisite of the statutory provisions of the Act.
That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, the assessing officer had initiated the proceedings u/s 148 of the Income Tax Act, 1961 despite the fact, he had no material to believe that there is an escapement of income and he could have issued a notice u/s 143(2) of the Income Tax Act, 1961 by 31.03.2004 and no proceedings could be validly initiated to make an investigation which are not permissible in law and as such the proceedings initiated u/s 147 of the Income Tax Act, 1961 are untenable both on fact and in law.
3. That without prejudice the learned Commissioner of Income Tax (Appeals) has erred in sustaining each of the following additions made: (a) Rs.7,00,000/- being the-cash deposited in the bank account.
(b) Rs. 3,57,971/- representing a sum of disallowance of expenditure incurred (being expenses for the maintenance of property in respect of which assessee received Rs. 4,20,0001- as maintenance.)
(c) Rs. 2,97,283/- the income derived from agriculture (held by the assessing officer to be an income from other sources)
4. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the assessee had duly furnished satisfactory explanation, in respect of the credit appearing in the bank account of Rs. 7 Lacs and there was no valid justification whatsoever, to have held that the explanation furnished is unsatisfactory and the credit represents an unexplained creditor.
5. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the amount of Rs.4,20,000/- represent income from property instead it was the business income of the assessee since the amount received of Rs.4,20,000/- was as a compensation in the course of his business activities for the maintenance.
That the learned Commissioner of Income Tax (Appeals) has further erred in upholding the finding of the assessing officer that the income of Rs.2,97,283/- did not represent income from agriculture, despite the fact assessee had led sufficient evidence and material to establish the same was income from agriculture, and had been earned from agricultural activities.
That the learned Commissioner of Income Tax (Appeals) in any case and without prejudice should have directed the assessing officer to recompute income assessed under the head business income by directing the assessing officer to allow deduction u/s 24 of the Income Tax Act, 1961 and tax such receipt as income from property.
8. That the learned Commissioner of Income Tax (Appeals) has further erred in upholding the levy of interest u/s 234B of the Income Tax Act, 1961.”
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : This is second round of litigation.
Coordinate Bench of the Tribunal vide order dated 11.02.2011 remanded the case back to the ld. CIT (A) for re-adjudication, thereafter fresh order dated 21.01.2014 has been passed. Assessee had filed original return on 14.05.2003. Assessing Officer after recording reasons issued a notice u/s 148 of the Income-tax Act, 1961 (for short ‘the Act’) to the assessee to which assessee filed return on 16.04.2007 without prejudice. In response to the notices u/s 142 (1) and 143 (3) dated 16.08.2007 and reasons recorded, assessee filed objections which were disposed off. AO completed assessment u/s 143 (3) read with section 148 by making addition of Rs.7,00,000/- on account of unexplained investment/cash deposited in bank account and by treating amount of Rs.2,97,283/- declared by the assessee as agricultural income as income from other sources and the AO has also disallowed expenses claimed by the assessee from business receipts. AO assessed the total income of the assessee at Rs.15,97,280/-.
Assessee carried the matter by way of appeal before the ld. CIT (A) who has confirmed the addition by dismissing the appeal.
Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
Undisputedly, the assessee has originally filed return of income on 14.05.2003 whereas he was required to file the return by 31.03.2003 u/s 139 (4) of the Act. It is also not in dispute that notice u/s 148 of the Act has been issued by the AO after recording reasons on the basis of enquiry report given by Directorate of Revenue Intelligence (DRI). It is also not in dispute that computation of business income is not subject matter for reopening.
GROUNDS NO.1 & 2 6. The ld. AR for the assessee challenging the reopening u/s 147 contended that the AO was not having any intangible material to issue notice u/s 148 which has merely been issued on the basis of enquiry report made by the DRI.
7. To proceed further, we would like to extract the reasons recorded by the AO before initiating the proceedings u/s 147 of the Act, which are as under :-
“REASONS FOR ISSUE OF NOTICE U/S 148 OF I.T. ACT, 1961
An information was received from DRI that a sum of Rs.7 lac was deposited in cash on 11.12.2000. Further, enquiries by the DRI in this regard were made. The assessee could not justify the source of cash credit in the bank account made by him on 11.12.2000.
It has also been brought to the notice that construction of farm house at Mehrauli namely Maharani farms was carried out in 2001-02.
In view of the above, I have reason to believe that the assessee has not disclosed source of cash deposit of Rs. 7 lac and source of investment in the construction of the farm house. Therefore, to charge the above income in the hands of the assessee permission may kindly be accorded to issue notice u/s 148 of the I. T. Act 1961.
Sd/- (AKHILESH BIDALIA) Asstt. Commissioner of Income Tax, Central Circle – 5, New Delhi.”
Undisputedly, for AY 2001-02, the assessee has filed original return of income on 14.05.2003 which was otherwise required to be filed within one year of the relevant assessment year i.e. 31.03.2003. So, undisputedly, return filed on 14.05.2003 is non est meaning thereby, it is no return in the eyes of law. So, in these circumstances, the Revenue had no option except to initiate the reassessment u/s 147 of the Act. Moreover, the assessment in this case has been initiated on the basis of tangible material as to the cash of Rs.7,00,000/- deposited by the assessee in his bank which is again an admitted fact. So, we are of the considered view that there is no change of opinion in this case, hence reopening has been validly initiated by the AO and confirmed by ld. CIT (A).
GROUNDS NO.3, 4 & 5 9. So far as question of depositing of cash of Rs.7,00,000/- in the bank account by the assessee is concerned, it is the case of the assessee that out of Rs.7,00,000/-, he has received Rs.4,00,000/- on account of sale proceed of Pajero car owned by him and Rs.3,00,000/- was his agriculture income. Admittedly, cash deposit of Rs.7,00,000/- was made in the bank by the assessee on 11.12.2000. AO as well as CIT (A) have declined the contentions of the assessee as to receiving the amount of Rs.4,00,000/- by the assessee from buyer of his Pajero car on the ground that the car was sold to Avinashji Patel on 04.01.2001 out of which Rs.2,00,000/- was received by pay order no.974877 and Rs.2,00,000/- was received in cash on 04.01.2001 whereas cash deposited was made more than one month prior to receiving of the said amount. Assessee has come up with the defence that since the amount of Rs.4,00,000/- was received by him from Bhagwan Singh, Broker as advance. However, AO relied upon the statement to Bhagwan Singh recorded u/s 37 of FEMA on 07.07.2006 who has stated that he has merely received RS.4,000/- for the deal from Shri Jagat Singh and has not provided any advance to Shri Jagat Singh.
We are of the considered view that assessee cannot be dis- believed for making cash deposit of Rs.4,00,000/- in the bank as sale proceeds of his car having been taken as advance from Bhagwan Singh, broker for three reasons viz. (i) that the AO has not dis-believed the sale of car and sale receipt, which has been brought on record; (ii) that assessee has never been provided with an opportunity to cross-examine Jagat Singh at the time of recording his statement u/s 37 of FEMA by DRI; and (iii) that merely because of the fact that there is a time gap between the sale proceeds and amount deposited in the bank, the same cannot be treated as unexplained because invariably statements by the investigating agencies are recorded with preconceived notion, particularly when aggrieved party has not been given right of cross examination. So, we are of the considered view that cash deposit of Rs.4,00,000/- by the assessee in his bank account has been duly explained being sale proceeds of Pajero car.
So far as question of deposit of remaining Rs.3,00,000/- by the assessee in bank account is concerned, the ld. AR for the assessee contended that he has brought on record arrangement of Batai, Khasra Girdawari of the assessee and Form-J showing the sale of the agricultural produce, available from pages 30 to 42 of the paper book, during assessment proceedings.
However, when we peruse the aforesaid documents, available at pages 30 to 42 of the paper book, it shows that the same are not legible. Even the alleged armament of Batai available at page 30 of the paper book is also not legible, wherein only area of land measuring about 40 acres is mentioned without any detail of Khasra number and Khatoni number, which is not sufficient to believe the case of assessee. Similarly, copies of Jamabandi made available at pages 31 to 42 of the paper book are also not legible showing assessee to be its owner or cultivator. However, there is J-form dated 21.04.2000 and dated 13.01.2001 showing payments of Rs.2,00,583.95 and Rs.96,698.64 respectively in the name of the assessee for selling the wheat crops, cotton, etc.
12.1 Prima facie, J-Form relied upon by the assessee cannot be dis-believed. However, in case assessee succeeds in proving the fact that he was having right to cultivate 48 acres of the land owned by Rajpal as per Jamabandies which are not now legible, the addition of Rs.3,00,000/- on account of unexplained cash deposit cannot be made merely on the ground that there was a time gap for depositing the cash in the bank. In case of an agriculturist taking the cash from the commission agent does not always go by the books because sometimes cash is taken prior to the sale of the agriculture produce or sometimes it is taken after sale of the agriculture produce and sometimes it is difficult to remember when the amount was taken from commission agent.
So, we direct the AO to verify the claim of the assessee as to his alleged cultivating possession over the land in question as per Jamabandi from pages 30 to 42 of the paper book and in case, it is proved by the assessee then cash deposit of Rs.3,00,000/- in the bank shall be treated as explained, otherwise it would be treated as unexplained cash deposit.
So far as question of disallowance of expenditure of Rs.3,57,971/- stated to have been incurred by the assessee for maintenance of property in respect of which assessee has received Rs.4,20,000/- as maintenance is concerned, undisputedly the assessee has earned business income but has not been allowed deduction of expenditure for want of books of accounts and other documents to support his claim. It is also not in dispute that in AY 2000-01, the assessee has earned Rs.6,00,000/- from the property on which ld. CIT (A) has allowed 25% deduction u/s 24 of the Act.
It is also not in dispute that in AY 1999-00, assessee declared business income of Rs.4,80,092/- and had also claimed expenses of Rs.4,23,008/- which was allowed as per computation of expenses for AY 1999-00, available at page 23 of the paper book.
Assessee has been denied the deduction of expenditure of Rs.3,57,971/- on two grounds viz. (i) that he failed to produce the books of account; and (ii) that he has failed to file proof of ownership of generator set, swimming pool and filtration plant.
However, we are of the considered view that findings returned by ld. CIT (A) in paras 3.7.2 to 3.7.5 go to prove that ample opportunities were given to the assessee by the AO to prove the ownership of properties of which maintenance expenses are being claimed.
However, before the ld. CIT (A), assessee sought to bring on record all the documents sought for by the AO by way of additional evidence which request was declined by the ld. CIT (A).
Keeping in view the admitted fact that in the earlier year, such expenses have been allowed to the assessee by the Revenue and that it is also accepted by Revenue that assessee has earned business income of Rs.6,00,000/- from the property on which deduction of 25% was allowed u/s 24 of the Act, we are of the considered view that the matter is required to be restored to the file of the AO and the assessee is required to be given opportunity to produce on record the documents by way of additional evidence to prove the ownership of the house property qua which he has claimed expenditure and to further prove the ownership of generator set, swimming pool and filtration plant and then to decide the matter afresh after providing an opportunity of being heard to the assessee. So, grounds no.3, 4 & 5 are partly determined in favour of the assessee for statistical purposes.
GROUND NO.6
Bare perusal of assessment order passed by the AO particularly para 4 goes to prove that addition of RS.2,97,283/- declared by the assessee as agricultural income and treated by the AO as income from other sources is part and parcel of addition of Rs.7,00,000/- made by the AO in para 3 of the assessment order. So, it amounts to double addition which is not sustainable in the eyes of law. Moreover, the same amount claimed as agricultural income has travelled to the cash deposit in the bank which issue has already been dealt with by the Bench under ground no.3 in the preceding paras. So, addition of RS.2,97,283/- is ordered to be deleted and ground no.6 is determined in favour of the assessee.
GROUND NO.7 18. Ground No.7 is consequential to ground no.5 which issue has been referred to the AO to decide afresh, so needs no specific finding. 19. Resultantly, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in open court on this 8th day of October, 2018.