ACIT, NEW DELHI vs. SH. PREET SINGH CHAUHAN, NEW DELHI

Date of Hearing : 13-04-2016 Date of Order : 02-05-2016 ORDER PER H.S. SIDHU, JM Revenue has filed the appeal against the Order dated 31.12.2013 passed by the Ld. Commissioner of Income Tax (Appeals)-XXVII, New Delhi pertaining to assessment year 2008-2009 on the following grounds:- i) That the order of the Ld. CIT(A) is bad in law and not in consonance with facts of the case. ii) The Ld. CIT(A) had erred in law and on facts in deleting the penalty amounting in Rs. 31,35,300/- made by the AO u/s. 271(1)(c) of the Act, 1961. iii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) had erred in appreciating the fact that the assessee has not voluntary disclosed the amount added as deemed income u/s. 68 of the Act in respect of which penalty was levied by the AO. iv) Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in not appreciating the fact that the assessee, has treated business income which has to be taxed at rate of 30% as short term capital gain thereby bringing his tax liability to lower rates. v) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the penalty on the ratio of the judgment in the case of Reliance Petro Products reported in 322 ITR 158 and Calcutta Discount Co. Ltd. vs. ITO when facts and circumstances of the instant case were quite different. vi) Whether on the facts and in the circumstances of the case, the appellant craves leave to add, allow or amend any or all the grounds of appeal before or during the course of hearing of the appeal.

2. The facts narrated by the Revenue Authorities are not disputed, therefore, the same are not repeated here for the sake of convenience.

3. At the time of hearing, Ms. Aruna Mittal, CA/Authorised Representative of the assessee stated that the quantum on which the penalty has been imposed, has already been deleted by the ITAT. She requested that the penalty in dispute may kindly be deleted. She has also filed the copy of the order dated 11.7.2014 passed by the ITAT, Delhi Bench ‘F’ in (AY 2008-09) in assessee’s own case. Therefore, she requested that the penalty in dispute may be deleted.

4. Ld. DR relied upon the order of the AO, but could not controvert the submission made by the assessee’s counsel. 2

5. We have carefully considered the submissions and perused the records. We find that in assessee’s own case in for A.Y. 2008-09 vide order dated 11.7.21014, the Tribunal had deleted the addition in this regard. The Tribunal has held as under:-

“6. We have heard rival parties and have gone through the material placed on record. We find that the assessee had received consideration for sale of shares through cheque which is apparent from the bank statement placed at paper book pages 47-49. The Assessing Officer had recorded the statements of the assessee and also the director of Broker Company and both of them i.e., the assessee and the Director of Broking Company had accepted that transaction had actually happened between the assessee and the broking company. The Assessing Officer arrived at the conclusion that money was unexplained on the basis that the broking company had purchased the shares on behalf of the assessee worth Rs.65 lacs without even getting any payment from the assessee. Therefore he arrived at the conclusion that no prudent man would have extended that credit facility to any person. Therefore, the Assessing Officer made the addition u/s 68 as unexplained money without doubting the creditworthiness of payer of cheques. If the Assessing Officer was to make addition u/s 68, it was to be proved that issuer of chqeus to assessee was not creditworthy. Nowhere in the assessment order the Assessing Officer doubted the creditworthiness. We observe that shares were received in D-mat account of the assessee as is apparent from the statement of Demat account placed at page 32 of the paper book. Moreover, we find that sale bills placed at paper book pages 12-24, clearly mention the name of the assessee as purchaser of the shares. The transaction might have been illegal in nature as alleged by the Assessing Officer and Ld. CIT(A) as it is the main broker only who is entitled to enter into transactions with the investor, but the amount earned by the assessee cannot be said to be an unexplained money u/s 68 of the Act as the identity and creditworthiness of the payer of money was not questioned and neither it was held that brokers was not creditworthy to pay money to the assessee. The amount earned by assessee has necessary flowed from the bank account of broker. Therefore, assessee was able to explain the source of money and therefore, addition u/s 68 cannot be made. Moreover, we find that assessee was not maintaining any books of accounts as is apparent from written submissions made to the CIT(A) on 27.03.2011 placed in paper book at page 3-10 and therefore also addition u/s 68 cannot be made. The Hon'ble Gauhati High Court in the case of Anand Ram Raitani Vs CIT as relied upon by Ld. A.R. has held as under:

“Held, (i) that the Assessing Officer, before invoking the power under section 68 of the Act must be satisfied that there are books of account maintained by ht assessee and the cash credit is recorded in the said books of account and if the assessee fails to satisfy the Assessing Officer, the said sum so credited has to be charged to income-tax as the income of the assessee of that previous year. The existence of books of account is a condition precedent for invoking the power. Discharging the burden is a subsequent condition. In order to justify the addition, it was the duty of the Tribunal to look to section 68 of the Act, which required that maintenance of books of account was necessary. The Tribunal had no jurisdiction to affirm the order passed by the Assessing Officer without first considering whether the conditions necessary were fulfilled. The question arose out of the Tribunal’s order.”

6.1 In view of the above, we are in agreement with the arguments of Ld. A.R. that addition cannot be made u/s 68 and therefore, we allow grounds No.1-5 of appeal of the assessee.”

Order pronounced in the Open Court on 02/05/2016.