MR. R.K. GUPTA,NEW DELHI vs. ACIT, NEW DELHI

The facts, in brief, are that the assessee had filed his return of income for the impugned assessment year declaring a total income of Rs. 5,38,177/-. The return was initially processed u/s 143(1) of the Act and was later picked up for scrutiny as an outcome of a search action carried out in the case of MDH group Assessment Year 2007-08 on 22.11.2006. The assessee was an Executive Director of the company M/s Mahashian Di Hatti (P) Ltd. (for short MDH) and he was also subjected to the search mounted against the group on 22.11.2006. Allegedly, incriminating documents were found and seized from his residence at E-13/14, IInd Floor, Vasant Vihar, New Delhi. During the search, cash of Rs. 48,400/- and jewellery of Rs. 4,02,679/- were found. Further, assessee’s locker No. 39 with Punjab National Bank, Udyog Vihar, Gurgaon jointly held in the name of Shri R.K. Gupta and Nutan Gupta was also opened and searched on 15.01.2007 wherein cash amounting to Rs. 8,50,000/-, NSCs/KVPs worth Rs. 1,10,000/- and LIC policy payment receipts amounting to Rs. 5,40,000/- were found and seized. It is seen from the records that all other items recovered from the locker barring cash of Rs. 8,50,000/- have already been offered to taxation during assessment year 2001-02 to assessment year 2007-08 i.e. in the return of income in respect of each assessment year falling under the provisions of section 153A(a) of the Act.

2.1 Regarding cash of Rs. 8.50 lacs, it has been the assessee’s contention that the same was received from a prospective buyer Assessment Year 2007-08 M/s Pataliputra Credit and Securities Ltd. (in short PCSL) against proposed construction and sale of flat on plot no. 416, Sector 46, Faridabad and formed a part of the tentative consideration of R.s 35.00 lacs agreed upon to be paid by the buyer to the assessee. However, the Assessing Officer was of the opinion that the transaction was nothing but an accommodation entry arranged by the assessee to explain the unaccounted cash found at the time of the search. Accordingly, the Assessing Officer made an addition of Rs. 8.50 lakhs u/s 69A of the Act as unexplained cash. The matter travelled up to the ITAT and the ‘F’ Bench of ITAT, New Delhi vide order dated 27.04.2012 set aside the issue of Rs. 8.50 lakhs to the file of the Assessing Officer with the direction to examine the assessee’s claim by summoning the Director of M/s PCSL and investigate the matter in detail and decide the issue after affording the assessee a due opportunity of being heard.

Now, the assessee has again approached the Tribunal in 4 Assessment Year 2007-08 this appeal and is contesting the impugned addition of Rs. 8.50 lakhs.

The Ld. DR referred at length to the order of the Ld. CIT(A) and averred that M/s PCSL was a listed company and therefore it cannot be believed that the company did not have a bank account. He also referred to the finding of the Ld. CIT (A) that the company did not have sufficient cash to close the deal. Placing heavy reliance on the orders of the authorities below, the Ld. DR submitted that on facts, the addition deserved to be upheld.

We have heard the rival submissions and have also perused the records. It is seen from the impugned order that the Ld. CIT (A) has upheld the addition on mere suspicion. The Ld. CIT (A) has observed on page 10 that “the entire case appears to have been manipulated in such a fashion as to make the entire sequence of events look genuine and creditable. The relevant question and answers thereto prove that the probabilities preponderated more in favour of the theory formed by the Ld. Assessing Officer while making the addition of Rs. 8.50 lacs than that advanced by the appellant before the former.” The Ld. CIT (A) then proceeded to second the observations of the Assessing Officer that M/s PCSL had no liquidity to purchase the flat. However, the Ld. CIT (A) has not given any specific reason as to how the evidences/documents produced both by the assessee as well as M/s PCSL were not reliable. The Ld. AR has submitted a paper book which contains 39 pages of documents/evidences submitted by the assessee before the lower authorities. However, there is no specific finding given by the Ld. CIT (A) on these 8 Assessment Year 2007-08 documents. It is seen from the records that Mr. Anil Sanghi, Director of M/s PCSL, has accepted in his statement recorded on oath by the Assessing Officer on 12.11.2012 that the company had given an advance of Rs.11,00,000/- on 27.10.2006 to the assessee. Moreover, M/s PCSL had also mentioned this advance given to the assessee in its assessment proceedings before DCIT, Central Circle-23, New Delhi which is also on record. The contention of the Ld. AR that Rs. 89,138,179/- pertain to income tax deposited under appeal is also correct as is evident from the balance sheet of M/s PCSL on 31.3.2007 and placed at page 17 of the paper book. Copy of cash account, bank account and account pertaining to advance against flat are also on record and they support the contention of the assessee and it is indeed surprising that in the face of such huge amount of evidence, the Ld. CIT (A) chose to adjudicate the issue on a fictional preponderance of probabilities without bringing any cogent material on record to contradict the claim of the assessee. Even in the appeal before us, the Department could not point out any defect in the evidences/documents but simply relied on the orders of the authorities below. The Hon'ble Punjab & Haryana High Court in a recent judgement in the case of CIT vs Jawaharlal Oswal and Others (I.T.A. No. 49 of 1999, Judgment delivered on 29.01.2016) dismissed the Department’s appeal by holding that suspicion and doubt may be the starting point of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly when deeming provision is sought to be invoked. The Hon’ble Court has observed , “...The I.T.A. No. 3919/D/2014 Assessment Year 2007-08 principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer….Further a deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section 69-A. As already held, if the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the Assessment Year 2007-08 revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions.”

Therefore, in the light of the facts and circumstances of the case, it is our considered opinion that once the assessee had offered an explanation fortified with documentary evidences and further corroborated by a third party, the onus reverted to the Revenue to prove that the facts were not correct. The Department was patently wrong in drawing an adverse inference based upon suspicion or perception of culpability and hence the addition cannot be sustained. The addition is accordingly deleted.

In the result, the appeal of the assessee is allowed.