DILIP N NARANG,MUMBAI vs. ITO (IT) 3(3)(1), MUMBAI

This appeal by the assessee is arising out of the order of the CIT (A)-56, Mumbai passed in appeal No.CIT (A)-56/ITO(IT)4 (1)/42-D dated 30-01-2015. Assessment was framed by the ITO-23(2) (2), Mumbai for assessment year 2007-08 vide his order dated 10-12-2009 passed u/s 144 of the Income Tax Act, 1961 (hereinafter “the Act”).

The only issue in this appeal of the assessee is against the order of the CIT (A) confirming the action of the AO in making addition u/s 68 of the Act in respect of loan of Rs.99,800/- from the assessee’s wife Mrs. Jaya Narang, Rs.40,000/- from the assessee’s daughter Miss Priya Narang and Rs.40,000/- from the assessee’s son John Chirag.

I have heard the rival contentions and have also gone through the facts and circumstances of the case. At the outset, the learned Counsel for the assessee took me through the remand report sent by the AO to the CIT (A) vide Remand Report No. ITO- 23(2) (2)/Remand/2011-12 dated 05-05-2011 (copy enclosed at page 26 of assessee’s paper book) and drew my attention to Para 5, 6 and 7 of the report which read as under:-

Loan from son (John/Chirag) – Rs.2,68,000/- The assessee submitted a confirmation dt. 14.10.2010 from his wife, Smt. Jaya D. Narang, as under: “This is to confirm that I have advanced following loans to my husband, Narang Dilip Kumar N. till 31.3.2007 on behalf of my son Chirag Dilip Narang from his account No.2041in the capacity of a Guardian. Date Amount Cheque No. 17.8.2001 8000.00 586245 27.3.2004 40000.00 586247 10.9.2005 200000.00 586248 12.9.2005 20000.00 586249 Total 268000.00 Out of the above, the extract of the bank pass book of Chirag Narang for March, 2004 shows that there was a cash deposit of Rs.40,000/- on 31.3.2004 and on the same day, Rs.40,000/- was transferred to Shri Dilip Narang’s account. Hence, this loan of Rs.40,000/- is out of unexplained cash deposit. The son of assessee is minor and has no source of his own. Neither his son is filing return of income. Therefore, creditworthiness of the loan creditor is nor proved. The same may kindly be decided on merit.

Loan from wife, Smt. Harsh/Jaya Narang – Rs.1,38,000/- The assessee has submitted a confirmation dated 14.10.2010 from his wife Smt. Jaya D. Narang as under: “This is to confirm that I have advanced following loans to my husband, Narang Dilip Kumar till 31.3.2007 Date Amount Cheque No. 17.8.2001 18000.00 47810 27.3.2004 20000.00 47819 12.1.2006 100000.00 47563 Total 138000.00 Out of the above, a perusal of the extract of the bank pass book of Jaya Narang from January 2006 to March, 2006 shows that there was a balance of Rs.3093.51 as on 1.1.2006. On 4.1.2006 and 6.1.2006 there have been cash deposits of Rs.49,900 each, totaling to a balance of Rs.1,02,893.51 on 6.1.2006. An amount of Rs.1,00,000/-has been transferred to Shri Dilip Narang vide cheque No.47563 on 12.10.2006. This transfer of Rs.1,00,000/- shown as loan is out of unexplained cash deposits of Rs.99,800/-. His wife is not filing return. Cash deposit is stated to have been from encashment proceeds of foreign exchange brought from overseas however there is no encashment certificate with the assessee. The same may kindly be decided on merit.

Loan from daughter, Ms. Priya Narang – Rs.24,700/- The assessee has submitted a confirmation dated 14.10.2010 from his wife Smt. Jaya D. Narang as under: “This is to inform that I have advanced following loans to my husband, Narang Dilip Kumar N. till 31.3.2007 on behalf of my daughter PRIYA DILIP NAGANG from her account No.740 in the capacity of a Guardian. Date Amount Cheque No. 17.8.2001 7000.00 586224 31.3.2004 4000.00 586226 10.9.2005 200000.00 586229 Total 247000.00 Out of this, a perusal of the extract of bank pass book of Ms. Priya Narang for March 2004 shows that there was a cash deposit of Rs.40,000/- on 31.3.2004 and transfer of Rs.40,000/- by cheque No.586226 on the same date. This amount of Rs.40,000/- shown as loan is out of the unexplained cash deposit. The same may kindly be decided on merit. The daughter of assessee is minor and has no source of his own. Neither his daughter is filing return of income. Therefore, creditworthiness of the loan creditor is not approved. The same may kindly be decided on merit”. In view of the above, the learned Counsel for the assessee stated that in the case of assessee’s son John Chirag, the amount of Rs.40,000/- in his bank account was deposited on 31-03-2004 and the same was transferred to assessee’s account on the same day i.e. on 31-03-2004. Similarly, in the case of the assessee’s wife Mrs. Jaya Narang the amount of Rs.49,900/- and another amount of Rs.49,900/- was deposited as cash on 04-1-2006 and 06-01-2006 respectively. Similarly, in the case of assessee’s daughter Priya Narang, the amount of Rs.40,000/- was deposited in her bank account on 31-03- 2004 and the same was transferred on the same day to assessee’s bank account. The facts are clearly narrated in the remand report as produced hereinabove. The learned Counsel for the assessee stated that in all the cases the amounts are deposited in the previous year i.e. in assessment year 2004-05 and 2006-07 and not related to assessment year 2007-08. According to the learned Counsel for the assessee these amounts cannot be assessed in the assessment year 2007-08 and if at all it has to be assessed, it is to be 2004-05 and 2006-07. In view of the above, the learned Counsel for the assessee requested for deletion of the addition. When a query was put to the learned Sr. DR, she clearly agreed to the facts of the case.

After hearing both the sides, I find that none of the cash credits falls in the assessment year 2007-08, whereas the entries are related to the assessment year 2004-05 and 2006-07. These cash credits pertain to earlier year and not to the present year. Hence, I have no hesitation in deleting the same. Accordingly, I do so.