A.C.I.T CIR - 3,ASANSOL, ASANSOL vs. SRI BIRESWAR KAR, RAIGANJ

Per Shri S.S. Viswanethra Ravi :-

This appeal and cross objection filed by the revenue and assessee are directed against the order of Commissioner of Income Tax (Appeals)- Durgapur dated 04.02.2013 for the assessment year 2008-09. The Assessee has also filed a Cross-objection against the very same order of the CIT(A).

That, the ld. CIT(A), Asansol has erred in law and on facts by deleting the addition of Rs.30,44,387/- made by the Assessing Officer on account of unexplained investment in land, residential flat & shop, etc.; 4. During the relevant year under consideration that the assessee had made an investment of Rs. 12,35,000/- for the purchase of Flat at Buro Shivtola, ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 2

Kolkata and Rs.18,44,000/- for purchase of Shop Room at Kolkata and Rs.3,75,000/- for the purchase of land. In the course of assessment proceedings, the AO called upon the Assessee to explain the source of investment made.

Rs.6,28,353/- and the assessee has shown withdrawal of Rs.30,28,626/- from the capital of Sudhi Bastralaya. This withdrawal consists of withdrawal of Rs.4,00,000/- for personal purpose, Rs.18,65,237/- for flat, Rs.4,50,000/- of Land purchase and the remaining amount of other investment such as LIC etc. If net profit of the current year of Rs.6,89,764/- is included with the capital, even then the assessee has withdrawn excess amount of Rs.17,10,507/- from his proprietorship business Sudhi Bastralaya, which he has shown as contra entry in his books of account. According to the AO, a person cannot withdraw capital of Rs.30,28,626/-, when he has the capital of Rs. 6,28,353/- only. The AO found that in the circumstances was of the view that the assessee does not have any cash credit account for running his business. A person cannot run his business that too with a turnover of Rs.2,67,54,866/- without having any capital. The assessee did not have any sundry debtors in his books.

have been returned to him. The AO found that this clearly means that the assessee did not maintain his cash book properly and he used to make a dummy entry for introduction of his out of books cash into his books of account to mitigate the shortage of cash in his books of account. The AO, therefore, concluded that the assessee did not have sufficient fund to withdraw from proprietorship business concern Sudhi Bastralaya and he has used his own undisclosed money to invest in Flat, Shop room and Land by giving it a colour of withdrawal from Bank account of his own business concern and the business concern of his wife. The assessee had shown withdrawal for flat of Rs.18,65,237/- and for Land of Rs.4,50,000/- from the capital of Sudhi Bastralaya. Whereas, he has invested total of Rs.26,69,387/- in flat and shop room and Rs.3,75,000/- in land. Thus the source of investment of Rs.30,44,387/- all together in Land, Flats and Shop Room is not explained. Hence, an amount of Rs.30,44,387/- was added as deemed income of the assessee in the guise of unexplained investment by the AO.

a. Flat at Behala : The Investment of flat at Behala purchased jointly with his wife Smt. Bubai Kar, proprietor of M/s. Sudhi Textiles, a wholesale cloth merchant assessed by the Income Tax Officer, Ward 3(1), Asansol under PA No. AFCPK8252M for Rs.12,35,000/-. The source of fund was Rs.6,10,367/- paid from the bank account of the business M/s. Sudhi Bastralaya (A/c No.2073 of Axis Bank, Burdwan), Rs.1,00,000/- from the bank account of M/s. Sudhi Textiles, the business of Smt. Bubai Kar (A/c ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 5

No.2097 of Axis Bank, Burdwan) and balance amount of loan jointly taken from ICICI Bank, Burdwan by the appellant and his wife.

b. Shop room

The total investment of Rs.18,44,000/- was paid from the Axis Bank of M/s. Sudhi Bastralaya Rs.11,39,850/- and Rs.7,00,000/- was paid from the Axis Bank account of M/s. Sudhi Textiles of Smt. Bubai Kar.

c. Land at Raina for Rs.3,75,000/- was shown in the personal capital account of the assessee out of withdrawals from the business of the assessee. All these investments have been made from the bank accounts of the assessee and his wife and also from bank loan and from withdrawals from his business which have been properly reflected in the books of the assessee. The books maintained are correct and truly reflected in transaction. Every receipts and disbursement made during the year are correctly entered and are properly explained. The Learned Assessing Officer has failed to appreciate the fact that total capital in a business cannot be any yardstick of the investment made especially when the purchase are made wholly on credit. Further more in a retail business of cotton and textile goods when almost the entire sales are made in cash and where the annual turnover is more than 2 crores, there can be no shortage of liquid money.

In view of this, the entire addition of Rs.30,44,387/- being properly explained, should be deleted. The Axis Bank account of the business of M/s. Sudhi Bastralaya, M/s. Sudhi Textiles, ICICI loan accounts, full set of accounts of M/s. Sudhi Bastralaya along with personal capital account, of the assessee and Balance Sheet, I.T papers, bank statements, capital accounts of the assessee’s

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wife, Smt. Bubai Kar showing the transactions are being enclosed. The details of payment towards the cost of the properties are also being submitted.

“ ... ... I do not see why this should be so. There is no mention in the AO’s order that datewise transactions have not been maintained in the cash book. If these are maintained, then, whether these transactions are in cash or through bank I do not see why calculating the availability of cash on any given day should be a problem. Secondly, the AO has also mentioned that on occasions the appellant is seen to have deposited cash which subsequently has also been returned to him. The AO has come to the conclusion here that cash book was not properly maintained. I cannot agree with this conclusion of the AO. As stated above, the AO does not mention any gaps occurring in the cash book. If the cash book has been maintained on day to day basis then calculating the availability of cash on a particular day should not be a problem. The AO has also mentioned that on occasions the appellant has introduced his own cash in the business but paradoxically no adverse comments has been made by the AO regarding the sources of such cash introduction. Presumably therefore he is satisfied regarding the sources of such cash. Therefore, in my opinion, the AO has not found anything incriminating in the appellant’s cash book which would entail its rejection. As regards the sources of the investments it has to be remembered that the appellant is the owner of a retail cloth shop. This business is conducted wholly by cash. The AO has himself noted in the assessment order that the appellant’s business turnover for the year was Rs.2,67,54,866/- and that he had no debtors. Therefore, availability of cash with the appellant does not appear to be in doubt. In course of appellate proceedings, the bank accounts maintained by the appellant and his wife for their business have been submitted. It is seen that the deposits are almost exclusively in cash. But in my opinion, this is only to be expected in a business where the sales are invariably in cash, a fact which the AO himself has attested too. Moreover, I find from an examination of the bank account that the cash has been deposited at regular intervals and not only before making the investments in question. To sum up, I do not agree with the AO’s view that the appellant’s cash availability as on a ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 7

particular day was not ascertainable from his cash book. I also find that availability of cash with the appellant was not a problem given the nature of his business. It is seen from the assessment order that the appellant had submitted before the AO details regarding the investment made by his wife. However, no examination of such submission by the AO is available on record. The total addition is seen to have been made as if the appellant had invested the entire amount. The appellant’s wife is seen to be separately assessed to tax. Under the circumstances, I do not see how her investments can draw adverse inference in the hands of the appellant. Thus, out of the total addition made by the AO Rs.8,00,000/- is seen to have been invested by the appellant’s wife and cannot suffer addition in the hands of the appellant. The AO is also seen to have noted that the appellant had taken a loan from M/s. ICICI Bank, but in his conclusion he appears to have added the loan amount also as unexplained investment. No discussion is available in the assessment order regarding the investment in land which is seen to be of Rs.3,75,000/-. I do not see how an addition towards unexplained investment can be made without any discussion. It also needs to be mentioned that the amount of capital in a particular business can only be a pointer but cannot be the only yardstick for judging whether withdrawals in excess of such capital can be made. Under the circumstances, I find that the withdrawals made by the appellant from his business for making the investment are well supported by his sources which are explained. In view of that, the addition made is directed to be deleted. “ 10. Aggrieved by such order of the ld.CIT-A, the revenue raised ground no.1 before us. We have heard the rival submissions. The ld.DR relied on the order of the AO and ld. Counsel for the assessee has relied on the order of the ld.CIT-A.

day. There were deposits and withdrawals in this cash book. The AO has come to the conclusion here that cash book was not properly maintained. This conclusion of the AO was not based on any discrepancy in the cash book but rather on surmises. The AO does not mention any gaps occurring in the cash book. The AO has not also disputed the source of cash as one from the sale proceeds of business. Therefore rejection of cash book by the AO was not proper. The circumstance that the Assessee is the owner of a retail cloth shop and in that line of business all transactions are wholly in cash cannot also be disputed. The AO has himself noted in the assessment order that the Assessee’s business turnover for the year was Rs.2,67,54,866/- and that he had no debtors. Therefore, availability of cash with the Assessee does not appear to be in doubt. The correlation between the cash book and the deposit in the bank account has also been accepted by the CIT(A). The source of funds in so far as it relates to the Assessee’s wife has also been given but the same was neither examined nor rejected by the AO. Therefore the conclusion that the Assessee invested the entire funds including the share of the Assessee’s wife was rightly held by the CIT(a) to be incorrect. The fact that the Assessee had taken a loan from M/s. ICICI Bank, is clear from the evidence on record but in his conclusion the AO did not give credit to this loan as funds explained by the Assessee. The above findings of the CIT(A) have not been shown before us to be incorrect based on material available on record. In the given circumstances, we are of the view that the addition made by the AO was rightly deleted by the CIT(a). Consequently, Gr.No.1 raised by the Revenue is dismissed.

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That, the ld. CIT(A), Asansol has erred in law and on facts by deleting the addition of Rs. 4,51,516/- disallowed by the Assessing Officer on account of gift received being failed to prove the creditworthiness of the donors from the party of the assessee. 13. The assessee had shown to have taken Gift of Rs.2,15,000/- from his relatives and gift of Rs.2,36,516/- from his wife Bubai kar during the relevant year. The AO called upon the assessee to furnish the name and other details of the relatives from who gift was received. In response to this, the assessee submitted that gift of Rs.25,000/- was received from Bhakti Binod Sinha (Brother in law of the assessee), Rs.70,000/- from Sushil Kar (Uncle), Rs.25,000/- from Sima Das (Sister), Rs.25,000/- from Swapan Das (Brother in law), Rs.70,000/- from Mamata Kar (Mother) and Rs.2,36,516/- from his wife Bubai Kar. Regarding their source he submitted that gift were given from all of them from their personal savings and inherited money. All the gift were given by cheque except the gift by Bubai Kar through book adjustment.

new flat and Rs.57,510/- paid by him to her on behalf of half share in the advance money of the new flat. The remaining amount of Rs.2,36,516/- has been shown as gift paid to him from his wife Bubai Kar. According to the AO from the investments made by the assessee in various properties, it is quite clear that he himself is a person of worth and the persons from whom he has claimed to have received gift is not so much affluent. This is clear from the fact that one of the person Swapan Das who is the brother in law of the assessee and he has claimed to have gifted him Rs.25,000/- is a school teacher. That too when the assessee is not in any distress. One more interesting thing is that almost all the gift has been received by the assessee in the fag end of the financial year. Since, the assessee failed to prove all the three basic conditions to have been taken as gift by the assessee amounting to Rs.4,51,516/- was disallowed and added to the income of the assessee.

The disallowance of gifts by the Learned Income Tax Officer is wrong unjust in view of the following reasons:-

(i) Gift by Sri Bhakti Binod Sinha

Sri Sinha is a retired employee and has at present running a PCO Booth, made the gift by making bank draft out of withdrawal from savings account of United Commercial Bank, Raniganj where his transactions are fully reflected which is being submitted.

(ii) Sri Sushil Kar

Sri Sushil Kar is a bachelor of about 78 years and is staying at Raniganj alongwith the mother of the assessee and other members of the family. ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 11

Sri Sushil Kar jointly carried on a big sweetmeat shop for about 50 years at Asansol Court jointly with Late Gopal Kar, the father of the assessee which they sold about 2/3 years back and the accumulated savings and the sale proceeds of the shop were kept by them. Sri Sushil Kar becoming old and invalid have gradually made gifts of his savings to the sons of his late brother.

(iii) Smt. Seema Das sister of the appellant had given a sum ofRs. 25,000/- as gift to his brother. The amount was given from her personal bank account out of own savings for the last 30/35 years as a married lady.

(iv)Sri Swapan Das, the brother-in-law of the appellant had made a gift of Rs. 25,000/-out of his personal savings account of Post Office out of savings from agricultural income.

(v) Smt. Mamata Kar, the mother of the appellant had made a gift of Rs.

70,000/- to the appellant during the year out of the savings of her

husband Late Gopal Kar through her bank account. She being a lady

widow of about 80 years, practically bedridden and have made gift to her all savings to sons.

(vi) Smt. Bubai Kar

The wife of the assessee had a running account with the assessee, the statement of which was submitted at the time of assessment. Since, Smt. Bubai Kar is a businessman, this is reflected in her personal capital account which is being submitted. The statement of accounts of Smt. ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 12

Bubai Kar prop M/s. Sudhi Bastralaya, and details of assessment papers are being submitted.

All these gifts are genuine and the donors are in the capacity to make such gifts. Hence, the disallowance is arbitrary and uncalled for and should be fully allowed.

The appellant has submitted the declaration of the persons, their identities have been proved and the bank statement of the donors have also shown to prove the genuineness of the transactions. Basing upon the principle laid down by the Supreme Court in case of CIT Vs. P.K Noorjahan (1999) 237 ITR 570 and relying upon the decisions of the Supreme Court in the case of CIT Vs. Orissa Corporation (P) Ltd 159 ITR 78, CIT Vs. Doulatram Rawatmal-87 ITR 249 and several other cases, Gujrat High Court has decided in the case of Deputy Commissioner of Income Tax Vs. Rohini Builders that in the absence of a unsatisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year and that the legislative mandate is not in terms of the words “shall be charged” to income tax as the income of the previous year.

The appellant has discharged his onus in terms of Section 68 by proving the identity of the donors, their full address, their P.A Nos. And assessment records where there are such assessment made. The gifts made through A/c payee cheques/drafts from the bank accounts of the accounts of the donors. Hence the gifts should be fully allowed.

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“... ...The AO is himself seen to admit that the appellant has submitted the name of the donor, the amount of gift and the mode of transaction which, admittedly, is through cheque. In my opinion, the AO has missed the point that the onus has shifted onto him once these basic details have been submitted by the appellant. He is not seen to have conducted any enquiries on these issues. Without an enquiry, the action of the AO bases itself on surmises and cannot be held to be correct. Besides, no adverse comments are seen to have been made by the AO on any of the details submitted. I also find these amounts to be meagre and cannot be said to be beyond the means of the donors given their relationship with the appellant. Under the circumstances, I cannot uphold the AO’s action in this regard. However, addition in respect of the gift from Swapan kr. Das, is confirmed because his relation with the appellant does not come within the definition of relative as Explanation to Proviso to Section 56(1(iv) of the I.T Act. The AO will also verify the relation of Shri Bhakti Binod Sinha with the appellant. If the relation is covered by the aforementioned Explanation to Proviso to Section 56(1)(iv) the appellant will get consequential relief. The additions made in respect of other gifts are directed to be deleted. This ground of appeal is partly allowed.” 17. Aggrieved by such order of the ld. CIT-A, the revenue raised ground no.2. In the Cross Objection the assessee has challenged the action of the ld.CIT-A in sustaining the addition made in respect of gifts received from Sri Swapan Kumar Das.

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“It appears from the assessment order that the AO’s direction were complied with. However, the AO has taken an adverse view based on the fact that payments for the settlement of the account were made wholly in cash. In my opinion, by itself this cannot draw any adverse notice. Further, the AO is also seen to have mentioned that the full address of the creditor was not available. But, in that case, he could have asked the appellant to provide such address. This is not seen to have been done. Merely on the basis that the account had been settled in cash I do not think it is justified to hold that the said transaction is bogus. The AO has mentioned that genuinty of the cash payments cannot be relied upon. Given the fact that availability of cash is not a problem for the appellant, i find this statement to be a surmise which cannot be said to be based on facts. Under the circumstances, the addition made is directed to be deleted. This ground of appeal is allowed.” 25. Aggrieved by such order of the ld.CIT-A the revenue ground no.3 before the tribunal.

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CO. 106/Kol/2013 (by the assessee)

For the Learned Assessing Officer was not justified in making an addition of Rs.5,00,000/- to the total income of the respondent being genuine loans advanced by the loan creditors and that the Learned Commissioner of Income Tax (Appeals) has also erred in confirming the same. 28. Brief facts of this case that the return of income for the A.Y under consideration was filed manually on 31-03-2009 declaring total income of Rs. 6,88,737/-. However, the case was selected for scrutiny by issuance of statutory notices. The assessee has taken loan from Aparna Banerjee and Swapan kr. Das of Rs.3,00,000/- and Rs.2,00,000/- respectively during the relevant year. Before the AO the assessee filed the copy of bank statement of Swapan Kumar Das, Aparna Banerjee and I.T Return of Tarakeswar Kar for the A.Y 2008-09 and submitted that Smt. Aparna Banerjee and Swapan Das are not assessed to income tax. To verify the veracity of the transaction notice u/s. 133(6) of the I.T Act was issued to Aparna Banerjee, Swapan Das by the AO.

Aparna Banerjee:

i. She has deposited cash of Rs.3,00,000/- on 03.04.2008 in her UCO Bank, Raniganj account and advanced the same money of Rs.3,00,000/- to Sudhi Bastralaya on 15.04.2008. No other major transaction prior to this has been made in this account apart from this transaction. If this transaction is excluded then the pick balance in the ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 18

account was of Rs.26,996/-, which is due to the credit of Rs.26,248/- deposited as closure proceeds of some account.

ii. She herself has admitted that she is a house wife and she has no business activity.

iii. She did not explain the source of cash deposited in her bank account.

Swapan Kr. Das:

i. He has deposited cash of Rs.2,00,000/- on 25.03.3008 in his AXIS Bank, Burdwan account no. 148010100141444 and advanced the same money of Rs. 2,00,000/- to Sudhi Bastralaya by four cheque of Rs. 50,000/- each on 27.03.2008 and 28.03.2008 respectively. No other major transaction has been made in this account apart from this. If this transaction is excluded then the pick balance in the account was of Rs.2610/-.

ii. He did not explain the source of cash deposited in the account. He has also not submitted the source of his income.

iii. He has sent the copy of his I.T Return filed in ITR-1 for the A.Y 2009-10 and 2008-09 submitted at Ward-1(3), Burdwan declaring income of Rs.1,49,046/- and Rs.1,31,077/- respectively.

iv. On verification from the bank deposit slip, it has been found that the cash was deposited in his account by some Tapan Kumar Mukherjee.

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The assessee submitted that Smt. Aparna Banerjee has deposited the cash which was received by her from her husband and Swapan Kumar Das, who is brother in law of the assessee is a Head Master of a school in the district of Burdwan. The money he put in the bank represented accumulation of his earnings as a teacher.The AO however, observed that it is well settled in the cases of CIT Vs. Biju Patnaik (SC) 160 ITR 674, Roshan De Hatti Vs. CIT (SC) 107 ITR 938 and Shankar Industries Vs. CIT (Cal) 114 ITR 689 and in many other cases by different courts of law of India that in order the discharge the onus, the assessee must prove the followings:-

i) The identity of the creditor,

ii) The capacity of the creditor to advance money, and

iii) The genuineness of the transaction.

There mere furnishing of particulars or the mere fact of payment by an account payee cheque, or the mere submission of confirmatory letter by the creditor is, by itself, not enough to shift onus on the department. The person who advanced the loan has herself not explained the source of her income and the assessee also could not establish her creditworthiness to advance money, which is the basic requirement to prove the transaction genuine. Thus, the entire transaction is coloured to give it a garb of a loan to enable the assessee to introduce his own undisclosed income in its books of account by this camouflaged transaction. The transaction is devoid of merit and lacks soundness of the creditworthiness of the lender. Hence, in the light of the above facts and circumstances, the above mentioned amount of Rs.5,00,00/- was added to the income of the assessee as cash credit u/s. 68 of the I.T Act, 1961. ITA No. 1454/K/13 CO No.106/Kol/2013 Sri Bireswar Kar 20

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given out of his personal savings. Since he also owns cultivated land in Burdwan area where 2/3 crops are grown, has also considerable agricultural income. Hence, the claim of the appellant should be upheld and the addition of Rs. 5,00,000/- in the income should be deleted. The confirmation certificates, the relevant bank statements, income statement of the parties and affidavit made by both of them substantiating the transactions are being submitted. (Ref. Deputy Commissioner of income Tax Vs. Rohini Builders- 256 LT.R.- 360(2003); CIT Vs. P.K Noorjahan 237 ITR 570(1999) (SC) CIT Vs. Orissa Corporation (P) Ltd 159 ITR 78, CIT Vs. Doulatram Rawatmal 87 ITR 249 and recent decisions of Gujrat High Court in the case of CIT Vs. Ujala Dyeing and Printing Mills (P) Ltd 328 ITR 437(Guj), CIT Vs. Micro Melt (P) Ltd 327 ITR 70(Guj.)

“Before me, the appellant’s case is that the identity of the loan creditor has been established and the transactions have been made through bank. Therefore, the genuinity of the transactions are not in question. I do not agree with the appellant’s view. No evidence regarding the creditworthiness of the alleged loan creditors have been furnished. I find the appellant’s contention regarding the genuinity of the bank transactions to be specious. Cash has been deposited only a few days before issue of cheque to the appellant. Under the circumstances, the creditworthiness of the alleged loan creditors cannot be said to have been evidenced. The AO’s action in respect of this addition is confirmed and this ground of appeal is dismissed. “

because the credit in question cannot be said to be a credit in the books of account of the assessee for the AY 2008-09. The addition, therefore, is directed to be deleted. As far as, the loan received from Swapan Das is concerned it is seen from the bank account of Sri Swapan Kumar Das that there was cash deposit of Rs. 2 lakhs on 25-03-2008. Immediately, thereafter on 27-28 March 2008 four cheques of rs. 50,000/- each ws issued to the assessee by Swapan Kumar das. Prior to deposit of cash, Mr. Swapan Kr. Das had a balance of Rs.2,50,000/- in his bank account. In these circumstances, we are of the view that the assessee failed to satisfactorily explain the loan taken from Swapan Kumar Das. We, therefore, confirm this addition.

ORDER PRONOUNCED IN OPEN COURT ON 29 /07 /2016

Sd/- Sd/- P.M Jagtap S.S. Viswanethra Ravi Accountant Member J Judicial Member

Date 29 /07/2016

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Copy of the order forwarded to 1.. The Appellant/Department: ACIT,Cir-3, Asansol ‘ Parmar Building’ 54 G.T Road (W), Asansol 713304.

2 The Respondent/Assessee: Sri Bireswar Kar Prop: Sudhi Bastralaya B.C Road, Kumar Bazar, Raniganj 713347. Burdwan.

(3) CIT (4) CIT(A) (5) The Departmental Representative (6) Guard File

By order etc

Assistant Registrar Income Tax Appellate Tribunal Kolkata benches, Kolkata

** PRADIP SPS

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