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Income Tax Appellate Tribunal, BANGALORE ‘A’ BENCH, BANGALORE
Before: SHRI N.V.VASUDEVAN & SHRI ABRAHAM P GEORGE
PER SHRI ABRAHAM P GEORGE, AM;
In this appeal filed by the assessee its grievance is that an addition of Rs.12 lakhs made by the AO under section 68 of the Income-tax Act, 1961 (in short The Act’) was confirmed by the learned CIT(A).
Assessee, an HUF had filed its return declaring an income of Rs.1,79,850/-. Income declared was interest received on money lent by the assessee to some persons. During the course of assessment proceedings, assessee furnished details of the person to whom it had lent money. Assessee, it seems also stated that no books of account were maintained. From the bank account in the name of the assessee with Indiranagar Branch of Corporation Bank, Assessing Officer noted that there was cash deposits of Rs.3,00,000/- on 23-11-2009 and Rs.9,00,000/- on 12-01-2005. He sought explanation for the source from the assessee. Assessee vide his letter dated 20-12-2007 stated as under;
“ With reference to the above, I would like to inform that I have deposited Rs.3,00,000/- on 23-11-2004 and Rs.9,00,000/- on 12-01-2005 respectively. I have submitted bank statement and remarks and cash book for your records. I have deposited Rs.3,00,000/-on 23- 11-2004 from my cash withdrawn from bank and cash on hand on that date I have taken money of Rs.50,000/- from Mahabaleshwar, Advocate, M/s MGC & Co. and he was asking money back immediately. Hence I don’t have any choice of getting money repay the same to him and I collected the money which I was lent to various persons and that money was lent to various persons and that money I was deposited in the bank and cleared the loan which I was taken from Mahabaleshwar. The details of sources of money deposited and withdrawn was already explained in the cash book which was already with you”.
The details explanation and evidence for depositing the above money into the bank has been enclosed. The confirmation of accounts here I lent money has been enclosed”
However, the AO did not accept the above reply and gave the following reasons as to why he was not satisfied with it. i) Argument that accumulated cash was deposited could not be accepted. ii) No valid proof for the source of the cash deposits were furnished He therefore, made an addition of Rs.12.00 Lakhs under section 68 of the Act.
In its appeal before the CIT(A), assessee took the following arguments.
i) Source of cash were receipt from debtors to whom assessee had earlier advanced loan, Eleven confirmations were filed. ii) Cash book produced reflected accumulation of cash balance, out of which the deposits were made.
However, the CIT(A) was not impressed with the above.
According to him, i) The confirmations filed by the assessee did not have complete particulars and signatures therein were from illiterate persons. ii) Assessee had made petty withdrawals from his bank account, even when it had substantial cash with it, which was illogical. iii) The flow of withdrawals from bank were such that idle funds remained with the assesee, which no prudent business person would have done. Especially so, since assessee was in money- lending business. He thus, confirmed the addition.
Now before us the learned AR , referring to PB pages 2 to 5 submitted that the cash book prepared and produced by the assessee at the behest of the AO, clearly showed that there was sufficient cash balance with the assessee to make the deposits.
According to him confirmation from Shri Abdul Raheem for Rs.45,000/- received on 10-01-2005, from Shri Anil Kumar Singh for Rs.50,000/- received on 29-09-2004, from Smt. Geetha for Rs.20,000/- received on 03-01-2005, from Guru Kamal for for Rs.95,000/- received on 12-08-2004 and Rs.27,500/- received on 30-09-2004, from Shri Immanual Prakash for Rs.93,500/- received on 03-09-2004, from Smt Manju for Rs.25,000/- received on 05-09-2004 and another Rs.25,000/- received on 10-01-2005, from Shri Pandian for Rs.60,000/- received on 01-09-2004 and Rs.9,750/- o 31-10-2004, from Shri Pranesh for Rs.1,00,000/- received on 10-12-2004 nd Rs.24,000/- on 01-01-2005 from M/s Rahul Airfreight for Rs.25,000/- received on 30-12-2004, from Rajajanna for Rs.10,000/- received on 13-08-2004, from Shri Ramana for Rs.15,000/- received on 23-11-2004 from Shri Shekar for Rs.75,000/- received on 30-07-2004 and Rs.66,200/- received on 15-12-2004, from Shri Shivarathri for Rs.93,000/- received on 31-12-2004, from Shri Sridhar for Rs.75,000/- received on 10-01- 2005 and from Shri Vinod for Rs.50,000/- received on 03-07-2004, were all on record (PB pages 22 to 36). In any case according to him, when no books were maintained Section 68 could not be invoked. According to the learned AR, bank pass-book could never be construed as books maintained by the assessee. Reliance was placed on a decision of Hon’ble Guwahati High Court in the case of Anand Ram Raitani Vs CIT 223 ITR 544.
Per contra, the learned DR supported the orders of the authorities below.
We have perused the orders and heard the rival contentions. What we find is that, assessee had indeed produced a cash book before the AO. In fact various confirmation obtained by the assessee from its debtors, reflecting repayment in cash by them placed at PB pages 22 to 36 are nothing but the ledger pages of these debtors in assessee’s books. May be its true that cash book was prepared at the behest of the AO. However, it remains a fact that the cash book was before the AO at the time of assessment proceedings. Copy of this cash book has been placed before us at PB pages 2 to 5 and bank book at page 6 to 10. Hence, assesssee’s statement before the AO that it had not maintained cash book as contrary to what was on records.
Once assessee produced a cash book, the onus was on the assessee to prove the entries therein. If it was unable to do so, AO could certainly invoke Section 68, even otherwise AO can invoke Section 69, if source of investment is not properly explained.
Assessee cannot wriggle out of its obligation under law, by citing a reason that books of accounts were prepared under the instruction of the AO. No doubt, assessee had returned its interest income under the head “Other sources”. But application of Section 68 and Section 69 are not restricted to business income. It can encompass any type of income, as the facts may call for.
Nevertheless, we find that confirmation filed by the assessee at pages 22 to 36, did carry the address of the persons from whom it had received cash. None of these persons were examined by the lower authorities. Further, accumulation of cash in cash-book perse cannot be a reason for disbelieving the source of a deposit in Bank. An assessee might have myriad of reason for withdrawing cash from bank or keeping cash with him. Unless the distance of time is such as to make it unbelievable, in our opinion explanation of source should not be brushed aside. We are therefore, of the opinion, that rules of justice require a verification of the confirmation filed by the assessee, placed at PB 22 to 36 by the AO, by issuing proper summons. If the parties do not attend the summons on if the assessee fails to produce them, AO can take an adverse view and make an addition. For the limited purpose of this verification, we set aside the orders of the authorities below and remit the issue of addition of Rs.12.00 lakhs back to the file of the AO.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on the 6th February, 2015.