GURDEEP SINGH BIRDI,MUMBAI vs. ACIT 24(1), MUMBAI

Briefly stated the facts are, the assessee an individual is engaged in the business of execution of civil contract work. For the assessment

The additions made by the Assessing Officer were challenged in the appeal before the learned Commissioner (Appeals). The learned Commissioner (Appeals), while disposing off the assessee’s appeal, deleted the addition of ` 93,87,596, made under section 69 of the Income Tax Act, 1961 (for short "the Act") on account of unexplained investment. However, he sustained the additions of ` 33,60,000 and ` 7,33,303, made under section 68 of the Act on account of unexplained cash credit. Admittedly, against the aforesaid additions sustained by the learned Commissioner (Appeals), assessee has not preferred any appeal before the Tribunal. Thus, the additions of ` 33,60,000 and ` 7,33,303, have become final.

Aggrieved of the imposition of penalty, assessee preferred appeal before the learned Commissioner (Appeals), who also confirmed the imposition of penalty.

The learned Counsel for the assessee submitted that as far as the addition of ` 30,60,000, on account of unsecured loan is concerned, the assessee has not only established the identity of the creditors but proved the genuineness of the transaction as the loans were received

The learned Departmental Representative, on the other hand, supporting the view of the learned Commissioner (Appeals) and the Shri Gurdeep Singh Birdi 5 Assessing Officer submitted, as the assessee has failed to discharge his onus of proving the cash credit and has accepted the additions, it proves the fact that cash credit are not genuine. Therefore, the assessee having concealed his income representing the cash credits is liable for penalty under section 271(1)(c). As far as difference in bank balance as per bank statement and as per balance sheet, the learned Departmental Representative submitted that the assessee had deliberately concealed the correct particulars by showing the bank balance at a lesser figure than the actual bank balance as per bank statement, therefore, concealment of income is proved beyond doubt. He, therefore, submitted that imposition of penalty in the particular facts and circumstances is correct.

We have considered the submissions of the parties and perused the material available on record in the light of the case laws relied upon by the learned counsel. As far as the factual aspect is concerned, there is no dispute that the assessee has not contested the additions of ` 33,60,000 and ` 7,33,303 made under section 68 of the Act as unexplained cash credit and has accepted the decision of the learned Commissioner (Appeals). Keeping in view the aforesaid factual aspect, it is to be seen whether penalty under section 271(1)(c) can be imposed on the basis of the aforesaid two additions for concealment of income by the assessee. As far as the addition of ` 33,60,000 on Shri Gurdeep Singh Birdi 6 account of unsecured loans from five different parties are concerned, it is seen from the facts on record that during the assessment proceedings, the assessee has disclosed the identity of the creditors with their postal address, however, summons issued under section 131 of the Act to the concerned creditors returned un–served by the postal authority as the parties were not traceable. When these facts were confronted to the assessee by the Assessing Officer with a request to produce the creditors along with confirmation letters, the assessee only furnished the confirmation letters without producing the creditors. However, fact remains, the loans were received through account payee cheque from the concerned creditors. As it appears, the Assessing Officer treated the credit as unexplained only because the concerned creditors were not produced before him. The learned Commissioner (Appeals), though, accepted that assessee has established the identity of the creditors but he confirmed the addition of ` 33,60,000 only for the reason that assessee could not prove the creditworthiness of the creditors to the satisfaction of the Assessing Officer. However, on a perusal of the order passed by the learned Commissioner (Appeals) in the quantum proceedings, it is found that learned Commissioner (Appeals), though, has confirmed the addition but at the same time has observed that the assessee has been able to establish the identity of the loan creditors. He has also observed that the Assessing Officer has not brought any adverse material on record to suggest that Shri Gurdeep Singh Birdi 7 account payee cheques are from fictitious persons or the amount represents assessee’s own income. It is well known principle of law that for proving a cash credit, assessee has to establish the identity of the creditor, his creditworthiness and genuineness of the transaction. In the present case, there is no dispute that identity of the creditors has been established by the assessee as recorded by the learned Commissioner (Appeals). The genuineness of the transaction is also proved to certain extent as the loans were received through account payee cheques and proper banking channel. The learned Commissioner (Appeals) has also observed that the Assessing Officer has failed to establish that the account payee cheques are from fictitious persons or represents assessee’s own money. In these circumstances, the only ingredient remains to be proved by the assessee is the creditworthiness of the creditors. In this context, it needs to be observed that before the Assessing Officer itself assessee has submitted confirmation letters from all the loan creditors. As it appears, before rejecting the loans on account of lack of creditworthiness of the creditors, no enquiry has been made by the Assessing Officer to find out whether the creditors actually had resources to advance the loan amount to the assessee. Therefore, only because the assessee did not challenge the additions of loan amounting to ` 33,60,000 in further appeal before the Tribunal that will not lead to the conclusion that assessee has concealed particulars

Insofar as the addition of ` 7,33,303, being difference in bank balance as per bank statement and as per balance sheet is concerned, from the facts recorded, it is proved that assessee has failed to properly explain the difference. When the bank statement shows the bank balance at ` 1,02,55,084, as on 31st March 2007, there is no justifiable reason why the assessee should show the bank balance of ` 95,21,781 in the balance sheet, as assessee must be very much aware of the bank balance in his own bank account. It is also evident that during the quantum proceedings as well as in course of penalty proceedings before the Departmental Authorities, assessee has failed to either reconcile the difference or justify the reasons for not doing so properly. Therefore, in our view, concealment of income to the extent of ` 7,33,303 being the difference between the bank balance as per

In the result, assessee’s appeal is partly allowed. Order pronounced in the open Court on 4th January 2016