BALVIR SINGH SEKHON,LUDHIANA vs. ADDL. CIT, R-VII, LUDHIANA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘B’, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER ITA No.1229/Chd/2017 (Assessment Year : 2011-12) Balvir Singh Sekhon, Vs. The Addl. CIT, B-XX-1881, ST.No.5, Range VII, Maharaj Nagar, Ludhiana. Ludhiana. PAN: ADVPS6951J (Appellant) (Respondent)

Appellant by : Shri Sarabjit Garg, CA Respondent by : Smt.Meenakshi Vohra, Sr.DR Date of hearing :13.04.2018 Date of Pronouncement :10.07.2018

ORDER Per Sanjay Garg, Judicial Member :

This appeal has been preferred by the assessee against

the order of Ld. Commissioner of Income Tax (Appeals)-3,

Ludhiana (hereinafter referred to as ‘Ld.CIT (Appeals)’]

dated 22.5.2017, passed u/s 250(6 of the Income Tax Act,

1961 (in short ‘the Act’) in Appeal No.762/ROT/IT/CIT(A)-

3/LDH/2014-15 relating to assessment year 2011-12.

appeal:

“1. That the Ld. CIT(A) has erred in law and on facts of the case, in confirming the addition of Rs.35,16,000/- to the income of the assessee, on account of amounts deposited in banks, terming them as unexplained, despite the fact that out of these a sum of Rs.3.00 lacs was deposited out of loan against KVPs against which bank certificate was duly produced, Rs.10.00 lacs was deposited out of biana received against agreement ,to sell residential house against which not only

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person who gave biana was produced but copies of sale deed executed in her favour were also produced, rest of the amounts were deposited out of loans received from banks in earlier years in the names of doctors associated with the assessee on his personal guarantee and against which post dated cheques were also issued by him, entries for which were neither recorded in assessee's books at the time of receipt of loan nor at the time of repayment thereof. 2. That on the facts and the circumstances of the case and in law, learned CIT(A) erred in confirming the addition of Rs.3,09,861/- u/s 14A despite the fact that there was neither dividend income against shares nor any expenditure was incurred to earn exempt income.” 3. In ground No.1, the assessee has agitated the addition

of Rs.35,16,000/- to the income of the assessee on account

of unexplained deposits in the bank account of the

assessee.

Officer noted that the assessee had total deposits of

Rs.44,01,000/- in the Corporation Bank, Ludhiana and

Rs.12,30,000/- in Punjab National Bank, Ludhiana. On

being asked to explain, the assessee explained that there

was excessive withdrawal of Rs.11,85,000/- from Punjab

National Bank and further the assessee had got sanctioned

loans in the name of various doctors against his personal

guarantee. That these doctors had further given these loans

to the assessee to clear his debts and that the said loans

from the doctors were deposited in the Corporation Bank.

The assessee had issued post-dated cheques to clear the

loan amount to the bank out of his own account. Further,

Rs.10 lacs were deposited out of advance money (Biana)

received from one Smt.Avtar Kaur in respect of sale of

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residential house at Janta Nagar, Ludhiana. After

considering the reply of the assessee, the Assessing Officer

noticed that the assessee could not produce reliable

evidence regarding receipt of biana of Rs.10 lacs. Further,

the assessee could not produce reliable evidence to

substantiate the claim that the amounts of Rs.18,43,754/-

were received from doctors. The Assessing Officer further

observed that though an amount of Rs.8,90,000/- could be

treated as deposited out of the excess withdrawal from the

bank, however, the assessee could not explain the source of

deposit regarding two entries of Rs.2,25,000/- on 3.7.2010

and Rs.75,000/- on 7.7.2010 by way of PC/Transfer. He,

therefore, held that the assessee could not explain the

source of amount of Rs.35,16,000/- and added the same

into the income of the assessee as unexplained credits.

application under rule 46A of the Income Tax Rules and

furnished the relevant evidences, on which the

Ld.CIT(Appeals) called Remand Report of the Assessing

Officer. The Assessing Officer examined the parties.

Thereafter, he reported that though Mrs. Avtar Kaur in his

statement had admitted that she had paid Rs.10 lacs to the

assessee for purchase of house at Ludhiana and she had

also explained that the amount was paid in the the year

2010, even though the sale deed of the house had also been

executed by the assessee in her favour in 2016. However,

she could not explain the source of the payment of Rs.10

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lacs to the assessee. In respect of loan received from

doctors, the Assessing Officer reported that the statement

of the doctors were recorded, who stated that neither they

had received any loan from the bank, nor they had further

paid the same to the assessee. Even they had not made any

repayment of any loan to the bank. The Assessing Officer,

therefore, reported that the assessee had failed to prove the

source of above deposits. Relying on the report of the

Assessing Officer, the CIT(Appeals) confirmed the impugned

additions so made by the Assessing Officer.

gone through the report. The additions made by the

Assessing Officer constitute three segments, first is Rs.3

lacs (Rs.2,25,000/- + Rs.75,000/-) found deposited in the

bank account of the assessee vide entries dated 3.7.2010

and 7.7.2010 respectively. The Ld. counsel for assessee, in

this respect, has drawn our attention to the Paper Book

page No.85, which is a copy of the certificate issued by

Punjab National Bank, Ferozepur Road, Ludhiana, wherein

it has been certified that the assessee had raised two

demand loans of Rs.2,25,000/- and Rs.75,000/- on

3.7.2010 and 7.7.2010 respectively and further that these

loans are advanced against KVP in the name of assessee.

Further that these loans were credited into the account of

the assessee. A perusal of the above certificate co-

relates the amount received as loan against KVP by the

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assessee from the bank with the deposits found in the bank.

In view of this, the amount of Rs.3 lacs stood explained by

the assessee. However, the lower authorities ignored the

above evidence on the file.

received by the assessee through doctors who were

employed in his hospital. There is no denial to the fact that

the amounts in question were sanctined by the bank in the

name of respective doctors. Further that the assessee has

also issued postdated cheques for repayment of those loans.

The lower authorities has made additions on this issue on

the basis of statement of doctors that they had neither

received any loan from bank, nor had repaid the same to

the bank. Even they had not advanced any loan to the

assessee. The plea of the assessee has been that the bank

do not issue loan without verifying the antecedents of the

loanee and further without taking any guarantee or surety

of the loan amount. It has, therefore, been pleaded that the

fact of grant of loan has been proved in the names of

doctors and further the said loan amount was deposited in

the bank account of the assessee. The assessee had also

issued cheques for re-payment of the same.

the receipt of any loan from the bank as was alleged by the

assessee, however, the fact that had not been disputed

by the lower authorities that the loans in question were

disbursed by the bank in the names of the doctors and

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further that the assessee had also issued postdated cheques

for repayment. We hereby are not concerned as to whether

the said loans were got issued by the assessee in the names

of doctors by way of keeping them in dark or by way of any

connivance with the bank authorities, we are concerned

whether the deposits found in the account of the assessee

were out of unexplained income of the assessee or not. The

fact on the file is that the loans were issued in the names of

doctors, may be with or without their consent or their

knowledge, and the said amount moved into the account of

the assessee and further that the assessee has owned loan

liability and has issued cheques for repayment of the same.

Under these circumstances, the source of deposits stood

explained and it cannot be said to be the income of the

assessee as the same is the liability of the assessee and

the assessee is liable to refund the same. Hence, the said

deposits out of the loans issued in the names of the doctors

cannot be added as income of the assessee.

So far as the receipt of Rs.10 lacs as advance money

(biana) received as per the agreement to sell of house with

Mrs.Avtar Kaur, is concerned, Mrs.Avtar Kaur has

confirmed that the she has executed an agreement with the

assessee and that she had paid Rs.10 lacs to the assessee.

The assessee has also executed the Registered Sale Deed

in favour of Mrs.Avtar Kaur. The Assessing Officer

has disbelieved the aforesaid transaction only on the

ground that Mrs.Avtar Kaur could not explain the source of

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money. On the other hand, the plea of the assessee has

been that the assessee was not supposed to enquire the

purchaser of her source of money. As per the agreement,

the assessee has received the amount in question and

further has executed the sale deed in favour of the

purchaser Mrs.Avtar Kaur. Mrs.Avtar Kaur has also

explained that there was a delay in execution of sale deed

because of the reason that the house was lying

mortgaged/attached with the bank.

We find force in the submissions of the assessee in

this respect. It is not a case of loan transaction, rather, it

is a case of sale of house. The house in question has been

transferred through Registered Sale Deed. The assessee has

parted with his property for which he got an amount of

Rs.10 lacs as advance. Under these circumstances, it

cannot be said to be a case where own money of the

assessee would have routed through Mrs. Avtar Kaur. Had

it been so, there was no question of transferring the

property by way of Registered Sale Deed by the assessee to

Mrs.Avtar Kaur and why the purchaser would suffer the

expenditure of stamp duty on the registration of sale deed.

In view of this, we do not find justification on the part of

lower authorities in making the impugned additions. In view

of our findings given above, no additions are warranted on

this issue and the same are accordingly, ordered to be

deleted.

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disallowance of Rs.3,09,861 u/s 14A of the Act.

submitted that the assessee during the year had not earned

any tax exempt income. The Ld. counsel has further

submitted that the issue is now squarely covered by the

numerous decisions of the various High Courts including

that of the Jurisdictional High Court of Punjab and Haryana

in the cases of ‘CIT Faridabad Vs. Lakhani Marketing Inc.’

226 Taxman 45 (P&H) and ‘CIT Vs. Winsome Textiles’ (2009)

319 ITR 204 (P&H), of the Hon'ble Delhi High Court in the

case of ‘Cheminvest Ltd Vs. ITO’ (2015) 378 ITR 33 (Delhi)

and of the Hon'ble Gujarat High Court in the case of

‘Corrtech Energy P. Ltd. (2014) 45 Taxman.com 116’ and

further of the Hon'ble Allahabad High Court in the case of

‘CIT Vs. M/s Shivam Motors (P) Ltd’ (2014) 272 CTR (All)

277 and various other case laws. In all the above referred

to case laws, the Hon'ble High Courts have been unanimous

to hold that no disallowance is attracted u/s 14A of the Act

in case the assessee has not earned any income not forming

part of the total income.

by the above referred to decisions and the same is

Accordingly, decided in favour of the assessee.

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nature and, hence require no adjudication.

allowed.

Order pronounced in the open court on 10.07.2018.

Sd/- Sd/- (B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 10th July, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR Assistant Registrar, ITAT, Chandigarh