SH. RAJAN KUMAR,LUDHIANA vs. ITO, LUDHIANA

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH ‘B’, CHANDIGARH

BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.1158/Chd/2016 (Assessment Year : 2008-09) Sh.Rajan Kumar, Vs. The Income Tax Officer, 605-B-III, Brahmpuri, Ward-III(3), Ludhiana. Ludhiana. PAN: ADDPK8274E (Appellant) (Respondent)

Appellant by : Shri Amandeep Vats Respondent by : Smt.Chanderkanta, Addl.CIT Date of hearing : 22.03.2018 Date of Pronouncement : 15.06.2018

ORDER PER ANNAPURNA GUPTA, A.M. : This appeal has been preferred by the assessee against

the order of Ld. Commissioner of Income Tax (Appeals)-1,

Ludhiana dated 24.8.2016 relating to assessment year

2008-09.

made on account of cash found deposited in the bank which

remained unexplained to the extent of Rs.4,50,000/-. The

assessee has raised following grounds with respect to the

same.:

“1. That the Learned Commissioner of Income Tax (Appeals)- I, Ludhiana has erred in sustaining the addition of Rs.4,50,000/- on account of amount deposited into bank account against the sale of machinery. That the Learned Commissioner of Income Tax (Appeals)-I, Ludhiana has rejected the plea of the assessee on ground that in his statement before the Learned Income Tax Officer, Ward- III(3), Ludhiana he had admitted that he has not sold any machinery, whereas in the bank statement of

assessee deposit of Rs.4,50,000/- has been narrated/written on account of Sale of Machinery. Therefore, addition of Rs. 4,50,000/- made by the Learner Assessing Officer and sustained by the Learned Commissioner of Income Tax (Appeals)-I, Ludhiana is illegal, unwarranted, uncalled for and may be deleted. 2. That the appellant craves to leave, to add or to amend any ground of appeal before it is finally disposed. 3. Further the assessee filed an application seeking

admission of the following additional ground:

“1. That the Id. CIT(A)-I, Ludhiana has erred in sustaining the addition of Rs.450000/- amount deposited in bank account against the sale of machinery, merely on basis of remand report submitted by the Id. assessing officer dated 21.07.2016, whereas the said remand report was never provided to the appellant and thus, the demand has been upheld without any opportunity to the assessee in respect of the remand report, wherein the Id. assessing officer has submitted incomplete and wrong facts of the case. Therefore, the addition of Rs.450000/- made by the Id. assessing officer and sustained by the Id. CIT(A)-I, Ludhiana is illegal, unwarranted, without opportunity and may be deleted.” 4. The Ld. counsel for assessee contended that since it

was a legal ground relevant to the issue in dispute, the

same needed to be admitted. We shall be dealing with the

admission of the additional ground of appeal in later part of

our order after discussing the various facts of the case and

the pleadings made by both the parties before us.

for assessee stated that all along it had been submitted to

the lower authorities that the impugned cash deposited in

the account was from the sale of machinery. The Ld.

counsel for assessee took us through the submissions made

before the Assessing Officer in this regard, reproduced at

para 6 of the order as under:

“As regards the amount of Rs.4,50,000/- deposited cash on 13-04-2007 on account of sale of stationery. It is submitted that the said machinery (Embroidery) were purchased for Rs.4,74,000/- on 08-05-2006 and 15-05-2006 for Rs.2,10,000/- and Rs.2,04,000/- respectfully and both were sold for Rs.4,50,000/- on 13-04-2007 suffering a loss of Rs.24,000/- and the amount was deposited cash in the account. Photocopy of the bank statement showing the purchase of machinery is enclosed.” 6. The Ld. counsel for assessee further stated that even

as per the narration of the entry in the bank account

statement submitted by the bank the cash deposited had

been reflected as being from the sale of machinery which

fact when confronted by the Assessing Officer to the bank

was confirmed by the bank stating that the said description

of the entry had been made on the basis of verbal request of

the assessee. The Ld. counsel for assessee drew our

attention to the findings of the Assessing Officer in this

regard at para 10 of his order:

“ 10.The explanation of the assessee with regard to deposit of cash in his bank account is discussed as under. (i)Deposit of cash of Rs.4,50,000/- on 13/4/2007 The narration of the entry dated 13.4.07 in bank account statement has been as sale of machinery. The assessee in his statement recorded on 09.08.2010 has stated on oath that he did not sell any flat or any other machine in the financial year 2007-08.The bank vide this office letter dated 24.11.10 was requested to clarify whether any document was furnished by the customer i.e. Sh.Rajan Kumar for the sale of machinery. The bank vide letter dated 16.12.10 has informed that for amount less than 5 lacs the bank request to the customer verbally for source of funds/purpose of withdrawal and whatever customer says the bank captures it in the transaction and no letter was taken for cash deposited on 13.4.07 for Rs.4,50,000/-.”

stated that it is evident that the source of the cash

deposited in the bank as being from sale of machinery had

been duly explained and substantiated also by way of

furnishing the bank statement reflecting the purchase of

the machinery on 8.5.2006 and 15.5.2006 for Rs.2,10,000/-

and Rs.2,04,000/- respectively and the sale thereof

reflected as such in the bank statement for Rs.4,50,000/-.

The Ld. counsel for assessee stated that as confirmed by

the Assessing Officer also the assessee had communicated

the source of the cash deposited in the bank on the said

date itself to the bank as being from sale of machinery on

account of which the said description was entered in the

bank statement of the assessee. The Ld. counsel for

assessee contended, therefore, that the explanation now

furnished by the assessee before the revenue authorities

cannot be said to be an after thought or a bogus

explanation since it stands corroborated by the explanation

given by the assessee to the bank at the point of time the

cash was deposited in the bank. The Ld. counsel for

assessee thereafter stated that the said explanation was

even furnished to the CIT(Appeals) which finds mention in

his order at para 2.1 also. The Ld. counsel for assessee

contended that even the copy of the sale invoice pertaining

to the sale of machinery was furnished before the lower

authorities as evidence of the said transaction. The Ld.

counsel for assessee thereafter contended that the

CIT(Appeals) had erred in rejecting the assessee’s

explanation merely on the basis of the statement recorded

of the assessee on 9.8.2010 wherein he was found to have

stated on oath that he did not sell any machinery in the

impugned assessment year. The Ld. counsel for assessee

stated that the question put to him was relating to

purchase as well as sale of machinery pertaining to only flat

machinery to which the assessee had replied as no, while

the machinery sold was a knitting and embroidery

machinery and, therefore, the statement of the assessee

could not be read against him for upholding the addition of

Rs.4,50,000/-. The Ld. counsel for assessee further stated

that the Ld.CIT(Appeals) had rejected the assessee’s

explanation by refusing to admit the additional evidence

filed by the assessee by way of sale invoice of the machinery

sold. The Ld. counsel for assessee stated that in the first

place the said invoice was not an additional evidence as the

same had been filed before the Assessing Officer also and

the assessee had not requested admission of the same

before the Ld.CIT(Appeals) as additional evidence. Our

attention was drawn to the submissions made before the

CIT(Appeals) and it was pointed out therefrom that the

assessee had only requested the admission of the cash flow

statement filed before the CIT(Appeals) as additional

evidence. The relevant submissions of the assessee

reproduced at para 2.2 of the order of the CIT(Appeals) are

as under:

“On the captioned subject we wish to submit that a written submission has been filed on record before your honor

in the appeal of above stated appellant. That a cash flow statement reflecting all the cash withdrawals from and deposits into the bank account is part of the written submissions. Regarding, it is respectfully submitted before your honor that the bank statement is already part of the assessment record. In fact, the assessment order contains addition on basis of cash transactions reflecting in this account. The details of cash transactions were already submitted during the assessment proceedings and have been reproduced in parts by the Id. Assessing Officer in the assessment order. The cash flow statement which is part of the written submissions, is in fact consolidated detail of the cash flow transactions persued during the assessment proceedings and reflecting in the bank statement. Thus, even if cash flow statement is considered as additional evidence, the same be admitted by your honor being details of facts already available on assessment record.” 8. The Ld. counsel for assessee further contended that

the Assessing Officer in his Remand Report had stated that

the additional evidences in the shape of the sale invoice

could not be accepted since enough opportunity had been

given to the assessee during assessment proceedings. The

Ld. counsel for assessee stated that the sale invoice was not

an additional evidence at all and the assessee had not

requested to admit the same also. The findings of the

Assessing Officer were therefore contended to be incorrect

and the Ld. CIT(A),it was contended, had wrongly relied

upon the same for entertaining and considering the

evidences filed by the assessee in the shape of sale invoice

of the machinery sold. The Ld. counsel for assessee also

pointed out that the Remand Report was not confronted to

the assessee also and, therefore, also the same should not

be considered for rejecting the evidence filed by the

assessee and upholding the addition made. The Ld. counsel

for assessee, therefore, contended that the assessee had

duly demonstrated the source of the cash deposited in the

bank to the extent of Rs.4,50,000/- as being on account of

cash received from sale of machinery and, therefore, the

addition made holding the said cash deposits as

unexplained was totally unwarranted.

of the CIT(Appeals) and stated that the additional evidence

filed by the assessee in the form of sale invoice of the

machinery sold had been rightly rejected since the assessee

had failed to show as to why the same had not been

submitted during assessment proceedings. Even otherwise,

the Ld. DR stated that considering the statement of the

assessee itself that it had sold no machinery during the

year and on account of the fact that the assessee had failed

to file any evidence to substantiate its claim that the cash

deposited in the bank was attributable to the sale of the

machinery, the addition on account of unexplained cash

deposits had been rightly upheld by the Ld.CIT(Appeals).

orders of authorities below and had gone through the

documents placed before us. With respect to the additional

ground raised before us, we are in agreement with the

assessee that the said ground is a legal ground challenging

the addition made on account of opportunity not being

granted to the assessee to rebut the Remand Report made

by the Assessing Officer on the submissions made by the

assessee during appellate proceedings. We, therefore, admit

the same for adjudication. Further, the Ld. counsel for

assessee has, we find, duly demonstrated before us that it

had never filed an invoice of sale of machinery as a piece of

additional evidence before the CIT(Appeals) and its request

for admission of additional evidence only pertained to cash

flow statement filed before the CIT(Appeals). The said fact is

evident from the submissions made before the CIT(Appeals)

as reproduced in the CIT(Appeals)’s order at para 2.2 and

reproduced above also by us. Therefore, the findings of the

Assessing Officer with regard to the admission of the sale

invoice as additional evidence was misplaced and incorrect.

The CIT(Appeals) in any case should have given an

opportunity to the assessee to rebut the same before relying

upon the same to refuse to admit it as additional evidence.

In view of the above, we allow the additional ground raised

by the assessee. Further we find merit in the contention

made by the assessee. We agree that the assessee had all along

claimed the said cash deposits to be from the sale of machinery so

much so that even when the cash was deposited in the bank, the

identical fact was conveyed to the bank authority also who have

noted the same in the narration made against the said cash

deposit. This fact, we find, was confirmed by the Assessing Officer

also on making enquiries with the bank authorities. Therefore,

evidently even when depositing the cash in the bank the assessee

had maintained that the same was received from sale of

machinery. We, therefore, agree with the Ld. counsel for

assessee that the said explanation is not an after thought.

Further the assessee has substantiated its explanation by

way of filing bank statement reflecting the purchase of the

said assets which was filed to the lower authorities but

which has, we find, not been controverted by the Revenue at

any stage. The assessee, therefore, proved the existence of

the machinery which was sold in the impugned year and has

therefore, substantiated its explanation to this extent.

Further copy of sale invoice which was filed to the Revenue

authorities also substantiates the explanation of the

assessee. The Ld.CIT(Appeals) and the Assessing Officer, we

hold, had erred in treating the same as additional evidence

and rejecting admission of the same for adjudicating the

issue. Reliance placed by the Revenue merely on the

submission made by the assessee we hold is not of much

relevance since the assessee has duly explained that the

question raised to which was understood to be on account

of purchase and sale of flat machinery with regard to which

the assessee had stated that it had not sold any such

machines while the sale made by the assessee related to

embroidery machines. Further considering evidences filed

by the assessee and considering explanation given by the

assessee regarding the question raised before it, we hold

that the addition cannot be made by holding the cash

deposits as unexplained. In view of the above, we hold that

the cash deposited in the bank to the extent of

Rs.4,50,000/- stands duly explained and the addition made

in this regard is, therefore, directed to be deleted.

allowed.

Order pronounced in the Open Court.

Sd/- Sd/-

(SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 15th June, 2018 *Rati* Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) 4. The CIT 5. The DR

Assistant Registrar, ITAT, Chandigarh