RAMKRUSHNA ZILBAJI THAKRE ,NAGPUR vs. INCOME TAX OFFICER , WRAD -4(4), NAGPUR

The cash deposited in both joint account amounting Rs.43,50,000/- is treated as income from other source & taxed in the hands of assessee U/s.68 is totally bad in law & the assessment order liable to be quashed by your honour on this issue.

The Assessing Officer erred in charging the interest U/s.234B of the Income Tax Act, 1961. 3. Assessee craves to leaves urge additional ground at the time of hearing of the case, if necessary.

Brief facts of the case are that there was information that there is a cash deposit of Rs.43.50 lakhs in the appellant’s bank account and the return was not filed for AY 2010-11. The Assessing Officer issued notice u/s.148, dtd. 03.03.2014 and served on the assessee. The assessee filed his return of income on 05.03.2014 declaring total income at Rs.31,730/-. Subsequently, the AO framed the assessment u/s.143(3) of the Act assessing the total income of the assessee at Rs.44,03,460/-, however, the AO made addition of Rs.43,50,000/- under the head income from other sources and Rs.53,459/- as income from interest.

Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A) and the CIT(A) affirmed the view taken by the AO in making the addition as stated above.

Ld. AR before us submitted the summary of the facts of the case for our perusal, which reads as under: In the matter of reassessment of income under provisions . of Section 147· read with S.143(2) of Ramkrishna Zimbaji Thakre for A.Y.2010-11 and in the matter of addition to income on account of cash deposits in bank accounts under section 68 which are jointly held along with spouse of the assessee and in the matter of rejecting the explanation that said deposits are made by other co holder of the bank account out of sale proceeds of the agriculture land and in the matter of arbitrarily rejecting the evidences submitted by assessee being unregistered agreement to sale holding it to be not admissible as evidence and accepting the claim of non signatory to the said document as regards its genuineness without due cross examination and ignoring the affidavits sworn under oath of two witnesses to the said agreement.

That agreement to sale is non registered document and legal heir has raised questions over signature of his father.

That, once the sale deed IS executed, facts mentioned therein take importance and previous document, if any, become null and void. In view of aforesaid reasons , addition to the income was made holding the cash receipt in bank account as unexplained money and treating it as income from other sources.

It is submitted that action of the AO to treat cash deposits under the head Income from.jhe other sources is totally illegal as assessee has explained the deposits being by spouse and the source thereof from the sale of agriculture land by the spouse of the petitioner and thus is squarely out of per view of section 56 in view of provisions of Subsection 1 of Section 56. This being agricultural land which is deemed capital asset, the proceeds there of would be taxable in hands of seller of land who is spouse of the petitioner. It requires to be understood that the said account being held jointly, both holder are jointly responsible for any transaction therein unless denied by anyone. In instant case, the other co holder has not denied the claim of the petitioner that deposits made in the account are made by her out of proceeds of sale of agricultural land received in cash.

It also requires to be seen that assessee has discharged his onus as the facts speak for themselves and hence it is not necessary to prove anything by positive material however he has produced evidence to support his contention. In such situation, it· was incumbent on the AO to drop proceedings against petitioner and, if felt, to initiate proceedings against the other co-holder. Nothing has been done so. Thus the action of AO is arbitrary and illegal and hence requires to be quashed.

It is submitted that AO's summary dismissal of evidence about market price in the same area is not correct as it has bearing on the resultant addition .The attempt was to show that any sane person will not execute such sale which is 10 percent of market price. The impossible requires to be rejected on the basis of common sense and probability. The documents in the form of Govt rates for stamp duty shows that market rate in relevant area is Rs.65,00,000 per hector. Thus value of said land which is roughly 2.5 hector comes to 1 crore 52 lakhs. No sane person will sale such valued land for mere sum of Rs.11 lakhs only. It also requires to be noted that spouse of assessee In such scenario is taxable under provisions of Section SOC and petitioner voluntarily provided said information in respect of other co holder of the account who has deposited money in the said bank account.

It is submitted that reliance Of AO to reject claim of the petitioner on the statement of Shri. Rajendra Bhotmare is not correct in view of the fact that he is neither signatory or witness to both documents that agreement of sale and also of registered sale deed. It requires to be seen that the agreement to sale is signed in presence of 2 witnesses. It requires to be appreciated that affidavit of both witnesses were submitted before the CIT appeal who has not taken any cognizance thereof in the order. Further the said statement speaks of some agreement to sale dt. 07-07-2007. However, though same was provided to the petitioner , petitioner is not aware about it. In such situation to utilize such document is against the principles of natural justice . It is submitted that to rely the statement of person who is not privy to documents when executed, is illegal and action based on such reliance is worthy of dismissal. It is submitted that AO is not expert to reject the duly executed documents on basis of alleged non matching of signature or the claim of someone that signatures appears to be fabricated.

It is submitted that a Taxing Authority cannot bring in his own conjectural opinion in a specialized field such as hand writing, or graphology, where the report of a specialist is of immense importance and determinative of the authenticity of the handwriting. As both the Authorities below having concurrently not sought such a report and are influenced by the non supported claim by the legal heir of the purchaser, said conclusion is not legally correct and hence order based on such conclusions requires to be quashed. (ABCAUSCaseLawCitation:ABCAUS 2532 (2018) 09 ITAT.)

It is submitted that in the appeal before the Hon'ble CIT(Appeal), Nagpur assessee submitted following documents which were accepted as additional evidence. i. Affidavit of Gajanan Choudhary ,witness to the agreement to sale dt.09-01-2009 Of and ii. Affidavit of Chandrashekhar Thakre, witness to the agreement to sale dt.09-01-2009 Of 15. However CIT appeal rejected the appeal of the assessee on following grounds.;

That burden of establishing the execution of the impugned agreement and its content was on the petitioner and he failed to discharge onus.

That unregistered document raises doubt about it's authenticity and does not qualify as corroborating evidence.

That appellant failed to provide legally acceptable and cogent explanation along with conclusive evidences which supports his claim.

Thus appellate authority held that cash deposit is correctly taxed us 68 of the Act. However while doing so the CIT (A) accepted the contention of the petitioner that he is agriculturist, and other than that there are no sources of income while confirming the action of AO to tax it as income from other sources under S.68 of the Act . 17. . A perusal of appellate order suggests that he is influenced by the claim of the Shri Rajendra Bhotmare that signature on the documents is fake. It appears to have clouded the appellate authority. However it is pertinent to note that the Shri. Rajendra Bhotmare ; though legal heir of the person who has executed the agreements; he is neither witness nor signatory to said documents.

Further petitioner submitted affidavit of both witnesses to the agreement to sale to prove the contents there of AO in his remand report remained silent about this. He has not examined the witnesses on cross examination. They being submitted under the oath requires to be accepted unless proved otherwise. These affidavit categorically affirms the execution of agreement and content thereof. No reason is adduced as regards why they are not cogent evidence to corroborate the evidence submitted by the petitioner. It is settled law that affidavit cannot be disregarded without effectively discrediting the same. PI refer Mehta Parekh Vs CIT, Bombay (30 ITR181.SC) & Indore Malwa Ltd Vs State of MP (60 ITR 41 (SC). It is settled law that averments of a duly sworn in affidavit are to be accepted as correct unless the same are rebutted by evidence.

Further nor AO or the CIT appeal is expert to decide about authenticity of signature of signatory to the document. Relying on claim of third party that it appears to br bogus, the quasijudicial authorities can not hold the evidence as not legally valid or unreliable or not corroborating the submission of the petitioner. In light of aforesaid, an expert opinion of the Handwriting and Finger Print Expert is submitted herewith which shows that 'writer of the comparative· signatures has signed the questioned signature'.

Whether the unregistered document is valid evidence in Income Tax proceedings, the answer is unquestionably in favor of the petitioner. The relied position of law as claimed by the appellate authority absolutely does nor relate to the income Tax proceedings. Such unregistered documents are deemed to be proof as regards the event and content thereof and its admissibility is evident from provisions of Search and seizure in the Act. Hence to summarily reject such evidence as not reliable only on ground as unregistered is not correct.

Section 49 of the Registration Act, 1908 reads as under:

Effect of non-registration of documents required to be registered.-No document required by section 17(1) or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall- • (a) affect any immovable property comprised therein, or • (b) confer any power to adopt, or • (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered: 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter 11 of the Specific Relief Act, 1877 (3 of 1877) or as evidence of any collateral transaction

Section 49 of the Registration Act expressly states admissibility of unregistered documents in evidence for collateral purposes. The word 'collateral' signifies something beyond or parallel. According to Law Lexicon it means "that which is by the side, and not the direct line; that which is additional to or beyond a thing" (Am it Khanna. Vs Suchi Khanna, 2008-10 ADJ 426; 2009-75 AllLR 34; 2009-1 AWC 929).

The Supreme Court observed in Sri Venkoba Rao Pawar v. Sri S. Chandrashekar, AIR 2008 SCW 4829, that the collateral purpose / transaction must be independent of, or divisible from the transaction which requires registration. In Yellapu Uma Maheswari v. Buddha Jagadheeswararao, (2015) 16 SCC 787, the Apex Court held that in the suit for declaration of title, an unregistered document can be relied upon for collateral purposes i.e. to prove his possession, payment of sale consideration and nature of possession; but not for primary purpose i.e. sale between the plaintiff and defendant or its terms.

The Apex Court in K.B. Saha and Sons Private Limited, 2008 AIR SCW 4829, has laid down the principle in respect of the collateral purpose. • "

From the principles laid down in the various decisions of this Court and the High Courts, as referred to here-in-above, it is evident that :-

It is settled legal position that an unregistered document does not become void just for want of registration. It is a valid document and admissible as collateral evidence. Section 68 of Evidence Act says that a document, which should be registered under the law, should not be used as evidence until at least one attesting witness has given the testimony but the proviso says that any non- testamentary document would not require the attesting witness unless the document worthiness is not questioned. The admission of the content of a document is best evidence that an opposite party can rely upon, unless it is successfully withdrawn or proved erroneous. (Narayan Bhawantrao Gosavi Vs. Gopal Vinayak Gosavi & oth. AIR, 1960, SC Page 100) Narshingdas Surajmal Properties (P.) Ltd. v. CIT [1981] 127 ITR 221, Gauhati High Court. In this case, according to the registered lease executed in 1955, the ground rent was Rs. 500 per annum. In 1961 this agreement was modified by an unregistered agreement raising the ground rent to Rs. 12,000 per annum. The authorities refused to deduct the higher amount of rent, on the ground that the subsequent agreement was an unregistered one and, therefore inadmissible in evidence. ITR 128 (Bombay) and Jamnadas Medhavji & Co Vs ITO (1986. 162 ITR 331 Born). It is respectably submitted that it has been held by the High Court of Bombay that the practice and the policy established one High Court must ordinarily accept the view taken by another High Court on the interpretation of the Section of statue which is an all India statue .

It is submitted that appellate authority also failed to take into account decision of Cochin Bench Of ITAT in the case of ITO Vs.Abraham In appeal No 30/ co eh/ 20 17.Appellate order passed without taking into the consideration the decisions cited by the appellant is arbitrary and illegal and requires to be quashed.

It is further submitted that the assessment for the AY 2012-13 were opened in the case of assessee for similar reasons that the deposit of cash in the saving account. Therein considering explanation given by the assessee about the source of deposit and source thereof, assessing officer accepted the returned income of the assessee. Hence in view of Principles of res judicata; it also requires to be applied to the instant year.

Further, Ld AO submitted to our attention the gist of the Assessee’s submission, the same are extracted here below: GIST OF ASSESSEE'S SUBMISSION IN RESPECT OF PROVISIONS UNDER SECTION 680F THE ACT The above named assessee most respectfully submits as under:

That the assessee is a agriculturist as stated earlier & having income from agricultural, which is not taxable. Apart from agricultural income the assessee having saving bank interest income which is below taxable limit. The assessee having no other source of income nor any source of ' income is brought on record by the department. This fact that assessee is agriculturist has been accepted by Learned Commissioner of Income Tax' [Appeals)- 1 Nagpur (para No. 5 of Appeal order dated 21.05.2018) which is reproduced as hereunder: "1 have carefully considered the submissions of the AO, Assessment order and remand report. The facts of the case is that the appellant is an agriculturist having income from agricultural activities, which is not taxable. Apart from agricultural income, the appellant had income from other sources i. e. saving bank interest. The appellant having no other source of income" by department.

That the assessee has taken following grounds No. 1 which relevant with respect to addition made by the Assessing Officer before Learned The Commissioner of Income Tax (Appeals)-l, Nagpur "The cash deposited in both joint account amounting Rs.43,50,000/- is treated as income from other source & taxed in the hands ,of assessee is totally bad in law & the assessment order liable to be quashed by your honour on this issue." On this ground the learned Commissioner of Income Tax (Appeals)- l, Nagpur held that the said cash deposit to the extent of Rs. 43,50,000/- is considered as un explained income of the appellant which has been correctly taxed xx] s. 68 of The Income Tax Act 1961. 6. From above order of Learned Commissioner of Income TAX (Appeals)-l Nagpur it is crystal clear that the addition was confirmed u/s. 68 of the Income Tax Act 1961. In this respect it is submitted that the assessee has not maintained any books of accounts and addition is confirmed by Learned Commissioner of Income Tax (Appeals)-l, Nagpur on the basis of amount deposited in joint saving bank account of assessee and his spouse.

As per provision of section 68, addition of amount is to be made if any credit in the books of account of the assessee, remains un- explained. In instant case addition is made on the basis of entries in bank passbook. It is brought to your kind notice that Bank statement is not books of account of the assessee as held in case of CIT Vs Bhaichand H Gandhi 141 ITR 67 (Bom). In case of Ms. Mayawati Vs DCIT 19 SOT 460 (Delhi), it was held that the passbook of bank cannot be treated as books of accounts. Again the Lucknow Bench in case of Kamal Kumar Mishra Vs. ITA 143 ITD 686 held that maintenance of books of assessee is a condition precedent for making addition u/ s 68 and, therefore, provisions of sec. 68 could not be invoked on the basis of deposits made in the bank account of assessee. Hence, the credit appearing in assessee' pass book/bank statement relevant to a particular previous year, where the assessee does not maintain books of accounts, would not attract provision of section 68.In this context reference can be made to apex court decision in the case of Baladin Ran Vs Cit 71 ITR 427 (SC).

That the assessee places further reliance on the judgement in the case of Smt . Manshi Mahendra Pitkar Vs. ITO 1(2), Thane (2016) 73 taxmann.com 68 (Mumbai Tr ib. ) wherein it was held as under: - "I have carefully considered the rival submissions. In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of sect ion 68 of the Act. The legal point raised by the assessee is to the effect that the bank Pass book is not an account book maintained by the assessee so as to fall within the ambit of sect ion 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation Where any sum is found credited in the books of an assessee , The Hon'ble Bombay High Court in the case of Shri Bhaichand Gandhi (supra) has approved the proposition that a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of sect ion 68 of the Act. Factually speaking, in the present case, assessee is not maintaining any books of account and sect ion 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of sect ion 68 of the Act. Therefore, on this account itself the impugned addition deserves to be deleted. I hold. so." The same proposition has been followed by Jaipur Tribunal 111 the case of Dr. Vishan Swaroop Gupta Vs. Income Tax Officer- Ward 7(3) ITA No. 13/JP/2020.Further reliance is placed on ratio in the decision of CIT Vs Noorjahan 237 ITR 570 where it has been held that even if source of investment is not found to be satisfactory explained no addition can be made in the peculiar facts of the case, Considering principles of merger and considering that order of CIT (A) is accepted by the department ,it is humbly prayed as hereunder Prayer: It is humbly prayed that kindly allow the appeal of the assessee in view of above submission and facts & oblige.

Ld DR on the contrary relied on the orders of revenue authorities and also submitted following judgments in support of contentions of the revenue:

We have considered the rival submissions, carefully perused facts of the case and gone through the judgments relied upon by the assessee and revenue. In the circumstances of the present case the addition u/s 68 was made by the Ld AO and confirmed by the Ld CIT(A) based on the cash deposit in the bank, which are evident from entries in the bank statement / pass book of the assessee. In this regard the citation ITA 13/JP/2020 in the case of Dr Vishan Swaroop Gupta Vs. IncomeTax Mishra (2013) 33 taxmann.com 610(Lucknow) etc are discussed, considered and observed that:

After having gone through the facts and circumstances, we observe that credit in the ‘bank account’ of an assessee cannot be construed as a credit in the ‘books’ of the assessee, for the very reason that the bank account cannot be held to be the ‘books’ of the assessee. Though, it remains as a matter of fact that the ‘bank account’ of an assessee is the account of the assessee with the the bank, but the same in no way can be held to be the ‘books’ of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision of Section 68, and are of the considered view that an addition made in respect of a cash deposit in the bank account of an assessee, in the absence of the same found credited in the ‘books’ of the assessee maintained for the previous year, cannot be brought to tax by invoking the provisions of Section 68 of the Act. In this respect, we draw strength from the decision of the Hon’ble Bombay High Court in the case of CIT Vs Bhaichand N Gandhi (1983) 141 ITR 67 (Bombay) wherein the High Court has held as under:- "As the Tribunal has pointed out, it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent's account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived." We find that the aforesaid view of the Hon'ble Bombay High Court had thereafter been followed by a 'SMC' bench of the ITAT, Mumbai in the case of Smt. Manshi Mahendra Pitkar Vs. ITO 1(2), Thane (2016) 73 taxmann.com 68 (Mumbai Trib.) wherein it was held as under: - "I have carefully considered the rival submissions. In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of section 68 of the Act. The legal point raised by the assessee is to the effect that the bank Pass book is not an account book maintained by the assessee so as to fall within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation Where any sum is found credited in the books of an assessee……....., The Hon'ble Bombay High Court in the case of Shri Bhaichand Gandhi (supra) has approved the proposition that a bank Pass Book maintained by the bank cannot be 68 of the Act. Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 of the Act. Therefore, on this account itself the impugned addition deserves to be deleted. I hold so." We further find that a similar view had also been arrived at in a 'third member' decision of the Tribunal in the case of Smt. Madhu Raitani Vs. ACIT (2011) 10

We find that as stands gathered from the records, the addition aggregating to Rs. 4.03 lacs sustained by the ld. CIT(A) is in respect of the cash deposits in the bank accounts of the assessee, and not in any 'books' of the assessee for the year under consideration. We thus are of the considered view that in the backdrop of the aforesaid settled position of law, the addition made by the A.O in respect of the cash deposits of Rs.7,13,000/- in the bank accounts of the assessee by invoking Section 68 has to fail, for the very reason that as per the judgment of the Hon'ble Bombay ITR 67 (Bombay), a bank pass book or bank statement cannot be considered to be a 'book' maintained by the assessee for any previous year for the purpose of Section 68 of the Act. Therefore, on this count itself the impugned addition made and sustained deserves to be deleted and we direct to delete the same. Since we have quashed the addition on the ground that no such addition could have been validly made U/s 68 of the Act, therefore, we refrain ourselves to decide the other grounds wherein the assessee has assailed on merits the additions sustained by the ld. CIT(A)

In this context, the case laws relied upon by the revenue were also considered. It is observed that in the case of N. Tarika Property Invest. (P.) Ltd (supra) Apex court had justified disallowance under section 68 as the assessee has adduced false evidence by forging and fabricating in the bank statement, which is not fact of the present case hence the ratio decided does not applies in the instant case. Other case laws of Hon’ble assessee. Therefore contentions of the revenue are not acceptable.

On the basis of material available on record, it is an admitted fact that the addition u/s 68 of the IT Act 1961 made by the Ld AO and sustained by Ld CIT(A) was on the basis of deposit entries in the bank statement of the assessee is in contradiction with the settled position of the law as decided in the case of CIT Vs. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bom) wherein it is observed that a bank pass book or bank statement cannot be considered to be a ‘book’ maintained by the assessee for section 68 of the IT Act. Thus, respectfully following the above legal preposition, we are of the considered view that the addition made by Ld AO u/s 68 of the Act is liable to be deleted and order of Ld CIT(A) is set aside. Since, the addition u/s 68 is deleted on the legal ground; no further adjudication on merits of the case is necessary.

In the result, appeal of the assessee is allowed. Order pronounced under Rule 34(4) of ITAT Rules, 1963 on 15/07/2022. (SANDEEP GOSAIN) (ARUN KHODPIA) न्याययक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER नागपुर Nagpur; ददनाांक Dated 15/07/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रयिलऱपप अग्रेपिि/Copy of the Order forwarded to : अऩीलाथी / The Appellant-

ITAT, Nagpur गार्ा पाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्यावऩत प्रनत //// (