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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
ORDER Per Dr. M. L. Meena, AM:
The appeal has been filed by the assessee against the impugned order dated 17.10.2018 passed by the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana in respect of the Assessment Year 2012-13. The assessee has raised the following grounds of appeal:
“1. That on fact and circumstances of the case learned Assessing Officer grossly erred in law in framing the assessment without assumption of valid jurisdiction which makes the assessment framed illegal, bad in law.
Dr. Harprit Singh v. DCIT 2. a) That on the facts and circumstances of the case, Ld. Assessing Officer has grossly erred in law in making addition of Rs. 23,86,720/- as cash credit u/s 68 of the Income Tax Act, 1961. Addition made u/s 68 of the Income Tax Act, 1961 is illegal and bad in law. b) That on the facts and circumstances of the case, Ld. Assessing Officer has grossly erred in law in making addition of Rs. 18,959/- as undisclosed interest income. Addition made is illegal and bad in law. c) While estimating income, no credit for withdrawals made has been given. d) Ld. A.O. has grossly erred in treating all credit entries amounting to Rs. 23,86,720/- in the bank accounts as unexplained income of the assessee. e) Learned Assessing Officer has grossly erred in law in not applying theory of telescoping & theory of peak credit.
3. (a) That on the facts and circumstances of the case, Ld. Assessing Officer has grossly erred in law in concluding that if at any stage of appellate proceedings, The Honourable Higher Judicial Authority held that the cash as deposited in the personal saving bank account of the assessee actually belong to M/s Orthonova Joint and Trauma Hospital Pvt. Ltd. then Rs. 24,05,679/- be held as dividend in the hands of the assessee and taxed as income u/s 2(22)(e) of the Income Tax Act, 1961. Conclusion drawn by the Ld. Assessing Officer is illegal and bad in law.
(b) That on the facts and circumstances of the case, learned assessing officer has grossly erred in concluding that Rs. 2405679/- is to be held as dividend in the hands of assessee on prediction basis.
4. That Ld. Assessing Officer has framed assessment by applying different possibilities and there is no specific charge against assessee. Assessment cannot be framed by making alternative additions. Assessment framed is bad in law since there should be specific charge against the assessee.
That on the facts and circumstances of the case, Ld. Assessing Officer has grossly erred in concluding that on receipt of the order of the Higher Appellate Authorities, in the event of the amount being held to be received from the company M/s Orthonova Joint and Trauma Hospital Pvt. Ltd., the assessee would be in that case liable for penalty u/s 27ID and 27 IE of the Dr. Harprit Singh v. DCIT Act. Therefore, a proposal for initiation of penalty proceedings u/s 27ID and 27IE of the Income Tax Act, 1961 in the case of the assessee would be sent to the Additional Commissioner of Income Tax, Central Range, Jalandhar in case the Higher Appellate Judicial Authorities make such decision on the nature of the money received by the assessee.
That the addition has been made in an arbitrary manner on assumptions & presumptions without affording adequate opportunity to the assessee and in violation of principles of natural justice and therefore may kindly be quashed.
7. That learned assessing officer has failed to consider various issues raised by the assessee in replies filed during the assessment proceedings which tantamount to denial of a reasonable opportunity of being heard which by itself makes the alleged assessment void ab-initio.
8. That the assessee requests for leave to add or annex any other grounds of appeal, before the appeal is heard or disposed off.”
Additional grounds of appeal:
“That on the facts & circumstances of the case, learned assessing officer has grossly erred in law in initiating proceedings u/s 147 of the Act since conditions for assumption of jurisdiction u/s 147 of the Act were lacking, in as much as, neither the reason to believe provide requisite nexus for the belief that income has escaped assessment nor there was any application of mind before assumption of jurisdiction. It may kindly be held that notice u/s 148 issued by the AO was illegal and invalid and consequent assessment framed u/s 143(3) r.w.s. 147 of the Act be held illegal and bad in law. Additional ground involving legal issues can be raised, keeping in view Judgment of the Apex court in the case of National Thermal Power Co Ltd. vs. Commissioner of Income Tax 229 ITR 383. Under the circumstances, it is most humbly requested that additional ground of appeal be admitted & oblige.”
Dr. Harprit Singh v. DCIT 2. The appellant assessee has raised multiple grounds with an additional ground as above which are interlinked to each other on the issue of validity of reopening of assessment and confirmation of addition of Rs. 24,05,679/- in appellants saving bank account and therefore, these are heard together and decided simultaneously for the sake of brevity.
In view Judgment of the Hon’ble Apex court in the case of ‘National Thermal Power Co Ltd. vs. Commissioner of Income Tax’, (Supra) the additional ground being legal ground challenging validity of notice issued u/s 148 of the Act, by the AO and consequent assessment framed u/s 143(3) r.w.s. 147 of the Act to be held illegal and bad in law, is admitted to be decided on merits in the following paras.
Briefly the facts as per record are that the assessee is a doctor and director of M/s Orthonova Joint and Trauma Hospital Pvt. Ltd. During the year under consideration, assessee deposited some of the cash available with the company M/s Orthonova Joint and Trauma Hospital Pvt. Ltd. in his saving bank account recorded in books of accounts of the company. The case of the assessee was reopened u/s 147 of the Income Tax Act 1961 and the AO being not satisfied with the reply of the appellant, disposed off the objections raised and confirmed the addition u/s 69 of the Act.
5. The Ld. CIT(A) has confirmed the finding of the AO by observing as under:
Dr. Harprit Singh v. DCIT “…………..There is merit in the observation of the AO that when the company M/s. Orthonova Joint & Trauma Hospital Pvt. Ltd. was having a current account and cash was being deposited in the current account of the Company (M/s. Orthonova Joint & Trauma Hospital Pvt. Ltd.) then the cash deposited in an account opened in the name of the assessee has to be treated as belonging to the assessee only. The cash deposited in the bank account is to be assessed as per the Income Tax Act and it cannot be adjudicated on the advice of the Astrologer. It is a cardinal principle that the income should be assessed in the right hand, in the relevant assessment year and under the relevant head of income. The income belonging to one person has to be assessed in his hands only and cannot be declared in the hands of the other persons. As per law, the bank account can be opened in the name of the company and the cash belonging to the company is to be deposited in the bank account in the name of the company. If, the cash out of the cash book of the company is deposited in the bank account opened in any individual's name then it has to be treated as loan or advance which will attract the provisions of section 269SS and further since the assessee is shareholder with substantial interest in the company then provisions of section 2(2)(e) should also be attracted in this case. The AO elaborately discussed the facts and legal position relating to the case and the same have been rebutted by the assessee during the appellate proceedings. Hence, the action of the AO is upheld and the various grounds of appeals are dismissed.”
6. The ld. Counsel submitted that on the facts and in law, the assessing officer has grossly erred in initiating proceedings u/s 147 of the Act, since conditions for assumption of jurisdiction u/s 147 of the Act were lacking, in as much as, neither the reason to believe had any requisite nexus for the belief that income has escaped assessment nor there was any application of mind by the AO for assumption of valid jurisdiction. He argued that as per reasons recorded being mentioned in para 2 on page 2 of the assessment order, it is abundantly clear that proceedings u/s 147 have been initiated on the basis of assessment framed in respect of the Assessment Year. 2011-12. Since, addition made in A.Y. 2011-12 has been deleted by coordinate ITAT Amritsar Bench, in ITA No. 195/Asr/2018
Dr. Harprit Singh v. DCIT vide order dated 19.12.2019 as such, no addition is warranted in this year, and accordingly, the Ld. AR prayed that notice u/s 148 issued by the AO was illegal and invalid and consequent assessment framed u/s 143(3) r.w.s. 147 of the Act be held illegal and bad in law.
Per contra, the Ld. DR supported the impugned order.
We have heard both the sides, perused the material on record and carefully gone through the written submission and the impugned order. It is admitted fact on record that the assessee has deposited cash of Rs. 24,05,679/- in its saving bank account on advice of an astrologer out of the funds of the company wherein he was one of the directors. The AO’s case is that why the cash of the company was being deposited in both the current account of the company and this new account in the name of the appellant simultaneously. The ld. DR argued that in case the transaction was being undertaken on astrological advice; all the cash should have been deposited in appellant bank account only.
The Ld. AR argued that the AO was wrong on the facts and circumstances of the case, and in law that if at any stage of appellate proceedings, the Honourable Higher Judicial Authority held that the cash as deposited in the personal saving bank account of the assessee actually belong to M/s Orthonova Joint and Trauma Hospital Pvt. Ltd., then Rs. 24,05,679/- ought to be held as dividend in the hands of the assessee and taxed as income u/s 2(22)(e) of the Income Tax Act, 1961. Such conclusion drawn by the Ld. AO and endorsed by the Ld. CIT(A) is illegal and bad in Dr. Harprit Singh v. DCIT law being held on prediction without certainty to be as dividend in the hands of assessee, leaving on higher judicial forums, if decides so.
In the appellant assessee’s own case, on the identical facts, the Coordinate Bench Amritsar has deleted the addition of Rs. 33,71,720/- was being made on account of cash deposits in SB A/c and Rs. 12,528/- being interest.in respect of immediately preceding Assessment Year 2011-12 by observing vide para 10, of the decision in as under:
“In the light of ratio laid down in above decision we hold that the CIT (A) was not justified in sustaining the addition, when the AO was not certain under which head the addition should be made. This means to the AO was somewhat agreed that cash deposits in said bank account are out of cash in hand available with the said company. However, the AO did accept that the bank opened pertained to M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. On careful consideration of facts, we are of the view that cash deposits in bank account are outof cash in hand belonging to M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. hence, source of cash deposits are duly explained and same pertained to the company as the source of cash deposits are from cash in hand of the impugned company. in such circumstances, we are of the view that the AO was not justified in making addition without bringing on record to establish that there was no cash in hand balance was available with said company. Therefore, having not done so theAO cannot add the sum belonging to company. Therefore, we hold that the addition made by the AO and sustained by the CIT (A) by invoking section 69 is not tenable in law, hence, same is deleted. Accordingly, appeal of the assessee is allowed.”
From the above, it is evident that source of the cash deposit was not 11. disputed by the authorities below as the amount of money pertains to M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. and hence, source of cash deposits is duly explained in hand of the impugned company. As per the law, the amount of the money deposited in the appellant’s bank account would be liable to be assessed as dividend income under section 2(22)(e)
Dr. Harprit Singh v. DCIT of the Income Tax Act, 1961. In our view, conclusion drawn by the Ld. AO and endorsed by the Ld. CIT(A) is illegal and bad in law in assessing the amounts of disputed deposits in the appellants bank account out of the funds of the company as income from undisclosed sources and Taxing under section 69 of the act as against dividend income under section 2(22)(e) the appellant being director of the company. Accordingly, we hold that while recording reasons for reopening of the assessment, the AO has not applied his mind to the specific reasons by way of establishing clear Nexus between the amount of the cash deposits and source of such deposits thereof to have prima facie belief that particular income has escaped assessment, for invoking specific provisions of the act. Thus, the reasons recorded by the AO in the said to be not valid reasons for formation of prima’ facie belief of the AO that particular income had escaped assessment is the appellant assessee.
In the above view, we hold that that notice issued u/s 148 of the act by the AO was illegal and consequent assessment framed u/s 143(3) r.w.s. 147 of the Act held to be bad in law, accordingly.
It is pertinent to mention that the AO had agreed that cash deposits in said bank account are out of cash in hand available with the said company. However, the AO did accept that cash was deposited partly in the appellant account, as he was director of the company, M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd. After carefully considering the facts, we are of the view that cash deposits in bank account are out of cash in hand belonging to M/s. Orthonovo Joint & Trauma Hospital Pvt. Ltd., hence, source of cash deposits stands explained and same pertained to the Dr. Harprit Singh v. DCIT company as the source of cash deposits are from cash in hand of the impugned company. Under such circumstances, we are of the view that the AO was not justified in making addition without bringing on record corroborative evidence to establish that there was no cash in hand available with the said company. Therefore, having not done such an exercise, the AO cannot add the sum in the hands of the appellants which were belonging to company.
Therefore, we hold that the addition made by the AO and sustained by the CIT (A) by invoking section 69 is not sustainable in law, and as such, it is deleted.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 11.08.2022.