SURENDRA NATH SINGH,,GHAZIPUR vs. ITO, WARD - 3(5), GHAZIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT ‘SMC’ BENCH, VARANASI BEFORE SHRI.VIJAY PAL RAO, JUDICIAL MEMBER Assessment Year: 2010-11 Surendra Nath Singh, v. Income Tax Officer, Tilak Nagar Colony, Mahuabagh, Ward-3(5), Ghazipur Ghazipur-233001 PAN-BPHPS5975K (Appellant) (Respondent) Appellant by: Sh. Apramay Gabhawala, CA Respondent by: Sh. A.K. Singh, Sr. D.R. Date of hearing: 05.07.2022 Date of pronouncement: 25.07.2022 O R D E R SHRI VIJAY PAL RAO, JUDICIAL MEMBER: This appeal by the assessee is directed against the order dated 07.08.2018 of CIT(A) for the assessment year 2010-11. The assessee has raised the following grounds:- “

1. Because the Order of the learned CIT(A) is erroneous in so far as it did not state point for determination, the decision thereon and the reason for decision.

2. Because the Order of learned CIT(A) is not a speaking Order and cannot be sustained being in violation of principles of natural justice.

3. Because the learned lower authorities are not justified in accepting past savings at Rs.6,00,000 only as against Rs. 8,03,900 and treating Rs.2,03,900 as unexplained / undisclosed income ignoring that the assessee had no bank account in the past and is a practicing advocate since 1976-77 and has also substantial income from agricultural land in support of which Khatauni of agricultural land at village Tanda and Bairakh were filed. The assessee had shown agricultural income at Rs.25,000 in the year under consideration which has been accepted by the A.O.

4. Because total deposit in the bank account of assessee son were 15,03,900 out of which Rs.7,00,000 were received as loan from relatives which has wrongly been treated by the learned A.O. as unexplained and also confirmed by learned CIT(A) ignoring evidence / documents filed before him.

5. Because the A.O. is grossly unjustified in stating in Para 4 of Assessment Order that the information called for u/s. 133(6) from all the six parties / relatives, who have given loan to assessee, no response were received from any one of them and in treating the loan amount of Rs. 70,000/- as unexplained and learned CIT(A) also erred in confirming the addition ignoring the facts and documents on record.

6. The observation of the learned A.O. in Para 4 of assessment Order dt.27.12.2017 is wrong and misleading that no reply was filed by any of the 6 parties, to whom notices u/s. 133(6) were issued, ignoring the vital fact that reply by Kalpnath Singh, Manish Singh and Samrath Singh admitting advance of loan to assessee were duly filed before the A.O on 27.12.2017, the date of Assessment Order. The learned CIT(A) also erred in not accepting the loan from these 3 parties relying upon the incorrect and misleading observation made by A.O. in Assessment Order - without verifying the fact on record that on 27.12.2017, the date of assessment order the replies filed in compliance to notice u/s. 133(6) by the aforesaid three parties were on assessment record the A.O.

7. Because the observation of the learned A.O. in Para 3 of the remand report that the assessee filed letter dated 17.11.2017 merely stating name of alleged lenders that too with incorrect address, is patiently not only wrong but also untrue as the notices issued under 133(6) by A.O. were duly complied with on 27.12.2017 by 3 parties and the other 3 parties alongwith aforesaid 3 parties also filed affidavit before the learned CIT(A) - on the basis of service of notice u/s. 133(6) on them, which prove that address given by assessee vide letter dt.17.11.2017 was complete and correct.

8. Because the allegation of A.O. in remand report that assessee failed to prove identity, genuineness of transaction and credit worthiness of the lenders and did not produce any evidence to prove ingredients of section 68 is wrong ignoring the document filed before the learned CIT(A) on which remand report was called for and the replies filed in compliance to notice u/s. 133(6) on 27.12.17 by three parties Kalanath, Manish, Samrath Singh before the A.O. The documents filed before learned CIT(A) are as under:- (a) Surjeet Singh - Aadhaar Card, 3 Khatauni (b) Samrath Singh - Aadhaar Card, 4 Khatauni (c) Manish Singh - Voter ID (d) Kalpnath Singh - Voter ID, 4 Khatauni (e) Yogesh Singh -Aadhaar Card, 1 Khatauni (f) Alok Singh - 1 Khatauni of father Jaiprakash 9. Because the learned CIT(A) has not adjudicated grounds of appeal as under:- “Because regarding loan the appellant has filed the list containing name of six persons their address and borrowed amount but teamed A. O. has not given reasonable opportunity to the appellant to prove his version ignored the fact and passed the order in so hurry. Because the version of learned A.O. explain in para 4 of the assessment order is totally against facts. The confirmation letter of three persons containing information as required by AO are already submitted.”

before or / on the date of hearing.”

2. The assessee is an individual and derives income from legal profession and agriculture. The Assessing Officer issued a notice under section 148 of the Income Tax Act on 30.3.2017on the basis of information received from Income Tax Officer 3(5), Lucknow, regarding the cash deposit of Rs. 15,03,900/- in the saving bank account of his son Sh. Brijesh Kumar Singh, during the year under consideration. In response to the notice issued under section 148, the assessee has filed a return 3 of income declaring total income of Rs. 1,27,500/- with agriculture income of Rs. 25,000/- for rate purpose. The assessee explained the deposit in the bank account of his son for the purpose of purchasing of apartment in Lucknow and the source of deposit is to the extent of Rs. 8,03,900/- from past savings of the assessee from his professional income as well as agricultural income. The assessee also produced the land holding evidence in support of the agricultural income. The balance amount of Rs. 7,00,000/- was explained by the assessee as loan taken from the relatives. The assessee has submitted the details of six persons with their address and amount borrowed from each one. The Assessing Officer issued notice under section 133(6) of the Income Tax Act to the relatives of the assessee from whom the assessee claimed to have taken the loan. The Assessing Officer called the information regarding the amount, mode of payment of loan, bank account statement of the year under consideration. There was no response received by the Assessing Officer from these relatives and therefore, the Assessing Officer has declined to accept the source explained by the assessee to the extent of Rs. 7,00,000/- claimed as loan taken from the relatives and made the addition of the said amount as unexplained / undisclosed income of the assessee. As regards, the assessee’s past savings of Rs. 8,03,900/-, the Assessing Officer accepted the past savings of the assessee by estimating the same at Rs. 6,00,000/- instead of Rs. 8,03,900/- and consequently the addition of Rs. 2,03,900/- was made on account of unexplained and undisclosed income. Thus, the total addition of Rs. 9,03,900/- made by the Assessing Officer to the return of income of the assessee. The assessee challenged the action of the Assessing Officer before the CIT(A) and submitted that the Assessing Officer ignored the confirmation letters of three persons containing the information as required by the Assessing Officer submitted and the confirmation letter of the rest three persons were ready to file but the order was passed by the Assessing Officer before the said information was to be submitted. Thus, the assessee contended that the Assessing Officer has not given the sufficient 4 time to the assessee or to the loan creditors to submit the information. The CIT(A) was not impressed with submissions of the assessee and confirmed the additions made by Assessing Officer.

3. Ground no. 3 is regarding the addition of Rs. 2,03,900/- on account of past savings of the assessee. The learned AR of the assessee has submitted that the assessee is in legal practice as an Advocate since 1976-77 and also having a substantial income from agricultural operations. He has pointed out that the assessee has submitted the proof of agricultural land holding and income therefrom during the assessment proceedings and the Assessing Officer accepted the agricultural income of the assessee. However, the Assessing Officer has estimated the past savings at Rs. 6,00,000/- instead of the claim of the assessee at Rs. 8,03,900/-. This estimation of the Assessing Officer is without any basis when the assessee has produced the evidence of agriculture land holding. Thus, the learned AR has submitted that having regard to the fact that the assessee is in legal profession for more than 40 years and also having the agricultural land in village Tanda and Bairakh for which the assessee has filed Khatauni / Revenue record which is accepted by the Assessing Officer the addition is not warranted. Thus, he has submitted that the addition made by the Assessing Officer by estimation of the past savings of the assessee is not justified and the same may be deleted.

“As regards addition of Rs. 2,03,900/-, no evidence could be furnished during the course of appellate proceedings and accordingly, this addition is also sustained.” Therefore, ignoring the facts and circumstances of legal practice of the assessee for such a long period as well as evidence produced for agricultural land holding, the additions sustained by the CIT(A) on the ground that no evidence could be furnished, is not justified. Accordingly, the addition made by the Assessing Officer and confirmed by the CIT(A) of Rs. 2,03,900/- is deleted.

10. I have gone through the notices issued by the Assessing Officer under section 133(6) and found that the details given by the assessee in the above said table is matching with the details of date of issuance of notice, dispatch of the notice, compliance date etc,. Thus, it is clear that the four notices were dispatched on 21st December, 2017 and the compliance date was given 26th December, 2017 and one notice was dispatched on 16th December, 2017 and another was dispatched on 14th December, 2017. The Assessing Officer has not mentioned in the assessment order that when these notices were served on the loan creditors. It is also pertinent to note that when the Assessing Officer himself has given the compliance date as on 26.12.2017, then the order passed by the Assessing Officer on the very next date shows that due to the time barring assessment, the Assessing Officer could not wait for the response of the loan creditors. Thus, it is apparent from the bare facts that the Assessing Officer has not given the sufficient and reasonable time to the loan creditors to furnish the requisite details as called for vide the notices issued under section 133(6). The assessee has even given the 10 details of two service of notices as on 1.1.2018 which is much after the assessment order was passed. All these facts and circumstances shows that the Assessing Officer was in the haste due to time barring case and the notices under section 133(6) were issued at the fag end of the limitation period of the assessment and further the Assessing Officer has dispatched the notices on 21.12.2017 which could have been received by the loan creditors even beyond the date of compliance stated in those notices. Therefore, without ascertaining the service of notices before the due date of compliance or before passing the assessment order, the assessee cannot be blamed for non receipt of response by the Assessing Officer before the assessment order was passed on 27th December, 2017. In view of this fact that the Assessing Officer has not given sufficient time to the loan creditors to furnish the requisite details and information, the assessee furnished all those details alongwith confirmation in the shape of affidavits of the loan creditors during the appeal proceedings before the CIT(A). The CIT(A) though called for a remand report from the Assessing Officer however, the Assessing Officer has objected to the admission of the additional evidence in the remand report which is reproduced by the CIT(A) at pages 5 and 6 of the impugned order as under:- 1) Appeal memo/written submission, containing brief facts and grounds of appeal, on which comments are sought, is not signed by the appellant and therefore deserve to be rejected out rightly being a non-entertainable piece of document. 2) Two additions have been made by the AO and both are based on well recorded findings of the AO and deserve to be confirmed. 3) Since the assessee had failed to prove claim of loan before the AO as all ingredients of the section 68 were not proved by him, the addition of Rs. 7 lakhs was justified. Though, it was obligatory on the part of the assessee to prove identity, genuineness of transaction and creditworthiness of the lenders, but the assessee did not produce any evidence to prove those ingredients. He simply filed a letter dated 17/1 1/2017 merely stating names of the alleged lenders and that also with incorrect address, (copy of letters are enclosed). 4) After completion of assessment proceedings and passing the order on 27/12/2017 the assessee furnished three letters/ response of notice u/s 133(6) which states nothing except statement of cash loan of the assessee. Nothing else were filed in support of their identity, creditworthiness and genuineness of transaction. These could not be treated sufficient evidence in support of claim of loan. 11 5) The assesses had submitted unfair affidavits of alleged lenders in appeal proceedings, which were not before the AO and have never been subjected to examination, and in the nature of additional evidence and for entertaining such additional evidences, condition of Rule 46A are required to be satisfied. In the present case none of the Condition of Rule 46A is satisfied and hence it is requested to reject the additional evidence. 6) Moreover, said affidavits are of no evidentiary value as the same are apparently tempered documents which is evidential from the fact of various cutting/overwriting which have not been signed/initiated by the alleged deponents but by the assessee himself and for that purpose he must be reprimand for submitting tempered documents. 7) Though, the additional evidence in contravention of provision of Rule 46A are not entertainable, still if your good self want to admit these documents, the contents of the same are required to be verified by examination of deponents. It is requested that before arriving at any conclusion the deponents may be examined u/s 131 of the I-T Act, 1961. 8) The averments made by the appellant in various grounds of appeal are false, incorrect, unsubstantiated and deserve to be rejected. Specifically the submission made in ground no. 8 is totally false that the appellant had filed any agricultural land paper and ID of lenders before the AO. No such evidence were filed before the AO. Even the claim of lenders being agriculturist was never made before the Assessing Officer, neither in the reply dated 17/11/2017 nor in the response of alleged lenders dated 27/12/2017 in compliance of notice u/s 133(6) of the I-T Act. 9) The second addition of Rs. 2,03,900/- made by the AO after assuming past saving of assessee Rs. 6 lakhs was more than reasonable and assessee deserves no relief on this addition. 10) Before parting with the matter and in addition to the submission made above, it is further submitted that if your good self arrive at the conclusion of genuineness of the cash loans, after through examination of the alleged lenders, then the assessee may be proceeded for penalty u/s 271D of the I-T Act, as he had accepted cash loan in contravention of provisions of section 269SS of the I-T Act. The condition of both, lenders and borrower, being farmer and having no income other than agriculture income is not satisfied.”

In the remand report, the Assessing Officer instead of examining the evidence furnished by the assessee or examining the loan creditors has straightway objected to the admission of the additional evidence except in para 7 of the remand report the Assessing Officer stated that if the CIT(A) wants to admit these documents, the contents of the same are required to be verified by an examination of deponents. It was requested by Assessing Officer before arriving to any conclusion, the deponent may be examined under section 133(6) of the Act. 12 Thus, the Assessing Officer alternatively desired to verify and examine the deponents before the evidence is accepted. The learned CIT(A) instead of considering of evidence or examining the loan creditors has confirmed the addition in para 5 as under:- “5. It is seen that appellant has claim to have received cash loan of Rs. 7 Lac from various persons whose confirmation in the form of affidavits filed for the first time during the course of appellate proceedings as an additional evidence and no reasons were submitted as to how the same could be admitted. Further the affidavit is in the same format with exactly the same language and handwritten notes on the affidavits at exactly the same places. Accordingly, the same cannot be relied as a valid evidence and in view of the report of the A.O. the cash loan cannot be accepted as genuine.”

“5. The most important point, on which the Tribunal relied, is that mentioned at No. 2, viz., that, according to the Tribunal, the assessee had not satisfactorily established that the shares had to be sola as the purchaser of the Jaswant Sugar Mills was not willing to purchase that mill unless the shares in the Straw Board Mills Ltd. 14 held by the family were also transferred to him at the same time. On this point, the only material available on the record is the affidavit which was filed by the assessee before the Income-tax Officer. The assessee in his affidavit, had definitely stated that the purchaser wanted to purchase both the going concerns, the Jaswant Sugar Mills and the Straw Board Mills Ltd., together and one of his conditions of purchase was that all the shares of Lala Jaswant Rai, his sons and other relatives had to be transferred to the purchaser. The Income-tax Appellate Tribunal rejected this affidavit of the assessee on the mere ground that there was no documentary evidence in corroboration in the form of any correspondence or otherwise on this point. Shri G.S. Pathak has contended rightly before us that the Tribunal was not entitled to reject the affidavit on this point on such a ground. After the assessee had filed the affidavit, he was neither cross- examined on that point, nor was he called upon to produce any documentary evidence. Consequently, the assessee was entitled to assume that the income-tax authorities were satisfied with the affidavit as sufficient proof on this point. If it was not to be accepted as sufficient proof either by the Income-tax Officer or by the Appellate Assistant Commissioner of Income-tax or by the Income-tax Appellate Tribunal, the assessee should have been called upon to produce documentary evidence, or, at least he should have been cross-examined to find out now far his assertions in the affidavit were correct. In this connection, Shri Pathak has drawn our attention to a decision of the Supreme Court of India in Parikh and Co. v. Commissioner of Income-tax, Bombay, 1956-30 ITR 181 : ((S) AIR 1956 SC 554) (A). In that case, their Lordships of the Supreme Court, in very similar circumstances, held that the rejection of an affidavit filed by an assessee was not justified unless the assessee had either been cross-examined or called upon to produce documentary evidence in support of the affidavit sworn by him. Their Lordships held: "No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits". In the instant case, these remarks fully apply, so that we have to hold that it was not open to the Tribunal to reject the plea taken by the assessee in his affidavit merely on the ground that no documentary evidence had been filed in support of that plea.”