ISLAMUDDEEN,GHAZIABAD vs. ITO, WARD-1(3), GHAZIABAD

1. That having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in framing the impugned reassessment order us 147/144 and that too without assuming jurisdiction as per law and without complying with the mandatory conditions u/s 147 to 151 as envisaged under the Income Tax Act, 1961.

The ld. counsel of assessee submitted that the assessee does not want to press ground no. 1 & 2 thus the same are dismissed as not pressed. Ground no. 5 is general in nature. Remaining effective grounds no. 3 & 4 are being adjudicated.

The ld. counsel submitted that having regard to the facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the addition of Rs. 36,00,000/- allegedly on the ground that the cash deposits in the bank account are unexplained and that too by recording incorrect facts and findings and without observing the principles of natural justice. The ld. counsel also submitted that in any case and in any view of the matter, action of Ld. CIT (A) in confirming the addition of Rs. 36,00,000/- allegedly on the ground that assessee has failed to explain the cash deposit, received out of sale of agricultural land and cash withdrawals from own bank account is bad in law and against the facts and circumstances of the case.

Placing reliance on the order of ITAT Delhi in the case of Moongipa Investment Ltd. vs. ITO reported as [2012] 32 CCH 0201 (Delhi Trib.) submitted that since the assessee has proved the identity and creditworthiness of lender then the assessee cannot be asked to prove the source of creditors for AY 2009-10 and if the explanation about the source of deposit in the creditors account if not found to be acceptable then also the addition cannot be made in the hands of assessee. Further placing reliance on the order of ITAT Delhi Bench in the case of ACIT vs. Baldev Raj Charla & Ors. reported as [2009] 121 TTJ 366 the ld. counsel submitted that the Tribunal in para 27 held that simply because there was a time gap between the cash withdrawals and redeposit the explanation of assessee cannot be dismissed when he has successfully demonstrated that he re-deposited the amount withdrawn from the bank earlier point of time.

Replying to the above, the ld. Senior DR supported the orders of the authorities below and read the relevant para 4 of assessment order.

From assessment order I note that the Assessing Officer observed from the bank account statement of assessee in Union Bank of India that the assessee has deposited cash of Rs. 36 lakhs during FY 2008-09 and has not file any written submission/explanation regarding source of cash deposited to his saving bank account. Since the assessee did not appear and comply the directions of the Assessing Officer therefore the Assessing Officer passed order u/s. 147/143(3) of the Act, and made impugned addition u/s. 69 of the Act. From relevant part of first appellate order I note that the assessee attended the proceedings before ld. CIT(A) and filed detailed submissions which has been reproduced by the ld. CIT(A) in para 4.6 of his order and 4.8 and admitted the additional evidence for consideration and adjudication of appeal after calling remand report from the Assessing Officer and also called upon the assessee to file rejoinder which was filed vide letter dated 26.02.2018 as per para 4.14 of first appellate order.

The explanation of the assessee regarding source of Rs. 36 lakhs cash deposited his account is of two folds viz. Rs. 21 lakh received from Shri Subhash Chand on account of agreement of sale and Rs. 15 lakh were available to him out of cash withdrawals from the bank. From the copy of bank statement of assessee available at pages 14 to 16 I note that the Assessing Officer has disputed four amounts viz. Rs. 10 lakhs on 25.08.2008 twice, Rs. 11 lakh on 25.08.2008 and Rs. 5 lakh on 21.10.2008 totaling to Rs. 36 lakh. From copy of bank account statement of Shri Subhash Chand available at page 58 of assessee paper book reveals that this person withdrew Rs. 50 lakh on 25.06.2008, Rs. 30 lakh twice on 16.07.2008 and Rs. 2 lakh on 18.07.2008 and as per statement submitted by the assessee first Rs. 10 lakh deposited on 25.08.2008 was out of amounts withdrawn on 24.08.2008 and second deposit of Rs. 10 lakh on the very same date and third deposit of Rs. 11 lakh on very same date was out of cash received as an advance against sale of land. The main contention of ld. Senior DR is that Shri Subhash Chand withdrew cash in the month of July and amounts have been deposited to the bank account of assessee in the last week of August on 25.08.2008 and the time gap creates doubt regarding explanation of assessee. It is pertinent to note the assessee has filed copy of agreement to sale to Shri Subhash Chand vide dated25.08.2008 which is registered notarized and have not been disputed by the authorities below by way of any sustainable adverse findings hence the factum of agreement of sale by the assessee on 25.08.2008 is clearly discernable from the said deed.

In my humble opinion until unless it is shown by the Assessing Officer by way of positive evidence that Shri Subhash Chand use his amounts withdrawn from bank in the month of July 2008 for other purposes the time gap of about one and half month is not fatal to the explanation of assessee it is also pertinent to mention that the total withdrawals in the month of July 2008 were Rs. 62 lakhs and the assessee is only claiming to have received Rs. 21 lakh cash from this said person which were deposited to his bank account on 25.08.2008 and this explanation of assessee cannot be doubted in absence of any other adverse material or fact merely because there was a gap of one and half month between withdrawals by Shri Subhash Chand and deposited by assessee after receiving advance from said person. This conclusion also get support from the judgment of coordinate of Delhi of the case of ACIT vs. Baldev Raj (supra). Therefore I Rs. 21 lakh cash deposit.

So far as second limb of arguments regarding source of Rs. 15 lakh from the copy of bank statement of assessee shows that the assessee has withdrawn Rs. 4,50,000/- on 19.02.2008, Rs. 1 lakh on 26.02.2008, Rs 1 lakh on 25.03.2008 and Rs. 5 lakh on 21.05.2008 total Rs. 11,50,000/- and as per assessee first deposit of Rs. 10 was made out of said withdrawals and except contention of time gap between withdrawals and deposits there is no contention of ld. Senior DR challenging to this factual position. At the cost of repetition I again observe that this explanation of assessee cannot be doubted in absence of any other adverse material or fact merely because there was a gap between withdrawals made by assessee and deposits by assessee. This conclusion also get support from the judgment of coordinate of Delhi of the case of ACIT vs. Baldev Raj (supra). Therefore I hold that the assessee has successfully demonstrated source of Rs. 10 lakh cash deposit on 25.08.2008 at the very first instance. From the bank statement of assessee, I further note that the assessee deposited Rs. 5 lakh cash on 21.10.2008 and prior to that there were withdrawals of Rs. 12,45,000/- between 27.08.2008 to 20.10.2008 which is higher than the amount deposited by the assessee and I am unable to agree with the contention of ld. Senior DR that the time gap between withdrawals and deposit creates doubt and suspicion. In my humble understanding suspicion or doubts even on the strong footing cannot take character of sustainable positive inference against the assessee in absence of other positive material which could show or demonstrate that the amount withdrawn by the assessee were used for other purpose and at the time of deposit there was no cash balance in the hands of assessee out of such withdrawals and assessee used his unaccounted and undisclosed income for the purpose of cash deposit to his bank account. No such case has been made by the authorities below against the assessee. Therefor in view of foregoing, I conclude that the assessee has also successfully explained and established source of cash deposit of Rs. 15 lakh to his bank account that is Rs. 10 lakh on 25.08.2008 and Rs. 5 lakh on 21.10.2008. Accordingly, ground no. 3 & 4 of assessee are allowed.