Saidan Kapoor, New Delhi V. JCIT, New Delhi

ITA 1115/DEL/2011

• Counselvise Citation: 111520114 RSA 2011
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 15-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Keywords: Rejection of books of accounts; Business income; Income from undisclosed sources; Fair market value
• Section: 234B; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM R.P.TOLANI, JM AND SHRI K.G.BANSAL, AM ITA NO. ITA NO. ITA NO. ITA NO.1115/DEL/2011 1115/DEL/2011 1115/DEL/2011 1115/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2007 2007 2007 2007- -- -08 0808 08 SHRI SAIDAN KAPOOR, SHRI SAIDAN KAPOOR, SHRI SAIDAN KAPOOR, SHRI SAIDAN KAPOOR, J JJ J- -- -6, 1 6, 1 6, 1 6, 1 ST STST ST FLOOR, NDSE, PART FLOOR, NDSE, PART FLOOR, NDSE, PART FLOOR, NDSE, PART- -- -I, I,I, I, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : PAN : PAN : PAN : AJNPK3289R. AJNPK3289R. AJNPK3289R. AJNPK3289R. VS. VS. VS. VS. JOI JOIJOI JOINT COMMISSIONER OF NT COMMISSIONER OF NT COMMISSIONER OF NT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, RANGE RANGE RANGE RANGE- -- -32, 32, 32, 32, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KAPIL GOEL, ADVOCATE. RESPONDENT BY : MS.ANUSHA KHURANA, DR. ORDER ORDER ORDER ORDER PER PER PER PER R.P.TOLANI, JM R.P.TOLANI, JM R.P.TOLANI, JM R.P.TOLANI, JM : : : : THIS IS ASSESSEES APPEAL CHALLENGING ADDITION UND ER SECTION 68 BY FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE & IN LAW, THE LD.CIT(A) ERRED IN SUSTAINING TH E ADDITION OF RS.38,50,000 ON PURPORTED REASON THAT THE SAME REPRESENTS UNEXPLAINED CASH DEPOSIT IN THE HANDS OF APPELLANT, AND HAD INCORRECTLY AND UNJUSTIFIABLY UP HELD THE SAID ACTION OF LD.AO. 1.1 THAT THE LD.CIT(A) ERRED ON BOTH FACTS AND IN L AW IN CONFIRMING THE ACTION OF THE LD.AO OF MAKING AN ADD ITION OF RS.38,50,000 WITHOUT APPRECIATING THAT THE ADDITION IS MERELY BASED ON SUSPICION AND SUBJECTIVE OPINION OF THE LD.AO ON THE BUSINESS OF SALE & PURCHASE OF PROPERT IES. 1.2 THAT THE LD.CIT(A) ERRED ON BOTH FACTS AND IN L AW IN CONFIRMING THE ACTION OF THE LD.AO OF REJECTING THE EXPLANATION OF THE APPELLANT OF CASH DEPOSIT IN BAN K WITHOUT APPRECIATING THAT THE SAID REJECTION IS NOT SUPPORTED BY ANY COGENT REASON OR ANY MATERIAL ON R ECORD WHICH REMOTELY SUGGEST THAT THERE IS ANY INVESTMENT/RECEIPT OVER AND ABOVE AS DISCLOSED BY T HE APPELLANT IN THE RETURN OF INCOME. ITA-1115/DEL/2011 2 1.3 THAT THE LD.CIT(A) ERRED ON BOTH FACTS AND IN L AW IN CONFIRMING THE ADDITION OF RS.38,50,000 BY APPLYING THE PROVISIONS OF SECTION 68 OF THE ACT, ESPECIALLY WHE N ENTIRE AMOUNT OF CASH DEPOSITED IN THE BANK WAS OUT OF CAS H AVAILABLE IN THE BOOKS OF ACCOUNT, WHICH HAVE BEEN ACCEPTED BY THE AO. 1.4 THAT THE LD.CIT(A) ERRED ON BOTH FACTS AND IN L AW IN HOLDING THAT NON REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT BY THE LD.AO UNDER SECTION 145 OF THE ACT IS MERELY TECHNICAL BREACH AND THE SAME IS NO MANNER JEOPARDIZE THE ADDITION MADE IN SECTION 68 OF THE A CT IN THE ASSESSMENT ORDER, EVEN WHEN THE AO ACCEPTED THE BOO K RESULTS NOR POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT. 2. THAT ON THE FACTS & IN LAW, THE LD.CIT(A) GROSSL Y ERRED IN CONFIRMING THE INTEREST CHARGED BY THE LD.AO UND ER SECTION 234B AND 234C OF THE ACT. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS REGULARLY A SSESSED TO INCOME TAX WITH MAIN SOURCE OF INCOME CONSISTING OF RENTAL INCOME, INTEREST FROM BANK AND BUSINESS OF BUYING AND SELLING OF PRO PERTIES. THE ASSESSEE MAINTAINED BOOKS OF ACCOUNT AND THE PROPER TY TRANSACTIONS ARE CLAIMED TO BE DISCLOSED UNDER THE HEAD INCOME F ROM BUSINESS. THE ASSESSEE MAINTAINED DAILY CASH BOOK. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE CASH DEPOSITS MADE IN HIS HSBC BANK, BA RAKHAMBA ROAD, STANDARD CHARTERED BANK, CHANAKYA PURI AND PUNJAB N ATIONAL BANK, CHANAKYA PURI. THE ASSESSEE FILED EXPLANATION IN H IS REGARD AND GAVE THE RECONCILIATION THEREOF WHICH IS LISTED IN PAGE 2 OF THE ASSESSMENT ORDER. THE CLAIM OF THE ASSESSEE WAS THAT THE VARI OUS CASH WITHDRAWALS WERE MADE WHICH AFTER SHORT INTERVALS R ANGING FROM FEW DAYS TO A MONTH WERE DEPOSITED IN THE BANK. SIMILA RLY, THE ASSESSEE EXPLAINED THAT FOR THE PURPOSE OF ITS BUSINESS OF B UYING AND SELLING OF PROPERTIES, CASH WAS WITHDRAWN FROM THE BANK ACCOUN T. SINCE THE PROPERTIES COULD NOT BE PURCHASED, THEY WERE REDEPO SITED IN THE BANK ACCOUNT. THE ASSESSING OFFICER FURTHER OBSERVED TH AT IN MANY PROPERTY TRANSACTIONS, THERE WAS HIGH PROBABILITY OF GENERAT ION OF UNACCOUNTED ITA-1115/DEL/2011 3 CASH. THEREFORE, THE CASH WITHDRAWAL MADE BY THE A SSESSEE WAS TO BE MADE IN THE PERSPECTIVE OF SUCH GENERATION OF SUCH UNACCOUNTED CASH. ON THESE OBSERVATIONS, ASSESSEE RELIED ON VARIOUS C ASE LAWS AS LISTED IN PAGE 6 OF THE ORDER INCLUDING KALE KHAN MOHD. HA NIF VS. CIT 50 ITR 1 AND MADE THE ADDITION IN RESPECT OF CASH DEPOSITS IN THE BANKS AS UNEXPLAINED INCOME. 3. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL WHERE THE ADDITION WAS CONFIRMED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ENTIRE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ONLY ON SURMISES AND CONJECTURES. THE ASSESSEE BEING IN TH E BUSINESS OF SALE AND PURCHASE OF PROPERTIES HAS BEEN ACCEPTED. THE LEARNED COUNSEL THEN ADVERTED TO REMAND REPORT SUBMITTED BY THE ASS ESSING OFFICER TO THE CIT(A) WHICH IS AS UNDER:- THE TOTAL CASH DEPOSITS DURING THE FY 2006-07 WAS RS.60,80,000/-. AFTER CAREFULLY CONSIDERING THE SU BMISSIONS OF THE ASSESSEE, CASH DEPOSITS OF RS.22,30,000/- WE RE ACCEPTED AS EXPLAINED DEPOSITS OUT OF THE TOTAL, BE ING FROM AND HAVING CLOSE NEXUS WITH THE WITHDRAWALS OF CASH FROM THE SAME ACCOUNTS. IN RESPECT OF THE REMAINING RS.38,50,000/-, NO IMMEDIATE NEXUS BETWEEN THE CASH WITHDRAWALS AND CASH DEPOSITS WAS FOUND. MOREOVER, THERE WAS SUFFICIENT CIRCUMSTANTIAL EVIDENCE, AS DISCUSSE D IN PARA 4 TO 9 OF THE ASSESSMENT ORDER, WHICH POINTED TO ST RONG NEXUS BETWEEN THE PROPERTY TRANSACTIONS AND CASH DEPOSITS. ON THE BASIS OF OVERWHELMING CIRCUMSTANT IAL EVIDENCE, IT WOULD BECOME OBVIOUS THAT MAJORITY OF THE CASH DEPOSITS WERE OUT OF SALE-CONSIDERATION OF THE PROPERTIES SOLD BY THE ASSESSEE, AS MENTIONED IN TA BLE-2 ON PAGE 3 OF THE ASSESSMENT ORDER. FURTHER, AS DIS CUSSED IN PARA-8 & 9, THE ASSESSEE HAD SHOWN A PARTICULAR SUSPICIOUS PATTERN OF BEHAVIOUR WHILE DEPOSITING TH E CASH IN VARIOUS BANK ACCOUNTS. THIS ALSO STRONGLY SUPPO RTS THE ARGUMENT THAT THE CASH DEPOSITS OF THE ASSESSEE ARE FROM UNACCOUNTED SOURCES. AFTER ANALYZING THE ENTIRE PA TTERN OF CASH DEPOSITS AND EVALUATED THE CIRCUMSTANTIAL EVID ENCE, A ITA-1115/DEL/2011 4 REASONABLE AND JUST ADDITION OF RS.38,50,000/- WAS MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS. 3. DURING THE COURSE OF ASSESSMENT, THE PROPERTIES SOLD BY THE ASSESSEE WERE ALSO REFERRED FOR VALUATION TO THE DVO. THE REPORT OF THE DVO WHICH WAS RECEIVED ON 31.12.2009 ALSO POINTS TO CONCEALMENT AS THERE IS SUBSTANTIAL DIFFERENCE BETWEEN THE DECLARED VALUE A ND THE FAIR MARKET VALUE. THIS CLEARLY POINT TO THE FACTS THAT THE ASSESSEE HAD RECEIVED PAYMENT FROM THE SALE OF PROP ERTIES OVER AND ABOVE THE DECLARED VALUE, WHICH MUST HAVE BEEN RECEIVED IN CASH AND HENCE DEPOSITED IN THE BANK ACCOUNTS. 4. FURTHERMORE, IT MAY KINDLY BE NOTED THAT HON'BLE SUPREME COURT AND VARIOUS HIGH COURTS INCLUDING THE JURISDICTIONAL HIGH COURT OF DELHI, HAVE HELD THAT THE BURDEN TO SATISFACTORILY PROVE THE SOURCE OF CASH D EPOSITS LIES ON THE ASSESSEE. SOME OF THESE JUDGMENTS HAVE BEEN REFERRED TO BY THE AO IN HER REPORT WHICH IS ENCLOS ED HEREWITH. HON'BLE SUPREME COURT IN THE CASE OF SUM ATI DAYAL VS. CIT(SC) 214 ITR 801 HAS HELD THAT IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATUR E AND SOURCE OF A CREDIT IS NOT SATISFACTORY IN THE OPINI ON OF THE AO, THE SAME MAY BE CHARGED TO INCOME TAX AS THE IN COME OF THE ASSESSEE FOR THAT PREVIOUS YEAR. 5. THE ASSESSEE HAS ALSO NOT BROUGHT ANY FRESH EVIDENCE BEFORE YOUR HONOUR TO BOLSTER HIS CLAIM IN RESPECT OF THE CASH DEPOSITS BEING FROM EXPLAINED SOURCES. HE HAS MERELY FILED COPIES OF THE SALE DEEDS AND THE REPOR TS OF THE DVO, WHICH DO NOT SUPPORT THE ARGUMENT OF THE ASSES SEE IN VIEW OF THE DETAILED REASONS RECORDED IN THE ASSESS MENT ORDER. IN VIEW OF THE FACTS SUBMITTED ABOVE, THE A DDITION MAY KINDLY BE CONFIRMED. THE REPORT OF THE AO IS A LSO ENCLOSED HEREWITH. 5. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT NO COMMENT HAS BEEN OFFERED BY THE ASSESSING OFFICER IN RESPEC T OF RECONCILIATION OF THE ASSESSEE FOR MAKING CASH DEPOSITS IN THE BANK A CCOUNTS. THE ASSESSEE WITHDREW CASH FROM THE BANK ACCOUNTS AND S INCE THEY COULD NOT BE UTILIZED AFTER A PERIOD OF FEW DAYS OR A WEE K DEPENDING UPON CIRCUMSTANCES REDEPOSITED THE CASH IN HIS OWN ACCOU NT. THE DEPOSITS ARE NOT NEW BUT ARE REDEPOSIT OF THE CASH WITHDRAWN . THERE IS NO ITA-1115/DEL/2011 5 FINDING THAT THE ASSESSEE HAS UTILIZED THE AMOUNT W ITHDRAWN BY CASH IN ANY OTHER ACTIVITY OR PROPERTY. 6. THE SOLE REASON FOR HOLDING THAT THE CASH DEPOSI TS ARE UNEXPLAINED IS THE SUSPICION OF THE ASSESSING OFFIC ER THAT THE ASSESSEE MIGHT HAVE COLLECTED UNACCOUNTED MONEY IN THE PROPE RTY TRANSACTIONS AND THE DVOS REPORT GIVES HIGHER MARKET VALUE. 7. IT IS PLEADED THAT IT IS TRITE LAW THAT THE ADDI TION CANNOT BE MADE ON THE BASIS OF SUSPICION AND MERELY ON SURMISES IT CANNOT BE HELD THAT THE ASSESSEE MIGHT HAVE EARNED FROM PROPERTY TRANSA CTIONS. 8. IF THE ASSESSEE HAD EARNED UNDISCLOSED AMOUNT FR OM PROPERTIES, THEN THE ASSESSING OFFICER COULD HAVE MADE THE ADDI TION BASED ON SUCH OBSERVATIONS AS BUSINESS INCOME. IT CANNOT BE HELD ON ONE HAND TO BE GENERATED OUT OF PROPERTY TRANSACTIONS AND HE LD TO BE UNEXPLAINED. IT IS PLEADED THAT THERE IS NO BASIS TO SUBSTANTIATE THE OBSERVATIONS MADE BY LOWER AUTHORITIES IN THE ABSEN CE OF ANY EVIDENCE TO SUGGEST THAT THE ASSESSEE EARNED UNACCOUNTED INC OME THE CASH DEPOSITED CANNOT BE ATTRIBUTED TO THE PROPERTY TRAN SACTIONS. 9. FURTHER, THE ASSESSEE HAS DEMONSTRATED CLOSE NEX US BETWEEN THE CASH DEPOSITED AND THE ASSESSEES OWN WITHDRAWA LS WHICH HAS NOT BEEN FOUND TO BE UNTRUE AND MERELY ON SURMISES AND UNSPECIFIED CIRCUMSTANCES, RELIANCE HAS BEEN MADE ON HON'BLE SU PREME COURT JUDGMENT IN THE CASE OF SUMATI DAYAL 214 ITR 801. 10. LEARNED DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN OUR VIEW, THE ADDITION MADE BY THE LOWER AUTHORITIES IS ON THE BASIS OF ASSUMPTIONS AND SURM ISES. IF IT WAS FOUND ITA-1115/DEL/2011 6 BY THE ASSESSING OFFICER THAT THE ASSESSEE MAY HAVE EARNED UNACCOUNTED INCOME, THEN HE SHOULD HAVE MADE FURTHE R ENQUIRIES FROM PURCHASERS AND GIVE A POSITIVE FINDING ABOUT SUCH I NCOME. IN THE ABSENCE THEREOF, THE OBSERVATION OF THE LOWER AUTHO RITIES THAT THE CASE DEPOSITS ARE ATTRIBUTABLE TO INCOME GENERATED BY TH E ASSESSEE FROM SUCH PROPERTY TRANSACTIONS IS UNFOUNDED. COMING TO THE ASSESSEES RECONCILIATION, IN OUR VIEW, THE SAME HAS NOT BEEN CONTROVERTED ON THE BASIS OF ANY MATERIAL AND HAS BEEN IGNORED ON SURMI SES. THERE IS NO FINDING THAT THE CASH WITHDRAWN BY THE ASSESSEE WAS INVESTED ELSEWHERE. IN THE ABSENCE OF SUCH FINDING, THE AVA ILABILITY OF CASH WITH THE ASSESSEE REMAINS UNREFUTED. THE ASSESSEES EXP LANATION IS FOUND TO BE REASONABLE THAT IN THE PROPERTY BUSINESS, THE RE ARE TIMES TO WITHDRAW THE CASH AND IF UNUTILIZED, THE SAME WILL BE REDEPOSITED. THE PERIOD OF WITHDRAWAL AND DEPOSIT IS NOT INORDINATE TO RAISE ANY OTHER ASSUMPTION. IN VIEW THEREOF, WE ARE UNABLE TO UPHO LD THE ORDERS OF LOWER AUTHORITIES ON THIS VIEW. THE ADDITION MADE IS DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2011. SD/- SD/- ( (( (K.G.BANSAL K.G.BANSAL K.G.BANSAL K.G.BANSAL) )) ) (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI (R.P.TOLANI) )) ) ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 30.11.2011 VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR