BHAGWAN SINGH POSWAL, JAIPUR V. INCOME TAX OFFICE, WARD 1(4), JAIPUR

ITA 266/JPR/2020

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9433 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BHAGWAN SINGH POSWAL SELF
• Keywords: Salary income; Peak credit; Source of fund; Additional evidence; Set aside
• Section: 271(1)(c); 144; 80C; 234B; 143(1); 143(2); 43; 13; 153

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ ITA. No. 266/JP/2020 fu/kZkj.k o"kZ@Assessment Years : 2011-12 Bhagwan Singh Poswal 1 Mahaveer Nagar-A, Muhana Road, Opp. V.T. Road, Mansarover, Jaipur. cuke Vs. ITO, Ward-1(4), Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AIPPP2375N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Bhagwan Singh Poswal (Self) jktLo dh vksj ls@ Revenue by : Ms. Runi pal (Addl.CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 17/08/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 31/10/2022 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M. This appeal of the assessee is directed against the order dated 17.01.2020 of learned Commissioner of Income Tax (Appeals)-1, Jaipur [hereinafter referred to as “ld.CIT(A)”] for the assessment year 2011-12, which in turn arises from the order passed by the Income Tax Officer Ward- 1(4), Jaipur passed under Section 144 of the Income tax Act, 1961 (in short 'the Act') dated 19.02.2014. 2. The assessee has raised the following grounds:- ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 2 “1.The ld. CIT(A) has erred in upholding the addition of Rs. 1,73,78,350/- u/s 68. That on the facts and in the circumstances of the case, the said addition is wrong, uncalled for and, hence requests to be deleted. 2. That Ld. CIT(A) has erred in confirming the addition of Rs. 98,000/- u/s 80C. 3. That Ld. CIT(A) erred in issuing direction to modify interest charged u/s 234A, 234B and 234C. That on the fact and in the circumstances of the case, the appellant is not liable for these interest, the same may be very kindly be deleted. 4. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.” 3. Brief facts of the case are that the assessee is earning income from salary, House property and other sources during the under consideration. The return of income for A.Y. 2011-12, declaring total income of Rs. 6,68,040/- was filed on 02.03.2012 and the same was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny through CASS and accordingly notice u/s 143(2) was issued on 11.09.2012. The Assessing Officer has made an addition of Rs. 1,73,78,350/- on account of cash deposited in the bank account of the assessee and the Assessing Officer has also disallowed a sum of Rs. 98,000/- u/s 80C of the Income Tax Act. 4. The AO arrived the findings that the assessee has claimed deduction 80C of Rs. 98,000/- while during the assessment proceedings assessee has not filed the proof of Rs. 98,000/-. Hence, deduction u/s 80C of Rs. 98,000/- ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 3 claimed by the assessee is hereby disallowed and added back to the total income of the assessee. Since the assessee has concealed the income and furnished inaccurate particulars of income penalty proceedings u/s 271(1)(c) are initiated. With these remarks the income of the assessee is computed as under:- Total income shown by the assessee as per Return Rs. 6,68,040/- Add: Addition of undisclosed cash deposit (as discussed above.) Rs. 1,73,78,350/- Add: Addition of u/s 80C (as discussed above) Rs. 98,000/- Total 1,81,44,390/- Assessed at Rs. 1,81,44,390/-. Tax and interest u/s 234A, 234B and 234C is payable as per ITNS 150 which is being appended and also form part of the order. Demand notices u/s 156 & all other necessary forms are issued. Penalty notices u/s 271(1)(c) and 271(1)(b) issued. 5. In first appeal the CIT(A) has confirmed the action of the AO by observing as under:- “(vi) I have duly considered the submission of the appellant, assessment order, remand report and the material placed on record. The appellant has itself stated that he is earning income from salary and house property. The appellant filed copy of bank account and cash flow statement as additional evidences. The AO examined the same in the remand proceedings and found that no explanation regarding cash deposited in the bank account is ascertainable. The appellant has remained non-compliant during the assessment proceeding as well as during remand proceedings. The onus lines on the appellant to examine ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 4 the source of cash deposited in the bank account. The appellant is earning income from salary and filing return of income of Rs. 6,68,040/- , which cannot explain the source of such huge cash deposit. The appellant has himself admitted that no records are maintained regarding bank account etc. The details filed by the appellant failed to explain the course of cash deposit as examined by the AO during the remand proceedings. In view of the above facts, it is held that the source of cash deposited in the bank account amounting to Rs. 1,73,78,350/- remained unexplained. Therefore, the addition made by the AO is upheld. 3.2 Ground of appeal No. 2:2 That the ld. AO has grossly erred in law and on the facts in disallowing Rs. 98,000/- u/s 80C of the Income-tax Act which as claimed towards education lines paid by the assessee. 3.2.1 Determination: The appellant claimed the deduction u/s 80C of the Act amounting to Rs. 98,000/-. The AO disallowed the above claim in absence of any proof produced during the assessment proceedings. During the appellate proceedings, no specific submission has been made regarding the above disallowance. Therefore, the disallowance made by the AO is upheld. 3.2 Ground of Appeal No. 3: That the ld. AO has grossly erred in charging surcharge, education cess, interest u/s 234A, 234B and 234C of the Income Tax Act and in creating a demand of Rs. 7804980/-. 3.2.1 Determination: The charging of interest 234A, 234B and 234C of the Act is mandatory and consequential in nature. The AO is directed to recomputed the same while giving appeal effect to this order. 4. In the result, the appeal is dismissed.” 6. Aggrieved by the ld. CIT(A) order, the assessee is in appeal before the Tribunal. Before us, the assessee has reiterated his submissions, which were not ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 5 taken on record by the ld. CIT(A). The ld. AR for the assessee submitted detailed written submissions which are as under:- “1. As per AIR information the assessee deposited Rs. 1,73,78,350/- in various banks as appearing in Ld. AO order page No. 2. 2. In compliance of notice of the Ld. AO the assessee requested to provide the copy of bank statement with the Ld. AO so that the assessee may submit reply kindly see Id. AO page no. 2 as under:- 3. The Ld. AO refused to provide and advice to the assessee that take it from bank kindly see Ld. AO order page no. 3 just before point no. 7. 4. Since the assessee was not having these details the order was passes u/s 144 with the addition of Rs. 1,73,78,350/- as undisclosed cash deposit. 5. The assessee filed an application under Rule 46A on dated 03.05.2016 as appearing in Ld. CIT Appeal order page no. 3 point 3.1.1 to page no. 8. The assessee furnished as under:- 5.1. Kindly see Ld. CIT Appeal order page no. 4 point no. 2 wherein the assessee submits that due to financial crises the bank account of the assessee was seized and the assessee could not get bank account from the bank and this was the reason to request to the Ld. AO to provide the copy of bank statement. Without any reason the Ld. AO choose to not to provide the copy of the bank statement available with the Ld. AO. Therefore the Ld. CIT Appeal was requested to allow additional evidences under Rule 46A of the income tax rule,1962. 5.2. Kindly see Ld. CIT Appeal order page no. 4 point no. 1 wherein the assessee furnished during the CIT appeal proceeding with the request under Rule 46A the cash book page no. 47 to 54, opy of bank ledger in the books of the ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 6 assessee page no. 55 to 65, statement of cash deposited page no. 66 to 67 and various other details and information. 6. Again the assessee filed submission on 17.08.2017 kindly see Ld. CIT appeal order page no. 8 with the request to allow application Rule 46A. The submission is from page no. 8 to 13. 7. The assessee again requested on 14.11.2018 kindly see Ld. CIT appeal order page No. 13 to 18 with the request to allow application Rule 46A. The submission is from page no. 8 to 13. 8. Kindly see ld CIT Appeal order page no. 20 point no. (iv) wherein the ld. CIT appeal stated that the ld. AO submitted remand report vide letter no. 429 dated 28.08.2019. The scanned content of the remand report is appearing as under:- 9. Kindly see PB-2 page no. 8 wherein the remand report is appearing. The assessee submits as under:- 9.1 Kindly see heading of remand report wherein the assessment year 2010-11 is appearing whereas the case of the assessee is AY 2011-12. 9.2. As regards to non appearing of the assessee in compliance of notice dated 23.7.2019 the assessee submitted to the Ld. CIT Appeal on 3.12.2019 that the assessee was in Jail. The assessee don't have any staff Your honour no reasonable opportunity has been provided to the assessee. Only single notice was issued no further opportunity was given. The notice was served to whom was not known to the assessee. (Kindly see PB 5 page no. 1-2 point no. 1). Therefore the assessee requested to send back for verification / Request to make further inquiry as your honour may deem fit or he may direct the assessing authority to make an inquiry and report the result thereof to your honour under section 250(4) of the Income Tax Acts, 1961. (Kindly see PB 6 para 1st wherein remand report is appearing). The Ld. AO has committed gross illegality causing injustice to the assessee in as much as the Ld. AO has not followed the principles of natural justice, according to which, the assessee should have been provided sufficient opportunity to establish genuineness of the ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 7 documents. Your honour rule 46A application was submitted on 03.05.2016 kindly see CIT Appeal order page no. 4 and remand report was issued by the Ld. AO 28.08.2019 kindly see paper book 2 page no. 8. The assessee requested to resend for remand on 03.12.2019. CIT appeal order was passed on dated 17.01.2020 during the intermediatary period the assessee was never asked for clarification of source of fund for deposit of cash into bank. Whereas the assessee already submitted the complete source of fund on 03.05.2016. 9.3. Kindly see the Ld. CIT Appeal order page no. 20 point no. 3 wherein the assessee submitted that the assessee furnished following additional evidence. a. Details of cash deposit by submitting cash book. b. Copies of bank account statements. The Ld. AO also confirmed the assessee submitted cash book, Bank Book and bank statement. (Kindly see PB 6 para 2nd wherein remand report is appearing). 9.4. No speaking adverse inference has been made on material available on record. The Ld. AO was having these crucial evidences and stated that source and clarification has not been produced and further stated that the assessee is only salaried employee and why the cash of Rs. 1,73,78,357/- can be deposited in bank and further stated that no clarification of source of cash deposit was produced. 9.5. Your honour the assessee produced complete cash book showing cash withdrawal and also income earned declared in ITR. There is no finding that the cash book is incorrect. No adverse inference has been drawn on cash book, Bank Book and bank statement submitted alongwith application under rule 46A. Your honor can verify that as per cash flow statement there is no undisclosed income and the source of deposit of cash of Rs.1,73,78,350/-.Your honour there is no adverse inference against the cash flow statement. 9.6. Your honor, kind attention is invited to the decision held in SIND MEDICAL STORES vs. COMMISSIONER OF INCOME TAX by the Hon'ble HIGH COURT OF RAJASTHAN, DB Income Tax ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 8 Reference No.24/1992 on dated Nov 12, 2014 (2014) 90 CCH 0497 Raj HC and (2015) 117 DTR (Raj) 0497 wherein it was held that as under:- "12. This court in the case of Commissioner of Income Tax Vs. Thryamal Balchand (supra), after relying on several judgments, also upheld the finding about peak credit theory. This Court in CIT Vs. Ishwardas Mutha (2004) 270 ITR 597 (Raj.) also accepted the contention to take into account, the peak credit. When any amount is paid, later withdrawn from the books, would be available for recycling and rotation, unless otherwise established as invested elsewhere by the Revenue. We hold the assessee was entitled to the benefit of peak credit which ought to have been allowed instead of making separate addition of entire amount. However, we may observe that the Assessing Officer has to come to a definite finding that the amount withdrawn was used by the assessee in any other expenditure or investment. If the Assessing Officer comes to a finding that withdrawn amount was used or spent by the assessee for any other investment or expenditure than the benefit of peak of such credit, in such circumstances, may not be available". 9.7. Your honour, in our case there is no finding that withdrawn amount was used or spent by the assessee for any other investment or expenditure hence the benefit of peak of such credit is available for recycling and rotation. The AR further relied the decision held in COMMISSIONER OF INCOME TAX vs. ISHWARDASS MUTHAHIGH COURT OF RAJASTHAN IT Ref. Nos. 1 & 43 of 1998Apr 17, 2002 (2002) 70 CCH 0300 Raj HC (2004) 186 CTR 0759, (2004) 270 ITR 0597, (2004) 141 TAXMAN 055. Hence, your honor is kindly requested to allow the relief or set aside the order to provide the adequate opportunity to the assessee.” 7. On the other hand, ld. DR supported the order of the lower authorities. 8. We have heard both the parties and perused the materials available on record. We observed that the substantial justice should be made to the parties in ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 9 accordance with law. Before us written submission dated 20.04.2022 was filed by the Ld AR for the assesee , the assessee requested to set aside the order and to provide the adequate opportunity to the assessee. It is noted that the assessee has requested to allow the additional evidence under Rule 46A of the Income Tax Rules, 1962 in connection with ground Nos. 1 to 3 before the ld. CIT(A) on 03.05.2016 and The ld. CIT(A) has considered the submission and the application filed for accepting the additional evidences and remanded back to the Ld AO .During the remand proceedings the Ld AO has observed that non appeared on behalf of assesee for the compliance of notice dated 23.07.2019 and again the Ld CIT (A) again failed to consider that the assesee has produced all documents pertaining to cash deposits Banks, Book and bank statement as additional evidence. 9. We are constrained for the acceptance of the documents as additional evidence de hors rule 46A of the Rules, because the appellant is not entitled to produce oral or documentary evidence afresh before the appellate authority, as a matter of right. Under special and certain circumstances only, as mentioned, in clauses (a), (b ), (c) and (d) of rule 46A(1) additional evidence can be adduced. Rule 46A itself contains the principles of natural justice. That being so, sub-rule (4) of rule 46A does not permit to accept any additional evidence in contravention of the provisions of sub-rules (2) and (3) of rule 46A. The ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 10 appellate authority is not permitted to act whimsically while exercising the jurisdiction under rule 46A of the Rules. 10. In this regard, We have gone through the decisions of various High Courts in the cases : 1. [2006] 153 TAXMAN 31 (GUJ. ) High Court Of Gujarat N.B. Surti Family Trust Vs. Commissioner Of Income-Tax. 2. [2007] 162 Taxman 257 (Gau.) High Court Of Gauhati Commissioner Of Income-Tax Vs.Ranjit Kumar Choudhury. 3. [2018] 89 Taxmann.Com 126 (Allahabad) High Court Of Allahabad Dr. Prabhu Dayal Yadav Vs. Commissioner Of Income Tax. We noted from the following judgments, that considering the fact that these additional evidences which are now sought to be admitted would be in the interest of proper adjudication of the issues at hand, the same are hereby admitted and the matter is set-aside to the file of AO to examine the same and decide the matter as per law after providing reasonable opportunity to the assessee and therefore we deem it fit to remand it back to the file of AO. 11 Accordingly, it is a fit case for remand for proper adjudication of the case by following the established procedure laid down. Under rules 46A(1), (2) and (3) of the Rules which we order accordingly. The impugned order passed by the Lower authority is hereby quashed and set aside. The appeal is remanded to the AO, who shall make an endeavour to dispose of the entire appeal in accordance with law as indicated above as expeditiously as possible, where additional evidence as it requires to justify the claim of assessee which needs to be verified and examined by the Revenue authorities afresh after allowing proper opportunity to the assessee. ITA No. 266/JP/2020 Bhagwan Singh Poswal vs. ITO 11 In the result, the appeals of the assessee is allowed for statistical purposes . Order pronounced in the open Court on 31 /10/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 31/10/2022. *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Bhagwan Singh Poswal, Jaipur. 2. izR;FkhZ@ The Respondent- ITO, Ward-1(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 266/JP/2020} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar