Shri Meet Pal Singh, Ludhiana V. Pr. C.I.T. (Central), Ludhiana

ITA 425/CHANDI/2022

AI Insights

The case revolves around an appeal by Shri Meet Pal Singh against the order of the PCIT, Central, Ludhiana, which had set aside the AO's assessment order for the assessment year 2013-14. The PCIT's order was based on the grounds that the AO had not conducted a proper and complete enquiry regarding the source of funds for a land purchase and the genuineness of unsecured loans taken by the assessee. The Tribunal examined the detailed submissions and evidence provided by both the assessee and the PCIT, including bank statements, cash flow statements, and the legal provisions under the Income Tax Act. The Tribunal found that the AO had indeed conducted a thorough enquiry and had sufficient material to substantiate the assessment made, thus setting aside the PCIT's order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127754 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 10-05-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Revision of order; Opportunity of being heard; Difference of opinion; Corroborative evidences; Competent authority; Assessment record; Set aside
• Section: 68; 263; 44AD; 143(3); 142(1); 153A; 143(2)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी $व%म 'संह यादव, लेखा सद,य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 425/Chd/ 2022 Assessment Year : 2013-14 Shri Meet Pal Singh H.No. 2253, Urban Estate, Dugri Ludhiana The Pr. CIT, Central, Ludhiana PAN NO: APNPS4960F Appellant Respondent ! " Assessee by : Shri Sudhir Sehgal, Advocate # ! " Revenue by : Shri Sarabjeet Singh, CIT, DR $ % ! & Date of Hearing : 16/02/2023 '()* ! & Date of Pronouncement : 04/05/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the assessee against the order of the Ld. PCIT(Central), Ludhiana dt. 29/03/2022 pertaining to A.Y. 2013-14 passed under section 263 of the Act wherein the assessee has taken the following grounds of appeal: 1. That the Ld. PCIT(Central), Ludhiana has erred in assuming the jurisdiction to issue notice u/s 263 of the Income Tax Act, 1961 and thereby cancelling the assessment as already framed by the AO vide order dated 29.03.2022 to the file of the Assessing Officer, with the direction to frame the assessment, afresh in accordance with law, after granting reasonable opportunity to the Assessee. 2. That the Ld. PCIT(Central), Ludhiana has failed to appreciate that on all the issues, which have been taken in show cause notice u/s 263, the Assessing Officer has raised specific queries, during the course of assessment proceedings and which were replied with numerous details and thus the Assessing Officer had duly applied his mind, to all such details, copies of accounts and other voluminous details furnished to the Assessing Officer and had taken a conscious decision in 2 respect of all the information and framed the assessment on the basis of the details furnished by the Assessee. 3. That the Ld. PCIT(Central), Ludhiana had not considered the detailed reply of the Assessee properly, furnished during the course of proceedings u/s 263 and had mislead himself, while giving a finding on various issues, particularly ignoring the fact that the payment for the purchase of the land has been paid by taking unsecured loan amounting to Rs. 1,25,00,000/- from Sh. Iqbal Singh and Rs.25,00,000/- in cash in regards to which the detailed reply has already been submitted to the PCIT and thus has erred in holding that the assessment as framed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue. 4. Notwithstanding, the above said grounds of appeal, the Ld. PCIT(Central), Ludhiana has wrongly passed the order u/s 263 even after all the evidences along with desired documents have been provided by the Assessee before the Ld. PCIT, Ludhiana. 5. That the appellant carves leave to add, amend, alter any of the above grounds during the appellate proceedings have been considered. 2. Briefly the facts of the case are that the assessee originally filed his return of income on 31/03/2014 declaring total income of Rs. 7,18,630/-. Subsequently the search and seizure action were conducted at the official and residential premises of Surinder Bindra Group and the case of the assessee was centralized under section 127 and notice under section 153A was issued on 31/07/2018. In response to the said notice, the assessee filed his income declaring total income of Rs. 6,29,120/- and thereafter, the notice under section 143(2) and 142(1) alongwith questionnaire were issued and after taking into consideration the information and documentation furnished by the assessee, the reassessment was completed under section 153A r.w.s 143(3) vide order dt. 27/12/2019 at an assessed income of Rs. 65,45,748/- by making an addition of Rs. 59,16,628/- on account of unexplained cash credit found in the books of accounts maintained by the assessee. 3. Against the said order, the assessee moved in appeal before the Ld. CIT(A) and during the pendency of the said appeal, the assessee opted for Direct Tax Vivad Se Vishwas Scheme and requested for withdrawal of the 3 appeal after paying the due taxes as determined by the appropriate authority. Thereafter, the taxes were paid and the appeal so filed by the assessee was withdrawn and Form 5 was issued by the Competent Authority. 4. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and a show cause dt. 16/08/2021 was issued to the assesee as to why the assessment order passed under section 153A r.w.s 143(3) should not be set aside as the same is apparently erroneous in so far as prejudicial to the interest of the Revenue. 4.1 In the show cause notice, it has been stated by the Ld. Pr. CIT that the assessee alongwith Shri Parminder Singh, entered into an agreement to purchase a land measuring 7433.32 Sq. Yards situated at Village Benhiwal, G.T. Road, Amritsar and paid Rs. 3,00,00,000/- in advance to M/s K.G. Infrastructure (P) Ltd and the assessee in his statement recorded on oath on 03/11/2017 has stated that out of the said advance, the assessee’s share was Rs. 1.50 Crores and which has been paid by way of cheque of Rs. 1.25 Crores and the remaining amount of Rs. 25,00,000/- has been paid in cash. 4.2 It has been further stated by the Ld. Pr. CIT that regarding the payment of Rs. 1.25 Crores, the assessee during the assessment proceedings has submitted that this amount was taken by way of unsecured loan from Shri Iqbal Singh and on perusal of the bank account statement of Shri Iqbal Singh maintained with Punjab National Bank, it reveals that the amount of Rs. 2.00 Crores was credited in the bank account of Shri Iqbal Singh on 18/02/2013 and on the same date, an amount of Rs. 1.25 Crores was transferred to the bank account of the assessee maintained with Bank of Maharashtra. 4.3 It has been further stated by the Ld. Pr. CIT that with regard to the genuineness and credit worthiness of Shri Iqbal Singh for giving unsecured loan of Rs. 1.25 Crores to the assessee, the assessee has only submitted PAN and Bank 4 Account Statement of Shri Iqbal Singh and no Income Tax Return has been submitted by the assessee. Further, no inquiry / verification has been conducted by the AO with regard to the creditworthiness of Shri Iqbal Singh and genuineness of the transaction. Besides, source of cash payment of Rs. 25,00,000/- made by the assessee was also not examined / verified by the AO. 4.4 It has been further stated by the Ld. Pr. CIT that on perusal of the seized document no. 19 & 20 of Annexure A found during the course of search, it reveals that the sale agreement was made between the parties on 14/01/2013 and the amount of Rs. 1.25 Crores has been credited in the assessee’s account on 18/02/2013 and on the next date, the same has been transferred to the account of M/s K.G. Infrastructure Private Limited through RTGS and therefore the transaction pertains to F.Y. 2012-13 relevant to A.Y. 2013-14. 4.5 It has been further stated by the Ld. Pr. CIT that the assessee was in receipt of various unsecured loans and advances during the year under consideration for which no inquiry / verification with respect to the source of the same have been made by the AO during the course of assessment proceedings. 5. In response to the show cause, the assessee filed his submissions which were taking into consideration by the Ld. Pr. CIT however the same were not found acceptable. 5.1 Firstly, as regard the contention of the assessee that the Ld. Pr. CIT, Ludhiana has issued Form No. 5 under Vivad Se Vishwas Scheme, it has been stated by the Ld. Pr. CIT that the same is of no consequences as far as the present proceeding under section 263 are concerned as the said Form 5 relates to the settling of tax demand pursuant to the assessment made passed earlier. 5.2 Further, the submissions of the assessee that the matter relating to the payment of Rs. 25,00,000/- in cash was considered by the Ld. CIT(A) in 5 proceedings for A.Y. 2014-15 was also not found acceptable by the ld PCIT holding that the Ld. CIT(A) was seized of the matter pertaining to the A.Y. 2014- 15 and the year under consideration pertaining to A.Y. 2013-14and there is no findings of the Ld. CIT(A) on merits as far as the impugned assessment year is concerned and therefore the order of the Ld. CIT(A) for A.Y. 2014-15 will have no impact on the present proceedings under section 263 of the Act. 5.3 Thereafter, the Ld. Pr. CIT has stated that the issue under consideration is whether the AO has made the relevant enquiry which is required in the given circumstances and has taken the decision based on material evidence and facts available on the record. Thereafter, the Ld. Pr. CIT has referred to the order sheet entry dt. 13/12/2019 wherein the specific query have been raised to the assessee regarding receipt of Rs. 1.25 Crores from Shri Iqbal Singh and cash payment of Rs. 25,00,000/- and thereafter the Ld. Pr. CIT has also examined the reply of the assessee dt. 16/12/2019 and taking the same into consideration has recorded the following findings which are stated at para 5.5 and 5.6 of the impugned order which read as under: “5.5 In so far as issue regarding unsecured loan from Sh. Iqbal Singh Rs.1,25,00,000/- is concerned, it is clear that AO asked for confirmation of Sh. Iqbal Singh and copy of Income tax Return of Iqbal Singh from the assessee. These details and explanation was called for vide order sheet entry dated 13.12.2019. From a perusal of the reply of the assessee dated 16.12.2019 as above point 2 & 4), it is clear that assessee or his AR never submitted copy of the ITR or confirmation from Sh. Iqbal Singh. Further during the 263 proceedings, nothing has been submitted by the assessee. The issue to be decided is whether the part explanation furnished by the assessee can be treated as proper enquiry where assessee has proved all the ingredients of section 68 i.e. identity of the creditor, creditworthiness of the creditor and the genuineness of the transaction. In point No.2 & 4 of reply dated 16.12.2019, assessee has submitted copy of the bank statement of Sh. Iqbal Singh and the PAN number. It is a fact that AO specifically asked for copy of Income Tax Return and confirmation from Sh. Iqbal Singh which were never submitted. In the opinion of the undersigned, proper and complete enquiry has not been conducted and the AO erroneously accepted the version of the assessee without relevant document bring on record. In this factual background, it is established that AO failed to conduct the relevant enquiry and bring on record required evidences. It is also clear that assessee is not correct in claiming that all the documents and details called for by the AO were duly submitted. Therefore, the assessment order dated 27.12.2019 passed by the AO is 6 rendered erroneous and prejudicial to the interest of the revenue. It is clear that assessee was able to furnish the documents which established identity of the creditor and the funds were transferred though banking channel. The details filed by the assessee were not sufficient to established other ingredients of section 68 i.e. creditworthiness of the creditor and genuineness of the transaction. In the absence of relevant documents i.e. copy of the return of income filed by the creditor Sh. Iqbal Singh and his confirmation reasonable doubt is raised with regard to creditworthiness of the creditor and genuineness of the transaction. This inference of non fulfillment of conditions u/s 68 of the Act gets further strengthened by the fact that immediately before the entry of transfer of Rs.1,25,00,000/-, there was a entry of Rs.2 Crores in the bank account of Sh. Iqbal Singh. The AO has not verified the genuineness and creditworthiness of Sh. Iqbal Singh after raising query on the said issue. This required further enquiry which AO failed to make. It may further be mentioned for clarity that AO's reference of Rs.1.25 crores by cheque in para 2.4 of the assessment order does not help the assessee either as the AO was to work out cash transaction details. Therefore, in the aforesaid background assessment order dated 27.12.2019 passed by the AO is held to be erroneous as well as prejudicial to the interest of the revenue. Needless to say that there are many Courts ruling that section 68 requires satisfaction of three conditions cumulatively. Therefore, the decision of the AO accepting assessee's version is not in accordance with the law, rendering the assessment erroneous as well as prejudicial to the interest of revenue. The assessment on this issue is set aside with the direction to the AO to decide the issue afresh after giving sufficient opportunity of being heard. 5.6 As regards, the issue of cash payment of Rs.25,00,000/- raised in the show cause notice u/s 263, the reply of the assessee is not acceptable. The cash/funds flow statements has been perused. The statement shows the funds flow on a very broad basis, which does not have day to day cash flow. In the absence of day to day cash flow, it would be difficult to hold that the cash payment of Rs.25,00,000/- is duly accounted for in the books of accounts. The reply of the assessee dated 16.12.2019 has been gone through which is found to be rather casual. It has already been discussed above that decision of the Ld.CIT(A) for A.Y.2014-15 holing that the transaction pertain to A.Y.2013-14 and deleting the addition in A.Y.2014-15 cannot be of any help to the assessee. Therefore, the decision of the AO not considering payment of Rs.25,00,000/- in the relevant assessment year 2013-14 renders the assessment erroneous as well as prejudicial to the interest of revenue. The assessment on this issue is also set aside with the direction to the AO to decide the issue afresh after giving sufficient opportunity of being heard.” 5.4 And in light of the aforesaid findings, the assessment order was set aside to pass the same afresh after granting sufficient opportunity to the assessee. Against the said findings and directions of the Ld. Pr. CIT, the assessee is in appeal before us. 7 6. During the course of hearing the Ld. AR submitted that during the assessment proceedings, the AO issued various questionnaires to the assessee and in response to the same, the assessee filed various detailed replies alongwith relevant documents. Subsequently, the assessment was framed by the AO after due verification of the facts. It was submitted that the AO was aware of the transaction of Rs. 1.50 Crores entered into by the assessee with M/s K.G. Infrastructure Private Limited and had asked the assessee to file his detailed reply vide questionnaire issued under section 142(1) dt. 12/11/2019. 6.1 In response, the assessee duly explained vide his reply dt. 16/12/2019 that during the relevant year, the assessee alongwith Shri Iqbal Singh had entered into an agreement dt. 14/01/2013 with M/s K.G. Infrastructure Private Limited for purchase of land measuring 7433.32 Sq. Yards situated at Village Benhiwal G.T. Road, Amritsar and the assessee had paid an advance of Rs. 1.50 Crores for his half share in the said property. 6.2 In the said reply, the assessee has duly explained that out of Rs. 1.50 Crores, Rs. 1.25 Crores has been received from Shri Iqbal Singh and Rs. 25,00,000/- has been paid in cash out of assessee’s regular business transactions. It was submitted that to substantiate the claim with respect to Rs. 1.25 Crores, the assessee submitted copy of the bank statement of Shri Iqbal singh which proves that the lender had sufficient funds and credit worthiness of the lender as on the date of the transfer to the assessee was proved. The assessee also submitted the PAN of Shri Iqbal Singh to prove the identity of the lender. For the cash paid of Rs. 25,00,000/-, the assessee duly submitted copy of the date wise cash book as maintained by the assessee for the period 01/04/2012 to 31/03/2013 and on perusal thereof, it is evident that the assessee had sufficient funds in hand which were earned by him in the normal course of his business. 8 6.3 It was further submitted that the assessee also submitted copy of the account of Shri Iqbal Singh in the books of the assessee and in this way, the assessee has submitted all the documents explaining the source of the funds and in case the AO had no doubt with respect to the genuineness of the transaction, he would have selected the case of Shri Iqbal singh for scrutiny and necessary details in form of PAN number of Shri Igbal Singh was duly submitted. It was submitted that Shri Igbal Singh was an agriculturist who needn’t file his tax return as receipts from agriculture produce are not taxable and in any case, the assessee was not privy to his personal tax return and it was practically not possible to obtain his tax return. It was accordingly submitted that the AO considered the explanation of the assessee and has not made any addition on this issue which reflects that the AO was satisfied with the explanation as given by the assessee and therefore the matter does not call for initiation of revision proceedings under section 263 of the Act. 6.4 Without prejudice to the above, it was submitted that a sum of Rs. 1,25,00,000/- was advanced by Sh.Iqbal Singh through banking channel on 18.02.2013 to Sh. Meet Pal Singh and which is evidenced by the copy of Bank Account of Sh. Iqbal Singh with Punjab National Bank, Village Mondiala Khurd, P.O. Bija, which was furnished to the Assessing Officer during the course of assessment proceedings by way of reply, dated 16.12.2019, placed in the Paper Book at page 30 and in para 2, it has been explained to the Assessing Officer and the Bank account of Bank of Maharashtra of Sh. Meet Pal Singh furnished as per page 46 of Paper book, wherein, it has been clearly mentioned that the amount was received from Sh. Iqbal Singh and the said entry is there at page 46, which correspond to page 50 of the Paper Book, which is account of Sh. Iqbal Singh as stated above. In fact, on the same date i.e. on 18.02.2013, there is credit of Rs. 2 crores in the account of Sh. Iqbal Singh but that amount has come from the Auto Sweep Account as mentioned at page 50 of the Paper 9 Book, which is bank account of Sh. Iqbal Singh and not that the amount was received from any other source and rather, it can be stated that Sh. Iqbal Singh had sufficient bank balance in his account, which was lying in Auto Sweep Account. 6.5 It was submitted that Sh. Iqbal Singh is an agriculturist having land in Village Mondiala and the land was acquired by the Railways vide notification, dated 12.01.2011 for Eastern Dedicated Freight Corridor, Distt. Ludhiana in State of Punjab and further, in the said notification, there is land owned by Sh. Iqbal Singh, which has been acquired, which is quite apparent from the notification at page 30, in which, the name of Village Mondiala Khurd, has been mentioned and at page 35 8t 36, the agricultural land having different Khasra Numbers of Sh. Iqbal Singh was acquired. 6.6 The said land was acquired and proof of the amount determined is evidenced by vouchers, which proves that different Khasra Number of land of Sh. Iqbal Singh were acquired for certain value as under:- KHASRA NUMBER AMOUNT 20 20,89,728.00 21 49,53,895.00 22 33,16,971.00 23 72,71,822.00 24 66,14,178.00 Total 2,42,46,534.00 6.7 The said vouchers for payment are also being enclosed herewith and the said payment was received through banking channels vide cheque, dated 16.05.2012 and which was credited to the account of Sh. Iqbal Singh at page 51 on 19.05.2012 as filed. 10 6.8 Since there was sufficient balance in the bank account and out of which, an amount of Rs. 2,43,60,000/- was transferred to Auto Sweep Account as per Pass book of Sh. Iqbal Singh dated 05.11.2012 and when the amount was advanced to Sh. Meet Pal Singh, the said amount of Rs. 2 crores was transferred from auto sweep account due to lower account balance, which has clearly been reflected in the bank statement of Sh. Iqbal Singh at page 50 of paper Book. 6.9 Thus, the source of amount of Rs. 1,25,00,000/- of Sh. Iqbal Singh and Sh. Meet Pal Singh is satisfactorily explained. It was also furnished and explained to the Assessing Officer and, therefore, the Assessing Officer had duly applied his mind to such bank statement. 6.10 Thus, the confirmation is in built in the bank statement of Sh. Iqbal Singh and Sh. Meet Pal Singh and being an agriculturist, Sh. Iqbal Singh is not assessed to tax and regarding entry of Rs. 2 crores as stated in the order of PCIT at page 11, the Ld. PCIT has failed to appreciate that the entry was on account of auto sweep and i.e. sufficient amount was always available with Sh. Iqbal Singh from 19.05.2012 and, thus, the assessment is neither erroneous and nor prejudicial to the interest of revenue. 6.11 It was accordingly submitted that where the availability of the funds was proved in the hands of the lender then such loans should have been accepted. 6.12 It was further submitted that the issue on the basis of which the revision proceedings were proposed have been duly considered by the AO during the course of assessment proceedings and the AO has taken a possible view while framing the assessment and therefore the proceedings under section 263 have been initiated merely on the basis of difference of opinion and the same cannot be taken as a ground to hold the order so passed by the AO as erroneous and prejudicial to the interest of the Revenue. 11 6.13 It was further submitted that the AO has duly applied his mind on each and every matter raised during the course of assessment proceedings as evident from para 1.3 and 2.4 of the assessment order and the Ld. Pr. CIT has not come up with any new findings and therefore the revision proceedings deserves to be set aside. It was accordingly submitted that in light of the aforesaid submissions, the complete trail of the transactions of the assessee with M/s K.G. Infrastructure Private Limited stands verified by the AO during the course of original assessment proceedings and therefore the impugned order under section 263 deserves to be set aside. 7. Per contra, the Ld. CIT DR has submitted that the issue under consideration is whether the AO has made the relevant enquiry regarding identity, creditworthiness and genuineness of the transaction of unsecured loan taken by the assessee and whether he has taken the decision based on material evidence and facts available on the record. It was submitted that the ld PCIT has rightly observed that based on material available on record, it is not possible to determine the creditworthiness and genuineness of the transaction and has referred to the findings of the Ld. Pr. CIT relating to credit in the bank account of Shri Igbal Singh immediately prior to transfer of funds to the assessee’s bank account. He accordingly relied on the findings of the ld PCIT. 8. We have heard the rival contentions and purused the material available on record. The undisputed facts which are emerging from the records are that certain documents were found and seized during the course of search at the premises of the assessee and as part of such documents, an agreement to purchase dated 14/01/2013 for purchase of certain land measuring 7433.32 Sq. Yards situated at Village Benhiwal G.T. Road, Amritsar was also found which was entered into by the assessee alongwith Shri Iqbal Singh with M/s K.G. Infrastructure Private Limited wherein an amount of Rs 3 crores was paid by assessee and Shri Igbal Singh as advance to M/s K.G. Infrastructure Private 12 Limited. It was also found from the documents so seized that an amount of Rs 1.25 Crores was credited in the assessee’s bank account on 18/02/2013 and on the next date, the same was transferred through RTGS to the bank account of M/s K G Infrastructure Private Limited. The assessee in his statement recorded on oath on 03/11/2017 has also confirmed that out of the said advance of Rs 3 Crores, the assessee’s share was Rs. 1.50 Crores and which was paid by way of cheque of Rs. 1.25 Crores and the remaining amount of Rs. 25,00,000/- was paid in cash. 9. In order to examine the aforesaid transaction, during the course of assessment proceedings, the AO, as part of the detailed questionnaire vide notice u/s 142(1) dated 12/11/2019 available as APB pages 11-21, referring to the aforesaid agreement seized during the course of search (Annexure AI pages 19-20) and the statement of the assessee recorded during the post-search enquiry, raised a specific query to the assessee to explain the nature of the aforesaid transaction alongwith necessary documentary evidence and to explain the source of cheque payment of Rs 1.25 Crores and cash payment of Rs 25 lakhs. The assessee was also asked to submit the complete address of Shri Parminder Singh who has entered into the transaction alongwith the assessee. In response, the assessee vide his submission dated Nil available at APB pages 22-29 has submitted his explanation and relevant contents thereof read as under: 2. As regards the page Number 19 & 20 of Annexure-A1 seized from the house of the assessee situated at H.No. 2253, Phase-II, Urban Estate, Dugri, Ludhiana on 02.11.2017. In this regard, it is hereby submitted that the assessee alongwith Sh. Parminder Singh had entered into agreement dated 14.01.2013 with M/s K.G. Infrastructure Private Limited for purchase of land measuring 7433.32 sq. yds situated at village Benhiwal, G.T. Road, Amritsar. In this regard, it is hereby submitted that the assessee had paid an advance amount of Rs. 1.25 crores through his saving bank account as maintained with Bank of Maharashtra. Subsequent to this, the assessee had approached the banks for availing the loan against the purchase of that property but the bank had denied to sanction the above said loan due to which the transaction for purchase of land could not carried out. 13 10. Thereafter, as stated by the ld PCIT, vide ordersheet entry dated 13/12/2019, the AO carried out further enquiry from the assessee regarding the receipt of Rs 1.25 crores from Shri Igbal Singh and cash payment of Rs 25 lacs and in response, the assessee vide his submission dated 16/12/2019 available at APB pages 30-33 submitted as under: Subject: Submission of Information in continuation of assessment proceedings u.s 153A of the Income Tax Act, 1961 in case of Sh. Meetpal Singh for A.Y. 2013-14 Hon’ble Sir, With reference to the captioned subject, it is hereby submitted that we are in receipt of notice u/s 142(1) of the Act requiring various details in respect of search conducted at the premises of the assessee. We have already submitted the reply to the queries raised by your honor. Further, yourself has show cause with regard to some of the proposed disallowances in this case, the submission of the same are being submitted as follows: 1. Copy of Cash Book for the F.Y. 2012-13 is enclosed herewith for your kind consideration. 2. As regards the unsecured loan from Sh. Iqbal Singh to the 'extent of Rs. 1.25 crores is concerned, it is hereby submitted that assesse has availed unsecured loan for purchase of an immovable property from M/s K.G, Infrastructure Pvt. Ltd. As regards the identity and creditworthiness of Sh. Iqbal Singh is concerned, the PAN number and the Bank statements Sh. Iqbal Singh showing the source in his hands is also enclosed herewith for your kind consideration. PAN: CPIPS1598Q Bank statement: enclosed , 3. During the year under consideration, assesse has also paid an advance amount of Rs. 1.5 crores in total to M/s K.G. Infrastructure Pvt. Ltd. It also includes cash payment to the extent of Rs. 25.00 lacs as advanced to M/ s K.G. Infrastructure and the same has also been acknowledged in the Agreement letter as seized by your honor from the premises of the assesse. In addition to' this, copy of cash flow statement for the year under consideration is enclosed in which the cash payment as stated above has duly been accounted for in the books of accounts. 4. As regards the total credit entries reflected in the bank statement to the extent of Rs. 3,76,62,436/- is concerned, the breakup and explanation of all these credit entries are explained as under: S.No. Particulars Amount Remarks Unsecured Loan from Sh. Iqbal Singh 1,25,00,000/- During the year, assessee has availed an unsecured loan from Sh. Iqbal Singh in 14 order to purchase a land from M/s K.G Infrastructure Pvt. Ltd. In this regard, we have provided the, identity, genuineness and creditworthiness of the transaction by submitting the bank statement and PAN of Sh, Iqbal Singh which duly proves his credibility of advancing such amount. 2. Unsecured Loan from Shiv Bajaj 45,00,000/- In this regard, it is hereby submitted that the assessee has also taken an unsecured loan from Sh. Shiv Bajaj which is totally squared off during the year under consideration also. Copy of account of Sh. Shiv Bajaj is also enclosed herewith for your kind consideration. 3. Unsecured Loan from Mohini Kulwant Ghai 10,00,000/- In this regard, it is hereby submitted that the assessee has also taken an unsecured loan from Mohini Kulwant Ghai which is totally squared off during the year under consideration also. Copy of account of Mohini Kulwant Ghai is also enclosed herewith for your kind consideration. 4. Unsecured Loan from Kuldeep Singh Ghai 35,00,000/- In this regard, it is hereby submitted that the assessee has also taken an unsecured loan from Kuldeep Ghai which is totally squared off during the year under consideration also. Copy of account of Kuldeep Singh Ghai is also enclosed herewith for your kind consideration. 5. Advances from Parents 9,31,000/- During the year under consideration, assesse has received such amount; from his parents for personal purposes in his bank accounts. 6. Rental Income 1,98,658/- Rent received from Bank of Maharashtra, duly shown in the Return of Income for the A.Y. under consideration. 7. 8. Cash Deposit Other Advances 1,17,77,500/- 32,55,278/- Further, as regards the source of cash deposits is concerned, it is hereby submitted that the cash was not deposited in one go but in various installments. Infact, the assessee was in the-possession of enough cash in hand in the beginning of the F.Y. 2012-13 i.e. Rs. 23,64,350/-. Further, amount totaling Rs. 37,00,000/- was received from the father of the assessee and the same has also been shown in the cash book enclosed herewith. Apart from this, there were the business receipts which was also deposited in the bank accounts to the 15 extent of Rs. 7,25,800/-,j Rental and agriculture income totaling Rs. 2,15,000/-. Further, out of the total withdrawal to the extent of Rs. 72,05,351/-, an amount of Rs. 21,14,000/- have been re-deposited into the bank account within a gap of 2 or 3 days. The remaining cash deposit to the extent of Rs. 2jjJk5J,350 and advances to the extent of Rs. 32,55,278/- might not be taken into "aTcount while calculating the taxable income of the assessee and was missed inadvertently. As the father of the assessee used to operate his personal account for some business purposes and therefore forego to take into account the income earned on this account. However, there was equivalent amount of withdrawals which were spent for sure by the father of the' assessee. Thus, the assessee is offering to tax the remaining income as per the provisions of Section 44AD of the act. Total 3,76,62,436/- Keeping in view of the above stated fads and documentary evidences as shown above, it has been concluded that assesse has taken in to account every 1 Income in his Return of Income as stated above. However as regards the income which was forego to taken into account would be offered to tax as per the provisions of Section 44AD of the act as mentioned above. 11. Thereafter, after taking into consideration the submissions of the assessee, the AO passed the assessment order u/s 153A r/w 143(3) dated 27/12/2019 and it would be relevant to refer to the findings of the AO which read as under: 2. Addition on account of undisclosed credit in the bank 2.1 Perusal of the assessee's bank account no. 60000885803 with Bank of Maharashtra reveals total credits of Rs. 3,76,62,436/- out of which a sum of Rs. 1,17,77,500/- was deposited in cash. 2.2 Notice u/s 142(1) of the Act alongwith questionnaire cum show cause was issued on 12.11.2019 in which assessee was asked to explain the cash deposits in the bank of Maharashtra vide order sheet entry dated ) 3.12.2019 as under: 16 "In your hank statement no. 60000885803 with Bank of Maharashtra there are total credit of Rs. 3,76,62,436/- including cash deposits of Rs. 1,17,77,500/-. No business is shown in respect of this bank account kindly explain why Rs. 3,76,62,436/- should not be added back. " 2.3 In response, to which, the counsel of the assessee has submitted his reply. The relevant extract of the above said reply is reproduced as under: "Further as regard the source of cash deposit is concerned, it is hereby submitted that the cash was not deposited in one go but in various installments. In fact, the assessee was in the possession of enough cash in hand in the beginning of the F. Y. 2012-13 i.e. Rs. 23,64,350. Further, amount totaling Rs. 37,00,000/- was received from the father of the assessee and the same has also been shown in the cash hook enclosed herewith. Apart from this there were the business receipts which wm also deposited in the bank accounts to the extent of Rs. 7,25,800/- rental and agriculture income totaling Rs. 2,15,000/-. Further, out of the total withdrawal to the extent of Rs. 72,05,351/- and amount ofRs. 21,14,000/- have been re- deposited into the bank account within a gap of 2 or 3 days. The remaining cash deposit to the extent of Rs. 26,58,350 and advances to the extent of Rs. 32,55,278/- might not be taken into account while calculating the taxable income of the assessee and was missed inadvertently as the father of the assessee used to operate his personal account for some business purposes and therefore forego to take in to the account the income earned on this account. However, there was equivalent amount of withdrawal which were spent for sure by the father of the assessee. Thus, the assessee is offering to tax the remaining income as per the provisions of Section 44AD of the Act" 2.4 The above contention of the assessee is examined and not found acceptable as the assessee it trying to justify the source of deposits in bank in a very casual manner and without any documentary evidences. However, on merits the reply of the assessee is examined. It is seen that there are deposits of cheques of Rs. 1.25 Crores and other squared up entries. The balance amount remains unexplainable for cash deposit of Rs. 26,58,350/- and advances amounting to Rs. 32,58,278/-. Assessee’s contention that 44AD should be applicable on this amount is not acceptable as assessee failed to prove the source of credit of cash deposit of Rs. 26,58,350/- and advances amounting to Rs. 32,58,278/-. Further, these entries are not in business nature and not explained by the assessee by any supporting evidences such as purchase or sale bills/agreements etc. The assessee himself admitted the fact and offering to tax on this amount as per the provisions of section 44AD of the Act which is not acceptable. Therefore, the total amount of Rs. 59,16,628/- (Rs. 26,58,350/- + Rs. 32,58,278/-) unexplained cash credits in the bank account even for which assessee has failed to give any justification. In view of above I hold that these are unexplained money of the assessee. Hence, an addition of Rs. 59,16,628/- is added back, to the total income of the assessee. (Addition:- Rs. 59,16,628/-) 12. We therefore find that the matter has been duly enquired into by the AO and after taking into consideration the explanation of the assessee alongwith 17 supporting documentation, no adverse finding has been recorded by the AO regarding the transaction of unsecured loan taken by the assessee from Shri Igbal Singh and the explanation so submitted by the assessee has been found acceptable. 13. It is also not the case of the Revenue that there is lack of enquiry on part of the AO. At the same time, as per ld PCIT, proper and complete enquiry has not been conducted by the AO and the latter has erroneously accepted the version of the assessee without relevant documentation. The basis of arriving at such a finding by the ld PCIT is that for examining the transaction of unsecured loan, the AO is required to test the said transaction on the principle of identity of the lender, creditworthiness of the lender and the genuineness of the transaction and for the purposes, he is required to call for the relevant documentation and subject the same to due verification. It was further stated by the ld PCIT that in response to specific query raised by the AO, the assessee did submit the PAN number and copy of bank statement of Shri Igbal Singh which establishes identity of the lender and the fact that the funds were transferred to the assessee through banking channel, however, the assessee failed to submit the copy of income tax return and confirmation from Shri Igbal Singh which raises reasonable doubt regarding creditworthiness of Shri Igbal Singh and genuineness of the unsecured loan transaction. In this regard, the ld PCIT has referred to the bank statement of Shri Igbal Singh and has stated that immediately before the transfer of funds to the tune of Rs 1.25 crores to the assessee, there is a credit entry of Rs 2 Crores in the bank account of Shri Igbal Singh which require examination. It was stated by the ld PCIT that the AO did ask for copy of income tax return and confirmation from Shri Igbal Singh, however, inspite of the fact that the assessee didn’t furnish these documentation, the AO proceeded ahead and completed the assessment and in a way accepted the version of the assessee without requisite documentation and verification thereof. 18 14. In this regard, the ld AR has submitted that Shri Igbal Singh was an agriculturist who needn’t file his tax return as receipts from agriculture produce are not taxable and in any case, the assessee was not privy to his personal tax return and it was practically not possible to obtain his tax return and necessary details in form of PAN number of Shri Igbal Singh was duly submitted. It was submitted that a perusal of the bank statement of Shri Igbal Singh proves that he had sufficient funds as on the date of transfer and the fact that the funds have been transferred from his bank account to the assessee bank account sufficiently proves his creditworthiness and geneuinessness of the transaction and which has been duly considered by the AO while accepting the explanation of the assessee. Regarding credit entry of Rs 2 crores in the bank account of Shri Igbal Singh, it was submitted that the said credit represents the amount received by Shri Igbal Singh in respect of his land situated at village Mondiala which was acquired by the Railways and the said amount was available with Shri Igbal Singh since 19/05/2012 and on account of auto-sweep account, the same was transferred out to the auto-sweep account on 5/11/2022 and then, transferred back on 18/02/2013 and relevant notification under which the land was acquired by the Railways and compensation vouchers so issued by the Competent authority has been placed on record. It was accordingly submitted that source of credit in the bank account of Shri Igbal Singh has also been sufficiently explained by the assessee before the AO as well as the ld PCIT and the order so passed by the AO therefore cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. 15. In this regard, we have gone through the bank statement of Shri Igbal Singh of his bank account maintained with PNB for the period 1/04/2012 to 31/03/2013 available at APB pages 50-51 and find that there is a credit entry of Rs 2,42,46,534/- on 19/05/2012 which tallies with the amount of compensation received by Shri Igbal Singh from Railways, thereafter, there is a debit entry of Rs 19 2,43,60,000/- on 5/11/2022 wherein the said amount has been transferred to another account of the assessee through auto-sweep facility, thereafter, there is a credit entry of Rs 2,00,00,000/- on 18/02/2013 wherein the amount has been transferred back into the said account from other account through auto-sweep facility (this entry has been referred to by the ld PCIT) and thereafter, there is a debit entry of Rs 1,25,00,000/- on 18/02/2013 wherein the amount has been debited from the account of Shir Igbal Singh and credited/transferred to the account of the assessee. Besides, there are various other debit and credit entries from time to time which shows regular inflow/outflow of funds undertaken by Shri Igbal Singh and it is not a case where there are just two entries or for that matter, the account is dormant. We therefore find that the credits in the bank account of Shri Igbal Singh has been sufficiently explained which has arisen on account of receipt of compensation from Railways on acquisition of his land. Therefore, the apprehension and doubt raised by the ld PCIT regarding creditworthiness of Shri Igbal Singh is not borne out of the records. The bank statement of Shri Igbal Singh was submitted by the assessee during the course of assessment proceedings as well as revisionary proceedings and necessary explanation regarding credit of Rs 2 crores in the bank account was also submitted and in this regard, we refer to submission of the assessee before the ld PCIT available at APB page 85 where in response to the show-cause, necessary explanation was submitted by the assessee and the ld PCIT has not referred to the said submission as to why the same is not acceptable or for that matter, what further enquiry or verification is required to be undertaken. Further, regarding non-submission of tax return of Shri Igbal Singh, we find that where the bank statement reasonably explain the availability of funds at the relevant point in time and necessary nexus has been duly established in terms of receipt of land compensation and lending of funds to the assessee, the tax return at best can corroborate creditworthiness of Shri Igbal Singh and non-filing thereof cannot be held against the assessee especially where the assessee is not privy 20 to his tax return. In any case, once the PAN number of Shri Igbal Singh has been submitted by the assessee, the Revenue has all the resources available at its disposal to enquire further regarding the tax return and filing status. 16. Regarding the source of cash payment of Rs 25 lacs, we find that the assessee has submitted copy of cash book for the period 1/04/2012 to 31/03/2013 as well as the cash flow statement during the course of assessment proceedings along with necessary explanation in terms of opening cash-in- hand, business receipts, agriculture and rental receipts and deposits from earlier withdrawals and the AO after taking into consideration the explanation of the assessee has gone ahead and brought to tax an amount of Rs 59,16,628/- as unexplained cash deposits and specific finding has been recorded by the AO while passing the assessment order. On perusal of the cash book available at APP pages 50-51, we find that the assessee had cash-in-hand of Rs 54,18,506/- on 17/01/2013 and thereafter, on 20/01/2013, amount of Rs 25,00,000/- was paid to M/s K G Infrastructure. Therefore, the findings of the ld PCIT that cash payment of Rs 25,00,000/- is not accounted for in books of account is not borne out of records. Further, we find that the assessee would still be eligible to claim availability of funds to the extent of intangible additions of Rs 59,16,628/- which has suffered taxation and also attained finality given that the assessee’s application under the VSV scheme has been accepted by the Competent authority on payment of due taxes. Apparently, the said fact which is clearly emerging from the records has not been considered by the ld PCIT and in our overall analysis, his findings in this regard therefore need to be set-aside. 17. In light of aforesaid discussions, we are of the considered view that the matter has been duly enquired into by the AO, specific queries has been raised from time to time and after taking into consideration the submissions of the assessee, the explanation of the assessee which is duly corroborated by documentation has been accepted by the AO and in view of the same, the 21 findings of ld PCIT that proper and complete enquiry has not been conducted by the AO and the latter has erroneously accepted the version of the assessee without relevant documentation is not borne out of records and the same is set- aside and therefore, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. The order of the ld PCIT is hereby set-aside and that of the AO is sustained. 18 In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 04/05/2023. Sd/- Sd/- आकाश द प जैन $व%म 'संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद,य/ ACCOUNTANT MEMBER AG Date: 04/05/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar