Sh. Pritam Kumar Sharma, New Delhi V. ITO, New Delhi

ITA 6748/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6709 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 27-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: VED JAIN ADV SH ASHISH GEOL
• Keywords: Business income; Deemed to accrue or arise in india; Reason to believe; Reassessment proceedings
• Section: 142(1); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-1, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 6748 /DEL/201 4 A.Y. 2009-10 PRITAM KUMAR SHARMA, 4/6, DESH BANDHU GUPTA ROAD, PAHAR GANJ, NEW DELHI 110 005 (PAN: ATYPP0148H) VS. ITO, WARD 39(4), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VED JAIN, ADV., SH. ASHISH GEOL, CA DEPARTMENT BY : SH. F.R. MEENA, SR. DR. ORDER ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDER DAT ED 29.8.2014 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS )XXVIII, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2009-10. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE O RDER PASSED BY THE LD. CIT(A) IS BAD BOTH IN THE EYES OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE INITIATION OF PROCEEDINGS UNDER SECTION 147, READ WITH SECTION 148, IS BAD AND LIABLE TO BE QUASHED AS THE 2 CONDITION AND PROCEDURE UNDER THE STATUTE HAVE NOT BEEN SATISFIED AND COMPLIED WITH. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO ARE BAD IN THE EYE OF LAW AS THE REASONS RECORDED FOR THE ISS UE OF NOTICE UNDER SECTION 148 ARE BAD IN THE EYE OF LAW AND ON FACTS. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 9,50,000/- MADE BY AO ON ACCOUNT OF CASH DEPOSIT IN BANK. (II) THAT THE ADDITION HAS BEEN CONFIRMED BY ARBITRA RILY REJECTING THE EXPLANATION AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN FOR THE ASSESSMENT YEAR 2009-10 DECLARING INCOME OF RS. 1 ,51,580/- ON 1.8.2009. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED, AO ISSUED NOTICE U/S. 148 OF THE I.T. ACT, 1961 ON 14. 3.2012. LATER ON, IN RESPONSE TO NOTICES ISSUED U/S. 143(2) AND 142(1) OF THE I.T. ACT, 1961, THE A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED NECESSARY DETAILS. DURING THE YEAR UNDER CONSIDERATIO N, AO NOTED THAT THE ASSESSEE HAS DECLARED INCOME FROM BUSINESS AND OTHER 3 SOURCES. AO ALSO NOTED THAT ASSESSEE HAS ADVANCED LO AN TO FOLLOWING PARTIES:- S.NO. NAME OF THE PARTY AMOUNT AS ON 31.3.2009 AMOUNT AS ON 31.3.2008 FRESH LOAN ADVANCED DURING THE YEAR 1 NEHA WUDLAM PRIVATE LIMITED RS. 3,00,000 --- RS. 3,00,000 2 SATYA DEV SHARMA RS. 2,50,000 ---- RS. 2,50,000 3 SHREE RAM TRADING CO. RS. 4,00,000 ---- RS. 4,00,000 4 CITY REALCOME LTD. RS . 1,29,010 RS. 1,29,010 ---- 3.1 THE ASSESSEE WAS ASKED TO JUSTIFY THE ADVANCING THE LOAN, WHEN THE ASSESSEE WAS HAVING MEAGER INCOME, WHICH THE ASS ESSEE COULD NOT JUSTIFY. AO FURTHER NOTED THAT IN ALL THESE CASES BE FORE ADVANCING LOAN TO THESE PARTIES, THERE WAS CASH DEPOSIT OF DIFFEREN T AMOUNT. ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THESE CASH DEPOSI T, WHICH HE COULD NOT EXPLAIN SATISFACTORILY. AS PER ASSESSEE, HE USED TO PURCHASE THE RAW WOOD FROM AGRICULTURIST OR FARMERS, WHERE THE SALE A RE EITHER ON CASH OR CREDIT BOTH. WHOLE OF THE BUSINESS IS CONDUC TED ON CASH BASIS. AS PER ASSESSEE, PURCHASES ARE FROM FARMERS AND AL THE SALES ARE MADE TO M/S NEHA WUDLAM PRIVATE LIMITED. THE ASSESSEE H AS NOT FURNISHED THE COMPLETE DETAILS OF PARTIES FROM WHERE TH E PURCHASE 4 WERE MADE BY WAY OF PROVIDING COMPLETE ADDRESS OF THE SE PARTIES. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS ADVAN CED LOAN AMOUNT TO RS. 9,50,000/- TO M/S NEHA WUDLAM PRIVATE LIMITED, SATYA DERVE SHARMA AND SHREE RAM TRADING CO. SINCE THE ASSESS EE HAS NOT FURNISHED THE SOURCE OF CASH DEPOSIT FOR ADVANCING THE LOAN SATISFACTORILY, THE SAME IS TREATED AS ASSESSEES INC OME FROM UNDISCLOSED SOURCES AND THE SAME IS ADDED TO THE DE CLARED INCOME OF THE ASSESSEE AND ASSESSMENT WAS COMPLETED U/S. 143( 3) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 20.3.2013. 4. AGAINST THE ASSESSMENT ORDER DATED 20.3.2013, ASSESSEE APPE ALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER D ATED 29.6.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. CIT(A) , ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HA S STATED THAT THE ASSESSEE IS IN THE BUSINESS OF RAW WOODS. THE W OODS WERE PURCHASED WHICH MANUFACTURE PLY, BLOCK BOARDS, FLUX DOORS ETC. AS GENERAL PRACTICE, THE PAYMENT OF THE TRANSACTION WAS M ADE IN CASH. THEREFORE, THE ASSESSEE WAS DEALING IN ITS WHOLE B USINESS ON CASH BASIS. THE ASSESSEE HAS FILED PROFIT AND LOSS ACCOU NT AND BALANCE 5 SHEET OF THE BUSINESS WHICH HAS BEEN ACCEPTED BY TH E AO AS IS EVIDENT FROM THE ASSESSMENT ORDER. THE ASSESSEE DOES NOT MAINT AIN ANY CURRENT ACCOUNT AND DEPOSITS ALL THE RECEIPTS IN THE SAVING BANK ACCOUNT. HE FURTHER STATED THAT THE ASSESSEE HAS ADVA NCED FRESH LOAN OF RS. 9,50,000 TO THREE PARTIES AND STATED THAT ASSE SSEES SOURCE OF DEPOSIT IS MAINLY THE WITHDRAWALS OF RS. 1,66,50 0/- AND COLLECTION FROM DEBTORS OF RS. 10,87,362/- FROM HIS BUSINESS, AS IS EVIDENT FROM THE FACT THAT OPENING DEBTORS IS OF RS. 2,79,166/- A ND TOTAL SALES MADE DURING THE YEAR IS RS. 9,46,850/-. OUT OF THIS DURING THE YEAR ASSESSEE RECEIVED AMOUNT OF RS. 10,87,362/- IN CASH AND RS. 1 ,33,221/- VIDE CHEQUES. HE FURTHER STATED THAT THE CASH RECEIVED A ND WITHDRAWALS AFTER MAKING PAYMENT FOR EXPENSES AND CREDITORS DEPOSI TED IN TO THE BANK ACCOUNT AND THE SAME WAS USED TO ADVANCE THE LOAN TO THE SAID PARTIES. HENCE, HE STATED THAT IN VIEW OF IT IS C RYSTAL CLEAR THAT THE PAYMENTS ARE TOTALLY OUT OF HIS BUSINESS AND THE RE SULTS HAVE BEEN ACCEPTED BY THE AO, AS THE BUSINESS INCOME HAS BEEN ASSESSED AT RS. 1,51,580/-, HENCE, THE SOURCE OF DEPOSIT HAS BEEN EX PLAINED BY THE ASSESSEE TO THE AO. IN VIEW OF ABOVE, LD. COUNSEL OF THE ASSESSEE STATED THAT AO HAS NOT CONSIDERED THE AFORESAID SOU RCE OF DEPOSITS, HENCE, THE ADDITION MADE ON THIS ACCOUNT MAY BE DEL ETED. IN ORDER TO SUPPORT HIS CONTENTION HE RELIED UPON THE FOLLOWING CASE LAWS:- 6 - ITAT, DELHI BENCH DECISION IN THE CASE OF BIR BAHADUR SINGH SIJWALI VS. ITO (2015) 68 SOT 197 (DELHI TRIB.) - ITAT, AGRA BENCH IN THE CASE OF SARAFGRAMODYOGSANSTHAN VS. ITO (2007) 108 ITD 115 (AGRA) - HIGH COURT OF DELHI IN THE CASE OF INDO ARAB AIR SERVICES (2016) 283 CTR 92 (DELHI). 7. ON THE CONTRARY, LD. DR OPPOSED THE AFORESAID CONT ENTION OF THE LD. COUNSEL OF THE ASSESSEE AND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND REQUESTED THAT THE SAME MAY BE UPHELD. 8. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEV ANT RECORDS AVAILABLE WITH ME, ESPECIALLY THE ORDERS PASSED BY TH E REVENUE AUTHORITIES AND THE CASE LAWS CITED BY THE LD. COUNS EL OF THE ASSESSEE. I FIND THAT THE ASSESSEE IS IN THE BUSINESS OF RAW W OODS. THE WOODS WERE PURCHASED WHICH MANUFACTURE PLY, BLOCK BOARDS, F LUX DOORS ETC. AS GENERAL PRACTICE, THE PAYMENT OF THE TRANSACTION WA S MADE IN CASH. THEREFORE, THE ASSESSEE WAS DEALING IN ITS WHOLE B USINESS ON CASH BASIS. THE ASSESSEE HAS FILED PROFIT AND LOSS ACCOU NT AND BALANCE 7 SHEET OF THE BUSINESS WHICH HAS BEEN ACCEPTED BY TH E AO AS IS EVIDENT FROM THE ASSESSMENT ORDER. THE ASSESSEE DOES NOT MAINT AIN ANY CURRENT ACCOUNT AND DEPOSITS ALL THE RECEIPTS IN THE SAVING BANK ACCOUNT. IN THIS CASE THE ASSESSEE HAS ADVANCED FRE SH LOAN OF RS. 9,50,000 TO THREE PARTIES AND ASSESSEES SOURCE OF D EPOSIT IS MAINLY THE WITHDRAWALS OF RS. 1,66,500/- AND COLLECTION FRO M DEBTORS OF RS. 10,87,362/- FROM HIS BUSINESS, AS IS EVIDENT FROM THE FACT THAT OPENING DEBTORS IS OF RS. 2,79,166/- AND TOTAL SALES MADE DU RING THE YEAR IS RS. 9,46,850/-. OUT OF THIS DURING THE YEAR ASSESSEE RECEIVED AMOUNT OF RS. 10,87,362/- IN CASH AND RS. 1,33,221/- VIDE CHEQUES. I FIND CONSIDERABLE COGENCY IN THE LD. COUNSEL OF THE ASSES SEES CONTENTION THAT THE CASH RECEIVED AND WITHDRAWALS AFTER MAKING PA YMENT FOR EXPENSES AND CREDITORS DEPOSITED IN TO THE BANK ACC OUNT AND THE SAME WAS USED TO ADVANCE THE LOAN TO THE SAID PARTI ES. HENCE, IT IS CRYSTAL CLEAR THAT THE PAYMENTS ARE TOTALLY OUT OF A SSESSEES BUSINESS AND THE RESULTS HAVE BEEN ACCEPTED BY THE AO, AS THE BUSINESS INCOME HAS BEEN ASSESSED AT RS. 1,51,580/-, HENCE, THE SOU RCE OF DEPOSIT HAS BEEN EXPLAINED BY THE ASSESSEE TO THE AO AND ADDITI ON MADE ON THIS ACCOUNT IS NOT SUSTAINABLE IN THE EYES OF LAW, HENC E, THE SAME NEEDS TO BE DELETED. MY AFORESAID VIEW IS FULLY SUPPORT ED BY THE FOLLOWING DECISIONS :- 8 ITAT DELHI IN THE CASE OF BIR BAHADUR SINGH SIJWALI VS. ITA [2015] 68 SOT 197 (DELHI - TRIB.) ALL THAT THE REASONS RECORDED FOR REOPENING INDICATE IS THAT CASH DEPOSITS AGGREGATING TO RS. 10,24,100 HAVE BEEN MADE IN THE BANK ACCOUNT OF THE ASSESSEE, BUT THE MERE FACT THAT THESE DEPOSITS HAV E BEEN MADE IN A BANK ACCOUNT DOES NOT INDICATE THAT THESE DEPOSITS CONSTITUTE AN INCOME WHICH HAS ESCAP ED ASSESSMENT. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT DO NOT MAKE OUT A CASE THAT THE ASSESSEE WAS ENGAGED IN SOME BUSINESS AND THE INCOME FROM SUCH A BUSINESS HAS NOT BEEN RETURNED BY THE ASSESS EE. IT IS NOT OPEN TO DEAL WITH THE QUESTION AS TO WHET HER THE ASSESSEE COULD BE SAID TO BE ENGAGED IN ANY BUSINESS; ALL THAT IS TO BE EXAMINED IS WHETHER THE FACT OF THE DEPOSITS, PER SE, IN THE BANK ACCOUNT OF THE ASSESSEE COULD BE BASIS FOR HOLDING THE VIEW THAT TH E INCOME HAS ESCAPED ASSESSMENT. THE ANSWER IS IN NEGATIVE. THE ASSESSING OFFICER HAS OPINED. THAT AN INCOME OF RS.10,24,100 HAS ESCAPED ASSESSMENT OF 9 INCOME BECAUSE THE ASSESSEE HAS RS.10,24,100 IN HIS BANK ACCOUNT BUT THEN SUCH AN OPINION PROCEEDS ON TH E FALLACIOUS ASSUMPTION THAT THE BANK DEPOSITS CONSTI TUTE UNDISCLOSED INCOME, AND OVERLOOKS THE FACT THAT THE SOURCES OF DEPOSIT NEED NOT NECESSARILY BE INCOME OF THE ASSESSEE. OF COURSE, IT MAY BE DESIRABLE, FROM THE PO INT OF VIEW OF REVENUE AUTHORITIES, TO EXAMINE THE MATTER IN DETAIL, BUT THEN REASSESSMENT PROCEEDINGS CANNOT BE RESTORED TO ONLY TO EXAMINE THE FACTS OF A CASE, NO MATTER HOW DESIRABLE THAT BE, UNLESS THERE IS A REASON TO BELIEVE, RATHER THAN SUSPECT, THAT AN INCOME HAS ESCAPED ASSESSMENT. {PARA 8} IN VIEW OF THE REASONS SET OUT ABOVE, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, THE REASONS RECORDED BY THE ASSESSING OFFICER, AS SET OUT EARLIER, WERE NOT SUFFICIENT REASONS FOR REOPENING THE ASSESSMENT PROCEEDINGS. THEREFORE, THE REASSESSMENT PROCEEDINGS IS QUASH. AS THE REASSESSMENT ITSELF IS QUASHED, ALL OTHER ISSUES ON MERITS OF THE ADDITIONS , IN 10 THE IMPUGNED ASSESSMENT PROCEEDINGS, ARE RENDERED ACADEMIC AND INFRUCTUOUS. {PA RA 10} ITAT AGRA BENCH IN THE CASE OF SARAFGRAMODYOGSANSTHAN V. ITA [2007] 108 ITD 115 (AGRA) THE CRUCIAL EXPRESSION FOR ASSUMPTION OF JURISDICTION UNDER SECTION 147 IS 'ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR'. THUS, THE ASSESSING OFFICER HAS TO RECORD IN THE REASONS THAT A PARTICULAR ITEM WHICH WAS CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT. IN THE INSTANT CASE, T HE ASSESSING OFFICER HAD WRITTEN THAT A SUM OF RS.1,02,047 DEPOSITED IN THE BANK ACCOUNT HAD ESCAPED ASSESSMENT. THAT BELIEF HE HAD ARRIVED ON THE BASIS OF THE FACT THAT RETURN OF INCOME HAD NOT BEEN FILED, BUT WHERE THE INCOME WAS NOT ABOVE THE MINIMUM AMOUNT ASSESSABLE, I.E., WHERE INCOME WAS BELOW EXEMPTION LIMIT, THE RETURN WAS NOT REQUIRED TO BE FILED AND, THEREFORE, ANY DEPOSIT IN A BANK ACCOU NT WOULD NOT AUTOMATICALLY LEAD TO THE INFERENCE THAT IT 11 WAS CHARGEABLE TO TAX. THE ASSESSING OFFICER OUGHT T O HAVE VERIFIED FROM THE BOOKS OF ACCOUNT WHETHER THAT DEPOSIT WAS RECORDED IN REGULAR BOOKS OR NOT. IF IT WAS RECORDED IN THE REGULAR BOOKS, THEN IT COULD NOT BE SAID THAT THE DEPOSIT WAS AUTOMATICALLY LIABLE TO B E TAXED. DEPOSIT IN THE BANK ACCOUNT CAN BE COVERED B Y VARIOUS RECEIPTS RECORDED IN THE CASH-BOOK. WITHOUT VERIFYING THE DEPOSITS IN THE BANK STATEMENT WITH TH E REGULAR BOOKS MAINTAINED BY THE ASSESSEE,. ONE COULD NOT COME TO THE INFERENCE THAT SUCH BANK DEPOSITS WERE CHARGEABLE TO TAX. NO DOUBT, THE DEPOSITS IN T HE BANK ACCOUNT ARE INVESTMENTS COVERED BY SECTION 69 AND WHERE THEY ARE NOT EXPLAINED, THEY ARE LIABLE TO BE ADDED AS DEEMED INCOME OF AN ASSESSEE. BUT MERE DEPOSIT OF AN AMOUNT ALONE IN THE BANK ACCOUNT COUL D NOT LEAD TO AN INFERENCE THAT THIS IS LIABLE TO BE T AXED AS INCOME AND THE ASSESSEE HAS NOT DISCLOSED THE SAME AND, THEREFORE, IT HAS ESCAPED ASSESSMENT. NO QUESTION HAD BEEN ASKED FROM THE ASSESSEE BEFORE REOPENING THE ASSESSMENT AS TO THE SOURCE OF THE DEPOSIT IN THE BANK ACCOUNT. [PARA 17J 12 8.1. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS A ND RESPECTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID, I DELETE THE ADDITION IN DISPUTE AND ACCORDINGLY DECIDE THE ISSUE IN DISPUTE IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/02/2017. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE:02/02/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORD ER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES