RAMAN KUMAR, LUDIHANA V. DCIT CENTRAL CIRCLE 3, LUDHIANA

ITA 686/CHANDI/2022

AI Insights

The case involves an appeal by Shri Raman Kumar against the order of the Ld. CIT(A)-5, Ludhiana, which confirmed the addition of Rs 11,65,000 under section 69A of the Income Tax Act. The amount was seized by ADCP (Narcotics), Ludhiana, and later requisitioned by the Income Tax Department. The assessee claimed the money was not his but belonged to Shri Surinder Kumar, for whom he acted as a collection agent. The Assessing Officer (AO) rejected this explanation after failing to verify the transactions and the identities of the persons involved. The CIT(A) upheld the AO's decision, leading to the current appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128644 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-05-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 13-11-2022
• Other Referred Cases: CIT vs. Durga Prasad More, Sumati Dayal vs. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF ALTERNATE
• Keywords: Principle of natural justice
• Section: 142(1); 143(2); 69A

Judgement Text

आयकर अपीलय अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश दप जैन, उपा य एवं ी $व%म 'संह यादव, लेखा सद,य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA No. 686/Chd/ 2022 Assessment Years : 2020-21 Shri Raman Kumar 4023, St. No. 8, Ludhiana (East) Basti Jodhewal, S.O. Ludhiana, Punjab -141007 The DCIT Central Circle -3 Opp. BVM Kitchlu Nagar, Ludhiana PAN NO: DWVPK5862A Appellant Respondent ! " Assessee by : Shri Ashok Kumar Goyal, CA # ! " Revenue by : Shri Akashdeep, JCIT, Sr. Dr $ % ! & Date of Hearing : 18/05/2023 '()* ! & Date of Pronouncement : 04/07/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-5, Ludhiana dt. 20/09/2022 wherein the assessee has taken the following grounds of appeal: 1. The learned C1T(A) has erred in confirming the addition when the assessment framed was against natural justice and sufficient opportunity was not provided. Hence relief be allowed. 2. The learned C1T(A) has erred in confirming the addition of Rs 11,65,000/- u/s 69 A of the income tax Act, when the addition made by the AO was without any inquiry and ignoring circumstantial evidence. Hence relief be allowed. 3. The learned CIT(A) has erred in confirming the addition of Rs 11,65,000/- u/s 69 A of the income tax Act, when the return income for the last six years was accepted and cash was available just on the basis that it is an afterthought when A O has considered the amount belong to appellant. Hence relief be allowed. 4. That the appellant craves leave to add delete or modify .any ground of appeal and to add any new ground of appeal. Before the same is heard or disposed off. 2 2. Briefly the facts of the case are that on the basis of receipt of information from ADCP (Narcotics), Ludhiana, an amount of Rs. 11,65,000/- was requisitioned and seized from the assessee under section 132A and in response to notice under section 142(1) issued on 23/06/2021, the assessee filed his return of income declaring total income of Rs. 4,83,000/- on 19/09/2021. Subsequently notice under section 143(2) and 142(1) were issued to the assessee. As per the AO, from the perusal of the records, it was found that the amount of Rs. 11,65,000/- was requisitioned and seized on the basis of information received from ADCP(Narcotics), Ludhiana dt. 08/11/2019 which belongs to the assessee. The assessee in his statement recorded on oath, in response the summons issued under section 131(1A), had stated that he was working as payment collection agent for Shri Surinker Kumar, Gali No. 2, Chandan Nagar, Ludhiana and has collected payments from different parties and gave the same to Shri Surinder Kumar. The assessee has further stated that he had received Rs. 10,00,000/- from Shri Ranjodh Singh Jagga, Sarpanch of Hambran and Rs. 1,65,000/- from Shri Surinder Kumar which was to be given to Shri Gurpreet Singh, Village Duley, Ludhiana. As per the AO, to verify the transaction as submitted by the assessee, the summons were issued to Shri Surinder Kumar through SHO, Police Division No. 2, Ludhiana which remained unserved for the reason that the door was found locked. Shri Ranjodh Singh Jagga, Sarpanch Village Hambran, Ludhiana during the recording of his statement has denied the identity of the assessee and also denied of any amount of Rs. 10,00,000/- given to the assessee. Further Shri Gurpreet Singh of Village Duley did not appear in response to the summons nor any reply was filed. Thereafter the assessee was given an opportunity to produce these persons but he had shown his inability to produce these persons. Thereafter notice under section 142(1) dt. 09/09/2021 was issued wherein the assessee was show cause as to why the amount of Rs. 11,65,000/- received from him by the ADCP(Narcotics), Ludhiana and later on seized by the department 3 should not be considered as unexplained money under section 69A r.w.s 115BBE of the Act. 2.1 In response, the assessee filed his submission dt. 20/09/2021which was considered but not found acceptable. Thereafter the assessee was given another opportunity to submit evidence in support of his claim on 22/02/2019 and another opportunity on 23/09/2021 and in absence of any reply from the assessee the AO proceeded with the assessment proceedings. As per the AO, as per Section 292C(2), the persons from whom the requisition of money have been made under section 132A is the real owner of such money and he is liable to explain the exact source thereof. Thereafter referring to the statement of the assessee recorded under section 131(1A) on 17/09/2021, the AO has recorded his findings which are contained at para 4.6 of the assessment order and the contents thereof read as under: “4.6 Even as per the story of the assessee he was not doing any legitimate transaction in which he claim that he used to collect and deliver cash from /to the persons as directed by allegedly Sh. Surinder Kumar without knowing the employer or the persons from and to whom such cash was delivered. The assessee had claimed to be working for many months with Shri Surinder Kumar but he has not provided any datewise details of the payments collected in cash and the delivery by him. He has only concocted a story about the cash found from him amounting to Rs. 11,65,000/- which too has been found to be fake. He claimed that he was getting salary of Rs. 12,000/- per month from him in cash on road some day of the month. It cannot be the case that he would have not undertaken other transactions as per his story of being delivery boy for which he was paid Rs. 12,000/- per month. The assessee has not come with clean funds to make true disclosures about the work he was doing and has tried to protect all the persons who were engaged in such cash transactions as claimed by him. Thus, the story of the assessee is not found acceptable and is rejected. It is an afterthought which was created using unidentifiable persons and unrecorded transactions. Thus, it proves that the story is the concocted one.” 2.2 And thereafter referring to the various Courts decisions and the principle of human probabilities, the AO held that the amount of Rs. 11,65,000/- found from the assessee by ADCP(Narcotics), Ludhiana and later on seized by the Department belongs to him and that he has failed to provide the source of such 4 money and therefore the said money was considered as his unexplained income and brought to tax under section 69A r.w.s 115BBE of the Act. 3. Being aggrieved the assessee carried the matter in appeal before the Ld. CIT(A) and it was submitted as under: “A sum of Rs 11,65,000/- was seized by ADCP (NARCOTICS) Ludhiana from me and it was not the drug money as alleged by them and they informed the IT Deptt. The facts are that money actually belongs to Sh Surinder Kumar who run away due to the fear of ADCP (NARCOTICS) out of this amount Rs 10,00,000/- was collected from Ranjodh Singh jaga Sarpanch of Hambran on behalf of Sh. Surinder Kumar and Rs 1,65,000/- given by Surinder Kumar as the total amount has to be paid Sh. Gurpreet Singh. But before the delivery of cash the same seized by ADCP (NARCOTICS) was requisitioned by the income tax Deptt. on 08.11.2019. That statement of Ranjodh Singh Jagga was recorded on 14.10.2019 which was before the requisition of cash by income tax Deptt. and drug enquires was going on and due to that he may have denied any such transaction. And Sh Surinder Kumar ran away from his address. The said statement was not confronted to me at that stage but confronted on 17.09.2021 during Asst. Proceeding after Gap of two year. It is against natural justice, as after two years no evidence could be produced as I was only collection agent and at that time due to fear of ADCP narcotics nobody came forward. Further the facts of the Asst. In the above case are as under: Return filed 19.09.2021 143(2) issued 22.09.2021 Show cause issued 09.09.2021 Statement recorded 131(1A) 17.09.2021 Cash requisitioned 08.11.2019 Statement of Ranjodh Singh 14.10.2019 Time for final reply 23.09.2021 Asst. Order Passed 24.09.2021 Within five days of filing of ITR, Asst. order was passed. The addition made that I could not produce the said person after two years is just on presumption as in such type of transaction and fear of the authorities nobody will come forward to explain the amounts hence in view of circumstances the amount cannot be taxed in my hand. Without prejudice to above, it is submitted that the Assessing officer has accepted the Return Income of the assessee for A.Y 2014-15, 2015-16, 2016-17, 2017-18, 2018-19, 2019-20. 5 The assessment orders were passed by accepting the return income. The year wise detail of ITR is as under: ASSESSMENT YEAR RETURNED INCOME INCOME ASSESSED BY DCIT CC-3 LUDHIANA 2014-15 2,20,000.00 2,20,000.00 2015-16 2,70,000.00 2,70,000.00 2016-17 2,70,000.00 2,70,000.00 2017-18 2,93,440.00 2,93,440.00 2018-19 2,99,520.00 2,99,520.00 2019-2020 2,97,600.00 2,97,600.00 2020-21 4,83,200.00 483200 + 1165000.00 TOTAL 2133760.00 3298760.00 It is submitted that income of Rs 4,83,000/-, has been accepted by the AO for the year under assessment and also the income for the previous years as per the above chart. Based on that itself, and earlier six year income, saving of Rs 11,65,000/- stand justified. A person earning Rs. 2133760.00/- in seven years can have cash in hand to the extent of Rs 11,65,000/- which is not unexplained in view of income declared and accepted. Further it may submit here no other valuable was found from me or seized from me. Hence the addition u/s 69A is not called for otherwise also be total amount cannot be considered as unexplained. The copies of ITR acknowledgement and orders passed by learned AO are attached. It is therefore prayed that addition made may please be deleted.” 3.1 The submissions so filed by the assessee were considered but not found acceptable to the Ld. CIT(A) and he has sustained the addition so made by the AO. Against the aforesaid order and findings of the ld CIT(A), the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR reiterated the submissions made before the lower authorities and it was submitted that there is no contradiction in the submission so made by the assessee before the Ld. CIT(A). It was submitted that at first place, it was the claim of the Revenue only that the money so seized belongs to the assessee and where the assessee came forward and submitted that the money does not belongs to him and belongs to Shri Surinder Kumar, the said explanation was not accepted by the AO therefore to prove the source of the money so seized, the assessee the assessee came out with an alternate explanation that he has been regularly filing his tax return for 6 the earlier years and therefore the cash so seized is from the savings from his earlier years and therefore the source thereof should be taken as explained based on his past tax filings. It was submitted that the alternate contention was however not rightly appreciated by the Ld. CIT(A) and hence the assessee is in appeal before this Tribunal. 4.1 During the course of hearing the Ld. AR also submitted the availability of cash out of past years income and tax filings and details thereof are as under: A.Y. Returned Income Savings & Tax Personal Expenditure Cash available 2014-15 Rs. 2,20,000 - 120000 100000/- 2015-16 Rs. 2,70,000 - 120000/- 150000/- 2016-17 Rs. 2,82,000 12000 140000/- 130000/- 2017-18 Rs. 3,25,000 31560 150000/- 143000/- 2018-19 Rs. 330000/- 30980 150000/- 149000/- 2019-20 Rs. 330000/- 32400+1000 150000/- 145000/- 2020-21 240000/-(6 months) - 80000/- 160000/- Total 9,77,000/- 4.2 It was submitted that the tax returns for all these assessment years have been accepted by the Revenue authorities and given the same and taking into consideration the past savings and availability of cash in hand, the same duly explains the source of seized from the assessee. It was accordingly submitted that necessary relief be provided to the assessee and the addition so made under section 69A be directed to be deleted. 5. Per contra, the Ld. DR has relied on the order of the lower authorities and has take us through the findings of the ld CIT(A) which are as under: 7 “The above arguments of the AR are self-contradictory and in contrast to what were stated before the AO. On one hand, the assessee claimed that the money seized belongs to one Sh. Surinder Kumar his employer and collected from two persons namely Sh. Surinder Singh and Sh. Ranjodh Singh Jagga but could not produce Sh. Surinder Singh and Sh. Ranjodh Singh Jagga denied giving any money to the assessee and even refused to identify the assessee. Now the AR during the appellate proceedings is trying to explain that the money is assessee's own income of the current year and earlier years. This change of stand is fatal to the case of the assessee and shows that the assessee is also not sure about the source of cash recovered from him. The first story of the assessee about collection of money from different persons on behalf of Sh. Surinder Kumar has been proved as an afterthought and found false as demonstrated by the AO in the assessment order. The second story of the AR of the assessee about the source of cash as savings out of assessee's income is also not believable because it is in contrast to the facts stated by the assessee earlier where no such claim was made at any time during the investigation, or before the AO during assessment. Hence, no such claim can be made now during the appellate proceedings. Secondly, the assessee has not been able to demonstrate why he was carrying the cash with him if it was his past savings and such claim is negated by the decision of the Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) quoted by the AO in the assessment order, on the principle of test of human probability and on the basis of surrounding circumstances. Thus, the AO was right in his observation that in this case, no documentary evidence have been provided by the assessee in support of his contention and all his submissions have been found to be unsubstantiated and hence not acceptable. The AO has rightly referred to the provision of Section 292C(2) of the Income Tax Act, 1961 and assessee is liable to explain the true source of the money as well as the ownership of the money found in his possession. Under the facts & circumstances of the case and in view of the discussion in the assessment order and the observations above, the addition of Rs. 11,65,000/- made by the AO is found sustainable and hence confirmed.” 6. We have heard the rival submissions and purused the material available on record. The limited issue under consideration relates to source of cash amounting to Rs 11.65 lacs found and seized from the possession of the assessee. The assessee has submitted that he was acting as a collecting agent for Shri Surinder kumar and used to collect cash on his behalf from various persons. In this particular case, it was submitted that he has collected cash of Rs 10 lacs from Shri Ranjodh Singh Jaga and Rs 1.65 lacs from Shri Surinder Kumar and which were to be given to Shri Gurpreet Singh. The explanation so submitted by the assessee was sought to be verified by the AO and summons were issued to the three persons referred to by the assessee. Summons issued to 8 Shri Surinder Kumar remain unserved, Shri Gurpreet Singh didn’t appear in response to summons issued and Shri Ranjodh Singh Jaga in his statement dated 14/10/2019 denied to identify the assessee and Shri Surinder Kumar and has also denied of giving any amount to the assessee. The assessee was thereafter issued a show-cause and was asked to produce these persons. The assessee in response shown his inability to produce these persons due to lapse of time and contact with these persons , however, reiterated his earlier submissions that he worked as a collection agent for Shri Surinder Kumar who used to contact him through telephone and issued him instructions and used to get paid Rs 12000/- as monthly salary. The explanation so submitted by the assessee in support of source of cash found and seized was however not found acceptable to the AO and was rejected. 7. During the appellate proceedings, the assessee reiterated his earlier submissions and has also emphasized on the fact that statement of Shri Ranjodh Singh Jagga was recorded on 14/10/2019 much before the requisition of cash by the tax department and drug enquiries were going on and due to that, he may have denied such transaction and Shri Surinder Kumar also ran away from his residence. It was also submitted before the ld CIT(A) that statement of Shri Ranjodh Singh Jagga was not confronted to the assessee at the time of recording of the said statement on 14/10/2019 but was provided to him during the course of assessment proceedings after gap of two years and it is against natural justice and as a result, the assessee couldn’t adduce any evidence at such later point in time or produce these persons as in such type of transactions the people will never come forward and it is for the authorities to enforce their presence. It was further submitted that within five days of filing the return of income, the AO passed the assessment order which again call for lack of sufficient opportunity. There is however no finding which has been recorded by the ld CIT(A) dealing with these contentions advanced by the assessee and the findings of the AO have been confirmed. 9 8. During the appellate proceedings, the assessee by way of alternate contention and without prejudice to his initial contention, submitted that where the AO has accepted the assessee’s return of income disclosing income amounting to Rs 4,83,000/- and taking the same into consideration and tax filings for earlier years, the source of cash so found and seized stand justified in terms of present and past savings of the assessee. The said alternate submission was also rejected by the ld CIT(A) holding it to be contradictory to initial submission so made by the assessee, that such alternate submission cannot be made during the appellate proceedings and that the assessee failed to offer any explanation for carrying such cash with him if it was from his past savings. 9. In our view, there is no contradiction in the alternate submission so made by the assessee before the Ld. CIT(A). Once the Assessing officer has recorded a finding that the cash so seized belongs to the assessee and not to any third person and rejected the initial explanation so furnished by the assessee, then in such a scenario, the onus shifts back on the assessee to explain the source of such cash found and seized from the possession of the assessee. In such a scenario, where the assessee came forward with an alternate submission that cash so found and seized is from his past earnings as duly reflected in his tax filings as accepted by the tax authorities and past savings which have been accumulated therefrom, the said explanation has to be examined based on material available on record and cannot be summarily dismissed as has been done in the present case by the ld CIT(A). The tax filings for the year under consideration as well as for the earlier years are very much part of record and as far as claim of past savings and availability of cash in hand, the ld AR has submitted the details and which can be verified by the authorities. Therefore, in the entirety of facts and circumstances of the case, we agree with the submissions of the ld AR that the alternate contention was not rightly appreciated by the Ld. CIT(A) and we deem it appropriate to set-aside the 10 matter to the file of the ld CIT(A) to examine the alternate contention a fresh as per law after providing reasonable opportunity to the assessee. 10. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 04/07/2023. Sd/- Sd/- आकाश दप जैन $व%म 'संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद,य/ ACCOUNTANT MEMBER AG Date: 04/07/2023 ( + ! , - . - 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