SHRI NASIR AHMED RANGSHU, ANANTNAG V. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, SRINAGAR

ITA 73/ASR/2023

AI Insights

The case involves Sh. Nasir Ahmad Rangshu, a proprietor of M/s Fancy Electronics, who appealed against the order of the Commissioner of Income Tax (Appeals)-5, Ludhiana, which confirmed the addition of Rs.10,50,000 to his income for the Assessment Year 2020-21. The cash was intercepted by the J&K Police at Srinagar Airport, and upon failure to satisfactorily explain its source, it was treated as unexplained money under section 69A of the Income Tax Act. The appellant argued that the cash was recorded in his books and was intended for his mother's treatment in Delhi, but the authorities found inconsistencies in his statements and lack of documentary evidence to support his claims.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114452 (ITAT-AMRITSAR)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-05-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 06-03-2023
• Other Referred Cases: Unit Construction Co. Ltd. vs. Jt. CIT [2003] 260 ITR 189 (Cal.), Shri Charan Singh vs. Chandra Bhan Singh (AIR 1988 SC 6370), Sumati Dayal vs. CIT (1995) 214 ITR 801, McDowell & Co. Ltd (1985) 154 ITR 148
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 68; 69; 143(3); 69A; 191; 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (VIRTUAT COURT) BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 73/Asr/2023 Assessment Year: 2020-21 Sh. Nasir Ahmad Rangshu, K.P. Road, Anantnag 192 101, Jammu & Kashmir [PAN: ANRPR 4755P] (Appellant) V. Asstt. Commissioner of Income Tax, Central Circle-1, Srinagar (Respondent) Appellant by Sh. Bashir Ahmed Lone, CA Respondent by Dr. Vedanshu Tripathi, Sr. DR Date of Hearing : 22.05.2023 Date of Pronouncement : 07.06.2023 ORDER Per Dr. M. L. Meena, AM: This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 04.01.2023 in respect of Assessment Year 2020-21 where the assessee has taken the following grounds of appeal: I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 2 “1. The order passed u/s 143(3) of the Act is bad in law, as entire assessment is based on presumptions. 2. The order passed u/s 143(3) of the Act is bad in law, as the additions stand made, without detecting any defect in the books of accounts nor the Ld. AO or Ld. CIT (A) was able to reject book of accounts. 3. The CIT (A) erred in both facts & law by confirming addition of Rs 10,50,000.00 u/s 69A in an arbitrary manner, when the entire cash is recorded in the books of accounts. 4. The CIT(A) erred in both facts & law by confirming an addition of Rs. 10,50,000.00 u/s 69A in an arbitrary manner, and entire additions is made on presumptions and conjectures. 5. That, the assessment is based on mere presumptions and conjectures. 6. The appellant craves leave to add, amend, modify, withdraw any ground of appeal at the time of hearing and before the appeal is disposed off.” 2. Briefly the facts as per record are that the assessee has filed his return of income u/s 139(1) of the Act Rs. 6,06,510/- dated 13.01.2021. The assessee is engaged in the sole proprietorship business of Electronic Goods under the name and style of firm M/s Fancy Electronics. The AO has stated in the assessment order that on the basis of information received from J&K Police at Srinagar Airport, Srinagar, a cash of Rs. 10,50,000/- was intercepted from Sh. Nasir Ahmad Rangshu S/o Sh. Bashir Ahmad Rangshu R/o K.P. Road Anantnag. Since, the assessee was not able to explain the source of cash and also did not submit the proof of source, therefore, requisition under section 132A of the I. T. Act, 1961 was I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 3 made with the Station House Officer, Police Station, Humhama, Srinagar on 05.09.2019 and cash of Rs.10,50,000/- was deposited in the P.D. account of the Pr. Commissioner of Income Tax (Central), Ludhiana. During pre and post requisition proceedings the assessee was asked by the DDIT(Inv.-I), Srinagar to explain the source of the cash as found in his possession on the given date and in response, the assessee has stated that the treatment of his mother was to be done in Delhi in Medanta Hospital and accordingly explained the cash from his business at Rs. 8,35,000/- (which has been duly reflected in his books of accounts) and balance Rs. 2,15,000/- from his mother out of her personal savings. Thereafter, in response to a show-cause notice issued by the AO, the assessee submitted his reply which is found unsatisfactory that the assessee had failed to give any reasonable explanation with regard to the source and reason of carrying the said cash. Hence, the AO treated the same as unexplained money under section 69A of the Act and taxed accordingly u/s 115BBE of the Act. 3. The Ld. CIT(A) has confirmed the finding of the AO by observing as under: I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 4 5.1.1 Grounds of Appeal Nos. 2 to 5: In brief, a cash of Rs. 10,50,000/- was seized by Police Department on 13.07.2019. The AO completed the assessment u/s 143(3) by considering the said cash as unexplained u/s 69A. The basic grounds on which the AO made the said addition were as under: (1) The statement of the assessee differed during the Investigation and the assessment proceedings. (2) There was no requirement to carry funds in the form of cash from Srinagar to Delhi. (3) The AO further observed that the assessee might have acquired the said funds from his undisclosed income/sources. (4) During pre-investigation stage, the assessee in his statement had stated that Rs. 8,35,000/- was from his business and the rest was from personal savings of mother. During the assessment proceedings, the assessee ascribed the entire cash to be as per his books of accounts. During the course of appellate proceedings, the assessee was asked to explain the reason for differing statements in response to which he stated that after sudden seizure of cash by the Police at Airport, he got confused and he took his and the name of his mother for explaining the money as the same was for treatment of mother only. I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 5 I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 6 The same shows cash balance of Rs. 10,74,463/- as on 13.07.2019. The cashbook* does not show any withdrawal of money by the assessee either on 13.07.2019 or the day immediately preceding that. In case, any money is withdrawn by the assessee for personal use, the same should be duly expressed in the books of accounts of the assessee. The assessee has acknowledged that the money was for treatment of mother at Delhi, i.e. for personal use of the assessee so the same should have been duly entered in the cashbook/capital account as drawing in the name of proprietor. From the perusal of cashbook, it is seen that no such drawing has been reflected in the cashbook. All this reveals that the ascribing of the source of cash to the business of the assessee is an afterthought and the same has been used as a ploy to justify the unexplained cash. The AR has also reasoned that the AO did not reject the books of accounts before framing the assessment u/s 143(3). In above regard, it is seen that there is no such compulsion on the AO to reject the books of accounts before applying the provisions of Section 69. It has been held by the Hon’ble High Court of Kolkata in the case of Unit Construction Co. Ltd. vs. Jt. CIT [2003] 260 ITR 189 (Cal.) that “for applying section 69 and 69B, it is not necessary that the books of account are to be rejected. The onus of proving the source of a sum of money is on the assessee. If he disputes the liability for tax, it is for him to show that the receipt was not income or that it was exempted from taxation under the law. In the absence of any proof, the Assessing Officer is entitled to charge it as taxable income. It is not necessary that the books of account have to be rejected expressly or that it is to be, in express terms, recorded that the books of account are not reliable or the explanation is not satisfactory. ” From the above facts, it emerges that: i. The assessee has been changing his statement during the investigation and assessment stages. ii. The change in statement shows that the assessee had an intention to hide the real source of money. iii. Earlier the assessee had stated that the money was required for treatment of mother at Medanta Delhi, subsequently it was stated that the appointment with Medanta was cancelled. I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 7 iv. The assessee could not provide any documentary evidence regarding appointment at Medanta Hospital, Delhi. v. The medical prescription of the mother is from Jammu & Kashmir Health Department dated 03.06.2019 and this document in no way proves the fixation of appointment of the assessee’s mother at Medanta Hospital, Delhi. vi. Had the source of money being genuinely from business, the same would have been part of the drawings/withdrawals in the cashbook. vii. The withdrawals in the cashbook should have been there as the money was not taken for business purpose but for personal purpose viii. There is no requirement to carry such amount of cash from Srinagar to Delhi when the same can be easily withdrawn from the bank accounts or transferred by wire. ix. There is enough circumstantial evidence to show that the cash was from unexplained sources. Apart from the circumstantial evidence, there is clear factual evidence in the nature of cashbook from where the assessee has not drawn any sum before the day of seizure. In the case of Shri Charan Singh vs. Chandra Bhan Singh (AIR 1988 SC 6370) the Hon’ble Apex Court clarified that the burden of proof lies with the party who substantially asserts the affirmative of the issue and not upon the party who denies it. It was further held that the party cannot, on failure to establish a prima-facie case, take advantage of the weakness of his adversary’s case. The party must succeed by the strength of his own right and the clearness of his own proof. The ratio laid down by Hon’ble Apex Court in case of Sumati Dayal vs. CIT (1995) 214 ITR 801 is squarely applicable in this case. The tax authorities are entitled to look into the surrounding circumstances to find out the realities and the matter has to be considered by applying test of human probabilities as enunciated r Hon’ble Apex Court. Reliance is also placed on judgement of Hon’ble Apex Court in McDowell & Co. Ltd (1985) 154 ITR 148 where it was observed that “Colorable devices cannot be part of tax planning and it was wrong to encourage or entertain the belief that is honorable to avoid the payment of tax by resorting to dubious methods’. Every person is entitled to so arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not sham and make believe. Thus, I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 8 the documents submitted as evidences serve as smoke screen to cover up the true nature of transactions. Thus in accordance with the ratio laid by the Hon'ble Apex Court in Sumati Dayal Vs Commissioner Of Income-Tax, 214 ITR 801 (SC), that "the apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. Hence, the addition made by the AO is upheld and accordingly, these grounds of appeal are dismissed.” 4. The assessee has reiterated the submissions made before the Ld. CIT(A) with the support of the written synopsis which reads as under: “The Ld. CIT (A) confirmed the addition of Rs 10,50,000.00 u/s 69A of the Act on account of cash intercepted at Srinagar airport in an arbitrary manner. It is submitted, that appellate for the relevant assessment year was engaged in the business of trading of electronic items and filed its JTR declaring Income of Rs. 606510.00 and sales of Rs 409,39,796,00 duly supported with audited financials and entire sales and purchases are supported with GST invoices. The appellate produced complete books of accounts comprising of cash book, ledger, sales invoice and purchases invoice before AO and the cash intercepted was duly recorded in these cash book, declared in audited financials under separate head as deposits with income tax and in the ITR. The Ld. AO made the addition purely on doubt as apparent from para 4.3, 4.4 & 4.5 of assessment order Kind attention is invited towards section 69A of the Act:- Section 69A is a deeming provision and applies on fulfilment of three conditions i. That in the financial year immediately preceding the assessment year the assessee found to be the owner of any money, bullion, I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 9 jewellery or other valuable article (technically means assets in the form of money or other high value precious metals). ii. That such assets such as money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by assessee iii. The assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, One of the essential conditions in Section 69A of the Act is that the Assessee should be the “owner of the money" and it should not be recorded in his books of accounts. This was a pre-condition to the next step of the Assessee offering no explanation about "the nature and source of the acquisition of such money. On a reading of section 69A (supra), it is clear that the onus is upon the AO to find the assessee to be the owner of any money, bullion, jewellery or valuable article and such money, bullion, jewellery or valuable article was not recorded in the books of account, if any, maintained by the assessee for any source of income. Only on those circumstances, the AO can resort to making an addition under section 69A of the Act only in respect of such monies / assets / articles or things which are not recorded in the assessee's books of account. The Hon’ble ITAT Bench- Mumbai in the case of DCIT Vs. Karthik Construction Co. in 1TA No.2292 Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under -cciiun 69A of the Act cannot be made in respect of those assets / monies / entries which are recorded in the assessee's books of account. Kind attention is invited torads recent judegment in case of Ramachandar Kanu Mendadkur Vs CIT (A) In ITA No. 163/Mum/2023- ITAT - ITAT (Mumbai) clarifies that addition under Section 69A of the Income Tax Act can only be made if the I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 10 assessee is found to be the owner of money that is not recorded in the books of account and fails to provide a satisfactory explanation regarding the source of the money Members Aniit Slmkla (Judicial) & Padmavatliy S. (Accountant) 112- 05-20231 The Conciilsion drawn by the Ilonble Bench arc reproduced as In the present case, the assessee was a practicing Advocate. The assessee was travelling from Mumbai to Delhi to attend two matters in the Hon'ble Supreme Court. During a search conducted at the airport, the officer found currency notes amounting to Rs. 16,00,000/- in possession of the assessee. The assessee claimed to have carried cash balance of Rs. 16,00,000/- for the purpose of paying the Senior Counsel in Delhi for cases listed before the Hon'ble Supreme Court. The assessee submitted that the source of this cash was from professional fees recorded in the books of accounts. The Tribunal observed that the assessee had provided supporting documents such as the cash book, bank statement, and ledger copy of professional fees to the lower authorities. Additionally, a detailed breakdown of cash fees received from Mr. Sagun Naik and the receipt pf professional fees via cheque from Mr. Biren Limbachiya was also submitted. The appellate attended before CIT (A) submitted written submisisons, copy of audited financials, cash book, GST returns, cash flows statements, bank statements, complete details of sources of cash realization from 1.04.2019 to 14/09/2019 and correspondingly utilization of cash and deposition in the bank account and the cash book clearly showed opening cash availability of Rs. 1074463.44 as on 13/07/2019 in the cash book. The appellate left for New Delhi on 13/07/2019 with cash, since, the cash books is maintained by accountant, who generally records the entries in the books in next day and clearly recorded the entry cash deposited with income tax on 15.07/2019, in the cash the cash book in normal course- cash book extract is attached. Regarding the issue raised by CIT (A), that appellate has not shown it as drawings, in the cash book or in capital account. Since, appellate is proprietor and cash was intercepted by income tax Department, so the I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 11 appropriate entry of cash deposit with Income Tax Department is reflected in the cash book and according reported the same in the balance sheet and declared in the ITR. The appellate dearly showed the said entry duly marked in cash book to AO and also to CIT (A) during assessment and appeal proceedings, the CIT(A) affixed the cash book upto 14/07/2019 in the assessment order only to confirm the addition, which is not an approach expected from quasi judicial authority, when the said entry is duly shown in the cash book on 15/07/2019, which is a normal practice in small business. Under the income tax Act, income is to be computed not of the basis of accounting treatment but on the well-established principle of the law interpreted by the courts on the basis of law of income tax. [CIT vs Sahara Investment India Ltd. (2004) 136 Taxman 61 (All)] Treatment as income bv the assessee is not conclusive: A receipt which is law cannot be regarded as income cannot become so merely because the assessee ha erroneously credited it to the profit and loss account. [CIT v Stewarts & Lloyds of India. (1987) 165 ITR (Cal); CIT v India Discount Co. Ltd. (1970) 75 ITR 191 (SC)] It is further submitted that the Ld. CIT (A), has made his own analysis and concluded, that on the basis of circumstantial evidences, that appellate has cash from unexplained sources, when appellate produced sufficient direct evidences, the circumstantial presumptions cannot be preferred. Further, the Ld. CIT (A) has relied on the Apex Courts judgment in case of Sumati Dayal Vs CIT (1995), the issue in the said case is different from this case. Primarily the addition in that case was tinder section 68, while as addition in the instant case is u/s 69A Section 68 and 69A are opposite sections. Section 68 makes addition , which is in the books of accounts,, and appellate cannot prove source of credit, while as section 69A makes additions which is out of books of accounts. Therefore this judgment is not applicable in the instant case. Regarding the issue of taking support from M/s Me Dowell & Co. Ltd. The said judgment has no relevance with the appellate case. Appellate has a very simply case, that cash intercepted is dub recorded in the books I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 12 of accounts , declared in audited financials and ITR and addition u s 69A is permissible, only, when cash or other assets are outside the books of accounts. The assets which is declared in the financials and ITR is already part of financial affiars and adding is again is not only unjustified rather will be technically as well as mathematically wrong. Keeping aforesaid facts and legality into consideration, it is prayed that, additions may please be deleted in the interest of justice and equity.” 5. The ld. DR for the department has supported the impugned order. He contended that the appellant contention is not substantiated with material evidence to explain the source of the cash found and seized by the department in lieu of interception of the Airport Authorities, Merely, changing the statement before the Assessing Officer, CIT(A) and in the present proceeding by way of afterthought without concrete verifiable corroborative documentary evidences cannot be acceptable under law. The appellant has explained at the time of seizure of the cash of Rs.10,50,000/- at the Airport that the source of the aforesaid cash was out of business income and personal savings but before the AO, he stated the cash pertains to the business income of the assessee. Without prejudice to above, if it is presumed that the cash seized pertains to the business cash, it is required to be supported with documentary evidences to substantiate that the cash has been withdrawn from the cash book of the assessee on the date of the seizure or previous days. He, further contended that the I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 13 purpose of the withdrawal of cash, has been for the treatment of mother illness, however, he has not produced any documents relating to the either mother illness or her treatment in Medanta Hospital. Thus, the appellant- assessee has failed to explain the source of cash of Rs.10,50,000/- seized and accordingly it is rightly treated as undisclosed income u/s 69A of the I.T. Act by the AO and accordingly confirmed by the ld. CIT(A) as per the law. He pleaded that the impugned order may be sustained. 6. Heard rival contentions, perused the material on record, impugned order, written submission and case law cited before us. It is undisputed facts on record that cash amounting to Rs.10,50,000/- was found and seized from the appellant assessee by the department in lieu of interception by the Airport Authorities. It is evident from the record that the appellant had made contradictory statement before the department in explaining the disputed cash seized to the extent of Rs.10,50,000/- being carried for the treatment of her ill mother in Medanta, Gurgaon. Initially, the source of the aforesaid cash was stated out of business income and personal savings before the Airport Authorities and DDIT (Investigation) and later before the AO, he stated the cash pertains to the business income of the assessee and carried for the treatment of her ill mother in Medanta, Gurgaon. I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 14 7. The CIT(A) has observed that the assessee has been changing his statement during the investigation and assessment stages which shows that the assessee had an intention to hide the real source of money. Earlier he had stated that the money was required for treatment of mother at Medanta Delhi, subsequently it was stated that the appointment with Medanta was cancelled. Further the assessee could not provide any documentary evidence regarding appointment at Medanta Hospital, Delhi and the medical prescription of his mother was from Jammu & Kashmir Health Department dated 03.06.2019, and that this document in no way proves the fixation of appointment of the assessee’s mother at Medanta Hospital, Delhi. The Ld. CIT(A) has categorically observed that had the source of money being genuinely from business, the same would have been part of the drawings/withdrawals in the cashbook as the money was not taken for business purpose but for personal purpose. The CIT(A) further noted that there was no requirement to carry such amount of cash from Srinagar to Delhi when the same can be easily withdrawn from the bank accounts or transferred. 8. Thus, the changing of the statement before the authorities below and in the present proceeding constitutes an afterthought which has no I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 15 evidentiary value in absence of supporting corroborative documentary evidences. The Ld. DR argued that even if, it is presumed that the cash seized pertains to the business cash, it is required to be supported with documentary evidences to substantiate that the cash has been withdrawn from the cash book of the assessee on the date of the seizure or previous day. The Ld. DR further contended that the purpose of the withdrawal of cash, has been for the treatment of mother illness in Vedanta, Gurgaon, however, he has not produced any documents relating to the either mother illness or her treatment in Medanta Hospital. Meaning thereby, the appellant-assessee has failed to explain the source of cash of Rs.10,50,000/- seized. Accordingly, it has been rightly treated by the Ld. CIT(A) as undisclosed income of the appellant u/s 69A of the I.T. Act, after considering both factual evidence such as no cash withdrawals from cashbook and circumstantial evidence of medical prescription of appellant’s mother and bills thereof with the support of the decisions of the higher Judicial forums as above. The Ld. AR failed to filed any documentary evidence or judgement in rebuttal to the contention and citation discussed by the CIT(A) while arriving at the decision in confirming the action of the AO. In view of that matter, we find no infirmity or perversity in the decision of the Ld. CIT(A) in confirming the addition of Rs.10,50,000/- as I.T.A. No. 73/Asr/2023 Nashir Ahmad Rangshu v. Asstt. CIT 16 unexplained money under section 69A of the Act and taxed accordingly u/s 115BBE of the Act. 9. In the above view, we hold that the submission and contentions raised by the Ld. AR for the appellant are devoid of merits. Therefore, the addition of Rs.10,50,000/ confirmed by the Ld. CIT(A) is upheld. 10. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 07.06.2023 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr./P.S.* Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order