Farhatullah Khan Hameed Khan, Aurangabad V. Income-tax Officer,

ITA 836/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7589 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-03-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 28-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Keywords: Principle of natural justice
• Section: 40A(3); 148

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D. KARUNAKARA RAO, AM . / ITA NO.836/PUN/2016 !' # $# / ASSESSMENT YEAR : 2008-09 MR. FARHATULLA KHAN HAMEED KHAN, 382, DAILY MARKET, CANTONMENT, AURANGABAD. PIN-431 002. PAN : ABHPH8236K ....... / APPELLANT %' / V/S. THE INCOME TAX OFFICER, WARD 2(3), AURANGABAD. / RESPONDENT APPELLANT BY : SMT. DEEPA KHARE RESPONDENT BY : SHRI PANKAJ GARG / DATE OF HEARING : 15.05.2018 / DATE OF PRONOUNCEMENT : 17.05.2018 & / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD DATED 15 .02.2016 FOR ASSESSMENT YEAR 2008-09. 2 ITA NO.836/PUN/2016 A.Y.2008-09 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN APPEAL: 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS I N CONFIRMING ADDITION OF RS.23,00,000/- U/S.69A ON ACCOUNT UNEXP LAINED MONEY ON THE GROUND THAT THE APPELLANT HAS NOT DISCHARGED TH E BURDEN OF PROVING THE CASH DEPOSITED IN THE BANK ACCOUNT. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS.55,490/- U/S.40A(3). 3. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.34,923/- ON ACCOUNT OF DISALLOWA NCE OF EXPENSES DEBITED TO P & L ACCOUNT WHICH IS NOT JUST AND PROPER. 4. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS 50,000/- ON ACCOUNT OF AGRICULTURAL INCOME. 5. THE APPELLANT CRAVES TO ADD, ALTER, MODIFY OR SU BSTITUTE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. FURTHER, THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GR OUND RELATING TO QUESTION OF RE-OPENING OF ASSESSMENT AND THE SAID ADDITION AL GROUND READS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REA SSESSMENT PROCEEDINGS U/S.147 BEING INITIATED IN ABSENCE OF M ATERIAL SOWING ESCAPEMENT OF INCOME IN THE HANDS OF THE APPELLANT IS VOID AND MAY KINDLY BE CANCELLED. THE MATERIAL BASED FOR RE-OPEN ING IS VAGUE AND HAS NO LIVE LINK WITH ESCAPEMENT OF INCOME IN THE H ANDS OF THE APPELLANT. 4. ON THE BASIS OF AIR INFORMATION, A NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS ISSUE D FOR THE PURPOSE OF VERIFYING THE SOURCES OF DEPOSITS IN CASH AMOUNTING TO RS .29,75,050/- IN HIS BANK ACCOUNT. IN RE-ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER MADE THE FOLLOWING ADDITIONS: SR. HEAD AMOUNT IN RS. 1 UNEXPLAINED MONEY UNDER SECTION 69A 23,00,000/- 2 DISALLOWANCE UNDER SECTION 40A(3) 55,490/- 3 DISALLOWANCE FROM SUNDRY EXPENSES 34,923/- 4 DISALLOWANCE OUT OF AGRICULTURAL INCOME 50,000/- 3 ITA NO.836/PUN/2016 A.Y.2008-09 AGGRIEVED WITH THE ADDITIONS MADE BY ASSESSING OFFICER, ASSE SSEE FILED APPEAL BEFORE CIT(A). THE CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE. NOW THE ASSESSEE IS IN APPEAL BEFORE ME RAISING GROUNDS EXTRACTED ABO VE. 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE ASSESSEE INTENDS TO NOT PRESS THE GROUND NO. 2, 3 & 4 IN VIEW OF SMALLNESS OF THE ADDITIONS. ACCORDINGLY, GROUND NO. 2, 3 & 4 ARE DISMISSED AS NOT PRESSED . NOW, THE GROUND NO. 1 IS TAKEN UP FOR ADJUDICATION. 6. RELEVANT FACTS WITH REGARD TO THE ADDITION OF RS.23,00,0 00/- INCLUDES THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED RETURN OF INCOME . ASSESSING OFFICER REOPENED THE ASSESSMENT BASED ON THE AIR INFORMA TION ABOUT THE VERIFICATION OF THE SOURCES OF THE CASH DEPOSITS IN THE BAN K ACCOUNT OF THE ASSESSEE. EVENTUALLY, UNSATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER MADE ADDITION OF RS. 23,00,000/- AS PER DISC USSION GIVEN IN 3.1 OF HER ORDER. WHEN THE DETAILS OF SOURCES OF DEPOSIT WAS ENQUIRED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT TOTAL A GGREGATED SUM OF RS.12,00,000/- WAS RECEIVED BY ASSESSEE ON DIFFERENT DATE S FROM MR. RIZWAN KHAN. SIMILARLY, ANOTHER AGGREGATED AMOUNT OF RS.11,00,000/- WAS RECEIVED FROM MRS. FARHA KHAN ON VARIOUS DATES. ON FINDING THE ASSE SSEE FAILED TO DISCHARGE THIS ONUS ABOUT THE SOURCES OF CASH DEPOSITS. ASSESSING OFFICER PROCEEDED TO MAKE ADDITION OF THE GROSS AMOUNT OF RS.23 ,00,000/-. REGARDING REPAYMENT OF THE SAID AMOUNT TO RIZWAN KHAN A ND FARHA KHAN IN SUBSEQUENT PERIOD, ASSESSING OFFICER DID NOT CONSIDER THIS FACT RELEVANT AND REJECTED THE SAME. ASSESSING OFFICER DISMISSED THE ASS ESSEES SUBMISSION ON THE FACT OF REPAYMENT IN CHEQUES USING BA NKING CHANNEL AND HELD THAT WOULD NOT AFTER THE DECISION OF THE ASSESSING OFFICER. 4 ITA NO.836/PUN/2016 A.Y.2008-09 7. DURING FIRST APPELLATE PROCEEDING, ON THE ISSUE OF ADDITION OF RS. 23,00,000/-, THE ASSESSEE COULD NOT IMPROVE HIS CASE DESP ITE VARIOUS SUBMISSIONS. THE CIT(A) DISMISSED THE SAME AS PER DISCUSSIO N GIVEN IN PARA 8 OF HIS ORDER. IN THE SAID PARAGRAPHS, CIT(A) HELD THAT T HE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS BY ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF THE PERSONS I.E. RIZWAN KHAN AND FARHA KHAN TO CONFIRM THE SAID PAYMENT IN CASH. THE CIT(A) HELD THAT CHEQ UES WERE NOT ISSUED TO RIZWAN KHAN. RELEVANT LINES OF THE SAID PARAGRAPH EXTRACTED AS UNDER: 8 IN RESPECT OF SHRI RIZWAN KHAN, THE ASSESSEE, VIDE SUBMISSIONS DATED 16/06/2014, HAD STATED THAT SHRI RIZWAN KHAN HAD LEFT AURANGABAD DURING THE PERIOD 2006-07 TO 2013-14. HOWEVER, NO PROOF OF THE SAME WAS SUPPLIED. EVEN OT HERWISE, THERE IS NO REASON AS TO WHY THE ASSESSEE COULD NOT PRODU CE THE ABOVE PARTY DURING THE COURSE OF APPELLATE PROCEEDINGS, W HICH HAS GONE ON TILL 10/12/2015 WHICH IS THE LAST DATE OF HEARIN G. IN RESPECT OF SMT.FARAH KHAN, IT HAS BEEN SIMPLY STATED IN THE CO URSE OF APPELLATE PROCEEDINGS THAT SHE HAS NOT GIVEN ANY RESPONSE TO COME FORWARD FOR GIVING ANY STATEMENT AND IDENTIFICATION PROOF. IT IS ABSOLUTELY CLEAR FROM THE ASSESSMENT ORDER AND THE CONDUCT OF THE ASSESSEE IN APPELLATE PROCEEDINGS THAT HE HAS FAILE D MISERABLY TO ESTABLISH THE IDENTITY OF THE PERSONS, THEIR CREDIT WORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS. MERE PRODUCTION OF AN UNREGISTERED DOCUMENT STATING THE INTENTION TO SELL THE PROPERTY , IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF TRANSACTION. EVEN THOUGH T HE AMOUNTS WERE SUBSEQUENTLY ALLEGED TO HAVE BEEN PAID BACK BY CHEQ UE, IN THE ABSENCE OF ANY DETAILS ABOUT THE BANK ACCOUNT IN WHICH THES E CHEQUES WERE DEPOSITED, IT CANNOT BE STATED THAT MERELY BECAUSE THE AMOUNTS WERE PAID BACK BY CHEQUE, THE TRANSACTION WOULD BE GENUI NE. IN THIS RESPECT, THE FACT THAT THE CHEQUES PURPORTEDLY ISSUED TO SHR I RIZWAN KHAN WAS FOUND TO HAVE BEEN CREDITED TO AN ACCOUNT BELONGING TO ONE SHRI RIZWAN AHMAD IS ALSO IMPORTANT. IT IS QUITE OBVIOUS THAT T HE CHEQUES WERE NOT ISSUED TO SHRI RIZWAN KHAN. IF ANY ENTRY STANDS IN THE NAME OF AN INDEPENDENT PARTY, THE BURDEN LIES ON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE PARTY AND ALSO TO PROVE TO THE SATI SFACTION OF THE ASSESSING OFFICER THAT THE ENTRIES REAL AND NOT FIC TITIOUS. UNDER THE CIRCUMSTANCES, I HOLD THAT THE ASSESSEE HAS BEEN UN ABLE TO ESTABLISH THE IDENTITY OF SHRI RIZWAN KHAN AND MRS.FARAH KHAN AND TO PROVE THAT THESE PERSONS ACTUALLY HAD ANY FUNDS OF THEIR OWN, OUT OF WHICH CASH PAYMENTS WERE MADE TO THE ASSESSEE AND AS SUCH THE ADDITION MADE BY THE AO IS JUSTIFIED. THUS, GROUND NO.1 IS D ISMISSED. 8. THE LD. COUNSEL FOR THE ASSESSEE REQUESTED FOR REMITTIN G THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER ON MERITS OF ADDITION OF RS. 23,00,000/-. 5 ITA NO.836/PUN/2016 A.Y.2008-09 9. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEAVILY ON THE ORD ER OF THE ASSESSING OFFICER/ CIT(A). 10. ON HEARING BOTH SIDES, I AM OF THE VIEW THAT THE COR E ISSUE RAISED BEFORE ME RELATES TO THE ADDITION OF RS. 23,00,000/- INVOLVING TWO CREDITORS I.E. RIZWAN KHAN AND FARHA KHAN AND THE DISCHARGING OF THE ONUS BY THE ASSESSEE. IT IS UNDISPUTED FACT THAT CREDITORS WERE NOT PRODUCED BEFORE THE AUTHORITIES BELOW AT THE RELEVANT POINT OF TIME. CIT(A) ALSO R AISED THE ISSUE ABOUT GENUINENESS OF THE ASSESSEES SUBMISSION ABOUT RE PAYMENT IN CHEQUES. IT IS NOT CLEAR AS TO WHY THE CREDITORS PAID T HE CASH IN SMALL PORTIONS AND PURPOSE THEREOF, WITHOUT HAVING ANY PROPER SECURITY OR DOCUMENTATION BY WAY OF PROMISSORY NOTE ETC. THERE IS NO CLARIFICATION ON THE NATURE OF TRANSACTIONS. I ALSO NOTICED THAT THE ISSU E OF REPAYMENT WAS REAL AND UNDOUBTED BY THE ASSESSING OFFICER. THERE IS THIRD PARTY EVIDENCE BY WAY OF CONFIRMATION FROM BOTH THE PERSONS I.E. RIZWAN KH AN AND FARHA KHAN. THERE CANNOT BE ANY DISPUTE ON THE IDENTITY OF THE PARTIES DUE TO THE UNDISPUTED FACT OF REPAYMENT OF RS.23,00,000/- TO BOTH THE KHANS (SUPRA.). CREDITWORTHINESS AND GENUINENESS CAN BE ISSUES. 11. CONSIDERING THE SAME, I AM OF THE VIEW THAT FOR THIS PURPOSE, THE MATTER SHOULD BE EXAMINED AFRESH BY THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS. THE ASSESSEE NEEDS TO DEMONSTRATE THE GE NUINENESS OF THE TRANSACTIONS TO THE SATISFACTION OF THE ASSESSING OFFICER IN THE REMAND PROCEEDING APART FROM THE CREDITWORTHINESS. THE ASSESS ING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF HEARING HEARD TO THE ASS ESSEE IN ACCORDANCE WITH SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO.1 RAISED IN APPEAL BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. ADDITIONAL GROUND RAISED BY ASSESSEE IS ALSO DISMISSED, AT THI S STAGE. 6 ITA NO.836/PUN/2016 A.Y.2008-09 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 17 TH DAY OF MAY, 2018. SD/- ( . / D. KARUNAKARA RAO ) / ACCOUNTANT MEMBER / PUNE; ! ' / DATED : 17 TH MAY, 2018. SB &'(!)*+,+$) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT (APPEALS), AURANGABAD. 4. THE PR. CIT-2, AURANGABAD. 5. %&' (( )* , + )* , - ,-. , / DR, ITAT, SMC BENCH, PUNE. 6. '/ 01 / GUARD FILE. // TRUE COPY // +2 / BY ORDER, ( 3 ). /PRIVATE SECRETARY + )* , / ITAT, PUNE.