Charan Singh Mehta, Hisar V. ITO WARD -1, Hisar

ITA 9380/DEL/2019

AI Insights

The case involves Charan Singh Mehta, the appellant, contesting the orders of the Income-tax Officer, Ward-1, Hisar, and the Commissioner of Income-tax (Appeals)-5, Ludhiana, regarding the assessment year 2010-11. The primary contention was the jurisdiction and the legality of the ex parte orders passed under sections 144 and 147 of the Income Tax Act, 1961. The appellant argued that the additions made to his income were arbitrary and without proper jurisdiction, as per CBDT instructions. The Assessing Officer had made additions based on unexplained cash deposits in the appellant's bank account, which were claimed to be proceeds from the sale of agricultural land. The Tribunal found that the CIT(Appeals) had merely affirmed the Assessing Officer's view without adequately addressing the appellant's explanations and thus restored the matter for a fresh assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 112592 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 06-12-2022
• Assessment Year: misc
• Appeal Filed On: 04-07-2022
• Other Referred Cases: Durga Prasad More (1971) 82 ITR 540
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Capital asset; Principle of natural justice; Deemed to accrue or arise in india; Assessment record; Capital receipt; Set aside
• Section: 147; 148; 144; 2(14); 143(2)

Judgement Text

1 ITA No. 9380/Del/2019 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER ITA No. 9380/DEL/2019 Assessment Year: 2010-11 Charan Singh Mehta, S/o Amar Ditta Mehta, 1-A Defence Colony Hisar-125001 PAN- AIAPM3173E Vs Income-tax Officer, Ward-1, Hisar. APPELLANT RESPONDENT Assessee represented by None Department represented by: Shri Sumesh Swani, Sr. DR Date of hearing 07.12.2022 Date of pronouncement 13.12.2022 O R D E R PER KUL BHARAT, JM: This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals)-5, Ludhiana, dated 25.09.2019, pertaining to the assessment year 2010-11. The assessee has raised following grounds of appeal: “1. That the orders of the Authorities below CIT(A) LDH/HSR and that of the Assessing officer ITO ward -1 Hisar are liable to be quashed, being arbitrary, illegal, without jurisdiction and justification so far as impugned additions as being made and sustained are concerned. 2. That the order passed by ITO ward-1 Hisar and sustained by worthy CIT(A) LDH/HSR is without jurisdiction and deserves to be quashed since 2 ITA No. 9380/Del/2019 as per CBDT instruction no. (i)/2011 dated:31/01/2011 jurisdiction of the case in case of non corporate assessee exceeding income Rs. 1500000/- vests with ACIT’s/DC’s and in the case of the appellant assessee total assessed income was 3482000/- and deposit in ICICI saving bank account as per AIR information Rs.3600000/-, on the basis of which proceedings u/s 147 of the Income Tax Act 1961 was initiated. 3. That the A.O below ITO ward -1 Hisar was quite wrong and worthy CIT (A) also grossly erred in sustaining the arbitrary and illegal exparte order made u/s 144 of the Act on the basis of tempered assessment record duly conceded by the A.O through his comments on remand report and as such the total income was wrongly and illegally assessed at Rs. 3482000/- the orders being bad in law requires to be annulled also beyond the scope of section 292. 4. That the assessing officer below grossly erred in initiating reassessment proceedings u/s 147 of the Act and passing an exparte assessment order u/s 144 of the Act without issue and service of proper and valid notice u/s 148 r.w.s. 147 of the IT Act 1961 and worthy appellate authority CIT(A) was wrong in sustaining the said impugned order and addition of Rs. 3482000/- as total income of the appellant assessee. 5. That the order of the authority below are further liable to be quashed for want of issue and service of notice u/s 143(2) of the Act before the said impugned order u/s 144 r.w.s 147 of the Act was passed. 6. That the authorities below ITO ward -1 Hisar as A.O and CIT (A) LDH/HSR were wrong in not appreciating the evidence adduced on record, explaining the source of deposit of Rs.3600000/- in assessee’s ICICI saving bank account received as advance from the vendees of agriculture land transferred vide sale deed no. 1244 dated:08/06/2011 for Rs. 6751000/- belonging to Smt. Rajrani Mehta w/o Sh. Charan Singh Mehta (assessee) and not relying on the related documents for that reason also the order requires to be quashed. 7. The orders of the authorities below are also liable to be quashed being conjectural and not being a speaking order. 8. That the authorities below were also grossly erred in opining and directing for initiation of penal proceedings u/s 271 (1) (c) of the Act 3 ITA No. 9380/Del/2019 against the appellant, action being bad in law requires to be set aside since additions are being on adhoc and estimated basis and on mere change of opinion.” 2. At the time of hearing no one attended the proceedings on behalf of the assessee. It is seen from the record that on various dates no one has been attending the proceedings on behalf of the assessee. The notice of hearing sent have been returned by the postal authorities. It is also seen that the acknowledgement of one of the hearing is also on record. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being decided on the basis of material available on record. 3. The facts giving rise to the present appeal are that the case of the assessee was reopened u/s 147 of the income-tax Act, 1961 (in short “the Act”). In response to the statutory notice the assessee appeared. However, before the assessing authority no one attended the proceedings after 10.11.2017. A final opportunity was given for 11.12.2017. Since no one attended the proceedings the Assessing Officer proceeded to make addition of Rs. 34,82,000/- out of the amount of cash deposited in the saving bank account held with the ICICI Bank, Hisar. Aggrieved against this, the assessee preferred appeal before the learned CIT(Appeals), who after considering the submissions dismissed the appeal. Now the assessee is in appeal before this Tribunal. 4 ITA No. 9380/Del/2019 4. Apropos to the grounds of appeal, learned Sr. DR supported the orders of the authorities below and submitted that the assessee could not explain the source of cash deposits, therefore, the authorities below were justified in making the addition. 5. The explanation of the assessee was that the amount was out sale proceeds of agricultural land. Out of this amount the assessee deposited the money in his bank account. It was stated that since wife of the assessee had sold agricultural land which was not a capital asset within the meaning of section 2(14) of the Act, no income tax was attracted on the transfer of such land. Hence, the entire cash was a capital receipt in the hands of the wife of the assessee. It was also stated that an affidavit was filed before the learned CIT(Appeals). 6. I find that the learned CIT(Appeals) has decided this issue by observing as under: 3.5 Ground of Appeal No. 9 taken as an Additional Ground relates to addition of Rs. 34,82,000/- on the basis of cash deposited in the bank account of the assessee. The AO has mentioned that the assessee deposited an amount of Rs. 36,07,000/- in cash in his bank account with ICICI Bank, Hisar during the year under consideration. The assessee was asked to explain the source of cash deposited in his bank account and as the assessee had not stated anything in the matter before the AO, it was presumed that the cash was deposited out of the unexplained sources. As per the AO, by taking the reasonable view in the matter, the peak of cash deposited was calculated which worked out at Rs. 34,82,000/- and the same was added to the taxable income of the assessee. Accordingly the AO made addition of Rs. 34,82,000/-. 5 ITA No. 9380/Del/2019 The facts of the case, the basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has submitted that the cash deposit was out of Rs. 6 lacs on 06.07.2009 received from Smt. Pushpa Devi through her daughter, Rs. 15 lacs on 10.07.2009 and Rs. 15 lacs on 03.09.2009 received from Smt. Rajbir Kaur, Smt. Sinder Kaur and Smt. Pushpa Devi w/o Sh. Deenanath as advanced/part payment against 77 acre of agriculture land at Village Mangalia, Tehsil Rania, District Sirsa. The AR has fiied the copies of the document in support of his submissions regarding the source of cash. The documents were sent to the AO for carrying out necessary enquiries and submit a report as per provision of Section 250(4) of the Income Tax Act, 1961. The assessee was also given an opportunity by the AO to substantiate his claim. A copy of the report submitted by the AO during the appellate proceedings was provided to the AR and the submissions filed have been considered & placed on record. It is rightly mentioned by the AO that the document does not support the explanation about the source of cash as advance against sale of land. The land in question was sold much later in the Financial Year 2011-12 vide registration deed no. 1244 dated 08.06.2011. Further, from the documents it is seen that the land in question was purchased by the Smt. Raj Rani w/o Sh. Charan Singh Mehta from one Sh. Yatish Kumar for Rs. 26,54,000/- vide Registration Deed dated 15.07.2010. It is thus clear that on the date of deposit of cash, the wife of the assessee was not even the owner of the land. In the absence of the ownership how could she enter into an agreement to sell and receive money against such land. It may be true that the AR has furnished certain documents regarding the explanation about the source of cash deposited in the bank account of the assessee, but the documents have to be seen critically and the story of the assessee is to be judged on the test of human probability. As rightly observed by the AO also in the remand report, infact, the story in the case of the assessee does not pass the test of human probability. Here, it is relevant to mention the ratio laid down by the Hon'ble Supreme Court in the case of Durga Prasad More (1971) 82 ITR 540 Hedge J, which is squarely applicable in this case. The part of the above judgment of Hon'ble Supreme Court, relevant to the matter in hand, are that "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an 6 ITA No. 9380/Del/2019 assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." Thus, the explanation of the appellant regarding the source of cash deposit is not comprehensible. The AO has rightly mentioned that explanation of the assessee cannot be accepted as the land was not owned by the assessee at the relevant time and there is wide gap of two years between the two situations. It is also mentioned by the AO that the assessee indulged in creating complexity in the facts by furnishing misleading the information and the process adopted by the assessee put a question mark as authenticity of the facts narrated by the assessee could not be established and remained unverified. Thus, the assessee has miserably failed to substantiate the claim regarding the cash deposit. The identity of the persons from whom the cash was allegedly received has not been established; neither their capacity to pay and the logic for receiving the money in the absence of ownership of land have also not been convincingly explained. Nobody will pay any sum of the money as advanced to another person who is not the owner of the land at that time. So the story of the assessee regarding the source of cash deposits is found to be a make belief story, not acceptable on the principle of human probability. Further, the assessee was never the owner of the alleged land and the assessee's wife was having her bank account. The affidavit of Smt. Raj Rani Mehta is a self serving document and the story therein is unbelievable. The AO has elaborately discussed the various documents filed as additional evidence including the 'agreement to sell' the land and the affidavits filed by the AR during the appellate proceedings and found the explanation regarding the cash deposit as not convincing. The AR has not been able to rebut the conclusions of the AO as mentioned in the remand report submitted during the appellate proceedings in the rejoinder filed in response to remand report. On the overall analysis of the facts in this case, it emerges that the source of cash deposited in the bank account of the assessee during the Financial Year 2009-10 remains unexplained and the AO was right in treating the same as deemed income of the assessee. In view of the elaborate discussion and facts mentioned by the AO in the remand report submitting during the appellate proceedings commenting on the various documents 7 ITA No. 9380/Del/2019 submitted during the appellate proceedings as additional evidence, the contentions of the AR are not found acceptable. The AR has not produced the relevant persons before the AO during the remand proceedings and the AO has rightly observed that the onus cast upon the assessee to explain the source of cash deposit is not a mere formality but the onus is to be discharged with evidence which can stand the test of scrutiny investigation. The AO has elaborately discussed and given comments while rejecting the various contentions and arguments taken during the appellate proceedings. The AO has also discussed in detail why the documents filed by the assessee are not convincing to explain the source of cash deposited in the bank account of the assessee. The reasoning given by the AO are found judicious and the AR has not been able to successfully rebut the same in the rejoinder filed during the appellate proceedings. As the assessee has not been able to satisfactorily explain the source of cash deposit in his bank account even during the appellate proceedings, the same is required to be treated as deemed income of the assessee. Therefore, the addition made by the AO is found sustainable and hence confirmed. Accordingly, this ground of appeal is dismissed. It is mentioned here that during the appellate proceedings, the assessee has filed an agreement dated 15.07.2010 for purchase of land by Smt. Raj Rani Mehta W/o Sh. Charan Singh Mehta for Rs. 26,54,000/- along with the stamp value of Rs. 45,516/-. The AO is advice to take necessary action as per law, to examine the source of investment made in the purchase of this land by Smt. Raj Rani Mehta. These may be considered as direction u/s 150 of the Income Tax Act, 1961.” 7. It is seen from the record that the assessment was made ex parte to the assessee. The learned CIT(Appeals) has merely affirmed the view of the Assessing Officer without giving any finding on the explanation offered by the assessee regarding sale of agricultural land. I, therefore, considering the totality of the facts and to subserve the principles of natural justice, set aside the impugned order and restore the assessment to the file of the assessing authority to frame the assessment 8 ITA No. 9380/Del/2019 de novo after giving adequate opportunity of hearing to the assessee. Grounds of appeal stands allowed for statistical purposes. 8. Assessee’s appeal is allowed for statistical purposes. Order pronounced in open court on 13 th December, 2022. Sd/- (KUL BHARAT) JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI