RAKESH KUMAR MATHUR,JAIPUR V. INCOME TAX OFFICER WARD 4(4) JAIPUR, JAIPUR

MA 25/JPR/2024

AI Insights

The case revolves around the addition of Rs. 12,87,678 as unexplained cash under section 69A of the Income Tax Act, 1961, in the hands of Rakesh Kumar Mathur, an employee of Shri Rajiv Johari. The addition was based on substantial cash deposits in a bank account allegedly owned by Mathur but operated by Johari for business purposes. The Tribunal found that the entire credit in the account should not be considered as income and directed that only the correct income be taxed under presumptive taxation. The Tribunal also noted procedural lapses in the earlier hearings, leading to a violation of the principles of natural justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 28509 (ITAT-JAIPUR)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 01-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Other Referred Cases: CIT-I v Bhagat Steel Forging Pvt Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: VIVEK BHARGAVA
• Keywords: Set aside; Business income; Opportunity of being heard; Additional evidence; Salary income; Peak credit; Principle of natural justice; Presumptive income
• Section: 148; 142(1); 43; 13; 69A

Judgement Text

" vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM MA No. 25/JP/2024 (Arising out of vk;dj vihy la- ITA No. 671/JP/2024) fu/kZkj.k o\"kZ@Assessment Year : 2009-10 Late Rakesh Kumar Mathur through Legal Heir Smt Annu Rani Mathur, 33, Barkat Nagar, Tonk Phatak, Kalyan Colony, Gandhi Nagar, Jaipur cuke Vs. The ITO Ward 4(4), Alwar LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: APXPM0237M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Vivek Bhargava, CA jktLo dh vksj ls@ Revenue by : Shri Gautam Singh Choudhary, (JCIT) a lquokbZ dh rkjh[k@ Date of Hearing : 04/03/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 01/ 04/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The Present Miscellaneous Application has been filed by the assessee u/s 254 of the Act against the order of ITAT, Jaipur Benches, Jaipur in ITA No. 671/JP/2023 dated 31.01.2024 praying therein following reasons to suitably modify or recall of its order: Brief facts of the case 1. The appellant was an employee of Shri Rajiv Johari during the AY 2009-10 as an assistant. He was working with him since 1996 and remained in his employment till December 2008/ January 2009. Mr Rajiv MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 2 Johari was doing his business of sale, supply and repair of computer and peripherals at 115, Shri Gopal Tower, Krishna Marg, C-Scheme, Jaipur. He was having few firms under his ownership viz.- a. M/s. Laptop Spares b. M/s. Digikey Computers 2. The appellant was paid salary of Rs. 5,000/- p.m. during AY 2009-10. 3. Notice u/s 148 was issued to him and it was alleged that assessee had a bank account with icici bank which was denied by the assessee at the initial stage of assessment proceedings. 4. The ld. A.O. obtained copy of bank statement from bank and informed assesse about it. The assessee was surprised and shocked to see the bank statement as the same was not in his knowledge and no transaction was carried out by him. There were huge transactions in the bank a/c. 5. The assessee under surprise and shock submitted his reply that the bank account was neither operated by him nor it was in his knowledge. He requested the ld. A.O. to provide some time to understand the situation and facts. The ld. A.O. did not allow any further time as the case was going to be barred by time and added the entire cash deposits of Rs. 12,87,678/- as unexplained cash u/s 69A vide order dated 28/12/2016. 6. The appeal of the assessee was also dismissed by the ld. CIT(Appeals) vide order dated 13/09/2023 without considering the additional evidences and the rejoinder of the assessee on the remand report of the ld. AO and hence this appeal Ground number 1 and 2 7. The assessee analysed the bank statement carefully and found that there were 13 credit entries (10 in AY 2009-10 and 3 in AY 2010-11) where name of ‘M/s. Laptop Spares’ was appearing in the narration column of the bank statement(PB-33). M/s. Laptop Spares is the name of firm owned by Shri Rajiv Johri, the previous employer of the assesse). Now, the assessee remembered that Shri Rajiv Johri opened this bank account by taking advantage of assessee’s low education, lack of understanding and his fiduciary capacity (influence as employer). He obtained KYC documents and took his signatures on bank account opening form by giving impression that salary account is being opened. The assessee did not any receive any further intimation/information/confirmation about account opening/ cheque book/ bank statement/passbook/atm card from the bank. The assessee MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 3 assumed that account has not been opened and this event faded from his memory by elapse of time. Mr. Johri continued to pay him salary in cash. Mr. Rajiv Johri secretly used this account for his own business receipts from his customers and withdrew cash from the account from time to time. It is evident from the 13 deposit entries (PB-33) where name of M/s. Laptop Spare has been mentioned by the respective payer and further evidenced by pattern of transactions as under- • The cash deposits have been made from various locations out of Jaipur by his customers and cash has been withdrawn through ATM by him soon after the deposit (within one or two days from deposit). • The other deposits (other than cash) contains narration like keyboard, battery, mother board and other computer parts which have been mentioned by respective payers suggest that the payment was made for supply/service of computer and related computer peripherals/items. • There is not a single withdrawal/payment by cheque. • All the withdrawals are by ATM card, Since the matter need thorough forensic investigation, the assessee lodged complaint against Shri Rajiv Johari with Police (Vidhyakpuri Police Station, Jaipur) on 27/01/2017 (PB. 43 to 44). No investigation report has been received from the Police till date. It can be understood from the facts stated above that the matter needs further investigation and scrutiny for the purpose of taxation as well. Thus under the facts and circumstances of the case prayer was made to the ld. CIT(Appeals) for admission of additional evidences in respect of ground no. 1 and 2. The additional evidences were as under- 1. Complaint filed by assessee with Police against Shri Rajiv Johri owner of M/s. Laptop Spares, (PB 43-44) 2. Affidavit of assesse to support his claim (PB 41-42) These evidences could not be produced before the ld. A.O. as the police complaint was lodged by assessee on 27/01/2017 i.e. after completion of assessment. The affidavit was given to support the contention raised by assessee after careful analysis of the bank statement of icici bank. It could not be done during assessment proceeding as the bank statement was available in the December 2017 only and the case was getting time barred on 31/12/2017. The ld. CIT(Appeals) sent these additional evidences to the ld. AO for necessary enquiry and his report. The ld. A.O. sent his comments vide letter dated 21/01/2019 (PB 45-46). The report of the ld. AO rejected the additional evidences without any discussion and therefore the ld. CIT(A) again asked the ld AO to send his proper report but no new report was submitted by him (PB-51). MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 4 The ld. A.O. has stated that the claim of the assessee does not appear to be genuine as he did not offer any explanation about cash deposits in the icici bank account during the course of assessment proceedings. It is respectfully submitted that the view expressed by the ld. A.O. in the remand report is not correct. His report is silent about any enquiry made by him from Mr. Rajiv Johri, icici bank and the Police department. He did not call the assessee during remand proceedings. It appears that he has not conducted any enquiry in remand proceedings and given his comments on the basis of the assessment proceedings. It is a fact that the bank account is in the name of the assessee and hence apparently the account holder is presumed as beneficial owner but in this case apparent is not real. Mr. Rajiv Johari is the real beneficial owner of this bank account and of the cash deposits/withdrawals and other deposits by online transfers/other modes. The pattern of transactions in the bank account, the 13 entries with name of M/s Laptop Spares (which is business firm of Mr. Rajiv Johari), police complaint filed by the assessee along with affidavit given by assessee supports the contention of the assessee. The ld. CIT (Appeals) dismissed the appeal without considering the rejoinder of the assessee on the remand report and further erred in holding that (para 12 of CIT(A) order)– “… In the present case, since the appellant was aware of said account number maintained in icici bank, Jaipur and the said account was opened by him or his employer as ‘Salary Account’ on behalf of the appellant was really belonging to him, the appellant.Therefore, the cash credit of Rs. 12,87,678/- must belong to appellant….” The ld. CIT(A) has erred • in not considering the rejoinder which he himself made part of the order. • in not considering the additional evidence and explanation furnished by the assessee. • In assuming that the assessee was aware of the bank account number whereas the assessee nowhere has admitted this fact. FIDUCIARY RELATION and UNDUE INFLUENCE OF MASTER 8. The master holds a real or apparent authority over the servant and he stands in a fiduciary relation to the servant. There are chances of master exercising undue influence over the servant to obtain undue advantage by exercising his authority and fiduciary relation. The assessee was a small wage earner and the employer Mr Rajiv Johri took undue advantage of his fiduciary relation to commit a fraud with assessee and Government. 9. The Police and Income tax authorities can track the deposit entries including the specific 13 entries and ascertain the details of depositors MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 5 and then enquiry can be made from them to unearth the truth. The ld. A.O. has not made any efforts in this regard under remand proceedings and the police is also not doing any investigation in spite of regular follow up by the assessee with the Police. The assessee is helpless and frustrated. The remand report was submitted in January 2019 i.e. after nine months by the ld AO and same report was repeated in his next reply dated 22/07/2019. 10. The cash withdrawal to the tune of Rs.14.83 lacs must have been utilized, spent or invested but the assessee is not found to be owner of such asset/investment or has made any huge expenditure Case Law 11. We would like to draw attention of the Hon’ble members towards judgment of Hon’ble Delhi High Court in the case of CIT-I v Bhagat Steel Forging Pvt Ltd (2014) 52 taxman.com 28 (16/09/2014) where it was held that- Where Assessing Officer submitted remand report after a gap of more than six months and said report did not deal with merits submitted by assessee, addition was not to be allowed 12. Under the facts and circumstances of the case the assessee has discharged his onus that he neither held the possession of the bank balance/cash withdrawals nor the cash deposited/other deposits pertains to him and where the ld. A.O. is not ready to make any further enquiry/investigation in the matter; the assesse cannot be held to be the owner of the cash deposits of Rs. 12,87,678/- in the icici bank account as contemplated u/s 69A of the Income tax Act, 1961. 13. We request your honours to direct the ld. A.O. to delete the addition of Rs. 12,87,678/-. Alternative Plea- Benefit of Peak Balance was not allowed 14. If your Honour do not agree with the above arguments then a prayer is made to consider this alternative plea while deciding the appeal. There are huge cash withdrawals from the bank soon after cash/other deposits in the bank account. It is an established norm that only peak balance is added to the income of the assessee but in this case this benefit has not been allowed to the assessee. We find support from the order of Delhi bench of Hon’ble ITAT in case of ITO Ward 4(2) v. Karan Mehra (ITA no. 2075/Del/2011) order dated 04/07/2014. It was held (para 5 of the order)- “….When the position is such that there are certain debits and credits in the bank account, it is wholly impermissible to consider only the deposits in the bank account for the purpose of making addition by totally ignoring the fact that there are withdrawals of the amount as well. In such a MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 6 situation, it is a peak amount which is required to be added, which exactly has been done by the ld. CIT(Appeals) in this case…..” We request your honours to direct the ld. AO to add only peak balance of Rs. 2,20,492/- and delete the addition of Rs. 12,87,678/-.” 2. Ld. AR of the assessee in addition to the prayer so made in the Miscellaneous Application vehemently submitted that as the assessee was in process of collecting the evidence based on the complaint lodged with police against Mr. Rajiv Johari who has used the bank account of the assessee that was the reason the assessee could not submit the detailed paper book to substantiate their case before Co-ordinate Bench and thereby the principle of natural justice is violated as the new date was not properly conveyed as on the date of last hearing the AR of the assessee sought adjournment as he was ill. The bench also noted that the assessee has filed the paper book but could not substantiate the written submission and thereby the bench has decided the appeal of the assessee exparte. Ld. AR of the assessee also submitted that during the pendency of the appeal. The assessee was expired and therefore, the legal heir prayed to restore the appeal of the assessee. MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 7 3. On the other hand, ld. DR supported the order of ITAT, Jaipur (supra) praying that the assessee wants to get ITAT’s order reviewed in the grab of Miscellaneous Application. 4. We have both parties and perused the material available on record. The bench prima facie notice that the case was fixed for hearing on 23.01.2024 on that day no one attended. Earlier to that date matter was fixed for hearing for the first time on 20.12.2023 and on that an application for adjournment was filed as his AR was suffering from fever and the bench adjourned that matter on 23.01.2024. The assessee contended that his counsel was not aware as was ill and thereby on 23.01.2024 no one attended hearing before the bench and thereby we are of the considered view that lis between the parties to be decided on merits so that nobody’s rights could be scuttled down without providing an opportunity of being heard. Therefore, considering the principle of nature justice which was violated based on the facts narrated above we recall the order dated 31.01.2024. 5. Now after recalling the order the case needs to be fixed for hearing afresh. But in the present case, the assessee has already placed on record all the material to decide the issue on hand in ITA No. 671/JP/2024. Therefore, with consent of both the parties, the MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 8 bench decided to proceed to consider the appeal of the assessee on its merits on the same day after recalling the order. 6. The assessee in this appeal has raised the following grounds: - “1. The ld. CIT(A) erred in law and on facts in confirming the action of the AO as to making the addition of Rs.12,87,678/- u/s 69A of the Act being the cash deposits in the bank account in the name of the assessee which was opened and operated by someone else. 2. (a) The ld. CIT(A) erred in law and on facts in not deciding the application under Rule 46A for admission of additional evidence and affidavit. (b) The ld. CIT(A) erred in law and on facts in deciding the case without considering the rejoinder of the assessee on remand report of the AO. (c) The AO erred in law and facts in not considering, not making any enquiry and not commenting on the additional evidences placed before the ld. CIT(A) and also not providing opportunity of being heard during remand proceedings. The AO was asked by the ld. CIT(A) to reexamine the additional evidences after submission of his remand report dated 21-01-2019 but no compliance was made by him. 3. The appellant craves permission to add or amend to any of the above grounds of appeal or to withdraw any of them. 7. The brief facts of the case are that in this case notice u/s 148 of the IT Act was issued on 21/03/2016 after obtaining administrative approval received from Pr. Commissioner of Income Tax-II, Jaipur. Notice u/s 148 was sent to the assessee through registered Post which was duly served upon the assessee. Thereafter, notice u/s 142(1) was issued to the assessee for filling MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 9 of return in response to notice u/s 148. The assessee submitted a return of income declaring total income of Rs. 75,090/- filed u/s. 139 may be treated return filed in response to notice u/s 148 of the IT Act 1961. Thereafter, notices were issued, and the assessee complied with those notices. The assessee drives income from Salary from M/s Digikey Computers. Ld. AO vide letter No. 555 dated 11.08.2016 and letter No. 735 dated 23/09/2016 addressed to the Branch Manager, ICICI Bank Ltd., C-Scheme, Jaipur calling for the bank statement of the assessee has been sent. In response, the Branch Manager, ICICI Bank Ltd., C-Scheme, Jaipur has sent a copy of the bank statement for the relevant period which was placed on record. Thereafter, a show cause notice was issued to the assessee on 17/11/2016 for explanation of cash deposit of Rs. 12,87,678/- on various dates throughout the year in the ICICI Bank, Jaipur. In response to show cause notice issued, the reply was filed contending that ; \"I have received your letter in connection with the rejections of the objection raised by me on reopening of the case u/s 148. In continuation to my earlier reply and under protest I would like to submit that the bank accounts maintained by me has already been submitted and the bank account for which the notice has been issued to me is not operated by me not it is in my knowledge. Further I would like to submit that I have enquired in the ICICI bank Ltd. and ask them to furnish the KYC details of the same account number and they have told me to wait for some time and they will provide the same in 7days.\" MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 10 Thereafter the assessee has not filed any explanation and thereby the ld. AO considered the cash deposited amounting to Rs. 12,87,678/- as unexplained money in the hands of the assessee- appellant u/s 69A of the Act added to the total income of the assessee. 8. When the matter carried to ld. CIT(A), he confirmed the finding of the Assessing Officer and thereby dismissed the appeal of the assessee by observing as under : “12 As per the above provisions of the Act, if appellant is found owner of such money and it is not recorded in the books of account, the initial onus lies over the appellant to prove the source of cash credit and genuineness of transaction. In the present case, since appellant was aware of said account number maintained in ICICI Bank, Jaipur and the said account was opened by him or his employee as ‘’Salary Account’’ on behalf of the appellant, was really belong to him, the appellant. Therefore, the cash credit of Rs.12,87,678/- must belong to appellant but the appellant was failed to explain the source of such money and has not offered satisfactory explanation before the AO at the time of assessment proceedings. Hence, I have arrived at the considered decision that the money in question belonged to appellant and the AO was totally justified in addition the same i.e Rs.12,87,678/- as unexplained money u/s 69A to the total income of the appellant. The addition of Rs.12,87,678/- is confirmed and grounds Nos. 1 & 2 are dismissed. 13. In the result, the appeal is dismissed.” 9. The ld. AR of the assessee in addition to the written submission so filed vehemently argued that the assessee has already taken up the matter of his bank account being used by Shri Rajiv Johari and he was doing his business of sale, supply and MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 11 repair of computer and its related items. Therefore, the assessee was not aware and the transactions recorded in that bank account. The assessee was receiving salary of Rs. 5,000/- only and therefore, transactions need to be assessed in the hands of Shri Rajiv Johari. Alternatively, Ld. AR of the assessee submitted that there are huge cash withdrawals from the same bank account soon after cash/other deposit in the bank account and therefore, the benefit of peak credit or if the same is treated as business then the profit under the presumptive taxation be applied. 10. Per contra, Ld. DR relied upon the orders of lower authorities submitting that the assessee was aware of the use of bank account and now the assessee cannot deny that he was not aware about of transactions recorded in his bank account. The assessee has not proved that the operations were also not taken by that assessee i.e. Sh. Rajiv Johari. Now at this stage, the assessee failed to place on record any material so as to charge income in the hands of Shri. Rajiv Johari. Therefore, the contentions of the assessee is not tenable as they have not co-operated and supplied those information at the time of assessment proceedings. MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 12 11. We have heard the rival contentions and perused the material placed on record. In this appeal though the assessee has raised three sperate grounds of appeal but all of them relates to the one issue of addition of Rs. 12,87,678/- u/s 69A of the Act in the hands of the assessee. The brief facts related to the dispute are that in his case notice u/s 148 of the IT Act was issued on 21/03/2016. The assessee submitted a return of income filed earlier declaring total income of Rs. 75,090/- u/s. 139 may be treated return filed in response to notice u/s 148 of the Act. Thereafter, notices were issued, and the assessee complied with those notices. The assessee drives income from Salary from M/s Digikey Computers. Ld. AO based on the record that the assessee has deposited a sum of 12,87,678/- in the ICICI Bank Ltd., C-Scheme, Jaipur. Based on that information he was issued to a show cause notice to explain the deposits of cash of Rs. 12,87,678/- on various dates throughout the year. The assessee submitted that; I would like to submit that the bank accounts maintained by me has already been submitted and the bank account for which the notice has been issued to me is not operated by me not it is in my knowledge. Further I would like to submit that I have enquired in the ICICI bank Ltd. and ask them to furnish the KYC details of the same account number and they have told me to wait for some time and they will provide the same in 7days.\" The bench noted that thereafter the assessee has not furnished MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 13 any details in support of the fact that who has in fact operated his bank account. Therefore, ld. AO made the addition of Rs. 12,87,678/- as unexplained money in the hands of the assessee- appellant u/s 69A of the Act. When the matter carried to ld. CIT(A) he has confirmed the addition by observing that the cash credit of Rs.12,87,678/- must belong to appellant but the appellant was failed to explain the source of such money and has not offered satisfactory explanation before the AO at the time of assessment proceedings and therefore, he confirmed the addition. Before us the ld. AR of the assessee that the bank account was used by Shri Rajiv Johari and he was doing his business of sale, supply and repair of computer and its related items. Therefore, the assessee was not aware on the fact of the transactions recorded in that bank account. The assessee was receiving salary of Rs. 5,000/- only and therefore, transactions need to be assessed in the hands of Shri Rajiv Johari. Alternatively, Ld. AR of the assessee submitted that there are huge cash withdrawals from the same bank account soon after cash/other deposit in the bank account and therefore, the benefit of peak credit or if the same is treated as business, then the profit under the presumptive taxation be applied to render the MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 14 justice to the assessee. Ld. DR did not dispute this alternative prayer of the assessee. Be that it may the bench feels that it is not under dispute that there are deposit of money and withdrawal of the same in the bank account and the assessee stated that one Shri Rajiv Johri used this account to undertake the business of doing the computer retail business and thereby who may the beneficiaries of that business the correct income in the hands of the beneficiary owner of the account be taxed and not the whole credit the benefit of expenditure incurred by using the same bank account credit be considered while computing the income of the assessee and therefore, the bench feels that entire credit of Rs. 12,87,678/- cannot be considered as income but the income from that credit be taxed in accordance with the presumptive scheme of taxation of retail trade be applied so as to end the justice in the matter and the ld. AO shall tax the correct income from that bank account and not the whole credit. Thus, we set aside the issue of charging the correct income in the hands of the assessee in accordance with law under the presumptive taxation after determining correct credit and expenditure incurred by way of withdrawal by the assessee. However, the assessee will not seek any adjournment on frivolous MA No. 25/JP/2024 Rakesh Kumar Mathur vs.ITO 15 ground and remain cooperative during proceedings before the ld. AO. In the result, Miscellaneous Application as well as appeal of the assessee is allowed as indicated hereinabove. Order pronounced in the open Court on 01/ 04/2025 Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 01/04/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Rakesh Kumar Mathur, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward 4(4), Alwar 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (MA No. 25/JP/2024) vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar "