SHRI SUBHASH SHARMA,CHANDIGARH V. ITO, W-2(3), CHANDIGARH

ITA 1586/CHANDI/2019

AI Insights

This case involves an appeal by Shri Subhash Sharma against the order of the CIT(A)-1, Chandigarh, which pertained to the Assessment Year 2014-15. The primary issues in the appeal included the sustenance of additions under Section 40A(3) for cash payments in property transactions, and the genuineness of unsecured loans from various individuals. The Tribunal examined the submissions and evidence presented, including affidavits, bank statements, and other documentation, to determine the validity of the additions made by the Assessing Officer and sustained by the CIT(A). The Tribunal's decision reflects a careful consideration of the legal provisions under the Income Tax Act, particularly focusing on the requirements for substantiating cash transactions and the burden of proof regarding unsecured loans.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469858 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: Gurdas Garg vs CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: AMANPREET KAUR
• Assessee Lawyers: TEJMOHAN SINGH; MERELY CLAIMING BUSINESS EXIGENCY OF
• Keywords: Condonation of delay; Additional evidence; Corroborative evidences; Competent authority
• Section: 143(3); 40A(3)

Judgement Text

"आयकर अपील य अ धकरण,च\u000fडीगढ़ \u0013यायपीठ “बी बी बी बी” , च\u000fडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE \u0017ी \u0018व\u001aम संह यादव, लेखा सद#य एवं \u0017ी परेश म. जोशी, , , , \u0013या(यक सद#य BEFORE: SHRI. VIKRAM SINGH YADAV, AM & & & & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA NO. 1586/Chd/2019 नधा\u000fरण वष\u000f / Assessment Year : 2014-15 Shri Subhash Sharma, C/o Shri Tejmohan Singh, Advocate # 527, Sector 10D, Chandigarh बनाम The ITO Ward -2(3), Chandigarh \u0015थायी लेखा सं./PAN NO: ACFPS1421E अपीलाथ\u001a/Appellant \u001b यथ\u001a/Respondent नधा\u000f रती क ओर से/Assessee by : Shri Tejmohan Singh, Advocate राज\u0015व क ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR सुनवाई क तार$ख/Date of Hearing : 16/10/2024 उदघोषणा क तार$ख/Date of Pronouncement : 31.12.2024 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-1, Chandigarh dt. 09/09/2019 pertaining to Assessment Year 2014-15. 2. There is a delay of 15 days in filing the appeal before this Tribunal, as pointed out by the Registry. The assessee has filed an application for condonation of delay alongwith affidavit of the assessee. On perusing the application for condonation of delay and affidavit of the assessee, the delay of 15 days in filing the appeal before this Tribunal is condoned. 3. Briefly the facts of the case are that the assessee filed his return of income declaring total income of Rs. 13,53,380/- which was selected for scrutiny and after issuing notices and calling for the necessary information/documentation, the assessment was completed under section 143(3) of the Act, wherein the assessed income was determined at Rs. 2,90,20,346/- by the Assessing officer. 2 Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) and vide the impugned order dt. 09/09/2019, the assessee got partial relief and against the addition sustained by the Ld. CIT(A), the assessee is in appeal before us. 4. In Ground No. 1, the assessee has challenged the sustenance of addition of Rs. 10,50,000/- under Section 40A(3) of the Act. 5. In this regard, briefly the facts of the case are that during the F.Y. relevant to impugned assessment year, the assessee has purchased a property jointly with another person wherein the assessee’s share comes to 50% and his share of the purchase consideration of Rs. 24,20,750/- was discharged by the assessee and out of which, Rs. 11,70,750/- was discharged in cash. During the course of assessment proceedings, the AO issued a notice to the assessee to show cause in terms of Section 40A(3) as to why the same should not be disallowed. 6. In his submissions, the assessee submitted that since the assessee was new to the seller, the seller refused to accept the whole payment by way of crossed cheque/ draft and there were certain business exigencies due to which the assessee need to make payment urgently and therefore, part consideration was discharged in cash and the same should be accepted without drawing any adverse inference. 7. The submissions so filed by the assessee were considered but not found acceptable to the AO. As per AO, in the transaction of sale/ purchase of immovable property, buyer and seller are mostly new to each other and assessee being engaged in the business of properties was quite aware of this position but he did not produce any evidence to support his contention regarding refusal of payment made by him through Demand Draft / Cheque. Further the assessee failed to establish the fact that the seller had no bank account and therefore the assessee has not been able to establish so called 3 business exigencies and insistence by the seller to accept sale consideration only in the shape of cash when RTGS/NEFT was quite prevalent in the banking system and assessee could have easily remitted the money through RTGS/NEFT. It was accordingly held by the AO that the assessee has clearly violated the provisions of Section 40A(3) of the Act and therefore, he made a disallowance of Rs. 11,70,750/- invoking provisions of Section 40A(3) of the Act. 8. During the appellate proceedings, the Ld. CIT(A) has stated that the assessee has failed to file any written or oral submissions during the appellate proceedings on the instant issue wherein the AO has disputed the genuineness of the cash transaction. As per the Ld. CIT(A), it is accepted that the payment are towards purchase of property but from sale deed, it is observed that out of Rs. 11,70,750/-, stamp duty of only Rs. 1,20,750/- has been paid therefore the Ld. AR is factually incorrect when he says that the payment of Rs. 11,70,750/- has been made before the competent authority for stamp duty. It was held that the assessee has failed to establish the genuineness of the cash payment exceeding Rs. 20,000/- amounting to Rs. 10,50,000/- and how the same is out of the ambit of Section 40A(3) of the Act. Further the assessee has failed to rebut the findings of the AO during the appellate proceedings. It was accordingly held that the cash payment amounting to Rs. 10,50,000/- towards purchase of the property are hit by the provisions of Section 40A(3) of the Act and after allowing relief to Rs. 1,20,750/-, amount of Rs. 10,50,000/- was sustained against which the assessee is in appeal before us. 9. During the course of hearing, the Ld. AR reiterated the submissions made before the lower authorities. It was submitted that the assessee was new to seller Shri Darshan Singh and he refused to accept whole of the payment by way of cross cheque/Demand Draft. Further, there were business exigencies due to which the assessee was required to make payment in cash. It was further submitted that the transaction occurred between the assessee and the seller 4 before the Estate Officer i.e; Government Authority and that payment has been certified by the competent authority and there is no scope of evasion of tax. In support, reliance was placed on the Hon’ble Punjab and Haryana High Court in case of Gurdas Garg vs CIT 63 taxmann.com 289. It was accordingly submitted that the disallowance so made be directed to be deleted. 10. Per Contra, the Ld. DR relied on the order of the lower authorities. 11. We have heard the rival contentions and purused the material available on record. We refer to the findings of the AO where he said that in the transaction of sale/ purchase of immovable property, buyer and seller are mostly new to each other and assessee being engaged in the business of properties was quite aware of this position but he did not produce any evidence to support his contention regarding refusal of payment made by him through Demand Draft / Cheque. Further the assessee failed to establish the fact that the seller had no bank account and therefore the assessee has not been able to establish so called business exigencies and insistence by the seller to accept sale consideration only in the shape of cash when RTGS/NEFT was quite prevalent in the banking system and assessee could have easily remitted the money through RTGS/NEFT. Nothing has been brought on record to rebut the findings of the AO. The assessee by merely claiming business exigency of making part payment in cash to the seller is not sufficient. He has to bring verifiable demonstrable evidence whereby there is insistence by the seller of the property for seeking cash payment and in absence of which, the transaction couldn’t be executed. Where such explanation is accepted without any corroborative evidence, in every transaction involving cash payment, the same can form the basis for seeking exception to provisions of section 40A(3) of the Act which will make the said provision redundant and thus not permissible under law. There is no dispute that the exceptions so carved to section 40A(3) by way of Rule 6DD is not exhaustive and the test of business exigency continue to 5 remain relevant as so held by the Hon’ble Punjab and Haryana High Court in case of Gurgas Garg, however, the onus is on the assessee to lead necessary evidence to corroborate his case which he has failed in the instant case. In the result, we don’t find any justifiable basis to interfere with the findings of the ld CIT(A) and the ground of appeal so taken by the assessee is dismissed. 12. In ground No. 2, the assessee has challenged the sustenance of addition of Rs. 89,400/- from Shri Jasmel Singh. In this regard, the AO observed that the assessee has taken unsecured loan from Shri Jasmel Singh amounting to Rs. 89,400/- and during the course of assessment proceedings, the assessee has failed to discharge the necessary onus in terms of establishing the identity, credit worthiness and genuineness of the unsecured loans so taken by him. 13. During the appellate proceedings, the Ld. CIT(A) has sustained the said addition. As per the Ld. CIT(A), the assessee has maintained joint account with Shri Jasmel Singh for rent receipts which is reflected as unsecured loan. He has filed a letter from Estate Office, Chandigarh vide letter dt. 04-06-2009 / 17-06- 2009 and letter dt. 04-11-2009 wherein 50% share in Property No. 365, Phase-1, Industrial Area, Chandigarh has been acknowledged. But no Rent Agreement could be produced in order to prove genuineness of the rent received. Further the Rent Agreement dt. 01/06/1993 between Shri Harinder Singh, Landlord and Shri Tajinder Singh, Tenant and Rent Agreement dt. 06/02/1993 between Shri Singara Singh, Landlord and M/s PS Fasteners were fled for the said property but it is nowhere clear that there is any rent agreement between present landlords neither there is any document which may prove that the same rent agreements are still in vogue. Moreover, there is no confirmation from Shri Jasmel Singh, and therefore the assessee has failed to shift onus on the AO and genuineness of the unsecured loans could not be proved and the findings of the AO was confirmed. 6 14. Against the said findings, the assessee is in appeal before us. During the course of hearing, the Ld. AR submitted that it is not a case of unsecured loan taken by the assessee from Shri Jasmel Singh, in fact it is the amount of share of rent belonging to Shri Jasmel Singh which has been received in the saving bank account of the assessee and which has been shown as payable to Shri Jasmel Singh. In this regard, our reference was drawn to the Ledger account of Jasmel Singh in the books of the assessee wherein there is an entry of Rs. 89,400/- on 31/03/2014 for half share of land belongs to Jasmel Singh for independent plot No. 365. Further our reference was drawn to the confirmation submitted by the assessee wherein he has stated that he has a joint saving bank account with Shri Jasmel Singh in SBI and last balance as on 31/03/2014 amounting to Rs. 1,78,800/- and out of this 50% i.e. Rs. 89,400/- belongs to Shri Jasmel Singh. It was submitted that both the AO as well as the Ld. CIT(A) have failed to appreciate the nature of the transaction which is duly supported by the transaction in the ledger as well as in the joint bank account as well as copy of the letters from the Estate Office which duly proves that the property was a joint property in the name of the assessee as well as Shri Jasmel Singh and therefore ½ share of rent which was mentioned in the joint saving bank account belongs to Shri Jasmel Singh. It was accordingly submitted that the addition so made and sustained by the Ld. CIT(A) be directed to be deleted. 15. Per contra, the Ld. DR relied on the orders of the lower authorities. 16. We have heard the rival contentions and purused the material available on record and agree with the explanation submitted by the ld AR that the subject transaction is the share of rent belonging to Shri Jasmel Singh which has been received in the joint saving bank account of the assessee and which has been shown as payable to Shri Jasmel Singh in the books of assessee and is not of any unsecured loan taken by the assessee from Shri Jasmel Singh. The necessary documentation have been placed to corroborate the same. In light 7 of the same, the addition so made is directed to be deleted and the ground of appeal is allowed. 17. In Ground No. 3, the assessee has challenged the sustenance of addition of Rs. 3,50,000/- treating the unsecured loan from Shri A.S. Saini as not genuine. In this regard, during the course of assessment proceedings, the AO observed that the assessee has not filed any evidence to establish the identity, credit worthiness and genuineness of the transaction and the addition was made. 18. In the appellate proceedings, the Ld. CIT(A) has stated that the assessee has filed confirmation affidavit from the party alongwith the statement of account in assessee’s books of account as well as copy of the return of income of A.Y. 2014-15 of Shri A.S. Saini. However, since no bank statement has been filed in order to verify the claim of RTGS payment, the genuineness of the unsecured loan could not be proved and the findings of the AO were sustained. 19. During the course of hearing, the Ld. AR has submitted that the assessee has filed the necessary confirmation affidavit from Shri A.S. Saini as well as copy of his return of income as well as the bank statement of Shri A.S. Saini and the necessary documents are placed on record as part of the assessee’s paper book. It was accordingly submitted that the transactions was made through RTGS on 13/01/2014 which is clearly evident from the bank statement and therefore the addition so made be directed to be deleted. 20. Per contra, the Ld. DR relied on the orders of the lower authorities. 21. We have heard the rival contentions and purused the material available on record. We find that the assessee has discharged the necessary onus by filing the confirmation affidavit from Shri A.S. Saini, his copy of income as well as his bank statement and in absence of any adverse finding recorded by the lower authorities rebutting the material placed on record and bringing any 8 adverse material on record, the addition so made cannot be sustained and is hereby directed to be deleted and the ground of appeal is allowed. 22. In Ground No. 4, the assessee has challenged the sustenance of addition of Rs. 13,59,475/- treating the credit in the name of Shri Harpreet Singh Bajwa as unexplained. In this regard, during the course of assessment proceedings, the AO observed that there is opening balance of Rs. 9,50,000/- and closing balance as on 31/03/2014 of Rs. 23,09,475/- in the account of Shri Harpreet Singh Bajwa and therefore, for the amount of Rs. 13,59,475/-, the confirmation was sought from the assessee. However in absence of any confirmation filed by the assessee, the addition was made in the hands of the assessee. 23. During the appellate proceedings, the Ld. CIT(A) has stated that assessee has filed confirmation affidavit from the party alongwith the statement of account in appellant’s books of account, copy of the return of income of A.Y. 2014-15 and bank statement and which is a running account but his return of income does not instill confidence that he has creditworthiness to give loan of Rs. 13,59,475/- in absence of any concrete evidence. There is a cash deposit of Rs. 5,00,000/- in his account and he issued cheque of the same amount to the appellant on the same day. No evidence of source of cash has been provided. Rs. 8,15,000/- has been shown as credit and the nature of this entry is not explained with any supporting evidence and further, there is no cheque entry found in the bank account of Rs. 44,475/- of Mr. Bajwa. Hence, the assessee has failed to establish the onus on him and in view of this, the addition so made by the AO was confirmed. 24. During the course of hearing, the submission made before the lower authorities were reiterated. It was submitted that the only reason why the AO has made addition was lack of confirmation from the said party and during the appellate proceedings, the assessee has furnished the necessary confirmation 9 and other documentation and inspite of that, the Ld. CIT(A) has sustained the addition which may be directed to be deleted. 25. Per contra, the Ld. DR relied on the order of the lower authorities. 26. We have heard the rival contentions and purused the material available on record. We agree with the findings of the ld CIT(A) that the assessee has failed to discharge the necessary onus in terms of establishing the creditworthiness of Shri Harpreet Singh Bajwa in advancing unsecured loan of Rs Rs. 13,59,475/- especially in light of the return of income where Shri Harpreet Singh Bajwa has shown income of Rs 277,390/-, meager credits/cash deposits in his bank statement except for cash deposit of Rs 5,00,000/- on 27/05/2013, the same day when the cheque of equivalent amount was issued to the assessee. Further, in respect of other two credits of Rs 815000/- and Rs 44,475/-, besides creditworthiness, even the mode of payment through banking channel has not been established by the assessee. In light of the same, the findings of the ld CIT(A) are hereby confirmed and the ground of appeal so taken by the assessee is dismissed. 27. In Ground No. 5, the assessee has challenged the sustenance of addition of Rs. 10,00,000/- treating the credit from Shri S. Ali, Proprietor Khonoor Jewellers as unexplained. In this case, in absence of necessary confirmation filed during the course of assessment proceedings, the AO has made the addition being amount standing to the credit of Shri S. Ali, proprietor of Khonoor Jewellers. 28. During the appellate proceedings, the Ld. CIT(A) has stated that the assessee has filed confirmation affidavit from the parties alongwith the statement of account in appellants books of account. There is a sale entry of Rs. 10,00,000/- claimed to be received by the cheque dt. 28/07/2014, no copy of the books of account, copy of the return was filed by the appellant. The nature of this entry is not explained with any supporting evidence, hence appellant has failed to shift the onus on the AO as the credit worthiness and genuineness of 10 the transaction stands unexplained and in view of this, the addition so made by the AO was confirmed. 29. During the course of hearing, the Ld. AR reiterated the submissions made before the lower authorities. It was submitted that the necessary confirmation was filed before the Ld. CIT(A). However the bank statement could not be produced earlier and with great difficulties and being an old matter, the assessee has now been able to obtain the bank statement of Shri S. Ali, Proprietor Khonoor Jewellers which shows clearly the cheque payment of Rs. 10,00,000/- to the assessee. It was further submitted that the assessee has since returned the said amount to Shri S. Ali as can be seen from his bank statement and which demonstrate that it was a genuine transaction between two parties and therefore the additional evidence be admitted and the addition so made be directed to be deleted. 30. Per contra, the Ld. DR relied on the order of the lower authorities. 31. We have heard the rival contentions and purused the material available on record. The additional evidence by way of bank statement, being an external evidence which has since been obtained by the assessee is hereby admitted in the interest of substantial justice and the matter is remitted for fresh adjudication to the file of the AO after providing reasonable opportunity to the assessee. In the result, the ground of appeal is allowed for statistical purposes. 32. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 31.12.2024. Sd/- Sd/- परेश म. जोशी \u0018व\u001aम संह यादव (PARESH M. JOSHI) ( VIKRAM SINGH YADAV) \u0013या(यक सद#य / JUDICIAL MEMBER लेखा सद#य/ ACCOUNTANT MEMBER AG 11 आदेश क \u001b त*ल+प अ,े+षत/ Copy of the order forwarded to : 1. अपीलाथ\u001a/ The Appellant 2. \u001b यथ\u001a/ The Respondent 3. आयकर आयु.त/ CIT 4. आयकर आयु.त (अपील)/ The CIT(A) 5. +वभागीय \u001b त न3ध, आयकर अपील$य आ3धकरण, च6डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड\u000f फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "