COMMISSIONER OF INCOME TAX-II LUDHIANA V. PALWINDER PAL SINGH

ITA/76/2011

AI Insights

The case revolves around an income tax appeal by the Commissioner of Income Tax-II, Ludhiana against Shri Palwinder Pal Singh concerning the assessment year 2006-07. The core issue was the addition made under Section 69A of the Income Tax Act, 1961, which the revenue contended was wrongly deleted by the lower authorities. The Assessing Officer had initially treated a sum of Rs.35,61,066 as income from undisclosed sources, based on bank deposits. However, the CIT(A) and the Tribunal found that these deposits were from legitimate family transactions and not unexplained income. The High Court, upon reviewing the matter, agreed with the lower authorities' findings and dismissed the appeal, noting that the funds were transferred within the family and were adequately explained.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 680053 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 14-11-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Bank deposits; Immigration; Income Tax; Undisclosed sources; Family Transfers; Canada
• Section: 142(1); 143(2); 271(1)(c); 69A; 260A

Judgement Text

"Income-tax Appeal No.76 of 2011 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.76 of 2011 Date of decision: 14.11.2011 The Commissioner of Income Tax-II, Ludhiana ...Appellant Versus Shri Palwinder Pal Singh ...Respondent CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Ms. Savita Saxena, Sr. Standing Counsel for the appellant. **** G.S.SANDHAWALIA, J. Affidavit of compliance regarding payment of costs as imposed vide order dated 28.7.2011 has been filed. The present appeal is filed by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 30.6.2010 passed in ITA No.165/Chd/2010 for the assessment year 2006-07 whereby the appeal filed by the revenue against the order of the Commissioner of Income Tax (Appeals)-II, Ludhiana (for short “the CIT (A)” has been dismissed. The revenue has contended that the following substantial questions of law arise in the facts of the case:- “1. Whether on the facts and in law, the Hon'ble ITAT was legally justified in dismissing the appeal of the department and upholding the order of CIT(Appeals) in deleting the addition made under Section 69A of the Act ignoring that there was Income-tax Appeal No.76 of 2011 -2- **** nexus established between the withdrawals made by the father/mother of the assessee from their bank account and the date of deposit of the same by the assessee into his bank account? 2. Whether on the facts and in law, the Hon'ble ITAT was legally justified in dismissing the appeal of the department and upholding the order of CIT(Appeals) in deleting the addition made under section 69A of the Act ignoring that there was substantial time gap between the withdrawals made by the father/mother of the assessee from their bank account and the date of deposit of the same by the assessee into his bank account?” The Assessing Officer while processing the return of the assessee of Rs.1,24,220/- issued statutory notice under Section 143(2) of the Act on 28.7.2007 and notice under Section 142(1) of the Act on 5.12.2008 which was responded to by the father of the assessee. The Assessing Officer examined the assessee's income from FDR and from the saving bank account with Centurion Bank of Punjab and saving bank account with Punjab National Bank came to the conclusion that the assessee deposited Rs.41,14,146/- in the Centurion Bank and Rs.4,86,700/- in the Punjab National Bank between the period from 21.4.2005 to 14.2.2006. The reply of the assessee was that he had sold a house on behalf of Baljit Singh Sidhu, Barjinder Singh Sidhu and Ravinder Singh Sidhu as a power of attorney holder on 20.12.2005 and received a sum of Rs.22,50,000/-. It was further explained that deposit had been transferred in the Punjab National bank account from Saving Bank Account No.61524, which was in the name of Smt. Surjit Kaur. The Assessing Income-tax Appeal No.76 of 2011 -3- **** Officer, accordingly, came to the conclusion that a sum of Rs.35,61,066/- were deposited from undisclosed sources under Section 69A of the Act and treated the same as income of the assessee from undisclosed sources and accordingly held that notice under Section 271(1) (c ) of the Act be issued separately. That in appeal, the CIT(A) while examining various entries which were made in the two bank accounts came to the conclusion that amount had been withdrawn from the account of the father of the appellant Ajit Singh Mangat who had a joint bank account with the assessee's mother Smt. Surjit Kaur. That after comparing the accounts entries it further came to the conclusion that account with the Centurion Bank of Punjab was in the joint name of the appellant, his wife Smt. Mandeep Kaur and his grand mother Smt. Daljit Kaur. It was also noticed by the CIT(A) that the notice was issued on 5.12.2008, which was served upon the assessee on 11.12.2008 fixing the case for 15.12.2008 and only three days' time was allowed to furnish the details called for. The fact that the assessee has immigrated to Canada on 7.11.2008 and copy of the confirmation of permanent residence was also taken into consideration while noting that assessee's father could not reasonably explain the deposits with the two banks due to shortage of time. A sum of Rs.17,00,000/- was transferred from the bank account No.85 OD 141978 of the assessee's father and mother of the Centurion Bank of Punjab. The certificate issued by the HDFC bank was also taken into consideration as additional evidence. Accordingly, the appeal was allowed and addition to the extent of Rs.34,36,846/- was deleted. The assessee's father also clarified that the said amount was deposited in these bank accounts held by him jointly with his Sh. Palwinder Pal Singh to show sufficient cash in Income-tax Appeal No.76 of 2011 -4- **** his bank account for going abroad to Canada which he ultimately did in November, 2008. That dissatisfied with the appeal being dismissed by the CIT (A), the appeal was filed before the Income Tax Appellate Tribunal, Chandigah Bench 'A', Chandigarh (for short “the Tribunal') which came to the conclusion that the entire deposits in the bank accounts were explained as out of the money withdrawn from the joint saving account of assessee's father and mother of the Centurion Bank of Punjab and that transfer of funds by Sh. Ajit Singh Mangat from one joint account to another joint account cannot be treated as unexplained and the source of deposits have been duly explained. The revenue had failed to bring on record any evidence to show that the explanation of the assessee was incorrect. The explanation of the father that the amount was withdrawn for the purchase of some agricultural land and when the purchase did not materialise, the amount was deposited in the aforesaid bank accounts of his son was accepted for showing certain amount in the bank account of the assessee who had plans to go abroad and had actually left the country in November, 2008. From the above facts and circumstances, it would be clear that the question of law as framed above by the revenue could not arise in the present case as admittedly the amount transferred is within the family and from joint accounts of the father, mother, grand mother, son and daughter- in-law and it is question of fact which has been determined by the CIT(A) by taking additional evidence on record as it came to the conclusion that the Assessing Officer had never given sufficient time to the assessee to explain the said deposits which would be clear from the dates mentioned above. The authorities below have also came to the categorical finding Income-tax Appeal No.76 of 2011 -5- **** that the amount was withdrawn from one account and deposited in the account of the assessee solely to facilitate his immigration to Canada and also took into consideration the fact that the assessee did migrate to Canada as the confirmation of the permanent resident was also placed before the CIT(A). Accoordingly, no question of law arises for determination in the background of the case due to transfer of funds interse between the family members. Accordingly, the appeal is dismissed. (G.S.SANDHAWALIA) Judge November 14, 2011 (HEMANT GUPTA) Pka Judge "