VIKAS CHUGH,KARNAL V. ACIT (OSD), KARNAL

ITA 1314/DEL/2020

AI Insights

The case involves Vikas Chugh, who appealed against the order of the Commissioner of Income-tax (Appeals), Karnal, which upheld the addition of Rs. 52,26,000 to his taxable income as unexplained cash deposits. The Assessing Officer (AO) had initially rejected the assessee's explanation that these deposits were from insurance premium payments received in his capacity as a partner in M/s Smart Automotive, Karnal. The Tribunal found that the AO and the CIT(A) had not properly considered the evidence provided by the assessee, including bank statements and insurance policy documents, which linked the deposits to legitimate business transactions. The Tribunal criticized the lower authorities for not verifying the claims through independent means, such as contacting policyholders or examining the nature of the transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 23840 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Other Referred Cases: Kalekhan Mohd. V/s CIT, Sreelekha Banerjee vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PARKASH
• Assessee Lawyers: RAKESH GUPTA; SOMIL AGARWAL
• Keywords: Corroborative evidences; Source of fund
• Section: 143(3); 69A; 274

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: C : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITA No.1314/Del/2020 Assessment Year: 2015-16 Vikas Chugh, C/o RRA TAXINDIA, D-28, South Extension Part I, New Delhi – 110 049. PAN: AEWPC7879R Vs ACIT (OSD), Karnal. (Appellant) (Respondent) Assessee by : Dr. Rakesh Gupta, Advocate & Shri Somil Agarwal, Advocate Revenue by : Shri Om Parkash, Sr. DR Date of Hearing : 03.03.2025 Date of Pronouncement : 12.03.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the order dated 11.02.2019 of the Commissioner of Income-tax (Appeals), Karnal (hereinafter referred to as the ld. First Appellate Authority or ‘the Ld. FAA’ for short) in Appeal No.IT/270/E/KNL/2017-18 arising out of the appeal before it against the order dated 14.12.2017 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT (OSD), Ward-5, Karnal (hereinafter referred to as the Ld. AO). ITA No.1314/Del/2020 2 2. The assessee had filed return of income declaring income of Rs.2,69,210/- and the case of the assessee was selected for scrutiny. Mandatory notices were issued under the Act. The case of the assessee was examined with regard to the source of deposit of Rs.52.26 lakhs in his bank account No.66170501152 maintained with ICICI Bank. The assessee had responded the same submitting: “…..assessee Sh. Vikas Chug is partner of M/s Smart Automotive Karnal and he has received, payments from customers against general insurance policies in cash/through banks and further make payments to Matushree Insurance Consultants Pvt. Ltd. in cash/through bank. Payment received from customer against general policies has been deposited with the ICICI Bank, Sector-12, Karnal, Saving Bank Account No. 661701501152 of the assessee Sh. Vikas Chug.” 2.1 The ld. AO was not satisfied and had observed as follows:- “The above reply of the assessee has been considered but not found satisfactory in view of the following reasons:- i) The assessee is not appointed by the Mutushree Insurance consultants Pvt. Ltd. to receive payments of insurance premium on its behalf and if so, the assessee has failed to furnish the same during assessment proceedings and in the absence of the same, the contention of the assessee is found vague and baseless. ii) The assessee has failed to prove his contention that he used to receive payment of insurance premium on behalf of the company, with such confirmation from the said Insurance company that during the year how much amount of insurance was deposited through the assessee or through his bank account, hence the contention of the assessee cannot be accepted. iii) During assessment proceedings, the assessee has failed to substantiate his contention with supporting evidences i.e. how much money he has received and its confirmation from the customer that they have given cash to the assessee for their insurance premium and when the cash was deposited in his bank a/c then why he did not transfer the same to the company directly from his bank a/c. Thus, the contention of the assessee ITA No.1314/Del/2020 3 that the cash was deposited out of cash received from customer on a/c of insurance premium, is not accepted. Considering the above mentioned reasons, the contention of the assessee that he has deposited cash of Rs.52.26 lacs in his bank a/c, out of cash received from customers on a/c of insurance premium, is vague and baseless and appears a concocted story just to prove the cash deposits in his bank accounts. 2. In view all the above narrated facts and being despite accorded sufficient opportunities of being heard and to furnish the explanation with respect to the source of cash deposited in his bank account, the Assessee has failed to furnish any explanation with supporting evidences in this regard. In such circumstances and in the absence of any plausible explanation with respect to the cash deposited in the said bank a/c i.e. Rs.52,26,000;/-, the undersigned is left with no other alternative but to treat the amount of Rs.52,26,000/-, as unexplained money as per provisions of section 69A of the Income Tax Act, and deposited by the assessee out of his undisclosed sources of income and accordingly required to be taxed in the hands of assessee by adding back the same to the taxable income of the assessee. As it is a settled dictum that burden of proving the source of credit is on the assesse. Support in this regard is drawn from the judgement of Supreme Court in the case of Kalekhan Mohd. V/s CIT “If the assessee offers an explanation about the cash credit, the Income Tax Department can put the assessee to proof of his explanation and if the assessee fails to tender evidences or burkes an enquiry, then the Assessing Officer is justified in rejecting the explanation and holding that the income is from an undisclosed source. The A.O. is not required to specify or prove that source is, which from the nature of case must be known only to assessee. Similarly, it has been laid down in the case of Sreelekha Banerjee vs. CIT (1963) 49 ITE 112.117(SC) holding that when a cash credit entry appears in the assessee’s books of accounts, the assessee have a legal obligation to explain the nature and sources of such credit.” Accordingly, considering the above narrated facts, Rs.52,26,000/- is added back to the taxable income of the assessee as per provisions of the Income Tax Act, 1961, considering the same as unexplained cash deposits in bank account which might have been deposited by the assessee out of his undisclosed income. I am satisfied that the assessee has concealed the particulars of his income by depositing cash of Rs.52,26,000/- in his bank a/c and by not disclosing the same in his Income Tax Return for the assessment year under assessment, therefore, penalty proceedings u/s 271(1)(c) read with section 274 of the Income Tax Act, 1961, are initiated separately on this issue. ITA No.1314/Del/2020 4 3. In appeal, the assessee failed and the following findings were recorded by the ld. CIT(A):- “3.2 Findings:- I have examined the facts of the case and the submissions made by the appellant. An addition of Rs. 52,26,000/- was made by the Assessing Officer (A.O) on account of unexplained cash deposits in the bank account of the assessee. The assessee has sought to state that the amounts relate to payments received from customers against general insurance policies in his capacity as partner of M/s Smart Automotive, Karnal and the said amounts received are further made to M/s Matushree Insurance Consultants Pvt. Ltd. The AO had, during the assessment proceedings, asked the assessee specifically to provide evidences regarding appointment by M/s Matushree Insurance Consultants Pvt. Ltd. to receive payments of insurance premium insurance on its behalf which was not done. Moreover, the assessee could not corroborate with supporting evidences the amount received from the customers nor any customer confirmation regarding cash payment made towards their insurance premium was produced. Even at the appellate stage, the assessee has only filed ledger copies purportedly showing the a/c with M/s Matushree Insurance Consultants Pvt. Ltd. No confirmation or evidence regarding his appointment by the said concern as being authorized to receive insurance premium on their behalf has been filed. The cash deposits, therefore, can certainly not be linked to such policies. The explanation that the deposits were made in his personal account for easy facilitation of transfer is not acceptable, as the same could have been directly transferred to the company in the normal course of business. Hence, I agree with the A.O. that the assessee has not discharged his onus in explaining the said deposits entries in his bank account. I confirm the addition so made.” 4. Heard and perused. The ld. AR has re-asserted the averments on the basis of facts as asserted before the ld. tax authorities and has taken us through the copies of relevant pieces of bank statement, Form 26, invoices, insurance ITA No.1314/Del/2020 5 policies to submit that all these evidences have been discarded by the ld. tax authorities below without any justification. 5. On the other hand, the ld. DR has submitted that the assessee had failed to discharge the onus. It was submitted that the evidences do not establish that the assessee was having any agency or sub-agency as claimed and that payments were made to M/s Matushree Insurance Consultants Pvt. Ltd. 6. After going through the material on record and the submissions made we observe that ld. AO has primarily not accepted the case of assessee for lack of satisfactory evidences and ld. CIT(A) has followed the same to non-suit the assessee. Now we find that as per the paper book filed before us and which contains the submissions/ reply of the assessee made to ld. AO during the assessment, assessee had claimed to be in business of consultancy of General Insurance business and of sale of used vehicles and had claimed to be sub- broker of M/s Matushree Insurance Consultant. In fact M/s Smart Automotive Karnal, a partnership firm was the sub-broker, and assessee is one of the partners. Ld. AO was provide details of policies done through Matushree and how payments of premium received in cash from customers were paid by banking mode to Matushree. On basis of bank statement it is sufficiently established that cash deposited were transferred to Matushree. In the bank statements there is even narration of some facts about transaction as claimed. AS we go through the copies of various insurance policies available at page no. ITA No.1314/Del/2020 6 105-139 of the PB, which were also before the ld. Tax Authorizes below we find that there are many facts, like amounts of premium mentioned corresponding to deposits and transfer to Matushree. The email address on policy being of M/s Smart Automotive Karnal and even of assessee, in few. Though one PROBUS Insurance Broker Ltd. is mentioned as intermediary, but that does not establish that the whole case as set up by assessee is liable to be called concocted story. 7. There was no attempt of ld. Tax authorities to examine the evidences filed by the assessee and understand the nature of transactions giving rise to deposits of cash from various stations and their transmission subsequently by the assessee. As this so called sub-brokership of insurance agency may not be a legal contract barred under law of insurance, assessee or M/s Smart Automotive Karnal, may not be having an agreement with Matushree, thus same could not be produced before the ld. Tax authorities below, but that alone could not have been basis to discredit the case of assessee. No effort whatsoever was made to issue any notices to any of the policy holders and examine the services, if any offered by the assessee. 8. The findings of ld. AO that despite accorded sufficient opportunities of being heard and to furnish the explanation with respect to the source of cash deposited in his bank account, the Assessee has failed to furnish any explanation with supporting evidences in this regard is erroneous. On the contrary we are of ITA No.1314/Del/2020 7 considered view that ld. Tax authorities have fallen in error to not examine the evidences of the assessee and otherwise the assessee had a plausible explanation of the cash deposits. The impugned orders cannot be sustained. 9. Though during hearing ld. DR has submitted that matter may be restored to the ld. AO for fresh examination of evidences, but that seems to be not the manner in which assessee should be cornered and made liable to go through the rigor of assessment proceedings afresh, for no fault of his. Consequently ground no. 1 and 2 are sustained and appeal of assessee is allowed. The impugned assessment is quashed. Order pronounced in the open court on 12.03.2025. Sd/- Sd/- (AMITABH SHUKLA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12th March, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "