Commissioner of Income Tax vs Kamlaben Sureshchandra Bhatti

@

Akil Abdul Hamid Kureshi, J.—The Revenue has challenged the judgment of the Income-tax Appellate Tribunal, Ahmedabad ("the Tribunal" for short) dated July 19, 2013, raising the following questions for our consideration:

"(A) Whether the Income-tax Appellate Tribunal erred in law in holding that there is no violation of rule 46A in the facts of the case without actually examining the facts and circumstances of the case, particularly when the Commissioner of Income-tax (Appeals) did not pass specific order disposing of the petition for admission of additional evidence filed by the assessee and the objection of the Assessing Officer, as held in Dinesh B. Parikh Vs. Commissioner of Income Tax, and Asst. CIT v. Mohan Singh (ITAT) DRT 497?

(B) Whether, in the facts and in the circumstances of the case, the impugned order of the Income-tax Appellate Tribunal is erroneous and perverse and bad in law and facts in so far as it accepts the Commissioner of Income-tax (Appeals) order despite it being admitted position on record that neither the source of funds in the cash book have been examined and corroborated by any authority nor any reason or correlation being established between the repeated withdrawals and deposits and the deletion are made based on the uncorroborated explanation of the assessee?

(C) Whether the Income-tax Appellate Tribunal erred in not adjudicating the factual issue of non-reflection of certain properties in the balance-sheet of the assessee filed before it which was raised by the Departmental representative and not setting aside the case where the case to the Assessing Officer to examine all issues particularly in view of the specific facts of the case where the assessee has not filed all details before the Assessing Officer and incomplete examination of the case by the Commissioner of Income-tax (Appeals)?

(D) Whether the Income-tax Appellate Tribunal erred in not setting aside the case to the Assessing Officer for de novo examination of the source of funds particularly the cash deposits in banks which came to light through information returns, cash payment of Rs. 59,73,000 to the seller of property in Satyagarah Chhavani, payment of Rs. 4,64,350 and Rs. 10,90,417 in cash for registration and the source of huge amounts paid by the assessee for purchase of properties during the year?

(E) Whether the Appellate Tribunal is right in law in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 2,39,55,700 made by the Assessing Officer on account of undisclosed source of income under section 69 of the Income-tax Act?

(F) Whether the Appellate Tribunal is right in law and on facts in ignoring the fact that the assessee failed to disclose the sale proceeds of two properties for capital gain purposes in the return of income filed by her and, therefore, in the absence of such disclosure, the alleged sale proceeds ought not to have been related with the properties in question?"

Principally, there are three issues raised by the Revenue. The first is with respect to additional evidence permitted by the Commissioner of Income-tax (Appeals) in terms of rule 46A of the Income-tax Rules, 1962 ("the Rules" for short). The second is with respect to the deletion of Rs. 59.73 lakhs by the Commissioner of Income-tax (Appeals) confirmed by the Tribunal and the third is the deletion of Rs. 2.39 crores (rounded off) made by the Assessing Officer under section 69 of the Income-tax Act, 1961 ("the Act" for short) which was not approved by the Commissioner of Income-tax (Appeals) and which order was confirmed by the Tribunal.

With respect to the first issue of admission of additional evidence, we notice that the Commissioner of Income-tax (Appeals) recorded that the notice of hearing issued by the Assessing Officer on October 31, 2011, was received by the assessee on the date of hearing itself. It was, therefore, that the assessee could not produce necessary evidence on such date. When subsequently, he attended the office of the Assessing Officer on November 25, 2011, with necessary evidence, he learnt that the order of assessment was already passed on November 21, 2011. It was on this ground that the Commissioner of Income-tax (Appeals) permitted the additional evidence to be produced before him. While doing so, he also called remand report from the Assessing Officer.

In our view, the Commissioner of Income-tax (Appeals) committed no error nor the admission of additional evidence can be stated to be in breach of the requirement of rule 46A of the Rules. Particularly when the interests of the Revenue was safeguarded by calling for the remand report and permitting the Assessing Officer to comment on such additional evidence, we see no reason to interfere.

Regarding the deletion of Rs. 59.73 lakhs, the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals). The order of the Commissioner of Income-tax (Appeals) being more elaborate, we may record the contents thereof:

"4.3 Decision

I have carefully considered the assessment order and the submission filed by the appellant. The addition has been made on account of cash deposit of Rs. 1,04,05,460 in Kalupur Commercial Bank Ltd., Ahmedabad. The appellant has submitted that the cash deposit is duly accounted for in the personal books of account of the appellant. Further, the appellant has claimed that the cash deposited in Kalupur Commercial Bank Ltd. is only Rs. 21,80,480 and the other deposit which is mentioned in the AIR is with HDFC Bank Ltd. which is amounting to Rs. 60,44,500. The appellant has explained the position of cash as per the AIR and as per the books as under:

The appellant has submitted that the cash has been deposited in these bank accounts out of cash withdrawn on earlier occasions from her bank accounts. The appellant has made a cash book which shows the incoming and outgoing of cash on every day and the cash deposited in the bank is duly shown therein.

After considering facts of the case, the report submitted by the Assessing Officer on the additional evidence given by the appellant, details of AIR and the explanations given by the appellant, it is noted that she has made cash deposits as mentioned in the preceding page. The claim of the appellant that the cash deposited in the bank is out of the cash book appears to be justified. Without commencing and examining the source of funds which are coming to the cash book, it is noted that the cash which has been deposited in the bank account and is appearing in the AIR can be reconciled by the entries shown as deposit of cash in the personal cash book maintained by the appellant. It is important to note that the cash book has been duly sent to the Assessing Officer for his comments while admitting the additional evidence under rule 46A.

The appellant has been able to reconcile the cash deposit of Rs. 43,60,960 shown in AIR as deposited in Kalupur Commercial Cooperative Bank Ltd. In the AIR, the entries of cash deposits are appearing two times for a particular date and, therefore, the amount as per the AIR is exactly the double as against the actual cash deposited in the bank. The reconciliation has been submitted by the appellant which is reproduced on preceding pages 46 to 49 as exhibit I. It is clear from the table that the claim of the appellant is correct and is, therefore, accepted.

The AIR also show another amount of cash of Rs. 60,44,500 which is actually deposited in HDFC Bank but the Assessing Officer has considered the same as deposited in Kalupur Commercial Co-op Bank Ltd. This is a factual error on the part of the Assessing Officer. The amount has been shown at entry No. 49 in the transactions of cash deposited of more than Rs. 1 lakh in the savings bank account. Since this is the only entry of cash deposited in HDFC Bank, and rest of the other entries which are 127 in number, the Assessing Officer must have mistaken it as cash deposited in Kalupur Commercial Co-operative Bank Ltd. However, the appellant has also satisfactorily explained the cash deposit as out of the withdrawals shown in the cash book. The entries of cash deposited are duly reflected in the personal cash book which the appellant has submitted under rule 46A. Therefore, without commenting on the source of funds, the entries are explained on the basis of cash book submitted by the appellant. Now, let us examine the source of various cash or funds which has been brought in the cash book and deposited in various bank accounts maintained by the appellant. The appellant has received funds from the following sources:

It is clear from the above position that the sources of fund which are received is mainly on account of house loan from GRUH Finance Ltd., crop loan from HDFC Bank Ltd. cheque funds received from Shri Subhash Bhatti, her husband and sale of agriculture land owned by the appellant.

The appellant has given documentary evidence relating to loans taken from GRUH Finance and HDFC Bank and, therefore, the source of the same is not questionable. The appellant has received an amount of Rs. 34,81,767 from her husband Shri Subhashchandra P. Bhatti who is also assessed to tax and has PAN. The Assessing Officer may pass this information to the Assessing Officer of her husband, but no addition in the case of the appellant can be made. Further, the agriculture land sold by the appellant is not disclosed in the return of income. The appellant has deposited the total sale consideration including that of her husband in the appellant account. The issue of income arising out of the land sale has been dealt with subsequently while dealing with the ground of appeal related to the issue. Therefore, the sources of funds which are shown by the appellant are explained.

However, further examination of the cash book submitted by the appellant show that the appellant has shown a cash loan of Rs. 45,000 on May 5, 2008, from her husband. The loan has been returned on July 18, 2008, in cash. Further, the appellant has also taken cash of Rs. 10,00,000 from Shri Shankarlalji Parihar on December 25, 2008, which is shown as returned to him on March 23, 2009. The appellant has explained that the cash of Rs. 45,000 received from her husband was out of his cash on hand and was taken as she required it. Similarly, in respect of the amount of Rs. 10,00,000 received from Shri Shankarlalji Parihar, it has been submitted that the amount was given by Shri Parikhar who is her father as against the family settlement on account of her share of the property owned by her father. It has further been claimed by her that since did not want any money from her father, she returned it subsequently. The explanation given by the appellant is clearly an afterthought. First of all, it is to be noted that all the entries in the cash book which has been submitted by the appellant for explaining the source of cash deposited in various bank accounts show withdrawal from the bank account and only the above instances are in cash. Closer examination of the cash book show that the amount of Rs. 45,000 which is shown to have been received from her husband has been shown as the appellant was having shortage of cash on hand near that date. As per the cash book given by the appellant, there was a cash on hand of Rs. 3,15,714 on May 1, 2008. However, cash totalling to Rs. 3,20,000 has been deposited from May 1, 2008, to May 6, 2008. Therefore, to cover this shortage, the appellant had to show this cash as received from her husband. Similarly, the cash of Rs. 10,00,000 which is claimed to have been received on account of her share of property from her father on December 25, 2008, is also shown in the cash book as received as the appellant has deposited huge cash in the bank accounts in the month of January 2009. The cash balance as on January 1, 2009, was Rs. 25,42,266 whereas it has gone down to Rs. 2,40,416 on January 29, 2009. Therefore, the cash of Rs. 10,00,000 is also shown as received from her father to cover the cash deposits in the bank. In view of these facts, the source of cash of Rs. 10,45,000 is clearly unexplained and the appellant has tried to create a source to cover up the deficiency of the cash. Therefore, out of the cash deposits of Rs. 1,04,05,460, the source of Rs. 10,45,000 is not explained. The addition made by the Assessing Officer is, therefore, restricted to Rs. 10,45,000.

The ground of appeal is accordingly partly allowed."

It is this order of the Commissioner of Income-tax (Appeals) which the Tribunal confirmed. From the contents of the order passed by the Commissioner of Income-tax (Appeals), it can be seen that the entire issue is based on appreciation of evidence on record. The Commissioner-of Income-tax (Appeals) having undertaken a detailed exercise of reconciling the accounts and examined the source of different deposits in cash, limited the addition to Rs. 10,45,000. No question of law, therefore, arises. Regarding deletion of Rs. 2.39 crores under section 69 of the Act, the Commissioner of Income-tax (Appeals) made the following observations:

"5.3 Decision:--

I have carefully considered the assessment order and the submission filed by the appellant. The appellant has reconciled the investment shown in the AIR and that which has been actually made by her as under:--

The source of investment of Rs. 94,73,000 for purchase of plot at Satyagrah Chhavani, vide sale deed dated January 29, 2009, is out of the funds which have been received by her on account of sale of agriculture land and loan from bank. The fund flow of the appellant has been duly discussed in the preceding ground of appeal. The appellant has made payment by cheque amounting to Rs. 35,00,000 and cash payment of Rs. 59,73,000 to the seller and another Rs. 4,64,350 has been spent in cash on stamp duty and related expenses. The source of cash is duly explained by the appellant with the help of cash book which is discussed in the preceding ground of appeal and sources of cash deposited in the cash book and in the bank account has been discussed therein. Therefore, the source of investment in this property is treated as explained.

The investment of Rs. 1,85,00,000 which has been made by the appellant in purchasing a house property at Satyagrah Chhavani, vide sale deed dated March 31, 2009, is made out of loan from Gruh Finance amounting to Rs. 1,50,00,000. The appellant has made cheque payment of Rs. 24,09,583 on various dates and cash payment of Rs. 10,90,417 for stamp duty and related expenses. The appellant has explained the sources of funds and the same has been discussed in the preceding ground of appeal and, therefore, the source of investment in this property is also treated as explained.

The ground of appeal is accordingly allowed."

Here also, the Commissioner of Income-tax (Appeals) has given cogent reasons and found no grounds for sustaining the addition made by the Assessing Officer. He held that the source of investment in the property stood explained. It is this order of the Commissioner of Income-tax (Appeals) which the Tribunal confirmed in further appeal. Here also, entire issue being based on facts and having examined by the Commissioner of Income-tax (Appeals) and the Tribunal and having come to a concurrent finding of fact, no question of law arises. The tax appeal is, therefore, dismissed.