Addition for unexplained cash deposits justified if explanation furnished by assessee not verifiable
Case Law Details
Shree Narayan Meena Vs ITO (ITAT Jaipur)
Conclusion: AO was justified in making addition under section 68 on account of unexplained cash deposits found in bank account in case having regard to the human probabilities and normal course of human conduct, explanation offered by assessee was not wholesome, credible and verifiable.
Held: During the course of assessment proceedings, assessee was asked to furnish source of cash deposits in his bank account exceeding Rs. 10,00,000/- during the financial year. Assessee submitted that based on the power attorney issued in his name by the land owners and on behalf of the land owners, he had sold land during the year to S. It was submitted by assessee that from time to time money was received from S and based on the same, the post-dated cheques issued by him in favour of the land owners were presented by the land owners and cleared from his bank account. AO however made addition under section 68 on account of alleged unexplained cash deposits in bank account. Since assessee was beneficiary, hence the addition was made in the hands of assessee on substantive basis and the matter was referred to the Income-tax Officer, Ward -2(3), Jaipur for making addition on protective basis in the hands of S. It was held where any sum was found credited in the books maintained by assessee, the primary requirements, which should be satisfied cumulatively by assessee in such cases was identification of the person, creditworthiness of that person and the genuineness of the transaction which had not been satisfied in the instant case. The explanation offered and material submitted by assessee in support of its explanation was not wholesome, credible and verifiable. These requirements had been examined in the instant case having regard to the human probabilities and normal course of human conduct and it was found that the explanation offered by assessee at this stage had not been satisfied. AO had rightly brought to tax the unexplained cash deposits found deposited in the bank account.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee against the order of Ld. CIT(A)-II, Jaipur dated 09.12.2013 for A.Y. 2009-10 wherein the assessee has taken following grounds of appeal:-
“1. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition o f Rs. 63,38,820/- on account of alleged unexplained cash deposits in bank account. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 63,38,820/-.
2. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition of Rs. 16,10,491/- on account of alleged unexplained cheques deposits in bank account. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 16,10,491/-.
3. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition o f Rs. 31,50,000/- on account of alleged income on sale of plot No. 143 Swaroop Vihar, Jagatpura, Jaipur. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 31,50,000/-.
4. In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in not accepting the gift of Rs. 2,00,000/- received from brother although no separate addition is made on this account. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 2,00,000/-.
2. Regarding first ground of appeal, brief facts of the case are that the return of income was filed by the assessee declaring an income of Rs. 1,48,340/- which was assessed at Rs. 1,12,57,130/- u/s 143(3) of the Act. During the course of assessment proceedings, the assessee was asked to furnish source of cash deposits in his bank account, maintained with Punjab Nation Bank, Bapu Nagar, Jaipur, exceeding Rs. 10,00,000/- during the financial year. It was submitted by the assessee that based on the power attorney issued in his name by the land owners and on behalf of the land owners, he has sold land during the year to Shri Shravan Kumar S/o Ramu R/o Ashok Pur, New Sanganer, Sodala, Jaipur. It was submitted by the assessee that from time to time money was received from Shri Shravan Kumar and based on the same, the post-dated cheques issued by him in favour of the land owners were presented by the land owners and cleared from his bank account. The Assessing Officer observed that the land was sold on 28.10.2006 and 11.01.2007 but the sale consideration was received by the assessee almost after 15th to 18th months which cannot be believed. Further, the assessee has not given the complete address of Shri Shravan Kumar and even his PAN details were not submitted by the assessee. Thereafter, the assessee started avoiding attending to the assessment proceedings and as a result, notice u/s 142(1) was issued requiring the assessee to furnish source of cash deposits in his bank account and it was also stated in the said notice that in case of non compliance, assessment will be completed u/s 144 and entire deposits in his bank account will be added to his total income. Subsequently, on receipt of such notice, the assessee came forward and attended the assessment proceedings and filed an affidavit from Shri Shravan Kumar where he had admitted that he had purchased land on power of attorney and paid cash to the assessee from time to time in lieu of which assessee has issued cheques to the land owner. The Assessing officer did not find the affidavit as reliable piece of evidence for various reasons discussed in the assessment order. Some of the reasons given by the Assessing officer are worth noting which are as follows:
“1. He had not mentioned any details of cash paid by him i.e. dates and amounts when he had paid cash to Shree Narayan Meena.
2. Details of colony developed by him were not mentioned.
3. The land was purchased by him in October, 2006 and January, 2007 and payments were made in May 2008 onwards, making payments after 15th to 18 months and reasons for delayed payments were not given. ”
3. Thereafter, the assessee was asked to produce Shri Shravan Kumar but he avoided presenting him and in turn requested the Assessing Officer to issue summons u/s 131 of the Act. However, in absence of complete address, the Assessing Officer could not issue the summons to Shri Shravan Kumar.
4. In the mean time, on 12.12.2011, the assessee filed written submission before the Ld. AO which interalia contains following submission:-
“3. That Mr. Sharwan Lal has purchased land at Shrikishanapura (Jagatpur Tehsi Sanganer, Jaipur by registered sale deed through power of attorney of Mr. Shri Narain Meena and details of all these transactions are already on record and after purchasing above land, Shri Sharwan Lal has developed scheme known as Nehru enclave extension and get the land divided in various plots and started selling the same and out of sale proceeds, Mr. Sharwan Lal started making payment to me so that I can clear the cheques mentioned in registered sale deed and I will submit detailed site plan, list of plot holders to whom plots were sold and area of each plot and amount received against each plot within a weeks time.
4. I had given complete address of Shri Sharwan Lan and Smt. Ruby Srivastav and I further request you to please issue summons for getting other detailed information from them and I am prepared to bear the cost of summoning them.
5. I am also trying to collect all those relevant information from those persons and no sooner I get the information I will submit the same to you immediately. ”
5. Thereafter, summons u/s 131 were issued to Shri Shravan Kumar who finally appeared before the AO on 16.12.2011 where his statement were recorded u/s 131 of the Act. However for details reasons given in the assessment order, the AO did not believe the said statement to be reliable piece of evidence to substantiate the source of cash deposits in the assessee’s bank accounts and in particular the creditworthiness of Shri Shravan Kumar.
6. Thereafter assessee was again given an opportunity to submit the details of money received from Shri Shravan Kumar and dates when it was received and details of payments made to the farmers when the payments were made however there was no compliance on the part of the assessee and thereafter, the Assessing Officer finally made the addition of Rs. 63,38,820/- as unexplained cash deposits with the following final findings:-
“In absence of details mentioned at Sl. No. a to o, it cannot be believed that the assessee has received any cash from Shri Sharwan Kumar during the year under consideration. Therefore, I hold that the cash deposited in the bank accounts of assessee was the undisclosed income of assessee which was deposited in bank account. The peak of cash deposited and withdrawn from all the three bank accounts is enclosed as Annexure-A to this order. As per this annexure total peak comes at Rs. 63,38,820/-. The same is held as unaccounted income of the assessee and added to his total income. Thus Rs. 63,38,820/- is added to the total income of the assessee.
Since the assessee is beneficiary, hence the addition is made in the hands of assessee on substantive basis. The matter is referred to the Income-tax Officer, Ward -2(3), Jaipur for making addition on protective basis in the hands of Shri Sharwan Kumar.”
7. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) wherein following submissions were made and which were again reiterated during the course of hearing before us:
“7. Briefly the facts of the case are that the assessee appellant aged about 39 years completed his MA in Sociology in the year 1996 and belongs to a small village Bassi where his father is involved in farming and is currently residing at Jagatpura, Jaipur. After completing his education, he was in search of some livelihood.
7.1 He was a man of meagre means. He belonged to an agriculturist family.
He had no resources to do any real estate business. However, since he was of rural background he thought if fit to do dalali business where he could locate prospective sellers of the farm land and get them appropriate buyers.
7.2 The assessee appellant, under his normal course of dalali business, came in contact with the following persons:
a. Ganga Devi
b. Shri Mool chand
c. Shri Ramjilal
d. Shri Ramdhan
7.3 The above persons had a land situated near a nullah, in village Vidhani, Goner Road. The land owners were belonging to Scheduled Caste, and therefore, their land could be purchased by other persons of the same caste only. Moreover, the land of these persons was located near a Nullah and the land owners were unable to find a buyer by themselves. Under these circumstances, the assessee appellant found a willing buyer of this land, Shri Shravan Kumar. However, looking to so many strings attached ( limitation of SC and location near a Nullah) to the land deal; it was agreed amongst the buyer and the sellers that they will execute registries in favour of the buyer Shri shravan Kumar. It was also mutually agreed that they will receive post dated cheques against the sale consideration which will be presented for clearing on a later date with the prior approval of Shri Shravan Kumar. Unfortunately, Shri Shravan Kumar, the buyer of the land did not have any bank account at that point of time. The bank account of Shri Shravan Kumar was opened in March, 2012, Shri Shravan Kumar’s earlier bank account with UCO Bank in NBC Campus, Jaipur became inoperative after his retirement from NBC in the year 1999. Ignorant of the legal consequences and driven by his zeal to complete the deal, the assessee appellant issued cheques of his own bank account with the understanding that cash will be made available by Shri Shravan Kumar which will be deposited by the assessee appellant and the cheques will be cleared in favour of the land owners (sellers). It was also decided that Shri Shravan Kumar will be allowed some time to develop the said land and find prospective buyers from whom Shri Shravan Kumar could receive money for payment to the land owners (sellers).
7.4 On the basis of being a local acquaintance to the land owners, the land owners executed Power of Attorney in favour of the assessee appellant and the assessee appellant, in turn, on the basis of that authority executed the sale deeds in favour of Shri Shravan Kumar.
The land owners executed the following power of Attorney in favour of the appellant:
| Name | Date of Execution of Power Attorney |
| Smt. Ganga Devi | 6th September, 2006 |
| Shri Mool Chand | 6th September, 2006 |
| Shri Ramjilal | 6th September, 2006 |
| Shri Ramdhan | 6th September, 2006 |
The land of the above mentioned land owners were sold by the assessee appellant on the basis of Power of Attorney to Shri Shravan Kumar through the following sale deeds:
| Name | Date of Execution of Sale Deed |
| Smt. Ganga Devi | 11th January, 2007 |
| Shri Mool Chand | 11th January, 2007 |
| Shri Ramjilal | 28th October, 2006 |
| Shri Ramdhan | 28th October, 2006 |
7.5 In terms of the above understanding amongst the parties, the sale deeds were executed by the sellers through the Power of Attorneys wherein post dated cheques were issued. In sale deed, the cheque numbers were mentioned that were issued as consideration. These very cheques were cleared in favour of the sellers by depositing the cash received from Shri Shravan Kumar.
7.6. The above facts were placed before the ld AO during the course of assessment proceedings. Shri Shravan Kumar also appeared before the ld. AO on 16th December, 2011. His statements were recorded by the ld. AO Shri Shravan Kumar confirmed the nature of transaction and also confirmed that the land was purchased by him (Shri Shravan Kumar). Shri Shravan Kumar also confirmed having made available cash to the assessee appellant for clearing the cheques.
7.7 The ld. AO, without bringing any material to support his action, disregarded the complete facts including the statement and the affidavit given by Shri Shravan Kumar. The ld. AO treated the cash deposited in the bank account of the assessee appellant as unexplained cash deposits and added a sum of Rs. 63,38,820/- by calculating the peak amount.
8. During the course of hearing, the ld. AO totally disregarded the facts confirmed by Shri Shravan Kumar during the course of his statements recorded by the ld. AO. The ld. AO has given reasons for not accepting the facts so emerging of his order. The reasons so given by the ld. AO have no relevance to the issue which he was expected to decide. Shri Shravan Kumar had categorically confirmed that he had made available the cash and the cheques to the assessee appellant so that the cheques issued to the land owners could be cleared from the bank statement of the assessee appellant.
The same facts were also confirmed by Shri Shravan Kumar vide certificate given by Shri Shravan Kumar.
Further, these facts were also confirmed by way of his sworn affidavit by Shri Shravan Kumar.
- The ld. AO’s reason for not accepting the said confirmations by Shri Shravan Kumar were that Shri Shravan Kumar did not mention the dates on which he handed over the cash to the assessee appellant. Not remembering the dates cannot be so fatal to disbelieve the entire confirmation.
- Further, the ld. AO disregarded Shri Shravan Kumar’s statements because he did not remember the details of plots sold by him rates at which plots were sold, colony which were developed, he was assessed to tax or not etc.. All these issues are not relevant. The ld. AO has not disputed the fact of the lands having been purchased by Shri Shravan Kumar. Once this fact is undisputed, details of subsequent sale by Shri Shravan Kumar can have no bearing on the earlier part of the deal.
- The ld. AO has also taken a plea that if cash is paid by Shri Shravan Kumar then the same is disallowed in his hands u/s 40A(3). This cannot be a reason for not believing the proof of cash having been received from Shri Shravan Kumar.
- The other reasons like Shri Shravan Kumar being a checker in NBC, Jaipur and after retirement purchased mini bus and truck and sold the same at loss had no bearing on the issue before the ld. AO.
- Another reasons mentioned by the ld. AO is that payments by Shri Shravan Kumar being made after a lapse of 15-18 months from the date of purchase of land cannot be believed. This is a fact not only confirmed by the assessee appellant but also by Shri Shravan Kumar and is fully corroborated by the gap in execution if registryand cheques cleared in favour of land owners. Nothing more is needed to substantiate this aspect which the ld. AO has ignored without giving any cogent reason.
8.1 Analysis of the sale deeds executed by the assessee appellant in favour of Shri Shravan Kumar will reveal the following vital facts which were before the ld. AO himself:
A. The cheque numbers mentioned in the sale deeds are cleared from the bank account of the assessee appellant in favour of the original land owners:
| Particulars | Details of Cheques In Sale Deed | Amount | Date of Clearance of Cheque | P.B | |
| In Pass Book | In Sale Deed |
||||
| Sale Deed for Smt. Ganga Devi Executed on 11th January 2007 at Rs. 99,00,000 | 183270 | 11,00,000/- | By Shravan Kumar | – | 29 |
| 183271 | 11,00,000/- | By Shravan Kumar | – | 29 | |
| 183272 | 11,00,000/- | 26.09.2011 | 59 | 29 | |
| 183273 | 11,00,000/- | 03.07.2008 | 55 | 29 | |
| 183274 | 11,00,000/- | 29.07.2008 | 55 | 29 | |
| 183275 | 11,00,000/- | 04.09.2008 | 55 | 29 | |
| 183276 | 11,00,000/- | 08.07.2010 | 59 | 29 | |
| 183277 | 11,00,000/- | 04.03.2009 | 57 | 29 | |
| 183278 | 11,00,000/- | 24.09.2009 | 58 | 29 | |
| Total | 99,00,00/- | ||||
| Sale Deed for Shri Mool chand Executed on 11th January 2007 at Rs. 33,00,000 | 183267 | 11,00,000/- | Replaced by New Cheque | – | 25 |
| 183268 | 11,00,000/- | 03.06.2008 | 55 | 25 | |
| 183269 | 11,00,000/- | 16.09.2008 | 56 | 25 | |
| Total | 33,00,000/- | ||||
| Sale Deed for Shri Ramdhan and Ramjilal | 671609 | 7,44,000/- | Replaced by New Cheque | – | 21 |
| executed on 28th October, 2006 at Rs. 14,88,000 | 671608 | 7,44,000/- | Replaced by New Cheque | – | 21 |
| Total | 14,88,000/- | ||||
The fact that the cheques were given in advance is established from the fact that they are not cleared in chronological order.
B. Following cheques became stale, and therefore, were replaced by the assessee appellant. The replaced cheques were also cleared in favour of the land loners:
| Name | Amount | Old Cheque No. | New Cheque No. | P.B. | Date of clearance of cheque |
| Shri Ramjilal | 7,44,000 | 671609 | 883893 | 56 | 19.12.2008 |
| Shri Ramdhan | 7,44,000 | 671608 | 883892 | 56 | 17.12.2008 |
| Total | 14,88,000 |
C. Following cheque was lost by the land owner and was replaced by the assessee appellant which was cleared in favour of the land owner:
| Name | Amount | Old Cheque No. | New Cheque No. | P.B. | Date of clearance of cheque |
| Shri Mool chand | 11,00,000 | 183267 | 883894 | 56 | 23.12.2008 |
| Total | 11,00,000 |
D. Following cheques originally issued to Smt. Ganga Devi by assessee appellant were misplaced by her and were replaced by Shri Shravan Kumar himself:
| Name | Amount | Old Cheque No. | New
Cheque No. |
P.B. | Date of clearance of cheque | |
| Receipt | Pass Book | |||||
| Shri Ganga Devi | 11,00,000 | 183270 | 008282 | 44 | 67 | 17.05.2012 |
| 11,00,000 | 183271 | 008281 | 45 | 67 | 09.05.2012 | |
| Total | 22,00,000 | |||||
The above two cheques were not cleared from the assessee appellant’s bank account but were directly cleared from the bank account of Shri Shravan Kumar.
Shri Shravan Kumar had obtained receipts from Smt. Ganga Devi to this effect. The said receipts do further confirm that the land was sold by Smt. Ganga Devi to Shri Shravan Kumar through Shri narayan Meena.
The pass book of Shri Shravan Kumar is not additional evidence but is only a further evidence to further substantiate what was submitted during the assessment proceedings by the ld. AO. These facts were admitted by Shri Shravan Kumar, when he appeared for his statements before the ld. AO. However, a matter of abundant precaution application under rule 46A is being moved for admitting this evidence.
8.2 At no point of time the assessee appellant ever became the owner of the land. nor, at the time of obtaining the Power of Attorney, the payments were made to the land owners. Both the aspects are substantiated by the bank statement wherein the cheques mentioned in the registered sale deed are cleared in favour of the land owners.
8.3 The cash which was received from Shri Shravan Kumar and deposited by the assessee in his bank account, duly confirmed by Shri Shravan Kumar, has not been accepted by the ld. AO with so many corroborative evidences, the transaction having taken place in the manner explained cannot be denied. The ld. AO has not accepted the said explanation without bringing anything on record to support his action.
8.4 The ld. AO has erred in applying peak theory. Peak theory is relevant when it is established that the money belongs to the assessee. In the instant case source of deposits have been established beyond doubt. Hence, the peal theory application is unjustified and deserves to be quashed.
In view of the above, the cash deposits are fully explained. The addition of the peak amount is totally unjustified and deserves to be deleted.”
9. The ld CIT(A) however didn’t agree with the contentions of the assessee and confirmed the order of the AO. The relevant findings of the ld. CIT(A) which are under challenge before us are reproduced as under:-
“3.5 I have considered the facts of the case, assessment order and appellant’s written submission. Assessing Officer made addition in respect of peak of substantial cash deposits in appellant’s bank account. Total Rs. 99 Lacs were deposited on various dates and after considering the cash withdrawals, assessing officer made the addition in respect o f peak cash deposited in appellant’s bank account. Appellant submitted that such huge cash was given to him by the prospective buyer of the property Shri Shravan Kumar. Why appellant deposited the cash allegedly given by Shri Shravan Kumar in his bank account is not clearly explained. When money is deposited in the appellant’s bank account, onus is on the appellant to explain the nature and source of such cash deposit. This burden can never be shifted to the assessing officer. Appellant only produced Shri Shravan Kumar before the AO who recorded his statement and came to the conclusion that there were many missing links in the statement and there was no evidence o f possession of such huge cash with Shri Shravan Kumar. Even in the statement recorded Shri Shravan Kumar could not provide the source o f such huge cash particularly when he was in employment as very low-paid employee till 1999 and thereafter not doing any major anything which can give him such cash. How such huge cash can be available with a person like him is not explained by anybody. Why with such substantial cash he did not have any bank account which he opened subsequently after this controversy arose. Just by admitting that he has given such huge cash to the appellant is not sufficient. There has to be evidence of source of such substantial cash which is completely missing even in the case of Shri Shravan Kumar. Therefore assessing officer after analysing the affairs of Shri Shravan Kumar concluded that the admission of giving cash by Shri Shravan Kumar is without any basis and the money deposited in the bank account belonged to the appellant only and the same was his unaccounted credit.
During appellate stage, appellant submitted additional evidences in the form of receipt given by seller and copy of passbook of Shri Shravan Kumar. But none of these evidences provide any indication with regard to source of cash deposits in appellant’s bank account. These evidences are of the period after assessment was completed and these are not o f the period during which cash was deposited. Subsequent evidences can be created and therefore these do not have evidentiary value. In any case, appellant tried to divert the main issue i.e. the source of cash deposit in the appellant’s bank account. Till date appellant was not able to provide any evidence or material to explain the source of cash deposits in his bank account. Even if for the sake of argument it is accepted that appellant was provided cash by Shri Shravan Kumar then the source of cash need to be proved in his case which was also not done. Protective assessment in his hand recommended by AO does not absolve appellant from his onus. Since appellant deposited the money in his bank account and there is no source for such deposit except claiming that it was given by Shri Shravan Kumar who in turn does not have a source, I have no hesitation in holding that money deposited in appellant’s bank account was unexplained and accordingly addition made by assessing officer is confirmed.”
10. Further, during the course of hearing, the ld AR submitted that the Ld. CIT(A) has failed to appreciate, in correct perspective, the vital evidences which beyond doubt prove that following persons namely Smt. Ganga Devi, Shri Moolchand, Shri Ramji Lal and Shri Ramdhan had sold their respective pieces of land to Shri Shravan Kumar and the appellant acted as a broker using his bank account for transferring the money from buyer to sellers.
10.1 The vital evidences before the ld. CIT(A) were as below:
i. Sale Deeds:
a. Copy of sale deed executed on 28/10/2006 between Shri Shravan Kumar and Shri Narayan Meena.
b. Copy of sale deed executed on 11/01/2007 between Shri Shravan Kumar and Shri Narayan Meena.
c. Copy of sale deed executed on 11/01/2007 between Shri Shravan Kumar and Shri Narayan Meena.
ii. Power of Attorney:
a. Copy of power of attorney executed on 06/09/2006 between Smt. Ganga Devi and Shri Narayan Meena.
b. Copy of power of attorney executed on 06/09/2006 between Shri Moolchand, Shri Ramjilal and Shri Ramdhan with Shri Narayan Meena.
iii. Stale cheques replaced by original buyer Shri Shravan Kumar.
iv. Copy of pass book of P.N.B. of appellant to prove deposits in his bank account found destination to the sellers of the land.
10.2 Ld. CIT(A) failed to appreciate the reason for depositing the cash made available by Shri Shravan Kumar in appellant’s own bank account. Shri Shravan Kumar got his bank account opened as late as 06/04/2012, whereas sale deeds were executed on 28/10/2006 and 11/01/2007, on which dates Shri Shravan Kumar had no bank account of his own and the cheque numbers were required to be mentioned in the sale deeds. It is also important to note that at that point of time, the buyer Shri Shravan Kumar had no cash available with him. This mechanism of mentioning the cheque numbers of appellant could lead to conclude the deal and therefore, the action was like a pragmatic businessman which needs to be appreciated by tax authorities.
10.3 The ld. CIT(A) also failed to appreciate that Shri Shravan Kumar, in turn received the cash from the different buyers to whom he had sold/ agreed to sell the plots out of the land purchased by him. Since, this cash was used for clearing the cheques in favour of the sellers, Shri Shravan Kumar did not feel any necessity to deposit the cash in his own account by opening a new account.
10.4 One vital evidence of replacing the stale cheques by the cheques of buyer of lands, Shri Shravan Kumar have been rejected by simply observing that this is an afterthought and is an evidence which is created subsequently. No one can lose/ misplace cheques in retrospect. The following cheque numbers were subsequent to cheque numbers 183270 and 183271:
| Cheque No. | Date of clearance of cheque |
| 183272 | 26/09/2011 |
| 183273 | 03/07/2008 |
| 183274 | 29/07/2008 |
| 183275 | 04/09/2008 |
| 183276 | 08/07/2010 |
| 183277 | 04/03/2009 |
| 183278 | 24/09/2009 |
Still, the cheque numbers 183270 and 183271 were not cleared by Shri Ganga Devi because she had lost these cheques. Since, all these cheques were of same amount of Rs. 11,00,000/- each, Smt. Ganga Devi kept on depositing other cheques and asked for replacement when cheques available with her were exhausted. The two lost cheques were replaced by the cheques of Shri Shravan Kumar himself numbering 8281 and 8282 which cleared on 09/05/2012 and 17/05/2012 respectively. These facts were evident before the ld. CIT(A).
10.5 Ld. CIT(A) was inclined to accept the fact of cash being made available to the appellant by Shri Shravan Kumar, yet he denied the relief for the simple reason that source in the hands of Shri Shravan Kumar was not proved. Following observation of ld. CIT(A) at Pg 12 of his order is worth noticing:
“Even if for the sake of argument it is accepted that appellant was provided cash by Shri Shravan Kumar then the source of cash need to be proved in his case which was also not done. Protective assessment in his hand recommended by A.O. does not absolve appellant from his onus.”
Once, this is established that Shri Shravan Kumar made available the cash to the appellant as consideration of his purchasing the land for onward transfer of money to the sellers of the land, the appellant acting as broker, there cannot be any reason to invoke section 68 in the hands of the appellant. Section 68 is not applicable for receiving the sale consideration. Section 69 can be invoked in the hands of the payer of such sum. Otherwise also even for section 68, the Hon’ble jurisdictional High Court in the cases of Kanhaialal Jangid v Asstt CIT (2008) 217 CTR (Raj) 354, Aravali Trading Co v ITO (2008) 220 CTR (Raj) 622, Labh Chand Bohra v ITO (2010)189 Taxman 141 (Raj) and CIT, Ajmer v Jai Kumar Bakliwal (2014) 366 ITR 217(Raj), has held that source of source need not be proved by the assessee.
In view of the above addition of Rs. 63,38,820/- made by the ld. A.O. and confirmed by ld. CIT(A), deserve to be deleted by allowing this ground of appeal.
11. The ld DR is heard who has vehemently argued the matter and took us through the detail findings of the AO and the ld CIT(A) and supported the said findings.
12. We have heard the rival contentions and purused the material available on record. The issue under consideration relates to cash found deposited in the bank account maintained and operated by the assessee and whether the assessee is able to offer suitable explanation regarding the nature and source of such cash deposits to the satisfaction of the Assessing officer.
12.1 Here, it would be relevant to refer to the legal propositions in the context of section 68 which has emerged after examining various legal authorities including those quoted by the ld AR on the subject as under:
a) Where any sum is found credited in the books maintained by the assessee, Section 68 requires that the assessee should offer an explanation about the nature and source of such sum found credited in its books of accounts to the satisfaction of the Assessing officer. In absence of explanation, or in the event of explanation being not found satisfactory, the sum so credited would be included in the income of the assessee.
b) The primary requirements, which should be satisfied cumulatively by the assessee in such cases is identification of the creditor/shareholder, creditworthiness of creditor/ shareholder and the genuineness of the transaction.
c) The explanation offered and material submitted by the assessee in support of its explanation should be wholesome, credible and verifiable. These three requirements thereafter have to be tested by the Assessing officer not superficially but in depth having regard to the human probabilities and normal course of human conduct. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on it would shift leaving it to the Assessing Officer to start inquiring into the affairs of the third party.
d) Whilst it is true that the assessee cannot be called upon to adduce conclusive proof on all these three requirements, it is nonetheless legitimate expectation of the process that he would bring in sufficient proof, which is credible and at the same time verifiable, so as to discharge the initial burden placed on him. Whether initial onus stands discharged would depend upon facts and circumstances of each case.
e) The degree of burden of proof on the assessee will vary from assessee to assessee. Where amounts are borrowed from or shares are allotted through private placement, to persons generally known to directors or shareholders, directly or indirectly, burden of proof is on higher pedestal and the Courts have laid down a strict approach in terms of satisfying such burden of proof.
f) The word “identity” means the condition or fact of a person or thing being that specified unique person or thing. The identification of the person would include the place of work, the staff, the fact that it was actually carrying on business and recognition of the said company in the eyes of public. Merely producing certificate of incorporation, PAN number or assessment particulars did not establish the identity of the person. PAN numbers are allotted on the basis of applications without actual de facto verification of the identity or ascertaining active nature of business activity. The actual and true identity of the person or a company was the business undertaken by them. Further, these documents have their limitation and cannot be relied upon blindly when there are surrounding circumstances to show that the subscriber was a paper company and not a genuine investor.
g) In respect of the genuineness of the transaction and creditworthiness of the shareholder/lender, it would be incorrect to state that the onus to prove the same stands discharged in all cases if payment is made through banking channels and the fact that the money originally lent has been returned through banking channels. Whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each other; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation and due diligence to protect the investment and the pay back on such investment, whether the investor professes and was an angel investor, the object and purpose (profit motive) behind the investment and whether any dividend declared and distributed in the past or not. Whether share subscribers have their own profit making apparatus and were involved in any tangible business activity or were they merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. Creditworthiness and genuineness of the transaction is therefore not proved by showing merely issue and receipt of a cheque or by furnishing a copy of statement of bank account of share subscriber, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment. Similar analogy will apply in respect of any loan transaction.
h) The entire evidence available on record has to be considered and a reasonable approach has to be adopted. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish identity, creditworthiness of the shareholders and the genuineness of the transaction.
i) Where the assessee has discharged the initial burden placed upon him under sec. 68 to prove and establish the identity and creditworthiness of the share applicant/lender and the genuineness of the transaction, the burden of proof shifts on the Assessing officer. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. If the Assessing Officer harbours any doubts of the legitimacy of any subscription, he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings or has no material in his possession, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company.
j) The case of CIT v. Orissa Corporation (P.) Ltd. [1986]159 ITR 78/25 Taxman 80 (SC) exemplifies the category of cases where no action is taken by the Assessing Officer to verify or conduct an enquiry into the particulars about the creditors furnished by the assessee, including their income-tax file numbers. In these cases, the decision was based on the fundamental rule of law that evidence or material adduced by the assessee cannot be thrown out without any enquiry. The ratio does not extend beyond that. The boundaries of the ratio cannot be, and should not be, widened to include therein cases where there exists material to implicate the assessee in a collusive arrangement with persons who are self-confessed “accommodation entry providers”.
13. In light of above legal propositions, we now refer to the factual matrix of the matter. Firstly, we refer to the bank statement for the period under consideration and the explanation offered by the assessee in this regard:
| Date | Particulars | Receipt | Particulars | Payme nts | Balance | |
| Cash | Cheque | |||||
| 09/05/2008 | Shri Shravan Kumar |
500000 | 500000 | |||
| 13/5/2008 | Shri Shravan Kumar |
600000 | 1100000 | |||
| 03/06/2008 | Shri Moolchand (183268) | 1100000 | 0 | |||
| 01/07/2008 | Shri Shravan Kumar |
600000 | 600000 | |||
| 02/07/2008 | Shri Shravan Kumar |
500000 | 1100000 | |||
| 03/07/2008 | Smt. Ganga Devi (183273) | 1100000 | 0 | |||
| 28/7/2008 | Shri Shravan Kumar |
600000 | 600000 | |||
| 29/7/2008 | Shri Shravan Kumar |
500000 | 1100000 | |||
| 29/7/2008 | Smt. Ganga Devi (183274) | 1100000 | 0 | |||
| 2/9/2008 | Shri Shravan Kumar |
500000 | 700000 | 1200000 | ||
| 4/9/2008 | Smt. Ganga Devi (183275) | 1100000 | 100000 | |||
| 5/9/2008 | Shri Shravan Kumar |
516500 | 616500 | |||
| 16/9/2008 | Shri Shravan Kumar |
500000 | 1116500 | |||
| 16/9/2008 | Shri
Moolchand (183269) |
1100000 | 16500 | |||
| 19/9/2008 | Smt. Richa
Chaudhary |
251000 | 267500 | |||
| 27/10/2008 | Smt. Richa Chaudhary | 2899000 | 3166500 | |||
| 31/10/2008 | Smt. Ruby Srivastav (cash) | 1300000 | 1866500 | |||
| 24/11/2008 | Smt. Ruby Srivastav (cash) | 700000 | 1166500 | |||
| 17/12/2008 | Shri Ramdhan (883892) | 744000 | 422500 | |||
| 18/12/2008 | Shri Shravan Kumar |
800000 | 1222500 | |||
| 19/12/2008 | Shri Ramji Lal (883893) | 744000 | 478500 | |||
| 20/12/2008 | Shri Shravan Kumar |
700000 | 1178500 | |||
| 23/12/2008 | Shri Moolchand (883894) | 1100000 | 78500 | |||
| 2/3/2009 | Shri Shravan Kumar |
600000 | 678500 | |||
| 3/3/2009 | Shri Shravan Kumar |
500000 | 1178500 | |||
| 4/3/2009 | Smt. Ganga Devi (183277) | 1100000 | 78500 | |||
| 23/9/2009 | Shri Shravan Kumar | 500000 | 578500 | |||
| 24/9/2009 | Shri Shravan Kumar | 599500 | 1178000 | |||
| 24/9/2009 | Smt. Ganga Devi (183278) | 1100000 | 78000 | |||
| 6/7/2010 | Shri Shravan Kumar | 1100000 | 1178000 | |||
| 8/7/2010 | Smt. Ganga Devi (183276) | 1100000 | 78000 | |||
| 23/9/2011 | Shri Shravan Kumar | 500000 | 578000 | |||
| 24/9/2011 | Shri Shravan Kumar | 600000 | 1178000 | |||
| 26/9/2011 | Smt. Ganga Devi (183272) | 1100000 | 78000 | |||
| 78000 | ||||||
| Total | 7616000 | 6950000 | 14488000 | |||
14. The narrations regarding deposits and withdrawals in the above bank statement are as per the assessee. As can be seen from above, there is a clear pattern of cash deposits and immediate withdrawal by way of issuance of cheques from time to time. Every time, a cheque is cleared, there is prior deposit of cash in denomination of Rs 6 lacs and Rs 5 lacs. As per the assessee, the cash which has been received from Shrawan Kumar has been deposited in his bank account from time to time and subsequent withdrawal by way of issuance of cheque is in favour of various persons from whom the land was purchased by Shrawan Kumar. In effect, the contention of the assessee is that there were transactions of sale and purchase among the land owners and Shrawan kumar, the cash deposited belongs to Shrawan kumar and the assessee acted as a facilitator by allowing the use of his bank account as Shrawan kumar was not having a bank account of his own at that point in time. Regarding the source of cash deposits by Shrawan kumar, it was submitted by the assessee before the AO that Sharwan kumar after purchasing the above land had developed a scheme known as Nehru enclave extension and got the land divided in various plots and started selling the same and out of sale proceeds, Shrawan kumar started making payment to him from time to time. It was also submitted by the assessee that he will submit detailed site plan, list of plot holders to whom plots were sold and area of each plot and amount received against each plot. However, we find that there is nothing on record to support the said contention of the assessee regarding cash deposits by Shrawan kumar. No verifiable evidence has been filed by the assessee either during the assessment or the appellate proceedings in this regard. If the assessee is aware of particulars of source of receipts in hands of Shrawan Kumar and has claimed to have facilitated the whole transaction, we don’t understand what stops the assessee in bringing on record the documentation in support of such receipts. It is not a question of determining the source of source but it is a question of determining the genuineness of the transaction and creditworthiness of Shrawan Kumar in respect of whom it has been claimed that the cash deposits belongs to him.
15. We know refer to the affidavit of Shrawan kumar filed by the assessee and statement of Shrawan kumar recorded u/s 131 by the AO during the course of assessment proceedings.
Affidavit of Shri Sharwan Kumar
Statement of Shri Sharwan Kumar recorded u/s 131 of Act
16. The AO however didn’t find the above affidavit and statement of Shri Shrawan Kumar credible for reasons as stated below:
a. he was not having any idea of the colony developed by him.
b. he was not having any idea about the plots which were sold and when sold.
c. he was not having any idea of rate at which the plots were sold.
d. He was not having any idea of location of land on which the colony was developed.
e. He was not having any idea that whether the sale proceeds were received by him by cheque or by cash.
f. He was not having any idea that whether he is an income tax assessee or not.
g. He was not having any idea of whether he is having PAN or not.
h. He was not having any idea that whether the colony/scheme was approved by the Government or not.
i. He was not having any idea that what is the name of colony.
j. The only idea he was having was that he had purchased land from Shri Shree Narayan Meena for Rs.99,00,000/- and the amount was paid by him in cash.
k. It may be mentioned that if the amount is paid by the Shri Sharwan in cash then these payments will hit by the provisions of section 40A(3) and the entire amount is to be disallowed.
l. He was bearing checker in National Engineering Industries, Jaipur, who retired in the year 1999.
m. After retirement he purchased one mini bus and one truck, but sold these vehicles after heavy losses after three-four years.
n. he is not an Income-tax assessee and not haning any PAN, if he had any PAN or Shri Sharwan Kumar.
o. He is not having any sources to buy such large chunk of land for such huge amount.”
17. On perusal of the above statement and the affidavit of Shrawan Kumar, we note that Shri Shrawan kumar has tried to broadly explain that the land purchased by him has subsequently been divided into various plots and sold to various persons and the cash received on such sale of plots has been handed over to the assessee from time to time and the cheque has been deposited in his UCO Bank. However, to verify the credence of such explanation so offered by Shrawan kumar, the AO has asked certain specific questions to him but his responses have been very sketchy throughout and the onus has been shifted totally to his accountant Shri Jain and surprisingly he is not even aware of his accountant’s whereabouts and his full name and address. If a person is dealing in sale/purchase of land, however, illiterate he may be and who doesn’t know the basics of accounting, atleast he will know the specifics of the land, its location, the area, the number of plots, rate at which the plots have been sold to various buyers and the specifics of the amount paid to the assessee from time to time especially given the huge quantum involved. However, we find that Shri Shrawan Kumar has miserably failed in disclosing these basic facts and sharing the same with the AO. Further, the details of cash paid to the assessee has been stated by him to be in thousands, which is vague without specifying the amount and date of payment and also inconsistent with the version of the assessee where the assessee says that he has received cash in lacs from Shrawan Kumar as we have noted above while reviewing the bank statement of the assessee. Even if we take into consideration the theory of fading memory with advancement of age given that Shri Shrawan Kumar is a retired person having retired in the year 1999 and the statement being recorded in the year 2011, atleast he should come foreward and share some credible evidence to support his assertions as stated in his statement and the affidavit, in form of sale deeds with the buyers to whom the plots have been claimed to be sold and consideration in form of cash which has been received, copies of his bank statements where he has deposited such cash and given the huge quantum of cash involved going by assessee’s own version, the amount and date of payment of such cash claimed to have been paid to the assessee. However, we find that there is nothing which has been brought on record to this effect. In absence of the same, it doesn’t lead us to anywhere but to disbelieve the explanation so offered by him. To our mind, the affidavit and statement of Shri Shrawan Kumar are self-serving document, are inconsistent with the version advanced by the assessee, are therefore not reliable and doesn’t inspire any confidence in accepting the same in absence of any credible verifiable supporting documentation to support the sale of land by way of plots by him and receipt of consideration in form of cash which is claimed to have been handed over to the assessee from time to time.
18. Now coming to the contention of the ld AR that the Ld. CIT(A) has failed to appreciate, in correct perspective, the vital evidences in form of power of attorney and sale deeds which beyond doubt prove that Smt. Ganga Devi, Shri Moolchand, Shri Ramji Lal and Shri Ramdhan had sold their respective pieces of land to Shri Shravan Kumar and the appellant acted as a broker using his bank account for transferring the money from Shri Shravan Kumar to sellers. We have gone through and examined these documents in form of power of attorneys and the sale deeds in detail. The power of attorney has been executed by the land owners in favour of the assessee in September 2006 and the sale deeds have been executed between the assessee as power of attorney holder on behalf of the land owners and Shri Shrawan Kumar in October 2006 and January 2007. However, what is critical to note that as far as discharge of sale consideration for purchase of land under the subject sale deeds are concerned, the cheques as mentioned in the sale deeds have been issued and cleared from the assessee’s bank account. The money therefore has travelled from assessee’s bank account to the sellers. It is assessee’s contention that cash which has been received from Shri Shrawan kumar has been deposited in his bank account and the cheques issued in favour of the sellers have been cleared therefrom. As we have held above, the statement and affidavit of Shri Shrawan Kumar is not reliable and there is nothing on record to suggest that cash found deposited in the assessee’s bank account belong to Shri Shrawan Kumar. In absence of the same, these sale deeds on a standalone basis don’t support the case of the assessee. Rather the factual position which emerges from perusal of such sale deeds is that given the fact that consideration has been paid by the assessee to the land owners though the land stood transferred in name of Shrawan kumar, Shri Shrawan Kumar was a mere name lender in these sale/purchase transactions and it is assessee’s undisclosed own money which has been deposited in his bank account and subsequently paid to the land owners.
19. Further, we are intrigued by the fact that there is huge time gap between the execution of the sale deed and realisation of sale consideration by the respective land owners. For instance, in case of Ganga Devi, the sale deed was executed on 11.01.2007 and first cheque was cleared on 03.07.2008 and the last cheque on 26.09.2011. Similar is the situation in case of other two transactions. We find that the whole of the sale consideration has been claimed to be discharged by issuance of post dated cheques and the said cheques have been cleared after a long period of time which is quite unusual in dealings in land and other real estate. Why would a land owner hand over the title and possession of his land without receiving any consideration or even a part of it and agree to receive it at a later point in time which is again uncertain and without any underlying surety or guarantee. It has been claimed that the land belongs to Scheduled caste and this land could be purchased by a person belonging to the same caste and further land was located near a nullah, hence, they were finding it difficult to find a suitable buyer. Finally, a buyer of the land namely Shrawan Kumar was identified and it was agreed that they will execute the sale deeds in favour of the buyer but will receive whole of the sale consideration in post dated cheques which will be presented for clearing on a later date with the prior approval of Shrawan kumar. It was further submitted that Shravan Kumar did not have any bank account at that point of time and ignorant of the legal consequences and driven by his zeal to complete the deal, the assessee appellant issued cheques of his own bank account with the understanding that cash will be made available by Shri Shravan Kumar which will be deposited by the assessee appellant and the cheques will be cleared in favour of the land owners. It was also claimed that it was agreed that Shravan Kumar will be allowed some time to develop the said land and find prospective buyers from whom Shri Shravan Kumar could receive money for payment to the land owners. However, we donot find any iota of evidence on record to support these so called understanding between the land owners, Shrawan kumar and the assessee. Looking at purely from a commercial angle, why would assessee in his zeal issue cheques in favour of Smt Ganga Devi worth Rs 99 lacs, in favour of Shri Mool Chand worth Rs 33 lacs and in favour of Shri Ramdhan and Shri Ramjilal worth Rs 14.88 lacs in absence of any surety or guarantee that Shrawan kumar in whose name the land stood registered will honour his commitment. What would happen when the land owners present the cheques on due date and by that Shrawan Kumar has not returned the amount and the consequences of dishonour of cheques under the Negotiable Instruments Act. What are the timelines for receipt of such huge payments from Shrawan Kumar. These are some of the questions which come to our mind and which remain unanswered. To our mind, these are merely contentions and nothing more to support the theory of cash deposit as belonging to Shrawan kumar which could not be substantiated by any credible piece of evidence. As we have stated above, only conclusion which can be drawn is that Shrawan Kumar was a name lender and it is assessee’s own money which has been paid to the land owners and effectively, the beneficial ownership over the land so purchased is with the assessee.
20. As we have stated above, where any sum is found credited in the books maintained by the assessee, the primary requirements, which should be satisfied cumulatively by the assessee in such cases is identification of the person, creditworthiness of that person and the genuineness of the transaction which has not been satisfied in the instant case.
The explanation offered and material submitted by the assessee in support of its explanation is not wholesome, credible and verifiable. These requirements have been examined in the instant case having regard to the human probabilities and normal course of human conduct and we find that the explanation offered by the assessee at this stage doesn’t passes this muster and the initial onus cast on the assessee has not been satisfied. In the instant case, the Assessing officer has also carried out necessary verification and has rightly brought to tax the unexplained cash deposits found deposited in the bank account. We have also gone through the various decisions cited by the ld AR and we find that the same have been rendered in the peculiar facts and are thus distinguishable and doesn’t support the case of the assessee. At the same time, the broad legal proposition emerging therefrom has been duly considered. In the result, ground of appeal is dismissed.
Ground No. 2 relating to addition of Rs. 16,10,491/-
21. Briefly, the facts of the case are that the cheques worth Rs 16,10,491 deposited in assessee’s bank account has been brought to tax by the AO.
21.1 During the course of hearing, the ld AR submitted that out of the total cheques of Rs. 16,10,491/-, three cheques of Rs. 10,073/-, Rs. 418/- and Rs. 1,00,000/- respectively (aggregating Rs. 1,10,491) were deposited, being brokerage income of assessee and were part of the total income of Rs. 1,48,340/- declared by the appellant in his return of income. Ld. CIT(A) has not at all considered this explanation and even without discussing this aspect has confirmed this addition.
21.2 It was further submitted that in respect of the two cheques amounting to Rs. 8,00,000/- and Rs. 7,00,000/- respectively, it was explained that these cheques were made available by Shri Shravan Kumar for onward transfer of money (against the already issued cheques) to the sellers of the land. The use of this Rs. 15,00,000/- in clearing the cheques of Rs. 7,44,000/- and Rs. 11,00,000/- respectively was explained to the ld. CIT(A) as appearing of his order. This explanation is not at all disputed by ld. CIT(A). However, ld. CIT(A) has denied the relief for the reason given by him, that the bank account of Shri Shravan Kumar was opened on 06/04/2012 and therefore, these cheques cleared on 18/12/2008 and 20/12/2008 cannot be given by Shri Shravan Kumar. Ld. CIT(A) has failed to appreciate that these cheques were made available and not issued by Shri Shravan Kumar. Since Shri Shravan Kumar was onward selling the land to other persons, he obtained two cheques of the above sums from those parties directly in the name of the appellant, so that his obligation of getting the cheques cleared in favour of sellers of land could be fulfilled. Shri Shravan Kumar had no bank account which is the reason he took the cheques directly in the name of appellant.
21.3 The explanation has to be evaluated in the background of the total factual matrix of the case. Evaluating the transaction in isolation is not justified. In the instant case the buyer Shri Shravan Kumar has paid the purchase consideration to the sellers through following three modes:
i. Cash deposited in assessee’s bank account.
ii. Cheques given to the assessee.
iii. Direct payment to the farmers.
Since, this fact is established that land has been purchased by Shri Shravan Kumar and sold by Smt. Ganga Devi, Shri Moolchand, Shri Ramji lal and Shri Ramdhan and purchase consideration has flowed from Shri Shravan Kumar (Buyer) to the sellers through the appellant broker, the explanation for the cheques deposited would in itself become fully justified and acceptable.
In view of the above, this ground of appeal may please be allowed.
22. We now refer to the relevant findings of the Ld. CIT(A) which are under challenge before us. The same are reproduced as under:-
“4.3 I have considered the facts of the case; assessment order and appellant’s written submission. Assessing officer made addition in respect of cheques deposited in his bank account which were not explained by the appellant. Appellant submitted that these were the cheques relating to land deals in which he was acting as broker. However from the details submitted by the appellant, the nature and source of such cheque deposits is not clear. Appellant submitted that the cheques were given by Shri Shravan Kumar but his bank account itself was opened on 6.04.2012 and therefore he could not have given cheques to the appellant in 2008. Again appellant tried to divert the attention by focusing on the payments made to sellers of the land which has nothing to do with nature and source of cheques deposited. From the discussion made in earlier ground, it is clear that Shri Shravan Kumar did not give any cheque to the appellant therefore nature and source of these cheques remained unexplained. Any money received by the appellant is either on revenue account or capital account. However appellant did not explain these credits whether these are revenue or on capital account. Since source of these deposits and nature are not explained properly, addition made by the assessing officer is confirmed.”
23. The facts relating to this ground are pari-materia to ground no. 1 except that instead of cash, cheque deposit worth Rs 16,10,491 has been examined by the AO to determine the nature and source thereof. The assessee has given a similar explanation that the cheque has been received from Shrawan Kumar and deposited in the assessee’s bank account towards part consideration for sale of land. The ld CIT(A) has given a finding that Shravan Kumar’s bank account itself was opened on 6.04.2012 and therefore he could not have given cheques to the appellant in 2008. In response, the assessee has submitted that these cheques were made available and not issued by Shri Shravan Kumar. It was further contended that since Shravan Kumar was onward selling the land to other persons, he obtained two cheques of the above sums from those parties directly in the name of the appellant, so that his obligation of getting the cheques cleared in favour of sellers of land could be fulfilled. In our view, these are merely contentions and not supported by any credible evidence that cheques were issued by ultimate buyers directly in favour of the assessee. Further, in view of the detailed reasoning given in respect of ground no. 1 above, we affirm the order of the ld CIT(A) to the extent of Rs 15 lacs. Regarding Rs. 1,10,491 which is claimed to be brokerage income and already offered in the return of income, the matter is set-aside to the file of the AO to examine the same and where it is found to be correct, allow the necessary relief to the assessee as amount already offered cannot be brought to tax again. The ground of appeal of the assessee is accordingly disposed off
Ground No. 3 relating to addition of Rs. 31,50,000
24. Briefly the facts of the case are that during the year under consideration, the assessee sold plot no. 143, Swaroop Nagar, Jagatpura, Jaipur for Rs. 31,50,000/- to Smt. Richa Choudhary. This plot was in the name of Smt. Ruby Shrivastav and the assessee was the power of attorney of the said land. As per AO, there was no occasion to execute power of attorney in favor of an unknown person and it is a case where the assessee bought the plot from Smt. Ruby Shrivastav and sold the same during the year under consideration. In absence of cost of purchase and the year of purchase, the entire sale consideration of Rs 31,50,000 which was received by the appellant in his bank account was brought to tax by the AO. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) which has confirmed the findings of the AO.
25. During the course of hearing, the ld AR submitted that the ld. CIT(A) did not accept the fact of power of attorney held by the appellant for the sole reason that Smt. Ruby Shrivastav was not related to the appellant. Ld. CIT(A) erred in missing the fact that appellant was a real estate broker and unrelated persons do execute power of attorney in favour of known brokers in order to facilitate sale of their property.
25.1 Ld. CIT(A) also opined that as a broker appellant was not expected to deposit the money in his bank account. Here again ld. CIT(A) could not appreciate the fact that in the instant case, appellant was not only acting as a broker but was also acting as a power of attorney holder. The normal practice is that the buyer, to safeguard his interest, makes payment in name of the power of attorney holder who is executing the sale deed.
25.2 Ld. CIT(A) also did not allow the relief for the reason that the handing over the money to Smt. Ruby Shrivastav was not evidenced. The payment was made to Smt. Ruby Shrivastav by withdrawing the money from his bank and this was evident from the pass book.
25.3 Ld. CIT(A) also erred in law by not appreciating the legal position that if the appellant as a power of attorney holder is treated as real owner then the investment could be taxed in the A.Y. 2008-09 (as power of attorney was executed on 19/05/2007) and not in A.Y. 2009-10. In A.Y. 2009-10 only short term capital gain on sale of land could be taxed and not the entire sale proceeds. Ld. CIT(A) and also the ld. A.O. were duty bound to accept this legal proposition. Both, the lower authorities have not countered this legal proposition, yet have erred in not taxing the capital gain in the year of sale of property. Ld. A.O. in his remand report has mentioned that since the appellant did not disclose the amount invested and source of investment, there was no other alternative but to tax the entire consideration in the year of receipt. In view of the above, this ground of appeal may please be allowed.
26. We now refer to the relevant findings of the ld. CIT(A) which are under challenge before us. The same are reproduced as under:-
“5.5 I have considered the facts of the case; assessment order and appellant’s written submission. Appellant received money in his bank account on sale of property standing in the name of Ruby Shrivastav. Appellant was Power of attorney holder in respect of this land and therefore he executed the sale deed and received the money which was deposited in his bank account. The lady in whose name the property stands is not related to the appellant. Whereabouts of Ruby Shrivastav is not known to the appellant. Her address is also not given. All these facts clearly prove that appellant was the real owner of the property and only name of Ruby Shrivastav was used. No one will give power o f attorney in favour of any stranger unless the property itself is sold to such person. Appellant did not submit the identity and details of Ruby Shrivastav’s address. She is also not produced for examination before AO therefore it is clear that appellant did not discharge his onus to explain the nature and source of deposits. As a broker, appellant is not supposed to accept money and deposit in his bank account unless he’s the real owner and the party to the transaction. Even if appellant’s argument is accepted then where has he given money bank to Ruby Shrivastav. Claim of giving payment by cash to her nominee is not evidenced by any document or contemporary material. Since appellant did not disclose any investment in the property standing in the name o f Ruby Shrivastav, entire sale consideration is taxable in the hands of the appellant during the current year. Accordingly, addition made by the assessing officer is confirmed. ”
27. We have gone through the factual matrix and hereby confirm the above findings of the ld CIT(A) except for the fact that instead of entire sale consideration, only gain on sale of land should be brought to tax in the hands of the assessee as purchase through power of attorney has been claimed to have been executed on 19.05.2007 falling in year AY 2008-09. The matter is accordingly set-aside to the file of the AO for determination of quantum of capital gains which can be brought to tax as per law. The ground of the assessee is disposed off accordingly.
Ground No. 4 relating to addition of Rs. 2,00,000
28. Briefly the facts of the case are that the appellant received a sum of Rs. 2,00,000/- which is claimed to be received as gift from Shri Babul lal Meena, the elder brother of the assessee’s wife. Copy of gift deed has been claimed to be submitted during the assessment proceedings while the AO stated that the affidavit has been submitted by Shri Babul lal Meena which is signed much later on 7.12.2011 and even PAN details and source of income has not been mentioned. Hence, the AO didn’t accept the explanation of the assessee.
29. On appeal, the ld CIT(A) confirmed the AO’s order and his relevant findings which are under challenge before us are reproduced as under:-
“6.5 I have considered the facts of the case; assessment order and appellant’s written submission. Appellant claimed receipt of gift of Rs. 2 Lacs from one Shri Babulal. When assessing officer asked to produce Shri Babulal, he was not produced. Assessing officer deputed inspector to serve summons on Shri Babulal and appellant was asked to assist in locating the said person. However appellant did not give any assistance in service and summons could not be served on Shri Babulal. Therefore it is clear that appellant did not discharge his onus by either producing the donor or assisting the Department in examination of the donor. The submission of documents are not relevant if the person who executed these documents is either not traceable or do not attend to confirm the content of such documents. Since appellant did not explain the nature and source of money received from Shri Babulal, assessing officer was justified in treating the same as unexplained. Accordingly addition made by the assessing officer is confirmed.”
30. During the course of hearing, the ld AR submitted that a confirmation has all the legal sanctity under section 56(vii)(a), when the gift is from a very close relative and the donor not being able to appear does not lead to any adverse inference in this regard.
31. As per section 56(vii)(a), a gift of money without consideration from wife’s brother cannot be brought to tax as income in the hands of the assessee and an affidavit in this regard has been filed during the course of assessment proceedings. However, the contents of the confirmation/ affidavit are not on record which can help determine the creditworthiness and genuineness of the transaction by way of gift as claimed. We accordingly confirm the order of the ld CIT(A). At the same time, on perusal of the assessment order, we find that there is no separate addition made by the AO and the amount of Rs 2 lacs is part of unexplained cash deposit of Rs 63,38,820 which has already been confirmed as discussed in ground no. 1 supra. In light of the same, there would not be any separate addition on this account. The ground is disposed off accordingly.
In the result, the appeal of the assessee is disposed off with above directions.
