Case Law Details
Nirmal Uppal Vs DCIT (ITAT Delhi)
ITAT Delhi held that addition based on some dummy name without incriminating material reflecting name of the assessee is unjustified.
Facts- The search and seizure operation was conducted in the Jindal Bullion Ltd. (JBL) Group on 05.01.2017 and from the incriminating material recovered in the form of data it was allegedly found that it is systematically engaged in cash transactions with a number of entities. The transactions through banking channels are reflected in the Tally books of the accounts whereas the cash transactions are not reflected. In this context, from the data name of a suspect beneficiary of accommodation entry, “Saurabh Ji, CA” was found and it was thereafter found from the bank and cash transactions mentioned in the ledger that the present assessee Smt. Nirmal Uppal, was the real beneficiary.
Accordingly, a notice u/s 153(c) was issued. A statement of Sh. Parul Ahluwalia, director and formal employee of JBL was recorded u/s 132(4) of the Act on 05.01.2016 and he was confronted with the loose sheets detail. On the basis of accounts maintained in Hajir Johri accounting software, it was found that on 03.12.2015 a sum of Rs. 27,42,000/- was received in the form of cash and thereafter on 05.12.2015, JBL issued a cheque of State Bank of India payable to Nirmal Uppal. The assessee had explained that she was an employee of the office of the Accountant General and earning salary and rental income from house property. She claimed that during the relevant financial year she sold her jewellery for the sale consideration of Rs. 27,02,000/-.
Conclusion- The Bench is of considered opinion that as the assessee is former Central Government Employee who retired from the office of Accountant General it can be very well believed that she must have been holding some jewelry. The AO without trying to make any further inquiries from the assessee to ascertain the truthfulness of her holding of the jewellery proceeded to out rightly discard the explanation. Admittedly in the alleged incriminatory material the name of assessee is not reflected and based upon some dummy name she has been connected to the transactions.
In the statement of Mr. Parul Ahluwalia or any other witness also there is no specific mention of the transaction with assessee, which has been made foundation for holding she was real beneficiary. The assessee was required to give explanation of the reasons for receiving the credit entry in her bank which she has given on the basis of the invoice issued by the JBL. Assessee has reported the sale of jewelry as ‘Long term capital gain’, To discredit the same and to connect assessee with the pseudonymous entries of cash, some evidence or circumstance based on preponderance of probability was required to be shown by Ld. AO, then mere presumption. What entries JBL was making in accounts is not conclusive against the assessee. May be the Gold purchased was not accounted in stock by JBL and it was merely reflected as cash received. Assessee was not under onus to prove the entries of JBL. Thus, the judgments relied by Ld. DR are thus distinguishable on facts. The orders of Ld. Tax authority below thus cannot be sustained.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal ITA no 1955/DEL/2022 is preferred by the Assessee against the order dated 27.07.2022 of CIT(A)-24, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 24/10730/2015-16 arising out of an appeal before it against the assessment order dated 28.12.2021 passed u/s 153(C) r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Central Circle–07, New Delhi (hereinafter referred as the Ld. AO). The appeal ITA no 1954/Del/2022 is against order dated 29.07.2022 in appeal no 24/ 10769/ 2015-16 against the Penalty order dated 10/3/2022 u/s 271(1)(c) of the Act
2. The facts in brief are that the search and seizure operation was conducted in the Jindal Bullion Ltd. (JBL) Group on 05.01.2017 and from the incriminating material recovered in the form of data it was allegedly found that it is systematically engaged in cash transactions with a number of entities. The transactions through banking channels are reflected in the Tally books of the accounts whereas the cash transactions are not reflected. In this context, from the data name of a suspect beneficiary of accommodation entry, “Saurabh Ji, CA” was found and it was thereafter found from the bank and cash transactions mentioned in the ledger that the present assessee Smt. Nirmal Uppal, was the real beneficiary. Accordingly, a notice u/s 153(c) was issued. A statement of Sh. Parul Ahluwalia, director and formal employee of JBL was recorded u/s 132(4) of the Act on 05.01.2016 and he was confronted with the loose sheets detail. On the basis of accounts maintained in Hajir Johri accounting softeare, it was found that on 03.12.2015 a sum of Rs. 27,42,000/- was received in the form of cash and thereafter on 05.12.2015, JBL issued a cheque of State Bank of India payable to Nirmal Uppal. The assessee had explained that she was an employee of the office of the Accountant General and earning salary and rental income from house property. She claimed that during the relevant financial year she sold her jewellery for the sale consideration of Rs. 27,02,000/-. The Ld. AO was not satisfied with the same and observed as follows :-
“8. The above explanations offered by the assessee has been considered. It is seen that the same is not acceptable. The assessee not accepting the Ledger accounts found in the HajirJohri books of accounts of M/s Jindal Bullion Ltd.. reflected the banking, transaction but surprisingly not denying the transaction made with JBL which is-exactly reflecting in seized ledger. This alone is sufficient evidence which establishes that the account maintained under the names ‘SaurabhJi CA’ pertain to the assessee. Further, the assessee also accepted that as sold to JBL and cheque was received from JBL in lieu of that jewellery.
Hence, it is a clear case of accommodation entry taken by the assessee. It has also been held in the assessment order in the case of M/s Jindal Bullion Limited was involved in the business of providing accommodation entries and used to book bogus purchases in its books. Or. account of this it is been the money paid by the assessee to JBL is her unaccounted income against which she has received credits in her bank account on dated 05.12.2015. Thus the assessee has failed to discharge his onus of explaining the genuineness of the transaction. Thereby the credits received in the bank account of the assessee remain unexplained on the part of the assessee as per the provision of the section 68 of the Income Tax Act, 1961. Also the commission paid to JBL @1.5 % falls under the purview of the unexplained expenditure u/s 69C. Hence the amount of Rs. 2 7,42,000/- (Rs. 27,02,000/- + 40,000/- balance amount) is added to the total income of the assessee.”
2.1 In appeal, the Ld. CIT(A) sustained the same. So assessee is in appeal raising following grounds;
“1. That Learned Commissioner of Income Tax (Appeal)- 24 erred in dismissing the appeal of appellant against the order of penalty passed by the Ld. Deputy Commissioner of Income Tax, Circle 7, New Delhi u/s 271(1 )(c) of the Act.
2. That Ld. CIT (Appeal) grossly erred in law and facts while sustaining the penalty imposed by assessing officer on account of the addition of Rs.27,42,000/- made u/s 68/69C of the Act which is already declared as LTCG.
3. That Ld. CIT (Appeal) grossly erred both in law and facts ignoring that the Ld.AO grossly erred in treating the “change in the taxable treatment of the declared transaction” as concealment of income and wrongly imposed the penalty u/s 271(1 )(c) of the Act.
4. That Ld. CIT (Appeal) grossly erred both in law and facts that the Ld. AO failed to appreciate the well-settled law that no concealment penalty can be imposed where the nature of the transaction is a debatable issue.
5. The appellant craves leave to add or amend any ground of appeal.”
“1. That Learned Commissioner of Income Tax (AppeaI)-24 erred in dismissing appeal of appellant in the order passed by Ld. Deputy Commissioner of Income Tax Central Circle 7 Delhi u/s 153C r.w.s 143(3) of the I.T Act, 1961.
2. That Ld. CIT (Appeal) grossly erred in law and facts while ignoring that the Ld. AO grossly erred in initiating the proceedings under section 153C r.w.s 143(3) of the Act with regards to the assessment year 2016-17.
3. That Ld. CIT (Appeal) grossly erred both in law and on facts sustaining the addition of Rs.27,02,000/- made by the assessing officer u/s 68 of the act, by substituting new section 69A of the Act.
4. That Ld. CIT (Appeal) grossly erred both in law and on facts sustaining the addition of Rs.40,000/- u/s 69C of the act.
5. That Ld. CIT (Appeal) grossly erred in law and facts while ignoring the fact that the assessee duly tendered the explanation during the course of the assessment proceeding and explained the long-term capital gain transaction made between assessee and M/s JBL (3rd Party). Hence, the order of assessment was made in disregard of the evidence furnished and documentary evidence. Hence the order of assessment is incorrect, invalid, and untenable.
6. The learned CIT(A) has erred both on facts and in law while not providing sufficient opportunity to the assessee in re-characterizing the addition of Rs. 27,02,00,0/- made u/s 68 by the assessing officer by applying Section 69A of the Act.
7. The appellant craves leave to add or amend any ground of appeal”
3. Heard and perused the record.
4. On behalf of the assessee, the Ld. Sr. Counsel submitted that Ld. AO has failed to take into consideration the fact that the assessee was not maintaining books of accounts so provisions of section 68 of the Act, cannot be invoked. It was further submitted that Ld. AO has failed to substantiate that any cash payment was made and only on the inferences and statement reached conclusion that assessee had paid cash. It was submitted that the revenue has failed to appreciate that assessee is a old lady of 84 years who has sold her ancestral jewellery and other jewellery, she accumulated in a life time. It was also submitted that in the return of income the sale of jewellery has been reported as a long term capital gain so there is double taxation.
4.1 On the other hand, Ld. DR defended the orders of Ld. Tax Authorities below and submitted that the tax authorities below have successfully detailed the trail of transactions as appearing in the seized material. Ld. DR has relied judgments in Jatinder Pal Singh vs. Deputy Commissioner of Income-tax, Central Circle-9- [2021] 123 taxmann.com 414 (Delhi), Heval Navinbhai Patel vs. Income Tax Officer, Ward 3(2)(2) [2021] 126 taxmann.com 82 (Gujarat), Krishan Kumar vs. Income-tax Officer, Patiala [2019] 107 taxmann.com 464 (SC), Commissioner of Income-tax-I vs. Sarwankumar Sharma [2014] 49 taxmann.com 101 (Gujarat), Swami Sharan Garg vs. Commissioner of Income-tax, Meerut [2014] 45 taxmann.com 276 (Allahabad), Kantilal Prabhudas Patel vs. Deputy Commissioner of Income-tax Investigation, Circle-2- [2005] 148 Taxman 569 (Madhya Pradesh), R. Mallika Vs CIT [2017] 79 taxmann.com 117 (SC), Ashokbhai H Jariwala vs. ACIT [2017] 84 taxmann.com 196 (SC) / [2017] 250 Taxman 14 (SC).
5. Giving thoughtful consideration the matter on record and submissions what can be appreciated is that at page no. 30 to 33 of the Paper Book, the assessee / appellant has made available the return of income and computation of total income for the relevant years wherein a long term capital gain of 27,02,000/- by way of sale consideration is shown. The description of gold sold is available on the purchase memo available at page no. 33 of the paper book. The same is in terms of item, weigh and rate. The order of Ld. AO shows that the fact of sale of jewellery has been out rightly discarded and rather the explanation of this transaction of sale of jewelry has been taken as the admission of facts with regard to the alleged accommodation entry.
6. The Bench is of considered opinion that as the assessee is former Central Government Employee who retired from the office of Accountant General it can be very well believed that she must have been holding some jewelry. The AO without trying to make any further inquiries from the assessee to ascertain the truthfulness of her holding of the jewellery proceeded to out rightly discard the explanation. Admittedly in the alleged incriminatory material the name of assessee is not reflected and based upon some dummy name she has been connected to the transactions. In the statement of Mr. Parul Ahluwalia or any other witness also there is no specific mention of the transaction with assesee, which has been made foundation for holding she was real beneficiary. The assessee was required to give explanation of the reasons for receiving the credit entry in her bank which she has given on the basis of the invoice issued by the JBL. Assessee has reported the sale of jewelry as ‘Long term capital gain’, To discredit the same and to connect assessee with the pseudonymous entries of cash, some evidence or circumstance based on preponderance of probability was required to be shown by Ld. AO, then mere presumption. What entries JBL was making in accounts is not conclusive against the assessee. May be the Gold purchased was not accounted in stock by JBL and it was merely reflected as cash received. Assessee was not under onus to prove the entries of JBL. Thus, the judgments relied by Ld. DR are thus distinguishable on facts. The orders of Ld. Tax authority below thus cannot be sustained. The grounds in ITA no 1955/DEL/2022 and the said appeal is allowed. As consequential effect, the Penalty appeal is also allowed.
Order pronounced in the open court on 3rd May, 2023.
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