Case Law Details
ITO Vs Rahul Kumar Jain (ITAT Raipur)
ITAT Raipur held that CIT(A) deleted the addition towards unexplained cash under section 68 of the Income Tax Act without proper verification of the facts and evidences and thus the matter restored back to the file of AO for adequate verifications.
Facts- Subsequent to processed u/s 143(1), it is noticed by the revenue that the assessee has sold an urban land and have received the consideration to the turn of Rs. 20,00,000/-, jointly with Shri Raja Vikram. Assessee’s share in the consideration was Rs. 10,00,000/-. It was the belief of the department that since the land sold was an urban land, the sale consideration received by the assessee was to be charged to tax under the head Capital Gains. However, as the assessee was failed to offer the sale consideration for taxation, therefore, AO has formulated the reason to believe that an amount of Rs. 9,00,585/- has escaped assessment. AO made addition of Short Term Capital Gain of Rs. 51,715/-; Long Term Capital Gain of Rs. 7,05,728/- and Unexplained cash Rs. 18,50,000/-.
Appeal of the assessee was allowed by CIT(A) by vacating the additions made by AO. Being aggrieved, the present appeal is filed by the revenue.
Conclusion- On perusal of the copy of will of grandmother, quantification of cash, gold or silver is not discernible, neither the same have been supported with any corroborative evidence, which shows the delivered of such assets to the assessee, therefore, contentions of the assessee that such amount and assets are received by the assessee from grand mother cannot be rejected at threshold but the quantum has to be verified with corroborative evidences. Similarly, funds received by the assessee from various sundry creditors which are 28 in numbers and receipts have got acknowledged from said creditors. In order to verify the veracity of documents, it is necessary for the assessee to provide address of such creditors or their credentials so as to fulfil the conditions, pre-requisite to satisfy the provisions of section 68 i.e., identity, creditworthiness of the creditors and the genuineness of the transaction.
Held that in all fairness, in the interest of justice, the issue needs to be restored to the file of Ld. AO for verification of the facts and contentions raised by the assessee, on the basis of corroborative evidences and to adjudicate the issue afresh. Ld. AO is directed to take necessary enquiries to reach on a logical conclusion on this aspect. Needless to say, reasonable opportunity of being heard shall be provide to the assessee and directed to assist with all the necessary evidence, compliances and produce the trade creditors and loan creditors before the Ld. AO, so as to substantiate his claims, failing which the Ld. AO would be at liberty to decide the issue following the mandate of law.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeal is filed by the department challenging the order under section 250 of the Income Tax Act, 1961 (in short “The Act”), passed by the Commissioner of Income Tax (Appeals)-I, Raipur (in short “Ld. CIT(A)”), for the Assessment Year 2007-08 dated 01.09.2016, which in turn arises from the order of Income Tax Officer, Jagdalpur, (in short “Ld. AO”), u/s 148/143(3) of the Act, dated 31.01.2013.
2. The grounds of appeal raised by the department are extracted as under:
1. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in allowing the deduction of Rs.4,31,581/- u/s 54B of the Act?”
2. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs.18,50,000/- made by the AO on account of unexplained cash in form of opening cash balance?”.
3. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in accepting the genuineness of gift received through the Will of assessee’s grandmother amounting to cash of Rs.7,00,000/- along with gold of 950-gms and 5 kg silver, as against the finding of the AO, that the gift was not genuine and authentic in the absences of the corroborative documentary evidences?”
4. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in accepting the genuineness of sundry creditors received from 28 parties, amounting to Rs.5,00,000/- as against the finding of the AO, that the sundry creditors were not genuine and authentic in the absences of the corroborative documentary evidences, more so when assessee has claimed to have received less than Rs.20,000/- from each of the 28 parties?”.
5. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in accepting the genuineness of unsecured loans from 28 parties, amounting to Rs.5,00,000/- as against the finding of the AO, that the unsecured loans were not genuine and authentic in the absences of the corroborative documentary evidences, more so when assessee has claimed to have received less than Rs.20,000/- from each of the 28 parties?”.
6. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred by giving a finding which is contrary to the evidence on record, as the Id CIT(A) has accepted in drawing the conclusion that the Will of the grandmother, confirmations from sundry creditors and unsecured loan advancing parties were genuine, in the absence of corroborative documenting evidences which is factually incorrect as per evidence on record, thereby rendering the decision, which is perverse?”
7. “The order of Ld. CIT(A) is erroneous both in law and on facts”.
8. “Any other ground that may be adduced at the time of hearing”.
3. The brief facts of the case are that the assessee, who is an individual had filed his Return of Income (ROI) on 31.03.2009 for the AY 2007-08 showing taxable income of Rs. 1,00,000/-. The return of income was processed u/s 143(1) on 10.02.2010. Subsequently, it is noticed by the revenue that the assessee has sold an urban land at Dharampura on 29.06.2006 and have received the consideration to the turn of Rs. 20,00,000/-, jointly with Shri Raja Vikram. Assessee’s share in the consideration was Rs. 10,00,000/-. It was the belief of the department that since the land sold was an urban land, the sale consideration received by the assessee was to be charged to tax under the head Capital Gains. However, as the assessee was failed to offer the sale consideration for taxation, therefore, the Assessing Officer has formulated the reason to believe that an amount of Rs. 9,00,585/- has escaped assessment. After recording reasons to believe notice u/s 148 of the Act was issued and served on the assessee, in response to the said notice assessee filed a revised return on 13.04.2012 showing his income at Rs. 1,94,943/-. Notice u/s 143(2) was issued on 11.07.2012, however, due to change of incumbent notice u/s 143(2) was again issued on 12.09.2012 and served through RPAD. Queries and notice u/s 142(1) have been issued and served to the assessee, towards which no objection was raised by the assessee qua the procedure and notices hence the procedural requirement are found to be fulfilled. Necessary written replies were furnished by the counsel of the assessee, which were placed on record. Case of the assessee was deliberated and discussed at length, however on certain points, assessee’s replies and explanations were not found to be satisfactory by the Ld. AO, therefore, following addition were made:
i. Short Term Capital Gain of Rs. 51,715/-
ii. Long Term Capital Gain of Rs. 7,05,728/-
iii. Unexplained cash Rs. 18,50,000/-
With the aforesaid addition, assessed income of the assessee was determined at Rs. 27,07,443/-.
4. Being aggrieved with the aforesaid addition, assessee preferred an appeal before the Ld. CIT(A), wherein the contention of the assessee is found to be plausible by the Ld. CIT(A) and, therefore, the appeal of the assessee was allowed, vacating the additions made by the Ld. AO.
5. Aggrieved by the reliefs granted by the Ld. CIT(A), now the revenue has carried this matter before us, assailing various issues pointing out the errors on the part of Ld. CIT(A).
6. Now, we are taking up the contentions of the department for our consideration as the same are raised under various aforesaid grounds.
6.1 Ground no. 1: Regarding allowing the exemption for Rs.4,31,581/- u/s 54B of the Act:
On this issue, Ld. Sr. DR reiterated the facts of the issue from the order of Ld. AO, wherein while denying the exemption u/s 54B of the Act, Ld. AO’s observations are as under:
9. Section 54B of the Income tax Act,1961
The assessee has claimed exemption under section 54B of the Act in the ITR filed in pursuance of notice under section 148. After Considering all the discussion and evidences on records, inference drawn is discussed below as:-
9.i Facts and circumstances of the case
The assessee has not filed his income tax returns for the A. Y 2007-08. Notice under /142(1) was issued and in response to the above notice, Return was filed. He failed to disclose the sale of above land in the ITR filed. It was not a return filed in pursuance of section 139(1) of the Income tax Act 1961. The assessee has not filed any application under section 154 of the Act to rectified the above mistake. A revised returns under section 139 (4) is out of question as it is not applicable to assessee. The assessee has lost opportunities to file his ITR under section 139 of the Act. When the rectification is made in the year 2012, by the assessee it was time barred. He has also failed to rectify the above omission of income under section 154. Further, ITR was filed in pursuance of Notice under section 148 of the Act. In this Return, the assessee has surrendered the sale consideration to be taxed under head Capital Gain. He rectified his omission only when the Assessing officer detected concealment of particulars and escaped income. He has not claimed exemption under section 54B of the Act in the ITR filed in response to notice under section 142(1) of the Act. From the above, it is inferred that the first return filed by the assessee in not a ITR in pursuance of section 139(1) and is Return filed in response to notice under section 142(1) of the Act. He has not claimed any exemption under section 54B of the Act. Further, the rectification, i.e. offered Capital gain, was made by the assessee in response to the Notice under section ‘148 of (he Act. In view of the above, the claim under section 54B be in view of the sub section 2 of the 54 B of the Act.
9.ii. Section 54 B(2) of the Act
Sub section 2 of section 54B of the Act defines the terms and condition of the getting exemption under section 54B of the Act. It read as:-
[ (2) The amount of the capital gain which is not utilized by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, be notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilized by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in subsection (1), then, –
i. the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and
ii. The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
The plain reading of the above section explains that the assessee was required to mention his claim for getting exemption under section 54B of the Act in the ITR filed in pursuance of section 139 of the Act. He must have enclosed documents and evidences along with the above ITR to get exemption. He have also filed declaration for future investment.
9. Inference
The assessee has not filed ITR in pursuance of provisions of section 139(1) of the Act. He has not filed any declaration to claim exemption. He failed to claim exemption under section 54B of the Act before issuing notice under section 148 of the Act. He has also not rectified his omission and has not filed revised ITR. The exemption claimed by the assessee under section 54B is barred by the rectifying mistake under section 154 and revising ITR under section 139(4) of the Act. The mistake was admitted in the ITR filed in response to the notice under section 148 of the Act. It is obvious that the assessee has concealed the fact and has not disclosed the particular of his income. The fact as discussed above is detected by the department and only after that he offered the Capital gain and me exemption. The claim can be entertained in the ITR filed under section 139 of the Act and is not applicable in the I IR filed under section 142(1) and 148 Act of the Act. In view of the above, the exemption claimed under section 54 B is disallowed.
Cash In hand and bank balance
As discussed earlier. The assessee has filed ITR for the AY 2007-08 on 31.03.2009 declaring income from business Rs.1,00,000.00. He revised his ITR on 13.04.2012 in response to the notice under section 148 the Act 1961. In the original return filed on 31-03-09, The assessee has filed Cash position showing opening Cash in hand Rs. 18,50,000.00 and closing cash balance of Rs.21,42,333.000. In previous assessment year the assessee has purchased properties the cost of which are more than taxable limit he claimed to have started his business since three year. Before it he has not any source of income. He was born in 04-10-85. As per his claim he started his business in A.Y.2005-06 at the age of 20 years and as he claimed that his income was below taxable hence, he has not filed his ITRs. He claimed to have purchased a land in 2003 for Rs.98,665.00. He purchased land for Rs.l,28,000.00 on 06-07-05. It appears from the fact on records that the assessee though have taxable income, but have never intended to file his ITR .Nor he intended to file a declaration regarding receipt Of huge gift and Will before the income tax authorities. On being detected, the assessee filed for the first time ITR in the year 2007-08 in pursuance of notice under section 142(1) of the Act. In view of the quantum of investment made in previous years, the assessee was required to file his ITR in pursuance of section 139 of the Act. The declaration of cash position was enclosed with ITR filed 200708 was a colourful story to escape from tax liabilities. It is inferred, from the above discussion that the assessee has escaped his income year to year and has concealed the particular of his income. He never intended to file his ITR, in spite of having taxable income. When the department detected the concealment, he came forward having a colourful story to evade tax.
In terms of section 139 of the Income tax Act, the assessee was required to furnish all the relevant documents in support of ITR filed. As per accounting principle and provisions of the Act, the assessee was required to furnish copy of trading account, profit and loss account, capital account and balance sheet. These are the basic financial statements to make proper assessment of his income. He was also required to furnish list of creditors and debtors along with any addition and deletion made in balance sheet. The assessee failed to furnish all the above accounts in ITR filed. The cash position sheet enclosed with the ITR is not the basic requirement of the ITR filed as provided in relevant provisions of the Act. It is supporting documents of the financial statement and shows incomplete aspects of his income, expenditure and liability and assets in possession of the assessee. Being failed to submit the above documents, assessee showed his intention of avoiding proper assessment of his income and to avoid co-operation to assessing officer for proper assessment of his income
Assessee has never filed his ITR though has taxable income in all the previous Assessment years. He claimed to have earn Rs. 1,50,000.00 in the F.Y 2005-06.00 but have denied to file ITR in that years. He denied to have maintained books of accounts but have claimed to have creditors and debtors. He also declined to provide the list of such creditors and debtors in the ITR filed and only furnish information when the notice under section 142(1) was issued. He furnished list of debtors and creditors having no postal in spite being asked specifically, to provide assistance to examine the debtors and creditors and to verify it. The onus lies with assessee but he failed 10 discharge it. It is further notice that the confirmation of creditors and debtors produced are prepared in hurried manner. [he assessee has put his signature in a day and with single pen though he claimed to have transaction in different days. The signature put by the creditors and is made by a single person and paper used for preparing the confirmation is same. The calligraphy of signature reveals that the above confirmation is prepared by single person by varying the style and using two or three different pens. The cross examination of above by calling the debtors in persons made difficult by not providing the full and complete address-of the above persons. It is beyond the business trend that the assessee has creditors and debtors in a single year i.e. 2005-06 and beyond it and after it has no creditors and debtors. He utilized the amount as claimed in purchase of land and not in business affairs. from the above, it is inferred that the onus to produce the address of the creditors and debtors lies with the assessee and to assist the undersigned to verify the genuineness was lies with the assessee, and he failed to discharge it, the confirmation produced are a colourful device to evade tax.
The narration shown in the Cash Position is read as:-
“That the Assessee is 24Year old person. He is doing Hardware Business last 3 Year. And as per will his grandmother gave him Rs.700000.00 cash and 950-gram gold and 5 kg. silver on DT. 16-1006 unsecured loans on DT.31-03-05 Rs. 500000.00 and Sunday trade Creditors as on 31-03-2005 Rs.500000. 00.”
His past saving and Gift received from friends on occasion of birthday up to 31-03-05. -1850,000.00″
The declaration given in the cash Position sheet is ambiguous and incomplete. The cash flow prepared did not incorporate cash received from sale and payment made for purchases. It also lacks the business receipt and payment made in cash. The statement prepared as above only an attempt to mention the sale and purchase of real assets and cash receipt and payment made to the purchase of real state and in some instances house hold withdrawal and investment made in securities. It is incomplete cash flow in terms of accounting principal. All the above is prepared on the basis of Opening cash in hand. Though the assessee claimed to have bank account and have claimed to have received Cheque from his father, but he failed to furnish the bank accounts for verification. It is also noticed that the deposit and withdrawal made from the bank accounts have not been included while preparing cash position. The onus to explain it and produce supporting documents lies with the assessee but he failed discharged it. From the above discussion it is inferred that each position claimed as above is incomplete and unreliable and not supported with any evidence.
The ambiguity can be further noticed that, It appears from the above narration that the assessee received silver gold cash through Will. In continuation of the above, he also received sundry creditors and debtors on the dates mentioned in the declaration. It is not supported with the capital account and balance sheet of his grandmother. The accounting presentation of the above is baseless, and invalid. The declaration made in the ITR must be prepared on the basis of accounting principle and accounting standard provided in the Act. It is also not clear from the above that the Will was executed in her life time. The physical delivery of the above could not be proved. He has not filed copy of Will and date of execution of will. Creditworthiness her and receipt of the above could not be proved by the assessee nor explained properly.
The nature of Cash given by his grandmother is also not defined. The cash is delivered in the of loan or delivered as gift is not defined properly. He claimed to have received Lum sump amount of Rs.18,50,000.00 as gift from friends and relatives and have some past savings. Being the huge cash, disproportionate to his income he must have to bifurcate the nature of cash. He claimed to have business since last three year and has not filed ITR claiming his income below taxable. The claim of such huge opening cash in hand is disproportionate to the income claimed and at no stretch of mind it is possible to save huge amount within span of three year. It is also beyond imagination that assessee could get huge cash gift from relatives and friends. The gift received from the friends is taxable and gifts received from other than notified relatives’ are also taxable. The name of the doners is not defined nor does he produce evidences of delivery of cash gift by providing statement account of doners to substantiate his claim. He failed to produce evidences to verify his claim and thus onus is not discharged.
The declaration furnished by the assessee is not signed properly and there is difference in the signature put in the ITR and put in the declaration. He confirms the cash position in the ITR filed in response to the notice under section 148 of the Act.
In spite of given several opportunities of being heard, the assessee has failed to furnish cash flow chart, income and expenditure account, capital accounts and balance sheet. These are the basic statement required for verification and entertain assets and liabilities. He also failed to furnish and to explain it satisfactorily.
From the discussion above it is inferred that the documents furnished is incomplete unreliable and invalid. It is against the accounting principle and accounting standard. The assessee failed to furnish financial statement for verification. He failed to explain the cash in hand; source of cash received is not verifiable as no supporting evidences are furnished. The huge cash in hand claimed is disproportionate to his income and gift received in view of his age and previous income earning activities. He has made no declaration of assets received in any previous years even having taxable income. He made a colourful device m the form of cash position chart, which is incomplete, against accounting principle and unreliable. The onus to prove the claim was not properly discharged by the assessee. The cash in hand is therefore found unexplained and IS treated as unexplained money under the provisions of the Act. Hence Rs.18, 50,000.00 is added to the income of the assessee. The assessee has conceal the particular of income, hence, liable to penalty under section 271 (1) c of the Act.
Initiate penalty under section 271(1) c of the Income tax Act.
Considering the arguments, compliances and documents furnished and evidence or records, the income is assessed as under; –
| 1. | Return Income | Rs.1,00,000.00 | |
| 2. | Short term capital gain | Rs.51,715.00 | |
| 3. | Long term capital gain | Rs.7,05,728.00 | |
| 4. | Unexplained cash | Rs.18,50,000.00 | |
| 5. | Assessed income | Rs.27,07,443.00 |
(Inwards Rs. Twenty-seven lacs, seven thousand four hundred forty-three only.)
Assessed as above.
(Under section 148/143(3) of the Act)
Charge interest as per law.
Give credit for prepaid tax.
Issue Demand Notice & challan.
Initiate penalty under section 271 (1) c of the income tax Act.
6.2 Based on aforesaid observations of Ld. AO, Ld. Sr. DR vehemently placed his reliance on order of Ld. AO and requested to sustain the same, by setting aside the order of Ld. CIT(A).
6.3 Contradicting the submissions of the Ld. Sr. DR, Ld. AR on behalf of the assessee have placed his reliance on the decision of Ld. CIT(A), stating that the facts of the case, could not be properly perceived by the Ld. AO, which were duly construed by the Ld. CIT(A), who had rightly adjudicated the issue and the relief has been granted to the assessee.
6.4 Ld. AR, further drew our attention to the findings of Ld. CIT(A) on the issue in para 2.3, the same is extracted as under for the sake of completeness of facts:
2.3 From the above facts and after considering submission of the assessee I come to the conclusion that assessee cannot be prevented from making a claim which is otherwise allowable and AO should dispose the matter on its merit rather than on technical grounds. It has been held in the case of DCIT Vs Lab India Instrumental Pvt Ltd 277 ITR 39, Pune ITAT that “had the legislature intended to dis-entitle the assessee to make any claim of deduction after the expiry of period specified u/s 139(5), it could do so by making a specific provision in this regard. Therefore, in the absence of such a provision assessee was entitled to make any claim of deduction/exemption in the course of assessment proceeding and consequently, the AO is duty bound to adjudicate upon such claim, even though it was filed after prescribed period u/s 139(5). The Commissioner (Appeals) was justified in entertaining such claim of the assessee”. In coming to the conclusion in the above case, the Hon’ble ITAT, Pune following the line of logic applied in the case of NTPC vs CIT 224 ITR 383 (SC). Therefore, the claim of assessee has to be considered before accepting or rejecting the same.
Coming to the merit of the claim made u/s 54 the same issue has been dealt with by my predecessor CIT(Appeals), Raipur in the case of joint owner of the above ‘land in question Shri Raja Vikaram. The Ld CIT(Appeals), Raipur has discussed the issue as under :-
“The AO has observed that in the course of assessment proceedings, the appellant has claimed deduction u/s 54B of the Act in respect of agricultural land purchased from the capital gain derived from transfer of capital asset. But such claim was not made in return filed u/s 139(1) or through revised return u/s 139(4) or through application u/s 154 or in the return filed in response to notice u/s 148 of the Act. He rectified his only when the AO detected the concealment. Therefore, he denied the deduction.
In the course of appeal proceedings, the Ld. counsel for the appellant has submitted that the appellant was under the bonafide belief that the land transferred during year was out of 8 kms form the municipal limits and accordingly, he claimed the income earned therefrom as exempt both in the original return and in the return filed in response to notice u/s 148 of the Act. Copies of returns were filed. It was only after joint site inspection, location of the land was determined to be within 8 kms. Hence he had not occasion to claim deduction u/s 54B against agricultural land purchased before due date of filing return u/s 139(1) of the Act. The deduction was therefore, claimed in the course of assessment proceedings and is allowable. The income treated as exempt income was duly disclosed in the relevant columns. Relying on the decision of Hon’ble Supreme Court in the case of Bajaj Tempt Ltd Vs CIT reported in (1992) 62 Taxman 480 (SC), it was contended that the provision in taxing statute granting incentives for promoting growth and development should be construed liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. In this case, the appellant has fulfilled all necessary conditions with respect to agricultural lands purchased on 06/10/2006 for Rs. 144050/- and on 20/11/2006 for Rs. 287531/-aggregating to Rs. 431581/-. Both these lands were purchased jointly by Shri Rahul Modi and the above investments relate to share of’ the appellant. Therefore, it was contended that the appellant is entitled for deduction of Rs. 431581/- u/s 54B of’ the Act.
I have gone through the observations of the AO and submissions of the appellant. Admittedly, the appellant has purchased above agricultural lands within due date of filing the return u/s 139(1) of the Act. The investment was made from capital gain earned on transfer of lands referred above. Under such circumstances, the appellant is eligible for deduction u/s 54B of the Act. The AO observations that no claim was made in the return filed is not sufficient to deny the deduction because the appellant has claimed the entire income as exempt income and had no occasion to claim such deduction both in the original return and return filed in response to notice u/s 148 of the Act. The appellant did not conceal this fact in any of these returns but exemption was claimed on bona fide misunderstanding of the facts. However, in subsequent developments it was concluded that said land was within the municipal limits and hence a capital asset and the income is not exempt. Under such circumstance the AO should have suomoto allowed the deduction because the appellant has utilized the capital gain in purchase of agricultural land. Therefore, looking to the facts and circumstances of the case and the case law relied upon by the appellant the AO is directed to allow deduction u/s 54B of the Act in respect of the above amount of Rs. 431581/- and recomputed the income as per law. This ground of appeal is, thus, partly allowed.”
In view of the judicial decisions (supra) and facts of the case, I am of the opinion that the AO should allow deduction u/s 54B, therefore, the appellant’s ground is allowed and addition made by the AO is deleted.
6.5 Placing reliance on the aforesaid observations of the Ld. CIT(A), Ld. AR requested to sustain the order of Ld. CIT(A), wherein the exemption u/s 54B has been allowed to the assessee.
6.6 It was the submission of Ld. AR that under similar facts and circumstances, Co-owner of the land with whom, jointly the land was sold, has also received the equal contribution from the sale of the subject land and the issue regarding exemption u/s 54B has been dealt with ITAT, Raipur in ITA No.347/RPR/2014 and CO No.83/RPR/2015 in the case of ITO vs. Shri Rajavikram P/O M/s Vikas Associates (Engineers) and (Vice-versa) dated 02.02.2022, wherein the observations of the tribunal were as under:
7. We have heard the Ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, as per the settled position of law it is not permissible for an assessee to raise a fresh claim for deduction otherwise than by filing a revised return of income. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court of India in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC). At the same time, we cannot also remain oblivious of the fact, that as observed by the Hon’ble Apex Court in its aforesaid order in the case of Goetze (India) Ltd. (supra), the limitation in entertaining a claim for deduction otherwise than by filing a revised return of income is limited to the power of the assessing authority and does not impinge on the powers of the Income-tax Appellate Tribunal. At this stage, we may herein observe, that the Hon’ble High Court of Bombay in the case of CIT Vs. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 349 ITR 336 (Bom) had after taking cognizance of the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. (supra) observed, that an assessee in the course of proceedings before the appellate authorities is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it . The Hon’ble High Court while concluding as hereinabove had observed as under:
“10. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it . It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an observation of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income Tax, 1991 Supp (2) SCC 744 (1991) 187 ITR 688. The second submission is based on a judgment of the Supreme Court in Goetze (India) Limited v. Commissioner of Income Tax.
11(A). In Jute Corporation of India Limited v. CIT, for the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd 6 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant’s application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court.
The Supreme Court held as under:-
“5. In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229)
“If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do.” (emphasis supplied)
6. The above observations are squarely applicable to the interpretation of Section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income Tax Officer, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer.” [emphasis supplied]
(B) It is clear, therefore, that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction.
12. At page 694, after referring to certain observations of the Supreme Court in Additional Commissioner of Income-tax v. Gurjargravures P. Ltd., (1978) 111 ITR 1, the Supreme Court observed at Page 694 as under:-
“The above observations do not rule out a case for raising an additional ground before the Appellate Assistant Commissioner if the ground so raised could not 7 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 have been raised at that particular stage when the return was filed or when the assessment order was made, or that the ground became available on account of change of circumstances or law. There may be several factors justifying raising of such new plea in appeal, and each case has to be considered on its own facts. If the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rule can be laid down for this purpose.” [emphasis supplied]
13 The underlined observations in the above passage do not curtail the ambit of the jurisdiction of the appellate authorities stipulated earlier. They do not restrict the new/additional grounds that may be taken by the assessee before the appellate authorities to those that were not available when the return was filed or even when the assessment order was made. The sentence read as a whole entitles an assessee to raise new grounds/make additional claims:-
“if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made…”
“or”
if “the ground became available on account of change of circumstances or law”
The appellate authorities, therefore, have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The first part viz. “if the ground so raised could not have been raised at that particular stage when the return was filed or when the assessment order was made… “clearly relate to cases where the ground was available when the return was filed and the assessment order was made but “could not have been raised” at that stage. The words are “could not have been raised” and not “were not in existence”. Grounds which were not in existence when the return was filed or when the assessment order was made fall within the second category viz. where “the ground became available on account of change of circumstances or law.”
14. The facts in Jute Corporation of India Ltd., various judgments referred to therein as well as in subsequent cases, which we will refer to, establishes this beyond doubt. In many of the cases, the grounds were, in fact, available when the return was filed and/or the assessment order was made. In Jute Corporation of India Ltd., the ground was available when the return was filed. The assessee did not claim any deduction of its liability to pay purchase tax as “it entertained a belief that it was not liable to pay purchase tax under the Bengal Raw Jute Taxation Act, 1941”. Thus, the ground existed when the return was filed. The assessment order was even made and received by the assessee. It is only after the appeal was filed that the assessee claimed a deduction in respect of the amount paid towards the purchase tax under the said Act. It is also significant to note that the assessee’s entitlement to claim deduction had been held to be valid in view of an earlier judgment of the Supreme Court in Kedarnath Jute Manufacturing Company Limited v. Commissioner of Income-tax, (1971) 82 ITR 363. This was, therefore, a case of error in perception/judgment. Despite the same, the Supreme Court upheld the decision of the Appellate Assistant Commissioner in allowing the deduction. The words “could not have been raised” must, therefore, be construed liberally and not strictly.
15. It is indeed a question of exercise of discretion whether or not to allow an assessee to raise a claim which was not raised when the return was filed or the assessment order was made. As held by the Supreme Court there may be several 8 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 factors justifying the raising of a new plea in appeal and each case must be considered on its own facts.
However, such cases include those, where the ground though available when the return was filed or the assessment order was made, was not taken or raised for reasons which the appellate authorities may consider valid. In other words, the jurisdiction of the appellate authorities to consider a fresh or new ground or claim is not restricted to cases where such a ground did not exist when the return was filed and the assessment order was made.
16(A). A Full Bench of this Court in Ahmedabad Electricity Limited v. Commissioner of Income-tax, (1993) 199 ITR 351 considered a similar situation. In that case, the appellant/assessee did not claim a deduction in respect of the amounts it was required to transfer to contingencies reserve and dividend and tariff reserve either before the Income Tax Officer or before the Appellate Assistant Commissioner in appeal. Subsequently, this Court had, in Amalgamated Electricity Company Limited v. Commissioner of Income-tax, (1974) 97 ITR 334, held that such amounts represented allowable deductions on revenue account. The appellant, therefore, raised a new claim and additional grounds before the Tribunal in that connection. The Tribunal rejected the same. The second question which was raised in the reference before the Division Bench was as under:-
“(2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in not allowing the assessee leave to raise in its own appeals additional grounds and in the departmental appeals cross objections regarding the deductibility of the sums transferred to contingency reserve and tariff and dividend control reserve?”
(B) The Division Bench which heard the reference, finding that there was a conflict of decisions, placed the papers before the Hon’ble Chief Justice for constituting a larger bench to resolve the controversy.
The Full Bench answered the reference in the affirmative and in favour of the assessee. The Full Bench held :-
“Thus, the Appellate Assistant Commissioner has very wide powers while considering an appeal which may be filed by the assessee. He may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of an assessee in accordance with law. Hence an Appellate Assistant Commissioner also has the power to enhance the tax liability of the assessee although the Department does not have a right of appeal before the Appellate Assistant Commissioner. The Explanation to subsection (2), however, makes it clear that for the purpose of enhancement, the Appellate Assistant Commissioner cannot travel beyond the proceedings which were originally before the Income-tax Officer or refer to new sources of income which were not before the Income-tax Officer at all. For this purpose, there are other separate remedies provided under the Income-tax Act.”
(C) It is unnecessary to refer to all the judgments that the Full Bench referred to while answering the reference. The Full Bench referred to the observations of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income-tax (supra) set out above. It is important to note that even in this case, therefore, the ground existed when the return was filed. The mere fact that a decision of a court is rendered subsequently does not indicate that the ground did not exist when the law was enacted. Judgments are only a declaration of the law. The assessee could have raised the ground in its return itself. It did not have to await a decision of a court in that regard. Indeed, even if a judgment is against an assessee, it is always open to the assessee to claim the deduction and carry the matter higher. The words “could not have been raised”, therefore, cannot be read strictly. Neither the Supreme Court nor the Full Bench of this Court meant them to be read strictly. They include cases where the assessee did not raise the claim for a reason found to 9 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 be reasonable or valid by the appellate authorities in the facts and circumstances of a case.
17. The next judgment to which our attention was invited by Mr. Mistri is the judgment of a Bench of three learned Judges of the Supreme Court in National Thermal Power Company Limited v. Commissioner of Income-tax, (1997) 7 SCC 489 (1998) 229 ITR 383. In that case, the assessee had deposited its funds not immediately required by it on short term deposits with banks. The interest received on such deposits was offered by the assessee itself for tax and the assessment was completed on that basis. Even before the Commissioner of Income-tax (Appeals), the inclusion of this amount was neither challenged by the assessee nor considered by the Commissioner of Income-tax (Appeals). The assessee filed an appeal before the Tribunal. The inclusion of the amount was not objected to even in the grounds of appeal as originally filed before the Tribunal.
Subsequently, the assessee by a letter, raised additional grounds to the effect that the said sum could not be included in the total income. The assessee contended that on a erroneous admission, no income can be included in the total income. It was further contended that the ITO and the Commissioner of Income-tax (Appeals) had erred and failed in their duty in adjudicating the matter correctly and by mechanically including the amount in the total income. It is pertinent to note that the assessee contended that it was entitled to the deduction in view of two orders of the Special Benches of the Tribunal and the assessee further stated that it had raised these additional grounds on learning about the legal position subsequently.
The Tribunal declined to entertain these additional grounds.
The Supreme Court did not answer the question on merits, but framed the following question and held as under :-
“4. The Tribunal has framed as many as five questions while making a reference to us. Since the Tribunal has not examined the additional grounds raised by the assessee on merit, we do not propose to answer the questions relating to the merit of those contentions. We reframe the question which arises for our consideration in order to bring out the point which requires determination more clearly. It is as follows:
“Where on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee, whether the Tribunal has jurisdiction to examine the same.”
Under Section 254 of the Income Tax Act the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with the appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income Tax (Appeals). Both the assessee as well as the Department have a right to file an appea1/cross- objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.”
18. In the case before us, the CIT(A) and the Tribunal have held the omission to claim the deduction of Rs.40,00,000/- to be inadvertent. Both the appellate authorities held, after considering all the facts, that the assessee had inadvertently claimed a deduction of Rs.20,00,000/- paid after the end of the year in question. 10 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 We see no reason to interfere with this finding. We see less reason to interfere with the exercise of discretion by the appellate authorities in permitting the respondent to raise this claim. That the respondent is entitled to the deduction in law is admitted and, in any event, clearly established. In the circumstances, the respondent ought not be prejudiced.
19. The orders of the CIT(A) and the Tribunal clearly indicate that both the appellate authorities had exercised their jurisdiction to consider the additional claim as they were entitled to in view of the various judgments on the issue, including the judgment of the Supreme Court in National Thermal Power Corporation Limited. This is clear from the fact that these judgments have been expressly referred to in detail by the CIT(A) and by the Tribunal.
20. We wish to clarify that both the appellate authorities have themselves considered the additional claim and allowed it. They have not remanded the matter to the Assessing Officer to consider the same. Both the orders expressly direct the Assessing Officer to allow the deduction of Rs.40,00,000/- under section 43B of the Act. The Assessing Officer is, therefore, now only to compute the respondent’s tax liability which he must do in accordance with the orders allowing the respondent a deduction of Rs.40,00,000/- under section 43B of the Act.
21. The conclusion that the error in not claiming the deduction in the return of income was inadvertent cannot be faulted for more than one reason. It is a finding of fact which cannot be termed perverse. There is nothing on record that militates against the finding. The appellant has not suggested, much less established that the omission was deliberate, mala-fide or even otherwise. The inference that the omission was inadvertent is, therefore, irresistible.
22. It was then submitted by Mr. Gupta that the Supreme Court had taken a different view in Goetze (India) Limited v. Commissioner of Income-tax. We are unable to agree. The decision was rendered by a Bench of two learned Judges and expressly refers to the judgment of the Bench of three learned Judges in National Thermal Power Company Limited vs. Commissioner of Income-tax (supra). The question before the Court was whether the appellant-assessee could make a claim for deduction, other than by filing a revised return. After the return was filed, the appellant sought to claim a deduction by way of a letter before the Assessing Officer.
The claim, therefore, was not before the appellate authorities. The deduction was disallowed by the Assessing Officer on the ground that there was no provision under the Act to make an amendment in the return of income by modifying an application at the assessment stage without revising the return. The Commissioner of Income-tax (Appeals) allowed the assessee’s appeal. The Tribunal, however, allowed the department’s appeal. In the Supreme Court, the assessee relied upon the judgment in National Thermal Power Company Limited contending that it was open to the assessee to raise the points of law even before the Tribunal. The Supreme Court held:-
“4. The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the Assessing Officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Income-tax Appellate Tribunal under section 254 of the Income- tax Act, 1961. There shall be no order as to costs.” [emphasis supplied]”
23. It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The 11 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254.
24. A Division Bench of the Delhi High Court dealt with a similar submission in Commissioner of Income-tax v. Jai Parabolic Springs Limited, (2008) 306 ITR 42. The Division Bench, in paragraph 17 of the judgment held that the Supreme Court dismissed the appeal making it clear that the decision was limited to the power of the assessing authority to entertain a claim for deduction otherwise than by a revised return and did not impinge on the powers of the Tribunal. In paragraph 19, the Division Bench held that there was no prohibition on the powers of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for the just decision of the case.
(emphasis supplied by us)
Now, in the case before us, we find that the assessee at the time of filing of his returns of income u/s. 139(1) and u/s 148 of the Act had remained under a bonafide belief that as the agricultural land in question i.e. at Village Dharampura was situated beyond the municipal limits, and thus not a “capital asset”, therefore, the gain on transfer of the same was not exigible to tax under the Act. Accordingly, backed by his aforesaid conviction, the assessee in our considered view had no occasion to have raised in his aforesaid returns of income filed u/s 139(1) and u/s 148 of the Act a claim for deduction u/s 54B w.r.t the investment that was made by him towards purchase of new agricultural lands. In fact, it was only after the aforesaid claim of the assessee for exemption of the gain on transfer of the agricultural land in question was scuttled by the A.O for the reason that the agricultural land in question was situated within the municipal limits, and thus, was a capital asset, that the assessee on account of such changed circumstances had raised the aforesaid claim for deduction u/s 54B of the Act. Insofar the declining of the assessee’s claim for deduction u/s 54B by the A.O is concerned, we are of the considered view, that as the same was raised by the assessee on the basis of a simpliciter claim in the course of the assessment proceedings and not by filing of a revised return of income, therefore, in the 12 ITA No.347 /RPR/2014 CO No.83/RPR/2015 A.Y.2007-08 backdrop of the judgment of the Hon’ble supreme Court in the case of Goetze (India) Ltd. (supra) no fault can be attributed to the A.O for refusing to entertain the said claim of deduction of the assessee. But then, the assessee remaining well within his rights had rightly raised the aforesaid claim for deduction u/s 54B before the CIT(Appeals), who in our considered view, remaining well within the realm of his jurisdiction had rightly entertained the assessee’s claim for deduction u/s 54B of the Act, and finding the same in order had directed the A.O to allow the same. Before parting, we may herein observe, that as our indulgence has been sought by the department only for adjudicating as to whether or not the CIT(A) was well within his jurisdiction to allow the assessee’s claim for deduction u/s 54B of the Act, despite the same not having been raised in the return of income, therefore, we are confining our adjudication to the said extent only. Accordingly, finding no infirmity in the order of the CIT(Appeals), who in our considered view remaining well within the realm of his jurisdiction had entertained the assessee’s claim for deduction u/s. 54B of the Act and directed the A.O to allow the same, we uphold his order. We, thus, finding no merit in the claim of the revenue that the CIT(A) had erred in allowing the assessee’s claim for deduction u/s 54B of the Act, dismiss the appeal.
6.7 We have considered the rival submission, perused the material available on record and case laws relied upon by the parties. Since the issue in present case, is squarely covered by the decision of this tribunal in ITA No. 347/RPR/2014, wherein under similar facts and circumstances, exemption u/s 54B has been allowed by the tribunal to the co-owner of the land, therefore, the issue in absence of any further development or any material aspect brought on record for our conviction to take a different stand, we have no reason to decide the issue on a different stand then the view already expressed by the tribunal in the case of ITO vs. Shri Rajavikram (supra). We, therefore, respectfully following the aforesaid decision of ITAT, Raipur, decide the issue in favour of the assessee by dismissing the ground no. 1 of the appeal of the revenue.
7. Ground No.2: Regarding deleting the addition of Rs.18,50,000/-made by ITO on account of unexplained cash in the form of opening cash balance:
On this issue, Ld. Sr. DR, drew our attention to the assessment order to elaborate the facts of the issue, wherein Ld. AO on this issue has observed that:
7.1 The assessee has filed cash position chart showing opening cash in hand of Rs.18,50,000/- and closing cash balance of Rs.21,42,333/- in the original return filed on 31.03.2009. Ld. AO disbelieved such information, with the observation that the assessee has purchased properties having consideration more than taxable limits, assessee claim to have started his business since last 3 years only. Before start of this business, the assessee has no other source of income. Before Ld. AO, it was the claim of the assessee that his income in last 3 years was below tax limit, therefore, he has not filed the ITRs. Looking to such unbelieving circumstances, Ld. AO request the assessee to furnish all the relevant documents in support of ITR filed. The information sought were trading account, Profit and Loss Account, Capital Account, Balance sheet, List of creditors and debtors along with additions, deletion made in balance sheet. The assessee failed to furnish all the above accounts to support the ITR filed. The assessee denied having maintain books of accounts. To claim the creditors and debtors, subsequently, assessee furnished list of creditors and debtors without postal address, in spite of specific requirement by the Ld. AO, therefore, it is inferred that the assessee was failed to provide any assistance to examine creditors and debtors and to verify the same. The explanation towards cash received by the assessee was:
“That the Assessee is 24Year old person. He is doing Hardware Business last 3 Year. And as per will his grandmother gave him Rs.700000.00 cash and 950-gram gold and 5 kg. silver on DT. 16-10-06 unsecured loans on DT.31-03-05 Rs. 500000.00 and Sundry trade Creditors as on 31-032005 Rs.500000. 00. His past saving and Gift received from friends on the occasion of birthday up to 31-03-05. -18,50,000.00”
7.2 The contention of the assessee were found to be ambiguous and incomplete by the Ld. AO, his observations was that, it is not clear from the submission of the assessee that the will was executed during the lifetime of his grandmother further, the physical delivery of the assets as per will was not proved, even the copy of will was not filed before the Ld. AO. Ld. AO has also doubted the creditworthiness of the grandmother and receipt of cash and Gold / Silver from her in absence of any corroborative evidence. With such observations, the addition was made. The Ld. Sr. DR in backdrop of aforesaid observations of the Ld. AO had submitted that the addition made by Ld. AO was justified and deserved to be sustained, therefore, requested to uphold the additions and set aside the order of Ld. CIT(A).
8. In rebuttal, Ld. AR of the assessee, placed his reliance on the order of Ld. CIT(A), wherein the facts of issue, appellants submission and decision of the Ld. CIT(A), are extracted hereunder:
3.1 As discussed earlier, the assessee has filed ITR for the AY 2007-08 on 31/03/2009 declaring income business at Rs. 100000/- revised his ITR on 13/04/2012 in response to the notice u/s 148 of the Income Tax Act, 1961. In the original return filed on 31/03/2009, the assessee has filed cash position chart showing opening cash in hand Rs. 18,50,000/- and closing cash balance of Rs. 2142333/-. In previous AY the assessee has purchased properties the cost of which are more than taxable limit he claimed to have stated his business since three year. Before it he has not any source of income. He was born in 04/10/85. As per his claim he started his business in AY 2005-06 at the age of 20 years and as he claimed that his income was below taxable hence, he has not filed his ITRs. He claimed to have purchased a land in 2003 for Rs. 98665/-. He purchased land for Rs. 128000/- on 06/07/2005. It appears from the fact on records that the assessee though have taxable income, but he never intended to file his ITR. Nor he intended to file a declaration regarding receipt of huge gift and will before the Income tax authorities. On being detected, the assessee filed for the first time ITR in the 2007-08 in pursuance of notice u/s 142(1) of the Act. In view of the quantum of investment made in previous year, the assessee was required to file his ITR in pursuance of Sec. 139 of the Act. The declaration of cash position was enclosed with ITYR filed 2007-08 was a colour full story to escape form tax liabilities. It is inferred from the above discussion that the assessee has escaped his income year to year and has concealed the particular of his income. He never intended to file his ITR, in spite of having taxable income. When the department detected the concealment, he came forward having colour full story to evade tax.
3.2 Appellant’s submission-
The AO has made the addition of Rs. 1850000/- as unexplained cash on various counts as –
| Opening balance | Rs. 150000/- |
| Advances | Rs.1000000/- |
| From Grandmother under will | Rs. 700000/- |
The addition made by the AO is baseless, vague and irrelevant. The addition has been made without appreciating the facts and therefore, illegal bad in law and hence not tenable. It is submitted as under in respect of this ground.
1 The assessee received cash, gold and silver from her grandmother Smt. Beshar Bain Jain under a will after her death and copy of the will duly notarized and her death certificate are enclosed which have been furnished before the AO also. The grandmother of the assessee was a lady from Marwari Jain family and having sound financial background. She was quite old and the AO is not justified in doubting the cash, gold and silver available with her. The assessee received Rs. 700000/- approximately in cash with gold and silver also mentioned in the will. The AO is not justified in concluding that the assessee was expected to prove the physical delivery of all these assets. It is not out of place of mention that all the wills are executed only during the life time of a person and no one can make a will after his or her death.
2. That the assessee had purchased agricultural land with one Mr. Raja Vikram of Jagdalpur whose details have been mentioned in the earlier ground of appeal. The assessee had planned to sell that land in piecemeal basis in order to realize more profits therefore. For that reason he had taken small token advances from various persons. The estimated sales price of one piece of land was supposed to be between Rs. 40000/- to Rs. 50000/-.
That plan did not work and at last he sold the lands (jointly held with Shri Raja Vikram) to other person. The petty advances are in the nature of advances for sale of small piece of plots of the lands which did not materialize. Since the total value of one plot was between Rs. 40000/- to Rs. 50000/-, the assessee has taken advances of such petty amounts form different persons. The details of list those person along with the confirmations there from have been furnished before the AO also. Copy of the same is furnished in pages no. 26 to page no. 57 of paper book for our perusal. The allegation of the AO is that all these confirmations have been prepared on continuous basis. It is submitted that the assessee had not taken any continuation kind of document from them earlier and those were taken from them only the AO asked for it.
3. That the AO has not believed that the assessee had saved Rs. 150000/out of his past incomes and savings and made the addition. It is submitted that it is meagre amount looking to the family status of the assessee which is established in Jagdalpur. The assessee has been doing business since 2004-05 although he had income which was not taxable. Considering this fact. the AO is not justified in not believing that the assessee had Rs. 150000/- out of his personal past savings.
4. that the assessee has taken a loan of Rs. 500000/- from his father Shri Raj Kumar Modi. Jagdalpur by bank cheque no. 544049 dated 20/04/2005 and his PAN is mentioned in the confirmation. Copy of the game is furnished in page no. 58 of the paper book. His father is an old assessee and a reputed businessman in Jagdalpur. The transaction pertains to FY 200506 only and may not be relevant for this assessment. But this shall be considered as opening balance of FY 2006-07. Without considering all these facts, the AO has made the addition.
3.3 The AO objects that assessee prepared the confirmations from creditors hurriedly and has put his signature on the same day and with a single pen. As per calligraphy these confirmations were prepared by single person. The assessee stated that the confirmation were prepared on demand from the AO. If this being so, there is nothing unusual in signing all confirmation on the same day. Regarding cash gift from grandmother the AO’s insistence to prove physical delivery and his question that the will was made in a life time is untenable. The assessee had filed copy of will before the AO which has to be accepted as evidence unless there is some material with the AO to disprove it. Regarding money from father the assessee did not file cheque details. ill dated 04/08/2003 was notarized with authorized notary before two witnesses. She expired on 16/10/2006. It is obvious that the will was prepared during her life time. Therefore, the two objections raised by the AO are not proper and, accordingly, additions made by him are hereby deleted and grounds taken by the appellant are allowed.
9. Based on aforesaid observations of the Ld. CIT(A) on the issue, Ld. AR submitted that since the assessee had received certain funds from his grandmother, through her will, copy of which is placed at page no. 46 of the paper book of the assessee, also gold and silver was received by the assessee for which no addition was proposed by the Ld. AO.
10. AR further explained that, on perusal of the order of Ld. CIT(A), it is emanating that Ld. CIT(A) had rightly taken a note that the grand mother of assessee, a lady from Marwadi Jain family having sound financial background thus, it is not justified to doubt the availability sources with her like cash, gold, and silver. She had made a will, which needs to believe, therefore the Ld. AO was not justified in concluding that the assessee was expected to prove the physical delivery of such assets. Herein, we may observe that on perusal of the copy of will of grandmother, quantification of cash, gold or silver is not discernible, neither the same have been supported with any corroborative evidence, which shows the delivered of such assets to the assessee, therefore, contentions of the assessee that such amount and assets are received by the assessee from grand mother cannot be rejected at threshold but the quantum has to be verified with corroborative evidences. Similarly, funds received by the assessee from various sundry creditors which are 28 in numbers, list of which is placed at page no. 48 of assessee’s paper book and receipts have got acknowledged from said creditors, copy of which are placed at page no. 49 to 65 of assessee’s paper book. In order to verify the veracity of documents, it is necessary for the assessee to provide address of such creditors or their credentials so as to fulfil the conditions, pre-requisite to satisfy the provisions of section 68 i.e., identity, creditworthiness of the creditors and the genuineness of the transaction.
11. Regarding, unsecured loan, before the Ld. AO assessee have furnished a list of unsecured loan creditors which are also 28 in numbers having aggregate unsecured loan for Rs.5 lacs, copy of documents supporting a receipt of unsecured loan are placed before us at page no. 68 to 79 of the assessee’s paper book. Whereas, before the Ld. CIT(A), it was the plea of the assessee that unsecured loan of Rs. 5 lac is received by the assessee from his father through Rajkumar Modi and his confirmation duly signed by both the assessee and loan creditor Shri Rajkumar Modi is placed at page no. 80 of the assessee’s paper book. Since the fact that receipt of loan from father was not the contention of the assessee before the Ld. AO, the same was accepted by the Ld. CIT(A) without confronting the Ld. AO on this issue, therefore, such shift of assessee’s contention before the Ld. AO and Ld. CIT(A) also requires verification. On the basis of aforesaid observations, wherein all the contentions raised by the assessee qua opening cash balance on Rs.18,50,000/- could not be substantiate by the assessee before the Ld. AO. However, the same are believed by the Ld. CIT(A), without proper verification of the facts from the evidence on record qua the assets / gifts received by the assessee or by making necessary enquiries with the trade creditors and unsecured loan creditors or the loan received from father, which was a fresh contention before the Ld. CIT(A) which was not brought to the notice of Ld. AO to offer his comments, therefore, in all fairness, in the interest of justice, the issue needs to be restored to the file of Ld. AO for verification of the facts and contentions raised by the assessee, on the basis of corroborative evidences and to adjudicate the issue afresh. Ld. AO is directed to take necessary enquiries to reach on a logical conclusion on this aspect. Needless to say, reasonable opportunity of being heard shall be provide to the assessee and directed to assist with all the necessary evidence, compliances and produce the trade creditors and loan creditors before the Ld. AO, so as to substantiate his claims, failing which the Ld. AO would be at liberty to decide the issue following the mandate of law.
12. Ground no. 3,4, 5 & 6: Our observation with respect to ground no. 2 of the present appeal shall have a square bearing on the issue raised in the ground no. 3 to 6 of the present appeal, therefore, our decision for ground no. 2 shall apply, mutatis mutandis on ground no. 3 to 6 of the present appeal of the revenue also. Consequently, the issue raised by the revenue in Ground no. 3 to 6 of the present appeal are also restored back to the files of Ld. AO for fresh adjudication.
13. Resultantly, ground no. 2 to 6 of the present appeal are restored back to the files of Ld. AO, therefore, the same stands partly allowed for statistical purposes.
14. Ground no. 7 & 8 are general and academic in nature, therefore, no separate adjudication of the same is required.
15. In result, present appeal of the revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 16/08/2024.
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