Arun Duggal Vs DCIT (ITAT Delhi)
Brief facts of the case are that information has been received from investigation division of the Income Tax department with regard to the two bank accounts maintained by the assessee which have not been disclosed to the Income Tax Department. Based on the information received, the Assessing Officer having satisfied himself has initiated reopening proceedings u/s 148 of the Income Tax Act, 1961 and issued notice as per the provisions of the Act after taking due approval from the competent authorities u/s 151. In response to the notices issued, the assessee availed inspection of the file and records on 19.04.2016 and certified copies were given by the revenue authorities. Owing to the credits in the bank account, addition of Rs.12.81 Crores has been made by the Assessing Officer u/s 68 of the Act.
We find that the revenue department has been conducted enquiries with the bank as to the transactions of the account. The assessee has vehemently argued that entire reopening and assessment is made on the basis of mere credit in the bank account and the credit cannot be called as real income in the hands of the assessee. The ld. AR argued referring to the decision of Hon’ble Apex Court in the case Shoorji Vallabh Dass 46 ITR 144. We have gone through the said judgment. The Hon’ble Supreme Court in Shoorji Vallabh Das (supra) has held that income tax is a levy on income and the Act takes into account two points of time at which the liability to tax is attracted i.e., accrual of income or its receipt but substance of the matter is the income. It has further been held that if the income does not result at all, there cannot be a levy of tax even though in book keeping entry is made about a hypothetical income which does not materialize. The Hon’ble High Court of Delhi in Ericsson Communications Ltd. has also taken a view that in the absence of any accrual of income, there is no obligation on the part of the assessee to deduct tax at source. Similar view has been taken by various other High Court’s including in the case of Toyota Kirloskar Motor (P) Ltd. Vs ITO (Karnataka High Court). We find that the facts and ratio of the said judgment is not applicable to the instant case before us.
At the cost of repetition, we reiterate the bare facts of this case, that the assessee has opened, operated and owned two bank accounts in which Rs.12.81 crores duly deposited. The assessee before the revenue authorities on various occasions denied the knowledge of having any such account. During the statement recorded on 29.12.2015, the assessee said that he was no way associated with Alfa India and he was hearing the name for the first time during the assessment proceedings also the assessee contended that he received nothing from Alfa India and explained that it is operated at the instruction of M/s Jagjit Industries Ltd. Late Sh. Banga has denied that any such instructions were given to Mr. Arun Duggal. These submissions of the assessee when weighed against the documentary evidences collected by the revenue authorities, it can be said that the assessee has miserably failed to explain in the credits in the bank account.
As per the provisions section 68 of the Act, since the assessee failed to prove the source of sum of money found in the bank account of the assessee they have been rightly taxed by the revenue u/s 68 of the Income Tax Act. Onus of providing the source of a sum of money found to have been received by an assessee is on him. When the nature and source of a receipt, whether it be a money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source. [Roshan Di Hatti Vs CIT (SC) 107 ITR 938, Kale Khan Mohammad Hanif Vs CIT 50 ITR 1].
Where any sum is found credited in the books of the assessee for any previous year, it may be charged to Income Tax as the income of the assessee for that previous year if the explanation offered by assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. [Vasantibai N. Shah Vs. CIT (Bom.) 213 ITR 805, Sreelekha Banerjee & Ors. Vs. CIT (SC) 49 ITR 112]
Cash credit can be assessed even if transaction is through cheques. [ K.C.N. Chandrasekhar Vs. ACIT (ITAT, Bang), 66 TTJ 355, CIT Vs. United Commercial & Industrial Co. (P) Ltd. (Cal.) 187 ITR 596]
Section 68 applicable even to share application money – use of the words “any sum found credited in the books” indicates that the section is widely worded and ITO is not precluded from making enquiry as to the true nature and source thereof even if the sum is credited as share application money. [CIT Vs. Nivedan Vanijyya Niyojan Ltd. (Cal.) 263 ITR 623, CIT Vs. Rathi Finlease Ltd. Ltd. (MP) 215 CTR 429]
Merely disowning the bank accounts by the assessee do not lead to the conclusion that the accounts are not maintained by him when there is a direct evidence contrary to the contention of the assessee. Enquiry was also made from State Excise Authorities of Haryana with regard to the proprietary concern of the assessee and it was proved that the assessee was not authorized dealer for sale of liquor. Hence, any business or liquor trade can be attributed and the assessee could not explain the source of deposits and accountability thereof to the revenue authorities. The statement of the brother of the assessee Sh. Sanjay Duggal wherein it was stated that the sales of M/s Jagjeet Industries Ltd. were unreported and under invoicing and the differential proceeds have been received could not be substantiated as the verification of books of accounts of M/s Jagjeet Industries Ltd. by the revenue did not yield any such under reporting or under invoicing. The contention of the assessee that he do not have any kind of interest in M/s Alfa India vide the statement recorded on 20.12.2015 and in the subsequent assessment proceedings cannot cut any ice as the documents, signature, photograph and instructions given to the bank by the assessee himself. There is absolutory no dispute on this issue.
The ld. Counsel has also tried to canvass before us that the entire deposits in the bank account of the assessee did not belong to him and therefore, there is no real income accrued or received to the assessee. We are unable to accept such a contention for the reason that, firstly, there are actual deposit in the bank account of the assessee for which no explanation about the nature and the source was explained which has led to addition u/s 68. Secondly, Section 68 is a deeming provision wherein the statute provides that if the assessee is unable to explain the nature and source of the credits, then it is deemed to be income of the assessee as undisclosed sources and is taxed accordingly. Provisions of section 68 apply to all credit entries in the cases including where credit entry has been made in the bank account of the assessee, if the assessee fails to offer any explanation fully corroborated and substantiated by evidences. The ambit of Section 68 is wide and inclusive and this provision applies to all credit entries either in the books of accounts or the bank account of the assessee because the bank account itself forms the account of the assessee where the assessee credits the amount for which he is required to explain the nature and source of such credit. The language of Section 68 applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or even in the name of a third party as held in the case of Gumani Ram Siri Ram v. CIT [1975] 98 ITR 337 (Punj. & Har.). No presumption under any other section does not override or exclude Section 68, that is, it does not obviate the necessity to establish by independent evidence the genuineness of the cash credits under Section 68, nor does it do away with the burden which is on the assessee to establish the requisites of cash credits as held in the cases of Pushkar Mamin Sarraf vs. CIT [1990] 183 ITR 388 (All) and Daya Chand vs. CIT [2001] 250 ITR 327 (Delhi). Hence, keeping in view the entire facts and circumstances of the case narrated above, we hereby hold that, firstly, the action of the revenue authorities on the issue of notice u/s 148, approval under section 151 was in accordance with the law and secondly, addition u/s 68 has rightly been made as assessee has failed to offer any explanation with regard to nature and source of credit in his bank account and the primary burden cast upon the assessee for proving the credits has not been discharged either before AO or ld. CIT(A) or before us. Accordingly, the action u/s 147/148 as well as the addition made u/s 68 is hereby affirmed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed by the assessee against the order of ld. CIT(A)-3, Gurgaon 26.02.2018.
2. Following grounds have been raised by the assessee:
“1. That on the facts and in the circumstances of the case and in law, Ld CIT- A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that assumption of jurisdiction u/s 148 was by Ld AO was in violation of jurisdictional conditions stipulated under the Act;
1.1 That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that “rubber stamp” reasons in present case are based on borrowed satisfaction and are without independent application of mind;
1.2 That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that no back material, repeatedly asked was confronted/provided to assessee thus invalidating entire reopening;
1.3 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that assessment u/s 147/148 cannot be made when search was conducted u/s 132, as strictly excluded u/s 153A/153B/153C of the Income Tax Act, 1961;
1.4 That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that none of the assessee submission is appreciated while adjudicating the appeal;
1.5 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that objection filed in response to reasons recorded were never disposed off by a speaking order before passing the final assessment order, which has invalidated the entire proceedings;
1.6 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that notice u/s 143(2) issued without waiting for GKN Driveshaft procedure to be exhausted is invalid. Further the Ld AO after assuming the jurisdiction transferring records from ITO Ward 1(1) to DCIT-CC-1, Faridabad, no notice u/s 143(2) was issued, which invalidated the entire proceedings;
1.7 That on the facts and in the circumstances of the case and in law, Ld CIT(A) erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that the reasons recorded for issuance of notice u/s 148, are just conclusions over conclusions, without any factual enquiry / back material on record.
1.8 That on the facts and in the circumstances of the case and in law, Ld CIT(A) erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that the mechanical and rubber stamp approval has been given by the Pr CIT, Faridabad-121001
2. That on the facts and in the circumstances of the case and in law, Id CIT- A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that on basis of surfeit and inundated evidences on records burden u/s 68 lying on assessee has been fully discharged and met so addition made by Ld AO (Rs.12,81,75,000.00 ) and confirmed by CIT-A in impugned order deserves to be deleted.
2.1 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that there is no valid basis of any of the addition of Rs. 12,81,75,000.00
2.2 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that all the additions made are without bringing any case specific and transaction specific material on records;
2.3 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that no meaningful enquiry was made by Ld AO which is sufficient to strike down the additions made;
2.4 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that no bank statements on the basis of which additions has been made were never provided to the assesse;
2.5 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that while making addition u/s 68 Ld AO has not issued any formal and required show cause notice nor Ld AO has considered detailed reply-filed by the assessee;
2.6 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) without appreciating that none of evidence filed by assessee is overruled in accordance with law;
4. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the order passed by the Ld AO u/s 147/143(3) without appreciating that the assesse was never provided with an opportunity of cross examination of any of officers of M/s Jagatjit Industries Ltd / other associates on the statement of Revenue / Investigation wing has relied upon and the Ld AO has passed the impugned assessment order.
5. The on the facts and in the circumstances of the case in law, Ld CIT(A) erred in sustaining the orders passed by the Ld AO u/s 147/143(3) without appreciating that the no addition u/s 68 can be made merely relying upon the bank statements, which was never books of accounts of the assesse.
6. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not restoring the returned income declared by assessee in its return of income.
7. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in not deleting the addition made by Ld AO which was also unlawful and made in violation of principles of natural justice, as no show cause notice has been issued, the bare minimum requirement for making additions under Income Tax Act, 1961 and making the assesse liable for enhanced taxation.
8. That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld AO u/s 147/143(3) in bare violation of principles of natural justice.”
3. Brief facts of the case are that information has been received from investigation division of the Income Tax department with regard to the two bank accounts maintained by the assessee which have not been disclosed to the Income Tax Department. Based on the information received, the Assessing Officer having satisfied himself has initiated reopening proceedings u/s 148 of the Income Tax Act, 1961 and issued notice as per the provisions of the Act after taking due approval from the competent authorities u/s 151. In response to the notices issued, the assessee availed inspection of the file and records on 19.04.2016 and certified copies were given by the revenue authorities. Owing to the credits in the bank account, addition of Rs.12.81 Crores has been made by the Assessing Officer u/s 68 of the Act.
4. Aggrieved the assessee filed appeal before the ld. CIT(A) who confirmed the order of the Assessing Authorities.
5. Hence, the appeal before the ITAT.
6. During the arguments, the ld. AR mainly argued on two issues viz., reopening u/s 148 and merits of the addition with regard to the income assessable in the hands of the assessee.
7. For the sake of completeness and ready reference, the arguments taken by the ld. AR and the rebuttal given by the ld. DR are placed hereunder:
Arguments of ld. AR:
8. The chronology of events are as under:
