Case Law Details
Sh. Kuldeep Kumar Vs ITO (ITAT Jodhpur)
Introduction: The case of Sh. Kuldeep Kumar Vs ITO, as adjudicated by the Income Tax Appellate Tribunal (ITAT) in Jodhpur, is a noteworthy example of how the burden of proof can shift to the Income Tax Department when affidavits are presented to verify the source of cash deposits. In this article, we will delve into the details of this case, including the grounds of appeal, the facts, and a comprehensive analysis of the ITAT Jodhpur’s order.
Background of the Case: The appellant, Sh. Kuldeep Kumar, filed an appeal against the order of the Commissioner of Income Tax (Appeals) (NFAC) under section 250 of the Income Tax Act, 1961. This order was dated 24.05.2023 and stemmed from the assessment order passed under section 147 r.w.s. 143(3) of the Act, dated 21.11.2017. The appellant raised several grounds of appeal, contesting the legality of the order passed by the Income Tax Officer.
Key Grounds of Appeal:
- The appellant contended that the order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals) was illegal, lacked legal basis, and displayed a lack of proper scrutiny, hence should be quashed.
- The appellant argued that the Commissioner of Income Tax (Appeals) failed to cross-examine the contents of the affidavit submitted during the appeal, thus rendering the addition of income illegal.
- The appellant claimed that the Commissioner of Income Tax (Appeals) failed to appreciate the evidence and additional evidence submitted, making the addition unlawful due to an unreasoned and non-speaking order.
- The appellant requested an award of costs, as the Commissioner of Income Tax (Appeals) allegedly failed to follow the established legal principles and did not address all the grounds in the appeal.
- The appellant criticized the order for being against judicial decorum and discipline and for not acknowledging the binding nature of certain judgments.
- The appellant argued that the Commissioner of Income Tax (Appeals) should have considered the double entry of 5 Lacs and should have accepted the bank certificate of Rs. 5 Lacs as a valid explanation.
- The appellant insisted that the deposit in the bank should be declared as explained, as it had been accepted as such by the Assessing Officer.
- The appellant contested the legality of reopening the assessment under section 147/148 and charging interest, claiming both actions were illegal and against the law.
Facts of the Case: The case revolved around the cash deposits made by the assessee in his bank account. The Assessing Officer issued a notice under section 148 after recording reasons and obtaining approval from the Pr. Commissioner of Income Tax. The assessee had deposited Rs. 10,00,500/- cash in his State Bank of India account, and during the assessment proceedings, he claimed that his father had made the deposits and that he had limited income as an agriculturist. He also mentioned that his father had sold some land during the year. Despite these explanations, the Assessing Officer made an addition of Rs. 5,00,000/- as undisclosed income.
Ld. CIT(A) Decision: The assessee appealed to the Commissioner of Income Tax (Appeals) and filed affidavits and additional evidence. However, the Commissioner of Income Tax (Appeals) upheld the addition. The Commissioner noted that the affidavit filed by the grandmother, who had reportedly gifted Rs. 5,00,000/- to the appellant, lacked supporting documentation such as the sale deed of the land involved. The Commissioner deemed this affidavit as an afterthought and not tenable. Therefore, the Commissioner concluded that the appellant failed to substantiate the source of the deposit of Rs. 5,00,000/- and confirmed the addition.
Assessee’s Submission: The appellant argued that once affidavits were filed to demonstrate the source of cash deposits, the burden shifted to the Income-tax department. The appellant also criticized the Commissioner of Income Tax (Appeals) for summarily rejecting the affidavits without proper justification.
ITAT Jodhpur’s Findings: The ITAT Jodhpur analyzed the case carefully and referenced several legal precedents. Notably, it cited the decision of the Hon’ble Supreme Court in Sreelekha Banerjee Vs. CIT, emphasizing that the department cannot unreasonably reject a good explanation. It also cited Parimisetti Seetharamamma vs. CIT, emphasizing that the burden lies on the department to prove that a receipt is taxable.
In the case under consideration, the ITAT observed that the affidavits filed by the appellant had shifted the onus to the Income-tax department. The department failed to provide any evidence to dispute the facts presented in the affidavits. Consequently, the ITAT held that the appellant had adequately explained the source of the cash deposits, leading to the deletion of the addition.
Conclusion: The Sh. Kuldeep Kumar Vs ITO case serves as a notable example of how the burden of proof can shift in tax matters when credible affidavits are presented. In this case, the ITAT Jodhpur ruled in favor of the appellant, emphasizing that the department cannot unreasonably reject a valid explanation and that the burden of proof lies with the tax authorities. This case underscores the importance of providing proper justification and following established legal principles in tax assessments and appeals.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
This is an appeal filed by the Assessee against the order of ld. Commissioner of Income Tax (Appeals) (NFAC) under section 250 of Income Tax Act, 1961 dated 24.05.2023 emanating from the assessment order passed under section 147 r.w.s. 143(3) of the Act dated 21.11.2017. The grounds of appeal raised by the assessee are as under:-
1. The order passed by the Income Tax Officer and sustained by the Commissioner of Income Tax (Appeals) is illegal against the law and without any application of mind, therefore, is liable for quash.
2. That the Commissioner of Income Tax (Appeals) fails to cross-examine the contents of the affidavit submitted before him during the course of appeal in view of the judgment of Mehta Parakh and Company and as such the addition sustained by the Commissioner of Income Tax appeals is illegal.
3. That the Commissioner of Income Tax appeals fails to appreciate the evidence, additional evidence, and submission submitted before him, therefore, the Addition may kindly be declared illegal looking to the unreasoned and non-speaking order.
4. That cost may kindly be awarded because the Commissioner of Income Tax appeals fails to follow the law of the land and also has not decided all grounds taken in the appeal, therefore, send me kindly be declared as illegal and the addition may kindly be deleted.
5. That the order may kindly be declared as against judicial decorum and judicial discipline because the binding nature of judgment was not appreciated and also not providing a place in the order of CIT (A).
6. That the CIT (A) should have considered the double entry of 5 Lacs and also should have considered the bank certificate of Rs. 5 Lacs and should have accepted the amount as explained.
7. That the deposit in the bank may kindly be declared as explained looking at the fact that the same was accepted as explained by the AO.
8. That reopening of the assessment u/s 147/ 148 may kindly be declared illegal and against the law In view of the judgments submitted in a written submission before the CIT (A).
9. That the charging of interest is illegal and against the law.
Brief facts of the case
2. In this case, the Assessing Officer i.e. ITO-1(4), Bikaner had received information regarding cash deposited by the assessee in his bank account. The Assessing Officer issued notice under section 148 after recording reasons and after obtaining approval of the Pr. Commissioner of Income Tax, Bikaner. It is mentioned in the assessment order that assessee had deposited Rs. 10,00,500/-cash in his account maintained with State Bank of India. During the assessment proceedings, the assessee submitted before the Assessing Officer that his father had deposited the said amounts and he is not aware about anything. The assessee also submitted before the Assessing Officer that he is an agriculturist and his family is also agriculturist and they have limited income. He also submitted that his father had sold some land and received certain amount during the year. The Assessing Officer made addition of Rs. 5,00,000/- as undisclosed income. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before ld. Commissioner of Income Tax (Appeals), Bikaner. The assessee also filed an application for additional evidence before the ld. Commissioner of Income Tax (Appeals), Bikaner. The assessee filed copies of two affidavits and written submissions before the ld. Commissioner of Income Tax (Appeals), Bikaner. However, ld. Commissioner of Income Tax (Appeals) (National Faceless Appeal Centre) confirmed the addition. The relevant part of the order of ld. Commissioner of Income Tax (Appeals) is reproduced as under:-
“Now the question arises in relation to the deposit of rest of amount of Rs. 5,00,000/-. The appellant in his written submission submitted in this office has stated that out of Rs. 5,00,000/-, Rs. 3,00,000/- was out of sale consideration and rest amount of Rs. 2,00,000/- was received by him as gift from his grandmother. Secondly, the appellant has also stated that he has received Rs. 5,00,000/- as gift from his grandmother and has also produced the affidavit regarding the gift made to the appellant before this office. On perusal of the affidavit, I have found that the affidavit was made and signed in the year 2018 in which it is stated that the grandmother of the appellant sold an immovable property on 01.01.2009. It is worthwhile to mention here that the appellant could have provided the copy of the sale deed with regard to the land sold by his grandmother in support of his affidavit. The said affidavit was not submitted before the AO at the time of assessment proceedings but the same has been produced before the undersigned is just an afterthought and not tenable.
Therefore, in view of the above facts and circumstances of the case, the appellant has not been able to substantiate with documentary evidences to prove the source of deposit of Rs. 5,00,000/- before the AO at the time of assessment proceedings as well before the undersigned. Thus, the action of the AO is found justified and the order is confirmed.”
Submission of ld. AR
3. Ld. AR made a written submission. The thrust of the ld. AR’s submission was that once the assessee had filed affidavits and explained the source of cash deposits, the onus shifted on department. The ld. CIT(A) has merely rejected affidavits filed by the assessee without giving any proper reason. Therefore, the order of the ld. CIT(A) is bad in law. The ld. AR also pleaded that cost may be levied.
3.1 The relevant part of the ld. AR’s written submission is reproduced as under:-
“The CIT (A) fails to pass the speaking order and passed the order in few lines whereas the assessee submitted a detailed submission referring to the case law AND THE TAXPAYER HAS BEEN DELIBERATELY PUSHED INTO THE PIT OF LITIGATION YOU ARE REQUESTED TO DECLARE THE SAME AS ILLEGAL
In view of the above submission, you will observe that the addition made by the assessing officer is illegal and against the law without following the order of the tribunal.
CONVERSATION OF PROOF INTO NO PROOF BY THE CIT(A).
Respected sir, we fail to understand how CIT (A) disbelieved the explanation/statements given by the assessee when both documents are the documents submitted by the assessee during the hearing of appeal are the best evidence in itself but the CIT(A) ignore and converted good proof into no proof.
Hon’ble Justice Hidayatullah of the Supreme Court in the case of Sreelekha Banerjee Vs CIT [1963] 49 ITR 112 (SC); 120 observed that the Income Tax Department cannot by merely rejecting unreasonably a good explanation, convert good “proof into no proof”. Hon’ble Supreme Court in the case of Uma Charan Shaw & Bros Co Vs CIT 37 ITR 271 has held that the surmises and conjectures, and the conclusion are the result of suspicion which cannot take the place of proof. Hon’ble Punjab & Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P &H) also held that suspicion, howsoever strong cannot take the place of legal proof.
Honorable, please also look into the working style of the Income Tax Commissioner Appeal, is nothing but pushing the assessee in the litigation.”
Submission of ld. DR
4. Ld. DR relied upon the orders of the lower authorities. The ld. DR submitted that the affidavits were not filed before the Assessing Officer. The ld. DR also submitted that though the affidavits were filed before ld. CIT(A) as claimed by the ld. AR of the assessee, the ld. CIT(A) has not forwarded these affidavits to the Assessing Officer. Hence, it is violation of Rule 46A of the Income Tax Rules, 1962.
Findings &Analysis
5. We have perused the orders and record.
6. It is an admitted fact that as per the bank statement of the assessee, there was cash deposit of Rs. 5,00,000/- on 29.06.2009 and then withdrawal on 29.06.2009, again deposited on 29.06.2009. Assessee had filed copy of a letter issued by State Bank of India, Khajuwala Beriyawali, Bikaner. The relevant part of the said letter is reproduced as under:-
7. Thus, the State Bank of India has admitted that due to technical reasons, there were two entries of cash deposits on 29.06.2009 of Rs. 5,00,000/-. It means assessee had deposited only Rs. 5,00,000/- on 29.06.2009 in State Bank of India. The Assessing Officer has also made an addition of Rs. 5,00,000/-. The ld. AR submitted that all the evidences were filed before the ld. CIT(A) but ld. CIT(A) has not properly appreciated it. It is observed that assessee had claimed that he is an agriculturist. He has received gift of Rs. 5,00,000/- from his grand-mother and Rs. 3,00,000/-from his father who had sold some land during the year. The assessee had filed copies of affidavit of Smt. Bhaktawari Devi. In the said affidavit, it is mentioned that Smt. Bhaktawari Devi had given a gift of Rs. 5,00,000/- to Sh. Kuldeep Kumar, out of natural love and affection. Similarly, the assessee had filed his own affidavit stating that he had received gift of Rs. 5,00,000/- from his grand-mother also his father has given him money from sale of agricultural land. Both these documents were filed by the assessee before the ld. CIT(A), Bikaner, vide letter dated 17.10.2019. Assessee had also filed an application for admission of additional evidence before ld. CIT(A), Bikaner. Then assessee filed all these details electronically before CIT(A) (NFAC), assessee filed copy of e-Proceedings Response Acknowledgment to demonstrate that assessee had filed all these documents electronically before ld. CIT(A) (NFAC). However, ld. CIT(A) had summarily rejected the affidavits stating that appellant could have submitted copy of sale deed. Once an affidavit is filed by assessee to demonstrate the source of cash deposits, the onus shifted on the Income-tax department. If ld. CIT(A) wanted any further clarification, he could have asked the assessee to file the same. Ld. CIT(A) could have recorded the statements under section 131 of the Act however, instead of carrying out proper investigation, ld. CIT(A) merely rejected the affidavits.
8. It has been held by Hon’ble Supreme Court in the case of Sreelekha Banerjee & Ors vs. Commissioner of Income Tax 49 ITR 112 (SC), which is reproduced as under:-
“It seems to us that the correct approach to questions of this kinds in this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income. The Department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected the Department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The Department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence against the assessee. There is thus, prima facie, evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very words “an undisclosed source” show that the disclosure must come from the assessee and not from the Department. In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes the assessee prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes. Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. It is within the range of these principles that such cases have to be decided. We do not think that the Allahabad view puts no burden upon the assessee and throws the entire burden on the Department. The case itself does not bear this out. If it does, then, it is not the right view.”
8.1 Thus, the Hon’ble Supreme Court has observed that the department cannot merely reject explanation filed by the assessee.
9. The Hon’ble Supreme Court also in the case of Parimisetti Seetharamamma vs Commissioner of Income-Tax 57 ITR 532 (SC) has held as under:-
“In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. The appellant admitted that she had received jewellery and diverse sums of money from Sita Devi and she claimed these gifts made out of love and affection. The case of the appellant was that the receipts did not fall within the taxing provision. It was therefore, for the department to establish that these receipts were chargeable to tax.”
10. In the case under consideration, the facts are identical to the case of Parimisetti Seetharamamma vs Commissioner Of Income-Tax (Supra). In the case under consideration, assessee claimed that he had received gift from grand-mother and filed affidavit of grand-mother, therefore, the onus shifted on the department. The department has not brought on record any evidence to establish that facts mentioned in the affidavits were not true and hence, the income was taxable therefore, in these facts and circumstances of the case, we are of the opinion that assessee had explained source of cash deposits of Rs. 5,00,000/- made in the assessment order. Ground No. 7 of the assessee is allowed.
11. Ground Nos. 1, 2, 3, 4, 5 & 6 have not been adjudicated by us as we have adjudicated ground no. 7 and directed the AO to delete the addition of Rs. 5,00,000/- therefore, these grounds become academic in nature. There will not be any prejudice cost to the assessee by we not adjudicating the grounds therefore, these Ground Nos. 1, 2, 3, 4, 5 & 6 are dismissed as not adjudicated.
12. As far as the Ld. AR’s argument regarding levy of cost is concerned, we have given our thoughtful consideration and arrived at the conclusion that it is not a fit case to levy cost. It is not the case that Ld. CIT(A) has not considered the evidence filed by the assessee. It is only the question of interpretation therefore, we do not feel appropriate to levy the cost.
Ground No. 8
13. AR submitted that he did not intend to press ground no. 8 by which he has challenged the legality of proceedings under section 147 of the Act. Therefore, Ground No. 8 is dismissed as not pressed.
14. Ground No. 9 is consequential in nature and hence dismissed. Accordingly, the appeal of the assessee is partly allowed.
15. In the result, the appeal of the assessee is partly allowed. Order pronounced on 10th August, 2023.
