Bhanwaroo Khan Chopdar v. Income Tax Officer, Ward 1, Sikar

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 124 / 2017 Bhanwaroo Khan Chopdar S/o Shri Lal Mohammad Chopdar, Aged About 66 Years, R/o Near Railway Lines, Jagdish Colony, Backside of S.K. Govt. Hr. Sec. School, District Sikar ----Appellant Versus Income Tax Officer, Ward 1, Sikar Having Its Address At Income Tax Department, NCR Building, Sanwalli Road, Todi Nagar, District Sikar ----Respondent _____________________________________________________ For Appellant(s) : Mr. Siddharth Ranka. For Respondent(s) : Mr. Daksh Pareek for Mr. Sameer Jain. _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERIHON'BLE MR. JUSTICE DEEPAK MAHESHWARI Judgment 22/11/2017 1.By way of this appeal, the appellant has challenged thejudgment and order passed by the Tribunal, whereby the Tribunalhas allowed the appeal filed by the assessee for statisticalpurposes and they have rejected the part of the appeal and addedincome under Section 69 of the Income Tax Act. 2.While admitting the appeal this Court framed the followingsubstantial questions of law :- “1.Whether on the law and in facts andmaterial available on record the Id. ITAT wascorrect in confirming the addition u/s. 69 of theAct in the hands of the assessee appellant byignoring the well settled principal of law that theassessee is not required to prove source ofsource and in holding that the assesseeappellant had not sufficiently discharged theprimary onus casted upon him?material available on record the Id. ITAT wascorrect in confirming the addition u/s. 69 of theAct in the hands of the assessee appellant byignoring the well settled principal of law that theassessee is not required to prove source ofsource and in holding that the assesseeappellant had not sufficiently discharged theprimary onus casted upon him? 2.Whether addition u/s 69 of the Act, whichis a deeming provision, could have beensustained against the assessee appellant merelyon the basis of hypothetical assumption andpresumption?” 3.Counsel for the appellant contended that the Tribunal hascommitted a serious error inasmuch as the amount which wasdeposited in several accounts on application on behalf of AnilKumar, Rajendra Singh, Dayal Singh and Puranmal Pareek wastendered from his account. Learned counsel has taken us throughthe observation of A.O., which reads as under:- “As per information available with thedepartment the Assessee has deposited cash ofRs.17,90,000/- in his saving bank A/cNo.1570/1778212742 maintained with CentralBank of India, Ashok Vihar, Sikar.” 3.1He also referred the statement of Anil Kumar and DayalSingh, whose statements were found to be doubtful by theTribunal. It was also contended that the agreement Annex.-7which was part of paper-book wherein all the four persons enteredinto the agreement and the balance-sheet as on 31.03.2009 hasclearly shown the liability of this amount. 3.2Counsel for the appellant has relied upon followingdecisions :- 1.CIT Vs. Daulat Ram Rawatmull – [1973] 87 ITR 349 (SC) : (SC) : “The onus to prove that the apparent is notthe real is on the party who claims it to beso. As it was the department whichclaimedthat the amount of fixed deposit receiptbelonged to the respondent firm eventhough the receipt had been issued in thename of B, the burden laid on the 2. 3.2Counsel for the appellant has relied upon followingdecisions :- 1.CIT Vs. Daulat Ram Rawatmull – [1973] 87 ITR 349 (SC) : (SC) : “The onus to prove that the apparent is notthe real is on the party who claims it to beso. As it was the department whichclaimedthat the amount of fixed deposit receiptbelonged to the respondent firm eventhough the receipt had been issued in thename of B, the burden laid on the 2. department to prove that the respondentwas the owner of the amount despite thefact that the receipt was in the name of B.A simple way of discharging the onus andresolving the controversy was to trace thesource and origin of the amount and findout its ultimate destination. So far as thesource is concerned, there is no material onthe record to show that the amount camefrom the coffers of the respondent-firm orthat it was tendered in B Calcutta branch ofthe Central Bank on behalf of therespondent. As regards the destination ofthe amount, there is nothing to show that itwent to the coffers of the respondent. Onthe contrary, there was positive evidencethat the amount was received by B. Itwould thus follow that both as regards thesource as well as the destination of theamount, the material on the record gave nosupport to the claim of the department.” CIT, Ajmer v. Jai Kumar Bakliwal – [2014] 45 Taxmann.com 203 (Raj.) : “The cash creditors appeared to be fromsmall place and it is quite possible that theymay not be in a position to pin pointedly orspecifically say about everything but by andlarge stood to the testimony and were ableto explain various issues as per thequestion and answer reproduced by theAssessing Officer himself in the assessmentorder. It may be that most of the cashcreditors are relatives of the respondent-assessee and heavy burden lay on therespondent-assessee to prove about thecash credit but once all the cash creditorsappeared before the Assessing Officer, theirstatements having been recorded undersection 131, then insofar as therespondent-assessee is concerned, theonus, which lay upon him (assessee), in ourview, stood discharged as he was able toprove identity of the creditors. Once theamount was advanced by account payeecheque from their respective own bankaccounts and were being assessed toincome tax, then in our view, capacity ofthe creditor and genuineness of thetransaction stood proved. In so far as therespondent-assessee is concerned, it iscorrect that he is not required to prove source of the source and if the AssessingOfficer had any doubt, then the AssessingOfficer, assessing the respondent-assessee,could have sent the information to theAssessing Officer, assessing the cashcreditors for appropriate action in theircases but in so far as the respondent-assessee is concerned, in our view, therespondent-assessee has been able todischarge the burden which lay upon him. Certainly, deposit of cash andimmediate transfer of cheque or clearanceof the cheque within a day or two casts adoubt as the transaction appears to besome what doubtful but suspicionhowsoever strong it may be is not sufficientitself. On perusal of the facts in the presentcase, it is observe that the amountsadvanced are not substantial and in most ofthe cases, the amounts are ranging from25,000 to 90,000 and in some cases, it isexceeding Rs.1,50,000. On perusal of thefacts, it is also apparent that in some of thecases (Uttan Chand Jain, HUF) even theKarta of the HUF and relatives hadproduced the cash book and their ledgeraccount before the Assessing Officer.” 3.(Raj.) : Labh Chand Bohra v. ITO – [2010] 189 Taxman 141 Certainly, deposit of cash andimmediate transfer of cheque or clearanceof the cheque within a day or two casts adoubt as the transaction appears to besome what doubtful but suspicionhowsoever strong it may be is not sufficientitself. On perusal of the facts in the presentcase, it is observe that the amountsadvanced are not substantial and in most ofthe cases, the amounts are ranging from25,000 to 90,000 and in some cases, it isexceeding Rs.1,50,000. On perusal of thefacts, it is also apparent that in some of thecases (Uttan Chand Jain, HUF) even theKarta of the HUF and relatives hadproduced the cash book and their ledgeraccount before the Assessing Officer.” 3.(Raj.) : Labh Chand Bohra v. ITO – [2010] 189 Taxman 141 “During the assessment proceedings of theassessee, the Assessing Officer foundvarious amounts credited in the names ofvarious persons in the assessee’s books ofaccount. The assessee was asked toproduce doubtful creditors. He producedmost of them, whose statements wererecorded on oath. The Assessing Officer,however, added amount of ten entries tothe total income of the assessee byinvoking the provisions of section 68. Onappeal, the Commissioner (Appeals)confirmed the additions with respect toamounts in the accounts of DS and VK andtwo ladies. On second appeal, the Tribunaldeleted the additions with regard to twoladies. As regards the amounts credited inthe accounts of DS and VK, though theTribunal found that their identity wasestablished; that they had also confirmedthe credit by making statements on oath; and that transactions had taken placethrough bank accounts and throughcheques, yet notwithstanding all that, theTribunal proceeded to consider othercircumstances and found that those personshad very meagre income; and that issuanceof cheques on the vary day of opening ofthe bank account without there being ampleamount available in the account, in itself,was a proof of ingenuity of the transactionsin question. It, therefore, confirmed theadditions of the amounts found credited intheir accounts.” 4.Aravali Trading Co. v. ITO – [2010] 187 Taxman 338 (Raj.) : “10. The answer to us appears to be nomore res integra. Neither the provisions ofSection 68 of the Income-tax Act nor ongeneral principle, it can be said that oncethe existence of persons in whose namecredits are found in the books of theassessee is proved and such persons ownsuch credits with the assessee still theassessee is to further prove the sourcefrom which the creditors could haveacquired money to be deposited with him. “11. The fact that the depositors’explanation about the sources wherefromthey acquired the money is not acceptableto the Assessing Officer, it cannot bepresumed that the deposits made by suchcreditors is the money of the assesseehimself. There is no warrant for suchpresumption. In such event if the creditorsexplanation is found to be not acceptableabout such deposits, the investment ownedby such persons may be subjected to theproceedings for inclusion of suchinvestment as their income fromundisclosed sources or if they have beenfound Benami, the real owner can bebrought to the tax net. But in order tofasten liability on the assessee by includingsuch credits as his income fromunexplained sources a nexus has to beestablished that the sources of creditors’deposit flew from the assessee. In theabsence of any such link, additions of cashcredits found in the books of account of theassessee cannot be considered to beunexplained income of the assessee, where existence of depositors of such credits isestablishedandsuchdeposits/advance/loan is owned by suchexisting person. On such proof theassessee’s onus is discharged.” 5.Kanhaiyalal Jangid v. Asstt. Commissioner of Income Tax –[2008] 217 CTR 354 (Raj.) :Tax –[2008] 217 CTR 354 (Raj.) : existence of depositors of such credits isestablishedandsuchdeposits/advance/loan is owned by suchexisting person. On such proof theassessee’s onus is discharged.” 5.Kanhaiyalal Jangid v. Asstt. Commissioner of Income Tax –[2008] 217 CTR 354 (Raj.) :Tax –[2008] 217 CTR 354 (Raj.) : “While it is the assessee’s burden to furnishexplanation relating to cash credits, theassessee’s burden does not extend beyondproving the existence of the creditor andfurther proving that such creditor owns tohave advanced the amount credited in theaccount of assessee to him. However, theburden does not go beyond to put theassessee under an obligation to furtherprove as to wherefrom the creditor has gotor procured the money to be deposited oradvanced to the assessee. The explanationfurnished by the creditor about the sourcefrom where he procured the money to bedeposited or advanced to the assessee, isnot relevant for the purposes of rejectingthe explanation furnished by the assesseeand making additions of such deposits asincome of the asasessee from undisclosedsources by invoking section 68 unless it canbe shown by the department that thesource of such money comes from theassessee himself or such source could betraced to the assessee itself. Where existence of the creditor wasnot in doubt and he had admitted to haveadvanced the loan to the assessee, the factthat the explanation furnished by him abouthis source of such advancement had notbeen accepted by the revenue authoritycould not lead to any presumption that thesource of such advance by him emanatedfrom the assessee so as to make addition ofthe sum in the hands of the assessee.” 4.Counsel for the respondent has taken us through thejudgment of the Tribunal and contended that Tribunal is justified inpassing the order. He has taken us to the provision of Section 69,which reads as under:- “Sec.69. Where in the financial year immediatelypreceding the assessment year the assessee hasmade investments which are not recorded in thebooks of account, if any, maintained by him forany source of income, and the assessee offersno explanation about the nature and source ofthe investments or the explanation offered byhim is not, in the opinion of the [Assessing]Officer, satisfactory, the value of the investmentsmay be deemed to be the income of theassessee of such financial year.” 5.We have heard learned counsel for the parties. 5.1In our opinion, the Tribunal has committed a serious errorinasmuch as in view of the exemption which has been shown as ademand draft was taken on behalf of those persons which hascome on record and it clearly established it was a businessarrangement which was made. The A.O. has considered it to beas an investment but the amount which was deposited, was noteither going to be deposited in terms of the investment or is goingto get any interest on it. In that view of the matter under Sec. 69,it will be open for the department to assess those four personsindependently as it could not be established the income of theassessee. 5.2In that view of the matter, both the issues are answered infavour of the assessee and against the department. 5.3The appeal stands allowed. (DEEPAK MAHESHWARI)J. (K.S. JHAVERI)J.