Commissioner Of Income Taxjalandhar v. M/S. Citizen Urban Co-Op. Bank Ltd.jalandhar

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 547 of 2008Date of decision: 21.4.2011 Commissioner of Income TaxJalandhar --- Appellant Versus M/s. Citizen Urban Co-op. Bank Ltd.Jalandhar --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Vivek Sethi, Advocatefor the appellant-Revenue.for the appellant-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act,1961 (for short “the Act”) has been filed by the Revenue against theorder dated 15.2.2008 passed by the Income Tax Appellate TribunalAmritsar Bench, Amritsar (in short “the Tribunal”) in ITA No. 115(ASR)2003, relating to the assessment year 1999-2000. 2.The appeal was admitted by this Court for determinationof the following substantial question of law: “Whether on the facts and in the circumstances of thecase, the Hon’ble ITAT is right in holding that Section 68case, the Hon’ble ITAT is right in holding that Section 68 of the Income Tax Act, 1961 does not apply to the co-operative bank for assessing the unexplained credits astaxable income?” 3. The facts, in brief, necessary for adjudication as narratedin the appeal, are that the respondent-assessee is a co-operativesociety. It filed return of income for the assessment year 1999-2000on 29.6.1999 declaring ‘Nil’ income. Later on, vide letter dated1.2.2000, the assessee was informed that during the course ofsurvey under Section 133A(1) carried at the Bank on 1.10.1999,certain accounts and transactions were noticed whereby the amountscontained in the FDRs were credited to those accounts andthereafter the cash was withdrawn and accounts were closed. In thewake of this situation, the assessee-bank was required to provideidentity of those account holders, but the assessee expressed itsinability to prove the genuineness of the creditors/depositors. Owingto failure of the assessee to do so, action under Section 68 of the Actwas recommended and accordingly, a notice under Section 148 ofthe Act was issued to the assessee. Thereafter assessment wasmade under Section 143(3) of the Act vide order dated 28.3.2002 atan income of Rs. 59,41,593/-, by making addition of the said amount,on account of peak balance standing in the name of the variousdepositors. The Commissioner of Income-tax (Appeals) {in short “theCIT (A)”}, deleted the addition vide order dated 31.12.2002, made bythe assessing officer. The Revenue carried appeal before theTribunal. The order of the CIT(A) having been upheld and Revenue’sappeal dismissed, it is how the Revenue is in appeal before us. 4.We have heard learned counsel for the appellant and have perused the record. 5. The point in issue in this appeal is, whether theunexplained amount in the accounts of the account holders could betreated income of the assessee-bank under Section 68 of the Act,where the revenue had not established that there was connivance ofthe said account holders with the assessee-bank? 6. The Tribunal on appreciation of evidence came to theconclusion that there was no nexus of the said creditors with thebank and, therefore, the same could not be treated to be unexplainedcredits of the assessee. The findings recorded by the Tribunal in thatbehalf in paras 34 to 40 are as under: 4.We have heard learned counsel for the appellant and have perused the record. 5. The point in issue in this appeal is, whether theunexplained amount in the accounts of the account holders could betreated income of the assessee-bank under Section 68 of the Act,where the revenue had not established that there was connivance ofthe said account holders with the assessee-bank? 6. The Tribunal on appreciation of evidence came to theconclusion that there was no nexus of the said creditors with thebank and, therefore, the same could not be treated to be unexplainedcredits of the assessee. The findings recorded by the Tribunal in thatbehalf in paras 34 to 40 are as under: “34. Further, even on merits, the addition was uncalledfor. Concerning account Nos. 8211, 8212 and 8213, theintroducer was Shri Vijay Sethi, the deceased ManagingDirector of the assessee bank itself. The originalinvestments were made in RMRD accounts of S.B.accounts with the Mithapur Branch of the assessee.These investments were made way back in 1992. It wasonly on maturity that they were transferred to theaccounts under consideration. It has rightly beencontended that the origin of these amounts falling in theearlier years, which fact has also been admitted by theA.O., they could not be brought to tax in the year underappeal, in the hands of the assessee. The learned CIT(A), thus, rightly deleted the addition in this regard. 35. The introducer of account Nos. 954. 955 and 956 was Shri Parmod Sharma, Accountant of the assessee-bank.He appeared before the A.O. in response to summonsunder Section 131 of the Act. He admitted knowing theaccount holders personally. The onus with regard tothese accounts, thus, stood amply discharged. 36. S. Swaran Singh was the account holder of accountNo. 1108. He was one of the Directors of the bank and sohe needed no independent introduction to open hisaccount with the assessee firm. His independentexistence also stands proved by the entries throughclearing in account. 37. Shri Pawan Sharma was the introducer of accountNo. 1658. His statement was recorded by the A.O. underSection 131 of the Act. He also confirmed knowing theaccount holder. 38. Smt. Harsimaranjit Kaur, Prop. M/s. H.S. Gas Serviceowned up account No. 8268 of Shri J.P. Singh, which factwas got confirmed by the learned CIT(A) through the A.Oassessing the said lady. 39. The above facts were duly taken into consideration bythe learned CIT(A) while admitting the appeal. We do notfind anything erroneous with the order of the learned CIT(A). 40. Not only this, in pursuance to the directions issued bythe learned CIT(A), the assessee located furtherdetails/addresses of account holders. These details were furnished to the A.O. vide letter dated 4.10.2005. A copyof this letter had been placed at pages 90-91 of theassessee’s paper book. This also boosts the stand takenby the assessee.” 7. The aforesaid findings have not been shown to beperverse or erroneous in any manner by the learned counsel for theRevenue. In the given facts, the amounts mentioned above cannotbe said to be unexplained credits in the hands of the assessee,under Section 68 of the Act. The substantial question of law is, thus,decided against the Revenue and the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE April 21, 2011*rkmalik* (ADARSH KUMAR GOEL) JUDGE