Commissioner Of Income Taxpatiala v. Puran Chand Mittal

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 505 of 2006Date of decision: 27.4.2011 Commissioner of Income TaxPatiala --- Appellant Versus Puran Chand Mittal --- Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Tejinder.K. Joshi, Standing Counselfor the appellant-revenue. Mr. K.L. Goyal, Senior Advocate assisted byMr. Sandeep Goyal, Advocate,for the respondent-assessee. --- 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 30.3.2006, passed by the Income Tax Appellate TribunalChandigarh Bench ‘B’, Chandigarh (in short “the Tribunal”) in ITA No.21/CHANDI/2004, relating to the assessment year 1993-94. 2.The appeal was admitted for determination of thefollowing substantial questions of law: “(i)Whether on the facts and in the circumstances of thecase, the Hon’ble ITAT was right in law in deleting thecase, the Hon’ble ITAT was right in law in deleting the addition of Rs. 3,25,000/- by admitting the evidence i.e. the agreement on plain paper by ignoring the principle ofhuman probabilities which was apparent fromcontradictory statements of the alleged creditor? 3. (ii) Whether on the facts and in the circumstances of thecase, the Hon’ble ITAT was right in law in deleting theaddition of Rs. 1,00,000/- which represented repaymentout of undisclosed sources? The facts, in brief, necessary for adjudication as narrated in the appeal, are that on 23.10.2000 the assessee filed return for theassessment year 1993-94 declaring income of Rs. 34,150/-. He haddeclared the income from salary and interest which he got in thecapacity of a partner of M/s. Piare Lal & Sons, Patiala. Besides, theassessee also showed income of Rs. 15,600/- from the commissionearned by selling and purchasing the properties. During theassessment proceedings, it was found that the assessee had alsoshown an amount of Rs. 3,25,000/- as liability towards one Ajit Singhin the balance sheet as on 31.3.1993. This amount was stated to bean advance consideration received from him on account of sale of acommercial plot No. 107 situated in Chhoti Baradari, Patiala. Bymeans of producing a copy of the agreement to sell, the assesseeshowed that as per the terms thereof, the sale price of the plot wasdetermined at Rs. 6,50,000/- and the purchaser had paid the amountof Rs. 3,25,000/- in advance. It was further stipulated in theagreement that the transfer of plot was to be made by 31.12.1995.During the proceedings, the assessee changed his stand and gavedifferent version. 4.The pleas raised and the answers furnished to thequestionnaire put by the Income Tax Department did not prevail uponthe authorities and ultimately, the assessing officer vide order dated27.3.2002 made addition of Rs. 3,25,000/-, on account ofunexplained entry showing liability towards Shri Ajit Singh andanother sum of Rs. 1,00,000/- on the ground that the assessee hadmade payment to Sh. Megh Chand Sharma which was not entered inthe books of accounts. The assessee, however, succeeded in appealbefore the Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}. The appellate authority vide order dated 29.10.2003 deletedthe addition, holding that the amount of Rs. 3,25,000/- was a tradingadvance against the intended sale of plot and it was not theassessee’s own money. The CIT(A) also deleted the addition of Rs.1,00,000/- made on account of payment to Megh Chand Sharma. Infurther appeal, at the instance of the Revenue, the order of CIT(A)was upheld by the Tribunal vide the order under appeal and this ishow the Revenue has come up in appeal before this Court. 5.We have heard learned counsel for the parties and haveperused the record. 6.The two-fold issues raised in the appeal are:- 5.We have heard learned counsel for the parties and haveperused the record. 6.The two-fold issues raised in the appeal are:- (a)Whether the CIT(A) and the Tribunal were right indeleting the addition of Rs. 3,25,000/- made on accountof unexplained entry shown as liability to Sh. Ajit Singh inthe Balance Sheet as on 31.3.1993?deleting the addition of Rs. 3,25,000/- made on accountof unexplained entry shown as liability to Sh. Ajit Singh inthe Balance Sheet as on 31.3.1993? (b)Whether the deletion of addition of Rs. 1,00,000/- by theCIT(A) and the Tribunal on account of payment to ShriCIT(A) and the Tribunal on account of payment to Shri Megh Chand Sharma outside the books of accounts was justified? 7. Taking up first issue, it would, in the first instance, beadvantageous to refer to the findings recorded by the Tribunal withregard to the aforesaid addition in para 8 of its order which are asunder: “8. We have considered the rival contentions carefully and gone through the material available on record. In theinstant case, it appears that the assessee had shownliability towards Shri Ajit Singh in his balance sheet, theliability was claimed to be an advance against thecommercial plot. However, the Assessing Officer treatedthe amount as a loan. He made the addition byconsidering the loan as non-genuine. The assesseeproduced the purchaser i.e. Shri Ajit Singh, whosestatement was recorded by the Assessing Officer. Thepurchaser categorically stated in his statement that hewas basically an agriculturist and had three sons whowere illiterate. He admitted that out of savings from hisagricultural income, he was purchasing agricultural landonly. However, he stated that an advance of Rs. 3.25lakhs was given to the assessee to purchase the plot forRs. 6.50 lakhs and out of advance, a sum of Rs. 75,000/-was received back by him. He also admitted that the dealwas not materialized. In the instant case, the amount ofRs. 75,000/- was received by the purchaser in the monthof July, 1994, i.e. in the subsequent year, therefore, the amount shown in the balance sheet was Rs. 3.25 lakhsand the amount of Rs. 2.50 lakhs was payable by theassessee in the financial year 1994-95. It appears thatthe Assessing Officer doubted the statement of thepurchaser on the basis that the amount of Rs. 2.50 lakhswas payable and the figure shown in the balance sheet atRs. 3.25 lakhs was different. In the present case, it is notin dispute that the assessee produced the person inwhose name the amount was outstanding. The saidperson, namely, Shri Ajit Singh admitted that he had giventhe amount to the assessee as an advance. It is not thecase of the Assessing Officer that the purchaser, Shri AjitSingh was not a man of means. We, therefore,considering the totality of the facts, are of the view thatthe Ld. CIT(A) was justified in deleting the addition madeby the Assessing Officer when the assessee dischargedthe onus cast upon him.” 8. The Tribunal on appreciation of evidence had come to theconclusion that the assessee had received an advance of Rs.3,25,000/- from Shri Ajit Singh for purchase of a plot from theassessee. Further, Shri Ajit Singh was produced before theassessing officer who had admitted having made payment to theassessee and that he was man of means. It was, thus, concludedthat the amount which was shown in the balance sheet against thename of Shri Ajit Singh was not the undisclosed income of theassessee. No perversity could be pointed out in the aforesaidfindings of the Tribunal warranting interference by this Court. Now adverting to second issue, the findings recorded by the Tribunal in para 22 of the order read thus: 8. The Tribunal on appreciation of evidence had come to theconclusion that the assessee had received an advance of Rs.3,25,000/- from Shri Ajit Singh for purchase of a plot from theassessee. Further, Shri Ajit Singh was produced before theassessing officer who had admitted having made payment to theassessee and that he was man of means. It was, thus, concludedthat the amount which was shown in the balance sheet against thename of Shri Ajit Singh was not the undisclosed income of theassessee. No perversity could be pointed out in the aforesaidfindings of the Tribunal warranting interference by this Court. Now adverting to second issue, the findings recorded by the Tribunal in para 22 of the order read thus: 22. We have given our careful thought to the rivalcontentions. In the present case, it seems that theAssessing Officer made the addition only on the basisthat the cheque received by the assessee from Shri MeghChand Sharma had not been reflected as a liability in thebalance sheet. But he ignored this explanation of theassessee that the cheque was received in lieu of cash ofRs. one lakh given to Shri Megh Chand Sharma. thecontents of the confirmation had not been rebutted bythe Assessing Officer. The Assessing Officer had also notrebutted this explanation of the assessee that the amountof Rs. one lakh was given to Shri Megh Chand Sharma incash out of advance received from Shri Ajit Singh. In thatview of the matter, we are of the opinion that the additionhad been made by the Assessing Officer only on thebasis of surmises and conjectures. In other words, theaddition had been made only on the basis of presumptionthat the assessee had repaid the money out ofundisclosed income, to Shri Megh Chand Sharma fromwhom cheque of Rs. one lakh was received. On thecontrary, the explanation given by the assessee that asum of Rs. one lakh was paid in cash out of receipt fromShri Ajit Singh, in lieu of cheque of same amount receivedfrom Shri Megh Chand Sharma had not been rebutted bythe Assessing Officer. Therefore, we are of the view that the Ld. CIT(A) rightly deleted the addition made by theAssessing Officer.” 10.The Tribunal while affirming the findings of the CIT(A) hadaccepted the explanation of the assessee that the amount of Rs.1,00,000/- which was paid to Shri Megh Chand Sharma in cash wasout of the amount received from Shri Ajit Singh and that Shri MeghChand Sharma had issued cheque to the assessee in lieu thereof.Learned counsel for the Revenue could not demonstrate that theaforesaid finding of fact recorded by the CIT(A) and affirmed by theTribunal was erroneous in any manner. 11.In view of the above, the substantial questions of law aredecided against the Revenue. The appeal is consequently dismissed. (AJAY KUMAR MITTAL) JUDGE April 27, 2011*rkmalik* (ADARSH KUMAR GOEL) JUDGE