Date Of Judgment:05.07.2018 In Itano.94/2016G Shubha Devi v. The Income Tax Officer

® IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5 DAY OF JULY, 2018 | PRESENT | THE HON’BLE Dr.JUSTICE VINEET KOTHARI AND THE HON’BLE MRS.JUSTICE S SUJATHA ITA No.94/2016 BHIWBEN: G. SHUBHA DBVILW/O G SAMBASIVA RAOAGHD ABOUT 59 YEARSNO 17/2 VANI VILAS ROADBASAVANAGUDIBENGALURU — 560004. (BY SRI: S A PADMANABHA, ADV) AN 1 THE INCOME TAX OFFICERWARD -3 (1), 4TH FLOORUNITY BUILDING ANNEXE _BENGALURU —- 560027 (BY SRI: K V ARAVIND, ADV) —. APPELLANT _. RBESPONDENT- Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer THIS JTA IS FILED UNDER SECTION 2Z60-A OFINCOME TAX ACT 1961, ARISING OUT OF ORDER DATED|09/10/2015.PASSEDBY.THBKITALIN:ITA|NO.1139/BANG/2014, FOR THE ASSESSMENT YEAR|AO 10-1 ANT)SHTASIDEKTHEORDER|DATEHD01/09/2014|PASSEDBYTHE.COMMISSIONEROF|INCOME,TAX(APPEALS)-II,BENGALURUINITA|NO.101/W-3(1)/CIT(A)-I/2012-13,PRAYING|THISHON'BLE COURT TO: 1) TO SET ASIDE THE ORDER)DATED 09/10/2015 PASSED BY THE ITAT, BENCH 'C,,|BENGALURU IN ITA NO. 1139/BANG/2014 IN SO FAR ASALLOWING THR ASSBSSMEBNT ORDBR PASSHD BY THERESPONDENTWITHREGARDTO|INCLUSIONOF|ADDITIONAL INCOME OF RS. 5,07,900/- PRODUCED AS|ANNEXURE-C; 2) TO SET ASIDE THE ORDER DATED)01/09/2014|PASSEDBYTHE.COMMISSIONEROF|INCOME.TAX(APPEALS)-II,BRENGALURUIN:ITA|NO.101/W-3(1)/CIT(A)-I]/2012-13ITNSO|FOR,AS|DISALLOWINGTHR.INTKBRBSTORDHBREDTO|BKCHANGED UNDER SECTION 234A & B OF THE INCOME|TAX ACT, 1961 PRODUCED AS ANNEXURE B AND 3) TO)ALLOW THIS APPEAL WITH COSTS TO MBEBI THE ENDSOF JUSTICEH. THIS ITA COMING ON FOR ADMISSION THIS DAY,|VINEET KOTHARI, J.,DELIVERED THE FOLLOWING: JUDGMENT Mr.S A Padmanabha, Adv for AppellantMr.K V Aravind, Adv for Respondent. 1.|The assessee — G Shubha Devi, wife of Sr.G sambasiva Rao, has filed this appeal underSection 260-A Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer 3 of the Income Tax Act, 1961, raising the substantial|question of law against the order passed by learned ITATdated09.10.2015for the assessment year2010-11, partly|allowing the appeal of Revenue. |The case of assessee before the authorities’below was that she made advances to the Agriculturists for|purchase of their lands and since the Agreements failed to)fructify, the advances made by the assessee to these)agriculturists were refunded back to her in cash and sincethe transactions of the said sale or purchase of agricultural lands in question with agriculturists generally takes place)only in cash, therefore, the cash refunded back by these)agriculturists were deposited in her bank account which|deposit (cash credits) to the extent of Rs.15,07,900/- were|not believed by the Assessing Authority as explained and)the additions to the declared income were made in her'hand under Section 68 of the Act to an extent otRs.15,07,900/-. Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer 3.|The assessee produced the confirmation lettersfrom the said four Agriculturists namely, Channa Shetty,|Dhana Shetty, M R Ranga Setty and B V Chandru, for therefund of cash to the extent of Rs.4,50,000/- by each one|of them and by M R Ranga Setty for Rs.4,09,000/-, which|entire amount received by the assessee in the relevant)assessment year 2010-11 was deposited by the assessee in her bank account. Disbelieving the confirmations given inwriting by these Agriculturists, the Assessing Authority|added back the said deposit in the Bank Account otfassessee to an extent of Rs.15,07,900/- in the declared|income oft the assessee. 4The observations made in pars 3.2 to 3.4 of theAssessment Order dated18.02.2013are quoted below ior|ready reference: “3.2 AS per confirmation letters, threepersons hail from Hassan and one person fromCoorg District. However, it is noticed from the|confirmation letters thatall the four letters|are similar in content, all the four letters ofconfirmation have been written in the same 4The observations made in pars 3.2 to 3.4 of theAssessment Order dated18.02.2013are quoted below ior|ready reference: “3.2 AS per confirmation letters, threepersons hail from Hassan and one person fromCoorg District. However, it is noticed from the|confirmation letters thatall the four letters|are similar in content, all the four letters ofconfirmation have been written in the same Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer handwriting and appears to be written bythe same persons.In all these confirmationletters, date of transaction is not mentioned as.also the date of receipt of advance is notmentioned. |Only repayment of advance in2009-10, that too in cash ts mentioned, inall the confirmation letters. 39.3. Ascouldbe.SCCT|from.theconfirmation letters, the addresses of the firstthree persons happens to be the same addressandholdings of agricultural lands is also inthe same survey No.129.It is clear from this.fact that the assessee has brought in confirmers|only after the proceedings started from theDepartment. 3.4. In order to verify the authenticity ofthe confirmation letters, a letter, calling for|information under section133(6) was tssued to| Tahsildar, Belur Taluk, Hassan District,requesting the Tahsildar to furnish detaitlsregarding Agricultural holdings of the following|persons. 1.Channa Shetty, S/o Ranga Setty,MadhugattaVillage,BitkkoduHobli,Belur,Hassan| Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer 2DDhana Shetty, --------- do ----------| Oo.M R Ranga Setty S/o M R Jayanna -- ------- do --------- In response to the above said letter, theTahsildar, vide his letter dated 15/02/2013has stated that Sn.Channa Shetty and Sriu.M R|Ranga Setty does not own any agricultural landsin Survey No.129, Madhughatta Village. As per|Tahsildar’s letter only Sri Dhana Shetty holds|agricultural land in Survey No.129, that too tothe extent of 0.22 Guntas, as against 2.2 guntas|mentioned in his confirmation letter. Therefore,|the confirmation given by the assessee is not|correct and the assessee’s statement for havingreceived back the advances, for non fulfillment ofcontract 1s also not correct. — It is clear from the above facts, that theconfirmation letters obtained by the assessee is.onlyanaccommodationentries|not.supported by any documentary evidences.Theconfirmationlettersfurnishedby|theassessee 1s only an after thought.” 5.|The first appeal filed by the assessee, however,came to be allowed by the learned CII (Appeals)-Il,| Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer Bengaluru, holding that the amount in question were duly|withdrawn by the assessee from her own bank account by)three different cheques, the details of which were furnishedbefore the Assessing Authority as well as the same have|been furnished by filing a memo dated 30.06.2016 in this|Court also stating the details of cheques, which are quoted|below for ready reference: The said advance amount given to the agriculturists|were reilected in the returns filed by the assessee for the|previous assessment years as well as the refund of which|was deposited by her in the bank account in the present|assessment year. The CIT (Appeals)-II, Bengaluru,therefore, allowed the appeal of the assessee vide order| dated01.05.2014and set aside the impugned assessment| order with the following observations: Bengaluru, holding that the amount in question were duly|withdrawn by the assessee from her own bank account by)three different cheques, the details of which were furnishedbefore the Assessing Authority as well as the same have|been furnished by filing a memo dated 30.06.2016 in this|Court also stating the details of cheques, which are quoted|below for ready reference: The said advance amount given to the agriculturists|were reilected in the returns filed by the assessee for the|previous assessment years as well as the refund of which|was deposited by her in the bank account in the present|assessment year. The CIT (Appeals)-II, Bengaluru,therefore, allowed the appeal of the assessee vide order| dated01.05.2014and set aside the impugned assessment| order with the following observations: 63.3 7have.carefully consideredthe|appellant’s submissions and also the reasons.given by the AO in the assessment order for theaddition made to the appellant's declaredincome. During the assessment proceedings, the|AO asked the appellant to|furnish detatlsregarding the cash deposits amounting toRs.15,07,900/- in her bank account.Theappellant, in reply, explained that she had givenadvances for purchase of agricultural lands andfollowing the cancellation of the deal theadvance paid earlier was received back anddeposited in the bank account in support of|which she filed copies of the returns of income|filed by her for the assessment years 2008-09and 2009-10; that the advances paid forpurchase of property were reflected in thestatement of affairs filed before the AO duringthe assessment proceedings; and that the|appellant had filed bank statements showingwithdrawals made on 14/3/2009 to the extent|of Rs.10 lakhs being advance paid for thepurchaseof.agriculturallands;thatthe|remaining amount of|Rs. 7,50,000/- had been Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer paid much earlier on 31/3/2009 out ofwithdrawals from bank made on 9/6/2007and 27/10/2007;- and that, following thecancellation of the deal for the purchase ofthe property, the advance paid prior to31/3/2009 had been returned, which weredepositedinthebank|account.The|appellant also explained that the deal entered|into for the purchase of property was only oraland no formal agreement in writing had beenentered into as the title and ownership of theproperty had not been put to legal scrutiny.Copies of the returns of income filed by the|appellant show that she had enough resourcesat her disposal for entering into a transaction.As the deal did not go through, the appellantreceived back the advance, which was depositedin her bank account. It is well settled law thatthe appellant cannot be expected to prove thefinancialcapacityOf|thecreditors.Theappellant’s contention that a contract betweenparties can be oral in as much as it is|enforceable in law, is well-founded as it legallysound. As it is found from the materials placedbefore me that the weight of evidence is infavour of the appellant, I hold that she has been Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer10 able to explain the source of money for the cash.credit, the addition of Rs.15,07,900/- made by.the AO tis deleted.” 6.|The Revenue took up the matter before thelearned Tribunal. The learned Tribunal, however, partly|allowed the appeal of the Revenue and deleted the additionmade under Section 68 of the Act only to an extent of)Rs.10,00,000/-, while upholding the additions under)section 68 of the Act to an extent of Rs.5,07,900/-. Therelevant portion of the Tribunal order dated|09.10.20151Squoted below for ready reference: Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer10 able to explain the source of money for the cash.credit, the addition of Rs.15,07,900/- made by.the AO tis deleted.” 6.|The Revenue took up the matter before thelearned Tribunal. The learned Tribunal, however, partly|allowed the appeal of the Revenue and deleted the additionmade under Section 68 of the Act only to an extent of)Rs.10,00,000/-, while upholding the additions under)section 68 of the Act to an extent of Rs.5,07,900/-. Therelevant portion of the Tribunal order dated|09.10.20151Squoted below for ready reference: “10. As it is clear from the finding of theCIT(A) that theassessee was able to prove thewithdrawals of Rs.10 lakhs made from thebank on 14/3/2009and, therefore, to theextent of the said amount theassessee hasproved at least the source of the deposit inthe bank evenwu the explanation of the|assessee was not acceptable because of theenquiry conducted by the AO.As far asremaining amount of Rs.5,07,900/-, theCIT(A) has also not given any details of thebank withdrawals- and, therefore, in the Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer absence of any record furnished by the partiesbefore us, we find that the assessee failed toexplain the source of remaining Rs.5,07,900/-deposit in the bank account. Thus, in view of theabove facts and circumstances, we confirm the.addition to the extent of Rs.5,07,900/- made bythe AO. Revenue has succeeded in part.” TT.Learned Counsel for the appellant-assesseeMr.S A Padmanabha submitted before this Court that thefindings given by the learned Tribunal are perverse and)without any reason, the learned Tribunal has wrongly held|that the explanation furnished by the assessee was only fora sum of Rs.10,00,000/- and not tor the entire sum of Rs.15,07,900/-. He has further submitted that theAssessing Authority never examined the four agriculturists|in question named above, nor the Tahsildar in question|whose letter was believed by the Assessing Authority was|produced and allowed to be cross examined by the)assessee in the present case and the confirmations given in|writing by these Agriculturists were disbelieved on an)uniounded apprehension by the Assessing Authority that| Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer since they were in the same handwriting, they were not)credible and could not be believed. He submitted that thewithdrawal from the bank by the assessee tor making the|said advances between 2007 to 2009 to the agriculturists|were duly proved with the help of passbook entries and|confirmations given by the Agriculturists and _ thosevidences having not been rebutted or controverted by theAssessing Authority, who made these additions, which|were rightly set aside by the CIT (Appeals)-II, Bengaluru,|but the learned Tribunal has wrongly allowed the appeal otthe Revenue even though partly. Hence, the present,appeal by the assessee before this Court under Section|260-A of the Act. 8.|In|our opinion,thefollowing|substantialquestion of law arises for our consideration and the partieswere heard on the same. “Whether|thelearnedTribunal|Werejustified in reversing the finding of CIT (Appeals)-II, Bengaluru, for the assessment year 2010-11.with regard to the additions of cash credit under Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer 13 SectionlefoftheActTO ar.extentofRs.5,07, 900/-?” OQ Learned Counsel for the Revenue Mr.kK VAravind, however, supported the impugned order of the|learned Tribunal, who submits before us that this findingsof fact given by the learned Tribunal deserves to be)accepted by this Court. 8.|In|our opinion,thefollowing|substantialquestion of law arises for our consideration and the partieswere heard on the same. “Whether|thelearnedTribunal|Werejustified in reversing the finding of CIT (Appeals)-II, Bengaluru, for the assessment year 2010-11.with regard to the additions of cash credit under Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer 13 SectionlefoftheActTO ar.extentofRs.5,07, 900/-?” OQ Learned Counsel for the Revenue Mr.kK VAravind, however, supported the impugned order of the|learned Tribunal, who submits before us that this findingsof fact given by the learned Tribunal deserves to be)accepted by this Court. 1Q.|Having heard the learned Counsels, we are ofthe opinion that the Tribunal being a fact finding body|while taking a different view from the one taken by the first|appellate authority was required to assign proper reason|for taking a different view in the matter. We find that thelearned Tribunal has wrongly noted in the aforesaid para|10 of the order that the assessee was able to prove|withdrawal only to the extent of Rs.10,00,000/-, whereas|the assessee has produced details of withdrawals to an|extent of Rs.18,30,000/- by three different cheques and thewritten confirmations of all the four agriculturists in)question were produced before the Assessing Authority for|the entire deposit of Rs.15,0/7,900/- made by the assessee Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer14 during the current year in her bank account which were)the refunds of advances given by the Assessee to the)Agriculturists with whom the Agreement of purchase otfagricultural lands tailed and consequently, the advances|made to them were returned back to the assessee during|the current year. 11.)We do not find any justification for upholdingthe additions under Section 68 of the Act to an extent otRs.5,07,900/- by the Tribunal. In our opinion, learned CIT(Appeals)-IJ, Bengaluru, had rightly looked into the entire|relevant evidence and set aside the additions made under|Section 68 of the Act. 12.|As far as the nature of enquiry conducted bythe Assessing Authority is concerned, we find that it has|left much to the guess work. The confirmations in writing|produced by the Agriculturists could not have been|rejected by the Assessing Authority without their evidence|being recorded by the Assessing Authority. The Assessing|Authority has the power of a Civil Court by virtue otf Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer15 section 131 of the Act. Therefore, he could very well)summon these Agriculturists and after their examination, he could have believed or discarded the evidence given by|them. Misplaced apprehension of the Assessing Authority|that since confirmations were in the same handwriting,|therefore, they were not believable is a typical pro-revenue|approach, without any foundation. The agriculturists most|of whom might have been illiterates, could not have been|expected to write their own confirmations to be produced|before the Assessing Authority, but as the witnesses they|could have been certainly summoned by the Assessing|Authority for verifying the written confirmations given by|them and it is only thereafter that the Assessing Authority|could have confirmed the fact as to whether the written|contirmations given by them were genuine or fake. 13. As far as the evidence collected through theTahsildar under Section 133(6) of the Act is concerned|also, we do not find that the said exparte evidence collectedby the Assessing Authority has been conironted to the| Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer assessee or the Agriculturists in question. Thus, the whole |process of enquiry conducted by the Assessing Authority in|the present case does not have any foundational legs to|stand upon. 13. As far as the evidence collected through theTahsildar under Section 133(6) of the Act is concerned|also, we do not find that the said exparte evidence collectedby the Assessing Authority has been conironted to the| Date of Judgment:05.07.2018 in ITANo.94/2016 G Shubha Devi Vs. The Income Tax Officer assessee or the Agriculturists in question. Thus, the whole |process of enquiry conducted by the Assessing Authority in|the present case does not have any foundational legs to|stand upon. 14. The Revenue authority even though bestowedwith the job to collect revenue in accordance with law)cannot act arbitrarily and on a mere guess work make theadditions in the declared income of the assessee. The'|reasonable factual enquiry in the matter, only can give)Support to their findings of facts, which are the subject)matter of further scrutiny by the appellate forums and alsoby the constitutional Courts. 15.|However, the very foundation of assessmentenquiry conducted by the Assessing Authority does not|inspire any confidence in the present case and the entire|assessment has to fall to the ground. 16.|In these circumstances, we are of the opinion|that the first appellate authority after having looked into| Date of Judgment:05.07.2018 in ITANo.94/2016G Shubha Devi Vs. The Income Tax Officer 17 the evidence on record was justified in granting the relief to)the assessee, but the learned Tribunal without assigning|any cogent reasons has taken a different view of the matterand has rendered a finding of fact, which is bad and_perverse to that extent. The said finding, therefore, cannot|be sustained and the order of the Tribunal, therefore,|requires to be quashed and set aside. The substantial|question is thus answered in the favour of assessee. | 17.|Accordingly, we allow the appeal filed by theAssessee. ‘The order dated|09.10.2015passed by the.learned Tribunal is quashed and set aside and the order|dated01.05.2014passedbythe CIT(Appeals)-II,Bengaluru, is restored.No order astocosts. *ben /-(List No.1 SI.No.1) Sd/-|JUDGE Sd/-|JUDGE