Ita/159/2016 Of Namdev Arora v. Commissioner Of Income Tax & Anr

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. Income Tax Appeal No. 159 of 2016 (O&M)Date of Decision: 20th July, 2016 Shri Namadev Aror ..Appellant | VeTSUS Commissioner of Income Tax, Jalandhar and another ..Respondents CORAM:HON'BLE MR. JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICEHON BLE MR. JUSTICE DEBPAK SIBAL. Present:Mr. Salil Kapoor, Advocate, | Mr. Saurabh Kapoor, Advocate and Mr. Sumit Lal, Advocate, for the appellant. AK AI SJ.VAZIFDAR, ACTING CHIEF JUSTICE CM No. 13417CII of 2016 Heard. For the reasons mentioned in the application, delay of690 days 1n re-filing the appeal 1s condoned. Application stands disposed of. Income Tax Appeal No. 159 of 2016 (O&M) This 1s an appeal against the order of the Income Tax AppellateTribunal confirming an addition by the Assessing Officer under section 69-A of the Income Tax Act, 1961 (for short ‘the Act’) and the enhancement ofthe appellant’s income by the Commissioner of Income Tax (Appeals). Thematter pertains to the assessment year 2008-09. )The appeal is admitted on the following substantial questions oflaw raised by the appellant:- a)|Whether in view of the facts and circumstances of the case,the Tribunal has erred in law and on facts in holding that|AO/CIT(A) meant addition under section 68 of the Actwhen specifically addition is made under section 69-A and|also in holding that such situation is covered under sectionIQID-B?the Tribunal has erred in law and on facts in holding that|AO/CIT(A) meant addition under section 68 of the Actwhen specifically addition is made under section 69-A and|also in holding that such situation is covered under sectionIQID-B? b)Whether in view of the facts and circumstances of the case,the Tribunal has erred in law and on facts in upholding the order of the respondent without even going into the)relevantfactsoT theCaseand|thenature otaddition/disallowance made? C)| Without prejudice whether on the facts and in the!circumstances of the case, the Tribunal erred in law andon facts in not considering the relevant fact that the AO'and CIT(A) has never examined the applicability of Section|68 ot the Act on the facts and circumstances of the case?Whether on the facts and in the circumstances of the case,the Tribunal erred in law and on facts in upholding the!order of AO/CIT(A) without giving opportunity as to the)applicability of section of the Act? d)| e)| Whether on the facts and in the circumstances ot the case.the findings arrived at by the Tribunal are perverse, in as|much as no reasonable person correctly informed of the! provisions of law would come to such a conclusion? 3The questions being inter-linked are dealt with together. Themain question 1s whether the Tribunal was justified in invoking theprovisions of section 68 of the Act, although the assessment order and theorder of CIT(A) were based on section 69-A of the Act. 4 Sections 68 and 69-A of the Act read as under:- 68.|Where any sum is found credited in the books ofan assessee maintained for any previous year, and theassessee offers no explanation about the nature and sourcethereof or the explanation offered by him is not, in theopinion of the Assessing Officer, satisfactory, the sum socredited may be charged to income-tax as the income of theassessee of that previous year: Providedthat where the assessee is a company (notbeing a company in which the public are substantiallyinterested), and the sum so credited consists of shareapplication money, share capital, share premium or anysuch amount by whatever name called, any explanationoffered by such assessee-company shall be deemed to be notsatisfactory, unless— (a) the person, being a resident in whose name such credit isrecorded in the books of such company also offers anexplanation about the nature and source of such sum socredited; and (b) such explanation in the opinion of the Assessing Officer|aforesaid has been found to be satisfactory: Providedthat where the assessee is a company (notbeing a company in which the public are substantiallyinterested), and the sum so credited consists of shareapplication money, share capital, share premium or anysuch amount by whatever name called, any explanationoffered by such assessee-company shall be deemed to be notsatisfactory, unless— (a) the person, being a resident in whose name such credit isrecorded in the books of such company also offers anexplanation about the nature and source of such sum socredited; and (b) such explanation in the opinion of the Assessing Officer|aforesaid has been found to be satisfactory: Provided furtherthat nothing contained in the first.proviso shall apply if the person, in whose name the sumreferred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (QSFB)ot section 10 Unexplained money, etc. 669A.Where in any financial year the assessee is foundto be the owner of any money, bullion, jewellery or othervaluable article and such money, bullion, jewellery orvaluable article is not recorded in the books of account, ifany, maintained by him tor any source of income, and theassessee offers no explanation about the nature and sourceof acquisition of the money, bullion, jewellery or othervaluable article, or the explanation offered by him is not, inthe opinion of the Assessing Officer, satisfactory, the moneyand the value of the bullion, jewellery or other valuablearticle may be deemed to be the income of the assessee forsuch financial year.” 5 _The appellant filed a return declaring an income of | =4,23,889/- which was processed under section 143(1) of the Act. Aquestionnaire was issued alongwith a notice under sections 142(1) and143(2) of the Act. 6_The assessee derives income on account of his share as a!partner in two firms and interest from two other firms. During the relevantcorresponding financial year, the assessee deposited an aggregate sum of=1,71,50,000/- in his bank account. He was asked to explain the source ofthe money. He named the sources. By a letter dated 14.12.2010 he was askedto furnish documentary evidence of the source of the deposits and to produceone of the sources named by him, namely, one Dhruv Parti for examination.He was also asked to produce the books of accounts of the firm and tofurnish certified copies of his accounts as appearing in their books ofaccounts. He furnished copies of his accounts in the firm as also copies ofsale-deeds of purchase of the lands. It 1s important to note, however, that hedid not furnish a confirmation of the said Dhruv Parti. Nor did he produceDhruv Parti for examination stating that he was a non-resident and therefore, was not available for examination. The assessee failed to comply with thesubsequent requisitions to this effect on the same ground. The Assessing Officer, therefore, requisitioned under section133(6) of the Act said Dhruv Parti’s non-resident account with KotakMahindra Bank Ltd. to ascertain the availability of funds with him. The bankstatements revealed that on 29.03.2007 there was a credit balance of only=a4972/- and on 16.04.2007 an aggregate sum of|=a19.30 lacs was deposited incash in Dhruv Parti’s account. The assessee received from Dhruv Parti bycheque a sum of=a10 lacs,|=10 lacs,=a5 lacs and)yz5 lacs on 01.04.2007,|16.04.2007, 19.04.2007 and 14.06.2007, respectively, aggregating toa30|lacs. Jo|The Assessing Officer held a sum of)yz19.30 lacs to beunexplained money and added the same to the assessee’s income undersection 69-A of the Act. The Assessing Officer, therefore, requisitioned under section133(6) of the Act said Dhruv Parti’s non-resident account with KotakMahindra Bank Ltd. to ascertain the availability of funds with him. The bankstatements revealed that on 29.03.2007 there was a credit balance of only=a4972/- and on 16.04.2007 an aggregate sum of|=a19.30 lacs was deposited incash in Dhruv Parti’s account. The assessee received from Dhruv Parti bycheque a sum of=a10 lacs,|=10 lacs,=a5 lacs and)yz5 lacs on 01.04.2007,|16.04.2007, 19.04.2007 and 14.06.2007, respectively, aggregating toa30|lacs. Jo|The Assessing Officer held a sum of)yz19.30 lacs to beunexplained money and added the same to the assessee’s income undersection 69-A of the Act. 8The CIT(A) noted that the assessee even after more than 4/2years of the receipt of the alleged loan had failed to submit any confirmationfrom Dhruv Parti that the amounts were advanced to the assessee as a loan.It was held that unless it was otherwise proved the assessee 1n possession ofthe money would be deemed to be the owner thereof; that there was nothingto show that Dhruv Parti retained a claim over this amount, that no prudentperson would lend such a large amount without some document evidencingthe loan and that there was not a shred of evidence 1n respect of the allegedloan. Dhruv Parti was unavailable at his residence at least on two occasions|when the officers of the department went to search for him. The CIT(A)enhanced the addition to the assessee income toL30 lacs. | Q_We are entirely in agreement with the conclusion of the CIT(A)on facts. The contention on behalf of the assessee that sufficient efforts werenot made by the Assessing Officer to trace out Dhruv Parti and to examinehis affairs was unwarranted. The contentions on behalf of the appellant arecontrary to the normal course of human conduct. It 1s impossible to believethat an amount of=a30 lacs was lent and advanced by Dhruv Parti to theappellant. There are several facts and circumstances that established theinherent improbability of the assessee’s case of a loan. There is not a singledocument evidencing the loan. There is no explanation as regards theabsence of any document evidencing the loan. There 1s nothing to suggestany special relationship between the parties on account whereof such a largeloan would be advanced without the lender insisting upon any documentevidencing the same. The loans admittedly have not been repaid upto date.There is no explanation for the same either. The assessee has not evenestablished that he tried to trace said Dhruv Parti during all these years. Hedoes not contend that Dhruv Parti never visited India during all these years.Nor does he contend that he ever tried to contact him 1n relation to the loan.It 1s equally important to note that it 1s not even the assessee’s case thatDhruv Parti demanded interest on the loans during all these years. 10.As rightly held by the CIT(A) the fact that there were severalother transactions in Dhruv Parti’s account does not carry the assessee’s caseany further for there 1s nothing to indicate the source of such funds, namely,whether the funds belonged to Dhruv Parti or that he was acting as a conduitfor others. 11.It is the assessee who claims to have received the amount as a'loan. The burden, therefore, was on him to establish the same. The assessee that the facts and circumstances of the case militate against the assessee’scase that the amounts were lent and advanced to him by said Dhruv Parti. Onfacts, therefore, the inference drawn by the authorities under the Act cannotbe faulted. In these circumstances, the direction issued by the CIT(A) for theaddition of =a30 lacs to be made to the assessee’s return 1s well founded. 12.The Tribunal upheld the findings of the CIT(A) on facts. Forthe reasons already stated these findings cannot be held to be absurd orperverse. In fact a view to the contrary would have been surprising. 11.It is the assessee who claims to have received the amount as a'loan. The burden, therefore, was on him to establish the same. The assessee that the facts and circumstances of the case militate against the assessee’scase that the amounts were lent and advanced to him by said Dhruv Parti. Onfacts, therefore, the inference drawn by the authorities under the Act cannotbe faulted. In these circumstances, the direction issued by the CIT(A) for theaddition of =a30 lacs to be made to the assessee’s return 1s well founded. 12.The Tribunal upheld the findings of the CIT(A) on facts. Forthe reasons already stated these findings cannot be held to be absurd orperverse. In fact a view to the contrary would have been surprising. 13.This brings us to the legal issue raised by Mr. Salil Kapoor, thelearned counsel appearing on behalf of the appellant. His submission is asfollows: The Assessing Officer made the addition in view of section69-A of the Act. The order of the CIT(A) did not mention any section.Presumably, therefore, the CII(A) confirmed the addition and infactenhanced the same from.=a19.30 lacs to=a30 lacs also under section69-A of the Act. Section 69-A of the Act applies only where the amountsought to be added is not recorded in the books of accounts, if any,maintained by an assessee for any source of income and the assessee offersno explanation about the nature and source of acquisition of the money. Boththe conditions must exist for the applicability of section 69-A of the Act.Section 69-A is inapplicable as the amounts received by the assesssee wereentered in his books of account. The Tribunal, however, justified theaddition not under section 69-A but under section 68 of the Act. Hesubmitted that as the Assessing Officer and the CIT(A) had no jurisdiction tomake the addition under section 69-A, the Tribunal could not have made theaddition under section 68 without putting the assessee to notice that it intended invoking section 68 of the Act. The Tribunal not having done so,the order 1s contrary to the rules of natural justice and 1s void. © 14.The submission 1s not well founded. This is merely a case of awrong section being mentioned in the assessment order and in the order ofCIT(A). All the jurisdictional facts for invoking section 68 existed. Moreimportantly, the enquiries made by the Assessing Officer in the assessmentproceedings were not stated to be under any particular provisions of the Act.The enquiries were merely factual relating to the source of acquisition of themoney. Had the Assessing Officer on the very same facts mentioned section68 instead of section 69-A it would not have been open to the assessee tocontend that he had not been put to notice that the Assessing Officerintended invoking section 68 of the Act. If he could not have done so inrespect of the assessment order, he cannot do so in respect of the orders inappeal by the CIT(A) or by the Tribunal. © 15.This aS we mentioned 1s not a case where in the assessment|proceedings the queries were raised specifically in relation to section 69-Aof the Act. The queries were raised generally only to ascertain the facts. Iffor instance it had been found in the assessment proceedings that theamounts received by the assessee had not been recorded in his books ofaccounts, the additions could have been made under section 69-A of the Act.Merely because it was found on such facts that the money was recorded inthe assessee’s books of accounts it would not exclude the operation ofsection 68 of the Act. That 1s an independent ground/provision open to beinvoked by the authorities. 16.The assessee has not been prejudiced in any manner whatsoeveron account of the Assessing Officer having mentioned the wrong section. 15.This aS we mentioned 1s not a case where in the assessment|proceedings the queries were raised specifically in relation to section 69-Aof the Act. The queries were raised generally only to ascertain the facts. Iffor instance it had been found in the assessment proceedings that theamounts received by the assessee had not been recorded in his books ofaccounts, the additions could have been made under section 69-A of the Act.Merely because it was found on such facts that the money was recorded inthe assessee’s books of accounts it would not exclude the operation ofsection 68 of the Act. That 1s an independent ground/provision open to beinvoked by the authorities. 16.The assessee has not been prejudiced in any manner whatsoeveron account of the Assessing Officer having mentioned the wrong section. Where in the assessment proceedings the enquiries are made by theAssessing Officer of facts and the Assessing Officer after considering thefacts and circumstances of the case including the assessee’s response, if any,thereto, makes an addition, which is justified and permissible under theprovisions of the Act but inadvertently or even wrongly mentions a wrongprovision of the Act, the assessment order cannot be set aside on thatground. It 1s open in such circumstances to the Appellate Authority or toCIT(A) or the Tribunal to uphold the addition under the correct section. Thisofcourse would be in circumstances where the error has not prejudiced theassessee In any manner whatsoever. At the cost of repetition it 1s not eventhe assessee’s case that during the assessment proceedings he was given tounderstand that the queries were raised by the Assessing Officer and/or thathe responded to the same only on the basis of the provisions of section 69-A_of the Act. 17.In this view of the matter, 1t 1s not necessary to consider theapplicability of section 292-B of the Act. 18.All the questions are, therefore, answered in favour of therespondent/revenue and against the assessee to the above extent. 19.At the time of pronouncement Mr. Kapoor stated that theappellant had now obtained a confirmation of the loan from the said DhruvParti. He further stated that Dhruv Parti 1s expected in India in Decemberthis year. He requested us to remand the matter to enable the appellant tolead further evidence. | 2().We are not inclined to accede to this request made after so.many years especially when even now there 1s no evidence. The appellantmerely expects to gather evidence in December in the event of the lender Dhruv Parti visiting India. The petitioner is at liberty to adopt appropriateproceedings if he obtains the alleged evidence. Such an application would bedealt with in accordance with law. We refrain from making any observationsin regard thereto including as to its maintainability. 20).The appeal is accordingly dismissed. (S.J.VAZIFDAR)ACTING CHIEF JUS TICE. "#[(,]July, 2016(DEEPAK SIBAL)‘ravinder’JUDGEWhether reportable: YES