Ita/17/2018 Of Sri C K Ramakrishna v. The Income Tax Officer

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 17 DAY OF NOVEMBER, 2021 PRESENT THE HON’BLE MRS.JUSTICE S.SUJATHA AND THE HON’BLE MR. JUSTICEHANCHATE SANJEEVKUMAR I.T.A.No.17/2018 BETWEEN : SRI C.K.RAMAKRISHNA S/O SRI C.K.KEMPAIAH, AGED ABOUT 48 YEARS, NO.525/B, 9 CROSS, 7 BLOCK, WEST JAYANAGAR, BANGALORE-560082 ...APPELLANT (BY SMT.JUNITA CHATTARJI, ADV. FOR SRI S.PARTHASARATHY, ADV.) AND : THE INCOME TAX OFFICER WARD 14 (4), BANGALORE, PRESENTLY, THE INCOME TAX OFFICER, WARD 5(3)(6), ROOM NO.625, 6 FLOOR, SOUTH WING, HMT BHAVAN, NO.59, BELLARY ROAD, BANGALORE-560032 …RESPONDENT (BY SRI JEEVAN J. NEERALGI, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 30.07.2015 PASSED IN ITA NO.550/BANG/2011, FOR THE ASSESSMENT YEAR 2009-2010, PRAYING TO (A) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED ABOVE; (B) ALLOW THE APPEAL AND SET-ASIDE THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL DATED 30.07.2015 BEARING ITA NO.550/BANG/2011 FOR THE ASSESSMENT YEAR 2009-2010. THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING: J U D G M E N T This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 (‘Act’ for short) challenging the order dated 30.07.2015 passed by the Income Tax Appellate Tribunal, Bangalore Bench “A”, Bengaluru (‘Tribunal’ for short) in ITA No.550/Bang/2011 relating to the Assessment Year 2009-10. 2. The assessee-appellant an individual employed at Satyam Computers Services Limited, Bengaluru, filed his return of income for the assessment year under consideration declaring income of Rs.8,31,390/- from salary and bank interest. The case was taken up for scrutiny and order under Section 143(3) of the Act was passed on 20.12.2011 by the Assessing Officer making an addition of Rs.23,91,000/- under Section 68 of the Act as unexplained cash credit in the bank account maintained by the assessee with ICICI Bank, Jayanagar Branch, Bengaluru, and raised a demand of Rs.11,02,000/-. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), wherein it was held that the provisions of Section 68 of the Act were not applicable and proceeded to confirm the addition under Section 69 of the Act. On further appeal before the Tribunal, vide order dated 30.07.2015, impugned herein, the order of the Commissioner of Income Tax (Appeals) has been upheld. Hence, this appeal by the assessee. 3. The appeal has been admitted by this Court to consider the following substantial questions of law; i) Whether the learned Income Tax Appellate Tribunal was justified in holding that the provisions of Section 68 (Cash credits) of the Income Tax Act, 1961, does not apply if the assessee does not maintain the ‘Books of Account’ and was, therefore, justified in invoking and applying the provisions of Section 69 (Unexplained investment) of the Act, for making additions in the hands of the assessee as ‘unexplained investments’? ii) Whether Bank Passbook of the assessee, who does not maintain regular books of accounts in the ordinary course of his business for any source of income, constitutes ‘Books of Account’ for the purpose of Sections 68, 69, 69A, 69B and 69C of the Income Tax Act, in the light of definition of ‘Books of Account’ as given in Section 2(12A) of the Income Tax Act, inserted by Finance Act, 2001, with effect from 1.6.2001? iii) Whether the additions in the declared income in the hands of assessee can be made simultaneously under Sections 68 and 69 of the Income Tax Act? 4. The assessee has filed an affidavit in compliance with the order of this Court dated 24.07.2018. The contents of the affidavit would disclose that the appellant was an employee of Satyam ii) Whether Bank Passbook of the assessee, who does not maintain regular books of accounts in the ordinary course of his business for any source of income, constitutes ‘Books of Account’ for the purpose of Sections 68, 69, 69A, 69B and 69C of the Income Tax Act, in the light of definition of ‘Books of Account’ as given in Section 2(12A) of the Income Tax Act, inserted by Finance Act, 2001, with effect from 1.6.2001? iii) Whether the additions in the declared income in the hands of assessee can be made simultaneously under Sections 68 and 69 of the Income Tax Act? 4. The assessee has filed an affidavit in compliance with the order of this Court dated 24.07.2018. The contents of the affidavit would disclose that the appellant was an employee of Satyam Computer Services Limited, Bengaluru and served there for 6 years 2 months and 12 days from 26.05.2003. He worked as a Test Manager taking care of the software testing team in Bengaluru. For about 3 years and 3 months he worked under 3 projects of Satyam Company at USA with valid work permit and for the rest of the period he worked in Satyam at Bengaluru. At that time, he had plans to invest in immovable property either by way of acquiring a house/apartment or site to build a house or land in his native place and made enquiries with the following persons; i) Jaya C, w/o Devendrakumar, Constructed Building with 3 Floors in 20x30 site. No.363, 16[th] Cross, 2[nd] Main, 4[th] Phase, JP Nagar, Bengaluru 560 078. (represented by Husband Devendrakumar) Constructed Building with 3 Floors in 20x30 site. No.363, 16[th] Cross, 2[nd] Main, 4[th] Phase, JP Nagar, Bengaluru 560 078. (represented by Husband Devendrakumar) ii)S.K.Shivaram s/o late S P Kariyappa Shivapura, Maddur Taluk, Property Survey: Shivapura 64 (24 guntas) Shivapura, Maddur Taluk, Property Survey: Shivapura 64 (24 guntas) iii)C.P.Nagaraj, s/o late C K Puttaswamaiah Chamanahalli, Maddur Taluk Property Survey : Chamanahalli 202 (1 acre 23 guntas). Chamanahalli, Maddur Taluk Property Survey : Chamanahalli 202 (1 acre 23 guntas). However, the negotiations failed and no agreements were executed. 5. It is stated that he was drawing money from his ICICI bank account from time to time to provide to his wife for investment if he were to go out of the Country. Since the negotiations to purchase could not be put through, he had temporarily provided funds to his brothers and sisters and as and when they returned the money, he re-deposited the money into his bank account. It is also stated that from out of the savings from US trip, he used to remit the same from time to time into his bank account and had also made investment in Shares. 6. Learned counsel appearing for the appellant referring to his affidavit and placing reliance on the ruling of the Coordinate Bench of this Court in the case of Vanitha G v. The Income Tax Officer, in ITA No.636/2013 (disposed off on 26.08.2014) as well as the judgment of this Court in the case of Smt P.Padmavathi v. The Income Tax Officer, in ITA No.414/2009 (disposed off on 06.10.2010)argued that the appellant has explained the reason for withdrawal and re-deposit. The amounts deposited were from out of the withdrawals made by the appellant from the same bank account with a view to make an investment in a land which ultimately did not materialize, hence, the said amounts were re-deposited. The proximity of withdrawal and re-deposit was clearly established. Despite the same, the Assessing Officer, appellate authority as well as the Tribunal failed to appreciate the same and proceeded to negate the contentions of the appellant in making addition of Rs.23,91,000/- and raising the demand of Rs.11,02,000/-. Learned counsel argued that Section 68 of the Act is not at all applicable to the facts of the case and the Assessing Officer has wrongly applied the said provision which though noticed by the Commissioner of Income Tax (Appeals), instead of setting aside the assessment order, proceeded to confirm the same under Section 69 of the Act which is wholly untenable in law. The Tribunal has ignored these aspects in dismissing the appeal filed by the assessee. 7. Learned counsel appearing for the Revenue justifying the impugned orders submitted that the nexus between the withdrawal and re-deposit was not established by the assessee. On the other hand, continuously the amounts were withdrawn from the account of the appellant-assessee and re-deposit was made in cash which could not establish the link. No documentary evidence was placed before the authorities or the Tribunal to substantiate the reason of so called acquisition of property. The explanation offered by the assessee regarding withdrawals made, which in no way link to the cash re-deposits made, could not satisfy the source of income for re-deposit. In the absence of material evidence, the orders passed by the authorities and the Tribunal being in conformity with law, no interference is warranted by this Court. Hence, the appeal deserves to be dismissed answering the substantial questions of law in favour of the Revenue and against the assessee. 8. We have carefully considered the rival submissions made by the learned counsel appearing for the parties and perused the material on record. 9. The main issue regarding the explanation offered by the appellant for re-depositing cash into the bank account has been held in negative against the assessee by the Tribunal for the reason that no material evidence was placed on record to substantiate the arguments advanced, inasmuch as the property transactions on which the assessee relied upon. 10. We have perused the bank statement of ICICI bank relating to the period from 01.10.2008 to 31.3.2009, wherein cash is deposited multiple times. It is trite that the onus lies on the assessee to explain the source of such deposits satisfactorily. The plea of the assessee, inasmuch as the plan for acquiring the property and negotiating with the vendors which did not materialise, appears to be only a devise set-up to escape the tax liability. We are not able to appreciate why the cash has to be withdrawn on several dates for purchasing the property. Ordinarily sale consideration of an immovable property has to be made by way of a cheque or Demand Draft as per law, more particularly, when the sale consideration runs into lakhs. No prudent person who is acting legally would transact with the vendors of the immovable property for acquiring the property agreeing to pay the sale consideration amount in cash. The stance of the appellant that the withdrawn amount was provided to his brothers and sisters as the transaction was not materialized and the amount was re-deposited as and when the same was paid by his siblings, cannot be appreciated as the same has been raised before the Court for the first time by way of an affidavit which is not supported by any substantial evidence. 11. In the case of Vanitha G, supra, it is clear that the assessee had withdrawn the amount from bank and after such withdrawal, the amount has been taken to the account books, thereafter, the amount was deposited after making entry in the books of account. The authorities without any proper appreciation of the books of accounts as well as the passbook had come to a conclusion that it was an undisclosed income. In that context, it was held that the authorities without any proper appreciation of the books of accounts as well as the passbook had come to a conclusion that it is an undisclosed income. 11. In the case of Vanitha G, supra, it is clear that the assessee had withdrawn the amount from bank and after such withdrawal, the amount has been taken to the account books, thereafter, the amount was deposited after making entry in the books of account. The authorities without any proper appreciation of the books of accounts as well as the passbook had come to a conclusion that it was an undisclosed income. In that context, it was held that the authorities without any proper appreciation of the books of accounts as well as the passbook had come to a conclusion that it is an undisclosed income. 12. However, in the present case, no such books of accounts were maintained by the assessee. The passbook/bank statement of ICICI bank has been extensively analyzed by the authorities as well as the Tribunal and on critical analysis of the same, there being no satisfactory correlation found between the withdrawal and cash deposit vis-à-vis, the claim of the assessee with regard to the land transaction negotiations not being proved, have rightly arrived at a finding that the source of income has not been established by the assessee. Hence, the judgment relied upon by the assessee in the case of Vanitha G, supra, do not come to the assistance of the assessee. 13. It is settled law that quoting a wrong provision is not fatal to the case. No doubt, the Assessing Officer has quoted Section 68 of the Act for making additions and the same has been rectified by the appellate authority modifying the provision as Section 69 of the Act. It is well settled legal principle that the power of first appellate authority is co-terminous with that of the Assessing Officer. That being done, there is no reason as to why the appellate authority cannot modify the assessment order by invoking the correct provision of law. This view is fortified by the judgment of the Hon’ble Apex Court in the case of Commissioner of Income-tax v. Nirbheram Deluram, reported in (1997) 91 Taxman 181 (SC). No addition is made simultaneously under Sections 68 and 69 of the Act. Even if the bank passbook/statement is not treated as books of accounts under Section 68 of the Act, the same can be used to make addition under Section 69 of the Act. 14. It is the onus of the assessee to explain the cash deposits and if there is no explanation or acceptable evidence to prove the source of cash deposits made, the said amount can be added as the assessee’s income on general principles. Even if a wrong provision i.e., Section 68 of the Act is quoted and the same is not applicable, the assessee could be asked to explain the source of income under Section 69 of the Act and such exercise made by the first appellate authority, cannot be faulted with. The affidavit filed by the assessee in no way would satisfy the source of income for the cash deposits made by the appellant. 15. The judgments referred to by the learned counsel appearing for the assessee are carefully considered by us and they are not applicable to the facts of the case on hand. 16. For the reasons aforesaid, the substantial questions of law are answered in favour of the Revenue and against the assessee. The appeal stands dismissed accordingly. Sd/- JUDGE Sd/- JUDGE nd