Ita/40/2010 Of Commissioner Of Income Tax-Ii Chandigarh v. Rajiv Kumar Manuja

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No. 40 of 2010 (O&M)Date of decision: 18.9.2015 Commissioner of Income Tax II, Chandigarh .....- Appe Shri Rajiv Kumar Manuyj ....mesponden CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’ BLE MR. JUSTICE RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?3. Whether the judgment should be reported 1n the Digest? Present: Ms. Urvashi Dhugga, Advocate for the appellant, Mr. Rajesh Garg, Sr. Advocate with|Ms. Nimrata Shergill, Advocate for the respondent. | Ajay Kumar Mittal,J, 1.|This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated dated 23.7.2009, Annexure A.3 passed by the Income Tax AppellateTribunal Chandigarh Bench 'B', Chandigarh (in short, “the Tribunal) in ITANo.1/CHANDI/2009 for the assessment year 2005-06, claiming followingsubstantial questions of law:- 1) Whether on the facts and in the circumstances of the caseand in law the order of the Hon'ble ITAT is correct 1n deletingthe addition made by the Assessing Officer, holding thatassessee cannot be said to be benami of Shri Nalnish Aggarwal, whereas Shri Nalnish Aggarwal was neither produced beforethe AO nor any evidence was given in support of his capacity tomake payment ofL20 lakhs?the AO nor any evidence was given in support of his capacity tomake payment ofL20 lakhs? 11) Whether on the facts and in the circumstances of the caseand in law, the order of the Hon'ble ITAT 1s correct in deletingthe above addition made by the Assessing Officer, in theabsence of any evidence of genuineness’ of _ payment/transaction by Shri Nalnish Aggarwal?and in law, the order of the Hon'ble ITAT 1s correct in deletingthe above addition made by the Assessing Officer, in theabsence of any evidence of genuineness’ of _ payment/transaction by Shri Nalnish Aggarwal? 111) Whether on the facts and in the circumstances of the caseand in law, the order of the Hon'ble ITAT 1s correct in deletingthe addition in the absence of any evidence of ownership of theproperty at Panipat, the sale proceeds of which are stated to bethe source of investment of the assessee to the tune of a5.0lakhs?and in law, the order of the Hon'ble ITAT 1s correct in deletingthe addition in the absence of any evidence of ownership of theproperty at Panipat, the sale proceeds of which are stated to bethe source of investment of the assessee to the tune of a5.0lakhs? |A few facts relevant for the decision of the controversy,involved as narrated in the appeal may be noticed. A survey under section133A of the Act was conducted at the business premises of M/s ChandigarhOverseas Pvt. Limited wherein certain documents were impounded asunder: 1) An agreement dated 1.1.2005 between M/s ChandigarhOverseas Pvt. Limited through its director Shri SomeshChawla and Shri Rajiv Kumar son of late Shri Sher ChandManuyja and Shri Nalnish Aggarwal son of Shri Nathru RamAccording to this document, the first party had received=aoelacs (a15 lacs by cash and =a10 lacs by cheque from secondparty for allotting a flat/commercial site etc. at KnowledgePark for Fashion Technology in Sector 90,Mohalh and;Overseas Pvt. Limited through its director Shri SomeshChawla and Shri Rajiv Kumar son of late Shri Sher ChandManuyja and Shri Nalnish Aggarwal son of Shri Nathru RamAccording to this document, the first party had received=aoelacs (a15 lacs by cash and =a10 lacs by cheque from secondparty for allotting a flat/commercial site etc. at KnowledgePark for Fashion Technology in Sector 90,Mohalh and; 11)A receipt ofa11.50 lacs according to which Shri NalnishAggarwal received back an amount of|<a11.50 lacs (10 lacsby cheque and v1.5 lacs by cash) from M/s ChandigarhOverseas Pvt. Limited.Aggarwal received back an amount of|<a11.50 lacs (10 lacsby cheque and v1.5 lacs by cash) from M/s ChandigarhOverseas Pvt. Limited. 11)A receipt ofa11.50 lacs according to which Shri NalnishAggarwal received back an amount of|<a11.50 lacs (10 lacsby cheque and v1.5 lacs by cash) from M/s ChandigarhOverseas Pvt. Limited.Aggarwal received back an amount of|<a11.50 lacs (10 lacsby cheque and v1.5 lacs by cash) from M/s ChandigarhOverseas Pvt. Limited. During the assessment proceedings, it was submitted by the assessee that hedid not know Shri Nalnish Aggarwal and he was introduced to him by M/sChandigarh Overseas Limited. He also submitted that he had invested onlyL5 lacs from the sale proceeds of H.No.886 at Panipat. The balance of a20lacs were invested by Shri Nalnish Agegrwal =a4 lacs by cheque of HDFCBank, Sector 35, Chandigarh, L6 lacs by cheque of Bank of India,Sector 16,Chandigarh and balancea10 lacs in cash). The Assessing Officer videorder dated 24.12.2007, Annexure A.1 made an addition of =a25 lacs in thehands of the assessee holding that Shri Nalnish Aggarwal was not a genuineparty, therefore, the total amount of“a25 lacs paid to M/s ChandigarhOverseas Pvt. Limited was treated as unexplained income of the assesseeinter alia on the basis of the reasons 1.e. Shri Nalnish Aggarwal was notknown to him; Mr. Aggarwal did not reside at the given address asmentioned in the agreement; no account existed in the name of Mr.Aggarwal in HDFC Bank and the assessee could not produce ShriAggarwal. The assessee's contention that he investedv5 lacs from the saleproceeds of H.No.886 at Panipat was rejected by the Assessing Officer onthe ground that according to the purchase deed of the said property, theassessee was neither the purchaser nor did he submit any evidence to showthat he was owner of the said property. The appeal filed by the assesseebefore the Commissioner of income Tax (Appeals) [(CIT(A)| was allowedvide order dated 17.10.2008, Annexure A.2. The revenue went 1n appealbefore the Tribunal. Vide order dated 23.7.2009, Annexure A.3, the Tribunaldismissed the appeal holding that the addition was made by the Assessingofficer merely on the basis of enquiry from one Shri Kedia residing at ITA No.40 of 2010 H.No.559, Sector 10, Panchkula 1.e. the so called address of Shri NalnishAggarwal as per departmental records and no specific opportunity wasgiven to the assessee to prove the genuineness of his contention. Hence theinstant appeal by the revenue. 3]We have heard learned counsel for the parties. 4 Learned counsel for the revenue submitted that the AssessingOfficer while holding that Shri Nalnish Aggarwal wasbenam|]of theassessee had taken into consideration various facts as mentioned in paras3.5 and 3.6 of its order. On appeal filed by the assessee, the CIT(A)reversed the findings without controverting the aforesaid reasons. Thefindings were upheld by the Tribunal. The findings recorded by theAssessing Officer are as under:- 3.5 For ascertaining the genuineness of the facts stated by theassessee, the information was called under section 133(6) fromthe Bank of India. It was found that Shri Nalnish Aggarwal hadonly one saving account SB 7909 in Bank of India. Copy ofstatement submitted by the bank proves that there is nowithdrawal from this account of the cheque mentioned in theagreement. Information under section 133(6) was again askedfrom Bank of India Sector 16, Panchkula. It was found thatcheque No.260257 of||6,00,000/- dated 1.1.2005 was issuedfrom the account of Mr. Nalnish Aggarwal in favour of M/sChandigarh Overses Pvt. Limited. It was cleared on 4.1.2005through Andhra Bank, Sector 34, Chandigarh. Information wasasked under section 133(6) from HDFC Bank. In response tothis HDEC Bank stated that no such account exists in the nameof Nalnish Aggarwal, House No.559, Sector 10, Panchkula intheir Branch. 3.6 The submissions of the assessee have been duly consideredwhich is not acceptable. It 1s impossible that any individual will 3.6 The submissions of the assessee have been duly consideredwhich is not acceptable. It 1s impossible that any individual will have property transaction in partnership with other individualwhom he does not know. Moreover, assessee admitted that ShriNalnish Aggarwal was not known to them and he wasintroduced by M/s Chandigarh Overseas (P) Limited in theiroffice. The agreement (Annexure A) does not explain regardingratio of share of the assessee and Shri Nalnish Aggarwal. Theassessee was asked to produce any evidence to prove that ShriNalnish Aggarwal was party to the agreement but he failed todo so. Moreover, the inquiries made by the department provethat Shri Nalnish Aggarwal does not reside at the given addressmentioned in the agreement. The person naming Mr.A.K.Kediastaying at that address had mentioned that he does not knowanything about Shri Nalnish Aggarwal. Thus, all the above factsprove that either Shri Nalnish Aggarwal does not exist or theassessee had used the name of any existing person for benamitransaction with M/s Chandigarh Overseas.The enquiries madeby the department prove that no account exist in the name ofNalnish Aggawal in HDFC Bank from where cheques havebeen withdrawn as mentioned in the agreement and also statedby the assessee. The cheque otf=a6 lacs was withdrawn fromBank of India, Sector 16, Panchkula which is not the accountmentioned 1n the agreement but from another account. It may bepossible that the assessee used the name of Shri NalnishAggarwal to operate the account just to avoid tax and tochannelize his unaccounted money. Moreover the account fromwhich <a6 lacs have been withdrawn was opened on |.1.20051e. on the same day of the agreement with M/s ChandigarhOverseas. 3.7 In view of all above, it 1s clear that here 1s no evidence ofany type whether Shri Nalnish Aggarwal was a genuine party tothe agreement and the payments were actually made by him.Therefore,it 1s held that the whole of the amount of theagreement with M/s Chandigarh Overseas (P) Limited 1.e.rs.25,00,000/- belongs to the assessee and had been invested out of unexplained sources. 5. The CIT(A) while partly allowing the appeal recorded as under:- *“*15. The assessee furnished before me various documents given in para 9 above. It was submitted by the assessee thatsufficient opportunity was not offered during the course ofassessment proceedings. On perusal of the assessment order,]find that the Assessing Officer has treated the assessee asbenami simply from the enquiry from one person Shri Kedia. Nospecific opportunity was given to the assessee to prove that theassessee 1s not a benami. [| am satisfied that the case of thassessee get covered under the circumstances mentioned 1n Rule460A. Moreover, the documents which have been submitted bthe assessee are not such which can be fabricated, for example,sale deed, copy of return of Shri Nalnish Aggarwal, copy ofpassport of Shri Nalnish Aggarwal etc. These documents go tothe root of the matter and deserve to be admitted. 16. The assessee has been able to give sufficient evidence toprove that Shri Nalnish Aggarwal is an existing person. Onthese facts, the assessee cannot be called as benami of ShriNalnish Aggarwal. If any action 1s to be taken, then the actionwould lie in the hands of Shri Nalnish Aggarwal. The assesseecannot be saddled with the lability of Shri Nalnish Aggarwal.The examination of the entire evidence prove that the assesseehas justified the investment in M/s Chandigarh Overseas Pvt.Limited, Chandigarh jointly. It 1s in the normal businessrelationship that many persons come together for making a jointinvestment. [t 1s also to be noted that the documents were foundin the premises of M/s Chandigarh Overseas Pvt. Limited. Theagreement clearly indicates that there are two persons 1.e. ShriRajiv Kumar Manuja and Shri Nalnish Aggarwal. If ShriManuja has responded and cooperated with the department thatdoes not mean that investment made by Shri Nalnish Aggarwalis made by Shri Manuja. It was obligatory on the part of the Assessing Officer to make further investigation to find out thewhereabouts of Shri Nalnish Aggarwal. A simple enquiry fromthe house of Shri Nalnish Aggarwal and also a statement of oneShri Kedia does not lead to the conclusion that Shri RayivKumar Manuja is benami of Shri Nalnish Aggarwal. On theother hand, the assessee has been able to produce clinchingevidence to show that Shri Nalnish Aggarwal 1s an existingperson (see para 9). In my opinion, the Assessing Officer wasnot justified to treat investment made by Shri Nalnish Aggarwalas an investment/undisclosed income of Shri Rajiv Manuja 1.e.the assessee.’’ 6]While affirming the findings recorded by the CIT(A), theTribunal noticed thus:- “4.There 1s a finding in the impugned order that the impugnedaddition was made merely on the basis from inquiry from oneShri Kedia and no specific opportunity was given to the assesseeto prove that the assessee was not benami. There 1s a furtherfinding that the nature of the documents like sale deed, copy ofreturn, bank documents etc. are as such that these cannot befabricated. If the conclusion drawn in the impugned order 1sanalyzed, we have found that there was sufficient evidence toprove that the assessee cannot be said to be benami of ShriNalnish Aggarwal. The investment with M/s ChandigarhOverseas Pvt. Limited was found to be genuine and thedocuments were also found from the premises of M/sChandigarh Overseas Pvt. Limited. Even if the agreement isperused, we have found that it is between Shri Rajiv Kumar 1.e,the assessee and M/s Chandigarh Overseas Pvt. Limited whereinthere 1s a mention of receipt ofL25 lakhs, the details of whichhas also been given. There is a certificate from ChandigarhOverseas Pvt. Limited that the amount of.=a5 lakhs was investedby the assessee. In this affidavit of Smt.Tarawanti, there aredetails and the details of PAN number and cash payment of“a26 lakhs. The sale deed clearly mention about the sale of H.No.559,Sector 10, Panchkula and the consideration amount of |L16,40,000/- entered into between Smt.Usha Verma and ShriNalnish Aggarwal. All these documents are available in thepaper book. The reallotment letter issued by Haryana UrbanDevelopment Authority has also been furnished alongwith copyof return of Shri Nalnish Aggarwal. If all these documents andthe conclusion drawn in the impugned order are kept injuxtaposition and analyzed, we have found that the learned firstappellate authority is quite justified in coming to particularconclusion. The documents as contained in the paper book havenot been controverted by the revenue. In view of these facts, wehave not found any infirmity in the impugned order,Consequently, the same 1s upheld.” TdA perusal of the findings recorded above shows that theAssessing Officer after considering the various factors came to theconclusion that there was no evidence of any type whether Shri NalnishAggarwal was a genuine party to the agreement and the payments wereactually made by him. It was held that the whole of the amount of theagreement with M/s Chandigarh Overseas (P) Limited 1.e. v25,00,000/-belonged to the assessee and had been invested out of unexplained sources,We find that the CIT(A) as well as the Tribunal had not adverted to thereasons given by the Assessing Officer while holding that the transaction onbehalf of the Nalnish Aggarwal was notbenaml.The reasons recorded byCIT(A) and the Tribunal are neither cogent nor convincing on the basis ofwhich the findings of the Assessing Officer could be validly set aside.Accordingly, the orders dated 17.10.2008 and 23.7.2009, Annexures A.2and A.3 are set aside and the matter 1s remanded to the CIT(A) to decide it ITA No.40 of 2010 ITA No.40 of 2010 Needless to say, the CIT(A) shall deal with all the objections on the basis ofwhich the Assessing Officer had held Shri Nalnish Aggarwal to be benamiof the assessee. However, it shall be open for the respondent-assessee tolproduce any evidence in terms of Rule 46A of the Income Tax Rules, 1962to substantiate that the transaction was genuine and Shri Nalnish Aggarwalwas not|benamliof the assessee. The appeal stands disposed of accordingly. September 18, 2015 (Ajay Kumar Mittal)Judge(Ramendra Jain)Judge