Pawan Kumar Pareek v. Income Tax Officer, Ward 2 (2) Jodhpur & Anr

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANAT JODHPUR <<>> :: ORDER:: Pawan Kumar Pareek Vs. Income Tax Officer, Ward 2 (2) Jodhpur & Anr. D.B.INCOME TAX APPEAL NO.34/2010. ... Date of Order :::: 29[th] September 2010 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARIHON'BLE MR. JUSTICE C.M. TOTLA Mr.L.M.Lodha for the appellant <><><> BY THE COURT: (Per Dinesh Maheshwari, J.) By way of this appeal under Section 260-A of theIncome Tax Act, 1961 ['the Act'], the appellant-assesseeseeks to challenge the judgment and order dated 16.12.2009passed by the Income Tax Appellate Tribunal, Jodhpur Bench,Jodhpur ['the Tribunal'] in ITA No.161/JU/2009 whereby theTribunal affirmed the judgment and order dated 05.03.2009passed by the Commissioner of Income Tax (Appeals),Jodhpur ['the CIT(A)'] dismissing the appeal filed against theassessment order dated 03.12.2008 for the assessment year2006-2007. Put in brief, the relevant background aspects of thematter are that the appellant-assessee, an individual carryingon business in his proprietorship concern and dealing in Mateera seeds, filed a return declaring income of Rs.87,360/-on 08.01.2007. The case was processed under Section 143(1) of the Act, was selected for scrutiny and a notice underSection 143 (2) of the Act was issued to the appellant on18.06.2007. Despite service, none on behalf of the assesseeattended the hearing before the Assessing Officer ['the AO'].The AO gathered that the assessee had deposited in the bankaccount a sum of Rs.14,13,350/- in cash during the relevantfinancial year and to ascertain the source of this cash, theassessee was given repeated notices under Section 142(1)and 143 (2) of the Act but he failed to submit the requisiteexplanation. According to the AO, on 19.09.2007, onerepresentative appeared on behalf of the assessee andsought adjournment but did not file any power of attorney.The case was, however, adjourned to 24.09.2007; but even onthe stipulated date, none attended on behalf of the assesseenor any reply was filed. The AO pointed out that yet furthernotices were issued under Section 143 (2) of the Act but theassessee failed to submit reply. The AO further pointed outthat finally, on 21.11.2008, the assessee was issued letterNo.2328 whereby he was specifically informed that even aftersufficient opportunities, he had not attended on any date andwas not co-operating with the Department; and the case wasfixed for hearing on 28.11.2008. The AO, after pointing outvarious notices issued to the assessee and his failure to reply,observed that the assessee failed to submit the source of cashdeposited in his account maintained with IDBI Bank, Mumbai.The said amount was taken to be undisclosed income earned from undisclosed sources. The AO completed the assessmenttaking the said cash deposited in the Bank as undisclosedincome of the assessee and issued consequential orders. from undisclosed sources. The AO completed the assessmenttaking the said cash deposited in the Bank as undisclosedincome of the assessee and issued consequential orders. In appeal before the CIT(A), it was contended on behalfof the appellant-assessee that the assessment order passedunder Section 144 of the Act was bad in law and on facts; thatnotices issued under Sections 142 (1) and 143 (2) of the Actwere not properly served; that the assessment order was anon-speaking one; and that addition of income was notjustified. The learned CIT(A) found that the assessee coulddare not deny specific assertion of the AO regarding service ofnotices and rejected the contention regarding want of properservice. The learned CIT(A) also found that the AO hadelaborately discussed the details of deposit as well as thereasons for treating the same as undisclosed income; andrejected the contentions in that regard too. It was alsocontended before the CIT(A) that the sources of subsequentdeposits were withdrawals from the bank account and no newasset was created; and the peak credit of the earlier year wasmore than the peak credit during the current year and hence,no further addition was required. The learned CIT(A) rejectedsuch contentions with the observation that despite multipleopportunities, the assessee did not furnish requisite detailsregarding deposits made in the bank account and no newevidence could be suggested in the appellate proceeding.Taking an overall view of the matter, the learned CIT (A) foundno reason to interfere. In further appeal before the Tribunal, again, the validityof service of notices was put to question. It was alsocontended that the peak credit should have been consideredinstead of addition of the entire amount of deposit. It wasfurther contended that the CIT (A) ought to have allowedadditional evidence. After hearing the parties, the Tribunalfound the contentions urged on behalf of the appellant-assessee devoid of substance. The contention regarding wantof service was rejected by the Tribunal while observing thus: “5.We have heard the parties and have carefullyperused the material on record. A perusal of thedepartmental record laid before us reveals that theappellant adopted non-cooperative attitude atassessment stage despite repeated number ofnotices u/s. 142(1) and 143(2) of the Act having beensent by registered post and also by Speed Post thatstand served upon him. Even the last notice dated21.11.2008 issued u/s. 142(1) and 143(2) of the Actlisting the case for hearing on 28.11.2008 are shownto have been served by Speed Post on the address ofthe appellant. The assessee merely makes an oralsubmission that no notices have been served. Anaffidavit to this effect has neither been laid before usnor shown to have been filed before any of theauthorities below. The oral denial, as such, is notbonafide. The assessee's claim, therefore, that thenotice issued have not been served is found rightlyrejected by the ld. CIT (A).” The Tribunal found the assessment under Section 144 of the Act justified after referring to the relevant provisionsthereof that read as under:- “144(1). If any person - (a) fails to make the return required under sub-section (1) of section 139 and has not made a returnor a revised return under sub-section (4) or sub-section (5) of that section, or (b)fails to comply with all the terms of a noticeissued under sub-section (1) of section 142 or fails tocomply with a direction issued under sub-section (2A)of that section, or (c)having made a return, fails to comply with allthe terms of a notice issued under sub-section (2) ofsection 143. the Assessing Officer, after taking into account allrelevant material which the Assessing Officer hasgathered, shall, after giving the assessee anopportunity of being heard, make the assessment ofthe total income or loss to the best of his judgmentand determine the sum payable by the assessee onthe basis of such assessment : (b)fails to comply with all the terms of a noticeissued under sub-section (1) of section 142 or fails tocomply with a direction issued under sub-section (2A)of that section, or (c)having made a return, fails to comply with allthe terms of a notice issued under sub-section (2) ofsection 143. the Assessing Officer, after taking into account allrelevant material which the Assessing Officer hasgathered, shall, after giving the assessee anopportunity of being heard, make the assessment ofthe total income or loss to the best of his judgmentand determine the sum payable by the assessee onthe basis of such assessment : Provided that such opportunity shall be givenby the Assessing Officer by serving a notice callingupon he assessee to show cause, on a date and timeto be specified in the notice, why the assessmentshould not be completed to the best of his judgment : Provided further that it shall not be necessaryto give such opportunity in a case where a noticeunder sub-section (1) of section 142 has been issuedprior to the making of an assessment under thissection.” In regard to the core issue of addition, the Tribunalfound the stand of the appellant rather contradictory and observed thus: “14. In order to render substantial justice to theassessee, we, however, allowed the assessee toshow as to how the addition for peak credit wasnecessary instead of the addition as unexplaineddeposits in the said bank account. The assessee,however, laid no cogent material or reliabledocumentary evidence to substantiate the claim thatthe deposits made in his bank account, allegedly,from the sale realization of his goods stood withdrawnand utilized either for making purchases for futuresales coming to the same account or re-deposited incash after making withdrawals there from. In fact, thebank statement reveals that on various dates, cash isdeposited at outstations, such as Kanpur, Delhi,Indore, Patiala, Bhuvneshwar, Jalandhar and variousother cities spread over in different states and aftermaking the deposits, the amounts are withdrawneither on the same day or immediately on the nextday, without establishing any nexus that the sameamount has been re-deposited at such outstations onsubsequent dates. The assessee's explanation, infact is contradictory inasmuch as on one hand hesays that the amount withdrawn on a particular datestands deposited in the same account while on theother hand, he claims that the amounts deposited atoutstations in various cities are the collection fromsale proceeds. In this view of the matter, theexplanation given by the assessee being untruecannot be accepted requiring to adopt a peak credit with respect to unexplained credit and debit entries inhis bank account with IDBI branch at Mumbai.Therefore, the decision by Hon'ble M.P. High Courtrendered in the case of Jhamatmal Takhatmal KiranaMerchants vs. CIT, (1999) 152 CTR (MP) 311 and ofRajasthan High Court in the case of Swaroop ChandKojuram, 235 ITR 732 (Raj.) relied upon by theRevenue are found relevant to the facts of the presentcase. The decision in the immediate preceding yearin his case for A.Y. 2005-06 is found rendered underdifferent facts and circumstances, where the ld. CIT(A) while accepting the peak credit theory for depositand withdrawals in the same account, has acted onthe remand report and relevant material which isfound absent here in this case. Finding no merit inthe grounds raised by the assessee, the same standrejected.” Seeking to assail the order so passed by the Tribunal,the learned counsel for the appellant-assessee hasstrenuously argued that the learned authorities below and theTribunal have proceeded on entirely irrelevant considerationsand on a wrong approach towards the operation of Section144 of the Act. The learned counsel submitted that if at alltaking up the best judgment assessment under Section 144, itwas required of the AO to take into account all the relevantmaterial gathered and to afford the assessee an opportunity ofbeing heard before making the final assessment. The learnedcounsel contended that the opportunity envisaged underSection 144 having not been given, the assessment isrendered invalid. According to the learned counsel, in theordinary circumstances where a case is covered under clause(b) of sub-section (1) of Section 144, service of notice may notbe necessary as per the second proviso to Section 144(1) butin the cases of other nature, before proceeding ex parte andbefore completing the assessment under Section 144, a notice is required to be given. The learned counsel submittedthat there had not been any cogent evidence before the AO tomake addition of the entire amount of Rs.14,13,350/- asundisclosed income of the appellant. The learned counselsubmitted that at the most, peak credit could have beentaken into consideration while making best judgmentassessment; and the entire of alleged amount deposited in thebank could not have been treated to be his undisclosedincome. The learned counsel has referred to and relied uponthe decisions in Dhanalakshmi Pictures Vs. Commissioner ofIncome-Tax, Madras: 144 ITR 452 and Commissioner ofIncome Tax Vs. Ranjeet Kumar Sethia: (2005) 198 CTR (Raj)550. Having given a thoughtful consideration to thesubmissions made, we are unable to find any substance in thisappeal; and we are clearly of opinion that this appeal, beingtotally bereft of substance, does not merit admission. So far the interpretation as suggested by the learnedcounsel to Section 144 is concerned, the same has only beennoted to be rejected. The suggestion remains squarelycontrary to the plain provisions of statute. The scheme ofSection 144(1) makes it explicit and evident that upon theperson concerned failing to make return, or failing to complywith the terms of notice issued under Section 142 (1) ordirection under Section 142 (2A), or failing to comply with thedirections of notice under Section 143 (2), the AO shall, aftertaking into account all the relevant material gathered and aftergiving the assessee an opportunity of being heard, make the So far the interpretation as suggested by the learnedcounsel to Section 144 is concerned, the same has only beennoted to be rejected. The suggestion remains squarelycontrary to the plain provisions of statute. The scheme ofSection 144(1) makes it explicit and evident that upon theperson concerned failing to make return, or failing to complywith the terms of notice issued under Section 142 (1) ordirection under Section 142 (2A), or failing to comply with thedirections of notice under Section 143 (2), the AO shall, aftertaking into account all the relevant material gathered and aftergiving the assessee an opportunity of being heard, make the assessment of total income to the best of his judgment. Asper the first proviso to Section 144(1), the opportunity is to begiven by the AO by serving a notice calling upon the assesseeto show cause as to why assessment should not be completedto the best of his judgment on a given date. However, thesecond proviso thereof makes it clear that it shall not benecessary to give such an opportunity in the case where anotice under Section 142 (1) had been issued prior to makingof assessment. Hence, where the notice under Section 142(1) was given and the assessee failed to comply with thesame, in our opinion, the second proviso to Section 144(1)clearly came in operation and it was never necessary for theAO to go on servicing further notices on the assessee. Thefact situation of the present case makes it clear that evenunder Section 143 (2), repeated opportunities were extendedby the AO by serving at least 9 notices of different dates. Theappellant-assessee having failed to co-operate with theDepartment and having failed to come out with explanation,as per the second proviso to Section 144(1), the AO was notat all obliged to have issued him yet another notice. In regardto the decision in Dhanalakshmi Pictures (supra) as reliedupon by the learned counsel for the appellant, suffice is topoint out that the said decision, rendered on 03.09.1980 andrelating to assessment years 1971-1972, had been in relationto the then existing provisions of Section 144 of the Actwhereas the provisos came to be inserted thereto only by wayof the amendment made by the Direct Tax Laws (Amendment)Act, 1987 (No.4 of 1988). The said decision can have no relevance for the purpose of interpretation of Section 144 asnow existing. So far the merits of the case are concerned, we do notfind any infirmity in the order passed by the AO as affirmed bythe Appellate Authorities for the basic reason that theappellant failed to account for the cash deposit in IDBI Bank,Mumbai, being the sum of Rs.14,13,350/-. We are unable tosee any logic in reference to the peak credit theory in thepresent case; and the decision in Ranjeet Kumar Sethia(supra) has hardly any application or relevance to the presentcase. The feeble explanation as sought to be suggestedbefore the Appellate Authorities has been found to be more ofcontradiction as indicated by the Tribunal in its judgment,particularly in the passage quoted hereinbefore. Thecontentions sought to be urged on behalf of the appellant failand are rejected. Accordingly and as a result of the discussions aforesaid,we do not find any substantial question of law being involvedin the present case. The appeal fails and is, therefore, dismissed summarily. (C.M. TOTLA), J. (DINESH MAHESHWARI), J. MK