Sh. Pavittar Singh v. Commissioner Of Income Tax-Iii, Ludhiana

ITA No. 86 of 2015 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 86 of 2015 (O&M) Date of Decision: 29.10.2015 Sh. Pavittar Singh ....Appellant. Versus Commissioner of Income Tax-III, Ludhiana ...Respondent. 1.Whether the Reporters of the local papers may be allowed to see the judgment?the judgment? 2.To be referred to the Reporters or not? 3.Whether the judgment should be reported in the Digest? CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE SHEKHER DHAWAN. PRESENT: Mr. Ravish Sood, Advocate for the appellant. Mr. Rajesh Katoch, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.The assessee has approached this Court by way of instantappeal under Section 260A of the Income Tax Act, 1961 (in short “theAct”) against the order dated 31.10.2014 (Annexure A-3) passed by theIncome Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafterreferred to as “the Tribunal”) in ITA No. 224(ASR)/2013, for theassessment year 2009-10, claiming the following substantial questions of law:- 1)Whether the Tribunal is right in law and facts ofthe case in rejecting the explanation of theappellant as regards the source of the deficit investment made towards the purchase of newagricultural lands? Whether the Tribunal is right in law and facts ofthe case in sustaining the addition ofRs.5,87,500/- in the hands of the appellant? 3) Whether the Tribunal has erred in law and factsof the case by failing to appreciate that in lightof inextricable facts regarding the 'Sole source'of income of the appellant, i.e. 'Salary income'as a 'Machine operator' with M/s Nestle IndiaLtd. r.w. the fact that the deficit as regardsinvestment in purchase of new agriculturallands had emerged during the period whenancestral agricultural lands were sold, thesource of the said investment thus safely,logically and rather inescapably could only berelated to the sale of the agricultural lands,pursuant whereto the said amount could only beconsidered under the head 'Capital gains'? 4) Whether the Tribunal had erred in law and factsof the case by failing to appreciate that thelower authorities while making an addition w.r.t.the source of the deficit investment in the handsof the appellant had gravely erred by failing toexercise the discretion, specifically in light of theexplanation of the appellant? 2.A few facts necessary for adjudication of the instant appeal ITA No. 86 of 2015 as narrated therein may be noticed. The assessee is employed as aMachine Operator with M/s Nestle India Ltd., Moga and filed his return ofincome on 20.7.2009 for the assessment year 2009-10 declaring incomeat ` 1,48,510/-. The said return was processed under Section 143(1) ofthe Act. The case of the assessee was taken up for scrutiny and noticesunder Sections 143(2)/142(1) of the Act were issued. The AssessingOfficer vide order dated 16.11.2011 (Annexure A-1) assessed the incomeof the assessee at ` 43,86,580/-. During the course of assessmentproceedings, the Assessing Officer, inter alia, made addition of` 42,00,000/- which was deposited in S/B A/c No. 114848 with AllahabadBank, Moga branch as 'unexplained cash credit' under Section 68 of theAct. Feeling aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. TheCIT(A) vide order dated 28.2.2013 (Annexure A-2) partly allowed theappeal and sustained the addition of ` 11,75,000/- towards unexplainedinvestment with respect to purchase of the new agricultural land. Stilldissatisfied, the assessee filed an appeal before the Tribunal who videorder dated 31.10.2014 (Annexure A-3) partly allowed the appeal andrestricted the addition of deficit of ` 11,75,000/- sustained by the CIT(A)to ` 5,87,500/-. Hence, the present appeal by the assessee. 3.Learned counsel for the assessee submitted that thefindings recorded by the authorities below are perverse, bad and againstthe record. It was further submitted that if the ratio of 50% each wasaccepted then it should have been assessed as capital gain and notincome from other sources. Reliance was placed upon the judgment ofthe Supreme Court in Commissioner of Income Tax v. Smt. P.K. Noorjahan (1999) 237 ITR 570. 4.On the other hand, learned counsel for the revenue hasstrongly opposed the prayer by submitting that there was deficit in thecash flow statement produced by the assessee and moreover, the saleproceeds cannot exceed the sale consideration in the registered saledeed. 5.After hearing learned counsel for the parties, we do not findany merit in the appeal. 6.The assessee was issued a notice under Section 142(1) ofthe Act on 10.6.2010 along with a detailed questionnaire. In responsethereto, the assessee furnished necessary information/details. Theassessee also furnished a copy of his saving Bank A/c No.4668000100000740 of Punjab National Bank, Moga along with details ofeach entry of cash deposited and withdrawals made. From the saidaccount, the assessee earned interest income of ` 38,066/- (` 24,485/- +` 13,58,1/-). The said interest income was not shown in the computationof income. The Assessing Officer made addition of ` 38,066/- andadded in the returned income of the assessee on account of nonshowing of interest income earned from saving bank account and alsoinitiated penalty proceedings under Section 271(1)(c) of the Actseparately for concealment of income. On being asked to furnish thecopy of account maintained with Allahabad Bank, Kolkata Main Branch,the assessee failed to produce the statement of account of the saidbank. As per the AIR information, a total transaction made with the saidbank account during the period 1.4.2008 to 31.3.2009 was at` 42,00,000/- and the said amount was added to the returned income ofthe assessee under Section 68 of the Act on account of unexplainedcash credits. Accordingly, the Assessing Officer assessed the total income of assessee at ` 43,86,580/-. In appeal before the CIT(A), theassessee filed an application for admission of additional evidence, interalia, on the grounds that he has been filing his return of incomereflecting his salary income in a routine manner; during the year inquestion, he had carried out sale transactions of 28 kanals of ancestralagricultural land at village Moga Mehal Singh, pursuant thereto, thesubstantial amounts were deposited by him in his bank accounts and thesame were utilized towards purchase of further agricultural land. The CIT(A) forwarded the said application to the Assessing Officer for remandreport. After receiving the remand report and considering thesubmissions of the assessee, the CIT(A) admitted the said applicationholding that the cash deposits in the Allahabad bank account standexplained on the basis of amounts received by the assessee as per theregistered sale deeds. However, the CIT(A) on finding a negative cashbalance on 23.10.2008 amounting to ` 11,05,000/- and ` 70,000/- on31.10.2008 (totalling ` 11,75,000/-) confirmed the said addition made bythe Assessing Officer holding that the investment had been made by theassessee without having availability of explained cash in terms of receiptof sale consideration. The relevant findings recorded by the CIT(A) inparas 8 and 9 read thus:- “8.I have considered the facts of the case, theobservations of the Assessing Officer in the remandproceedings, the submissions of the AR during theappellate proceedings and the rejoinder on theAssessing Officer's remand report. The first questionto be considered here is whether the appellant'srequest for admission of additional evidence is to be “8.I have considered the facts of the case, theobservations of the Assessing Officer in the remandproceedings, the submissions of the AR during theappellate proceedings and the rejoinder on theAssessing Officer's remand report. The first questionto be considered here is whether the appellant'srequest for admission of additional evidence is to be allowed or not. The important thing is to be seen hereis that the assessee had not provided the copy ofbank account maintained with Allahabad bank duringappellate proceedings, even though the informationregarding the same has been in department'spossession at the time of selection of case forscrutiny, it is also a matter of fact that the specificbank account maintained by the assessee withAllahabad bank had been confronted to him at the fagend of appellate proceedings i.e. 14.11.2011 and theorder had been passed on 16.11.2011. The apparentlimited time available with the assessee to come upwith the entire explanation with regard to the cashdeposits cannot be said to be sufficient under thecircumstances. It is also important to appreciate thatthe assessee is an operator working on salary withNestle India Ltd. at Moga and his main source ofincome for all the years had been the said salaryincome. Further, the amounts deposited in theAllahabad bank account are clearly receipts from thesale proceeds of ancestral agricultural land belongingto the appellant and his brother and therefore it ispossible that the assessee could not comprehend thathe was liable to explain the entries pertaining to him/his brother of sale of agricultural land. It is also seenthat the evidence filed by the appellant has not beenconstructed afresh and in fact is documented in the form of registered deed which are clear evidence ofsale of agricultural land and the proceeds thereof.The entirety of circumstances and the facts detailedabove make it clear that the same could not be filed atthe time of assessment because of limited timeavailable and apparent lack of appreciation of thelegal requirement on the part of the assessee in thisregard. It could be easily termed as a technical flawon the part of the appellant especially when noamount is being claimed to be pertaining to bebelonging to third party at all. The Hon'bleJurisdictional High Court in the case of CIT Patiala vs.Chitosho Motors in Income Tax Appeal No. 741 of2010 vide order dated 5.1.2011 has clearly held thatthe department is not expected to take technical pleaof additional evidence when such evidence mayadvance the interest of justice. The additionalevidence was allowed to be admitted by the Hon'bleHigh Court especially when the evidence was in theshape of sale deeds, certificates from banks andcopies of bank accounts. Therefore, the additionalevidence is allowed to be admitted.sale of agricultural land and the proceeds thereof.The entirety of circumstances and the facts detailedabove make it clear that the same could not be filed atthe time of assessment because of limited timeavailable and apparent lack of appreciation of thelegal requirement on the part of the assessee in thisregard. It could be easily termed as a technical flawon the part of the appellant especially when noamount is being claimed to be pertaining to bebelonging to third party at all. The Hon'bleJurisdictional High Court in the case of CIT Patiala vs.Chitosho Motors in Income Tax Appeal No. 741 of2010 vide order dated 5.1.2011 has clearly held thatthe department is not expected to take technical pleaof additional evidence when such evidence mayadvance the interest of justice. The additionalevidence was allowed to be admitted by the Hon'bleHigh Court especially when the evidence was in theshape of sale deeds, certificates from banks andcopies of bank accounts. Therefore, the additionalevidence is allowed to be admitted. 9.The recasted cash flow statement and theobjections to the same by the Assessing Officerduring the remand proceedings have been consideredand it is seen that the cash deposits in the Allahabadbank account stand explained on the basis ofobjections to the same by the Assessing Officerduring the remand proceedings have been consideredand it is seen that the cash deposits in the Allahabadbank account stand explained on the basis of ITA No. 86 of 2015-8- amounts received by the assessee as per theregistered sale deeds. However, there is a negativecash balance on 23.10.2008 to the tune ofRs.11,05,000/- and Rs.70,000/- on 31.10.2008 whichmeans that the investment has been made by theassessee without having availability of explained cashin terms of receipt of sale consideration. The additionmade by the Assessing Officer is therefore confirmedto the tune of Rs.11,75,000/- being the amount thathad been invested in the purchase of agricultural landfor which no corresponding availability of cash hasbeen explained.” 7.On further appeal by the assessee, the Tribunal restrictedthe addition of ` 11,75,000/- confirmed by the CIT(A) to ` 5,87,500/- byobserving that the deficit of ` 11,75,000/- belonged equally to theassessee and his brother Shri Amarjit Singh and the assessee alonecould not be said to be liable for the entire deficit. Further, the Tribunalheld that in the absence of any cogent explanation or any evidence orarguments, the plea of the assessee that he was having only source ofincome as salary income or agricultural income and the deficit so arisebe treated as sale proceeds of the agricultural land could not beaccepted on the ground that the assessee had never treated the saiddeficit as agricultural income in his cash flow statement or re-cast cashflow statement before any of the authorities. The relevant findingsrecorded by the Tribunal are as under:- “7.We have heard the rival contentions andperused the facts of the case. There is no dispute to the admission of additional evidence by the Revenuein the present case. In para 8, there is clear finding ofthe Ld. CIT(A), which is not subject matter ofchallenge by the Revenue and that the amountsdeposited in the Allahabad Bank are clearly receiptsfrom the sale proceeds of ancestral agricultural landbelonging to the assessee and his brother. Therefore,it is possible that the assessee could not comprehendthat he was liable to explain the entries pertaining tohim/his brother of sale of agricultural land. Further,the evidence filed by the assessee has not beenconstructed afresh and in fact is documented in theform of registered deed which are clear evidence ofsale of agricultural land and the proceeds thereof.The cash flow statement furnished by the assesseehad rightly been admitted by the ld. CIT(A), which isnot in dispute. As mentioned hereinabove, theancestral agricultural land had been sold, which washeld jointly by the assessee along with his brother Sh.Amarjit Singh and agricultural land, which has beenpurchased by the assessee along with his brother Sh.Amarjit Singh in equal share is also not in dispute.Therefore, the deficit of Rs.11,75,000/- belongsequally to the assessee and his brother Sh. AmarjitSingh and assessee alone cannot be said to be liablefor the entire deposit of Rs.11,75,000/-. Theargument of the Ld. DR that Power of Attorney by Sh. Amarjit Singh brother of the assessee had been givento the assessee, does not mean the deficit or levy oftax in toto shall fall on the assessee. Accordingly, thedeficit of Rs.5,87,500/- is on account of the assesseeand the other deficit of Rs.5,87,500/- is on account ofbrother of the assessee, Sh. Amarjit Singh.Accordingly, the addition confirmed by the Ld. CIT(A)is restricted to Rs.5,87,500/- in view of our findingshereinabove. Amarjit Singh brother of the assessee had been givento the assessee, does not mean the deficit or levy oftax in toto shall fall on the assessee. Accordingly, thedeficit of Rs.5,87,500/- is on account of the assesseeand the other deficit of Rs.5,87,500/- is on account ofbrother of the assessee, Sh. Amarjit Singh.Accordingly, the addition confirmed by the Ld. CIT(A)is restricted to Rs.5,87,500/- in view of our findingshereinabove. 8.As regards the arguments by the Ld. Counselfor the assessee that the assessee is having onlysource of income as salary income or agriculturalincome and the deficit so arisen should be treated assale proceeds of the agricultural land and not to beaccepted for the reason that the assessee had nevertreated the said deficit as agricultural income in hiscash flow statement or recasted cash flow statementbefore any of the authorities below or even before us.Also in the absence of any cogent explanation or anyevidence or arguments made by the Ld. Counsel forthe assessee, the decision of Hon'ble Supreme Courtin the case of Smt. P.K. Noorjahan vs. CIT (supra)cannot help the assessee. Accordingly, the AO isdirected to sustain the addition of Rs.5,87,500/- and isdirected to delete the rest of the addition amounting to` 5,87,500/-. Thus, the appeal of the assessee ispartly allowed.” 8.The findings of fact recorded by the Tribunal are based onmaterial on record and after appreciating the cash flow statement orrecast cash flow statement furnished by the assessee. The view of theTribunal is a plausible one which does not call for interference by thisCourt. 9.Adverting to the judgment in Smt. P.K. Noorjahan's case(supra), relied upon by the learned counsel for the assessee, theTribunal had held that the discretion had not been properly exercised bythe ITO and the AAC in taking into account the circumstances in whichthe assessee was placed and the Tribunal had found that the source ofinvestment could not be treated as income of the assessee in the light offacts of that case. The High Court and the Supreme Court had agreedwith the conclusion of the Tribunal. The factual situation is the presentcase is different and, therefore, no advantage can be derived by theassessee therefrom. 10.In view of the above, no substantial question of law arises inthis appeal. Accordingly, the instant appeal is dismissed. (AJAY KUMAR MITTAL)JUDGE October 29, 2015gbs (SHEKHER DHAWAN)JUDGE