Anil Dhingra, New Delhi vs Department Of Income Tax

BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. No. 3759/Del/2011 Assessment year : 2005-06 ACIT, CC-18, Vs. Shri Anil Dhingra, New Delhi B-131, Sheikh Sarai, Phase I, New Delhi GIR / PAN:AAPPD9828G (Appellant) (Respondent)

Appellant by : Shri K.K. Jaiswal, Sr. DR Respondent by : Shri S K Gupta, CA

Date of hearing : 16.04.2015 Date of pronouncement : 24.04.2015

ORDER

PER T.S. KAPOOR, AM:

This is an appeal filed by Revenue against the order of Ld. CIT(A) dated 02.05.2011. The grounds of appeal taken by Revenue are as under:

"1. On the fact and in the circumstances of the case, the CIT(A) has erred in law and in facts in deleting the addition of Rs. 6,63,300/- made by the Assessing Officer on account of undisclosed investment.

2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 10,00,000/- made by the Assessing Officer on account of investment in FDR.

3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 11,05,000/- made by the Assessing Officer on account of loan given to Smt. Rita Dhingra.

2 ITA No.3759/Del/2011 4. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 7,52,522/- made by the Assessing Officer out of the drawing for personal expenses.

5. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,44,000/- made by the Assessing Officer on count of unexplained cash credits.

6. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in admitting additional evidences under rule 46A?

7. The order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law."

2. Ld. D.R. at the outset invited our attention to the relevant paragraphs of assessment order and submitted that the additions made by A.O. were based upon facts and were made as the assessee was unable to explain the same. He heavily relied upon the order of the A.O. Ld. D.R. further submitted that Ld. CIT(A) had accepted additional evidence in violation of the provisions of Rule 46A of I. T. Rules.

3. Ld. A.R. on the other hand submitted that the provision of Rule 46 A were not violated and Ld. CIT(A) had obtained remand report from the A.O. and the A.O. in his remand report has communicated merits of addition and Ld. CIT(A) after taking into account the objection of the A.O. in remand report has accepted the contention of assessee and has thereby given relief and therefore, there was no violation of Rule 46A. Ld. A.R. invited our attention to various findings of Ld. CIT(A) and submitted that each and every addition made by A.O. were explained and therefore, Ld. CIT(A) has rightly deleted the additions. In respect of ground No.3 raised by Revenue, Ld. A.R. submitted that the amount of Rs.11.05 lacs was explained to have been received as loan from Smt. Rita Dhingra, wife of the assessee and she 3 ITA No.3759/Del/2011

was also being assessed by the same A.O., therefore, the fact of having given loan by Smt. Rita Dhingra to the assessee was verifiable form the records available with the Revenue authorities. Ld. A.R. heavily relied upon the order of Ld. CIT(A).

4. We have heard rival parties and have gone through the material placed on record. We find that Ld. CIT(A) has allowed relief to the assessee on various additions after obtaining remand report and after discussing the objections of A.O. on merits. Therefore, there is no relation of provisions of Rule 46A, therefore, ground No.6 taken by Revenue is dismissed. As regards merits for deletions made by Ld. CIT(A), he has deleted the same by holding as under::

"5.3 Finding on Ground No. 3:

I have considered the observation of the AO in the order of assessment, submission of the appellant, remand report of the AO and the explanation of the appellant in the rejoinder to the remand report. After carefully considering the relevant facts of the case it is noticed that out of the total investment of Rs. 6,63,300/-, the AO has in the remand report objected to the two investment of Rs. 30,000/~dated 10/1/05 and Rs. 1,96,300/-dated 30/3/05 only. Other investments have not been commented upon by the AO in the remand report which implies that he is agreeable to the explanation regarding the source of investment for Rs. 4,37,000/- and therefore effectively only the addition of Rs. 30,000/- and Rs. 1,96,300/- has to be considered in the present appeal. I have gone through the cash account furnished by the appellant in the paper book and I find that the appellant had sufficient amount of cash available as per the cash book so as to enable to him to make the investment of the above amounts. Regarding the objection of the AO, that the cash withdrawn might have been spent by the appellant somewhere else and there was no chance of the appellant having cash in hand with him sufficient enough to make cash deposits with the bank from which the investment has been made by the appellant, I find that the above objection of the AO is not supported by any hard evidence and is based on general observation. Since there is 4 ITA No.3759/Del/2011

no cogent material before the AO to support his above suspicion of the appellant having spent the cash balance on some other activities, I allow a relief of Rs. 6,63,300/-. "

6.3 Finding on Ground No.4.

I have considered the entire material available in the form of observation in the assessment order and the submissions of the appellant and the remand report and rejoinder of the appellant thereon. From the brief discussion in the assessment order, I find that the only reason given by the AO is that FDR is not reflected in the statement of affairs of the appellant as on 31/3/05. I find that in the next ground there is contention raised on behalf of the appellant that the said FDR was handed over to the wife for availment of credit facilities from bank and therefore, the amount of FDR was debited to the account of wife of appellant, Mrs. Rita Dhingra. The confirmation of Mrs. Rita Dhingra is there in the paper book on page 17 where, the amount of FDR has been credited to the account of the appellant by Mrs. Rita Dhingra on 31/3/07 and therefore, there was a justifiable reason of the above FDR not appearing in the statement of affairs of the appellant on 31/3/07. Further, coming to the source of the FDR, the AO has only objected to the source to the extent of Rs. 35,000/- only, which is the cash deposit made by the appellant in the bank account on 5/1/05. I have verified the cash account of the appellant and from the perusal of the cash account, I find <that there was sufficient balance in the cash account on 5/1/05 from which the cash deposit of Rs. 35,000/-could have been made. The AO has no material to justify his suspicion that earlier cash withdrawals from bank have been spent or invested by the appellant somewhere else, and in the absence of such material, no adverse view can be taken against the appellant. I therefore. allow this ground of appeal and delete the addition for Rs. 10 lakhs, as the AO's objection in remand report related only to the source of cash deposit of Rs. 35,000/- on 05.01.2005 and not to the difference i.e. Rs. 10 lakhs minus Rs. 35,000/-, as the balance amount was received through Bank transfers from A/c of G&J Apparels, the proprietary concern of Mrs. Rita Dhingra, the details of which have been placed on record.

5 ITA No.3759/Del/2011 7.2 Finding in Ground No. 5.

I have considered the submissions and the contentions raised. It is clear that the AO has in the remand report contested the addition of Rs. 10,00,000/- out of Rs. 11,05,000/- made by him for the loan/advance made to Mrs. Rita Dhingra. The confirmation of Mrs. Rita Dhingra is on record which proves that FDR of Rs. 10 lakhs has been credited by her in the ledger account in favour of the appellant. It could be matter of dispute whether handing over FDR could result into a valid loan/advance. But the validity of loan/advance is not the issue under dispute. The dispute really is whether this transaction has any element of transfer of funds, source of which remains to be explained. Considering the ledger account submitted from the books of Mrs. Rita Dhingra, the loan transaction consists of credit of FDR of Rs. 10,00,000/- and source of above FDR has already been considered by the AO in para 2 of the impugned order and therefore, there is nothing which remains unexplained as far as purchase of FDR is concerned. The loan transaction, as entered into between the parties, is to be verified with reference to the question whether this transaction of loan involves transfer of funds which needs to be explained. In this case, there is nothing which needs to be explained when source of the same FDR has already been considered by the AO himself in his order. So far as the remaining amount of Rs. 1,05,000/- is concerned, the AO has accepted the source of this being out of 3 months' rent @ Rs. 35,0001- per month collected and credited in bank account of appellant wherein his wife Mrs. Rita Dhingra was a joint holder of account and also this rent has been declared by the appellant in his return of income for A.Y. 2005-06. Accordingly, the entire addition for Rs. 11,05,000/- being explained is directed to be deleted.

8.4 Findings on Ground No.6.

I have carefully examined the AO's observation in the order under appeal, the remand report and the submission of the appellant including the submission made in the rejoinder and after considering the same, I find that the premium of A viva Life Insurance policy of Rs. 5,00,000/- was paid on 7/1/7/04 through cheque no. 590801 encashed on 29/7/04 reference paper book page-8. The copy of 6 ITA No.3759/Del/2011

confirmation of G&J Apparels is available at page 18 of the paper book, wherein the above cheque with the same number is debited "in the account of the appellant in the above firm. There is a cash deposit of Rs. 5 lakhs in the bank account on 29/7/04 which is verified by me from the cash book of G&J Apparels produced before me on requisition. The AO's observation in the remand report that the source of the above insurance policy is the cheque no. 394888, dated 23/6/04 of Rs. 5 lakhs is not correct as the said credit entry is independent of the above transaction against the opening outstanding debit balance of Rs. 21, 12,719.15 as on 114/04. So far as the payment of the premium is concerned, there is absolutely no doubt about the source of above expenditure. The AO has raised doubt about the source of the cheque of Rs. 5 lakhs on 23/6/04 and I have verified that the appellant on 23/6/04 has deposited cash of Rs. 5 lakhs in the bank of Punjab as per cash account page 20 of the paper book from which the above cheque was en cashed. In view of my above observations, the payment of insurance policy of Rs. 5 lakhs stands explained.

Regarding the expenditure of Rs. 1,23,100/-, the explanation of the appellant has been sought to be rejected by the AO in the remand report on the ground that cash flow statement and cash account of the appellant is not correct and reliable. I have verified the objection of the AO and the explanation of the appellant and I find that the AO is not correct in assuming that all expenses of personal contingencies aggregating Rs. 1,23,000/- are incurred in cash and therefore, on that basis, he has found that the same is not accounted for in the cash flow statement and the cash account of the appellant. From the cash flow statement of the appellant at page 25 of the paper book, it is evident that there is a cash withdrawal of Rs. 45,000/- for personal expenses and the difference of Rs. 78000/- (between the total personal expenses of Rs. 1,23,000/- and the cash expenses of Rs. 45,000/-) is because of the fact that such expenses for personal contingencies were incurred through cheques or through direct payments from bank, which cannot be considered in the cash flow statement or the cash account of the appellant.

In view of above, I find that there is no difference in the accounted personal expenses as per the information given during assessment proceedings and therefore, source of the above personal expenses stand explained in view of reconciliation of cash flow statement. Regarding the balance amount of Rs. 1,29,521/-the AO has not raised any objection on the appellant's explanation in his report.

7 ITA No.3759/Del/2011 It is observed that this balance amount for Rs. 1,29,521/- consists of LIC Premium for Rs. 1,07,4711-; mediclaim insurance for Rs. 17,995/- and Travel Insurance for Rs. 4055/-. All these payments have been made through cheques from the Account of G&J Apparels and are, therefore, explained. I therefore allow this ground of appeal and the AO is directed to delete the addition for Rs. 7,52,522/-.

9.2 Additions due to cash credits:

I have considered the submission of the AO and the appellant and find that AO has not considered the cash withdrawals of Rs. 1,89,000/- which he himself has taken in para-vii of the remand report and there is no reason given by the AO for omitting the above withdrawals to work out the availability of the cash deposits. I have already considered the issue of correctness of the cash flow statement in the preceding paras. Accordingly, the explanation of the appellant regarding these source of cash deposits stand explained and there is no justification for addition of Rs. 1,44,000/-. Therefore, appellant gets a relief of Rs. 1,44,000/-."

5. From the above finding of Ld. CIT(A) we observe that Ld. CIT(A) has passed a detailed and well reasoned order wherein, we do not find any infirmity.

6. In view of above, appeal filed by Revenue is dismissed.

7. Order pronounced in the open court on 24th Apr., 2015

Sd./- Sd./-

( G. GEORGE K.) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER Date: 24.04.2015 Sp 8 ITA No.3759/Del/2011

Copy forwarded to:- 1. The appellant 2. The respondent 3. The CIT 4. The CIT (A)-, New Delhi.

5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.

True copy.

By Order (ITAT, New Delhi).

S.No. Details Date Initials Designation 1 Draft dictated on 20/4 Sr. PS/PS 2 Draft placed before author 20/4 Sr. PS/PS Draft proposed & placed before the 3 JM/AM Second Member Draft discussed/approved by Second 4 AM/AM Member 5 Approved Draft comes to the Sr. PS/PS 24/4 Sr. PS/PS 6 Kept for pronouncement 24/4 Sr. PS/PS 7 File sent to Bench Clerk 24/4 Sr. PS/PS Date on which the file goes to Head 8 Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order