Harbans Singh Malhotra S/O, Ludhiana vs Assessee

Harbans Singh Malhotra, Vs. The Income Tax Officer-VII(3) S/o Sh.Gurmukh Singh, Ludhiana. 373-G, BRS Nagar. Ludhiana. PAN No. AKLPM0031E (Appellant) (Respondent)

Appellant by : S/Shri Y.K.Saxena & Amandeep Saxena Respondent by : Shri S.K.Mittal, DR

Date of hearing : 23.06.2015 Date of Pronouncement : 26.06.2015

PER H.L.KARWA, VP :

This appeal filed by the assessee is directed against

the order of the learned Commissioner of Income Tax

(Appeals)-II, Ludhiana dated 27.8.2013 relating to assessment

year 2002-03.

2. Ground No.1 of the appeal reads as under :

"1. That on the facts and in the circumstances of the case, the Ld. CIT (Appeals)-II, Ludhiana has erred in law by holding 2

that AO had applied his mind while reopening the assessment by resorting to the provisions of Section 147 of the Income-tax Act. 1961."

3. At the time of hearing of the appeal S/Shri

Y.K.Saxena and Amandeep Saxena, learned counsel for

assessee did not press for this ground of appeal and

accordingly, I dismiss the same as not pressed.

4. Ground Nos. 2 and 3 of the appeal are directed

against the action of the learned CIT (Appeals) in confirming

the addition of Rs.5,10,000/- made by the Assessing Officer

on the ground that the assessee made investment out of

undisclosed sources. The assessee is a retired Executive

Engineer of Punjab State Electricity Board. On the basis of

Tax Evasion Petition, enquiry was conducted by the Assistant

Director of Income Tax (Investigation)-III, Ludhiana, notice

under section 148 of the Income Tax Act, 1961 (in short 'the

Act') was issued on 15.2.2007, which was served upon the

assessee on 22.2.2007. The assessee submitted his return

of income declaring an income of Rs.1,12,551/- under the

head "salary" on 24.12.2007. Thereafter the Assessing

Officer issued notices under section 143(2) and 142(1) of the

Act. As per information received from the DI(Investigation),

Ludhiana, the assessee lodged FIR with Police Station,

Sarabha Nagar, Ludhiana stating that he had advanced Rs.25

lacs to various persons out which the assessee failed to

explain the source of investment made on 18.9.2001

amounting to Rs.5,10,000/-. The assessee's version was that 3

the aforesaid investment was made after lifting committee

from Shri Jatinder Sharma of Meena Bazar, Ludhiana.

During the course of assessment proceedings, the assessee

submitted that the amount of Rs.5,10,000/- was received from

Shri Jatinder Sharma and payment to Shri Jatinder Sharma

was actually made in installments by cash @ Rs.10,000/- per

month for the last 51 months from 1997. The assessee also

claimed before the Assessing Officer that he had sufficient

funds for making the payment of committee, which was made

by cash and as a matter of practice, committee payment is

always made by cash. The Assessing Officer did not accept

the reply of the assessee stating that the assessee has himself

stated in the FIR that he lifted committee of Rs.5,10,000/-

from Shri Jatinder Sharma of Meena Bazar, Ludhiana on

18.9.2001, whereas this claim of the assessee has been

categorically denied by Shri Jatinder Sharma. The Assessing

Officer concluded that the assessee made investment of

Rs.5,10,000/- out of undisclosed sources and the same was

added to the total income of the assessee.

5. On appeal, the learned CIT (Appeals) confirmed the

addition for the reasons stated in para 5.8 of the impugned

order, and hence the assessee is in appeal before the

Tribunal.

6. I have heard the S/Shri Y.K.Saxena and Amandeep

Saxena, learned counsel for assessee and Shri S.K.Mittal,

learned D.R for the Revenue at length. The learned counsel

for assessee submitted that the learned CIT (Appeals) has 4

called for Remand Report from the Assessing Officer under

section 250(4) of the Act. The copy of Remand Report is

available at page 3 of assessee's Paper Book. In her Remand

Report, the Assessing Officer enclosed affidavit of Shri

Jatinder Sharma dated 28.11.2011. According to learned

counsel for assessee, the Assessing Officer relied upon the

statement of Shri Jatinder Shamra given in the affidavit,

wherein it has been solemnly affirmed that the assessee had

contributed Rs.10,000/- per month for about 51 months

since 1997 in the association of 51 members of committee.

Shri Jatinder Sharma has also stated in the affidavit that the

assessee was the last member amongst 51 members to take

sum of Rs.5,10,000/- in 2001. Shri Jatinder Sharma further

stated in his affidavit "That the above sum does not reflect in

my books of account as I was only entrusted with collecting

and to hand the same to the winner of draw". The learned

counsel for assessee submitted that a bare reading of the

statement of Shri Jatinder Sharma given on solemn

affirmation in the said affidavit corroborates the version of

the assessee that he in fact lifted the committee amount of

Rs.5,10,000/- on 18.9.2001, as stated by him in the FIR

No.208, referred to above. The next contention of the learned

counsel for assessee is that the learned CIT (Appeals) has

rejected the Remand Report of the Assessing Officer merely on

the ground that the affidavit of Shri Jatinder Sharma filed

during the assessment proceedings was at variance with his

statement recorded by ADI, and no evidence was produced by

the assessee, or Shri Jatinder Sharma regarding the 5

contribution of Rs.10,000/- per month towards the committee.

The learned counsel for the assessee vehemently argued that

the statement of Shri Jatinder Sharma, as referred to by the

learned CIT (Appeals), has never been confronted to the

assessee and, therefore such statement, even if recorded by

ADI at the back of the assessee, cannot be the basis for

addition either by the Assessing Officer or by the learned CIT

(Appeals). In my considered view, there is a merit in the

above submissions of the learned counsel for assessee. The

Remand Report submitted by the Assessing Officer reads as

under :

No. 254

Office of the Income Tax Officer Ward VII(3), Rishi Nagar Ludhiana 30.11.11

To The Commissioner of Income Tax(A)-II Ludhiana.

Sir, Sub:- Appeal No. 235/CIT(A)-II/ Ldh 107-08 in the case of Sh.Harbans Singh Malhotra, 373-G, BRS Nagar, Ludhiana-A.y. 2002-03 reg:-

Kindly refer to your office letter No. CIT(A)-II/Ldh/11-12/1036 dated 04.11.2011 on the subject cited above.

In this regard Sh. Jatinder Sharma was summoned in this office. Mr. Jatinder Sharma of M/S Raja Telecom has not attended the office rather he has filed an affidavit in support of the assessee's claim. Sh Jatinder Sharma has stated that Sh. H.S. Malhotra contributed Rs.l0,000/- per month for about 51 months since 1997 in the association of 51 members of the committee. That Mr. Malhotra was the last among the members to take the sum of Rs. 5,10,000/- in 2001. He has also stated that this sum does not reflect in his books. Affidavit of Sh. Jatinder Sharma of M/S Raja Telecom is placed on file for your kind perusal. 6

In view of the above facts the appeal may be decided on merits.

Encl:-Copy of Affidavit

Yours faithfully (Balwinder Kaur) Income Tax Officer Ward VII(3), Rishi Nagar Ludhiana.

7. On perusal of the Remand Report, it would be clear

that the Assessing Officer has never rejected the affidavit of

Shri Jatinder Sharma. The Assessing Officer has not given

any adverse comments to the effect that the facts stated by

Shri Jatinder Sharma are incorrect. However, the learned

CIT (Appeals) has rejected the Remand Report on flimsy

ground stating that the affidavit submitted by Shri Jatinder

Sharma was at variance with his statement recorded by the

ADI. It is true that the statement of Shri Jatinder Sharma,

as referred to by the learned CIT (Appeals) has never been

confronted to the assessee, and therefore, such statement

even if recorded by the ADI at the back of the assessee,

cannot be the basis for rejecting the statement of Shri

Jatinder Sharma stated in the affidavit. The statement, if

any, has been recorded by the ADI has never been confronted

to the assessee, and, therefore, such statement, even if

recorded by the ADI at the back of the assessee cannot be

relied upon and, therefore, the learned CIT (Appeals) was not

justified in rejecting the affidavit of Shri Jatinder Sharma

filed during the Remand proceedings. No opportunity was

afforded by the ADI to the assessee to crosses examine Shri 7

Jatinder Sharma. The learned counsel for assessee also

submitted that the assessee had never stated in his reply that

he had made contribution towards committee after

withdrawing cash from the bank account. The learned

counsel for assessee invited my attention to a reply dated

23.2.2011 (pages 10 to 14 of assessee's Paper Book) and

submitted that in the said reply, the assessee has stated

"That in any case, the assessee and his wife have sufficient

funds for making the payment of committee, for which FIR was

lodged". It was also pointed out that in the said reply, it is

clearly stated that as a matter of practice monthly payments

towards committee are made by cash. The next contention of

the learned counsel for assessee was that the learned CIT

(Appeals) while passing the order has drawn peak of

withdrawals and deposits in respect of bank account of the

assessee only for the period from 1.1.1999 to 31.3.2001.

According to the learned counsel for assessee, the learned CIT

(Appeals) failed to appreciate that the assessee had served the

Punjab Government for more than 36 years and having

banking transactions prior to the aforesaid period also.

Moreover, no cognizance of bank account of his wife

Smt.Gurswaran Kaur furnished to the learned CIT (Appeals)

was taken without assigning any reason. The peak of

withdrawals and deposits in respect of bank account of the

assessee mentioned in the impugned order was not confronted

to the assessee by the learned CIT (Appeals). Even the

learned CIT (Appeals) has not correctly reflected the dates and

figures mentioned in bank account of the assessee. It was 8

also stated by the learned counsel for assessee that

Smt.Gurswaran Kaur was having rental income from the

industrial shed at Ludhiana. She was also having rental

income from a portion of their residential house. The rental

income from industrial shed was being received by cheque.

Accordingly, it was submitted that the assessee and his wife

were having sufficient cash in their hands to make the

payment of Rs.10,000/- per month for the committee. Taking

into consideration the entire facts and circumstances of the

present case, I think it proper to set aside the order of the

learned CIT (Appeals) on this issue and remand the matter to

the Assessing Officer with a direction to decide the issue

afresh in accordance with law after affording due and

reasonable opportunity of being heard to the assessee.

Before parting with this case, it is made clear that the

Assessing Officer may examine Shri Jatinder Sharma and

member(s) of the committee, if he finds it necessary for

deciding the issue correctly.

8. In the result, the appeal is allowed partly for

statistical purposes.

Order pronounced in the open court on this 26th

day of June, 2015.

Sd/- (H.L.KARWA) VICE PRESIDENT

Dated : 26 t h June, 2015 *Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR. 9

Assistant Registrar, ITAT, Chandigarh