Jagtar Singh Prop., Faridkot vs Assessee

This appeal of the assessee arises from the order of the CIT(A),

Bathinda, dated 06.08.2013 for the assessment year 2009.10. The assessee

has raised following grounds of appeal:

1) That the worthy CIT(A) has erred in dismissing the appeal and upholding the addition of Rs.16,00,000/-.

2 2) That the worthy CIT(A) has failed to consider the fact that no sufficient/reasonable opportunity was afforded to the assessee to represent his case.

3) That the worthy CIT(A) has erred to consider the fact that the AO collected and relied upon the information from the bank at the back of the assessee and that too after the last date of hearing on 08.12.2011 and that too without confronting the same to the assessee during the course of assessment proceedings.

4) Notwithstanding above facts, the worthy CIT(A) has erred in not entertaining and rejecting the vital additional evidence which goes to the route of the issue in respect of which the addition has been made by the AO and upheld by the ld.

CIT(A).

5) That the worthy CIT(A) has erred in not considering the fact that the amount deposited in the joint a/c of the assessee with his wife belonged to his wife only, which she has received from her father at the time of hear marriage solemnized on 29.06.2008 out of sufficient funds withdrawn by him from his books of account.

6) Notwithstanding the ground of appeal no.5, the CIT(A) has erred in confirming the addition of Rs.16,00,000/- being the cash deposited in the joint a/c of the assessee with his wife by considering the bank a/c only of the assessee.

7) That the ld. CIT(A) has also not considered the fact that the wife of the assessee later on withdrew the said amount (as she could not pull on with the assessee) and had purchased three plots in Faridkot with the said amount for total sum of Rs.16,84,000/- and the said purchases were even made before the date of assessment order i.e. on 09.12.2011.

8) That otherwise the worthy CIT(A) has not considered that the addition made u/s 68 is uncalled for in view of the fact that the joint a/c in question is not part of the account books of assessee maintained for the business s purpose of the assessee. 3

9) That the appellant craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off."

2. The brief facts of the case are that the case of the assessee was

selected for scrutiny as per CASS and scrutiny notice u/s 143(2) of the Act

was issued on 24.08.2010 and thereafter the assessee has been seeking

adjournments on one pretext or the another and had submitted certain

details. It is observed by the AO at page 2 that the assessee is doing

business of manufacturing and sale of hardware goods. Necessary evidence

in this regard has been filed by the assessee during the course of assessment

proceedings. In response to notices under sections 143(1) and 142(1) of the

Act, Sh. Dinesh Gupta, CA, Sh. Gautam Bansal Advocate and Sh. Sanjeev

Arora, Advocate of the assessee attended the assessment proceedings from

time to time and filed the information as called for during the course of

assessment proceedings and information filed by the assessee has been

examined by the test check from the documents produced by the assessee

during the course of assessment proceedings. The AO observed that the

assessee was maintaining saving bank account with Punjab & Sind Bank,

Faridkot and HDFC Bank, Faridkot. On 23.11.2011, the counsel for the

assessee was specifically asked to explain the source and evidence for the

cash deposits amounting Rs.16,00,000/- in Punjab & Sind Bank, Faridkot 4

and the case was adjourned to 08.12.2011. On 08.12.2011, nobody attended

the proceedings nor written reply was received. The AO observed that the

assessee has nothing to say in the matter and in the meantime, the

information was called from the Manager, Punjab & Sind Bank, Faridkot,

vide letter No. 339 dated 09.12.2011 regarding the saving bank account

maintained by the assessee with Punjab & Sind Bank, where an amount of

Rs.16 lacs i.e. Rs. 7 lacs on 08.07.2008 and Rs.9 lacs on 26.07.2008 has

been deposited in cash during the year. The AO further observed that the

assessee could not explain in the source of deposits in the bank and treated

the same as income of the assessee from undisclosed sources, as per

provisions of section 68 of the Act and accordingly added to the income of

the assessee.

3. Before the ld. CIT(A), assessee the raised ground that no reasonable

opportunity of hearing was given to the assessee and information from

Punjab & Sind Bank, Faridkot has been called for at the back of the assessee

and without confronting the same to the assessee. The ld. CIT(A) rejected

the ground of the assessee.

3.1. Regarding unexplained cash deposits in the bank account amounting

to Rs.16,00,000/-, the findings of the ld. CIT(A) for the sake of convenience

are reproduced, as under:

5

"For the sake of convenience and to avoid repetition of facts, the grounds of appeal at S.No. 4,5,6 & 7 are being taken up together for adjudication. During assessment proceedings, the AO required to the assessee on 23.11.2011 to explain the source and evidence of cash deposits of Rs.16,00,000/- (Rs.7,00,000/- on 08.07.2008 and Rs.9,00,000/- on 26.07.2008) in saving bank account no.921933 maintained with Punjab & Sind Bank, Faridkot. The date of hearing in this regard was fixed for 08.12.2011. However, on the appointed date of hearing, neither anybody attended the proceedings nor any explanation /evidence regarding the source of cash deposit was tendered/adduced by the appellant. Accordingly, the AO held the amount of Rs.16,00,000/- as assessee's income from undisclosed sources and added the same to the income returned. The Ld. A/R of the appellant has filed before me an Audit Report in the case of Sh. Balwinder Singh Prop. M/s. Mitharu Gear Industry, Faridkot for the year ending 31.03.2009 to show that he had withdrawn Rs.42,69,000/- and a part of it was given by him to his daughter Smt. Parvinder Kaur who happened to be the wife of the assessee. That out of the said amount, Rs.16,00,000/- were deposited by her in the joint account maintained by her with her husband Sh. Jagtar Singh. This evidence was not produced by the appellant during the course of assessment proceedings before the AO nor any such contention was raised. Rule 46A of the I.T. Rules, 1962 provide that the appellant shall be entitled to produce before the Deputy Commissioner (Appeals) or as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the AO except in the following circumstances, namely:-

i) Where the AO has refused to admit evidence which ought to have been admitted or

ii) Where the appellant was prevented by sufficient cause from producing the evidence which was called upon to produce by the AO or

iii) Where the AO has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

From the perusal of the assessment order, it is found that the AO at no stage refused to admit any evidence which ought to have been 6

admitted. The appellant has not been able to make out any case that it was prevented by sufficient cause form producing the evidence which was called to produce by the AO. From the details given above, it would be seen that the case of the assessee was fixed for hearing 11 times during the period 09.09.2010 and 08.12.2011 but at no stage the assessee expressed any intention to adduce any such evidence as is being adduced at appellate stage. Complete details of the opportunities afforded by the AO have been given hereinabove in this order. In the circumstances, it cannot be said that the assessee was prevented by a sufficient cause from producing the evidence which was called upon to produce by the AO. Further, the assessee was also not prevented by a sufficient cause from producing before the AO any evidence which was relevant to any grounds of appeal. Accordingly, the application of the assessee u/s 250 of the Act read with Rule 46A of the IT Rules, 1962 cannot be entertained and the same is herby rejected.

It has also been contended by the Ld. A/R of the appellant that the bank account is not a part of the account books and so no addition u/s 68 of the Act could be made. In this regard, it may be stated that wrong mentioning of section does not vitiate the order and further, the AO in the assessment order has clearly mentioned that in the absence of any evidence regarding the source of cash deposits, the amount of Rs.16,00,000/- is being held as income of the assessee from undisclosed sources. Thus, this contention of the appellant also cannot be accepted.

On the facts and in the circumstances of the case, the addition of Rs.16,00,000/- made by the AO is sustained and the grounds of appeal in this regard are herby dismissed."

4. The Ld. counsel for the assessee, Sh. Sudhir Sehgal, argued that

during the course of assessment proceedings on 23.11.2011, the assessee

was asked to explain the source and evidence for the deposit of cash deposits

in the Punjab & Sind Bank and the case was adjourned to 08.12.2011. The

assessee had engaged his counsel in order to appear before the AO. The 7

assessee never knew that nobody had appeared before the AO on

08.12.2011. He further submitted that on 09.12.2011, the AO received the

a/c statement from the bank and on the same day without giving any

opportunity to the assessee passed the assessment order.(The facts are very

much clear from the assessment order at page 2). He submitted that the bank

account wherein Rs.16 lacs was deposited was a joint A/c of the assessee

alongwith his wife (PB 21-22) and the said fact was very much known to the

AO as the information was called by the AO from the bank. The ld. counsel

stated that the AO without giving any show cause or any opportunity to the

assessee added the entire amount of Rs.16 lacs to the income of the assessee.

4.1. The Ld. counsel further submitted that during the proceedings before

the ld. CIT(A), the detailed submissions were filed alongwith the relevant

proofs wherein it was very much evident that the entire amount belonged to

the assessee's wife and the source from where the wife of the assessee

received the said amount was clearly explained but the ld. CIT(A) rejected

the additional evidence by holding that enough opportunities were given to

the assessee at the time of assessment proceedings.

4.2. As regards the additional evidence, the ld. counsel submitted that the

ld. CIT(A) has erred in not accepting the additional evidence as filed by the

assessee. The additional evidence needs to be accepted as the same goes to 8

the root of the matter for deciding the case of the assessee. He stated that

from the sequence of events it is clear that the AO received the information

on 09.12.2011 from the bank and on the same day without giving any

opportunity to the assessee, the order was passed. The AO should have

allowed the assessee to cross examine the bank details. The elementary

principle of natural justice is that the assessee should have knowledge of the

material which is going to be used against him so that he can rebut the same.

He further submitted that even in the remand report, the AO has not given

any comment regarding the details submissions as filed by the assessee and

merely stated that the assessee is not entitled to produce any evidence after

the assessment proceedings (remand report at PB-61). He further submitted

that the assessee was prevented by sufficient cause from producing before

the AO the relevant evidence called, because the marital life of the assessee

was not going on well. The wife of the assessee had made many complaints

to the police authorities, in the women cell of police and many court cases

including case for maintenance has been filed by his wife against the

assessee, due to which assessee was under constant depression.

4.3 The ld. counsel for the assessee has placed reliance on plethora of

judgments wherein it has been held that the if the evidences are vital and in

the interest of justice, the same must be admitted, which are as under: 9

i) CIT vs. Mukta Metals Works as reported in (2011) 336 ITR

555.

ii) CIT vs. Giani Bhai Wahav Bhaui as reported in 232 ITR 900

iii) Electra Jaipur Pvt. Ltd. vs. IAC as reported in 26 ITD 236

iv) CIT vs. Parimal Kanti Chanda (Gauhati) reported in 291 ITR 77

v) Paras Rice Mill as reported in 90 TTJ 789

vi) Ichalkaranji Co-operative Spinning Mills Ltd. vs. DCIT (ITAT, Pune) (TM) reported in 103 TTJ 593.

vii) ITO vs. Bhagwan Dass Contractor (2012) 17 ITR (Trib) 446)

Wherever the assessee is prevented by a sufficient cause from producing the

evidence then such additional evidence should be admitted. The reason for

the same is very simple in the light of the settled position of law that appeal

proceedings are continuation of the assessment proceedings. In this regard

reliance is being placed on the decision of the Hon'ble Supreme Court in the

case of CIT vs. Kanpur Coal Syndicate, 53 ITR 225.

4.4. The ld. counsel for the assessee, Sh. Sudhir Sehgal further submitted

that the AO in his remand report as well as ld. CIT(A) has held that the

assessee was given sufficient opportunities during the course of assessment

proceedings. The AO has referred to the many dates prior to 23.11.2011 on

which adjournments were taken by the assessee. It is submitted that it was

only on 23.11.2011 when the assessee was asked regarding the source of the

amount deposited in the bank a/c and on the next hearing date, the case was 10

decided after making an addition of Rs.16 lacs. As such, the AO as well as

the ld. CIT(A) are not correct in saying so.

4.5. As regards the issue on merits, the ld. counsel for the assessee

submitted that the bank a/c was a joint bank a/c of the assessee and his wife

and the entire amount of Rs.16 lacs deposited in the bank a/c belonged to the

assessee's wife. The said amount was given by the assessee's father-in-law.

It was the second marriage of the assessee and second marriage of the wife

as well, which was solemnized on 29.06.2008. The deposit entries in the

Bank A/ c are on 08.07.2008 amounting to Rs.7 lacs and on 26.07.2008

amounting to Rs.9 lacs. The wife of the assessee had a daughter from her

previous marriage and the assessee accepted the liability of the daughter.

Because of this reason, the father-in-law of the assessee gave an amount of

Rs.16 lacs at the time of marriage to his daughter, which was deposited by

her in the joint bank account. He further stated that the father-in-law of the

assessee had withdrawn Rs.42,69,000/- from his capital account (PB-250 in

the year of marriage which proves that he is a person of means and on the

other hand the assessee has very limited resources and the same can be seen

from the financial statements of the proprietrorship concern owned by the

assessee (PB23 to 26 and PB 1 to 16). Since the wife of the assessee could

not pull on with the assessee, so she withdrew the amount from the bank and 11

purchased three plots (total amounting to more than Rs.16,00,000/-) before

the date of assessment order (copies of the registries purchased is given form

PB 36-56). Further, the assessee was not having good terms with his wife,

and the wife had also filed lot of complaints against the assessee and his

family because of which the assessee was under depression. He stated that in

view of the above it is very clear that in actual the amount do not belong to

the assessee at all. The same belongs to the wife of the assessee. Even then,

the complete source for the same has also been explained and under such

circumstances there cannot be any addition in the hands of the assessee.

Thus, the AO has made addition without considering the above submissions

of the assessee, made the addition u/s 68 of the Act. The entries for cash

have been found in the bank a/c of the assessee which cannot be termed as

the books of accounts of the assessee.

5. The Ld. DR, on the other hands, relied upon the orders of both the

authorities below.

6. We have heard the rival contentions and perused the facts of the case.

The undisputed facts of the case are that the assessee in the beginning had

been taking various adjournments in the matter but also filed various

documents as required from time to time by the AO, which were examined

by the test check, which in fact, is part of the assessment order at page-2. It 12

is also undisputed fact that the assessee was asked to submit source of

deposits of Rs.16,00,000/- on 23.11.2011 in the Punjab & Sind Bank,

Faridkot. The case was finally adjourned to 08.12.2011 and none attended

on the said date and the AO passed the assessment order on 09.12.2011 after

collecting information from the Manager, Punjab & Sind Bank, Faridkot, at

the back of the assessee without confronting the same to the assessee. No

show cause notice was given to the assessee with regard to the addition of

Rs.16,00,000/-, as income of the assessee. Even if, the AO has to make

assessment in a manner under section 144 of the Act, the AO cannot make

wild additions or no addition can be made on conjectures or surmises. There

was no material on record before the AO to prove that Rs.16,00,000/- (i.e.

Rs.7,00,000/- on 08.07.202008 and Rs.9,00,000/- on 26.07.2008) was

income from undisclosed sources u/s 68 of the Act and belonged to the

assessee Therefore, the AO is not justified in passing such order. However,

the assessee submitted the additional evidence and explanation to the

deposits of Rs.16,00,000/- before the ld. CIT(A) under Rule 46A of the I.T.

Rules, 1962 and in the facts and circumstances of the case and in view of our

findings given hereinabove, the assessee was prevented by sufficient cause

from producing the evidence which was called upon to produce before the

AO. Therefore, the ld. CIT(A) should have accepted the additional evidence 13

after examining the same and after taking report of the AO, should have

decided the matter. It was pre-mature on the part of the ld. CIT(A) to

confirm the action of the AO as income of Rs.16,00,000/- from undisclosed

sources. Moreover, the evidences are vital and in the interest of justice, the

same should be admitted. The reliance has rightly been placed by the ld.

counsel for the assessee in the cases of CIT vs. Mukta Metals Works

(supra), CIT vs. Mukta Metals Works (supra), CIT vs. Giani Bhai Wahav

Bhaui (supra), Electra Jaipur Pvt. Ltd. vs. IAC (supra), CIT vs. Parimal

Kanti Chanda (supra), Paras Rice Mill (supra) , Ichalkaranji Co-operative

Spinning Mills Ltd. vs. DCIT and ITO vs. Bhagwan Dass Contractor

(supra).

6.1. In the facts and circumstances of the case and in the interest of natural

justice, the matter is set aside to the file of the ld. CIT(A), who is directed to

admit the additional evidence submitted by the assessee and decide the issue

on examining the same or by getting the report from the AO but by affording

adequate opportunity of being heard to the assessee. Accordingly, in the

interest of justice, the matter is set aside to the file of the ld. CIT(A), who

will decide the issue denovo after considering the additional evidence and

after affording adequate opportunity of being heard, as directed hereinabove. 14

Accordingly, all the grounds of the assessee are allowed for statistical

purposes.

7. In the result, the appeal of the assessee in ITA No.662(Asr)//2013 is

allowed for statistical purposes.

Order pronounced in the open court on 17th March, 2015.

Sd/- Sd/- (A.D.JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17th March, 2015 /SKR/ Copy of the order forwarded to: 1. The Assessee:Sh.Jagtar Singh, Faridkot. 2. The Income Tax Officer, Ward-3(4), Faridkot. 3. The CIT(A), Bathinda. 4. The CIT, Bathinda. 5. The SR DR, ITAT, Amritsar. True copy By order

(Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.