Kishorbhai Chhotalal Parmar, Surat vs Department Of Income Tax

आयकर अपील सं./I.T.A. No.1469/Ahd/2011 ( नधा रण वष / Assessment Year : 2007-08) The Income Tax Officer बनाम/ Shri Kishorbhai Ward-9(2) Vs. Chhotalal Parmar Surat C/o.Parmar Boot House 11/215 Bhagaltalav, Surat थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : ADQPP 1400 Q (अपीलाथ# /Appellant) .. ($%यथ# / Respondent)

अपीलाथ# ओर से / Appellant by : Shri Nimesh Yadav, Sr.DR $%यथ# क' ओर से/Respondent by : Shri S.B. Vaidya, AR

ु वाई क' तार*ख / सन Date of Hearing 06/04/2015 घोषणा क' तार*ख /Date of Pronounce ment 17/04/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Revenue is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-V, Surat ('CIT(A)' in short) dated 17/01/2011 pertaining to Assessment Year (AY) 2007-08. The Revenue has raised the following grounds of appeal:-

ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -2-

1. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.27,96,075/- made by the A.O. u/s.69 of the Act despite the fact that assessee failed to explain the source of the credits made in the four undisclosed bank accounts.

2. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.27,96,075/- made by the A.O. u/s.69 of the Act after accepting the plea of the assessee that cash deposits made in these four undisclosed accounts were made from the cash withdrawn from these accounts on earlier occasions despite the fact that there was sufficient cash available with the assessee as per the cash book and assessee failed to furnish any cogent reason for the withdrawals.

3. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.27,96,075/- made by the A.O. u/s.69 of the Act after accepting the plea of the assessee that an amount of rs.6,47,847/- was the loan amount take from four friends/relatives despite the fact that these loans were not reflected in the balance sheets of the lenders. Further the assessee failed to prove the genuineness and the credit worthiness of these transactions.

4. It is therefore, prayed that the order of the ld.CIT(A) be set aside and the Assessing Officer's order be restored.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 24/12/2009. While framing the assessment, the Assessing Officer (AO in short) made addition of Rs.38,95,184/- on account of unexplained cash credit/bank deposit and investment in various securities by the assessee from undisclosed bank accounts by invoking the provisions of ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -3- section 69 of the IT Act. Against this, assessee filed an appeal before the ld.CIT(A), who after considering the submissions of the assessee restricted the addition to the extent of Rs.10,99,109/-. The ld.CIT(A) further directed the AO to re-examine the case from the angle of reopening the of AY 2006-07 in order to bring the opening cash balance of Rs.10 lacs and opening bank balance in these bank accounts of Rs.2,07,231/- under the purview of taxation. Aggrieved by the order of the ld.CIT(A), the Reve4nue is in appeal before us.

3. Grounds Nos.1 to 3 are inter-connection and, therefore, the same is decided together. The ld.Sr.DR Shri Nimesh Yadav vehemently argued that the ld.CIT(A) failed to appreciate the fact that the assessee had not disclosed the bank account. He drew our attention towards the statement of facts, wherein the bank accounts are mentioned. He made submissions as were made in the statement of facts. He submitted that the ld.CIT(A) ought to have sustained the addition.

3.1. On the contrary, ld.counsel for the assessee submitted that there is no error into the order of the ld.CIT(A). He submitted that the AO failed to take note of the fact that the said accounts were held in joint-names with relatives and the deposits in the said accounts comprised mainly of loans from friends and relatives, cash deposits, redemption of mutual ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -4-

fund and interest income. The assessee had also submitted loan confirmations as well as details of mutual fund redeemed during the year. However, the AO did not consider the submission of the assessee. He submitted that during the course of assessment proceedings, the assessee had submitted vide letter dated 17/12/2009 that a part of cash deposit in different bank accounts was made out of cash on hand generated by way of withdrawals of earlier years as reflected in opening balance and by way of withdrawals of cash balance from different bank accounts in current year.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The contention of the ld.counsel for the assessee is that the accounts were held jointly with other relatives. The amount so credited into the account the accounts generated from cash on hand, past savings and loan received from friends and relatives. He submitted that the amount also comprised of the maturity amount of the mutual funds. We find that the ld.CIT(A) after considering the submissions of the assessee has decided this issue by observing as under:-

"It is seen from the details submitted that the appellant had made cash withdrawals from all these four accounts to the tune of Rs. 14,78,000/= (supra) and therefore a substantial cash balance was lying in the hands of the appellant which were reapplied for deposition of cash in these bank accounts. Moreover, as per the cash book of the ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -5-

current year as well as earlier year submitted before me, it is observed that there was an opening cash balance of Rs. 10,00,000/= which must have been used for deposition in bank account. It is also observed from the current year's cash book that there was a negative cash balance of Rs.5,37,000/= on 30-11-2006 which was the peak amount of negative balance suggesting the unexplained cash deposit. Since a substantial cash was withdrawn during the earlier year, there is a reason to believe that the same could have been on hand with the appellant which might have been applied by way of deposition in the current year. However, the fact remains that all these accounts were operated in earlier year also and therefore, when the contention of the appellant about cash on hand is to be accepted, then it is also required to reopen the assessment of the earlier year i.e. A.Y. 2006-07.

In short, it can be concluded that the appellant has satisfactorily explained the source to the tune of Rs.10,00,000/= being the opening cash balance and reapplication of Rs.14,78,000/ = being withdrawals of current year. However, the negative balance of Rs.5,37,000/= in current year's cash book remains unexplained and therefore, that must be treated as unexplained investment in form of cash deposit. Also, there was an opening balance of Rs. 2,07,231/ = in aggregate in these bank accounts which cannot be treated as unexplained investment of the current year.

Regarding loan transactions in the impugned bank account, it is observed that the appellant had obtained loans from the under mentioned parties.

a. Chandan Parmar Rs. 2,79,450/= b. Bhuderji Mithal Rs. 88,690/ = c. Hansaben Parmar Rs. 2,09,707/= d. Jayshree Parmar Rs. 70,000/= ------------------- Rs. 6,47,847/= ========= ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -6-

During assessment proceedings, the appellant had submitted confirmation letters of these parties alongwith their bank pass books. It is also observed that the depositor viz. Jayshree Parmar was assessed with the same AO where addition in respect of such bank account was made in her case and the said person had given the loan to the appellant from the said bank account only. In respect of other loans, the appellant had submitted the confirmations as well as their pass books from where the loans were given to the appellant and the AO did not give any rebuttal against these loans except that their names were not appearing in the Balance sheet of the appellant. However, since these bank accounts were not shown by the appellant, obviously, their names could not be reflected in the accounts filed alongwith the return of income. The AO did not give any specific rebuttal against these loans. Therefore, when the source of funds credited in the impugned bank account was explained with evidence, there was no justification in treating the same as the income of the appellant.

Considering the above discussion, it can be concluded that out of the total deposit of Rs. 38,95,184/=, certain sources were explained by the appellant and therefore, the ultimate position of the sustained addition is worked out as under:

Rs. Rs.

Addition as per Assessment Order 38,95,184

Less : Deposits stands explained and not treated as income

a. Opening Cash Balance, 10,00,000 subject to further direction hereinafter

b. Cash withdrawals during the 14,78,000 year reapplied for deposition

c. Loans from friends and 6,47,847 relatives ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -7-

d. Opening bank balance in the 2.07.231 33,33,078 impugned bank accounts, subject to further direction hereinafter

5,62,109

Add : Negative balance found in cash 5,37,000 book on 30-11-2006

Total addition sustained 10,99,109"

4.1. There is no dispute with regard to the fact the account Nos.9427,61506, 61175 & 61095 with the Surat Peoples Co-operative Bank Ltd., Bhgatalao Branch, Surat, were not disclosed by the assessee to the Income Tax Department while filing the return. The explanation of the assessee in respect of these accounts was that the accounts were jointly held with other persons and the amount credited therein was out of the savings, loan and maturity of mutual funds. In our considered view, if any, credit entries found in the accounts of the assessee, it is incumbent upon him to explain the source of such credit. In the present case, the assessee has merely made a sweeping statement that these amounts were out of loans from friends and relatives, cash deposits, interest income and from maturity of mutual funds. The assessee also furnished certain confirmations from Jayshreeben Parmar, Chandan Parmar, Hansaben Parmar and Bhudarji Mithal. However, the assessee has not furnished the proof of creditworthiness of such creditors.

ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -8-

Therefore, the ld.CIT(A) was not justified in deleting the addition of Rs.6,47,847/- being the loan received from friends and relatives without any supporting evidences of the creditworthiness of such creditors. Further, the ld.CIT(A) observed that there was an opening cash balance of Rs.10 lacs which he presumed that amount might have been used for depositing in the bank account. Before us, the assessee could not point out as to whether the amount of Rs.10 lacs shown as cash on hand related to the account declared by the assessee. These accounts are not the recorded accounts. The assessee was required to demonstrate with evidence as to how this cash was generated. Therefore, we cannot affirm the order of the ld.CIT(A), same is hereby set aside. The ld.CIT(A) ought to have passed a speaking order in respect of genuineness of the transactions and creditworthiness of depositors. It is also not clear whether the transactions in question had been reflected by other persons or not in their respective books of accounts. And also whether such transactions were reflected in their respective income-tax returns of the parties, if not what action has been taken in their hands. Under these facts, we restore this issue back to the file of ld.CIT(A) for decision afresh in the light of our observation made hereinbefore. Thus, ground Nos.1 to 3 of Revenue's appeal are allowed for statistical purposes.

5. Ground No.4 is general in nature require no independent adjudication.

ITA No.1469/Ahd/2011 ITO vs. Shri Kishorbhai Chhotalal Parmar Asst.Year - 2007-08 -9-

6. In the result, the appeal of the Revenue is allowed for statistical purposes.

Order pronounced in the Court on Friday, the 17th day of April, 2015 at Ahmedabad.

Sd/- Sd/- (एन.एस.सैनी) (कुल भारत) लेखा सद य या यक सद य ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 17/ 04 /2015 ट*.सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ# / The Appellant

2. $%यथ# / The Respondent.

3. संबं4धत आयकर आयु6त / Concerned CIT

4. आयकर आय6 ु त(अपील) / The CIT(A)-V, Surat

5. 7वभागीय $ त न4ध, आयकर अपील*य अ4धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड; फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स%या7पत $ त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 09.4.15 (dictation-pad 11-pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..15.4.2015

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......17.4.15

7. Date on which the file goes to the Bench Clerk.....................17.4.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order...............