Kuldeep Kumar Sharma , Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 1018/JP/2011 fu/kZkj.k o"kZ@Assessment Year : 2008-09

Shri Kuldeep Kumar cuke The ITO Sharma, B-2, Satya Nagar, Vs. Ward- 3 (1) Jhotwara, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AVEPS 4062 P vihykFkhZ@Appellant izR;FkhZ@Respondent

vk;dj vihy la-@ITA No. 1049/JP/2011 fu/kZkj.k o"kZ@Assessment Year : 2008-09

The ITO cuke Shri Kuldeep Kumar Ward- 3 (1) Vs. Sharma, B-2, Satya Nagar, Jaipur Jhotwara, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AVEPS 4062 P vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Kulbhushan Sharma, CA jktLo dh vksj ls@ Revenue by : Shri Rajesh Ojha, JCIT

lquokbZ dh rkjh[k@ Date of Hearing : 31/12/2014 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 19 /02/2015

vkns'k@ ORDER PER R.P. TOLANI, JM

These are cross appeals against the order of the ld. CIT(A)-1,

Jaipur dated 07-09-2011 for the assessment year 2008-09. 2 ITA No.1018/JP/2011

Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

2.1 The assessee has raised the ground against the order of the ld.

CIT(A) challenging the retention of additions of Rs. 7.70 lacs u/s 69 of

the Act qua the deposits in bank account.

2.2 The Revenue has raised the ground as under:-

''Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in restricting the addition of Rs. 14.72 lacs made by the AO on account of unexplained cash deposits in the bank account.''

3.1 Brief facts of the case are that the assessee claims to be a civil

contractor and has declared income from house property and civil

contract works in the return of income. The turnover being less than Rs.

40.00 lacs, books of accounts are not maintained and the income in this

behalf is offered u/s 44AD of the I.T. Act on presumptive basis. During

the course of assessment proceedings, on the basis of AIR information

AO found that the assessee had deposited huge cash amounts in Canara

Bank, Vidhyadhar, Jaipur. Regarding the source thereof assessee replied

as under:-

''Cash deposits in Bank A/c

(1) Deposit of Rs. 10 lacs:- An agricultural land was sold by Mr. Kuldeep Sharma for Rs. 10,00,000/-. The same was deposited in the bank.

3 ITA No.1018/JP/2011 Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

(2) Deposits of Rs. 20 lacs:- Cash gift of Rs. 20,00,000/- was received by Kuldeep Sharma from his father.

(3) Other cash deposits & payments:- All other deposits and payment related to business only.''

It was stated that the assessee has received cash amounting to Rs. 20,00,000/- from his father Shri Ramji Lal Sharma on 20-04-2007. On being asked to prove cash availability of Rs. 20,00,000/- with Shri Ramji Lal Sharma, the father of the assessee. It was further stated that the father of the assessee is a cultivator at Village-Dhola, Tehsil-Jamuwaramgarh, Distt. Jaipur and he sold his agriculture land on 16-04-2007 for a sale consideration of Rs. 10,00,000/- and it has also stated that the father of the assessee had kept past saving as well as agricultural receipts of past time and out of them he has gifted a sum of Rs. 20,00,000/- to Shri Kuleep Sharma in cash.

The AO accepted assessee's version about the sale of agricultural land by

him for the remaining amounts AO was of the view that the assessee has

not fully demonstrated the financial capacity of his father. The other cash

deposits in the account represent his income from property business. The

gift deed filed by the assessee was only an afterthought to justify the cash

available with his father. The facts that father retained the old sale

proceeds of agricultural land and used them for money landing business

was not believed. Similarly sources of other deposits were not accepted. 4 ITA No.1018/JP/2011

Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

Consequently, a sum of Rs. 22,42,000/- was added to the assessee's

income.

3.2 Aggrieved, the assessee preferred first appeal; wherein it was

contended that qua the amount of Rs. 10.00 lacs given by the father of the

assessee; an amount of Rs. 4.28 was received by him by sale of

agricultural land in the year 1996. Besides, the father of the assessee

carried over money lending activities to earn interest from other

agriculturists at his native place. The amount of Rs. 20 lacs was thus

accumulated by father and gifted to assessee. Fresh evidence being copies

of some affidavits from father's borrowers were filed. The ld. CIT(A)

forwarded these affidavits to AO for remand report who summoned the

borrowers u/s 131 of the Act. The deponents viz. S/ Shri Bannaram

Gurjar S/o late Shri Ghasilal Gurjar for Rs. 1.50 lacs, Shri Phoolchand

Saini S/o Shri Sitaram Saini for Rs. 2.50 lacs, Shri Brij Mohan Sharma

S/o late Shri Bhagwani Sahai Sharma for Rs. 2.00 lacs and Shri Ishwar

Kumawat S/o late Shri Prabhulal Kumawat for Rs. 2.75 lacs; accepted

having taken loans from the assessee's father and paid interest thereon.

The AO in his remand report objected to admission of fresh evidence and

on affidavits reported that they were not reliable as the deponents were 5 ITA No.1018/JP/2011 Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

small agriculturists, specific period of lending and repayment were not

mentioned, therefore, they were urged to be not considered. The ld.

CIT(A), however admitted the additional evidence & on merits and

accepted that assessee's father sold land in 1996 and the amount was used

by him for money lending business which could accumulate into 20 lacs

used for the gifted. The affidavits support the claim of the assessee. The

addition in this behalf was deleted.

3.3 Apropos other additions, the ld. CIT(A) accepted the assessee's

contention that the assessee being the civil contractor was not required to

maintain the books of account u/s 44AD of the Act. However it was held

that it cannot be ruled out that he made financial gains from loan

transactions which were presented by him qua the power of attorney

given by Smt. Saroj Deedwania who could not be presented for

examination before AO. It was held that the assessee u/s 44AD could

have earned only Rs. 3.20 lacs on contract turnover of Rs. 40.00 lacs.

The assessee had himself accepted that he was paying EMI of Rs.

25,000/- per month for purchase of household goods to financial

institutions. Thus assessee's yearly cash outflow was at Rs. 4.25 lacs. In

conclusion out of entire additions a sum of Rs. 7.70 lacs was confirmed. 6 ITA No.1018/JP/2011

Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

3.4 Aggrieved on the respective grounds, both the parties are before us.

3.5 The ld. Counsel for the assessee reiterated the facts as relied on the

written submission filed by him and contends that the ld. CIT(A) was

justified in accepting the affidavits and financial capacity of assessee's

father while deleting the addition of Rs. 10.00 lacs.

3.6 Apropos assessee's appeal, the ld. Counsel for the assessee drew

our attention to the synopsis of financial transactions as mentioned in the

written submission and contends that neither the AO nor the ld. CIT(A)

has considered the following aspect.

(a) The presumptive basis of computation of income u/s 44AD is just for the sake of administrative convenience/ simplification of system/ thumb rule for benchmarking and not a universal truth or yardstick that person engaged in the civil construction cannot make more profit than 8% of contract work.

(b) Further in case of cash flow consideration, inflow may be higher than the net income due to anything i.e.

(a) amount received towards the material supplied but not paid to the supplier.

(b) payment received towards labour payment but not paid by the contractor to the labour/ sub-

contractor.

© Towards advance received against work order or at stage of work completion etc. 7 ITA No.1018/JP/2011 Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

© Same way consideration towards loan instalment, please note that all the loans had been taken by the assessee in the previous years and the repayment was scheduled at the time of disbursement only. The loans were taken by the assessee because he was expecting more revenue from his business, other than that even if the assessee were not by the power of attorney holder still the repayment of loan was pre- fixed and he has to manage his cash flows accordingly. This may be the reason why assessee has sold his agricultural land holding during the assessment year

(d) Further the synopsis of the transaction taken place are as follows:-

Date Particulars Amount 18-04-2007 Assessee and his father sold their (+) 10,00,000/- agriculture land at Dhola (deposited in Urban Co-op. Bank on 16-04-2007 in cash) 19-04-2007 Assessee's father made a gift (+) 20,00,000/- deed favouring assessee (deposited in Canara Bank on 20-04-2007 in cash) 01-06-2007 Cash withdrawal from Canara (-) 12,50,000/- Bank, power of attorney was given by Saroj Deedwania 18-06-2007 Cash re-deposited in Canara (+) 4,80,000/- Bank 27-06-2007 Cash re-deposited in Canara (+) 7,50,000/- Bank 07-11-2007 Realization of plot sold of Saroj (+) 7,70,000/- Deedwania in Canara Bank 16-11-2007 Cashwithdrawal and returned (-) 7,00,000/- back to Saroj 8 ITA No.1018/JP/2011

Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

Reliance is placed in the case of CIT vs. Surinder Pal Anand, 192

Taxman 264 (P&H) for the proposition that assessee need not explain

each and every entry of deposit/ investment unless such entry has no

nexus with gross receipts. Hence, the assessee is under no obligation to

explain only the deposits or investments higher than gross receipts or

turnover.

3.7 The ld. DR vehemently contends that the ld. CIT(A) has neither

reproduced the remand report obtained from AO nor the assessee has

supplied a copy thereof, in the paper book. From the index of the paper

book, it does not emerge that he has filed any cash flow statement being

relied on before ITAT giving summary of the transactions before lower

authorities. The copy of the statements made before the ld. CIT(A) at PB

pages 9 to 18 does not contain any cash flow statement. Therefore, the

evidence claimed by the assessee to his advantage are not coming out

from the record. The donor was the father of the assessee, it is ironical

that instead of producing the donor his debtors are produced. Despite

adequate opportunities no such evidence or affidavits were filed before

AO and by a design they have been filed at the stage of first appeal before

ld. CIT(A). The copy of application for admission of fresh evidence is not 9 ITA No.1018/JP/2011 Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

filed by the assessee nor ld. CIT(A) has given reasons for conclusion that

assessee was prevented by sufficient reasons before AO. The financial

year in question is 2007-08 and the affidavits have been sworn by the

debtors during 27-07-11 to 25-07-2011 i.e. after the assessment order, the

names of these debtors were not given to the AO. Thus the affidavits are

nothing but a make believe evidence and an afterthought. The debtors

nowhere specified when the loans were taken and when repaid so as to

draw any view about availability of cash for the alleged gift. Thus entire

edifice of the order is based on unverified, vague and specious pleas and

the relief given by the ld. CIT(A) at Rs. 10.00 lacs is without proper

reasonings & justification.

3.8 Apropos addition of Rs. 7.70 lacs, the order of the ld. CIT(A) is

relied on.

3.9 We have heard the rival contentions and perused the materials

available on record. Based on the arguments made by the ld. DR, we find

that neither the remand report is available on the record not it finds place

in the order of the ld. CIT(A). Similarly, the cash flow statement do not

appear to have been filed before lower authorities. Therefore, the cash

flow statement become a new piece of evidence which is not verified by 10 ITA No.1018/JP/2011 Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

lower authorities. The gift was made the assessee's father and

surprisingly debtors affidavits are filed. Therefore, it was desirable that

father himself was properly examined as to details of years of lending

money and receiving back so as to explain the availability of amount at

the time of gift. If the rate of interest was 15% to 18%, it is quite likely

that father's income could have been taxable income in earlier years. The

assessee was very selective in giving effective explanation and evidence

before the AO despite adequate opportunities. In the absence contents of

application for additional evidence, the remand report and looking at the

vagueness in the affidavits, we are of the view that proper assessment can

be framed only by setting aside the appeals back to the file of the AO to

decide the same afresh after giving a reasonable opportunity of being

heard to the assessee. The assessee shall cooperate and produce all the

materials which is asked for by the AO. With these observations, both the

appeals are set aside to the file of the AO to decide the same afresh in

accordance with law.

11 ITA No.1018/JP/2011

Shri Kuldeep Kumar Sharma vs. ITO, Ward- 3 (1), Jaipur .

4.0 In the result, the appeals of the assessee and the Revenue are

allowed for statistical purposes.

Order pronounced in the open court on 19/02/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 19th FEB, 2015

*Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Kuleep Kumar Sharma, Jaipur

2. izR;FkhZ@ The Respondent- The ITO,Ward- 3 (1), Jaipur

3. vk;dj vk;qDr¼vihy½@The CIT(A).

4. vk;dj vk;qDr@ CIT, Jaipur

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.1018/JP/2011)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar