Manjinder Singh Chatha, Jalandhar vs Assessee

These are the cross appeals - one by the Revenue and another by the

assessee for the assessment year 2006-07 against the order dated

18.03.2010 passed by the Ld. CIT(A), Jalandhar.

2 ITA No.303(Asr)/2010 ITA No.318(Asr)/2010

2. The Department in ITA No.303(Asr)/2010 has taken the following grounds of appeal:

"1. That, on the facts in the circumstances of the case, the Ld. CIT(A) has erred in law in reducing the addition of Rs.50,00,000/- to Rs.37,00,000/- made on account of unexplained cash deposits.

1.1 While doing so the Ld. CIT(A) has failed to appreciate the facts that:

a) The assessee itself during the course of assessment proceedings produced two Ikrarnamas the full value of agreement namely Rs.28 lacs and Rs. 22 lacs respectively, as cash paid to the assessee in the presence of witness and no balance payment was to be received. Thus, the assessee itself contended that Rs.50 lacs was received by him.

b) The Ld. CIT(A) ignored the documents produced by the assessee itself and relied only on cash deposit in the account of the assessee.

c) There is no dispute that sale consideration was Rs.50 lacs. This is evident from the first agreement showing payment of Rs. 37 lacs in advance and balance to be paid and subsequent two Ikrarnamas of Rs. 28 lacs and Rs.22 lacs claimed to have been paid in cash to the assessee. Thus, the entire sale consideration of Rs. 50 lacs had to be brought into the tax net as there is no dispute that the total sale consideration was anything other than Rs.50 lacs.

2. This, it is prayed that the order of the Ld. CIT(A) be set aside and that of the AO restored.

3. That the appellant requests for leave to add or amend or alter the grounds of appeal before the appeal is heard and disposed off."

3. In assessee's appeal, i.e., in ITA No.318(Asr)/2010, the following grounds have been raised:

3 ITA No.303(Asr)/2010

ITA No.318(Asr)/2010

"1. That the Ld. CIT(A) has grossly erred in upholding the addition of Rs. 37 lacs, out of Rs.50 lacs added by the ITO, is contrary, inferences drawn arbitrarily unmindful of the facts of the case, are wholly untenable.

2. That the additional evidence, as filed during appellate proceedings, ought to have been accepted by the ld. CIT(A), more so, when not objected to by the ITO and also when CIT(A) himself relied on the same to the disadvantage of assessee.

3. That the Ld. CIT(A) misconstrued the facts to hold that there was no land sale agreement executed with Sh. Raj Kumar for Rs. 50lacs, which resulted in advance payment of Rs. 37 lacs to assessee, with balance received in next year.

4. That the Ld. CIT(A) was not justified in holding that Sh.Raj Kumar was not a man of means, without verification of his credentials, especially his bank accounts filed during appellate proceedings.

5. That the capital gain on sale of impugned land for Rs. 50 lacs shown in the return for next year, having direct nexus with the controversy this year, has been wrongly held as irrelevant by the CIT(A).

6. That the impugned addition, if at all sustained, ought to have been assessed under the head 'capital gain' besides allowing its apportioning amongst five co-owners.

7. That the claim of deduction u/s 54B, for sale and purchase of agriculture land, has been wrongly disallowed."

4. The AO made an addition of Rs.50 lacs on account of cash deposits.

The Ld. CIT(A) deleted Rs. 13 lacs and sustained the addition of Rs.37 lacs,

resulting in these cross appeals.

4 ITA No.303(Asr)/2010

ITA No.318(Asr)/2010

5. As per ground No.2 raised by the assessee, the ld. CIT(A) should have

admitted the additional evidence filed by the assessee, when it was not

objected to by the AO and when the ld. CIT(A) himself relied on such

additional evidence to the detriment of the assessee.

6. In this regard, the ld. Counsel for the assessee has contended that in

the last sentence of the running para at page 14 of the impugned order, the

ld. CIT(A) has wrongly observed, while rejecting the assessee's application

for additional evidence, that no application was made by the assessee before

the AO for submitting any further information. Our attention has been drawn

to the assessee's reply dated 26.12.2008 ( copy at APB 46 - 47) before the

AO wherein, according to the ld. Counsel for the assessee, the assesse had

made a specific request to the AO to grant him time to give further evidence

in support of his contention.

7. The Ld. DR, on the other hand, has placed strong reliance on the

impugned order contending that the assessee did not file any application for

additional evidence before the AO and so the ld. CIT(A) correctly rejected

the application for additional evidence filed before him.

8. From the assessment order, it is available that the AO noticed that the

assessee had entered into an agreement with one Sh. Raj Kumar to sell land

measuring 7 kanals 5 marlas for Rs. 50 lacs, receiving an advance of Rs.37 5 ITA No.303(Asr)/2010 ITA No.318(Asr)/2010

lacs in cash (assessment order, page 1, para 2). On 12.12.2008, the AO

recorded the statement of Sh.Raj Kumar under section 131 of the I.T.Act

(assessment order, pages 2-3). Therein, interlia, Sh. Raj Kumar agreed

having entered into an agreement to purchase land measuring 7 kanals 5

marlas from the assessee (assessment order, page 2, reply to the third

question). Vide statement dated 23.12.2008 (assessment order, page 4 to 6),

again, recorded u/s 131 of the Act, Sh. Raj Kumar retracted from his earlier

statement and deposed that he had never entered into any agreement dated

24.02.2006 with the assessee., that the signature on the photocopy of the

agreement, as shown to him by the AO was not his., and that he had given

his earlier statement dated 12.12.2008, since he was under constant threat of

assessee's men and undue influence of the assessee ( assessment order,

pages 4-5). The AO wrote a letter dated 24.12.2008 (assessment order, page-

6, para 4) to the assessee, intimating to him, Raj Kumar's denial having

entered into any agreement with the assessee. The assessee was asked to

attend proceedings on 26.12.2008. The assessee filed reply dated 26.12.2008

(APB, pages 46-47). This has been taken note of in para 4 at page 6 of

assessment order. On 26.12.2008, the assessee's statement was recorded by

the AO in assessment proceedings for A.Y. 2006-07 (assessment order,

pages 7 to 10). The assessment order was passed on 30.12.2008. 6 ITA No.303(Asr)/2010

ITA No.318(Asr)/2010

9. Now, it is seen that in his reply dated 26.12.2008, filed before the AO,

the assessee has specifically requested as follows (APB-47, last sentence

para 4):-

"The assessee requests that he may be granted time to give further evidence in support of his contention."

However, this request was not even taken note of in the assessment order

while discussing the contents of the assessee's aforesaid reply, in para 4 & 5

at page 6 of the assessment order.

10. The Ld. CIT(A) had, thus, while observing that the assessee did not

file any application before the AO, remained oblivious of the above

mentioned specific request made before the AO by the assessee to grant him

time to give further evidence in support of his contention. To reiterate, this

request was contained in assessee's reply dated 26.12.2008, filed before the

A.O. It was not even commented on and the assessment order was passed on

30.12.2008.

11. In view of the above, evidently the ld. CIT(A) has erred in rejecting

the application for additional evidence filed by the assessee, thereby causing

prejudice to the assessee.

12. Therefore, in the interest of justice, we remit this matter to the file of

the AO, to decide it afresh in accordance with law, on entertaining and

considering the additional evidence filed by the assessee before the ld. 7 ITA No.303(Asr)/2010

ITA No.318(Asr)/2010

CIT(A). The assessee, no doubt, will be provided adequate opportunity by

the AO, to support his case. The assessee shall co-operate with the AO in

the remand proceedings.

13. In the result, both the appeals of the Revenue and that of the assessee

are treated as allowed for statistical purposes.

Order pronounced in the open court on 20th February, 2015.

Sd/- Sd/- (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20th February, 2015 /SKR/ Copy of the order forwarded to:

1. The Assessee:Sh.Manjinder Singh Chatha, Jalandhar.

2. The ITO Ward II(3), Jalandhar.

3. The CIT(A), Jalandhar.

4. The CIT, Jalandhar.

5. The SR DR, ITAT, Amritsar.

True copy By order

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