Ramawati, 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. 701/JP/2014 fu/kZkj.k o"kZ@Assessment Year: 2010-11

Smt. Ramwati cuke The I.T.O. W/o- Shri Ram Singh, Village- Vs. Ward 2, Bharatpur. Kathera Chouth, Deeg- Bharatpur (Raj). LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AVBPR 1675 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri Dilip Sharma( Addl.CIT)

lquokbZ dh rkjh[k@ Date of Hearing : 12/02/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 10/04/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the assessee against the order dated

19/09/2014 passed by the learned CIT (A), Alwar for A.Y. 2010-11. The

effective grounds of appeals are as under:-

"1) The ld. CIT(A) has erred on facts and law in confirming the addition of Rs. 52 lacs made by the A.O. on account of alleged unexplained cash deposit

2 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

in the bank u/s 68 of the Income Tax Act, 1961. He has further erred in confirming the addition ignoring that:-

(a) the said amount is received by the assessee against sale of the agricultural land for Rs. 72 lacs for which sale deed is executed for Rs. 20 lacs only for which assessee has brought on record the bank account of the buyer of the land Smt. Kiran Devi and her husband/relative Sh. Giriraj and Sh. Latoor Singh who have withdrawn Rs. 80 lacs from their bank account on 11/05/2009 out of which Rs. 72 lacs was paid to the assessee against the sale of land which was deposited by her by opening the bank account on the same date.

(b) Assessee has discharged her initial burden to prove the source of credit in her bank account but still holding that she has failed to discharge the onus u/s 68 to prove the identity of the creditor, their creditworthiness and the genuineness of the transaction and overlooking the fact that the addition made u/s 68 is illegal and bad in law inasmuch as this section does not apply to the deposit made in the bank account.

1.1) The ld. CIT(A) has erred on facts and in confirming the above addition without rebutting the various evidences filed and case laws relied upon by solely basing his decision on the ground that assessee has failed to produce the buyer Smt. Kiran Devi for examination in the remand proceedings before the A.O.

2) The assessee craves to alter, amend, modify any of the grounds of appeal.

3) Necessary cost be allowed to the assessee."

3 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

2. All the grounds of the assessee's appeal are revolving around the

assessee's income on account of unexplained cash deposited U/s 68 of

the Income Tax Act, 1961 (in short the Act) at Rs. 52 lacs. The ld.

Assessing Officer observed that the assessee has interest income during

the year under consideration. She filed return on 08/11/2010 at total

income of Rs. 2,52,748/-. This case was scrutinized U/s 143(3) of the

Act. The ld. Assessing Officer observed that on perusal of bank account

that the assessee has deposited cash of Rs. 72 lacs on 11/5/2009 in

Punjab national Bank, Deeg Bharatpur in her savings bank account No.

0989000100362622. The assessee was given reasonable opportunity of

being heard on unexplained source of cash deposited in her bank

account, which is been availed by the assessee. She filed a written

reply, which has been reproduced by the Assessing Officer on page 2,3,

and 4 of the assessment order. The assessee submitted that she has

sold agricultural land situated at village Paigaon, tehsil- Chhata, district-

Mathura to Smt. Kiran Devi, wife of Shri Giriraj Singh of district Mathura

at Rs. 20 lacs as per registered sale deed. However, the cash was

deposited in the bank account was Rs. 72 lacs. It is submitted that the

remaining amount of Rs. 52 lacs was received from Smt. Kiran Devi,

W/o- Shri Gopal Singh @ Latoor Singh in cash. The ld Assessing Officer 4 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

issued notice to Smt. Kiran Devi (purchaser) to verify the facts of the

case. In response to notice to Smt. Kiran Devi, her husband Giriraj

Singh appeared before the Assessing Officer and furnished written reply

before him and claimed that purchaser had paid Rs. 20 lacs for

purchasing of agricultural land, besides this, no evidence has been

placed by the assessee to explain the source of Rs. 52 lacs. Therefore,

ld Assessing Officer made addition of cash deposited Rs. 52 lacs after

accepting the 20 lacs cash deposited from the sale proceed of

agricultural land U/s 68 of the Act.

3. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the learned CIT(A), who had

confirmed the addition by observing as under:-

"4.5 I have perused the assessment order, remand report of the A.O. and submissions made and cross reply of the appellant and find that and addition of Rs. 52 lacs has been made by the A.O. on account of unexplained cash deposits in the bank account of the appellant. During the course of assessment proceedings, it was found by the A.O. that an amount of Rs. 72 lacs has been deposited in cash on a single day i.e. 11th May, 2009 in her saving account in PNB, Deeg, Bharatpur branch. It was explained by the appellant that she has sold agricultural land in District Mathura and 5 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

as per sale deed registered, the same consideration received is only Rs. 20 lacs. It is submitted by the appellant that balance amount of Rs. 52 lacs has been received from the purchaser of land Smt. Kiran Devi, W/o- Sh. Girraj Singh, R/o- Kosi Kalan, district- Mathura. The appellant could not substantiate the sources of cash deposits in the bank account. The A.O. has given a number of opportunities to the appellant to produce the buyer of land, who is stated to have given the cash but the appellant failed to produce the buyer.

4.6 The appellant has explained that the amount deposited in cash is on account of cash sale of land for which the registered sale deed has been executed at Rs. 20 lacs only. The appellant has also filed copies of bank account of the buyer of land Smt. Kiran Devi and her husband Shri Girraj Singh, wherein huge cash deposits and withdrawals from the bank account are reflected in the same period. It is stated that the source of cash deposits in the bank account of the appellant are the amounts withdrawn by these two persons. The additional evident filed by the appellant was forwarded to the A.O. for examination and submission of remand report.

4.7 The A.O. in the course of remand proceedings given enough opportunities to the appellant to produce the buyer 6 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

of land to substantiate the source of cash deposits in the bank account. The appellant has stated that the buyer Smt. Kiran Devi is known to her for a long time but still failed to produce her for examination before the A.O. I concur with the A.O. that initial burden lies upon the appellant to prove the sources of credits in her bank account. The appellant has clearly failed to discharge the onus which lay upon her under the provisions of section 68 of the IT Act i.e. to prove the identity and creditworthiness of the creditor, genuineness of the transaction etc. In this case, I find that sufficient opportunity has been given to the appellant to prove the sources of credits in the bank account but the appellant has wholly and squarely failed to adduce enough evidence in this regard.

4.8 Ld. CIT(A) has relied on the following case laws:-

(i) Ramlal Agarwal Vs. CIT 280 ITR 547. (ii) Hyderabad ITAT decision 023 ITR (Trib) 0528.

(iii) Vijay Kumar Talwar Vs. CIT 330 ITR 1 (SC) (2010).

(iv) Papneja Traders Vs. CIT 337 ITR 172 (P&H)(2011) (v) Acron Finance Pvt. Ltd. Vs. CIT 238 CTR 344 (P&H) (2011) 7 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

4.9 In view of the above discussion, I hold that the A.O. was justified in treating the cash deposits of Rs. 52 lacs as unexplained income of the appellant. Accordingly, I confirm the addition of Rs. 52 lacs made by the A.O. u/s 68 of the IT Act.

4. Now the assessee is in appeal before us. The learned A.R. for the

assessee submitted as under:-

1. It is a known fact that generally there is a difference between sale consideration as recorded in the registered sale deed and the actual consideration of an immovable property particularly the agricultural land. This is done by the purchaser to save the stamp duty. In the present case also, in the registered sale deed, it is stated that the said agricultural land is sold for Rs. 20 lacs but such recital is made only to save the stamp duty and the actual consideration received by the assessee is Rs.72 lacs. The AO inspite of the assessee's request to record the statement of Smt. Kiran Devi has neither recorded her statement nor the statement of her husband Sh. Girraj Singh who is stated to have furnished a written submission. He has also not provided the copy of such written submission to the assessee and also not called the bank statement of purchaser and her husband before completing the assessment.

2. Immediately after completion of the assessment, the assessee vide letter dated 02.04.2013 again requested the AO to provide the copy 8 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

of written reply filed by Smt. Kiran Devi/Sh. Girraj Singh and also requested to call the bank statement of Smt. Kiran Devi and her husband Sh. Giiraj Singh by issuing notice u/s 133(6) to the bank manager. In response, the AO vide letter dated 02.04.2013 refused to call the bank statement on the lame excuse that the same cannot be called as no proceedings are pending before him. All these facts shows that AO was not inclined to go into the truth of the matter.

3. In the meanwhile, the assessee has obtained the bank account of Smt. Kiran Devi, her husband Sh. Girraj and her relative Sh. Latoor Singh maintained with PNB, Koshikala and also letter dated

05.03.2013 issued by the AO to Kiran Devi and reply given by Kiran Devi/Girraj Singh in Dak counter on 08.03.2013. From these bank statements, it can be noted that they have deposited Rs. 40 lacs each in their bank account opened on 16.04.2009/17.04.2009. From these accounts, they have withdrawn Rs. 80,00,000/- on 11.05.2009. Out of this amount, Rs.72 lacs was paid to the assessee on 11.05.2009 against the purchase of the said agricultural land which was deposited by the assessee in her bank account on the same date i.e. 11.05.2009. In fact, this account was opened by the assessee only on 11.05.2009 with the amount of Rs.1,000/- given by the purchaser and the balance amount of Rs.71,99,000/- was also deposited in this bank account on the same date. All these facts clearly establish that the source of the amount deposited in the bank account is nothing but the sale consideration of the agricultural land sold by assessee to Smt. Kiran Devi. The AO has 9 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

also accepted that out of Rs. 72 lacs, Rs. 20 lacs represent the sale proceeds of the agricultural land but at the same time he has not accepted the claim of the assessee that the remaining amount of Rs. 52 lacs also represents the sale proceeds of agricultural land without calling the bank account of the purchaser from the bank and to record the statement of the purchaser and allowing opportunity to cross examine them inspite of assessee's request. In these facts and circumstances of the case, addition of Rs. 52 lacs made by the AO and confirmed by CIT(A) is unjustified.

4. The AO at Page 4 of his order has stated that the purchaser Smt. Kiran Devi was granted opportunity vide letter dated 05.03.2013 to attend the office for cross examining the issue on 08.03.2013. This is incorrect. The AO vide letter dated 05.03.2013, only required Smt. Kiran Devi to attend the office or give the written reply on 08.03.2013 with the information about the amount for which the land is purchased from the assessee and to give the evidence for the same. In reply, Smt. Kiran Devi and Girraj Singh filed reply on 08.03.2013 in the Dak counter stating that they have purchased the land from assessee for Rs. 20 lacs. In the letter send by the AO to Smt. Kiran Devi there is no dispatch number and in the reply given, the signature of Kiran Devi appears to be forged as in the sale deed she has put the thumb impression whereas in the reply she has put the signature. All this cast a shadow of doubt about the veracity of letter dated 05.03.2013 issued by the AO to Smt. Kiran Devi and the reply dated 08.03.2013 stated to be filed by her. Therefore, only on 10 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

the basis of the so called letter filed by Kiran Devi/Girraj, the sale consideration of the property considered by the AO at Rs. 20 lacs as against Rs. 72 lacs is incorrect and cannot be a basis of making addition of Rs. 52 lacs as unexplained income of the assessee.

5. So far as other observations of the AO are concerned, the same are not relevant in as much as from the facts stated above, it is established that Smt. Kiran Devi has paid Rs. 72 lacs against purchase of agricultural land from the assessee and the AO for the reasons best known to him has not examined Smt. Kiran Devi nor provided any opportunity to cross-examine her. Further, stating the name of husband of Smt. Kiran Devi as Gopal Singh instead of Sh. Girraj Singh in the reply filed by assessee was only a typographical mistake. Hence, the reasons given by the AO for making the addition are frivolous.

6. In the remand proceedings the AO issued summons u/s 131 to the assessee and to Smt. Kiran Devi. Statement of the assessee was recorded where she affirmed that the actual sales consideration is Rs.72 lacs which is deposited in her bank account. However, summons send to Smt. Kiran Devi is stated to have returned back with the remark incomplete address. No evidences of the postal authorities returning back the summons was brought on record by the AO. Further when the AO has the address of these persons as mentioned in the bank account and when in course of assessment proceedings the letter sent to her has been replied by her, the 11 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

observation of the AO in the remand report that assessee failed to produce Smt. Kiran Devi is just to sidetrack the issue knowing well that in the circumstances of the case it was impossible for assessee to produce Smt. Kiran Devi. So far as identity of Kiran Devi is concerned the same is proof from her photo affixed on the sale deed and the address given thereat. All these source shows that AO in the remand proceedings has intentionally not exercised his powers to enforce attendance of Smt. Kiran Devi nor he has brought any evidence on record that source of deposit in the bank account of the assessee is from any other source other than the sale of the land.

7. The ld. CIT(A) has also ignored all the evidences filed before him to prove that the source of deposit in the bank account is nothing but the sale proceeds of the agricultural land sold by the assessee. The identity of the buyer Smt. Kiran Devi is proved from the sale deed and her creditworthiness and genuineness of the transaction is proved from the bank account. The CIT(A) has erred in holding that assessee has failed to discharge his onus to prove the identity and the creditworthiness of Smt. Kiran Devi and the genuineness of the transaction. Therefore, CIT(A) has erred in confirming the addition by ignoring the various material evidences filed before him and by solely relying on the remand report of the AO.

8. It is a fact on record that the assessee is an illiterate lady & has no source of income other than agricultural income. Even the lower 12 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

authorities have not found any other source of income in the hands of the assessee. Hence, it cannot be presumed that assessee has any undisclosed income which is deposited in the bank account. In these circumstances, even if the source of deposit in the bank account is not found to be satisfactory explained, no addition can be made in the peculiar facts of the case in view of Hon'ble Supreme Court decision in case of CIT vs. P.K. Noorjehan 237 ITR 570. In this case, assessee was a Muslim lady aged 20 years. She made certain investments in land. The explanation of assessee regarding the source of the purchase money for these investments was that the same were financed from out of the savings from the income of the properties which were left by her mother's first husband. The said explanation offered by the assessee was rejected and addition was made u/s 69. The Tribunal, however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case it was not possible for the assessee to earn the amount invested in the properties and that by no stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year or was even in a position to earn it for a decade or more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected, s. 69 of the Act conferred only a discretion on the ITO to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the investment as income of the assessee as soon as the latter's explanation happened to be 13 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

rejected. According to the High Court, the Tribunal had not committed any error in taking into account the complete absence of resources of the assessee and also the fact that having regard to her age and the circumstances in which she was placed she could not be credited with having made any income of her own and in these circumstances the Tribunal was right in refusing to make an addition of the value of the investments to the income of the assessee. Ld. counsel appearing for the Revenue, has urged that the Tribunal as well as the High Court were in error in their interpretation of s. 69 of the Act. It was held by Hon'ble Supreme Court as under:-

"We are unable to agree. As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in Parliament, the word "shall" had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word "may". This clearly indicates that the intention of Parliament in enacting s. 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under s. 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under s. 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the

14 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

said discretion has to be exercised keeping in view the facts and circumstances of the particular case. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. We also do not find any error in the said finding recorded by the Tribunal. There is thus no merit in these appeals and the same are accordingly dismissed."

The ratio laid down in this case is equally applicable on the facts of the present case and therefore the addition made by AO is uncalled for and be deleted.

9. The Hon'ble ITAT, Jaipur Bench in case of Sh. Rajesh Gupta Vs. ITO in ITA No. 1458/JP/2010 order dated 08.04.2011 (PB 41-46) and in case of Deepak Saren Vs. ITO in ITA No. 619/JP/2009 dated 31.03.2010, in somewhat similar circumstances by relying on the decision of Supreme Court in case of CIT vs. P.K. Noorjehan supra and after considering all the circumstantial evidences including the source of income, deleted the addition made by the AO where there is difference in what is written in the sale deed and what was the actual consideration in respect of the sale of properties.

10. The lower authorities have made the addition u/s 68. Section 68 applies when any sum is found credited in the books of the assessee. It is a fact on record that assessee does not maintain any 15 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

books of account. Bank statement is not books of account of the assessee as held in case of CIT Vs Bhaichand H Gandhi 141 ITR 67 (Bom). In case of Ms. Mayawati Vs DCIT 19 SOT 460 (Delhi), it was held that the passbook of bank cannot be treated as books of accounts. Again the Lucknow Bench in case of Kamal Kumar Mishra Vs. ITO 143 ITD 686 held that maintenance of books of assessee is a condition precedent for making addition u/s 68 and, therefore, provisions of sec. 68 could not be invoked on the basis of deposits made in the bank account of assessee. Hence, the credit appearing in assessee' pass book/bank statement relevant to a particular previous year, where the assessee does not maintain books of accounts, would not attract provision of section 68. Therefore, addition made by lower authorities u/s 68 is legally incorrect.

In view of above, addition of Rs. 52 lacs made by AO and confirmed by

the CIT(A) be deleted.

5. The learned DR vehemently supported the order of the ld.

Assessing Officer and CIT(A) as the assessee has not proved the

genuineness of the transaction, creditworthiness of the assessee and

identity of the persons. Therefore, he rightly confirmed the addition.

6. We have heard the rival contentions of both the parties and

perused the material available on record. The primary burden to prove 16 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

the cash deposited in the bank account is on the assessee, which has

not been discharged fully. She has allowed time to produce the

purchaser to explain the transactions whether they have paid the

amount to the assessee or not with evidence. Hence sufficient time has

been provided by the Assessing Officer at the time of remand report

even the assessee could not produce the purchaser to verify the

transaction. The case laws relied upon by the Assessing Officer are

squarely applicable on the assessee. The case law referred by the ld. AR

is on Section 69 of the Act i.e. unexplained investment. The ld. AR also

referred the decision of Hon'ble Bombay High Court in the case of CIT

Vs. Bhaichand H Gandhi (supra), ITAT Delhi's Bench order in Ms.

Mayawati Vs. DCIT (supra) and ITAT Lucknow's Bench order in Kamal

Kumar Mishra Vs. ITO (supra) is on different issue, therefore, the case

laws are not squarely applicable but in the interest of justice, we set

aside the order of the CIT(A) to the Assessing Officer to give one more

chance to the assessee to explain the source of cash deposited as the

burden lies on her. Accordingly, we set aside the order of the CIT(A) to

the ld Assessing Officer.

17 ITA701/JP/2014_ Smt. Ramwati Vs. ITO

7. In the result, the assessee's appeal is allowed for statistical

purposes only.

Order pronounced in the open court on 10/04/2015.

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

Tk;iqj@Jaipur fnukad@Dated:- 10th April, 2015 *Ranjan

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

1. vihykFkhZ@The Appellant- Smt. Ramwati, Bharatpur

2. izR;FkhZ@ The Respondent- The I.T.O., Ward 2, Bharatpur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

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

6. xkMZ QkbZy@ Guard File (ITA No. 701/JP/2014)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar