S. Rajinder Singh, Ludhiana vs Assessee

Appellant By : S/Shri Sudhir Sehgal & Ashok Goyal Respondent By : Shri R.K. Gupta

Date of hearing : 26.5.2015 Date of Pronouncement : 05/06/2015

ORDER

PER T.R.SOOD, A.M.

Both the appeal by the assessee are directed against the separate orders each

dated 23/12/2011 passed by the C IT(A)-II, Ludhiana.

2. Since identical issue has been raised in these appeals, these were heard

together and are being disposed of by this common and consolidated order.

3. First we shall deal with ITA No. 256/Chd/2012 wherein the assessee has

raised the following grounds:-

2

1. That the Learned CIT(Appeals)-II, Ludhiana has erred in law and on facts in confirming the addition to the tune of Rs.

19272047/- out of total credits to the tune of Rs. 23118468/-.

2. That the learned CIT (Appeals)-II, Ludhiana has erred in law and facts in rejecting the claim of the assessee that the learned assessing officer has accepted part of the business as draft discounting business out of the total deposits of draft amounting Rs. 23118468/- and not accepting the balance amount.

3. That the learned CIT(Appeals)-II, Ludhiana has erred in law and facts in not accepting the claim of the assessee that he has not deposited Rs. 10 Lacs or more in cash in his saving bank account. Therefore, the selection of the case under scrutiny through CASS by AIR information basis is bad in law and assessment so framed is null and void.

4. That the learned CIT(Appeals)-II, Ludhiana has not doubted and rejected the claim of assessee that he did the draft discounting business and earning a commission of 0.30%, despite this fact the addition of Rs. 19272047/- for the parts of the drafts deposited sustained is unjustified and to be treated as null and void.

5. That the learned CIT(Appeals)-II, Ludhiana has not given any justification for treating the part of the business as unexplained investments or unexplained money.

6. That the learned CIT(Appeals)-II, Ludhiana has erred in law and facts in sustaining the addition made by the learned assessing officer without any basis and on the basis of conjectures and surmises.

7. That the learned CIT(Appeals)-II, Ludhiana has erred in rejecting the income and expenditure statement as submitted before the learned assessing officer without any basis.

4. In this appeal though various grounds have been raised but during the

course of hearing it is submitted that the onl y dispute was regarding addition of

Rs. 1,92,72,047/- on account of credit appearing in the bank account.

5. After hearing both the parties we find that assessment was taken under

scrutiny and assessee was required to furnished details of the bank accounts in his 3

name as well as names of his famil y members. Vide reply dated 24.6.2010 the

assessee submitted copy of the statement of his saving bank account No.

30064414211 and his wife Gurjeet Kaur's bank account No. 300064413965. Both

the accounts were in State Bank of India, Gill Road, Ludhiana. The assessee was

again vide order sheet entries dated 26.6.2010 and 20.7.2010 was asked to furnish

details of any other bank account. The assessees vide repl y dated 20.7.2010

submitted as under:-

"That the assessee does not have any other saving account except the one already submitted. Copy of wife's saving bank account is submitted."

The Assessing Officer noted that AIR information was available that assessee was

also maintaining a bank account with Dena Bank with Mata Rani Chowk Branch,

Ludhiana. Information regarding this was not furnished in the return of income

and assessee had failed to disclose this account despite various opportunities.

Therefore, information was obtained u/s 133(6) from Dena Bank which revealed

that assessee was maintaining two bank accounts bearing No. CAGEN 4701 in the

name of M/s Ishu Trading Company Prop. Shri Rajinder Singh and another account

No. 146098 in the name of Shri. Rajinder Singh. It was further noted form the

information that in the Current Account No. CAGEN4701, the assessee has

deposited Rs. 1,92,72,047/- in the form of demand drafts. The Assessing Officer

noted that assessee has willfull y tried to conceal this information relating to the

transaction made through bank account No. CAGEN 4701 with Dena Bank.

Assessee was again asked to explain the nature of entries in this account. In repl y

dated 14.10.2010 it was submitted as under:-

"with reference to your queries we submit our reply as under:-

1. That the assessee has carried out the business of drafts discounting for a small period of about two months during the financial year 2007-08. During that period he had opened a current account in the name of M/s Ishu Trading Co. and saving account in his name and in the name of his wife Smt. Gurjeet Kaur with the Dena Bank, Bhadaur House, Ludhiana. Copies are enclosed herewith.

4 2. That all the discounted drafts were deposited in the current account.

3. That the assessee had withdrawn the amount in cash or transferred the ssme to his saving account or to his wife's account to save the banking cash transaction tax.

4. That the assessee suffered net loss in the business carried out for a small period and accordingly stopped the same.

5. That during the period the assessee financial conditional was not well and to meet the family needs by earning some extra income he started this business.

6. Sir keeping in view the facts of the case, we request you to accept our pleading and pronouns the order accordingly."

6. Thereafter the assessee was asked to appear in person and his statement was

recorded. In the statement, assessee refused to disclose the names of parties from

whom the drafts were received. He also refused to produce any of the 10 persons

from whom said drafts were said to have been received for the purpose of

discounting such drafts. The Assessing Officer noted that onus was clearl y on the

assessee to explain the nature of each and every entry appearing in his bank

account. He observed that by simpl y saying that he was doing Draft Discounting

business on behalf of the other persons was not enough and he was required to

substantiate the genuineness of these facts m y giving the names and addresses of

such persons or by producing persons from whom such drafts were received.

Another show cause notice was issued that why such credits appearing in the bank

account should not be treated as undisclosed money and added to his money. The

assessee filed detailed repl y vide letter dated 22.12.2010, the contents of this

repl y has been reproduced by the Assessing Officer at pages 6 to 13.

7. The Assessing Officer did not accept the above repl y because in his opinion

transactions could not be accepted simply because the amount has come by way of

cheques and drafts unless the recipient prove the genuineness of the same.

Though the assessee has stated that he was doing the business of Draft Discounting 5

on behalf of the other persons but he has not provided the names and addressed of

such persons form whom drafts have been received and to whom cash was paid,

therefore, the assessee has failed to substantiate the sources of the drafts. In this

background, a sum of Rs. 1,92,72,047/- was added to the income of the assessee.

8. On appeal, the submissions made before the Assessing Officer were

reiterated and a detailed repl y was filed which has been extracted by Ld. C IT(A) in

para 4 of the impugned order. The Ld. CIT(A) also did not find force in these

submissions and the issue was decided against the assessee vide paras 7 to 7.2

which are as under:-

"7. 1 have considered the findings given by the AO in the order and in the Remand Report and also the detailed submissions of the assessee. It is an admitted fact that the assessee was maintaining a bank account with Dena Bank, Mata Rani Chowk, Ludhiana, where there has been various deposits and withdrawals of cash and the transfer of amount by way of cheques from 27.11.2007 to 31.03.2008. As noticed in the Assessment order, assessee has admitted the ownership of the above account. Since the AO received AIR information from the bank and, accordingly, the case was selected for scrutiny under CASS, therefore, no fault could be found for receipt of information from the bank and selection of the case for scrutiny.

7.1 During the course of assessment proceedings before the AO and the appellate proceedings before me, it has been contended that assessee was doing the business of draft discounting on behalf of other parties an commission basis and the bank drafts were deposited in the bank account, as obtained from different parties and there after the amount was withdrawn from the bank accounts and the cash was paid to the parties from whom the drafts were taken. In the above process, it was contended that the assessee was earning commission income of 0.30%. It was also contended that total deposits of drafts were to the tune of Rs. 2,31,18,468/- in Dena Bunk, Mata Rani Chowk, Ludhiana in the name of' "Issue Trading Co.,' and as 6

out of this bank account, cash amounting to Rs. 39,06,000/- - was withdrawn cash and paid to the parties and part of the amount was put to bank transfer amounting to Rs. 1,92,72,047/- in two accounts such as SB A/c No. 14608 in the name of Sh. Rajinder Singh and in A/c No. 14616 in the name of Mrs. Gurjeet Kaur Since, the draft discounted business was accepted as business transaction partially, therefore, the total amount deposited-by way of drafts was the business of assessee. In view of the above and on the basis of the income and expenditure account produced before the A/O, and during the appellate proceedings before me, it was prayed that the total transactions were treated as the business of assessee and it was prayed that the commission at the rate of 0.30% may be applied and not total deposits meaning thereby the total amounts of drafts obtained on behalf of other parties. It has been contented that the sequence and mode of transaction place the case of the assessee that as and when there were deposits of drafts purchased from other parties, and which were, infact, claimed to be the proceeds of other parties effected through the assessee, the amount was withdrawn immediately for making the payment to the parties, from whom the drafts were taken

7.2 1 have gone through the above argument of the assessee, but find that the appellant has not been able to prove the contentions as put forth by the assessee that he was earning the commission by doing the draft discounting business and earring 0.30% commission thereon. Since, the assessee had tailed to discharge the onus upon him to prove the fact that deposits in the bank were in respect of drafts discounting business, the commission of the assessee with regard to earning of the commission cannot be accepted. Primarily it is the duty of the assessee to prove the sources of such deposits in his bank account. He cannot shill this burden on others. More so, there is nothing on record to prove that other persons to whom he alleges that the deposit belongs have accepted/surrendered such deposits in their hands and have paid tax thereon. There is maxim in law that contents of documents arc proved to be true unless proved otherwise. Even if he is in collusion/collaboration in defrauding revenue, he has to bear the consequence. It is not 7

that for the unexplained .income revenue suffers the tax loss. Therefore, the contentions raised by the appellant are dismissed and relevant grounds of appeal also."

9. Before us Ld. Counsel for the assessee submitted that assessee was doing

business of draft discounting on which assessee was getting small commission. He

referred to the summary of the various bank accounts which is given at page 1 and

pointed out onl y Rs. 60,000/- was deposited in cash and another amount of Rs.

2,31,18,468/- was deposited through demand drafts. Out of this, Rs. 39,06,500/-

was withdrawn in cash for distribution among the persons who has given the drafts

to the assessee. Another amount of Rs. 1,25,40,000/- was transferred to account

No. 14608 from where the amount was withdrawn and distributed to various draft

holders. He then referred to detailed account summary placed at pages 2 & 3 of the

paper book and pointed out that maximum credit available was Rs. 5,85,305/-.

However, when some objections were raised, he categorically stated that he is not

pressing the contention of peak credit theory in this case.

10. He further contended that the amount were received through drafts and not

by cash, therefore, once it was established that assessee was doing draft

discounting business, then the Assessing Officer could have easil y obtained the

information by making correspondence with the bank who were given such drafts.

He also contended that there was no reason to deposit the demand drafts and then

withdraw the money in cash which clearl y shows that assessee was doing draft

discounting business.

11. On the other hand Ld. DR strongl y supported the order of Assessing Officer

and C IT(A) and submitted that onus was onl y on the assessee to give the names

and addresses of the draft holders. In this regard, he pointed out that answers to

question Nos. 8 & 9 of the assessee statement given before the Assessing Officer

wherein assessee has clearl y stated that he does not know anything regarding these 8

parties, which clearly shows that assessee was not doing any draft discounting

business. In any case this issue is squarely covered by the decision of Chandigarh

Bench of the Tribunal in the case of Sudhir Kumar Sharma v ITO in ITA No.

713/Chd/2010 and others. In this case the Tribunal has placed reliance on the

decision of Hon'ble Allahabad High Court in the case of Bhaiyalal Shayam Behari

v C IT 276 ITR 36 (All.) which was relied by Revenue in that case. This decision

has been confirmed by the Hon'ble High Court of Punjab & Haryana reported at 46

taxman.com 340. The Ld. DR has filed copies of the decision of Tribunal as well

as High Court which are placed on record.

12. In the rejoinder Ld. Counsel for the assessee submitted that there was

important distinction between the assessee's case and case of Shri Sudhir Kumar

Sharma because in the case of Shri Sudhir Kumar Sharma first cash was received

which was deposited in the bank and then cheques were issued to the various

parties whereas in the present case the assessee has deposited demand draft and

then later on cash has been withdrawn.

13. We have considering the rival submissions carefull y, case laws and

judgments cited by the parties as well as relevant material on record. In this case

initiall y assessee submitted that he was maintaining one bank account in his name

and one more bank account in the name of his wife in State Bank of India and

despite various opportunities, the assessee maintained that stand. It is onl y after

that assessee was confronted with the information obtained from Dena Bank, that

he was maintaining another current account No. CAGEN 4701 in the name of M/s

Ishu Trading Company and another saving bank account No. 14608 (in his own

name i.e. Shri Rajinder Singh) he came out with the theory that assessee was

doing draft discounting business. At this stage, the Assessing Officer recorded the

assessee's statement and few answers to the questions which are very relevant are

reproduced below:-

9

"8. In reply to earlier question you have stated that you were depositing D.D. of various parties in your bank accounts. Please give name and PAN of any 10 person or parties / concerns whose banks draft you were deposited in bank account and withdrawing cash for them.

Ans. I do not know anything about it. I cannot produce or name any such parties.

9. Please explain how you were getting bank drafts if you are not able to explain whose bank drafts are there.

Ans. I cannot say anything regarding this I was receiving these drafts from my friends and I was getting commission of Rs. 30 per thousands."

14. The answers to the above questions clearl y shows that assessee has simpl y

stated that he does not know anything about this i.e. source of the deposits and

showed his inabilit y to produce any of the 10 persons as desired by the Assessing

Officer. It is settled law that whenever a deposit is made the burden is always on

the assessee to show the sources of such deposits. The facts of the present case are

identical to the case of Sudhir Kumar Sharma vs ITO (supra) where the assessee

has deposited certain cash in his bank account and later on given cheqeus to

various parties. Therefore, the Tribunal on these facts ultimatel y held that burden

was on the assessee to prove the genuineness of sources of the deposits. When the

matter travelled to the Hon'ble High Court the same was adjudicated in ITA No.

122 of 2014 vide order dated May 12, 2014. The head note of this decision reads

as under:-

"Section 68 of the Income-tax Act, 1961 - Cash credits (Cash deposits) - Assessment year 2007-08 - During assessment proceedings, Assessing Officer noticed that assessee had deposited huge amount of cash in his bank account - In view of failure of assessee to explain source of said deposits, Assessing Officer added amount so deposited to assessee's taxable income by invoking provisions of section 68 -Tribunal confirmed said addition - Whether since various amounts in cash were deposited in bank account of assessee, onus was upon assessee to explain nature and source of said cash deposits - Held, yes - Whether since assessee failed to give list of persons who 10

advanced cash to him along with their confirmation in respect of said cash credits, impugned addition was to be confirmed - Held, yes [Para 9] [In favour of revenue] "

Therefore, clearl y the burden was on the assessee but the assessee has shown his

inabilit y to give names and addresses of such persons or produced the persons

from whom such drafts were received.

15. The Ld. Counsel had tried to distinguish this decision by stating that in the

present case it was draft which was deposited and later on cash was withdrawn. In

our opinion, it does not matter whether cash is deposited or draft is deposited,

onus remains the same and assessee should have come forward with the names of

persons who had given drafts. There is no force in the contention that Revenue

should have made further enquiries as there is no burden casted on the Revenue.

We further find no force in the contention that why any assessee would first

deposit the draft in bank account and then withdraw the cash. That information is

purel y in the domain of the assessee and onl y he could have given such

information. If he fails to give such information then the Revenue has every right

to take adverse inference. This proposition have been confirmed by the Hon'ble

Supreme Court in the case of C IT Vs. Best and Co. (Private) Ltd. 60 ITR 11 (SC).

In this regard, following observation given in the head note is relevant :-

"The Supreme Court did not lay down in Commissioner of Income-tax v. Chari and Chari Ltd. [1965] 57 I.T.R. 400 (S.C.) that the burden on the revenue to establish that an income was taxable was immutable in the sense that it never shifted to the assessee. When sufficient evidence, either direct or circumstantial, in respect if its contention was disclosed by the revenue, an adverse inference could be drawn against the assessee if he failed to put before the department material which was in his exclusive possession.

While the income-tax authorities have to gather the relevant material to establish that the compensation given for the loss of agency was a taxable income, adverse inference could be drawn against the assessee if he had suppressed documents 11

and evidence, which were exclusively within his knowledge or keeping."

Therefore, we find nothing wrong in the order of Ld. CIT(A) and we confirm the

same.

16. In the result, appeal of the assessee is dismissed.

ITA No. 257/Chd/2012

17. In this appeal identical grounds have been raised. The Assessing Officer has

made addition on account of deposits made in her account. The facts and

contentions in this case are similar except that one additional contention was

raised that money into the account of Smt. Gurjeet Kaur has been deposited out of

funds transferred from husband's account.

18. In this case also the statement of Smt. Gurjeet Kaur i.e. assessee was

recorded and she also stated in repl y to question Nos. 12 & 13 that she does not

know anything about the accounts and deposits. The relevant answers to the

question are as under:-

"12. During the course of Asst. proceedings, you have filed one letter from (certificate) Gigabite Network that you were working there as field supervisor then and getting 10000/-P.M. as contract charges. But the some has not been disclosed in the Return filed by you. Please explain?

Ans. The income received from Gigabite Network being contract charges has been shown under the head business income.

13. Do you want to say anything else?

Ans. No I do not want to say any thing.

The assessee has stated in his statement that he was doing business of draft discounting during the year under consideration and getting commission, but when asked to produce the persons from whom drafts have been received and to whom cash has been paid he was unable to 12

do so. Onus is on the assessee to explain the nature and source of each and every entry appearing in his bank account. Simply saying that he was doing draft discounting business on behalf of other persons is not enough, he has not substantiated the genuineness of this fact by giving the names, addresses or by producing the persons from whom the drafts have been received and to whom cash has been paid. Any transaction cannot be accepted genuine because the amount has come by way of a cheque or draft unless the recipient proves the genuineness of the same."

19. However, we find force in the alternative submission that the amount have

been transferred from the husband,s account in whose case addition has already

been made in the case of Shri Rajinder Singh. We have already confirmed the

addition in the case of Shri Rajinder singh i.e. husband of the assessee, therefore,

the money deposited in his account now can be said to be explained and there if

addition is again made in the hands of this assessee i.e. Smt. Gurjeet Kaur then

that would amount to double addition. However, this contention was not before

the Assessing Officer. Therefore, we set aside the order of Ld. C IT(A) and remit

this matter back to the file of Assessing Officer to verify if money has been

transferred from husbands account then no addition should be made otherwise the

issue will be decided in accordance with law.

20. In the result appeal in ITA No. 256/Chd/2012 is dismissed whereas ITA No.

257/Chd/2012 is allowed for statistical purposes.

Order pronounced in the open Court on 05/06/2015.

Sd/- Sd/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 5 t h June, 2015 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR 13