Sonpal Singh Pal Singh Saini, Mumbai vs Department Of Income Tax

सर्वश्री आय.सी.शभमव, रेखम सदस्म एवुं श्री संजम गगव, न्ममयमक सदस्म BEFORE SHRI R.C.SHARMA, AM & SHRI SANJAY GARG, JM आमकय अऩीर सं./ITA No.4374/Mum/2013 ( नििाारण वषा / Assessment Year :2009-10) ITO-21(3)(2), Mumbai Vs. Sri Sonpal Singh Pal Singh Saini, C/o Sona Transport Pvt. Ltd., Opp.

Nilam Hotel, Near Amar Cinema, Govandi, Mumbai-400088

स्थममी रेखम सं ./ जीआइआय सं ./ PAN/GIR No. : AXBPS 4516 M (अऩीरमथी /Appellant) .. (प्रत्मथी / Respondent)

यमजस्र् की ओर से /Revenue by : Shri Neil Philip यनधमवरयती की ओर से /Assessee by : Shri Nilesh Joshi

सुनर्मई की तमयीख / Date of Hearing : 24/03/2015 घोषणम की तमयीख/Date of Pronouncement 10/04/2015

आदे श / O R D E R

PER R.C.SHARMA (A.M):

This is an appeal filed by the Revenue against the order of CIT(A)

dated 12-3-2013 for the A.Y.2009-2010 in the matter of order passed

u/s.143(3) of the I.T.Act.

2. Rival contentions have been heard and record perused. Facts in

brief are that the assessee is a Director in M/s Sonal Transport Pvt. Ltd.

and during the year it declared income from salary and house property

and other concerns. During the course of scrutiny assessment, the AO

made an addition of Rs.20,60,300/- in respect of cash deposit in the bank 2 ITA No.4374/13

account. The facts leading to addition are that on the basis of AIR

information, the AO found that the assessee had deposited cash in the

bank account as under :-

(i) HDFC Bank Rs.15,00,000/- (ii) ICICI Bank Rs.20,60,300/- (iii)State Bank of Patiala Rs.22,10,000/-

Total Rs.57,70,300/-

During the course of the assessment proceedings the assessee offered

the cash deposit of Rs.15,00,000/- in HDFC and Rs.22,10,000/- in State

Bank of Patiala as his income from unexplained sources vide letter dated

20.12.2011. As regards source of cash deposit of Rs.20,60,300/- in the

ICICI Bank, it was submitted that the said cash has been deposited out of

the withdrawals made from M/s. Sona Transport Pvt. Ltd wherein the

assessee was a director and the expenses were incurred from the said

IClCI Bank A/c for trip expenses of the drivers of M/s. Sona Transport pvt.

Ltd. by giving debit cards to the truck operators. The AO however did not

agree to the explanation of the assessee on the grounds that since the

assessee has already admitted the cash deposits in HDFC Bank & State

Bank of Patiala as income from unexplained sources, which shows that

the assessee is generating cash from undisclosed sources. The AO also

observed that the assessee had not shown the ICICI Bank account as

well as HDFC and State Bank of Patiala account in the return of income.

Accordingly the cash deposit of Rs. 20,60,300/- in the ICICI Bank account

was treated by AO as income from undisclosed sources.

3. By the impugned order, the CIT(A) deleted the addition after having

the following observations :-

3 ITA No.4374/13

"3.3 I have considered the arguments of the Ld.AR and perused the assessment order. From the perusal of the assessment order, it is noted that the appellant had duly claimed before the AO also that the cash were withdrawn from the company M/s Sona Transport Pvt. Ltd. wherein the assessee was a major shareholder and then deposited the same in the ICICI Bank account to meet the expenditure incurred by drivers through debit cards issued to them from ICICI bank a/c in the name of appellant. The contention of appellant was that it merely acted as an escrow or agent for making payment to drivers on behalf of the company. But the AO in spite of verifying this contention of the assessee form the bank account of the company and bank account of the appellant, based his conclusion on the mere suspicion just because the assessee has surrendered cash deposits in other two bank accounts as undisclosed income and that the said bank account was not appearing in the balance sheet of the assessee submitted during course of asstt. proceedings.

Before me the Ld.AR has produced the cash book of the company as well as the copy of the bank statement of ICICI Bank which were also available before' the AO. The appellant has given the date wise details of amounts withdrawn from the company's cash book and the amounts deposited in the ICICI Bank account which is enclosed as Annexure I to this appellate order. From the said Annexure, it is very clear that the dates of withdrawal from the company's cash book matches with dates of equivalent' deposit or cash in the ICICl Bank account of the assessee. The contention of the AO that there is a negative cash balance in the cash book of the company is not correct. He presumed the narration in the Bank statement as "chq paid- Mumbai-Sion T" was by cheque whereas the bank has given certificate that same was withdrawal by cash. 'Hence there remains no discrepancy in cash book of STPL also as suspected by AO in asstt order. It is further noted that the amount withdrawn from, the companies cash book has been duly considered in the ledger account of the assessee in the books of the company. Since it was the contention of the appellant that the amounts were withdrawn from company and deposited in ICICI Bank account in order to enable the drivers to use debit card issued form the ICICI bank account of the assessee, the assessee was asked to give the ledger a/c wherein the expenses incurred through debit cards by the assessee has been incorporated in the books of company STPL. From the details given, it is verified that the expenditure incurred by the assessee on various trip expenses and diesel and oil of the trucks have been duly considered in the ledger account of the assessee in the books of the company also and such expenses have been claimed by the company as a deduction in P&L A/c. Thus there is a clear nexus between the withdrawals made from cash book of STPL, its deposit in ICICI bank of appellant, the expenditure incurred by appellant from ICICI bank a/c on behalf of STPL and their accounting in books of company thereafter. The AO in the assessment order has not at all looked into the verification of the entries from books of company which could have easily proved the contention of the assessee. The mere fact that the assessee has voluntarily offered to tax the cash 4 ITA No.4374/13

deposits in other two bank accounts will not by itself prove that the cash deposits in lCICl bank account too are unexplained. It is well settled principle that no addition can be made on mere presumption. The AO brought nothing on record to exclusively rebut the contention of the assessee as far as cash deposits of Rs 20,60,300 in ICICI Bank account are concerned. As regards the non appearance of ICICI Bank account in the return of the assessee, it is the contention of the appellant that no balance sheet was being drawn by the assessee as he has only salary income and the ICICI bank a/ c was being operated by assessee only as escrow agent on behalf of company. Moreover the cash deposits in ICICI bank, its utilization thereafter are duly reflected in books of company, therefore no adverse view can be taken even if in the provisional balance sheet given during asstt proceedings did not reflect the closing balances in ICICI bank. Hence the addition made by the AO to the extent of Rs.20,60,300/- is not justified and the same is directed to be deleted."

Against the above order of CIT(A), the revenue is in appeal before us.

4. We have considered rival contentions and carefully gone through

the orders of the authorities below. From the record we found that the

assessee is a Director in M/s Sona Transport Pvt. Ltd.. In order to effect

payment of driver salary and diesel etc., the assessee has given debit

card to truck operators. The money was withdrawn from the account of

M/s Sona Transport Pvt. Ltd. and was deposited by assessee in his

account at ICICI Bank Ltd., on the plea that assessee is in individual

capacity has not disclosed this bank account in his return of income. The

AO made addition in respect of amount deposited in this bank account by

recording a finding that cash was withdrawn by assessee from the

company M/s Sona Transport Pvt. Ltd., wherein assessee was a major

shareholder and the same was deposited in the ICICI bank account to

meet the expenditure incurred by drivers through debit card issued to

them from ICICI bank account in the name of assessee. The CIT(A)

deleted the addition. The CIT(A) has verified the cash book of M/s Sona

Transport Ltd. as well as copy of the bank statement of ICICI bank, which 5 ITA No.4374/13

were also filed before the AO and found that assessee has given

datewise withdrawal of amount from the companies cash book and the

amount deposited in the ICICI bank account. From these details it was

very clear that the dates of withdrawal from the companies cash book

matches with the dates of equivalent deposited in ICICI bank account of

the assessee. A finding has also been recorded to the effect that the

amount withdrawn in the company's cash books has been duly

considered in the ledger account of the assessee in the books of

company. The CIT(A) has also recorded a finding to the effect that the

expenditure incurred by assessee on various trips expenses, diesel and

oil of the trucks has duly been considered in the ledger accounts of the

assessee in the book of the company and also such expenses has been

claimed by the company by the deduction in its P & L account. Thus,

there was a clear nexus between withdrawal made from cash book of the

company and its deposit in the ICICI bank account of the assessee. The

finding recorded by the CIT(A) is as per material on record and the same

has not been controverted by the ld. DR by bringing any positive material

on record. Accordingly, we do not find any reason to interfere in the order

of CIT(A) deleted the addition made on account of cash deposited in the

ICICI bank account which were actual withdrawal of the amount from the

companies cash books.

5. The AO also made addition of Rs.26,11,350/- on account of

unexplained investment in shares of the company M/s Sona Transport.

Facts in this regard are that on verification of the balance sheet of the

company M/s Sona Transport Pvt. Ltd it was noted by the AO that the 6 ITA No.4374/13

assessee was owning 26,113 shares of the company as on 31/3/2009

valued at Rs.26,11,350/-. However in the balance sheet of the assessee

filed during the course of the assessment proceedings, no such

investment in the shares of the company was reflected. Vide letter dated

14.12.2011, it was explained by the assessee that the company M/s Sona

Transport Pvt. Ltd. was promoted originally by his rather Shri Pal Singh

Saini and after the death of his father all the 26,113 shares of the

company held by father and father's HUF were transferred in the name of

the assessee. However, due to clerical error of the accountant, the said

shares inherited by the assessee from his father were not reflected in the

capital account of the assessee. Accordingly he disbelieved the

contention of the assessee and added the sum of Rs. 26,11,350/ - as

undisclosed investment in respect of the share in the company owned by

assessee.

6. By the impugned order the CIT(A) deleted the addition after having

following observation :-.

"4.3 I have considered' the above arguments of the Ld.AR and perused the assessment order. It is 'noted that when the appellant vide letter dated 14.12.2011 explained before the AO that the said shares have been received on inheritance after the 'death of the father and no fresh investment has been made by the assessee, the AO did not ask any other details to cross check the contention of the appellant. During the course of the appellate proceedings the Ld.AR has produced copy of the share certificates which reveal that shares were originally held by father and it was only on 1.4.2000 that the shares have been endorsed by the company in favour of appellant. The copy of the register of shares maintained by the company along with the Board's Resolution dated 1.4.2000 agreeing to transfer shares in the name of the son duly supports the contention of the appellant. It is further noted that even till date the total number of shares issued by the company is 29,015 valued at Rs 29,015,00/- which is same since F.Y. 98-99 as evident from the annual return filed by the company under the Companies Act. Since no fresh shares have been issued by the company and the number and paid up value of shares prior to death of the father of the 7 ITA No.4374/13

appellant and after remains the same, it proves that it is the same shares which were held by the father, which have now been transferred in the name of the appellant and no further payment to acquire these shares have been made by the appellant. In fact the AO also in the assessment order has not mentioned anything to suggest that the assessee had made any payment for acquiring such shares during the year. He has disbelieved the contention only on grounds that no documentary evidence has been given. There is no evidence that after furnishing the reply on 14/12/2011, the AO did ask the assessee to produce any further documents before completing the assessment on 23/12/1011. When the shares have been acquired through inheritance, without paying any money, the balance sheet can be prepared without such shares cannot be said to be faulty, as suspected' by the AO. Even otherwise since the shares have been allotted in the name of the appellant on 1.4.2000, there can be no case for making addition of unexplained investment in A.Y. 2009-10. Considering totality of facts and circumstances of the case, the contention of the appellant that the shares were received through inheritance after the death of the father without making any investment by the appellant is correct and hence addition of Rs.26,11,350/ - made by the AO as unexplained investment is not justified and the same is directed to be deleted."

7. Against the above order of CIT(A), the revenue is in appeal before

us. From the record we found that the AO had made addition of

Rs.26,11,350/- on account of unexplained investment in shares of the

company M/s Sona Transport by observing that these shares were not

shown in the balance sheet of the assessee filed during the course of

assessment proceeding. The AO, therefore, treated the investment as

unexplained. From the record, we found that the company M/s Sona

Transport Pvt. Ltd was promoted by his father Shri Pal Singh Saini and

after the death of his father in the year 2000, all the 26,113 shares of the

company held by father and father's HUF were transferred in the name of

the assessee on 1st April, 2000 i.e. 8 years back. The register of the

shares maintained by the company along with board resolution dated 1-4-

2000 also indicating transfer of shares in the name of son. Thus, the

shares received by the assessee from his father eight years back on 8 ITA No.4374/13

father's death cannot be said to be undisclosed investment on assessee.

Since the shares were received as inheritance and no value was paid for

the same, it was not shown in the balance sheet of the assessee filed

during the course of assessment proceedings. Since there was no

investment by the assessee in the shares of the company either during

the year or in earlier year, there is no infirmity in the order of CIT(A) for

deleting the addition made on account of 26,113 shares after recording

the detailed finding at para 4.3 to the effect that shares were acquired by

the assessee on inheritance in the year 2000.

8. In the result, appeal of the revenue is dismissed.

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

Sd/- Sd/- (संजम गगव) (आय.सी.शभमव) (SANJAY GARG) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनमंक Dated 10/04/2015 प्र.कु.मभ/pkm, यन.स/ PS

आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :

1. अऩीरमथी / The Appellant

2. प्रत्मथी / The Respondent.

3. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai.

4. आमकय आमुक्त / CIT

5. वर्बमगीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai

6. गमर्व पमईर / Guard file.

सत्ममवऩत प्रयत //True Copy// आदे शािसार/ BY ORDER,

उप/सहायक पुंजीकार (Asstt. Registrar) आयकर अपीऱीय अधिकरण, भुंफई / ITAT, Mumbai