Suresh Monga,, vs Department Of Income Tax

Asstt.Commissioner of Income Tax, vs Shri Suresh Monga, Circle 23(1), New Delhi. S-190, Greater Kailash-II, New Delhi. C.O. No. 161/Del/2008 (IN IT(SS)A NO. 118/DEL/2006) Block Period 1.4.96 to 25.4.02

Shri Suresh Monga, vs ACIT, Circle 23(1), New Delhi. New Delhi. (Appellant) (Respondent) Appellant by: Shri A. Misra CIT DR Respondent by: S/Shri K. Sampath, Rajan Kumar Adocates Date of Hearing: 19.1.2015

PER CHANDRAMOHAN GARG, J.M.

The above captioned appeal of the revenue as well as Cross Objection

of the assessee have been directed against the order of the CIT(A)-XXIII,

New Delhi dated 31.1.2006 in Appeal No. 271/ 2004-05 for block period

reckoning from 1.4.96 to 25.4.2002.

1 IT(SS) No.118/D/2006 & CO No.161/D/2008

Additional ground of the Revenue

2. We have heard arguments of both the sides on admissibility of

additional ground. Ld. DR submitted that additional ground submitted by

the revenue is necessary for proper adjudication of the appeal, therefore

the same may be submitted. Ld. DR has further drawn our attention

towards impugned order and submitted that the CIT(A) deleted addition of

Rs.12,72,707 and Rs. 91,817 being aggregate of various figures scribbled on

loose slips which were found and seized during the course of search,

therefore, this ground pertaining to mixed question of law and fact may

kindly be taken for adjudication.

3. Ld. Counsel of the assessee objected to the admissibility of additional

ground and subsequently, the ld. Counsel of the assessee submitted that in

all fairness if it is found just and proper to admit additional ground of the

revenue, then the assessee has no serious objection if the same is

adjudicated on merits. In view of above submissions of both the parties

and on careful perusal of the impugned order, we observe that the

additional ground raised by the revenue having mixed essence of law and

fact is necessary for proper adjudication of the grievance of the revenue,

therefore, the additional ground submitted by the revenue is admitted for

adjudication.

2 IT(SS) No.118/D/2006 & CO No.161/D/2008

Appeal of the revenue IT(SS)A No.118/Del/2006

4. The revenue has raised one main ground and one additional ground

which read as under:-

"The ld. CIT(A) has erred in deleting the addition of Rs.6,08,000 made on account of cash deposits in Bank on various dates."

"The ld. CIT(A) has also erred in deleting the addition of Rs.12,72,707/- and Rs. 91,817/- being aggregate of various figures scribbled on loose slips, found and seized during the course of search."

5. Briefly stated the facts giving rise to these cases are that a search

operation u/s 132A of the Income Tax Act, 1961 was conducted on

26.04.2002 in the residential premises of the assessee. As a result of

search, certain documents were found and seized and therefore, the AO

asked the assessee to explain entries amounting to Rs.91,870 along with

sufficient evidences and the AO concluded that the assessee failed to

explain these entries and therefore total amount of Rs.91,870 was added

back as undisclosed income of the assessee. The AO further observed that

on some of the bills, there appeared the name of the assessee's wife Smt.

Monga revealing investment in jewellery and the AO was of the view that

the assessee could not disown the responsibility of explaining entries in

these documents. The AO concluded the assessment proceedings by

holding that since the assessee failed to discharge his onus, the total

3 IT(SS) No.118/D/2006 & CO No.161/D/2008

amount of Rs.6,79,890 was treated as undisclosed income of the assessee

and also the scribbling showed various expenses amounting to Rs.5,92,817

and since the assessee could not submit any cogent explanation, thereof,

these amounts were treated as undisclosed income of the assessee by

making total addition of Rs.12,72,707 on protective basis and ordered to be

treated the same amount as substantive income in the hands of assessee's

wife Smt. Avinash Monga. The assessee preferred an appeal before the

CIT(A) which was partly allowed deleting the addition of Rs.91,970 and

protective addition of Rs.12,72,707. The CIT(A) also deleted the addition of

Rs.6,08,000 being cash deposits found in the bank account of the assessee

on various dates. Now, being aggrieved by the above impugned order of

the CIT(A), the revenue is before this Tribunal with the aforementioned

ground.

Main ground no. 1 of the revenue

6. Apropos main ground of the revenue, ld. DR, supporting the action of

the AO, submitted that as per details of narration of bank details submitted

by the assessee, the assessee received loan of Rs. 1 lakh on 20.5.1998 and

Rs. 5 lakh on 20.5.1999 from Shri Gyan Gupta and assessee has failed to

furnish any evidence to support the fact that the transaction had actually

taken place with Shri Gyan Gupta. The DR further pointed out that the

assessee failed to furnish required confirmation and other details and 4 IT(SS) No.118/D/2006 & CO No.161/D/2008

documentary evidence, therefore, the AO was right in holding the same as

undisclosed income of the assessee for AY 1999-2000 and 2000-01

respectively. The DR further pointed out that the CIT(A) deleted the

addition without any basis, therefore, conclusion of the CIT(A) on ground

no. 5 may be set aside by restoring that of the AO on this issue. Replying to

the above, ld. AR submitted that the AO did not afford due opportunity of

hearing for the assessee and the CIT(A) after considering the explanation,

submission and other relevant documentary evidence of the assessee was

justified in deleting the addition.

7. On careful consideration of above rival submissions and careful

perusal of the impugned order, we find that the CIT(A) in ground no. 5 of

the assessee has dealt with this issue on addition of Rs.6,08,000/-. The

operative part of the order of the CIT(A) deleting the addition reads as

under:-

" Now the contention of the appellant is found to be correct. The statement of the bank account which on one hand reveals cash deposits as brought out by the AO in his order for the purpose of its taxation u/s 68, the same bank accounts on the other hand reveal withdrawals also prior to such cash deposits. Therefore, the assessee's plea that the same funds were deposited in cash which had been withdrawn earlier cannot be simply brushed aside. No matter how farfetched the proposition is, still it indicates the availability of funds with the appellant. A search was carried out in the residential premises of the appellant and if the funds so withdrawn were invested or spent elsewhere, some corroborating evidences would have been found and in that 5 IT(SS) No.118/D/2006 & CO No.161/D/2008

case the AO would have been justified to make additions u/s 68 for the unexplained cash deposits. However, for want of such evidences, the source of subsequent cash deposits stands correlated with the earlier cash withdrawals. The probability of the funds withdrawn and having been retained by the appellant in cash may be doubtful, still in absence of any proof that it had already been utilized and was not available at the time of deposits, the appellant's explanation cannot be disregarded. The ratio as laid down by the Hon. Apex Court in the case of CIT vs Durga Prasad Mere (1971) 82 ITR 540 (SC) would be very relevant in the present case which says "apparent must be considered the real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities". In the instant case also what is apparent has to be taken as real in absence of proof as to what was actually real. Because of the time gap between the withdrawal of funds and their re-deposit, the assessee's explanation may not appear convincing, but such time gap alone cannot be the reason to reject the appellant's explanation.

So far as deposit of Rs.2 lakhs in the bank account No. 56317 found credited on 29.10.1997 is concerned, it stands well explained by the withdrawal of Rs.2 lakhs on 31.7.1997 because a gap of three months time cannot be said to be a long gap. The fund withdrawn on 31.7.1997 was available with the appellant for redeposit on 29.10.1997 and once the source of credit stands proved it cannot be added U/S 68. The time gap in respect of deposits in the bank account No. 16488 of Central Bank of India and withdrawal of funds from the same appears to be longer but as it remains unproved that the funds withdrawn were spent or invested somewhere else, the assessee's explanation will have to be accepted. So far as deposit of Rs.1 lakh and Rs.1,25,000/- on 12.7.2000 is concerned, these are not two independent deposits On perusal of the photocopy of the pass book it is found that the assessee had deposited Rs.1lakh in cash on 12.7.2000 and funds to the extent of Rs.30,392/- was already available as old balance. Out of the total credit balance of Rs.1,30,392/- only, cash of Rs.1,05,000/- was initially withdrawn.

This was for the purpose of preparation

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of the bank draft and as confirmed by the bank certificate dated 12.7.2000, pay order No. 9243 was prepared on this date i.e. 12.7.2000 for Rs.1,25,000/-. Since it was got cancelled by the appellant on the same day, credit of Rs.1,25,000/- was given to appellant's saving account and that is how the deposit of Rs.1,25,000/- again appeared on 12.7.2000. Thus so far as this subsequent deposit of Rs.1,25,000/- is concerned, deposit to the extent of Rs.1,05,000/- at least stands proved. Balance of Rs.20,000/- is being considered separately with reference to other earlier withdrawals. Apart from this there was deposit to the extent of Rs.2,03,000/- between 17.1.2001 and 30.1.2001. As against this there was heavy withdrawal totalling to Rs.5 lakhs on 2nd and 4th February, 1999 and again there was withdrawal of Rs.1,50,000/- on 4th July, 1999. The assessee's reliance on the decision of the Hon. Patna High Court in the case of Addl. CIT Bihar vs Mohan Engg. Co. Ltd. reported in (1985) 151 ITR 571 (Patna) is squarely applicable in his case. In that case the deposit was withdrawn from the account of "R" between November 28, 1961 to February 6, 1963 and the deposits in the name of "D" had been made between April 26, 1963 and September 2, 1963 and on reference it was held that "the deposit was made out of the funds withdrawn in the immediately preceding year and hence the alternative plea had been proved by positive evidence.

The assessee had not only discharged the onus placed on him u/s 68 but had adduced evidence in support of his plea. It was therefore held that the deletion of the amount credited in the name of "D" from his total income was valid. In the instant case also the time gap is almost the same and the cash deposits have been made out of the funds withdrawn in the preceding years and therefore the appellant's plea stands proved by positive evidences. As against this, there has not been brought even-an iota of evidence on record, even after searching the appellant's residential premises to disprove the appellant's claim and to prove that he did not have such funds available at the time of subsequent cash deposits. Since the assessee has discharged his onus placed on him U/S 68 by adducing evidence in support of his plea on the basis of the same pass books, the addition U/S 68 was not correct and valid. Even otherwise the assessee had cash credit of Rs.l lakh on 20.5.1998 and

7 IT(SS) No.118/D/2006 & CO No.161/D/2008

Rs.5 lakhs on 20.5.1999 purported to have been received from Shri Gyan Gupta available with him. As the same has already been taxed as unexplained cash credit and as the addition has been held to be correct on account of failure on the part of the appellant to prove its source, the funds to the extent of Rs.6 lakhs at least were available with the appellant to explain the credits of the subsequent period. In the case of CIT vs Ram Sanehi Gyan Chand (1972) 86 ITR 724 (P&H) it has been held "on the intangible additions made in the previous years, the assessee had paid the income tax and possibly penalty for not disclosing it, and if the law permits the assessee to contest addition of this intangible additions for explaining the capital in the subsequent asstt years, the opportunity should be allowed to it in the interest of equity and fair play". Since cash credit to the extent of Rs.6 lakhs has already been held to be undisclosed income of the appellant as discussed supra, the appellant deserves its credit in respect of subsequent credit entries found in the bank statement. In this view of the matter also addition of Rs.6,08,000/- was not called for. Accordingly for the reasons discussed above, the same is hereby deleted."

8. On logical analysis of the above conclusion of the CIT(A) in the

impugned order, we note that the first appellate authority granted relief for

the assessee by following the decision of Hon'ble Punjab and Haryana

High Court in the case of CIT vs Ram Sanehi Gian Chand (1972) 86 ITR

724 (P&H) wherein it has been held that on the tangible additions made in

the previous years, the assessee had paid the income tax and if the law

permits the assessee to contest addition of this intangible addition for

explaining the capital in the subsequent assessment years, the opportunity

should be allowed to it in the interest of equity and fair play. In the present

case, the cash credit to the extent of Rs. 6 lakh has already been held to be 8 IT(SS) No.118/D/2006 & CO No.161/D/2008

undisclosed income of the appellant and the appellant deserves its credit in

respect of subsequent credit entries found.

9. Coming to the facts and circumstances of the present case, we note

that the impugned cash deposits have been made out of the funds

withdrawn in the preceding years and hence, we are in agreement with the

conclusion drawn by the CIT(A) that assessee's stand on this issue has been

proved by positive evidences. Per contra, the AO has not brought out any

material or evidence in spite of search operation at the residential premises

of the assessee to dismiss assessee's claim/stand that the assessee actually

has such funds available at the time of subsequent cash deposits. We are

also inclined to hold that the CIT(A) was quite justified in reaching to a

conclusion that the assessee has discharged its onus incumbent upon him

u/s 68 of the Act by submitting supportive and reliable evidence and

explanation viz. same bank pass book etc. Therefore, the addition u/s 68 of

the Act was not sustainable. Hence, we are unable to see any ambiguity or

any other valid reason to interfere with the impugned order on this issue

and we uphold the decision of the CIT(A) deleting the said addition made by

the AO u/s 68 of the Act. Accordingly, ground no. 1 of the revenue is

dismissed.

9 IT(SS) No.118/D/2006 & CO No.161/D/2008

Ground no. 2 of the revenue

10. Apropos ground no.2, ld. DR submitted that CIT(A) has also erred in

deleting the addition of Rs.12,72,707 and 91,817 being aggregate of various

figures scribbled on loose slips, found and seized during the course of

search. Supporting the stand of the AO, ld. DR further contended that the

assessee was asked to furnish sufficient evidence regarding some entries

amounting to Rs.91,870 but assessee failed to explain these entries during

assessment proceedings and, hence, in this situation, in the absence of any

explanation from the assessee, the said amount was rightly added to the

income of the assessee. Ld. DR has further drawn our attention towards

para 3 of the assessment order and submitted that the amount of

Rs.6,79,890 which was total of loose slips, was rightly treated as

undisclosed income of the assessee and there were scribblings which

showed various expenditure amounting to Rs.5,92,817/- and there was no

cogent and sustainable explanation from the assessee, therefore, the said

amount was also disallowed and added to the undisclosed income of the

assessee. Ld. DR vehemently contended that the total addition under the

said came to Rs.12,72,707/- and protective addition was made in the hands

of assessee and the same was rightly treated as substantive income in the

hands of assessee's wife Smt. Avinash Monga.

10 IT(SS) No.118/D/2006 & CO No.161/D/2008

11. Ld. DR vehemently contended that the CIT(A) was not justified in

granting relief for the assessee as the appellate order in the case of Smt.

Avinash Monga has not attained finality and the addition could not be

deleted only on this basis. The DR finally prayed that the impugned order

may be set aside by restoring that of the AO.

12. Replying to the above, ld. Counsel of the assessee supported the order

of the first appellate authority and submitted a copy of the order of ITAT

Delhi 'A' Bench in ITA No.389/Del/2005 and C.O. No. 160/Del/2008 in the

case of ACIT vs Avinash Monga dated 8.11.2011 and submitted that the

order of the CIT(A) in the case of assessee's wife Smt. Avinash Monga dated

25.07.2005 has been upheld by the Tribunal dismissing the plea of the

revenue on this issue. Ld. Counsel further submitted that the impugned

addition was made in the hands of assessee on protective basis and the

substantive addition for the aforesaid amount had been made in the hands

of wife of the assessee Smt. Avinash Monga and when the addition in the

hands of Smt. Avinash Monga has been deleted, then protective addition in

the case of assessee is not sustainable and, therefore, the CIT(A) was right

in granting relief for the assessee.

13. On careful consideration of above rival submissions of both the

parties and relevant material placed on record, inter alia, the order of the

Tribunal in the case of the assessee's wife Smt. Avinash Monga dated 11 IT(SS) No.118/D/2006 & CO No.161/D/2008

8.11.2011 (supra), we note that undisputedly, the substantive addition was

made in the hands of assessee's wife and for the same amount protective

addition was made in the case of present assessee. We further note that the

CIT(A) granted relief for the assessee by noticing decision of the first

appellate authority viz. CIT-XXX, New Delhi dated 25.07.2005 in Appeal

No.224/2004-05 and this order on this issue has been upheld by the

Tribunal order dated 8.11.2011 (supra). Now, we take cognizance of this

well-accepted proposition that when substantive addition in the hands of

other assessee was not found to be sustainable, then protective addition in

the hands of the present assessee cannot be held as sustainable. In the

present case, there was a protective addition in the case of present assessee

i.e. Shri Suresh Monga and substantive addition in the hands of his wife Smt.

Avinash Monga which has been deleted by the CIT(A) vide order dated

25.07.2005 and this order of the first appellate authority has been upheld

by the Tribunal by order dated 8.11.2011 with following observations and

conclusion:-

"23. Concerning the addition of Rs.12,72,707/-, this figure represented the total of the figures appearing on pages 1 to 22 of the seized annexure A-1. Out of these, page 1 of Annexure A-1 contained various figures, total amounting to Rs.95,000/-. This slip contained the name of Smt. Monga, with "10,000" written against her name. The ld. CIT(A) sustained the addition to this amount of Rs.10,000/-, which was mentioned against the name of the assessee. We do not

12 IT(SS) No.118/D/2006 & CO No.161/D/2008

find any error in this action of the ld. CIT(A). The seized slip did not contain any detail of as to what the figures contained therein represented the names mentioned on the slip were only of ladies, leading the CIT(A) to the observation that the amounts represented some sort of contribution like a kitty party. Since the remaining amounts, totalling to Rs. 85,000/- were not relatable to the assessee, the addition to this extent was rightly deleted.

24. Now we turn to the addition of Rs. 12,62,707/-. This figure represents the amounts mentioned in pages 2 to 24 of the seized annexure A-1. As per the ld. CIT(A), some of the seized slips contained narrations that the figures mentioned therein related to the jewellery. The rest of the slip did not contain any such recital. The AO assumed the figures on all the slips to represent the expenditure for purchase of jewellery, even though no jewellery relatable to the added amount was seized in the search operation, the AO concluded that the figures mentioned in the seized slips represented jewellery purchased by the assessee. Pertinently, addition of these amounts was made in the block assessment of not only the assessee, but also her husband, Suresh Monga. It is also undisputed that the AO has not been able to relate the amounts to the assessee or to corroborate the same with the jewellery or other assets discovered in the search. Further, Suresh Monga, the husband of the assessee in his statement, had stated that the jewellery which was found in the house was the stridhan of his wife, the assessee or purchased from their own sources. These facts remain uncontroverted.

25. The stand of the Department in this regard is that the ld. CIT(A) has ignored the factum of the slips containing the entries having been found from the premises of the assessee and the assessee having failed to discharge her onus u/s 132(4A) of the Act with regard to such slips. In this regard, whereas it is undeniable that the onus u/s 132(4A) of the Act was on the assessee, the slips seized in the search operation were neither in the hand-writing of the assessee, nor did they

13 IT(SS) No.118/D/2006 & CO No.161/D/2008

contain the nature of the figures mentioned therein, nor as to whether the figures represented goods or money, sales or purchase, the receipt or payment, etc. Therefore, the seized slips were nothing more than dumb documents. And, more pertinently, no material was found during the search, which could be co-related to these seized slips.

26. In view of the above, finding no merit therein, the grievance of the Department in this regard is also rejected. As such, ground Nos. 1 to 4 are rejected. "

14. In view of above, we are inclined to hold that the substantive addition was

made in the hands of Smt. Avinash Monga and in the assessee's case, there was

merely a protective addition. We further note that the CIT(A)-XXX, New

Delhi, after detailed deliberations found that the substantive addition is not

sustainable and both the additions of Rs.12,72,707/- and Rs.91,870 except

addition to the extent of Rs.10,000 were deleted. We are also in agreement with

the conclusion of the CIT(A) in the impugned order that whatever undisclosed

income had to be taxed based on these loose papers, has been taxed in the hands

of assessee's wife Smt. Avinash Monga substantively and as the rest of

substantive addition has been deleted, then there is no ground to uphold the

protective addition in the hands of present assessee Shri Suresh Monga. Finally,

under above noted facts and circumstances, we reach to a logical conclusion that

the CIT(A) was right in granting relief for the assessee and deleting the

protective addition. Accordingly ground no. 2 of the revenue is also dismissed.

14 IT(SS) No.118/D/2006 & CO No.161/D/2008

C.O. of the assessee

15. The assessee has raised following cross objection:-

"That on the facts and in the circumstances of the case, the authorities below erred in law in holding that the loan amounting to Rs.6 lakhs received by the assessee was unexplained cash credit u/s 68 of the Income Tax Act, 1961."

16. Since by the earlier part of this order, we have dismissed the main ground

no.1 of the revenue, therefore, C.O. of the assesse on the same issue become

infructuous and we dismiss the same as having become infructuous.

17. In the result, the appeal of the revenue as well as C.O. of the assessee are

dismissed.

Order pronounced in the open court on 23.2.2015.

Sd/- Sd/-

(PRAMOD KUMAR) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

DT. 23rd February, 2015 'GS'

Copy forwarded to:- 1. Appellant 2. Respondent 3. C.I.T.(A) 4. C.I.T. 5. DR By Order

Asstt. Registrar

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