TMI Blog2017 (11) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... tive and we find that the same have been rendered in the peculiar facts and are thus distinguishable and does not support the case of the assessee. - Decided against assessee. Unexplained cheques issued - Held that:- The learned Commissioner of Income-tax (Appeals) has given a finding that Shravan Kumar's bank account itself was opened on April 6, 2012 and therefore he could not have given cheques to the appellant in 2008. In response, the assessee has submitted that these cheques were made available and not issued by Shri Shravan Kumar. It was further contended that since Shravan Kumar was onward selling the land to other persons, he obtained two cheques of the above sums from those parties directly in the name of the appellant, so that his obligation of getting the cheques cleared in favour of sellers of land could be fulfilled. In our view, these are merely contentions and not supported by any credible evidence that cheques were issued by ultimate buyers directly in favour of the assessee. Further, in view of the detailed reasoning given in respect of ground No. 1 above, we affirm the order of the learned Commissioner of Income-tax (Appeals) to the extent of ₹ 15 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken the following grounds of appeal : 1. In the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the learned Assessing Officer in making the addition of ₹ 63,38,820 on account of the alleged unexplained cash deposits in the bank account. The action of the learned Commissioner of Income-tax (Appeals) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 63,38,820. 2. In the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in confirming the action of the learned Assessing Officer in making the addition of ₹ 16,10,491 on account of the alleged unexplained cheques deposits in the bank account. The action of the learned Commissioner of Income-tax (Appeals) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of ₹ 16,10,491. 3. In the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 142(1) was issued requiring the assessee to furnish source of cash deposits in his bank account and it was also stated in the said notice that in case of non-compliance, assessment will be completed under section 144 and the entire deposits in his bank account will be added to his total income. Subsequently, on receipt of such notice, the assessee came forward and attended the assessment proceedings and filed an affidavit from Shri Shravan Kumar where he had admitted that he had purchased the land on power of attorney and paid cash to the assessee from time to time in lieu of which the assessee has issued cheques to the land owner. The Assessing Officer did not find the affidavit as reliable piece of evidence for various reasons discussed in the assessment order. Some of the reasons given by the Assessing Officer are worth noting which are as follows : 1. He had not mentioned any details of cash paid by him i.e. dates and amounts when he had paid cash to Shree Narayan Meena. 2. Details of colony developed by him were not mentioned. 3. The land was purchased by him in October, 2006 and January, 2007 and payments were made in May 2008 onwards, making paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade however there was no compliance on the part of the assessee and thereafter, the Assessing Officer finally made the addition of ₹ 63,38,820 as unexplained cash deposits with the following final findings : In the absence of details mentioned at Sl. Nos. (a) to (o), it cannot be believed that the assessee has received any cash from Shri Shar wan Kumar during the year under consideration. Therefore, I hold that the cash deposited in the bank accounts of the assessee was the undisclosed income of the assessee which was deposited in the bank account. The peak of cash deposited and withdrawn from all the three bank accounts is enclosed as annexure-A to this order. As per this annexure the total peak comes at ₹ 63,38,820. The same is held as unaccounted income of the assessee and added to his total income. Thus ₹ 63,38,820 is added to the total income of the assessee. Since the assessee is the beneficiary, hence the addition is made in the hands of assessee on substantive basis. The matter is referred to the Income-tax Officer, Ward-2(3), Jaipur for making addition on protective basis in the hands of Shri Sharwan Kumar. 7. Being aggrieved, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is own bank account with the understanding that cash will be made available by Shri Shravan Kumar which will be deposited by the assessee-appellant and the cheques will be cleared in favour of the land owners (sellers). It was also decided that Shri Shravan Kumar will be allowed some time to develop the said land and find prospective buyers from whom Shri Shravan Kumar could receive money for payment to the land owners (sellers). 7.4 On the basis of being a local acquaintance to the land owners, the land owners executed power of attorney in favour of the assessee- appellant and the assessee-appellant, in turn, on the basis of that authority executed the sale deeds in favour of Shri Shravan Kumar. The land owners executed the following power of attorney in favour of the appellant : Name Date of execution of power attorney Smt. Ganga Devi 6th September, 2006 Shri Mool Chand 6th September, 2006 Shri Ramjilal 6th September, 2006 Shri Ramdhan 6th September, 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash and the cheques to the assessee-appellant so that the cheques issued to the land owners could be cleared from the bank statement of the assessee- appellant. The same facts were also confirmed by Shri Shravan Kumar vide certificate given by Shri Shravan Kumar. Further, these facts were also confirmed by way of his sworn affidavit by Shri Shravan Kumar. The learned Assessing Officer's reason for not accepting the said confirmations by Shri Shravan Kumar were that Shri Shravan Kumar did not mention the dates on which he handed over the cash to the assessee-appellant. Not remembering the dates cannot be so fatal to disbelieve the entire confirmation. Further, the learned Assessing Officer disregarded Shri Shravan Kumar's statements because he did not remember the details of plots sold by him rates at which plots were sold, colony which were developed, he was assessed to tax or not etc. All these issues are not relevant. The learned Assessing Officer has not disputed the fact of the lands having been purchased by Shri Shravan Kumar. Once this fact is undisputed, details of subsequent sale by Shri Shravan Kumar can have no bearing on the earlier part of the deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 183274 11,00,000 29-7-2008 55 29 183275 11,00,000 04-9-2008 55 29 183276 11,00,000 08-7-2010 59 29 183277 11,00,000 04-3-2009 57 29 183278 11,00,000 24-9-2009 58 29 Total 99,00,000 Sale deed for Shri Mool Chand Executed on 11th January 2007 at ₹ 33,00,000 183267 11,00,000 Replaced by new cheque - 25 183268 11,00,000 03-6-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,00,000 D. Following cheques originally issued to Smt. Ganga Devi by assessee-appellant were misplaced by her and were replaced by Shri Shravan Kumar himself : Name Amount Old Cheque No. New Cheque No. P.B. Date of clearance of cheque Receipt Pass book Shri Ganga Devi 11,00,000 183270 008282 44 67 17-5-2012 11,00,000 183271 008281 45 67 9-5-2012 Total 22,00,000 The above two cheques were not cleared from the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n submission. The Assessing Officer made addition in respect of peak of substantial cash deposits in the appellant's bank account. Total ₹ 99 lakhs were deposited on various dates and after considering the cash withdrawals, the Assessing Officer made the addition in respect of peak cash deposited in the appellant's bank account. The appellant submitted that such huge cash was given to him by the prospective buyer of the property Shri Shravan Kumar. Why the appellant deposited the cash allegedly given by Shri Shravan Kumar in his bank account is not clearly explained. When money is deposited in the appellant's bank account, onus is on the appellant to explain the nature and source of such cash deposit. This burden can never be shifted to the Assessing Officer. The appellant only produced Shri Shravan Kumar before the Assessing Officer who recorded his statement and came to the conclusion that there were many missing links in the statement and there was no evidence of possession of such huge cash with Shri Shravan Kumar. Even in the statement recorded Shri Shravan Kumar could not provide the source of such huge cash particularly when he was in employment as very low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate, in correct perspective, the vital evidences which beyond doubt prove that following persons namely Smt. Ganga Devi, Shri Moolchand, Shri Ramji Lal and Shri Ramdhan had sold their respective pieces of land to Shri Shravan Kumar and the appellant acted as a broker using his bank account for transferring the money from buyer to sellers. 10.1 The vital evidences before the learned Commissioner of Income- tax (Appeals) were as below : (i) Sale deeds : (a) Copy of the sale deed executed on October 28, 2006 between Shri Shravan Kumar and Shri Narayan Meena. (b) Copy of sale deed executed on January 11, 2007 between Shri Shravan Kumar and Shri Narayan Meena. (c) Copy of sale deed executed on January 11, 2007 between Shri Shravan Kumar and Shri Narayan Meena. (ii) Power of attorney : (a) Copy of power of attorney executed on September 6, 2006 between Smt. Ganga Devi and Shri Narayan Meena. (b) Copy of power of attorney executed on September 6, 2006 between Shri Moolchand, Shri Ramjilal and Shri Ramdhan with Shri Narayan Meena. (iii) Stale cheques replaced by original buyer Shri Shravan Kumar. (iv) Copy of pass book of P.N.B. of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and asked for replacement when cheques available with her were exhausted. The two lost cheques were replaced by the cheques of Shri Shravan Kumar himself numbering 8281 and 8282 which cleared on May 9, 2012 and May 17, 2012 respectively. These facts were evident before the learned Commissioner of Income-tax (Appeals). 10.5 The learned Commissioner of Income-tax (Appeals) was inclined to accept the fact of cash being made available to the appellant by Shri Shravan Kumar, yet he denied the relief for the simple reason that source in the hands of Shri Shravan Kumar was not proved. Following the observation of the learned Commissioner of Income-tax (Appeals) at page 12 of his order is worth noticing : Even if for the sake of argument it is accepted that the appellant was provided cash by Shri Shravan Kumar then the source of cash need to be proved in his case which was also not done. Protective assessment in his hand recommended by the Assessing Officer does not absolve the appellant from his onus. Once this is established that Shri Shravan Kumar made available the cash to the appellant as consideration of his purchasing the land for onward transfer of money to the sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) The explanation offered and material submitted by the assessee in support of its explanation should be wholesome, credible and verifiable. These three requirements thereafter have to be tested by the Assessing Officer not superficially but in depth having regard to the human probabilities and normal course of human conduct. It is only when the explanation and the material offered by the assessee at this stage passes this muster that the initial onus placed on it would shift leaving it to the Assessing Officer to start inquiring into the affairs of the third party. (d) Whilst it is true that the assessee cannot be called upon to adduce conclusive proof on all these three requirements, it is nonetheless legitimate expectation of the process that he would bring in sufficient proof, which is credible and at the same time verifiable, so as to discharge the initial burden placed on him. Whether initial onus stands discharged would depend upon facts and circumstances of each case. (e) The degree of burden of proof on the assessee will vary from assessee to assessee. Where amounts are borrowed from or shares are allotted through private placement, to persons generally known ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment. Similar analogy will apply in respect of any loan transaction. (h) The entire evidence available on record has to be considered and a reasonable approach has to be adopted. The final conclusion must be pragmatic and practical, which takes into account holistic view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish identity, creditworthiness of the shareholders and the genuineness of the transaction. (i) Where the assessee has discharged the initial burden placed upon him under section 68 to prove and establish the identity and creditworthiness of the share applicant/lender and the genuineness of the transaction, the burden of proof shifts on the Assessing Officer. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. If the Assessing Officer harbo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar 5,00,000 11,00,000 3/7/2008 Smt. Ganga Devi (183273) 11,00,000 0 28/7/2008 Shri Shravan Kumar 6,00,000 6,00,000 29/7/2008 Shri Shravan Kumar 5,00,000 11,00,000 29/7/2008 Smt. Ganga Devi (183274) 11,00,000 0 2/9/2008 Shri Shravan Kumar 5,00,000 7,00,000 12,00,000 4/9/2008 Smt. Ganga Devi (183275) 11,00,000 1,00,000 5/9/2008 Shri Shravan Kumar 5,16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i (183277) 11,00,000 78,500 23/9/2009 Shri Shravan Kumar 5,00,000 5,78,500 24/9/2009 Shri Shravan Kumar 5,99,500 11,78,000 24/9/2009 Smt. Ganga Devi (183278) 11,00,000 78,000 6/7/2010 Shri Shravan Kumar 11,00,000 11,78,000 8/7/2010 Smt. Ganga Devi (183276) 11,00,000 78,000 23/9/2011 Shri Shravan Kumar 5,00,000 5,78,000 24/9/2011 Shri Shravan Kumar 6,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shrawan Kumar and has claimed to have facilitated the whole transaction, we don't understand what stops the assessee in bringing on record the documentation in support of such receipts. It is not a question of determining the source of source but it is a question of determining the genuineness of the transaction and creditworthiness of Shrawan Kumar in respect of whom it has been claimed that the cash deposits belongs to him. 15. We know refer to the affidavit of Shrawan Kumar filed by the assessee and the statement of Shrawan Kumar recorded under section 131 by the Assessing Officer during the course of assessment proceedings. 16. The Assessing Officer however did not find the above affidavit and the statement of Shri Shrawan Kumar credible for reasons as stated below : (a) He was not having any idea of the colony developed by him. (b) he was not having any idea about the plots which were sold and when sold. (c) He was not having any idea of rate at which the plots were sold. (d) He was not having any idea of location of land on which the colony was developed. (e) He was not having any idea that whether the sale proceeds were received by him by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wan Kumar has miserably failed in disclosing these basic facts and sharing the same with the Assessing Officer. Further, the details of cash paid to the assessee has been stated by him to be in thousands, which is vague without specifying the amount and date of payment and also inconsistent with the version of the assessee where the assessee says that he has received cash in lakhs from Shrawan Kumar as we have noted above while reviewing the bank statement of the assessee. Even if we take into consideration the theory of fading memory with the advancement of age given that Shri Shrawan Kumar is a retired person having retired in the year 1999 and the statement being recorded in the year 2011, atleast he should come foreward and share some credible evidence to support his assertions as stated in his statement and the affidavit, in form of sale deeds with the buyers to whom the plots have been claimed to be sold and consideration in form of cash which has been received, copies of his bank statements where he has deposited such cash and given the huge quantum of cash involved going by the assessee's own version, the amount and date of payment of such cash claimed to have been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of the same, these sale deeds on a standalone basis do not support the case of the assessee. Rather the factual position which emerges from a perusal of such sale deeds is that given the fact that consideration has been paid by the assessee to the land owners though the land stood transferred in the name of Shrawan Kumar, Shri Shrawan Kumar was a mere name lender in these sale/purchase transactions and it is the assessee's undisclosed own money which has been deposited in his bank account and subsequently paid to the land owners. 19. Further, we are intrigued by the fact that there is huge time gap between the execution of the sale deed and realisation of sale consideration by the respective land owners. For instance, in the case of Ganga Devi, the sale deed was executed on January 11, 2007 and the first cheque was cleared on July 3, 2008 and the last cheque on September 26, 2011. Similar is the situation in the case of other two transactions. We find that the whole of the sale consideration has been claimed to be discharged by issuance of post-dated cheques and the said cheques have been cleared after a long period of time which is quite unusual in dealings in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. To our mind, these are merely contentions and nothing more to support the theory of cash deposit as belonging to Shrawan Kumar which could not be substantiated by any credible piece of evidence. As we have stated above, the only conclusion which can be drawn is that Shrawan Kumar was a name lender and it is the assessee's own money which has been paid to the land owners and effectively, the beneficial ownership over the land so purchased is with the assessee. 20. As we have stated above, where any sum is found credited in the books maintained by the assessee, the primary requirements, which should be satisfied cumulatively by the assessee in such cases is identification of the person, creditworthiness of that person and the genuineness of the transaction which has not been satisfied in the instant case. The explanation offered and material submitted by the assessee in support of its explanation is not wholesome, credible and verifiable. These requirements have been examined in the instant case having regard to the human probabilities and normal course of human conduct and we find that the explanation offered by the assessee at this stage does not passes this muster and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate that these cheques were made available and not issued by Shri Shravan Kumar. Since Shri Shravan Kumar was onward selling the land to other persons, he obtained two cheques of the above sums from those parties directly in the name of the appellant, so that his obligation of getting the cheques cleared in favour of sellers of land could be fulfilled. Shri Shravan Kumar had no bank account which is the reason he took the cheques directly in the name of the appellant. 21.3 The explanation has to be evaluated in the background of the total factual matrix of the case. Evaluating the transaction in isolation is not justified. In the instant case the buyer Shri Shravan Kumar has paid the purchase consideration to the sellers through following three modes : (i) Cash deposited in the assessee's bank account. (ii) Cheques given to the assessee. (iii) Direct payment to the farmers. Since this fact is established that land has been purchased by Shri Shravan Kumar and sold by Smt. Ganga Devi, Shri Moolchand, Shri Ramji Lal and Shri Ramdhan and purchase consideration has flowed from Shri Shravan Kumar (buyer) to the sellers through the appellant broker, the explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Shravan Kumar. It was further contended that since Shravan Kumar was onward selling the land to other persons, he obtained two cheques of the above sums from those parties directly in the name of the appellant, so that his obligation of getting the cheques cleared in favour of sellers of land could be fulfilled. In our view, these are merely contentions and not supported by any credible evidence that cheques were issued by ultimate buyers directly in favour of the assessee. Further, in view of the detailed reasoning given in respect of ground No. 1 above, we affirm the order of the learned Commissioner of Income-tax (Appeals) to the extent of ₹ 15 lakhs. Regarding ₹ 1,10,491 which is claimed to be brokerage income and already offered in the return of income, the matter is set aside to the file of the Assessing Officer to examine the same and where it is found to be correct, allow the necessary relief to the assessee as the amount already offered cannot be brought to tax again. The ground of appeal of the assessee is accordingly disposed of. Ground No. 3 relating to the addition of ₹ 31,50,000 24. Briefly the facts of the case are that during the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as real owner then the investment could be taxed in the assessment year 2008-09 (as power of attorney was executed on May 19, 2007) and not in the assessment year 2009-10. In assessment year 2009-10 only short-term capital gain on sale of land could be taxed and not the entire sale proceeds. The learned Commissioner of Income-tax (Appeals) and also the learned Assessing Officer were duty bound to accept this legal proposition. Both the lower authorities have not countered this legal proposition, yet have erred in not taxing the capital gain in the year of sale of property. The learned Assessing Officer in his remand report has mentioned that since the appellant did not disclose the amount invested and the source of investment, there was no other alternative but to tax the entire consideration in the year of receipt. In view of the above, this ground of appeal may please be allowed. 26. We now refer to the relevant findings of the learned Commissioner of Income-tax (Appeals) which are under challenge before us. The same are reproduced as under : 5.5 I have considered the facts of the case ; assessment order and the appellant's written submission. The appellant rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft from Shri Babul Lal Meena, the elder brother of the assessee's wife. Copy of the gift deed has been claimed to be submitted during the assessment proceedings while the Assessing Officer stated that the affidavit has been submitted by Shri Babul Lal Meena which is signed much later on December 7, 2011 and even permanent account number details and source of income has not been mentioned. Hence, the Assessing Officer did not accept the explanation of the assessee. 29. On appeal, the learned Commissioner of Income-tax (Appeals) confirmed the Assessing Officer's order and his relevant findings which are under challenge before us are reproduced as under : 6.5 I have considered the facts of the case ; assessment order and the appellant's written submission. The appellant claimed the receipt of gift of ₹ 2 lakhs from one Shri Babulal. When the Assessing Officer asked to produce Shri Babulal, he was not produced. The Assessing Officer deputed a inspector to serve summons on Shri Babulal and the appellant was asked to assist in locating the said person. However the appellant did not give any assistance in service and summons could not be served on Shri Babulal. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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