TMI Blog2024 (2) TMI 631X X X X Extracts X X X X X X X X Extracts X X X X ..... the stage of reopening and merits of the matter are not relevant at this stage. In the case of ACIT vs Rajesh Jhaveri Stock Brokers (P) Ltd. [ 2007 (5) TMI 197 - SUPREME COURT] it was held by the Hon ble Court that at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Therefore, whether the materials would conclusively prove that the escapement is not concern at that stage. This is so because the formation of belief by the AO with the realm of subjective satisfaction. Thus keeping in view the above principles, we hold that AO s action in reopening the assessee s assessment for A.Y.2012-13 is found to be in accordance with the provisions of the law. Therefore, these grounds raised by the assessee stands dismissed. Denial of admission of additional evidences under Rule 46A by the ld. CIT(A) - These evidences are in the shape of affidavits of the cash creditors who provided financial help to the assessee and of witnesses to the sale transaction - We find that the AO in response to the confirmations filed by the assessee before him in some cases straight forwardly made the impugned a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly, the payment towards the stamp duty and registration charge being small amount and could be made out of the past savings of the family. We thus, find no justification behind the addition and the same hereby deleted. This ground of the assessee is allowed. Addition of cash deposit in the bank account - only basis of the addition is ITS details wherein the Assessee was found to have deposited cash of Rs. 5 lacs on 15.12.2012 - HELD THAT:- The source of cash deposit was explained out of the past saving of the appellant which could be around Rs. 5 to 6 lakhs from her business and Streedhan; from the past saving of her husband, Navender Kumar, who has been a central government employee and partly from the savings of Shri Umesh Kumar Sharma s/o the appellant. While considering the source of payment of sale consideration of Rs. 2.50 Lakh by the appellant herself, we have held that looking to the totality of facts and circumstances she could have saved that amount. In addition, the fact is not denied that her husband Navender Kumar was a central government employee and retired from the Post and Telegraph department after serving as a postman getting salary more than Rs. 3 Lakh annuall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the facts of the case in confirming the addition made on account of alleged unexplained cash deposits in the bank of Rs. 5,00,000/- on 15.02.2012 alleging that the assessee has failed to supply supporting evidences. The addition so made being contrary to the provisions of law and facts of the case and contrary hence, the same kindly be deleted in full. 5. The Id.AO further erred in law as well as on facts of the case in charging interest u/s 234A 234B of the Act. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full. 2.1 The Bench noted that the Ground No. 1 2 are interconnected and interrelated. Vide these grounds , the Ld. AR of the assessee challenged the action of AO for invoking the provisions of reopening by stating that the AO was wrong in issuing notice u/s 148 dated 02-03-2016 against the assessee as he had no case for reopening of the assessment for which the ld. AR of the assessee relied upon the following written submission. 1. Reason to believe and not reason to suspect: 1.1. It is submitted that even under the amended law the bedrock condition or words, which continue right since inception till date, are reason to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so called prior agreement dt. 12.02.2012 was given by Shri Dave to the appellant but the AO never supplied the same to the appellant. On this ground alone therefore, the entire proceedings has to be quashed. Reliance is to be placed on Micro Marbles (P) LTD. vs. ITO (2023) 331 CTR (Raj) 329 (DPB1-8) wherein it was held as under: Supply of the material which forms the basis for forming such opinion becomes sine qua non to enable the notice to effectively participate in the proceedings by filing objections. The supply of documents referred to in the reasons to believe becomes inevitable and in the event such documents are not supplied, it would be flagrant violation of the principles of natural justice. The reasons to believe, as supplied to the assessee, on the face of it are incomplete and do not afford the assessee due and proper opportunity to file objections against such reassessment. The submission of Revenue that reasons to believe cannot be equated with the final conclusion and as long as the AO has sufficient material to demonstrate that he had bona fidely formed the opinion that the income chargeable to tax has escaped assessment, the requirement of law stands satisfied is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt had laid down the principle that the prima facia belief of the AO that the income had escaped assessment is enough at the stage of reopening and merits of the matter are not relevant. In the light of the above facts, the AO s action in reopening the appellant s assessment for the A.Y. 2012-13 is found to be in accordance with the provisions of the law. This ground of appeal is therefore dismissed. 2.3 During the course of hearing, the ld. DR relied upon the orders of Revenue Authorities and it was also submitted that the grounds raised by the ld. AR deserves to be dismissed. 2.4 After having gone through the detailed arguments, orders passed by the lower authorities, judgement relied upon by the respective parties and material placed on record, we are of the considered view that the AO was having information and documents for forming reasons to believe that during the year under consideration, the assessee had purchased a residential house property from Smt. Sushila Devi which got registered on 22-03-2012 with Sub-Registrar-VIII, Jaipur and according to that registered sale deed the said Smt. Sushila Devi sold the property for total consideration of Rs. 12.00 lacs. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be in accordance with the provisions of the law. Therefore, these grounds raised by the assessee stands dismissed. 3.1 The Ground No. 2 of the assessee is denial of admission of additional evidences under Rule 46A by the ld. CIT(A). Brief facts of the case are that during the course of ongoing proceedings, the assessee submitted a detailed prayer for admission of additional evidences under the rule 46A r/w 250 and 251 of the act vide letter dt. 05.02.2018, which is reproduced at Pg. 6 to 8 of the Appellate Order. The ld. CIT(A) however, rejected the prayer at pg. 11 very summarily as under: From a plain reading of the above provisions, it is apparent that the case of the appellant does not satisfy any of the four conditions specified therein. The AO had afforded the appellant adequate opportunities to substantiate with documentary evidence the source of funds for purchase of the property and for payment of the stamp duty and registration charges. Therefore, the admission of the additional evidence under Rule 46A is not tenable. 3.2 It is noted that the ld. AR of the assessee has submitted the following written submission countering the action of the ld. CIT(A) After going throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) was not justified in rejecting confirmation letters produced by assessee straightaway and he should have directed Assessing Officer to consider said confirmation letters and find out identity, creditworthiness, etc., of persons who had made fixed deposits - Held, yes Section 80HHC of the Income-tax Act, 1961 - Deductions - Exporters - Whether processing charges received by assessee do not form part of export turnovers as only sale proceeds of goods or merchandise alone form part of said turnover - Held, yes Interestingly, the ld. CIT(A) on one hand rejected the admission but at the same time even went on commenting upon merits of these very evidences. Which, evidently implies that the ld. CIT(A) had virtually admitted these evidences as he considered the same while adjudication. Kindly refer M/s Mahendra Oil Mills vs. The Income Tax Officer, ITA. No.751/JP/2017 Hence, his denial is only for the sake of denial but having considered the merits, such denial deserve to be ignored and the matter may kindly be decided on its merit considering all these additional evidences which were available before the CIT(A) and also before the AO (through remand). 3.3 On the other hand, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Rs. 65,100/- (Stamp and Registration) 4.2 In the first appeal, the CIT(A) also confirmed the additions by observing at para 11 12 of his order in the following words:- On merits too, the additional evidence in the form of affidavits does not significantly help the appellant's case. Apart from submitting confirmations from three parties that they had made cheque payments on the appellant's behalf to the seller, no documentary evidence of their creditworthiness in terms of their return of income, PAN or bank statement were filed. Only in one case, that of Shri Ramprasad Sharma, has a copy of the return of income been filed. A perusal of the same indicates that Shri Ramprasad Sharma had returned income of Rs. 1.74.370/- for the A.Y. 2011-12 from salary, business and other sources. However, he made a payment of Rs 4,00,000/- on behalf of the appellant. He also did not submit a copy of his bank statement to substantiate his ability to make such a payment on behalf of the appellant, who is stated to be known to him. Further, in the affidavit, Shri Ramprasad Sharma has claimed that he is an agriculturist, but no agricultural income has been shown in his return of income for rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not placed before a Court, an adverse inference can be drawn against a person who ought to have produced it. In case of non-furnishing of documentary evidence of corroborative value, which is within reach of the assessee, judicial body cannot act on such interested testimony of the assessee alone. Also in the case of R. Mallika vs CIT [2017] 79 taxmann.com 117 (SC), the SLP filed against the High Court's ruling that the assessee had not discharged the burden as regards source from which investment was made, investment in property was an unexplained investment. and the same was rightly added to the assessee's income, was dismissed by the Hon'ble Supreme Court. In view of the above discussion, this ground of appeal is dismissed. 4.3 During the course of hearing, the ld. AR of the assessee filed the following written submission countering the decision of the ld. CIT (A) as under:- A: Submission: on the Addition of Rs. 22,71,000/- 1.1 At the outset it is submitted that the only dispute between the parties is whether the assessee has paid Rs. 34,71,000/- as per agreement to sell dated 12.02.2012 as alleged by the AO as against declared sale consideration of Rs. 12,00,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rs. 12,00,000/- only. Such statement, taken on oath, were binding upon the AO. 1.2.3 Further, the DLC rates of the property at the point of time when sold also suggested the sale price (full value of sale consideration) only further Rs. 12,00,000/- and not Rs. 34.71 Lakh i.e. almost three time more as alleged. Facts are otherwise against the human/ preponderance of probability which lay in favour of the assessee because the buyer will be making substantially higher consideration then the prevalent market rate and why the seller should declare the LTCG thereon when not actually received. Further, the AO has not brought any other comparable case, showing that the actual sales consideration could have been to such a high extent that is 3 times of the prevailing DLC rate, based on the similar sale instances in the nearby area or even at some remote place to support his allegation. 1.2.4 The ld. AO completely ignored that the actual sale consideration was only Rs. 12 lakhs however, it was only to pressurize the assessee seller this higher amount has been mentioned but not otherwise. 1.3 It is not denied that the declared sale consideration of Rs. 12 Lakh was based on the registered sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that the material collected by the ld. AO must be confronted to the assessee before making any addition. Unless the appellant was given an opportunity to cross examine, the law clearly prohibits the use of such a testimony given by the witness. Kindly refer Vimal Chandra Golecha v/s ITO Anr. (1982) 134 ITR 119 (Raj.) Kishinchand Chellaram vs. CIT (1980) 125 ITR 713 (SC), ITO Anr. v/s Gargidin Jwala Prasad Maholi Ors. (1980) 124 ITR 203 (All). In these it is held that it is not a matter of merely confronting with the material but it was an obligation on the AO was obliged to have given the assessee opportunity to cross examine the witness, the statement of whom are being used adversely and against the assessee. In this factual and legal ground, allegation of the action of the ld. AO was not mere irregularity but was a nullity. 2.1 In support of its contention that the actual sale consideration paid / received by the buyer / seller, was Rs. 12 Lakh only and the statement given by the seller was misread by the ld. AO, without giving further opportunity to the assessee as stated above, hence an affidavit of the seller affirming the fact of selling the property at Rs. 12 lakh only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration or not may not be in there in the FIR, yet however the very fact of filing the FIR against Shri Durgesh shows that something seriously wrong was done by the broker with the assessee, which was to the extent that he compelled the appellant to approach the police authority by filling an FIR. The Upper Mahanagar Magistrate, S. No. -18, Jaipur rejected his bail application (II PB 91-92). Shri. Dave was never summoned and examined by the AO so as to bring correct facts on the record, probably that might have gone against the AO. 3.2.2. Very pertinently Shri Dave has now affirmed that the actual sale consideration was Rs. 12 Lakhs only vide his Affidavit (II PB 93-95) u/r 8 of ITAT Rules, 1963. 3.3 Interestingly, the AO is completely silent as to what happened in the case of Sushila Devi. If she really sold the property for such a huge amount, the department must have collected tax from her as well. In absence of such investigation, no valid conclusion could be reached in this case/buyer. 3.4 Alternatively and without prejudice to the basic contention as stated above even assuming there was an agreement dated 12.02.2012 which was acted upon by a party and was rightly considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties and AO having failed to prove understatement. The ratio so laid down, holds good till date. 5.1 There apart, the amended law u/s 50C creates a legal fiction for the purposes of determining the full value of sale consideration. The sale consideration as determined/adopted by the Stamp Duty Authorities, has to be adopted for the purposes of computation of capital gain. Thus, the intention of the legislature is quite clear that after this amendment, it is always the Stamp Valuation to be considered (except the cases of S.50C(2)) and there is no warrant to replace such figure in view of such binding legal fiction. The subjected transaction between the seller and the assessee buyer firm, was in accordance with the prevailing DLC rates and the Stamp Duty Authority has duly accepted the declared consideration. Thus, Sec. 50C directly and strongly supports the case of the assessee buyer. 5.2 Sale consideration supported by Registered Deed: The facts are not denied that the declared sale consideration of Rs. 12 Lakh was duly supported by Registered Sale Deed and was transacted in the presence of the witnesses as also before the Sub Registrar himself as aforesaid and is having more evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the cases were filed but were rejected without there being any justified ground. As Admitted by the AO himself, confirmations from three persons (Shri Pradeep Jain of Rs. 2 Lakhs, Smt. Seema Sharma of Rs. 1 Lakh and Shri Umesh Kumar Sharma of Rs. 1.5 Lakhs) were submitted but were not accepted for want of PAN No., ROI etc. though the other facts of making payment directly to the seller was available on record 1.2 It is submitted that despite filing confirmation the AO never disclosed to the assessee that he was not satisfied with these confirmations but straight away made the addition which, came to the notice of the assessee only after receipt of the order. Therefore, we are filing herewith affidavits from Shri Ram Prasad Sharma (Rs.4,00,000/-), Shri Satya Narain Sharma (Rs.1,00,000/-), Smt. Seema Sharma (Rs.1,00,000/-) and Shri Umesh Kumar Sharma (Rs.1,50,000/-) totaling to Rs. 7,50,000/- wherein, the fact of giving amount to the assessee is mentioned. 1.3 It is pertinent to note that all the persons had given account payee cheques and that too directly in the name of the seller Smt. Sushila Maheshwari and therefore, these cheques were deposited by the seller lady in her bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discretionary: with regard to the financial assistance provided by the different person the CIT(A) do not deny that affirmatory affidavits duly sworn on oath were submitted for him on which, even remand report was obtained and thus, such evidences were before the authorities however firstly, they completely failed to controvert the contents of the affidavits which were otherwise binding upon the authorities as held in case of Mehta Parikh Co. 30 ITR 181 (SC) (DPB 14-23) wherein it was held : ...the cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The assessee took it that the affidavits of these parties were enough and neither the AAC, nor the ITO considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits . The CIT(A) mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Select Committee, the said word was substituted by the word may . This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Income Tax Officer 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 Income Tax Officer is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee id found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the Income Tax Officer under section 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 said discretion has to be exercised keeping in view the facts and circumstances of the particular case. Held, dismissing the appeal, that in the instant case, the Tribunal had held that the discretion had not been properly exercised by the Income Tax Officer and the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akh paid by the appellant to the seller - Sushila Devi. With regard to the addition of Rs. 22,71,000, being the difference between the sale consideration found in the sale agreement and declared in the registered sale deed, the AO has placed reliance mainly on the agreement dated 12.02.2012, as also on the statement of the Seller Shri Sushila Devi recorded on 27.03.2014 - Question 12 reproduced in the assessment order. After careful consideration of the material placed on record and the rival contentions however, we find that there are valid reasons not to believe the said agreement showing the sale consideration of Rs. 34,71,000/-. The appellant alleged that the figure of Rs. 34,71,000/- was not real, but was put by the broker, so also confirmed by the Seller - Smt. Sushila Devi in the same answer to question No. 12. The source of receipt of the agreement was the real estate broker Shri Durgesh Dave. The conduct of Ss. Dave was itself doubtful as the assessee filed First Information Report (FIR) against him. Even his bail application was rejected by the upper Mahanagar Magistrate. Though the complaint related to dishonor of cheques, but that shows the conduct of the person. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vits were before the AO as sent during the remand proceedings, however, the AO failed to controvert the averments made therein hence as per the law well settled in the case of Mehta Parikh Co. 30 ITR 181 (SC) the averments are binding upon the authorities. It is also settled that the AO cannot ask to prove source of source, once the existence, identity of the Creditor and the affirmation of getting loan from them, are established. We draw support from Labhchand Bohra V/s ITO (2008) 8 DTR 44 (Raj.) and Aravalli Trading Co. v/s ITO (2008) 8 DTR 199 (Raj). Thus, the appellant having discharged the initial onus and the AO failed to discharge the burden by making enquiries and bringing cogent evidence on record, we do not find any justification behind the addition made of Rs. 9,50,000/-. As regards the balance amount of Rs. 2,50,000/- which was paid in cash to the seller by the appellant, the facts are not disputed that she has been filing a return of income in the past ranging between Rs. 1.65 to 2.02 Lakh and keeping in mind that being a female she was not supposed to incur expenditure, saving of a small amount of Rs. 2,50,000/- was not something abnormal. Looking to the totality of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained cash deposits in the appellant s bank account. Neither during the assessment nor during appellant proceedings, has the source of these cash deposits been explained by the appellant. In the view of above, the AO s action is sustained. The ground of appeal is dismissed. 4.4 Vide ground of appeal no. 3.2, the appellant has contended that the AO had erred in making a further lump sum addition of Rs. 5,00,000/- on the grounds that she had not produced her bank statement. Seen in the context of the addition made on account of cash deposits in the appellant s account as discussed in ground of appeal no. 3 supra, I am of the opinion that no further addition is called for as the AO has not provided any rationale for the lump sum addition. The addition made on his account is deleted. This ground of appeal is allowed. 5.3 During the course of hearing the ld. AR vehemently agitated the addition so made and explained the sources thereof. The written submission so made before us is as under:- Before the AO it was submitted that it was a joint account with the husband (II PB 87-90), who deposited Rs 5 lakh on 15.02.2012 out of past savings. Further we also rely our w/s filed before CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and keeping of cash to this extent was not abnormal because firstly, it was kept by the members separately and secondly, keeping in mind the fact that such fund were required / might be needed towards the acquisition of new plot, there was nothing abnormal if the family pooled and kept the cash with them only. 2. Thus, it can t be denied that the assessee has furnished a plausible explanation u/s 69A, fully explaining the sources of the cash of Rs. 5.00 Lakhs which was deposited in her bank accounts. 3. Otherwise also Sec.69A conferred a discretion only upon the AO and it is not always obligatory upon him to make addition in any situation. Kindly refer CIT v/s P. K. Noorjahan (1999) 237 ITR 570 (SC). Hence, the impugned addition kindly be deleted in full. 5.5 The ld. DR. strongly relied upon the orders of the authorities below. 5.6 We have carefully considered the material placed on record and the rival contentions. The source of cash deposit was explained out of the past saving of the appellant which could be around Rs. 5 to 6 lakhs from her business and Streedhan; from the past saving of her husband, Navender Kumar, who has been a central government employee and partly from the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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