Source of cash deposited in Bank should be properly disclosed

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘E’ NEW DELHI

BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER

AND

SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER

ITA No. 2381/Del/2010

Assessment Year: 2005-06

Income Tax officer,

Ward 31(1),

C. R. Building,

 New Delhi.

(Appellant)

Vs.

Smt. Maheep Manjit Singh,

28-A, Prithvi Raj Road,

New Delhi.

(PAN No. APMPS1355P)

 (Respondent)

Appellant by: Shri R.S. Negi, Sr. DR

Respondent by: Shri S.R. Wadhwa

O R D E R

PER CHANDRA MOHAN GARG, JUDICIAL MEMBER

This appeal has been preferred by the Revenue against the order of Commissioner of Income Tax(A)-XXVI, New Delhi dated 23.3.2010 by which he deleted the additions made by the Assessing Officer on account of bank deposits in cash on various dates during the year under consideration to the assessee’s bank account. The grounds of appeal reads as under:-

“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in allowing the assessee to file additional evidence under Rule 46-A of the Income Tax Act, 1961 in spite of the fact that the assessee was provided sufficient opportunities during the course of assessment proceedings.

2. Ld. Commissioner of Income Tax(A) has erred in accepting the assessee’s explanation about the source of cash deposits to the tune of Rs.10,03,108/- made in the alter half of F.Y.2004-05, whereas funds stated to have been withdrawn in the F.Y. 2003-04.”

2. Briefly stated the facts of the case are that the assessee filed his return declaring an income of Rs. 1,82,480 for AY 2005-06. Subsequently, the case was selected for scrutiny through CASS and a notice u/s 143(2) of the Income Tax Act, 1961 dated 11.7.2006 was served on the assessee. The Assessing Officer noted that during the year under consideration, the assessee deposited cash in SB account amounting to Rs.19,00,108/- on various dates. The Assessing Officer asked the assessee to explain the source of the cash deposits with supporting evidence and the assessee failed to submit the same. Accordingly, the Assessing Officer added the cash deposited to the returned income of the assessee u/s 68 of the Act.

3. Aggrieved, the assessee filed an appeal before the Commissioner of Income Tax(A) which was allowed by deleting the addition of Rs.19,00,108/-. Hence, this appeal by the Revenue before this Tribunal.

4. We have heard rival arguments of both the parties in the light of material placed on record before us. The ld. DR submitted that the assessee did not cooperate during the assessment proceedings and he failed to furnish required detail and source of deposits of cash amount to the HSBC bank account of the assessee. Therefore, the Assessing Officer rightly added the amount to the returned income of the assessee u/s 68 of the Act as income from undisclosed sources. Ld. DR also submitted that the Commissioner of Income Tax(A) admitted the evidence in contravention to Rule 46A of the I.T. Rules, 1962 and also accepted the explanation of assessee regarding cash deposits on misleading facts and unreasonable grounds. The ld. DR finally submitted that the impugned order may be set aside, restoring the original assessment order.

5. The assessee’s representative submitted that the Assessing Officer wrongly calculated the cash deposited amount to Rs.19,00,108/- which was rightly calculated by the ld. Commissioner of Income Tax(A) to Rs.10,03,108/- to the HDFC bank account of the assessee on the basis of confirmation by the said bank. The AR also submitted that the ld. Commissioner of Income Tax(A) rightly held that the appellant had sufficiently furnished the source of the cash withdrawals from the HUF bank account in view of sale of HUF property at 28-A, Prithviraj Road, New Delhi. The AR supported the impugned order and finally submitted that the action of the Assessing Officer was based on misinterpretation of the facts and ignoring the truthful evidence by explanation furnished by the assessee.

6. At the outset, we note that representatives of both the parties before us admitted that the impugned amount of cash deposited as estimated by the Assessing Officer was of Rs.19,00,108 which was rightly calculated by ld. Commissioner of Income Tax(A) at Rs.10,03,108/-. Both the parties submitted that the actual amount in question was Rs.10,03,108/- related to deposit of cash in the account of the assessee.

7. The AR has also drawn our attention towards page no. 25 to 29 of the paper book which reveals that there was a Memorandum of Understanding (MOU) dated 21.10.2003 between Bhai Manjit Singh (HUF) through its Karta Smt. Maheep Manjit Singh (Assessee-appellant) and M/s Yahoo Properties (P) Ltd. relating to sale of plots and construction thereon situated at 28-A, Prithviraj Road, New Delhi for total consideration of Rs.29 crores with an advance of Rs.1.51 cores at the time of execution of said MOU.

8. We have also perused letter dated 29.12.2009 of the Assessing Officer submitted to the ld. Commissioner of Income Tax(A) regarding admissibility of additional evidence available on page 113 to 116 of the Paper Book which reveals that the Assessing Officer objected to the admission of additional evidence but did not make any comment on the merits of the additional evidence submitted by the assessee.

9. On bare reading of the impugned order, we observe that the ld. Commissioner of Income Tax(A) considered the assessment order and firstly, he arrived to a conclusion that the impugned cash deposited was only of Rs.10,03,108 and this fact has not been disputed by the ld. DR before us. We further observe that the ld. Commissioner of Income Tax(A) admitted the additional evidence with following observations:-

“5. On careful consideration of the facts of the case and the various conditions entailed in Rule 46A, I find that the major addition was on account of unexplained cash deposits in the bank statement. For this purpose, examination of the bank statement was a clear must. However, being an old record, the same was not provided by the bank to the appellant during the short period of 3 days between the last 2 hearing. The said bank statement was also sought by the learned Assessing Officer from the bank, however, till the date of assessment, the Assessing Officer was not provided with the same by the bank. In view of the above, and considering various other grounds in para 4 above, I find that there was sufficient cause for the appellant for not furnishing the key evidence, i.e. the bank statement before the learned AO which was relevant to the major ground of addition. In view of the same, I allow admission of additional evidence under Rule 46A.”

10. Accordingly, ld. Commissioner of Income Tax(A) admitted additional evidence following Rule 46A(1)(b)(c) of the Income Tax Rules, 1962 (hereinafter referred to as ‘the Rules’).

11. Therefore, we observe that the ld. Commissioner of Income Tax(A) admitted additional evidence following Rule 46A(1)(c) of the Rules but he did not follow mandatory provisions of Rule 46A(3) of the Rules as after admission of additional evidence, the Assessing Officer should be given an opportunity to examine the additional evidence or document produced by the appellant and to produce any evidence or document in rebuttal of the additional evidence produced by the appellant.

12. At this juncture, we are inclined to take notice of judgment of Hon’ble Jurisdictional High Court of Delhi in the case of Commissioner of Income Tax vs Manish Build Well (P) Ltd. in ITA No.928/2011 dated 15.11.2011 reported as (2011) 63 DTR Judgements 369 wherein their

lordships held that after admission of additional evidence, it is mandatory to follow Rule 46A(3) of the Rules but in the case in hand, we observe that the ld. Commissioner of Income Tax(A) merely proceeded to decide the matter only on the objections of Assessing Officer on admission of additional evidence because as per letter of the Assessing Officer dated 29.12.2009 available on Paper Book from page 113 to 116, we observe that the Assessing Officer only objected the admissibility of additional evidence and restricted himself to comment on the merits of the evidence. Therefore, we finally observe that the ld. Commissioner of Income Tax(A) did not follow the mandatory procedure for consideration of additional evidence at the first appellate stage.

13. During the argument, the ld. DR submitted that the case should be restored to the file of the Assessing Officer for compliance of Rule 46A(3) of the Rules and the AR contended that if we reach to the conclusion that the matter needs to be considered by the authorities below, then the matter should be restored to the file of the ld. Commissioner of Income Tax(A). After careful consideration of above submissions and facts and circumstances of the case, we note that the ld. Commissioner of Income Tax(A) considered additional evidence violating Rule 46A(3) of the Rules but at the same time, we also observe that the appellant filed a Paper Book containing 109 pages before the Commissioner of Income Tax(A) which he could not submit before the Assessing Officer during the assessment and the Assessing Officer concluded the assessment u/s 144 of the Act on the basis of material available on record before him. Therefore, we find it appropriate to restore the matter back to the file of the Assessing Officer for adjudication afresh after due consideration of additional evidence and affording a due opportunity of being heard to the assessee. In view of above, the appeal of the Revenue is disposed of and accordingly, it is treated as allowed for statistical purposes.

14. In the result, the appeal of the Revenue is allowed as indicated above.

Order pronounced in the open court on 29th August, 2012.

                                                         Sd/-                                 Sd/-

                                              (J.S. REDDY)       (CHANDRAMOHAN GARG)

                                   ACCOUNTANT MEMBER     JUDICIAL MEMBER

DT. 29th AUGUST 2012

‘GS’

Copy forwarded to:-

1. Appellant

2. Respondent

3. CIT(A)

4. CIT 5. DR By Order

Deputy Registrar