TaxTMI 
TaxTMI 
2023 (10) TMI 551
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....That the Ld. CIT(A) has erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act, and, completion of assessment under section 147(143(3)) of the Act without appreciating that the same were without jurisdiction and hence, deserve to be quashed as such. 2.1 That the Ld. CIT(A) has failed to appreciate that there was no specific relevant, reliable and tangible material on record to form a "reason to believe" that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable. 2.2 That in the absence of any valid approval obtained under section 151 of the Act, initiation of proceedings u/s. 147 of the Act and assessment framed u/s. 147(143(3)) of the Act are invalid and deserve to be quashed as such. 3. The Ld. Counsel for the assessee pressing into service above noted legal grounds submitted that the Ld. CIT(A) has erred both in law and on facts in upholding the initiation of proceedings u/s. 147 of the Act and completion of assessment u/s. 147/143(3) of the Act without appreciating that the same were without jurisdiction and hence, deserv....
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....ed in 57 ITR 532 (SC) and other propositions the Ld. Counsel submitted that the deposits in the bank account cannot be mechanically or automatically assumed the income of the appellant without any further verification and examination by the AO and therefore, the reason to believe as noted by the AO in the satisfaction note is nothing, but reason to suspect which obviously resulted into inevitable invalidation of reassessment proceedings. Therefore, initiation of reassessment proceedings and impugned reassessment order may kindly be quashed. 3.2 Replying to the above, Ld. Sr. DR drawing our attention towards para no. 4.1.5 to 4.1.8 of the First Appellate order and submitted that Ld. CIT(A) has adjudicated this issue by considering the totality of facts and circumstances of the case which are quite correct and justified. The Ld. Sr. DR further submitted that the case of the appellant was reopened u/s. 147 of the Act on the basis of reasons summarised by the Ld. CIT(A) in para 4.1.5 which are self speaking and therefore, the AO had valid reason to believe that an amount minimum to the extent of Rs. 82,96,000/- has escaped assessment for the assessment year 2013-14. The Ld. Sr. DR a....
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....e Act. Ld. Sr. DR thus, submitted that legal grounds of the assessee may kindly be dismissed. 3.3 Placing the rejoinder to the above submissions, Ld. Counsel for the assessee submitted that it is a clear case of reasons to suspect and not reason to believe, therefore AO did not assume valid jurisdiction to initiate the reassessment proceedings particularly when the proceedings are based on surmises, conjectures and suspicion therefore, the same have to be held as without jurisdiction and hence, deserved to be quashed. 3.4 On careful consideration of the above submissions, first of all, we find it necessary and appropriate to reproduce the reasons recorded by the AO for initiation of the reassessment proceedings for AY 2013-14 as follows:- 3.5 From the First Appellate order's relevant paras, we note that Ld. CIT(A) has dismissed the legal grounds of assessee with the following observations and findings:- "4.1.5 The case of the appellant was reopened u/s 147 of Income Tax Act on the basis of the following summarized reasons to believe of escapement of income: 1. It is prima facie evident that Ms. Ruby Singh has failed to explain the genuineness of these tra....
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....ng of facts based on the available data. Therefore the reasons recorded by the Assessing Officer were logical, concrete, tangible, adequate and relevant to form a reasonable belief that the income has escaped assessment. 4.1.8 In my considered opinion, the reasons recorded were based on tangible material and were logical and adequate to form reasons to believe that income has escaped assessment. Subsequently, these reasons have resulted in addition on these grounds in the assessment order. On the basis of discussion above, I am of the considered opinion that the jurisdiction u/s 147 of Income Tax Act has been correctly invoked in this case and accordingly, the Ground Nos 1, 13 & 14 of the appeal are dismissed." 3.6 On careful consideration of rival submissions as noted above, reasons recorded by the AO for initiation of reassessment proceedings and conclusion drawn by the Ld. CIT(A), at the very outset, we note that the AO initiated the reassessment proceedings u/s. 148 of the Act on the basis of reasons as precisely summarised below:- (i) The assessee failed to explain the genuineness of transaction of cash deposit to her bank account and the amount of Rs. 2,9....
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....gations. It was also revealed that as per survey and post survey investigations the appellant could not satisfactorily explained the source of cash deposits to her bank account and therefore the source of unsecured loan, for acquiring the immovable property, was sourced by the creditors from cash deposits to their bank accounts. 3.7 On careful consideration of the above noted factual matrix, we observe that the AO had recorded the detailed reasons for reopening of assessment wherein the relevant documentary evidences including the documentary evidence found during the course of survey operation and statements recorded during and post survey operations were in possession of AO which was sufficient material indicating the escapement of assessment by the assessee. The AO also carried out the necessary analysis and examination of the said material, correlating the same with the income tax returns filed by the assessee as well as the statement recorded during the course of investigations. Therefore, the AO had sufficient reasons to believe that income had escaped assessment and therefore, he rightly invoked the action u/s. 147 of the Act for initiation of reassessment proceedings and....
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.... he is satisfied that it was a fit case of reopening assessment u/s. 147 and issuance of notice u/s. 148 of the Act and accordingly, ground no. 2.2 of the assessee being devoid of merits is also dismissed. 4. The Ground no. 3 to 4.1 are reproduced as under:- "3. That the Ld. CIT(A) has also erred both in law and on facts in sustaining an addition of Rs,. 75,00,000/- representing sums received from Sh. Singh as unsecured loan and erroneously held as unexplained cash credit under section 68 of the Act. 3.1 That the Ld. CIT(A) has failed to appreciate that the unsecured loan aggregating to Rs. 75 lacs had been received through banking channels from indentifiable party who had duly confirmed the same that loan had been advanced by them to the appellant and as such, addition so made is invalid and untenable. 3.2 That the ld. CIT(A) has failed to appreciate that assessee has led complete documentary evidence in support of the unsecured loans so as to discharge the onus under section 68 of the Act and therefore, the addition sustained on subjective and arbitrary assumptions is contrary to law and hence untenable. 3.3 That the ld. CIT(A) has failed to....
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.... of immovable property i.e. Flat No. R-543, New Rajinder Nagar, New Delhi, but the assessee failed to furnish any documentary evidence regarding agreement or instrument with the creditor pertaining to such unsecured loan. The Ld. Sr. DR also pointed out that AO has issued summons u/s. 131 of the Act to Sh. Ummed Singh on 5.11.2020 with the directions of personal deposition along with documents mentioned in the notice, but no response was received from. Sh. Ummed Singh inspite of the reminder to the summons issued. Ld. Sr. DR further submitted that AO in order to ascertain the genuineness of transaction and source considered the copy of bank statements and return of income of Sh. Singh for the year under consideration and observed that there was huge cash deposit before transfer of funds to the assessee by way of issuing cheques to the assessee amounting to Rs. 75 lacs which were credited in the bank account of the assessee. Ld. Sr DR also submitted that the return of income clearly reveals that no substantial income has been declared by the creditor Sh. Ummed Singh during three previous assessment years from the year under consideration and therefore, the creditworthiness of unsecu....
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....e alleged loan creditors to show and establish that the cash deposit made to the bank account of Sh. Ummed Singh was the cash belonging to the assessee which was given by the assessee to Sh. Ummed Singh for remitting the same through banking channel as unsecured loan back to the assessee. Ld. Counsel for the assessee further pointed out that unless such fact is established by way of plausible and sustainable adverse material against the assessee, no addition u/s. 68 or any other provisions of the Act can be made in the hands of the assessee. 4.5 On careful consideration of the above submissions, first of all, from the relevant part of the Ld. First Appellate order, we note that AO made addition u/s. 68 amounting to Rs. 75 lacs with the following observations and findings:- "3.1 On perusal of the bank A/c statement of the assessee, it has been found that an amount of Rs. 25 Lakh and Rs. 50 Lakh has been received on transfer from joint Alc of Dalpat Singh and Singh (linked PAN- APUPS2619J), A/c No. 30780100001515 with Bank of Baroda and joint account of Singh and Harsh Kanwar (linked PAN- APUPS2619J A/c No. 51101307304 with State Bank of Bikaner & Jaipur respectively. Fur....
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....on issued to Sh. Singh, the source of huge cash deposits and its nature remains unverified. 3.5 Moreover, it seems irrational that why an entity would provide such a huge loan without any legal agreement as well as interest free and an isolated attempt has been seen from the side of assessee in respect of repayment of loan and the same view has been reflected from the side of Sh. Singh (Loan Giver). Further, assessee has not been made repayment of the said loan or part repayment of the same as per the reply dated 17.01.2022 against show cause issued on 10.1.2022. In view of the above facts, it is evident that fund for 'acquisition of the said property have been mobilized by depositing cash in joint alc of Dalpat Singh and Singh and forwarding of the same to the assessee. The nature of transaction from Dalpat Singh and Singh and the business relation of the same with assessee have not been explained by the assessee. Also, Ms Ruby Singh failed to explain the source and creditworthiness of funds for purchasing the said immovable property transactions. Hence, a show cause was issued to the assessee in respect of unsecured loan. 3.6 Further, the assessee complied t....
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....g Officer analysed the return of income of Sh. Singh of three previous years. Perusal of the return of income indicated that Sh. Singh did not have adequate source of income or had no reserve funds to facilitate a loan of amount of Rs. 75,00,000/-. These loans have been sourced from the cash deposits in the bank accounts. The financial profile of Sh. Singh was not found commensurate with huge cash deposits in his bank account. Further, in the absence of compliance of summons issued to Sh. Singh the cash deposits remained unverified. 4.3.11 The Assessing Officer argued that it is irrational that why an entity would provide such a huge loan without any legal agreement and without charging any interest. Further, these loans are still outstanding and have not been repaid yet. In the opinion of Assessing Officer the appellant failed to explain the source and creditworthiness of the funds used for purchasing the immovable property. Based on the facts mentioned above the Assessing Officer has found his opinion that the unsecured loan of Rs. 75,00,000/- is nothing but unaccounted cash of the appellant which was routed through bank account for camouflaging the fund as unsecured loa....
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..... No loan has been extended from this account of Dalpat Singh HUF. Therefore, it can be observed that the above confirmation have been issued by Sh. Singh in the capacity of Karta of Singh HUF for alleged loan extended from a HUF accounts of Sh. Dalpat Singh. Both the accounts mentioned in the confirmation does not belong to either Dalpat Singh HUFor the Singh HUF. Further, the HUF's PAN is linked to another accountant and not any of these two accounts mentioned in the confirmation. In view of the discrepancies mentioned above the confirmation filed above cannot be considered as genuine and correct. 4.3.16 The bank statement Account No. 30780100001515 of Sh. Dalpat Singh in Bank of Baroda have been analysed and it has been observed that an amount of cash of Rs. 25,00,000/- as deposited on 09.05.2012 and two cheques amounting to Rs. 10,00,000/- and Rs. 15,00,000/- were issued to Ms. Ruby Singh on 16.05.2012. The balance in the bank account prior to the receipt of cash and subsequent to issuance of cheque was Rs. 2,86,040/- only. Therefore, Sh. Dalpat Singh and/or Sh. Singh and/or their HUFs were not in the capacity to extend such a loan unless the cash of Rs. 2....
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....rlier and the confirmation cannot be considered as correct. 4.3.20 On the basis of the discussion above, perusal of bank accounts, confirmation and circumstances during issuance of loans, the following points are noteworthy: i The loan was extended in 2012 and even after a gap of around ten years the loan is still outstanding. ii. No interest was either payable or paid during this period. iii. No attempt was made by Sh. Singh to reclaim his amount. iv. No loan agreement was prepared for this loan. v. There are several inconsistencies in the confirmation filed by Sh. Singh and the confirmation cannot be treated as correct. vi. All these loans were issued out of the amount of cash deposited in the bank accounts of Sh. Singh and others immediately prior to the issuance of cheques for loans. vii. Sh. Singh did not comply to the summons issued by the Assessing Officer and therefore, the source of cash deposit in their bank accounts remains unexplained. 4.3.21 During the course of appellate proceedings, the appellant submitted the following: "As already stated, the appellant was maintaining books of....
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....regarding section 68 applicability forms part of our earlier submissions in Para 12.2 & 12.3 of letter dated 20.06.2022. If any further explanation or information is required in this regards, appellant will be pleased to submit the same. Meanwhile thanking you and assuring of all the cooperation in the matter." 4.3.22 Thus the appellant conveyed that she was maintaining the books of accounts of the proprietorship firm M/s. Moonage Films for which the balance sheet was prepared and the current account of OBC Bank was part of books of accounts and balance sheet. Further, the loan of Rs. 75,00,000/- was received in the saving bank account with the Standard Chartered Bank for which no books of account were maintained. The appellant conveyed that the loan of Rs. 75,00,000/- was personal in nature and was not part of books of accounts and hence is not covered u/s 68 of the Income Tax Act. On perusal of grounds of appeal it is noted that this issue was not included in any of the grounds submitted by the appellant in the appeal and therefore is not required to be adjudicated. However, it is noted that the assessment was made u/s 147 of Income Tax Act and a notice u/s 148 ....
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....tandard Chartered Bank account, where the loan was received is part of the regular books of account of the appellant. (v) The loan taken in the Standard Chartered Bank and the property purchased through that loan, both have found manifestation in the regular books of accounts maintained by the appellant. (vi) Further, in the case of the appeal in subsequent years also it is noted that the receipt in Standard Chartered Bank in several cases also forms the part of proprietorship business of Moonage Films. There are several receipts which have been received in Standard Chartered Bank which belongs to the proprietorship business of appellant. Therefore, it would be inappropriate to accept that entries in Standard Chartered Bank are not recorded in the books of accounts of the appellant. 4.3.25 This is a case where the regular books of accounts are being maintained by the appellant. On the basis of the observations above it is proved that the appellant is maintained regular books of accounts and all her bank accounts, assets have been included in those books of accounts and the same have found manifestation in fixed assets, balance with bank etc. Therefore, th....
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....ervations of Ld. CIT(A) while upholding the addition (supra) and on careful perusal of Paper Book filed by the assessee, first of all, we note that the action of initiation of reassessment proceedings u/s. 147 of the Act issuance of notice u/s. 148 of the Act was triggered when the AO received the documentary evidence including the bank statements of assessee, bank statement of joint account of creditor Sh. Ummed Singh and Sh. Dalpat Singh, copy of income tax return of Sh. Ummed Singh and documentary evidence showing acquisition of immovable property by the assessee after receiving unsecured loan of Rs. 75 lacs from said lender. Thus, the very basis for initiation of reassessment proceedings was unsecured loan and cash deposit to the bank account of the assessee. The AO asked the assessee to explain the source of unsecured loan received from Sh. Singh and assessee filed the copies of her bank account, copy of bank statement of joint account held by Sh. Ummed Singh and Sh. Dalpat Singh and copy of income tax returns of Creditor, Sh. Ummed Singh. The AO made the addition u/s. 68 of the Act by observing that the assessee could not establish the creditworthiness of creditors and genuin....
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....cluded that discrepancies mentioned in the confirmation filed by the assessee cannot be considered as genuine and correct. 4.7.2 Thereafter, the Ld. CIT(A) observed that cash amount of Rs. 25 lacs was deposited on 09.05.2012 and two cheques amounting to Rs. 10 lacs and Rs. 15 lacs were issued to the assessee on 16.05.2012 and prior to deposit of cash and issuance of cheque in favour of the assessee, the bank balance was remained same at Rs. 2,86,040/-. The CIT(A) thus rightly observed that Sh. Dalpat Singh and / or Sh. Umed Singh and / or HUF were not in the capacity to extent such loan unless the cash of Rs. 25 lacs was deposited to the respective bank accounts. Ld. CIT(A) rightly concluded that the source of the said cash remains unknown and unexplained as Sh. Ummed Singh did not attend the proceedings in response to notice u/s. 131 of the Act before the AO. The Ld. CIT(A) further observed that the bank statement of Sh. Umed Singh No. XXXXX7304 in the Bank of Bikaner and Jaipur reveals that prior to 08.05.2012 balance in the bank was Rs. 1,65,992/- on 08.05.2012 there was cash deposits of Rs. 50 lacs in 06 installments and unsecured loan amounting to Rs. 50 lacs was given to a....
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....ontentions of assessee that loan was not part of books of accounts and hence not covered u/s. 68 of the Act was rightly held as unsustainable and untenable as the assessee had shown amount of unsecured loan of Rs. 75 lacs and her balance sheet for the relevant financial year 2012-13, relevant to present assessment year 2013-14. It is a settled principle of tax jurisprudence that for claiming creditworthiness of the creditors and genuineness of transactions of unsecured loan the onus is on assessee to prove that the creditor was having capacity and creditworthiness to extend the loan and thus the transaction was genuine. In the present case undisputedly the assessee filed the copies of bank statements of creditor, copy of income tax return and confirmation issued by Sh. Ummed Singh along with the copy of assessee's bank account in which unsecured loan was received. But merely filing said documentary evidence is not sufficient to discharge the onus as per mandate of section 68 of the Act particularly when there was factum of cash deposit to the bank account of creditors immediately before issuance of cheques to the assessee as unsecured loan. The Ld. CIT(A) has noted a detailed and c....
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....that the cash in hand of Rs. 2,56,942/- shown in the return of income for AY 2013-14 was not opening cash balance but it was closing cash in hand at the end of financial period on 31.03.2013. Accordingly, the same cannot be considered as valid basis explaining source of cash deposit. He vehemently contended that the AO from the return of income for AY 2012-13 noted that at the end of financial period on 31.3.2012 which was to be brought forward as opening cash in hand on 1.4.2012 was NIL. The ld. Sr. DR submitted that from the copies of the returns of income of assessee for AY 2012-13 and AY 2013-14 (for the year under consideration) clearly reveals that there was no opening cash in hand with the assessee at the beginning of financial period on 1.4.2012 and the cash in hand noted by the AO in the reason amounting to Rs. 2,56,942/- was cash in hand at the end of year on 31.3.2012, thus the same was shown as closing cash in hand in the return for AY 2013-14. The assessee herself has shown closing cash balance of Rs. 2,56,942/- in the cash in hand factual tabulation reproduced by the AO in the assessment at page 6 top para. Therefore, explanation of assessee towards source of cash dep....
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....econcile. Further, assessee failed to furnish the explanation as how the cash in hand on personal a/c and on proprietorship a/c should be different. The following accounting of assessee does not match with accounting standard of AS-1 which required true and fair disclosure. As the assessee has declared Rs. NIL as closing cash in hand in the ROl for AY 2012-13, the same is allowed as opening cash in hand for this financial year i.e. 2012-13. Cash in hand on personal account is remained unverified and it is not considered as genuine cash in hand of assessee. ii) The assessee has submitted the details of month wise cash flow statement depicting opening balance, cash deposit, cash withdrawal from the bank is as follows: From the above submission, it can be seen from the ROI of A.Y. 2012-13 that the opening cash in hand with assessee was NIL for the A.Y. 2013-14. The assessee has submitted two different cash book for personal account and for the proprietorship. The same cannot be relied as there cannot be two separate cash book for the year. iii) Further, on perusal of Bank a/c statement, reply dated 26.11.2021 and Month wise cash flow, it is observed that ass....
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....ee with a direction to explain the cash deposit along with documentary evidence. 4.7 Further, the assessee complied to the show cause notice with documentary evidence and on perusal of them, the same is not tenable as per issues raised in the show cause and the source of cash deposit is remains unverified. Therefore, as per discussion in para 4.1 to 4.7, it is clearly evident that the Cash deposit of amount to Rs. 2,05,000/- in Standard Chartered Bank (52910029713) is nothing but unaccounted cash of the assessee which was not disclosed as income by the assessee and the Cash deposit of amount to Rs. 2,05,000/- is added in the income of the assessee as unaccounted cash credits us 68 of the Income Tax Act, 1961 for the AY under consideration." 5.5 Further from the relevant para of First Appellate order, we note that Ld. CIT(A) upheld the said addition with the following factual findings and conclusions :- "4.4.6 During the assessment proceedings, the Assessing Officer noted that the appellant has deposited cash of amount of Rs. 2,96,000/- in Standard Chartered Bank. The appellant explained that the cash deposit was from the opening cash in hand as on 01.04.2012 be....
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.... cash. Further year under consideration the opening cash in hand as per the return of income is grossly insufficient for such cash deposits in the bank. 3. As per the statement of Ms. Ruby Singh recorded u/s 131 of Income Tax Act by the DDIT, Investigation, Delhi she had clearly mentioned that all payments are received through banking channels and no payment received in cash in last six to seven years. Therefore, there is no possibility of any availability of cash with the appellant which could have been deposited in the bank account during the year. 4. Since there is no income in cash in last several years, there is no justification of having any cash in hand other than what has been withdrawn over the years from the bank. Further, the appellant did not mention any specific reason for depositing cash in her bank account during the year. 5. On perusal of the details of expenditure it is noted that an amount of Rs. 18,900/- was paid in cash for a stamp duty on 01.04.2012 and a payment to seller in cash was made of an amount of Rs. 2,10,000/- on 16.04.2012. Therefore, if at all the contention of the appellant of opening personal cash is considered ....
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....012-13 cash in hand at the end of financial period was NIL. Therefore, the AO as well as Ld. CIT(A) were correct and justified in dismissing the Cash Flow Statement submitted by the assessee showing personal cash in hand of Rs. 40,322/- and cash in hand of her firm M/s Moonage Films amounting to Rs. 5,30,702/-. From the relevant part of the assessment order from para 4.2 to 4.7 (supra), we further note that the assessee on 21.12.2021 was show caused by the AO to explain different opening cash in hand for the same PAN. After considering the reply of the assessee the AO rightly observed that the sole proprietorship concern and the person has control over the concern should be treated as one entity and financials statement reconciled accordingly as the assessee failed to substantiate that by way of tenable explanation that how the cash in hand was personal account and on proprietorship concern a/c should be different and then the accounting adopted by the assessee was not in accordance with AS-1 which requires true and fair disclosure. The AO rightly took opening cash in hand on 1.4.2012 as NIL which is in confirmatory with the return of income for AY 2012-13. Therefore, the cash in h....
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....), hence, we uphold the same. Accordingly, the ground no. 4 and 4.1 of assessee for AY 2013-14 are also dismissed. The legal Ground no. 2 to 2.2 of assessee in other 06 appeals from assessment years 2014-15 to 2019-20. 6. The Ld. Representatives of both the sides submitted and agreed to the factual position that, except quantum the reasons recorded by the AO for initiation of reassessment proceedings u/s. 147 of the Act and for issuance of notice u/s. 148 of the Act are identical and similar, therefore, we took up the Appeal for assessment year 2013-14 as lead case to adjudicate the said legal grounds of assessee. Since in the earlier part of this order, we have dismissed the legal grounds no. 2 to 2.2 of the assessee challenging the validity of assumption of jurisdiction by the AO for initiation of reassessment proceedings u/s. 147 of the Act and issuance of said notice u/s. 148, therefore, our conclusion drawn for assessment year 2013-14 (supra) would apply mutatis mutandis to the identical and similar grounds no. 2 to 2.2 of assessee in other 06 appeals. Consequently, grounds no. 2 to 2.2 of the assessee in other 06 appeals for AY 2014-15 to 2019-20 are also dismissed. ....
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.... 6. That without prejudice to the above and in the alternative, even otherwise, the Ld. CIT(A) has erred both in law and on facts in holding that amount deposited in the bank by the appellant is taxable as income under section 69A of the Act and thereafter computed the demand in accordance with rates specified in section 115BBE of the Act as amended by Taxation Law (Second Amendment) Act, 2016." 8.1 Ground no. 3, 3.1 & 4 of the assessee for AY 2018-19. Apropos ground nos. 3, 3.1 & 4 Ld. Counsel for the assessee submitted that Ld. CIT(A) has erred in both facts and in law in upholding the addition of Rs. 10,00,000/- on account of sums received and declared as salary and Rs. 1,39,000/- alleging the same as unexplained cash deposit to the bank of the assessee treating the same as unexplained credit u/s. 68 of the Act read with section 115BBE of the Act. The Ld. Counsel for the assessee submitted that salary received from M/s Arihant Associates during the year was declared in the return of income as salary income. He further stated that assessee took employment, with M/s Arihant Associates and its Partner Shri Chetan Shukla, as Public Relation Officer (PRO) and the job profile....
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....e was no employee-employer agreement between the assessee and the firm and the payments made to assessee were not periodic, but random and was made in lumpsum. Thus, the assessee failed provide the details of business procured by her for M/s Arihant Associates in lieu of which impugned salary has been shown as paid. The AO categorically noted that the assessee has no expertise in the core business of M/s Arihant Associates i.e. sale and purchase of old commercial vehicles, therefore, the genuineness of transaction received on salary in line of service rendered by the said firm to the assessee could not established. The Ld. Sr. DR. Vehemently contended that with these observations the AO rightly observed that the transaction of receipt of Rs. 10,00,800/- by the assessee from M/s Arihant Associates could not be treated as genuine salary and thus it was bogus entry in the disguise of salary. He further submitted that the assessee had only declared Rs. 10,00,800/- as salary income in her income tax return for AY 2018- 19, whereas there was credit of Rs. 11,40,000/- to her bank account. Therefore, the AO was quite correct and justified in making further addition of remaining amount of R....
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.... 2017-18 AY 2018-19 AY 2019-20 Total income 5072 0 36419 Revenue from operations 0 0 988503 Compensation to employees (inclusive of salary expenses) 56500 4073 419860 A) Further, composite analyses of financials of Ms. Ruby Singh and M/s Arihant Associates revealed that salary income as claimed by Ms. Ruby Singh is not getting reflected in the financials of M/s Arihant Associates (as expense). Moreover, M/s Arihant Associates is not in a position to pay such huge salary. Further the bank statement and statement of Sh. Chetan Shukla dated 16.9.2020 partner in M/s Arihant Associates, was analyzed and found that their exist a mismatch and conflict in the stand taken by M/s Arihant Associates and Ms. Ruby Singh which is follows:- S.No. Salary claimed by Ms. Ruby Singh (Rs.) Salary claimed by M/s Arihant Associates (Rs.) Difference (Rs.) AY 2017-18 0 0 0 Ay 2018-19 10,00,800 11,40,000 1,39,200 Ay 2019-20 10,09,800 12,20,000 2,19,200 4.3 It can be clearly seen from the above tables, that M/s Arihant Associates has claimed Rs. 4,19,860/- as compensation to employees (In its financia....
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....CIT(A)'s order, we also observed that Ld. CIT(A) has upheld the said conclusion of the AO with the following observations and findings:- "4.4.8 The nature of alleged employment and amount received in disguise of salary has been discussed while deciding the additional ground. Accordingly, the Assessing Officer has taxed the remaining amount of Rs. 1,39,200/- (Rs. 11,40,000 - Rs. 10,00,800) as unaccounted income of the appellant and added to the income of the appellant as unexplained cash credit us 68 r.w.s 115BBE of Income Tax Act. As per records Ms Arihant Associates had made a payment of Rs. 11,40,000/- to the appellant during the year. Out of this, an amount of Rs. 10,00,800/- has already been considered as unexplained amount paid in disguise of salary and has been taxed at special rate W/s 115BBE of Income Tax Act. The remaining amount of Rs. 1,39,200/- has been received by the appellant from the Ms Arihant Associates during the year cannot be considered as amount received for any genuine employment activity. The appellant has considered this amount as out of pocket expenses which cannot be considered as correct in view of the lack of existence of employer employee rela....
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....red the impugned amount of Rs. 10,00,800/- as salary income and offered the same for taxation at the rate of normal tax rate, in her return of income, hence, the AO has not made any further addition. But we find in the instant case, the assessee had not proved the nature of credit to be salary by proving employer-employee relationship. Hence, addition made by the AO u/s. 68 is justified. Once Section 68 addition is sustained, logical conclusion would be to invoke Section 115BBE of the Act. The AO noted that there was credit of Rs. 11,40,000/- to the bank account of assessee and she had already drawn and shown amount of Rs. 10,00,800/- in her return of income, thus, the AO rightly made the addition of remaining amount of Rs. 1,39,200/- in the hands of the assessee. From para 4.3.4 of first appellate order, we further note that the ld. CIT(A) upheld the said finding of the AO with detailed and sustainable conclusion. Thus, we are unable to see any valid reason to interfere with the findings arrived by the authorities below, hence, we uphold the same. Accordingly, the grounds no. 3, 3.1 and 4 of the assessee are dismissed. Ground no. 3, 3.1 and 4 of assessee for AY 2019-20 8.7 S....
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....,502/- on 1.4.2017 belong to proprietorship concern M/s Moonage Films account and assessee's personal cash in hand of Rs. 2,07,698/- accumulated from the income received in cash. Ld. Counsel for the assessee submitted that reply and explanation of the assessee was dismissed by the AO without any justification only on the basis of his whims and fancies which is not sustainable. Ld. Counsel for the assessee submitted that AO has taken irrelevant and incorrect factual position for dismissing the contention of the assessee and therefore baseless addition made by the AO may kindly be deleted. Ld. Counsel for the assessee also contended that when the assessee is owing a concern / Moonage Films which has a different financial transactions then the factum of two separate cash in hand and cash books cannot be disbelieved. 9.1 Ld. Counsel for the assessee further submitted that the assessee has successfully demonstrated the source of cash deposit of Rs. 12.40 lacs to her bank account which has been dismissed by the authorities below without substantiating the mandatory requirement of section 68 of the Act, therefore, the addition may kindly be directed to be deleted. 9.2 Replying to th....
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....6,068/- on 31.3.2017 as asset in the balance sheet of her sole proprietorship firm, Moonage Films and the same amount has carried forward and declared in the financial of AY 2018-19 as opening cash in hand on 1.4.2017. Whereas as per reply dated 26.11.2021, assessee has declared cash in hand Rs. 622,502/- (personal account of Ruby Singh) on 1.4.2017. i) Assessee failed to furnish the accouting of cash in hand of Rs. 4,41,002/- (personal account of Ruby Singh) on 1.4.2017 as well as genuine source of cash in hand for personal account. The following accouting of assessee is not matched with accounting standard AS-1 and failed to true and fair disclosure. As the assesee has declared Rs. 16,098/- as cash in hand on 1.4.2017 in her financials, the same is allowed and other cash in hand is remained unverified and it is not regarded as genuine cash in hand of assessee. ii) On perusal of bank account statement of assessee, and cash ledger of the assessee it cannto be concluded that the assessee has made payment of expenses from the bank account or in cash mode. iii) Assessee failed to furnish why cash withdrawals were continuously made from April, 2017 to March 2....
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....ter considering the written submissions of the assessee as well as stand taken by the AO for making addition upheld the addition. First of all, we note that this is a case where the regular books of accounts were being maintained by the appellant and all her bank accounts and assets have been included in those books of account and the same have been found manifested in the schedule of fixed assets, balance with bank etc. With these observations, the Ld. CIT(A) rightly dismissed contention of the assesee that cash and other deposits in the saving account in Standard Chartered Bank was not part of the books of accounts and hence, not covered u/s. 68 of the Act is incorrect and devoid of any merits. Ld. CIT(A) considered the monthwise cash flow statement of assessee filed before the AO and thereafter proceeded to adjudicate the grievance of assessee. 9.7 The main basis taken by the assessee before the authorities below to justify the source of cash deposits was personal cash in hand in the beginning of year, withdrawal from the bank accounts during the year and rental cash receipts during the relevant financial year. The explanation and justification submitted by the appellant was ....
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....unts must have been utilised for business and other purposes and therefore, the same were not available for redepositing the same in the bank account and Ld. CIT(A) finally concluded that the source of cash deposit of Rs. 12,40,000/- in the bank remains unexplained and upheld the addition made by the AO u/s. 68 read with section 115BBE of the Act. In view of forgoing evaluation and analysis of orders of the authorities below, we are unable to see any ambiguity, perversity or any valid reason to interfere with the conclusion drawn by the AO as well the findings recorded by the Ld. CIT(A), hence, we uphold the same. Accordingly, the ground no. 5 of assessee's appeal for assessment year 2018-19 is dismissed. 9.9 It is also pertinent to mention that Ld. Counsel for the assessee in ground No. 6 has raised an alternative ground that Ld. CIT(A) was not correct and justified in upholding the addition on account of deposit in the bank account u/s. 69A of the Act and in directing the AO to tax the same at higher rate of tax u/s. 115BBE of the Act. On consideration of the said alternative ground of assessee from the orders of the authorities below, we are unable to see any such addition ne....
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....ly be deleted. Ld. Counsel for the assessee vehemently pointed out that the AO was not correct and justified in dismissing the self speaking explanation and sustainable documentary evidence filed by the assessee explaining the source of impugned cash deposit in the bank account only on his whims and fancies, therefore, the impugned addition may kindly be deleted by allowing the grounds of appeal. 10.1 Replying to the above, Sr. DR supported the assessment order as well as first appellate order and submitted that assessee was allowed due opportunity of hearing during assessment and first appellate proceedings, but the assessee had failed to substantiate the source of cash deposit of Rs. 20 lacs to her bank account. Therefore, the AO was quite correct and justified in making the addition u/s 68 of the Act read with section 115BBE of the Act and Ld. CIT(A) rightly upheld the same after proper evaluation of factual matrix of the issue and observations of the AO. 10.2 Placing rejoinder to the above, Ld. Counsel of the assessee submitted that there was no positive adverse material against the assessee disbelieving the explanation of the assessee i.e. impugned cash deposits in the b....
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....er be different. Further, assessee failed to furnish the accouting of cash in hand of Rs. 622,502/- (personal a/c of Ruby Singh) on 1.4.2018 as well as genuine source of cash in hand for personal account. The following accounting of assessee is not matched with accounting standard of AS-1. As the assessee has declared Rs. 207,698/- as cash in hand on 1.4.2018 in her financials, the same is allowed and other cash in hand remains unverified and it is not regarded as genuine cash in hand of assessee. iii) The maximum opening cash in hand available with assessee in FY 2018-19 relevant to assessment year 2019-20 is Rs. 207,698/- as declared in financial. iv) On perusals of bank account statement of assessee, and cash ledger of the assessee it cannot be concluded that the assessee has made payment of expenses from the bank account or in cash mode. v) The opening cash in hand with assessee was Rs. 207,698/- so how can assessee be able to deposit Rs. 6,50,000 in the month of September which also does not correlate with the personal cash book of the assessee. Further, assessee failed to furnish why cash withdrawals were continuously made from April to August. In a....
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....h amounting to Rs.20,00,000/- in her bank accounts. Thus a total amount of cash of Rs20,00,000/- was deposited in appellant's bank account during the year. The Assessing Officer did not find the explanation submitted by the appellant that the deposits were sourced from the rental income and cash withdrawals from the bank satisfactory and made an addition of Rs.20,00,000/- as unaccounted cash available with the appellant. An addition of Rs. 20,00,000/- was made as unaccounted cash of the appellant which was not declared as income by the appellant and therefore, was treated as unaccounted cash credits us 68 r.w. 115BBE of the Income Tax Act. 4.2.7 On perusal of the return of income it is noted that the Part A-BS heading mentions "Balance sheet as on 31* day of March 2019 OF THE PROPRITORY BUISNESS OR PROFESSION (fill items below in case where regular books of accounts are maintained, otherwise fill item 6)". Following salient points were noted on perusal of this part: 1. Fixed assets a. Gross : Block  ....
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....ilms. There are several receipts which have been received in Standard Chartered Bank and other bank accounts which belongs to the proprietorship business of appellant. Therefore, it would be inappropriate to accept that entries in all the bank accounts are not recorded in the books of accounts of the appellant. 4.2.9 This is a case where the regular books of accounts are being maintained by the appellant. On the basis of the observations above it is proved that the appellant is maintained regular books of accounts and all her bank accounts, assets have been included in those books of accounts and the same have found manifestation in fixed assets, balance with bank etc. Therefore, the appellant's contention during the appellate proceedings that the cash and other deposits in the saving accounts in Standard Chartered Bank was not paper book of account and hence not covered u/s 68 of the Income Tax Act is incorrect and devoid of any merit. The return of income duly verified by the appellant and filed in response to notice u/s 148 is the very basis of assessment and that highlights that the appellant is maintaining regular books of accounts and which contains the deposits ....
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....ned that all payments are received through banking channels and no payment received in cash in last six to seven years. Therefore, there is no possibility of any availability of cash with the appellant which could have been deposited in the bank account during the year. Further, as per the return of income there is no business income in this year. 4. The appellant deposited cash in her saving bank account on several occasions. The appellant did not mention any specific reason for depositing cash in her bank account during the year. 5. There is no justification of making regular deposits in bank even out of the personal cash in hand, if any. 6. Cash available out of rental income, if any, was only sufficient to meet the day to day expenditure of the appellant for which no cash drawings have been mentioned even in the personal cash account. 7. From the accounts submitted by the appellant it cannot be concluded as to how the appellant has incurred a personal and other house hold expenses during the year. In the assessment year 2013-14 the cash drawings were Rs. 18,23,900/- and during the year under consideration there were only a minimal cash drawin....
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.... 4.2.13 During the year, there are no business receipts in the appellant's proprietorship firm and indirect expense amounting to Rs. 3,21,459/- have been booked resulting in a net loss of Rs. 3,21,459/-. The Assessing Officer clearly pointed out that on perusal of bank account statement and the cash ledger of the appellant, it cannot be concluded that the appellant has made payment of expenses from the bank account or in cash. As per the cash book submitted by the appellant there are cash drawings amounting to Rs. 20,000/- only. It is difficult to imagine as how the appellant has incurred her household expenses as there are hardly any cash drawings. Rental income, if any, if received in cash was only sufficient for the household expenses of the appellant. 4.2.14 In view of the above, I am of the considered opinion that the source of cash deposited in the bank account remains unexplained and there is no reason to interfere with the order of the Assessing Officer. The Assessing Officer has correctly held that the cash amounting to Rs. 20,00,000/- is unaccounted cash available with the appellant earned during F.Y. under consideration and not offered for taxation ....
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....sh the observations of the authorities below that as per return of income filed by the assessee for AY 2019-20, there was no business income during the period under consideration. The assessee also failed to justify the reason for depositing cash to her bank account during the year and making regular cash deposits in the bank out of personal cash in hand, if any. Ld. CIT(A) thus rightly observed that despite request, the assessee did not submit the renal agreement also taking into account explanation of the assesee that cash available out of rental income, if any, was only sufficient to meet the day to day expenditure of appellant for which no cash drawings have been mentioned even in the personal cash account. Ld. CIT(A) also evaluated the pattern of cash deposits and withdrawals by the assessee from her bank accounts and thereafter concluded that it is expected that withdrawal can be made after the exhausting or spending the existing cash in hand and therefore, the cash withdrew every month cannot be said to be available with the assessee for redepositing in her bank account. Ld. CIT(A) thus rightly dismissed the explanation of the assessee regarding withdrawal of cash for the pu....
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....ng to Ms. Ruby Singh, Proprietor of M/s Moonage Films, were found. As a result of further enquiries, it became evident that the assessee, over several years, is indulging in tax evasion practices like unexplained unsecured loans, huge unexplained cash deposits, unexplained credits in the form of salary and unexplained immovable property transactions. Suspicious Transactions 3.1 Unexplained Cash Deposit: As per the information received, it was found that the Ms. Ruby Singh for the AY under consideration has made the following cash deposit: Bank Name and Acc 1. StandardChartered Bank (52910029713) AY 2013-14 Source 2,96,000/- Unexplained The same fact was confronted with Ms. Ruby Singh during recording her statement dated 14.10.2020 u/s 131 of the Income Tax Act, 1961 wherein she failed to provide any documentary evidence to justify the source of such huge cash deposit and, as has been observed in the later part of this note, failed to explain the nature, source and genuineness of such huge cash deposits in her bank accounts. 3.2 Unexplained Property Transaction As per the information received, it was found that the Ms....
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....d still holding Unexplained new rajinder nagar To ascertain the genuineness of the immovable property transaction done by the assessee, purchase deed of the property R-543, Top Floor, New Rajinder Nagar was examined and found that this property was acquired on 04.09.2012 for Rs. 80 lakh. Further, bank Statement of Ms Ruby Singh reveals that an amount of Rs. 25 lakh and Rs 50 Lakh has been received on transfer from joint a/c of Dalpat Singh and Ummed Singh (Linked PAN APUPS2619J), A/c No. 30780100001515 with Bank of Baroda and A/c No 51101307304 State Bank of Bikaner & Jaipur. A further perusal of these accounts showed that these amounts were sourced from cash deposits in these accounts. Document 4 In order to verify the net worth and genuineness of transactions routed from bank account of Ummed Singh, his ITR profiling was done using ITBA system which is tabulated as under. UMMED SINGH (APUPS2619J) F.Y. 2011-12 2012-13 2013-14 Total Sales/Gross receipts of business 2120940 0 0 Income from Salary 0 0 0 Income from House Property 0 0 Capital Gain 0 0 0 Income from Business or Profession ....
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....80100001515) BANK OF BARODA (30780100001515) Amount Rs. 9,00,000/ Rs. 9,00,000/- Rs. 0,00,000/- Rs. 5,00,000/- Rs. 9,00,000/- Rs. 9,00,000/ Rs. 15,00,000 - Rs. 10,00,000/- The amount of loan was given out of personal savings and accumulated funds in the bank account. The bank account detalls are mentioned above. The amount was given from HUF a/c of Sh Dalpat Singh jointly operated by Sh. Ummed Singh, son of Sh. Dalpat Singh. The copy of income tax return along with computation is attached herewith. 29-12-202) Ummed Singh HUF(KARTA) S/o Sh. Dalpat Singh R/o 435, Rajputon Ki Dhani Sanganer (Jalpur) Pan No. AAGHD5908J Document 7 Re: Ruby Singh, PAN No. ANAPS3827J, Reply to notice u/s 142(1) of the Income Tax Act, 1961, A.Y. 2013-14. In the above please find enclosed herewith the following for your kind consideration: 1. Statement of affairs: Balance sheet and Profit and loss a/c for the year ended 31.03.2013 is attached herewith. The balances in the balance sheet are the statement of affairs except the cash in hand of the assessee in her personal capacity. Cash flow statement for the financial yea....