Provision of section 69A of IT Act 1961 for unexplained cash

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH ‘E’: NEW DELHI)

BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER

And

SHRI T. S. KAPOOR, ACCOUNTANT MEMBER

ITA No.5269/DEL/ 2011

(Assessment Year: 1995-96)

&

ITA No.2513/DEL/ 2012

(Assessment Year: 1995-96)

Late Shri Mukhtiar Singh Through Legal

Heir and Son Shri Gurdayal Singh.

23/A-7, Sector-16,

Rohini.

New Delhi.

PAN: AIWPM7485P

(APPELANT)

Vs.

ACIT

Circle-21(1)

New Delhi.

Heir and Son Shri Gurdayal Singh.

23/A-7, Sector-16,

Rohini.

New Delhi.

PAN: AIWPM7485P

 (RESPONDENT)

REVENUE B: Mrs. A. S. Awasthi, Sr.DR.

ASSESSEE BY: Shri Suresh K. Gupta, CA.

ORDER

PER T. S. KAPOOR, AM

These are two appeals filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-XIII, New Delhi dated 30.09.2011 and 06.03.2012 respectively for the assessment year 1995-96.

2. The ITA No. 5269 relates to quantum additions, whereas ITA No. 2513 relates to appeal against penalty orders u/s 271 (1) (c). The grounds taken by assessee in respect of both ITAs are as under:

Grounds of ITA No. 5269

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in confirming the addition of Rs.7,65,000/- on account of cash found at the time of search considering the same as unexplained cash u/s 69A of Income Tax Act.”

Grounds of ITA No. 5269

“1 On the facts and in the circumstances of the cazse and in law, the Ld. Commissioner of Income Tax (appeals) has erred in confirming the penalty of Rs.6,89,620/- u/s 271(1) (c)  ignoring the facts that in the quantum proceeding the appellant has already got the relief to the extent of 9,59,051/- against the assessed income of Rs.17,24,051/- and also ignoring the fact that the sustained on of Rs.7,65,000/- also does not involve any furnishing of inaccurate particulars of income or furnishing inaccurate income and therefore it was prayed before the Ld. CIT (A) that no penalty is leviable in the present case.”

3. The brief facts of the case are that the Assessing Officer had made additions in the hands of assessee by opening up its case u/s 148. Case of the assessee was re-opened on the basis of search by CBI on the residential premises of the assessee. The assessee was working as Deputy Director General Foreign Trade. The CBI had found certain amounts of cash belonging to the assessee, which was kept by the assessee with some other persons for safe custody. In all a sum of Rs.15,65,000/- was recovered by CBI from two persons the detail of which is as under:

(a) Rs.8,00,000/- from Shri Narendra Goel.

(b) Rs.40,000/- from ancestral house of assessee.

(c) Rs.2,25,000/- from Shri Narendra Goel.

(d) Rs.5,00,000/- from Shri Ravinder Malik.

4. The Assessing Officer made the additions of these amounts along with certain other additions relating to interest income and in all an amount of Rs.17,01,626/- was added to the income of assessee vide assessment order dated 26.03.2002. On appeal, the Ld. CIT (A) deleted the additions on account of Rs.8,00,000/-, on the basis of that such income belonged to assessment year 1994-95. However, he upheld the additions of Rs.2,25,000/-, Rs.50,000/- and Rs.40,000/- by holding as under:

“11.4.3 Rs.2.25 lacs recovered from Sh. Narender Goel. The next addition relates to the sum of Rs.2.25 lakhs as recovered from Sh. Narender Goel’s statement was recorded on 6.7.95 u/s

161 of the Criminal Procedure Court by the CBI. In the statement dated 6.7.95, he stated that in the month of March, 1994 Sh. Mukhtiar Singh came to his (Sh.Goel’s) residence three times- first time Sh. Mukhtiar Singh gave Rs.8 lakhs, second time he gave Rs.2 lakhs and third time he gave Rs.25,000/- for safe keeping. In the subsequent statement dt.30.08.1995 before the Metropolitan Magistrate Sh. Narender Goel further stated that in the month of March, 1994 he was given cash of Rs.8 lakhs and after a few days he was given Rs.2 lakhs in cash and then after some days again he was given Rs.25,000/-. If the two statements dated 6.7.1995 and 30.08.1995 are read together, it is evident that initial sum of Rs.8 lakhs was paid at the end of March, 1994 and the subsequent sums of Rs.2 lakhs given after a few days, which by inference would mean in the first week of April,2004 and remaining amount of Rs.25,000/- given definitely within April,2004. Thus, so far as the sum of Rs.2,25,000/- is concerned, it is held that it pertains to the previous year relevant to A. Y. 1995-96. As the source of the sum Rs.2,25,000/- remains undisclosed, it is held that the Assessing Officer has  correctly treated the entire sum of Rs.2,25,000/- as appellant’s income from undisclosed source for the A. Y. 1995-96. The addition of Rs.2,25,000/- is accordingly confirmed.

The year April, 2004 as mentioned above by Ld. CIT (A) seems to be a mistake and it should be April, 1994. 11.4.4. Rs.5 lakhs recovered from Sh. Ravinder Malik. Another sum of Rs.5lakhs was recovered on 03.10.1994 from Sh. Ravinder Malik. Sh. Ravinder Malik in his statement before the CBI on 29.09.1994 has stated that the money was handed over to him for safe keeping by the deceased assessee, Sh. Mukhtiar Singh. As per his statement recorded on 29.09.1994 Sh. Ravinder Malik has stated that Sh. Mukhtiar Singh in the year 1993, about 6-8 months prior (to the recording of statement) gave a loan of a sum of Rs.5 lakhs to 3 persons through Sh. Ravinder Malik. From this statement the period of receipt of money by Sh. Ravinder Malik is to be inferred as January- March,1994. Subsequently on 11.07.1995 in his statement recorded before the CBI, Sh. Malik stated that about two years back (which would mean July, 1993), Sh. Mukhtiar Singh handed over a sum of Rs.5 lakhs to him for giving loan on interest to some persons during that period.

11.4.5 It is noticed that there is a wide gap/ a gross mismatch between the alleged stated periods of receipt of money in both the statements. Unlike the statements of the Narender Goel, the statements of Sh. Ravinder Malik lack consistency. Even going by the commonality of usage there is a wide difference between January-March 1994 and July 1993. Moreover, even the CBI has not read much into the veracity of the statement or else it would have given some benefit of the availability of the interest income on the sum of Rs.5 lacs alleged to have been given on loan to 3 persons. Therefore, on account of the inconsistency in both the statements of Sh. Ravinder Malik and the failure of appellant to have disclosed interest income on the sum of Rs.5 lakhs (the sole purpose for which the sum was stated to have been given) it is held that the claim of the sum of Rs.5 lakhs having been in F. Y. 2003-04 and therefore the money originating in F.YR 2003-04 is not conclusively proved. In such circumstances, it is held that the Assessing Officer was fully justified in bringing the amount to tax on recovery basis under the deeming provisions of 69A of the IT Act. Thus the action of Assessing Officer in treating the sum of Rs.5 lacs as income of A. Y. 1995-96 is upheld.”

Here also there is a mistake in the mentioning of year in the Ld. CIT (A) order, which should have been 1993-94 instead of 2003-04.

12.7 With regard to the recovery of cash of Rs.40,000/- from the parental residence of the deceased assessee in Sonipat Distt it has been submitted by the Ld. Counsel that the amount was part of the savings from the salary income of the deceased assessee. In support of this claim no evidence has been filed. The Ld. Counsel has failed to show the withdrawals from the bank account of the assessee which would establish that this recovered amount, represented savings from salary. In the absence of this evidence, it is held that the source of Rs.40,000/- remains un-proved. Moreover the explanation of the appellant is shifting as in the course of assessment proceedings the amount was sought to be explained as parental income generated from cattle rearing. No evidence of the late assessee’s mother having generated and kept in lump sum such income/ amounts was however filed.

As the source of the non salary income of Rs.50,000/- shown in the return is unknown and no details of the manner and period of generation of the income are available, the cash found at the parental residence cannot be held to be explained out of the remaining income of Rs.50,000/- shown in the return. The source of the cash found thus remains unexplained. The addition of Rs.40,000/- made by the Assessing Officer is accordingly confirmed.”

5. Aggrieved, with upholding of additions, the assessee is in appeal before us. In the meanwhile, the Assessing Officer also concluded the proceedings u/s 271(1) (c) and imposed a penalty equivalent to 100% of tax evaded amounting to Rs.6,89,620/-. On appeal before Ld. CIT (A), the Ld. CIT (A) upheld the imposition of penalty. The assessee is in appeal before us, in respect of both orders of CIT (A) regarding quantum and penalty.

6. At the outset, Ld. AR took us to relevant dates and also invited our attention to statements of Shri Narender Goel and Shri Ravinder Malik placed at paper book pages 7 and 8. Highlighting from the statements of Shri Narender Goel placed at paper book page 7.The Ld. AR invited our attention to the following lines:

“In the month of March, 1994 he gave me 8 lacs cash since his residence is located at a lonely place. He stated that he will take back the same after about 10-15 days. After few days he also gave me two lakhs in cash and again an amount of Rs.25, 000/- for the same purpose.”

7. In view of the above part of statement, the Ld. AR argued that since Rs.8,00,000/- was given in March, 1994 wherein specific date was not mentioned and within 10-15 days means that amount was paid in the month of March, 1994 itself and, therefore, the amount of Rs.2,25,000/- also related to earlier year and Ld. CIT (A) should have deleted this addition also. Similarly our attention was invited to the statement of Shri Ravinder Malik placed at paper book page 8, which was recorded on 11.07.1995 and which contained the following:

“About two years back Shri Mukhtiar Singh came to my residence and handed over a sum of Rs.5,00,000/- to me and told me to keep the same with me for some time.”

9. In view of the above statement, the Ld. AR stated that the amount was received on some date in July, 1993 which fell into financial year 1993-94 and, therefore, the Ld. CIT (A) should have deleted this amount also as it belongs to the earlier year. Our attention was also invited to paper book pages 28 and 29 wherein a copy of statement recorded of the same person on 29.09.194 was placed wherein Shri Ravinder Malik has stated Shri Mukhtiar Singh had lent money amounting to Rs.5,00,000/- to three persons of Panipat during the period of 6-8 months in year 1993 and in view of this argued that there was no ambiguity in the two statements and Ld. CIT (A) has wrongly interpreted these. He further took us to page 17 wherein the explanation regarding recovery of Rs.40,000/- from the ancestral house of assessee was placed. In view of the above findings, it was argued that additions upheld by Ld. CIT (A) needed to be deleted.

10. Regarding imposition of penalty, the Ld. AR argued that despite relief given by Ld. CIT (A) in respect of quantum proceedings, the Ld. CIT (A) has ignored to give the relief in respect of penalty imposed by Assessing Officer. Regarding additions upheld by Ld. CIT (A) also he argued that penalty in its entirety needed to be deleted as no inaccurate particulars were furnished.

11. The Ld. Departmental Representative on the other hand, relied upon the order of CIT (A).

12. We have heard the rival parties and have gone through the material placed on record. We find that Ld. CIT (A) deleted the addition of Rs.8,00,000/- on the basis that amount of Rs.8,00,000/- related to earlier year. The addition of Rs.5,00,000/- was upheld on the basis of difference in statements of Shri Ravinder Malik recorded on 11.07.1995 and 29.09.1994. We have gone through both statements and we observe that in the statement recorded on 29.09.2004 placed at paper book page 28. Shri Ravinder Malik had submitted that Shri Mukhtiar Singh had lent an amount of Rs.5,00,000/- to three persons of Panipat during the period of 6- 8 months in the year 1993 and in the statement recorded on 11.07.1995\ placed at paper book page 8 the same person had said that about two years back Shri Mukhtiar Singh came to his residence and handed over Rs.5,00,000/- to him. From both the statements the period of transactions is interpreted to be in between June, 1993 to August, 1993. The Ld. CIT (A) had mentioned this period of 6-8 months as period prior to the recording of statements and, therefore inferred that the period was January and March 1994. Therefore, on the basis of inconsistency between two statements he upheld the addition, whereas in our opinion in the statement dated 29.09.1994 placed at paper book page 28, 6-8 months in year 1993 meant period of June to August in the year 1993 and the same inferences can be drawn in respect of statement recorded on 11.07.1995 placed at paper book page 8, wherein it has been mentioned that two years back the amount was given. Therefore, in the both statements the probable period is between June, 1993 and August, 1993, which falls in the financial year 1993-94 and, therefore, cannot be taxed in assessment year 1995-96. Therefore, we are of the considered opinion that additions of Rs.5,00,000/- needs to be deleted and is deleted accordingly.

13. As regards, the addition of Rs.2,25,000/-, we do not agree with the contention of Ld. AR that this amount was also given in the month of March,1994. The statements recorded, reveal that the amount of Rs.2,25,000/- was paid after 10-15 days from the date of giving of Rs.8,00,000/- which was in the month of March, 1994. Therefore, we uphold the addition of Rs.2,25,000/- in this respect.

14. As regards Rs.40,000/-, the plea of Ld. AR that it was a part of salary income is not acceptable as Ld. CIT (A) has clearly made a finding that it was not a part of salary.

In view of the above ITA No. 5269 is partly allowed.

15. As regards ITA No. 2513, we observe that Ld. CIT (A) did not reduce the penalty amount after the part success of assessee in quantum proceedings. Therefore, Assessing Officer is directed to reduce the penalty amount by appropriate amount, after giving effect to Ld. CIT (A)’s order in respect of quantum proceedings. He is further directed to reduce the penalty amount with the effect of relief given by us. Accordingly the ITA No. 2513 is also partly allowed.

Order pronounced in Open Court on 5th /07/ 2013

Sd/- Sd/-

(Rajpal Yadav) (T.S. Kapoor)

Judicial Member Accountant Member

Dated the 5th day of July, 2013

S.Sinha

Copy forwarded to

1. APPELLANT

2. RESPONDENT

3. CIT

4. CIT (A)

5. CIT (ITAT), New Delhi.

AR, ITAT

NEW DELHI.