THE INCOME TAX APPELLATE TRIBUNAL DELHI 'A' BENCH
BEFORE SHRI HARI OM MARATHA, JM & SHRI A.N. PAHUJA,AM
Bhupinder Singh V/s. Income-tax Officer, W ard 10/3, Old Rajinder Nagar, 33(4),New Delhi New Delhi
[PAN : AAUPS 9406 N]
Assessee by Shri Inderjeet Ahuja, AR
Revenue by Shri C.B. Singh, DR
Date of hearing 28-08-2012 Date of pronouncement 15-10-2012
A.N.Pahuja:- This appeal filed on 02.02.2012 by the assessee against an order dated 14th November, 2011 of the ld. CIT(A)-XXVI, New Delhi, raises the following grounds:-
1. "The learned CIT(A) was not justified to uphold the exparte assessment u/s 144 of the I.T. Act.
2. The learned CIT(A) erred to uphold the addition of ``12,99,850/- made to the income of appellant u/s 68 of the Income-tax Act on account of cash deposits in the bank. The addition of ``12,99,850/- is unfounded and uncalled for.
3. The following observations of the learned CIT(A) are incorrect:- a) There is no sufficient cause put forward by the appellant that prevented him from attending the assessment
b) There is no merit in the submissions put forward by the appellant to say that the assessment made u/s 144 was wrong and unjustified.
c) Sufficient opportunities given to the appellant which remained un-complied only suggest that the appellant is not in possession of any evidence to explain the source 2 ITA no.526/Del./2012
of deposits in the bank and hence avoided the
proceedings u/s 143(3) of the I.T. Act.
4. The learned CIT(A) failed to appreciate that : a) The appellant was taken ill and could not attend the case on some dates of hearing. There was, therefore,
sufficient cause for non-appearance on some dates of hearing.
b) The deposits in bank a/c are explainable.
5. The various reasons given by the learned Assessing Officer to uphold the ex parte assessment u/s 144 of the I.T. Act and addition of ``12,99,850/- to the income of the appellant on account of unexplained cash credit are misconceived and incorrect.
6. The appellant order is contrary to the facts and law of the case.
7. The appellant craves leave to add, amend or alter any of the foregoing grounds of appeal at the time of hearing."
2. Facts, in brief, as per relevant orders are that return declaring income of ``1,11,998/- filed on 31.12.2007 by the assessee, after being processed u/s 143(1) of the Income-tax Act, 1961, (hereinafter referred to as the 'Act'), was selected for scrutiny with the service of a notice u/s 143(2) of the Act. None responded to this notice. In this case, the Assessing Officer[AO in short] received an AIR information that the assessee deposited cash of ``12,99,850/- in his saving bank account maintained with Centurion Bank of Punjab Ltd., East Patel Nagar Market, New Delhi during the year under consideration. A copy of AIR information was sent to the assessee with the request to furnish the sources of cash deposited in the aforesaid bank a/c along with documentary evidence. None appeared on the scheduled date of hearing in response to the notice dated 26th June, 2009 & 25th September, 2009. Subsequently, in response to a show cause notice dated 14.10.2009 issued u/s 271(1)(b) of the Act, the assessee appeared before the AO. Inter alia, he was requested to furnish details as per order-sheet entry dated 22nd October, 2009 by 28.10.2009. None appeared on this date of hearing nor any adjournment was sought and nor even any written reply filed. A subsequent show cause notice dated 27.11.2009 also remained un- complied with. In these circumstances, the AO proceeded to complete the assessment u/s 144 of the Act with the addition of `12,99,850/- u/s 68 of the Act on account of unexplained cash credit.
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3. On appeal, the ld CIT(A), admitted additional evidence in terms of an application dated 27.10.10 under Rule 46A of the Income-tax Rules, 1962 and called for a remand report from the AO. The said additional evidence comprised i)medical certificate; ii) affidavit; iii)copies of LIC premium receipts & iv) copy of bank statement for the AY 2007-08. After considering the submissions of the assessee and remand report of the AO , the ld. CIT(A) upheld the completion of assessment u/s 144 of the Act in the following terms:-
"5.1.2 I have perused the facts of the case and find that though the appellant was suffering from uncontrolled diabetes, hypertension and depression, he is not prevented by any reasons to appoint an AR to represent him before the Assessing Officer and present his case with documentary evidences regarding the deposits made in his savings bank account maintained with Centurion Bank of Punjab Ltd. In his remand report the Assessing Officer has reiterated the same version which was appearing in the assessment order dated 18.12.2009. It is also observed that several opportunities were given to the appellant to represent his case before the Assessing Officer and that remained un-complied. Only when a notice u/s 271(1)(b) was issued for levy of penalty for non appearance, then the appellant himself made an appearance before the Assessing Officer and represented his case. However, it is seen that he has not submitted any documents substantiating the cash deposits in his personal bank accounts, though he is aware that such details were called for by the Assessing Officer. There is no sufficient cause put forth by the appellant that prevented him for attending the assessment proceedings. There is no merit in the submissions put forth by the appellant to say that the assessment made u/s 144 was wrong and unjustified. The assessment proceedings u/s 143(2) began prior to the information that was provided to the appellant vide letter dated 20.01.2009 and continued uptill 18.12.2009. 12 months is a long time for the appellant to avail the opportunity of explaining his part of the evidence. Therefore, in my opinion, the Assessing Officer is justified in making an assessment u/s 144 of the Income-tax Act to the best of his knowledge from the details available as per the return submitted by the appellant. Therefore, this ground of appeal holds no merit and hence the same is dismissed."
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3.1 As regards addition u/s 68 of the Act, the ld. CIT(A) concluded as under:-
"5.2.2. I have gone through the facts of the case. On perusal of the computation of income filed by the appellant, it is seen that the appellant declared income from business u/s 44AF amounting to `1,25,250/- on the gross turnover of `9,56,780/- from his business concern namely, M/s Car Cute. After deduction under chapter VIA (LIC u/s 80C) for an amount of `13,252/-, the income was shown at 1,11,998/-. Section 44AF of the Income-tax Act details with special provisions for computing profit and gains of retail business. According to section 44AF, if an assessee is engaged in retail trade in any goods for merchandise, a sum equal to 5% or more of the total turnover in the previous year is declared on account of such business, such income shall be deemed to be the profits and gains of such business and is chargeable to tax under the head 'profits and gains of business or profession'. According to sub-section 4 of this section an assessee is also not liable to maintain books of account as prescribed under section 44AA and 44AB of the Income-tax Act, 1961. It is pertinent to mention here that the issue concerned here is not of the business profits whether declared u/s.44AF or not. The issue concerned is about the source of the deposits those have been credited into the savings bank account of the appellant. The source of such deposits were not explained at all nor any attempt was made by the appellant to explain the same through his AR to the Assessing Officer. A nexus between the business and the source of the deposit has not been drawn by the appellant. Though the turnover is below Rs.40 lacs and the appellant was not required to maintain the books of account in terms of provisions of section 44AF, but the source of Rs.12,99,850/- should have been explained connecting the deposits and business transactions. At least a primary evidence of receipt of such cash out of the sale proceeds in the trading account is required to be shown. Since the appellant or his AR has failed to attend the proceedings and did not satisfactorily prove the source of the cash that has been deposited in the savings bank account of the appellant, I am of the opinion, that the decision taken by the Assessing Officer is correct and justified. Also several opportunities given to the appellant which remained uncomplied only suggests that the appellant is not in possession of any evidence to explain such a source and hence he avoided the proceedings u/s.143. After giving an opportunity as per the law and examining the evidence filed before the Assessing Officer the remand report was sent in an elaborate manner, and about the verification of cash deposits the Assessing Officer stated as under:-
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"Further, on perusal of the bank statement of Centurion Bank of Punjab Limited in which assessee has saving account, it is noticed that assessee has deposited cash amounting to Rs.13, 09,873/- during the FY- 2006-07. It is noted that the cash deposit in the bank is Rs.13,09,873/- which exceeds Rs.9,56,760/- i.e. gross receipts declared by the assessee in his return of income. Clearly, cash deposits in the bank are about 40% higher than the gross business receipts shown by the assessee in his return of income and further, as stated above, no nexus between the cash entries in the bank with gross receipts has been shown by the assessee and thus the cash deposits are unexplained/undisclosed income of the assessee."
In rejoinder dated 1.11.2011, the AR admitted the following:-
"The assessee stated that the SB A/c. with the Centurion Bank of Punjab Ltd. in which deposits and withdrawals had been made related to his business and that from the perusal of the said bank statement, it will be seen that there are regular deposits and withdrawals in the said bank account and that the credit balance on various dates during the financial year 2006-07 has not been much and that the deposits in the bank account are from the sale proceeds of the retail business and out of earlier withdrawals made but not utilized.
The assessee has also filed an affidavit to this effect and also filed copies of some purchase bills and electricity bills in the name of Smt. Prem Kaur. The assessee has not filed any other evidence having been asked to do so vide office letter dated 11.1.2011 nor the details or evidence regarding source of cash deposits on various dates has been filed. The date of cash withdrawals and purpose thereof the date and amount of redeposit of remaining cash and deposit out of cash sales have not been furnished by the assessee."
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In addition to the above, the appellant has not explained as to what made him submit the purchase bills and electricity bills drawn in the name of Smt. Prem Kaur and her connection with the appellant's business. In the absence of complete and correct evidence not being furnished by the appellant in the course of the appellate proceedings, it is difficult to deliver a judicious opinion in favour of the appellant. For an appellate authority what matters is evidence on record while delivering justice. On record, there is an ample evidence to show that the appellant did avoid the assessment proceedings because he was asked to substantiate the source of the cash deposits in his account and sort shelter under an umbrella on medical grounds. However, the fact remains that even in the course of appellate proceedings, no satisfactory and complete evidence is furnished. The onus cast upon him to discharge the burden of proof to explain the source of cash credits has not been adhered under Rule 46A where a legal recourse was despite of the fact that additional evidence sought to fill the gap to produce the evidence which could not be done at the time of assessment proceedings. In view of the above discussion the addition made by the Assessing Officer is confirmed and upheld."
3.2. Regarding ground relating to circumstances preventing the assessee from attending the assessment proceedings, the ld. CIT(A) held as under:
"5.3.2 On perusal of the assessment order, it is seen that after selection of the case for scrutiny, a notice u/s 143(2) was issued to the appellant. Subsequently, vide letter dated 20.1.2009 the AIR information was sent to the appellant asking him to furnish the necessary details with substantiating evidences pertaining to the deposits in his savings bank account maintained with Centurion Bank of Punjab Ltd. Several notices dated 26.6.2009, 17.7.2009, 25.9.2009 were issued and duly served upon the appellant. None attended the proceedings on these dates. Subsequently, a notice u/s. 271(1)(b) dated 14.10.2009 posting the date of hearing as 22.10.2009 was issued and served upon the appellant. On 22.10.2009, the appellant himself appeared before the Assessing Officer, read the order-sheet entries which were to be explained by him and signed it when the case was posted to 28.10.2009. None attended on the adjourned date nor any adjournment was sought by the appellant. A show cause notice dated 19.11.2009 was issued to the appellant affording him one last opportunity of being 7 ITA no.526/Del./2012
heard and to furnish requisite details on 27.11.2009 and with the clear indication that in case of failure to comply to furnish such details, it would be presumed that the appellant had nothing to say and the matter would be decided exparte on merits and on the basis of information available on record. It is very surprising to note that the appellant fell ill only on the dates those were given by the Assessing Officer for furnishing the details. It is also said with conviction that the medical report is a manipulated one because the doctor under whose supervision the appellant was undergoing treatment is not connected with the ailments that the appellant is supposed to be suffering with. A cardiologist cannot treat a person who is suffering with depression, as he is a specialist looking after heart problems. Hypertension, no doubt affects a person's health, but it is not a disease that prevented the appellant to engage an AR who would in turn appear before the Assessing Officer and explain the source of such deposits. Similarly, an uncontrolled diabetes needs hospitalization and no such reports were furnished by the appellant except a certificate.
On perusal of the medical certificate, it is seen that the appellant was under medical treatment from 4.10.2009 to 28.2.2010. However, when a notice u/s. 271(1)(c)1)(b) was issued, he attended the proceedings himself and he did not mention any such reasons before the Assessing Officer regarding such ailments. In order to avoid the proceedings, because evidences were required. to explain his case, relying on such false reports is unfair and unjustified and expecting to avail fair and just approach from the authorities. Since I do not find any merit in the reasoning given by the appellant suggesting that those were the causes that prevented him either by personal attendance or by approaching and appointing an AR on his behalf to represent his case, I agree with the grounds and basis on which the Assessing Officer made an addition. Hence there is no merit in this ground and therefore dismissed. '
5.3.2a Regarding the deposits in the bank account which are said to be explainable by the appellant, it is seen that the appellant is maintaining a savings bank account with the Centurion Bank of Punjab Ltd. It was stated that the deposits and withdrawals have been made relating to his business and that the credit balance on various dates during the financial year 2006-07 are from the sale proceeds of the retail business and out of the earlier withdrawals made but not utilized. To substantiate the same the appellant filed an affidavit. When the case was remanded to the Assessing Officer to furnish necessary report after verifying such deposits and 8 ITA no.526/Del./2012
withdrawals, the Assessing Officer simply stated in his report that the appellant merely filed copies of some purchase bills and electricity bills in the name of Smt. Prem Kaur. Apart from this, he has not filed any other evidence despite of giving an opportunity on 11.1.2011 to file details pertaining to the source of cash deposited on various dates or date of cash withdrawals or purpose of cash withdrawals, date and amount of re-deposit of remaining cash and deposit out of cash sales were furnished by the appellant. The Assessing Officer while examining the case relied upon the decision in the case of Smt. Sharda Devi Vyas Vs. Income-tax Officer in ITA No.433/lnd/2009AY-2006-07 where the Indore bench decided that "in terms of provisions of 44AF of the Act, the assessee cannot be asked to produce the books of account, but at the very same time, it is found that huge cash has been deposited in the bank, at least primary evidence of receipt of such amount of cash out of sale proceeds in the trading account is required to be shown."
In the present case, furnishing of purchase bills etc. in the name of Smt. Prem Kaur has not been supported by related documentary evidence like, delivery slips or cash receipts etc. A detailed observation has been discussed in the paragraph supra at ground no.-2. In view of this discussion, the addition of Rs.12,99,850/- is justified and therefore I confirm and upheld the addition made by the Assessing Officer."
4. The assessee is now in appeal before us against the aforesaid findings of the ld. CIT(A).the ld.AR on behalf of the assessee while referring to affidavit of the assessee contended that the ld. CIT(A) was not justified in ignoring the medical certificate issued by Dr. Dhanesh Kawatra nor there is any evidence to suggest that the certificate was not genuine. Since the assessee was undergoing treatment from 4th October, 2009 to 28th February, 2010, he was not able to appear before the AO. In his affidavit dated 23.10.2010, the assessee averred that he was suffering from uncontrolled diabetes, hypertension and depression since January, 2009 which became acute & severe many times and therefore, could not appear before the AO. While referring to decisions in L. Sohan Lal Gupta Vs. CIT, 33 ITR 786 (All.); Mehta Parikh and Company Vs. CIT, 30 ITR 181(SC); Dilip Kumar Roy Vs. CIT,94 ITR1 (Bom.) and Smt. Gunwantibai Rtilal Vs. CIT,146 ITR 140(MP), the ld. AR argued that there was no justification 9 ITA no.526/Del./2012
for the ld. CIT(A) to uphold completion of assessment u/s 144 of the Act. As regards addition of ``12,99,850/-,the ld.AR while relying upon decisions in CWT Vs. M. Kulandaivelu Pillai (Decd.), 179 ITR 228 (Madras); CIT Vs. Ramkrishna Stores, 253 ITR 175 (Calcutta); CIT Vs. Surinder Pal Anand,192 Taxman 64 (P&H) and CST Vs. H.M. Esufali H.M. Abdulali 90 ITR 271 (SC) pointed out that since the assessee was suffering from various diseases, he incorrectly reported the cash deposited in the bank. In the absence of books of account, the assessee could not give exact source of deposit. The assessee having conducted business from the shop at old Rajender Nagar, owned by his wife, was assisted by his two sons during the period of illness. Therefore, the ld. CIT(A) was not justified in upholding the addition. On the other hand, the ld. DR supported the findings of the ld. CIT(A).
5. We have heard both the parties and gone through the facts of the case as also the written submissions filed on behalf of the assessee. As is apparent from the aforesaid facts narrated in the assessment order, none appeared before the AO despite issuance of various notices dated 26th June, 2009 & 25th September, 2009. Subsequently, in response to a show cause notice dated 14.10.2009 issued u/s 271(1)(b) of the Act, the assessee appeared before the AO. Inter alia, he was requested to furnish details as per order-sheet entry dated 22nd October, 2009 by 28.10.2009. None appeared on the scheduled date of hearing nor any adjournment was soughtnd nor even any written submissions were filed. A subsequent show cause notice dated 27.11.2009 also remained un-complied with. In these circumstances, the AO proceeded to complete the assessment u/s 144 of the Act with the addition of `12,99,850/- u/s 68 of the Act on account of unexplained cash deposited in his bank account. On appeal, the ld. CIT(A) admitted additional evidence in terms of an application dated 27.10.2010 under Rule 46A of the Income-tax Rules, 1962 , comprising i)medical certificate; ii) affidavit; iii)copies of LIC premium receipts & iv) copy of bank statement for the AY 2007-08 . The medical certificate dated 12.3.2010 for the period 4.10.2009 to 28.2.2010 mentioned complete bed rest. It 10 ITA no.526/Del./2012
is mentioned in the said certificate that the certificate is not valid for medicolegal purpose. In any case, this certificate does not explain the absence on 17.7.2009 as also how could the assessee appear before the AO on 22.10.2009, despite being advised bed rest. The factum of illness and bed rest was never communicated to the AO during the course of assessment proceedings nor it was explained as to what prevented the assessee from explaining entries in his bank account .Even in the documents submitted by way of additional evidence , the assessee did not furnish any evidence regarding source of cash deposited in his bank account. In these circumstances, the ld. CIT(A) while discarding the aforesaid medical certificate ,upheld the completion of best judgment assessment and in the absence of any evidence regarding source of cash deposited in the bank, upheld the addition made by the AO. The ld AR merely reiterated their submissions before the ld. CIT(A).The ld. AR did not explain as to how could the assessee appear before the AO on 22.10.2009,despite advised bed rest and why the factum of illness or bed rest was not communicated to the AO during the course of assessment proceedings. In these circumstances, especially when the assessee was provided with the requisite information as early as vide letter dated 20.01.2009 and in spite of that, assessee did not respond to the notices while the ld. AR did not place before us any material controverting the findings of the ld. CIT(A),upholding completing of assessment u/s 144 of the Act , applying the test of human probabilities laid down in CIT v. Durga Prasad More  82 ITR 540 (SC), we are of the opinion that the authorities were justified in proceeding to make best judgment in terms of provisions of sec. 144 of the Act in view of persistence non-compliance of the notices over a period of one year. Therefore, ground nos.1,3,4(a) & a portion of ground no. 5 in relation to completion of assessment u/s 144 of the act, are dismissed.
6. Despite completion of assessment u/s. 144 of the Act, we are of the opinion that it is still the duty of the ITO to make the assessment to the 'best of his judgment' after taking into account all relevant materials which he might have 11 ITA no.526/Del./2012
gathered. The two processes, i.e the gathering of relevant materials and the making of the assessment to the best judgment can never be dispensed with, even in a case where the assessment is made ex parte following the default of the assessee. Except for the fact that the assessee is not present before the AO or has not furnished a return, or where he has furnished a return, has subsequently defaulted to produce materials in support of his return or defaulted to co-operate with the officer in the task of adjusting his tax liability, the position of the AO in no way differs from a case where he has got to proceed under any other provision of the Act for the purpose of making the assessment. It is true that under s. 142(3) of the Act, there is a statutory requirement for giving an opportunity to the assessee before any materials are being utilised by the ITO for the purpose of assessment, and this requirement stands excluded by the very terms of s. 142(3) in the case of an assessment under s. 144. But that does not really impinge upon the wider and ever present statutory mandate that the officer must frame the assessment only to the best of his judgment. In the instant case, the AO asked the assessee to explain source of cash deposited in his bank. Before the AO assessee did not put forth any explanation nor furnished any evidence regarding the source of such cash. On appeal,, the assessee pleaded that deposits and withdrawals in the said bank account ,related to his business. However, the assessee did not place any evidence before the AO or the ld. CIT(A),establishing nexus of cash deposited in the bank with his receipts from business. The turnover of the business was claimed to be only `9,56,780/-while the actual cash deposited in the bank, as per remand report of the AO is `13,09,873/-.Whether the entire turnover in cash was deposited in the bank, has not been established by the assessee. We find from the copy of bank statement that cash of `18,800/- was deposited on 4.4.2006,`11,800 on 10.4.2006;`13000 on 6.7.2006;&`22,800/- on 22.3.2007 at police line branch of the bank at Ludhiana while `41,000/- on 29.4.2006 at Akalgarh branch of the bank and `4,500/- on 2.1.2007 at BRS Nagar,Ludhiana Branch and an amount of `30,000 on 26.5.2006;`17,500/- on 22.6.2006;`5,000/- on 2.1.2007 and `1,000/- on 3.1.2007 has been paid to Boby Kumar. There is no explanation as to how cash 12 ITA no.526/Del./2012
was deposited at Ludhiana or Akalgarh. Besides , there are number of entries of deposit of cash and payments in cash, including to one Mr. Kripal Singh .Not even one entry has been explained before the AO or the ld. CIT(A) and even before us. The ld. AR on behalf of the assessee, though relied upon a number of judgments, did not even attempt to co-relate the deposits in cash in the bank account of the assessee with his business receipts. The onus is on the assesseee to establish that the cash deposited in the bank ,originated from his turnover of the business. In these circumstances, especially when the complete facts are not before us, we consider it fair and appropriate to vacate the findings of the ld. CIT(A) and restore the matter to the file of the AO with the directions to allow one final opportunity to the assessee to establish the nexus of his business receipts with cash deposited in the bank as also to explain the nature of transactions in the said account and thereafter, pass appropriate orders in accordance with law . The assessee is also directed to place his best evidence before the AO so that matter could be disposed of expeditiously. In the event the assessee does not avail the opportunity provided by the AO or does not establish nexus of his business receipts with the cash deposited in the aforesaid bank account, the addition shall stand confirmed With these directions, ground nos. 2,4(b) and the remaining portion of ground no.5 are disposed of.
7. Ground no.6 in the appeal being general in nature nor any submissions having been made before us, does not require any separate adjudication while no additional ground having been raised before us in terms of residuary ground no.7 in the appeal, accordingly, these grounds are dismissed.
8. No other plea or argument was made before us
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9. In the result, appeal is partly allowed but for statistical purposes. Order pronounced in open Court
Sd/- Sd/- ( HARI OM MARATHA) (A.N. PAHUJA ) (Judicial Member) (Accountant Member)
Copy of the Order forwarded to:-
2. ITO W ard-33(4),New Delhi
3. CIT concerned.
4. CIT(A)-XXVI, New Delhi
5. DR, ITAT,'A' Bench, New Delhi
6. Guard File.