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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 101/2017
Date of decision: 14th March, 2018
KRISHAN KUMAR SETHI PROPRIETER OF M/S. SETHI AUTO
CENTRE ..... Appellant
Through Mr. Salil Kapur, Advocate.
versus
COMMISSIONER OF INCOME TAX-XX & ANR...... Respondent
Through Mr. Deepak Anand, Jr. Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J. (ORAL)
Appellant-Krishan Kumar Sethi has filed the present appeal under
Section 260-A of the Income Tax Act, 1961 (,,Act for short), which relates
to assessment year 2005-06 and impugns the order dated 8.7.2016 passed by
the Income Tax Appellate Tribunal (Tribunal).
2. In the return of income filed for the AY 2005-06, the appellant had
declared taxable income of Rs.4,05,265/- from the business of
sale/purchase/financing of three-wheeler/scooters on commission basis and
income earned under the head "income from house property".
3. The Assessing Officer (,,AO), vide assessment order dated
28.12.2007, made addition of Rs.36,80,000/- as income from undisclosed
sources invoking Section 68 of the Act on account of unexplained cash
ITA No. 101/2017 Page 1 of 10
deposits of Rs.92,80,000/- in the bank accounts of the appellant and his
minor sons- Master Sahil Sethi and Sarik Sethi. These deposits were made
on different dates and sometimes there were multiple deposits even on a
single day. The appellant, on being asked, could not furnish details and
explain source of deposits. The AO had made addition of peak cash in hand
of Rs.36,80,000/-.
4. The appellant in the appeal, for the first time, took the stand and
position that he had had received Rs.33,00,000/- as advance in cash from
Anuj Garg, R.K. Garg, Gaurav Gupta and Dinesh Garg, with whom he and
his wife had entered into two Agreements to Sell dated 27th August, 2004 for
Rs.45,00,000/- in respect of property No.F-2/25, Krishna Nagar, Delhi. This
amount and personal savings of Rs.3,00,000/- had been deposited in the
bank account of the appellant and his minor sons - Master Sahil Sethi and
Sarik Sethi on different dates. The Commissioner of Income Tax (Appeals)
[CIT(Appeals)] accepted the aforesaid explanation and deleted the addition
vide order dated 27th March, 2009, recording as under:-
"6. Determination:
The submissions made by the appellant have been carefully
considered in view of the facts and circumstances of the
case and the provisions of law. It is observed that the
Assessing Officer has made the addition u/s 68 of the Act
on account of bank deposits on the basis of AIR
information received in this case, on the ground that the
assessee could not justify the same. This, however, cannot
be taken as a sufficient ground for making such addition in
the absence of any cogent reasons or evidence to the
contrary brought on record.
ITA No. 101/2017 Page 2 of 10
6.1. The Ld. Authorised Representative on the other hand
has furnished the relevant details in this regard, which
have been placed on record. It has been submitted that the
assessee is doing the business of sale/purchase (financing
of three wheeler scooters) on commission basis. He'also
derives income from house property. The assessee has
filed his Income-tax return for the assessment year 2005-
06 declaring net income of Rs. 4,05,265/-.
6.2. It has been submitted that the assessee owns property
No. F 2/25, Krishna Nagar, Delhi, along with his wife, Smt.
Jyoti Sethi. The said property is given on rent to Axis Bank.
The rental income from the bank has been duly reflected in
the Income-tax return. The bank also deducts tax from the
payments of rent. TDS certificate has already been filed along
with the return. Copy of purchase deed of property was filed
along with the return for A.Y. 1997-98 when the assessee had
purchased the said property. Copy of the same has been
furnished in support which has been placed on record.
6.3. It has been submitted that during the year under
consideration, the assessee and his wife, Smt. Jyoti Sethi,
entered into an agreement for sale of the above property witn
Sh. R.K. Garg, Sh. Gaurav Gupta, Sh. Dinesh Garg and Sh.
Anuj Garg on 27.08.2004 for a consideration of Rs. 45 lakhs.
Copy of agreement for sale has been furnished in support
which has been placed on record. The documents in original
have also been produced for verification during the course of
the appellate proceedings.
6.4. It has been submitted that the assessee and his wife
received a sum of Rs.33 Iakhs as advance for sale of property
from the proposed buyers, namely, Sh. R.K. Garg, Sh. Gaurav
ITA No. 101/2017 Page 3 of 10
Gupta, Sh. Dinesh Garg and Sh. Anuj Garg, Rio 8-256, Suraj
Mal Vihar, Delhi-110092. Confirmation letters along with
PAN Nos. and Income-tax returns of the above persons have
been furnished in support which have been placed on record.
6.5. It has been submitted that the assessee has deposited
the said amount in UTI Bank, Krishna Nagar, Delhi, in
two bank accounts opened in the names of his sons, Sh.
Sahil Sethi and Sank Sethi. Both his sons are minor and
the account is being operated by him as their guardian
The amount has been deposited in the said account on
various dates. He has also withdrawn cash from the bank
on various dates and again deposited the same at times.
Copies of bank statements have already been filed before
the Assessing Officer which have been placed on record.
6.6. It has been submitted that subsequently, the buyers
could not arrange the balance amount of sale
consideration agreed upon, with the result that the deal for
the sale of property did not mature and the assessee had to
pay back the amount received as advance from the said
buyers. At present, the property is still owned by Sh. K.
K. Sethi & Smt. Jyoti Sethi.
6.7. It has been submitted that in the assessment order, the
Assessing Officer has calculated Rs.36,80,000/- as peak
cash in the hands of the assessee. Out of this, Rs.
33,00,000!- is the cash received as advance for sale of
property from Sh. R.K. Garg, Sh. Gaurav Gupta, Sh.
Dinesh Garg and Sh. Anuj Garg as aforesaid, and Rs.
3,80,000/- from personal savings. It has been submitted
that the assessee has been paying Income-tax for the last
so many years and was having sufficient cash balance as
his personal savings. Copies of the last four Income-tax
ITA No. 101/2017 Page 4 of 10
returns filed by the assessee have been furnished in
support which have been placed on record.
6.8. It is, thus, observed that the appellant has furnished
satisfactory explanation in regard to the transactions made
in his aforesaid bank accounts in question.
6.9. In view of the above discussion, it is hereby held
that the Assessing Officer was not justified in making
addition u/s 68 of the Act on account of bank deposit s as
above. The addition of Rs. 36,80,000/-made on this
count is, accordingly, hereby deleted. "
5. Aggrieved, the Revenue preferred an appeal, which was allowed by
the Tribunal vide order dated 14th May, 2010, after making adverse
comments and reasoning given by the first appellate authority.
6. The appellant preferred ITA No. 209/2010 under Section 260A of the
Act before the High Court, which was partly allowed vide order dated 17th
February, 2011, remanding the matter to the Tribunal for fresh
consideration. Lest there be any confusion, the order dated 17.2.2011 is
reproduced:-
"1. Notice. Mr. Deepak Anand enters appearance and
accepts notice on behalf of Revenue.
2. Having regard to the nature of arguments raised by
the learned counsel for the appellant and the order we
propose to pass, it is not necessary to take into
consideration the facts of the case in detail. The issue
pertains to addition made under Section 68 of the Income
Tax Act. There were certain deposits made in cash in the
bank account from time to time. According to the
ITA No. 101/2017 Page 5 of 10
Assessing Officer, assessee could not explain some of
these entries and taking into account the peak of cash in
hand, on Rs.36.80 lakhs addition was made under Section
68 of the Income Tax Act. CIT (Appeal), however,
deleted this addition. In the circumstances, the
Department preferred further appeal before the Income
Tax Appellate Tribunal (hereinafter referred to as "the
Tribunal").
3. Learned counsel for the appellant has produced
certain papers indicating that in the appeal notice was
issued to the assessee for January, 2010, when the
assessee appeared. However, on that date the
representative of the Department filed an application
for adjournment on the ground that he wanted to see
the assessment records. Case was adjourned to 16'
March, 2010. On that date again, the departmental
representative sought an adjournment stating that he
intended to file a paper book. Acceding to his request,
the case was again adjourned to 5th May, 2010. It is
pointed out by Mr. Kapoor, learned counsel for the
appellant, that paper book was not filed, which could
have contained the material/document on the
consideration whereof CIT (Appeal) had deleted the
addition. However, on 5 th May, 2010, the appeal was
heard without the paper book and without even giving
chance to the assessee to file the papers, the Tribunal
has allowed the appeal inter alia stating that no
evidence had been brought on record by the assessee to
suggest that amounts deposited On various dates had
come out from the sale consideration received in
advance form the prospective buyers. His submission
is that there was sufficient evidence, which was
produced before the CIT (Appeal) and since the
ITA No. 101/2017 Page 6 of 10
Revenue was the appellant before the Tribunal, it was
for the Revenue to file the entire paper book. Even if
the Revenue had not filed the paper book, it is
submitted that in those circumstances chance should
have been given to the assessee to place the papers on
record.
4. After hearing the learned counsel for the parties,
we find substance in the aforesaid submissions. In these
circumstances, without commenting upon the merit of
the order passed by the Tribunal, we set aside the said
order on the aforesaid ground giving liberty to the
assessee to file the paper book containing the documents
on which the appellant wants to-rely in support of his
submissions. The Tribunal shall hear the parties afresh
and take into consideration the said material to decide the
issue again.
5. The appeal and the application are disposed of with
the aforesaid direction."
7. After remand, the appellant had filed paper book, enclosing
photocopy of agreements to sell dated 27th August, 2004, copy of
confirmations from the proposed purchasers and cash flow statement in case
of the appellant and his minor sons. The appellant had also furnished copy
of the remand report filed before the CIT(Appeals) in response to his
application for admission of additional documents under Rule 46A of the
Income Tax Rules, 1962. Appellant had asserted that the sale did not
materialize and, in April, 2005, Rs.33,00,000/- was returned to Anuj Garg,
R.K. Garg, Gaurav Gupta and Dinesh Garg again in cash. Confirmations in
this regard were filed.
ITA No. 101/2017 Page 7 of 10
8. Tribunal, by the impugned order dated 8.7.2016, has accepted the
Revenues appeal and confirmed the addition of Rs.36,80,000/- made by the
AO by setting aside the order of the CIT(Appeals).
9. Counsel for the appellant accepts that the issue raised in the present
appeal relates to facts. It is, however, submitted that the decision of the
Tribunal is perverse on two counts. Firstly, the Tribunal had directed the
appellant to furnish documents/details in the form of cash flow statements,
affidavits of intending purchaser and confirmations, which were furnished,
but these have not been considered and given due evidentiary weightage.
Secondly, in case further enquiry and investigation was required, the matter
should have been remitted to the AO for detailed scrutiny.
10. We have considered the said contention but do not think that the order
passed by the Tribunal would fall and can be categorized as a perverse order
i.e. an order which no reasonable person well versed in the field would have
passed in the given facts and circumstances. Relevant facts and evidence has
been considered.
11. The facts of the case are rather glaring and one-sided. The appellant
accepts and admits that cash deposit of Rs.92,80,000/- were made in bank
accounts belonging to him and his two minor sons during the period
relevant to the AY 2005-06. These cash deposits were made on different
dates and there were multiple deposits on one day. There were also multiple
withdrawals. The peak cash credit was Rs.36,80,000/-. To this extent, there
is no factual dispute. It is accepted that the appellant was engaged in the
business of financing and sale/purchase of scooters. On the question
ITA No. 101/2017 Page 8 of 10
whether the appellant was able to show source of funds and receipt of
Rs.33,00,000/- in cash from proposed purchasers, the following facts need to
be highlighted:
(i) The appellant had not given explanation or relied on propounded
Agreements to Sell before the AO. This explanation was given belatedly
before the CIT(Appeals).
(ii) The property in question was a commercial property, which was rented
out to a bank.
(iii) It was per se unbelievable that the proposed purchasers would pay 75%
of the sale consideration of Rs.33,000,000/-, out of Rs.45,00,000/-, in cash.
Not even a rupee was paid by bank instrument.
(iv) Cash payment purportedly received from the proposed buyers were not
deposited on one date, but allegedly on different dates.
(v) The Agreements to Sell, it is alleged, did not materialize and were finally
cancelled in the next AY. As per the appellant, Rs.33,00,000/- was returned
to the proposed buyers in cash.
(vi) As per the documents filed by the appellant, for the assessment year
2004-05, Anuj Garg had declared income of Rs.1,48,185/-, Rajendra Kumar
Garg had declared income of Rs.1,54,000/- and Gaurav Gupta had declared
income of Rs.69,616/-. Details with regard to Dinesh Gupta were not
furnished. Thus, the financial capacity of the proposed buyers was not
established.
(vii) The AO, in his remand report, had objected to the admission of
additional documents.
(viii) The date on which the agreements were cancelled, was not indicated.
ITA No. 101/2017 Page 9 of 10
12. Agreements to sell and receipt of Rs, 33,00,000/- in cash were sham
and make belief. This story was concocted after the appellant was cornered
and confronted without answer before the AO, for the first time in the
appellate proceedings. In view of the aforesaid factual background, we do
not think that any substantial question of law arises for consideration. The
appeal is dismissed, without any order as to costs.
SANJIV KHANNA, J.
MARCH 14, 2017 CHANDER SHEKHAR, J.
NA/VKR
ITA No. 101/2017 Page 10 of 10
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