It is not justified to add something based on a fictitious name without any supporting evidence
Fact and issue of the case
The appeal ITA no 1955/DEL/2022 is preferred by the Assessee against the order dated 27.07.2022 of CIT(A)-24, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal No. 24/10730/2015-16 arising out of an appeal before it against the assessment order dated 28.12.2021 passed u/s 153(C) r.w.s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the DCIT, Central Circle–07, New Delhi (hereinafter referred as the Ld. AO). The appeal ITA no 1954/Del/2022 is against order dated 29.07.2022 in appeal no 24/ 10769/ 2015-16 against the Penalty order dated 10/3/2022 u/s 271(1)(c) of the Act
The facts in brief are that the search and seizure operation was conducted in the Jindal Bullion Ltd. (JBL) Group on 05.01.2017 and from the incriminating material recovered in the form of data it was allegedly found that it is systematically engaged in cash transactions with a number of entities. The transactions through banking channels are reflected in the Tally books of the accounts whereas the cash transactions are not reflected. In this context, from the data name of a suspect beneficiary of accommodation entry, “Saurabh Ji, CA” was found and it was thereafter found from the bank and cash transactions mentioned in the ledger that the present assessee Smt. Nirmal Uppal, was the real beneficiary. Accordingly, a notice u/s 153(c) was issued. A statement of Sh. Parul Ahluwalia, director and formal employee of JBL was recorded u/s 132(4) of the Act on 05.01.2016 and he was confronted with the loose sheets detail. On the basis of accounts maintained in Hajir Johri accounting softeare, it was found that on 03.12.2015 a sum of Rs. 27,42,000/- was received in the form of cash and thereafter on 05.12.2015, JBL issued a cheque of State Bank of India payable to Nirmal Uppal. The assessee had explained that she was an employee of the office of the Accountant General and earning salary and rental income from house property. She claimed that during the relevant financial year she sold her jewellery for the sale consideration of Rs. 27,02,000/-. The Ld. AO was not satisfied with the same and observed as follows
The above explanations offered by the assessee has been considered. It is seen that the same is not acceptable. The assessee not accepting the Ledger accounts found in the HajirJohri books of accounts of M/s Jindal Bullion Ltd.. reflected the banking, transaction but surprisingly not denying the transaction made with JBL which is-exactly reflecting in seized ledger. This alone is sufficient evidence which establishes that the account maintained under the names ‘SaurabhJi CA’ pertain to the assessee. Further, the assessee also accepted that as sold to JBL and cheque was received from JBL in lieu of that jewellery. Hence, it is a clear case of accommodation entry taken by the assessee. It has also been held in the assessment order in the case of M/s Jindal Bullion Limited was involved in the business of providing accommodation entries and used to book bogus purchases in its books. Or. account of this it is been the money paid by the assessee to JBL is her unaccounted income against which she has received credits in her bank account on dated 05.12.2015. Thus the assessee has failed to discharge his onus of explaining the genuineness of the transaction. Thereby the credits received in the bank account of the assessee remain unexplained on the part of the assessee as per the provision of the section 68 of the Income Tax Act, 1961. Also the commission paid to JBL @1.5 % falls under the purview of the unexplained expenditure u/s 69C. Hence the amount of Rs. 2 7,42,000/- (Rs. 27,02,000/- + 40,000/- balance amount) is added to the total income of the assessee
In appeal, the Ld. CIT(A) sustained the same. So assessee is in appeal raising following grounds
That Learned Commissioner of Income Tax (Appeal)- 24 erred in dismissing the appeal of appellant against the order of penalty passed by the Ld. Deputy Commissioner of Income Tax, Circle 7, New Delhi u/s 271(1 )(c) of the Act
That Ld. CIT (Appeal) grossly erred in law and facts while sustaining the penalty imposed by assessing officer on account of the addition of Rs.27,42,000/- made u/s 68/69C of the Act which is already declared as LTCG
That Ld. CIT (Appeal) grossly erred both in law and facts ignoring that the Ld.AO grossly erred in treating the “change in the taxable treatment of the declared transaction” as concealment of income and wrongly imposed the penalty u/s 271(1 )(c) of the Act
That Ld. CIT (Appeal) grossly erred both in law and facts that the Ld. AO failed to appreciate the well-settled law that no concealment penalty can be imposed where the nature of the transaction is a debatable issue
Observation of the court
Giving thoughtful consideration the matter on record and submissions what can be appreciated is that at page no. 30 to 33 of the Paper Book, the assessee / appellant has made available the return of income and computation of total income for the relevant years wherein a long term capital gain of 27,02,000/- by way of sale consideration is shown. The description of gold sold is available on the purchase memo available at page no. 33 of the paper book. The same is in terms of item, weigh and rate. The order of Ld. AO shows that the fact of sale of jewellery has been out rightly discarded and rather the explanation of this transaction of sale of jewelry has been taken as the admission of facts with regard to the alleged accommodation entry
The Bench is of considered opinion that as the assessee is former Central Government Employee who retired from the office of Accountant General it can be very well believed that she must have been holding some jewelry. The AO without trying to make any further inquiries from the assessee to ascertain the truthfulness of her holding of the jewellery proceeded to out rightly discard the explanation. Admittedly in the alleged incriminatory material the name of assessee is not reflected and based upon some dummy name she has been connected to the transactions. In the statement of Mr. Parul Ahluwalia or any other witness also there is no specific mention of the transaction with assesee, which has been made foundation for holding she was real beneficiary. The assessee was required to give explanation of the reasons for receiving the credit entry in her bank which she has given on the basis of the invoice issued by the JBL. Assessee has reported the sale of jewelry as ‘Long term capital gain’, To discredit the same and to connect assessee with the pseudonymous entries of cash, some evidence or circumstance based on preponderance of probability was required to be shown by Ld. AO, then mere presumption. What entries JBL was making in accounts is not conclusive against the assessee. May be the Gold purchased was not accounted in stock by JBL and it was merely reflected as cash received. Assessee was not under onus to prove the entries of JBL. Thus, the judgments relied by Ld. DR are thus distinguishable on facts. The orders of Ld. Tax authority below thus cannot be sustained. The grounds in ITA no 1955/DEL/2022 and the said appeal is allowed. As consequential effect, the Penalty appeal is also allowed
Order pronounced in the open court on 3rd May, 2023
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Nirmal-Uppal-Vs-DCIT-ITAT-Delhi-2
