Addition to inexplicable credit not upheld since source of credit is properly disclosed
Fact and issue of the case
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals)-6, (in short “Ld. CIT(A)”), Ahmedabad in Appeal No. CIT(A)-6/297/16-17 vide order dated 31.10.2017 passed for Assessment Year 2011-12.
The assessee has taken the following grounds of appeal:-
The order passed by the Ld. CIT(A) is against law, equity & justice.
The Ld. CIT(A) has erred in law and/or facts in upholding the addition made by Ld. A.O. U/S 68 of the Act though no incriminating material found during the course of search.
The appellant Craves liberty to add, amend, alter or modify all or any grounds of appeal before final hearing.”
Further, the assessee has also taken the following additional ground of appeal before us:-
The assessment order passed by Ld. AO is without jurisdiction and in contravention to the instruction No. 08 dated 14-08-2002 of CBDT.” Application for condonation of delay
At the outset, we observe that the appeal is time-barred by 246 days. The assessee has filed application for condonation of delay along with affidavit, in which the assessee submitted that the Counsel who represented the case of the assessee before Ld. CIT(Appeals) advised the assessee not to file further appeal before ITAT. However, the assessee approach in another counsel, who advised assessee to file appeal before the Tribunal. Accordingly, since the assessee is not conversant with Income Tax Laws, he relied on the advice of the earlier counsel and did not file appeal before the Tribunal. Accordingly, the delay in filing of the present appeal is on account of incorrect advice of the earlier counsel appointed by the assessee, and therefore the same was on account of bona fide reasons. Accordingly, it was requested that the delay may kindly be condoned looking into the facts of the instant case.
It is a settled principle of law that the Tribunal, u/s 253 of the Act, may admit an appeal, or cross-objection, after the expiry of prescribed period, if it is satisfied that there was sufficient cause for not presenting it within that period. The Supreme Court in the case of State of West Bengal v. Administrator, Howrah Municipality AIR 1972 SC 749 (SC) held that the expression “sufficient cause” for condonation of delay in section 5 of Limitation Act should receive a liberal construction so as to advance the substantial justice when no negligence or inaction or want of bona fide is imputable to party. The Mumbai ITAT in the case of Sterlite Industries (India) Ltd. v. Addl. CIT/Jt. CIT [2006] 6 SOT 497 (Mum.)]laid down the following proposition on power of ITAT to condone delay:
“The expression ‘sufficient cause or reason’ as provided in sub-section (5) of section 253 of the Act is used in identical position in the Limitation Act, 1963 and the CPC. Such expression has also been used in other sections of the Income-tax Act such as sections 274, 273, etc. Keeping in mind the authoritative pronouncement of the Supreme Court, it is an admitted position that the words ‘sufficient cause’ appearing in sub-section (5) of section 253 of the Act should receive a liberal construction so as to advance substantial justice. It must be remembered that in every case of delay, there can be some lapse of the litigant concerned. That alone is not enough to turn down the plea and to shut the doors against him. If explanation does not smack of mala fide or does not put forth a dilatory strategy, the Court must show utmost consideration to such litigant. Further, the length of delay is immaterial, it is the acceptability of the explanation and that is the only criteria for condoning the delay.”
The Supreme Court in the case of Senior Bhosale Estate (HUF) v. ACIT [2019] 112 taxmann.com 134 (SC) held that where revenue did not expressly refute stand taken by assessee that they had no knowledge about passing of order of Tribunal, dated 29-12-2003, until June, 2008, assessee’s delay of 1754 days in filing appeal before Bombay High Court against Tribunal order was to be condoned. The brief facts of the case were that assessee sought condonation of delay of 1754 days in filing appeals against order, dated 29-12-2003, passed by Tribunal. The assessee pleaded that it had no knowledge about passing of Tribunal’s order, until it was confronted with auction notices in June, 2008, issued by competent authority, immediately upon which, assessee filed appeal with High Court. The High Court dismissed assessee’s appeals holding that these were not fit cases in which inordinate delay of 1754 days in filing appeals deserved to be condoned. However, it was found that respondent revenue did not expressly refute stand taken by assessee that they had no knowledge about passing of order, dated 29-12-2003, until June, 2008.The Supreme Court held that unless that fact was to be refuted by the Revenue, question of disbelieving stand taken by assessee on affidavit, could not arise and for which reason, High Court should have shown sympathy to assessee by condoning delay in filing concerned appeal(s).
The Vishakhapatnam ITAT in the case of Smt. Samanthapudi Lavanya v. ACIT [2021] 127 taxmann.com 188 (Visakhapatnam – Trib.) held that where assessee was under bona fide impression that its appeal had been filed by accountant, but came to know fact of not having filed appeal when there was pressure from department for payment of demand, delay of 492 days in filing appeal was to be condoned, in the interests of justice.
In view of the facts placed on record by the assessee and light of the judicial precedents referred to above, in the interest of justice, the delay in filing of the present appeal is being condoned. Additional ground of appeal
Before us, the counsel for the assessee has taken an addition ground which is to the effect that assessment order was passed by ACIT, Circle 6(1) Ahmedabad u/s 153A of the Act. However, according to CBDT Instruction Number 8 dated 14-08-2002, it is mandatory that search cases shall be centralised in central charges. However, despite this, the Ld. Assessing Officer passed assessment order, who is not in charge of Central Range in violation of aforesaid Instruction of CBDT. The assessee filed RTI application on 24-01-2022 to provide copy of order, if any passed by concerned authority for not assigning the case to Central Charges, however, the aforesaid information was not available on record. Accordingly, it was submitted that the aforesaid assessment order was passed without requisite jurisdiction, and hence the same is void ab initio and hence liable to be set aside.
It is a well settled law that no person can call in question the jurisdiction of the assessing officer after the expiry of time limit laid down in subsection (3) of section 124 of the Act which ensures that the objection is raised before the assessment is completed. In the case of Bhupindra Food & Malt Industries [1997] 95 Taxman 203 (HP), the High Court held that assessee not having raised objection regarding jurisdiction within a period of 30 days from receipt of notice under section 147(a), assessment related to assessment year 1964-65, ITO Simla was held to be having proper jurisdiction in the instant case. In the case of Hindustan Transport Co. 63 Taxman 246 (Allahabad), the High Court held that in view of section 124(5)(a), no objection to jurisdiction can be raised after assessment has been completed. Further, the High Court held that allocation of functions to various authorities or officers is one of procedures and any defect arising from allocation of functions is a mere irregularity which does not affect resultant action. In the case of Punjab Urban Development Authority, Mohali 42 taxmann.com 160 (Chandigarh – Trib.), the ITAT held that once a notice under section 143(2) is issued by a particular officer and if assessee wishes to object to such jurisdiction then objection has to be raised in terms of section 124(3)(a) within 30 days of issue of such notice and, in absence of such objection, assessee cannot challenge jurisdiction later on. In the case of All India Children Care & Educational Development Society 41 taxmann.com 20 (Allahabad), the High Court held that Tribunal is not a competent authority to adjudicate upon jurisdiction of Assessing Officer when it is not raised before Assessing Authority. In the case of CWT v. Ravi Malhotra 166 Taxman 253 (Allahabad), the High Court held that where up till stage of assessment no objection whatsoever was taken by assessee relating to jurisdiction of Wealth-tax Officer concerned, it would be presumed that assessee had acquiesced in jurisdiction of that Wealth-tax Officer and, therefore, he could not be permitted to raise such objection subsequently. In the case of Abhishek Jain 94 taxmann.com 355 (Delhi), the Delhi High Court held that in terms of section 124(3)(b) jurisdiction of an Assessing Officer cannot be called in question by an assessee after expiry of one month from date on which he was served with a notice for reopening assessment under section issued notice u/s 148 of the Act. In the case of Elite Pharmaceuticals 73 taxmann.com 69 (Calcutta), the High Court held that where Assessing Officer conducted survey upon assessee and thereafter issued on it a notice under section 148 dated 27-3-2015 and assessee by letter dated 29-4-2015 raised objection to territorial jurisdiction of Assessing Officer, since objection was not raised within 30 days even from date of issuance of notice under section 148, assessee had lost right to raise objection by efflux of time. In the case of Bal Chand Jain & Sons 41 taxmann.com 524 (Allahabad), the High Court held that provisions of sub-section (3) of section 124 bar an assessee from raising question of jurisdiction before first appellate authority or Tribunal if such an objection has not been raised before assessing authority at very first stage.
The brief facts of the instant case are that the assessment was completed 31-12-2016 u/s 153A of the Act and the appeal was disposed of by Ld. CIT(Appeals) vide order dated 16-08-2018. However, the assessee now before us vide application dated 17-01-2022 is seeking to challenge the jurisdiction of the assessing officer on the ground that in view of the CBDT Instruction, the concerned officer did not have requisite authority to pass the assessment order. However, the assessee did not object to the jurisdiction of the assessing officer during the course of assessment proceedings and nor any challenge was posed before Ld. CIT(Appeals) during the course of appellate proceedings. Therefore, now, after a period of substantial lapse of time of almost 6 years from completion of assessment, the appeal of jurisdiction cannot be raised at appellate stage before us. Accordingly, the additional ground raised by the assessee is dismissed.
In the result, the additional ground raised by the assessee is dismissed.
On merits
The brief facts of the case are that during the year under consideration, the assessing officer observed that there was an increase in the capital from ₹14,88,157/- to ₹ 28,77,899/-. On being requisitioned by the AO, the assessee submitted that the capital of the current year included profit of current year and gift given to the assessee by his mother. The assessee submitted the gift deed and bank statement showing gift of ₹ 11,98,025/-. The AO, however held that the gift was not genuine for the reason that the affidavit demonstrated that the stamp paper used for making deed of purchase was on 08-02-2008 and gift deed was written on 05-01-2011 i.e. the date on which the money was transferred. This clearly shows that the transaction was an afterthought. Secondly, the AO observed that normally gift is given in round figures, whereas in the instant case amount gifted was not so. In view of the above, the AO held that the gift of ₹11,98,025/- as unexplained cash credit in the hands of the assessee.
In appeal, Ld. CIT(Appeals) observed that from the copy of bank statement it is seen that the amount which was gifted to the assessee from his mother came from a joint account, in which the mother is the primary account holder and the assessee is the joint holder. The assessee however failed to explain the source of this money which was lying in the joint account, from which the gift was made by the mother of the assessee to the assessee. Accordingly, Ld. CIT(Appeals) upheld the assessment order with the following observations:
“As per plain reading of statement, the amount has been transferred by Jignesh Patel to this account by NEFT. The appellant failed to explain the source of this money. In any case, it is not understood as to how this amount of Rs. 11,98,025/- transferred to this joint account in the name of mother of appellant and the appellant himself can be/has been treated as gift from mother to son. The appellant failed to explain this.
Observation of the court
In view of discussion above, it is held that the AO was justified in treating the amount of Rs. 11,98,025/- as unexplained credit and adding the same u/s 68 of the Act. Accordingly, addition of Rs. 11,98,025/- is upheld. This ground of appeal is rejected.”
Before us, the assessee submitted that firstly, there are no was incriminating material which was unearthed during the course of search, which formed the basis for the aforesaid addition. However, we are not agreeable to this contention since we observe that the aforesaid additions were ostensibly made on the basis of incriminating material found in the course of search. The assessing officer made addition is on the basis of gift deed found during the course of search, which belonged to the assessee. According to the assessing officer, the aforesaid gift deed, belonging to the assessee was not genuine and therefore, amounting to Rs. 11,98,025/-were made in the hands the assessee under Section 68 of the Act, as unexplained cash credits. Therefore, looking into the instant facts, the additions were in fact made on the basis of incriminating material found during the course of search and therefore, it cannot be inferred that the additions were made de hors any incriminating material found during the course of search.
Now coming to the basis of addition, the assessing officer was of the view that the gift deed, which according to the assessee was the source of difference in capital of the assessee during the impugned assessment year, was not genuine and was an afterthought. However, we observe that in the instant facts, the search under Section 132 of the Act was conducted of the assessee on 19-02-2015 and notice under section 153A of the Act was issued to the assessee on the 23-02-2016. During the course of assessment, the assessing officer observed that a perusal of the balance sheet for the previous assessment year 2010-11 shows the closing capital of ₹14,88,157/- whereas in the current assessment year 2011-12, the opening capital is shown at ₹ 28,77,899/-. As per the assessee, the difference was owing to the fact that the capital of the current year includes profit of the current year and gift given to the assessee by his mother for an amount of ₹11,98,025/-. The aforesaid gift deed was discarded by the assessing officer on the ground that genuineness of the said could gift deed was in doubt. However, what also needs to be seen in the instant facts is that the aforesaid gift deed is also duly supported by bank transfer from the bank account in which the mother of the assessee is the primary holder to the account of the assessee during the year under consideration. Further, the aforesaid gift has not been transferred by way of a single transfer on a single date, but comprises of multiple transfers made to the account of the assessee on various dates though under Gift Deed gives a consolidated figure of these multiple transfers. Therefore, in our considered view, it would not be correct to conclude that the gift deed was an afterthought since the aforesaid transfers were made on dates much prior to the date when the search was carried out at the premises of the assessee and notice under section 153A of the Act was issued to the assessee. We observe that the gifted deed was on a stamp paper and the same was also duly supported by way of bank transfers. Therefore, in our view the assessee has been able to reasonably explain the source of gift from his mother.
In light of the above observations, looking into the instant facts, they addition is liable to be set aside.
In the result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 04/08/2023
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
