ORDER

M.R. Shah, J. – Feeling aggrieved and dissatisfied with the impugned judgment and order dated 02.02.2018 passed by the Income Tax Appellate Tribunal, ‘C’ Bench, Ahmedabad in ITA Appeal No.861/Ahd./2015 for the Assessment Year : 2006-2007, by which the learned Tribunal dismissed the Appeal preferred by the assessee and confirmed the addition made by the Assessing Officer and further confirmed by the learned CIT (Appeals) of Rs.18,26,730/- as unexplained cash credit, the assessee has preferred the present appeal with the following proposed question of law :

2. The facts leading to filing of the present Appeal, in a nutshell, are as under :—

3. We have heard learned Counsel Mr. Ketan H. Shah appearing on behalf of the assessee. It is vehemently submitted by learned Counsel Mr. Ketan H. Shah that the learned Tribunal has materially erred in dismissing the Appeal without considering the material produced along with the Paper Book which was produced before the learned CIT (Appeals). It is submitted that the learned Tribunal has not properly appreciated the fact that those persons who made the gift have specific confirmations and therefore, the learned Tribunal ought to have allowed the Appeal and disallow the addition made by the Assessing Officer.

4. Having heard learned Advocate appearing on behalf of the appellant – assessee, and considering the material on record, and even considering the impugned orders, it appears that the assessee has shown receipt of Rs.19,92,730/- by way of unsecured loan and/or gift from various persons. However, on appreciation of evidence, and by giving cogent reasons, the learned CIT (Appeals) as well as the learned Tribunal has doubted the capacity of the concerned persons, who are alleged to have given the unsecured loan / gift. As per the assessee, he received a total sum of Rs.19,92,730/- by way of unsecured loan and/or gift as under :—

5. The aforesaid have been considered by the learned Tribunal in detail. On appreciation of evidence, the learned Tribunal has observed in Paragraph 5 as under :—

“5. We have gone through the relevant record and impugned order. Appellant received gift of Rs.17,00,000/- from relatives and Rs.1,50,400/-borrowings from relative and friends.

With regard to the disallowance and addition made of Rs.17,00,000/- being claimed by the appellant, as gift were received from the following persons.

In the remand report, AO mentioned that gift from relatives of Rs.17,00,000/- and borrowing from friends and relatives of Rs.1,50,400/- cannot be accepted as depositors are mostly labourers working in APMC Market and appellant has proved the paying capacity of such borrowings. Appellant could not prove such borrowings. It is also a fact, that they have not been maintaining any accounts and their statements were recorded on oath. The contention of the appellant that the borrowings had been repaid to them is baseless and made up story and an afterthought. Further, the contention of the appellant that the donors had confirmed on oath in their statements that they had given the gift out of agricultural income is also doubtful in the absence of documentary evidences. To prove source of such gift no evidences have been produced before the AO either during the assessment proceedings or remand proceedings. It was a claim of the appellant that the source of such gifts were from agricultural income and pass savings of the donors but appellant failed to produce any bank statement to prove that gift was given from past savings. Appellant has been failed to produce either before the authorities below or before us that sale of agriculture produced receipts and bills etc. in support of his contention and not even a single transaction have been entered through bank.

A statement of Shri Krashan Naran Kaladiya S/o Shri Naran Kaladiya was recorded by the AO u/s. 131 of the I.T. Act at Page No.31 and 32, he stated that he owned 14 Bigha agricultural land and his total crops was 500 Mann (1 Mann = 20 Kg) and 500 mann peanuts produce from agriculture land. We are just fail to understand how this much of land can produce such a huge crop. It is a matter of research for the Agriculture Scientist as well. This statement cannot be relied upon and in support of its contention he has not produced any certificate from the agriculture department and when he was specifically asked whether he has maintaining any record then in reply he stated that he does not have any documentary evidence and moreover he has not maintaining any account of agriculture produce and bank account. He further stated that he does not have any gift deed when he gifted the amount to the relatives. So in our considered opinion, appellant has been failed to prove his case as he has not maintaining any bank account nor his relatives and friends are maintaining any bank account either they are labourers or framers. Therefore, there credit worthiness is in doubt.”

6. Considering the aforesaid facts and circumstances and when the assessee failed to prove the capacity of the concerned persons who alleged to have given the unsecured loan and/or gift, it cannot be said that the learned Tribunal has committed any error in confirming the additions made by the Assessing officer and confirmed by the CIT (Appeals) of Rs.19,92,730/- as unsecured cash credit. Now, so far as submission on behalf of the assessee that all the concerned persons gave their confirmation, the aforesaid confirmations are neither here or there. These confirmations are required to be decided and/or considered along with the capacity / financial capacity of the concerned persons. Mere confirmation alone is not sufficient. In a given case, it may happen that a labourer may give a confirmation of Rs.1 Crore, but ultimately the same is to be decided or considered, considering his paying capacity.

7. In the facts and circumstances narrated herein above and for the reasons enumerated, it cannot be said that the Tribunal has committed any error. No substantial question of law arises in the present Appeal and therefore, the present Appeal deserves to be dismissed and is accordingly dismissed.

Other Income Tax Judgments

ORDER

S. Rifaur Rahman, Accountant Member – This appeal by the assessee is directed against the order passed by CIT (A)-II, Hyderabad and it pertains to the A.Y. 2009-2010. The following grounds were urged before us.

2. At the time of hearing, Learned Counsel for the assessee did not advance any arguments with regard to ground No. 3. Ground No. 4 is general in nature. Therefore, grounds 3 and 4 are not taken into consideration. Ground No. 2 is with regard to not giving an opportunity of being heard before the CIT (A). Though the Learned Counsel for the assessee submitted that there are sufficient reasons for non-appearance on the dates fixed for hearing, it could not be substantiated before us and therefore, ground No. 1 is rejected. Thus, the only ground survives for our consideration is with regard to the addition of Rs. 18,98,800 referable to the cash deposits in bank account.

2.1 As could be noticed from the assessment order, the assessee is engaged in the business of purchase and sale of general goods and also dealer in gas. For the year under consideration, the assessee admitted total income of Rs. 1,54,700. During the scrutiny assessment proceedings the assessee was called-upon to furnish the ratio of head-wise expenses to turnover for the last 03 years, complete details of parties from whom huge purchases were made, details of sister concerns and also details of investments made. The assessee neither appeared nor submitted any information on the above points. Again a fresh opportunity was given indicating that in the absence of any reply the assessment would be completed under section 144 of the Act and an addition of Rs. 18,98,800 would be made since there were cash deposits with ICICI Bank, Santoshnagar Branch which was not explained. On 08.12.2011 the assessee appeared in response to the above show cause notice and requested time till 12.12.2011 but on the said date it did not appear and therefore, on the basis of the material available on record, assessment was completed wherein total of the cash deposits in the years under consideration was treated as unexplained credits added back to the income returned presumably under section 68 of the Act. The assessment was thus completed at a total income of Rs. 21,00,800.

3. Aggrieved, assessee contended before the CIT (A) that the assessee was not given a proper opportunity of being heard before concluding the assessment proceedings. It was also contended, in the statement of facts filed before the CIT (A), that during the financial year the assessee deposited cash of Rs. 18,98,800 on different dates in the savings bank account and the said deposits were made out of earlier withdrawal from the same bank account. In other words, the same cash was recycled round the year and it was explained to the Assessing Officer at the time of submitting bank statement. But the Assessing Officer failed to appreciate the same and sought to add all the deposits as unexplained deposits.

4. Even before the CIT (A) the assessee did not appear, despite granting several opportunities. Therefore, the Ld. CIT (A) concluded that the assessee is not interested in prosecuting the appeal and hence it is liable to be dismissed in the light of decision of the Apex Court in the case of CIT v. B.N. Bhattacharjee [1979] 118 ITR 461 . We also observed that the law assists a person who is vigilant and not those who sleep over their rights. Thus, without going into the merits of the addition, the Ld. CIT (A) confirmed the order passed by the Assessing Officer.

5. Further aggrieved, assessee is in appeal before us. Learned Counsel for the assessee submitted that even if an assessee has not appeared before the Assessing Officer and the CIT (A), the tax authorities should not take the benefit out of it and it is their duty to bring to tax the correct income assessable under the Act. Learned Counsel for the assessee sought to bring out the principle laid down by the Hon’ble Madras High Court in the case of CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705  to submit that it is not a lis between the two parties but what is expected of from the Assessing Officer is to make proper adjustments so as to bring to tax the correct income that is assessable under the Act. He submitted that the assessee is engaged in Kirana business and distribution of gas and his income over the past several years never crossed above Rs. 2 lakhs. He also submitted that in the immediately preceding year as well as in subsequent year, the income offered to tax was accepted by the Assessing Officer, which was hovering around Rs. 2 lakhs, which clearly proves that the assessee could not have earned income from the said business over and above Rs. 2 lakhs in which event, merely because there are certain deposits, Assessing Officer cannot make any addition on the ground that assessee has not furnished proof with regard to source of cash more particularly when the deposits were stated to be recycled – in which event only the peak cash credit is assessable to tax which works-out, in this case to Rs. 2,80,154. It is the contention of the Learned Counsel for the assessee that even while making the addition under section 68 of the Act the Assessing Officer has to logically verify as to whether an assessee could have earned such income or not, in the light of principle laid down by the Apex Court in the case of CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570 . In the instant case, the assessee is a small time businessman who could not have earned such income in one year and in fact, this fact was brought to the notice of the Ld. CIT (A) also in the form of statement of facts but the appeal was dismissed merely on the ground that none appeared for the assessee, overlooking the fact that in the earlier year as well as subsequent years the income offered by the assessee, hovering around Rs. 2 lakhs, was accepted by the Revenue.

6. On the other hand, Ld. D.R. strongly submitted that justice is only meant for people who are vigilant and not those who are indolent. Despite the fact that the Assessing Officer as well as the CIT (A) have given number of opportunities assessee did not come forward to furnish the details and therefore, there was no other alternative except to make the impugned addition. He thus, strongly supported the orders of the tax authorities.

7. We have heard the rival contentions and perused the record. In the case of P.K. Noorjahan (supra), the Hon’ble Supreme Court observed that section 68 of the Act imposes burden on the part of the assessee to explain the source of cash deposits but merely because it could not be explained the amount cannot automatically be added since the expression “May” used in Section 68 of the Act imposes an obligation on the Assessing Officer to verify as to whether assessee could have earned such huge income in one year. In the instant case, it is not in dispute that the assessee’s income either in the earlier year or in subsequent years has never crossed the threshold of Rs. 2 lakhs in which event the Assessing Officer could have kept the same in mind while making the addition. Even while computing the assessment to the best of his judgment, under section 144 of the Act, it is the duty of the Assessing Officer to make an addition on the basis of the available material and circumstances of each case. Judgement is a faculty to decide the matters with wisdom, truly and legally and it should not depend on the arbitrary caprice of an officer. In other words, though an element of guess work is involved in best judgement it should not be a wild one, as held by the Hon’ble Supreme Court in the case of State of Kerala v. Velukutti [1966] 60 ITR 239. In the instant case, the Assessing Officer ought to have taken into consideration the normal turnover of the assessee, the expected profit in each year, based on the earlier year’s income declared and accepted in order to estimate the income of the current year; while holding that there was some undisclosed income assessable to tax under section 68 of the Act. The assessee having furnished the bank statement Assessing Officer could have verified and noticed that there were credits and corresponding debits which would give an indication that some amount has been recycled and it is a settled principle that in such cases ordinarily, peak credit is taken into consideration for the purpose of making an addition. On a conspectus of the matter, we are of the view that an addition of peak credit would meet the ends of justice. We, therefore, direct the Assessing Officer accordingly.

8. In the result, appeal filed by the assessee is treated as partly allowed.