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Bachan Singh v. Cit
Tribunal Opinion Summary — ITA 819/CHD/2017, ITA 1642/CHD/2017 & ITA 1651/CHD/2017 (A.Y. 2009-10)
Factual and Procedural Background
Three appeals filed by the assessee against orders of the Commissioner of Income Tax (Appeals) for assessment year 2009-10 were decided together. The principal appeal, ITA 819/CHD/2017, challenged the CIT(A)-2 Ludhiana's order dated 16/02/2017 in the quantum proceedings and also involved challenges to penalties imposed by the Assessing Officer (AO) under section 271(1)(c) and section 271(1)(b) of the Income Tax Act, which were confirmed by the CIT(A).
The Registry pointed out an eight-day delay in filing; the assessee sought condonation of delay on the ground of illiteracy and ignorance of legal procedures. The Revenue did not object to condonation. The Tribunal condoned the 8-day delay having accepted the assessee's explanation and noting that no undue advantage to the assessee or prejudice to the Revenue would result.
In the quantum proceedings the AO made an addition of Rs. 17,95,000/-, treating an asserted biana (earnest money) receipt and its alleged forfeiture as not satisfactorily proved by the assessee. The AO relied on a remand report noting gaps between the alleged date of receipt (28.02.2006) and subsequent deposits in the bank account (from 24.10.2008 onwards), the failure of the assessee to produce the purchaser (Sh. Jaswant Singh) and a witness (Sh. Ranjit Singh) despite summons (including a s.131 summons), and the absence of any suit filed by the purchaser claiming the forfeited biana.
The Tribunal examined these facts, observed deficiencies in the AO's inquiry (notably lack of discussion on ownership of the specific land and incomplete steps to identify or examine the purchaser/witness), and set aside the impugned order in the quantum proceedings directing the AO to pass a reasoned ("speaking") order after addressing the relevant facts. Consequently, the Tribunal treated the penalty appeal dependent on the quantum as infructuous. Separately, a penalty under section 271(1)(b) was quashed on the stated facts.
Legal Issues Presented
- Whether the addition of Rs. 17,95,000/- (attributed to an alleged forfeited biana) was correctly sustained in the absence of satisfactory evidence connecting the bank deposits to the alleged biana transaction.
- Whether the delay in filing the appeal (8 days) should be condoned in view of the assessee's explanation of illiteracy and ignorance of procedures.
- Whether the penalty under section 271(1)(c) confirmed by the CIT(A) becomes infructuous in view of the outcome of the quantum proceedings.
- Whether the penalty under section 271(1)(b) should be quashed given the circumstances of non-participation in assessment proceedings, admission of fresh evidence by the CIT(A), lack of a specified date of non-compliance in the penalty order, and the assessee's pleaded illiteracy.
Arguments of the Parties
Appellant's (Assessee's) Arguments
- The assessee (a coparcener) entered into an agreement to sell dated 28/02/2006 with Sh. Jaswant Singh for a specific piece of land and received biana which was subsequently forfeited because the sale could not be completed; therefore the cash deposits related to that transaction and should not be treated as unexplained income.
- In remand proceedings, the assessee could not produce Sh. Jaswant Singh personally, but contended that summons had been issued and served by the department; the failure to produce the purchaser was not attributable to the assessee's unwillingness or fault.
- The delay in filing the appeal should be condoned because the assessee is illiterate, unaware of legal technicalities and time-limits, and the delay was not intentional.
- Subsequently the specific piece of land was sold (the assessee contended), which relates to the account of the amounts deposited.
Respondent's (Revenue's) Arguments / Department's Position
- The AO's remand report concluded that the assessee failed to prove the biana claim because the purchaser and the witness were not produced despite opportunities and summons, including a s.131 summons that the purchaser refused to receive.
- The AO relied on the bank statements showing that the alleged biana amount received on 28.02.2006 was not deposited until a gap of almost three years (deposits starting 24.10.2008), which cast doubt on the assessee's explanation that the amount was kept at home because the bank account was not operational.
- The Sr.DR relied upon the impugned order and the remand report; however, she was not able to clarify whether the assessee owned the specific parcel of land central to the transaction.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Tribunal proceeded in a stepwise manner, as reflected in the opinion:
- Delay Condonation: The Tribunal examined the assessee's condonation application and the submissions that he was illiterate and unaware of procedural time-limits. The Revenue raised no objection. The Tribunal accepted the explanation, observed that no undue advantage to the assessee or prejudice to the Revenue would result from condonation, and accordingly condoned the eight-day delay.
- Assessment of the Addition (Rs. 17,95,000/-): The AO's remand report was reviewed. The AO found inconsistency between the alleged date of receipt of biana (28.02.2006) and the dates on which cash deposits appear in the bank account (from 24.10.2008 onwards). The AO required the assessee to produce the purchaser (Sh. Jaswant Singh) and a witness (Sh. Ranjit Singh) for examination; those persons were not produced and a s.131 summons to the purchaser was reported to have been refused. The AO therefore held the assessee had not discharged the onus of proving the claimed biana, and sustained the addition.
- Tribunal's Critique of AO's Inquiry: The Tribunal observed important gaps in the AO's approach and in the record:
- No clear discussion in the assessment order on whether the assessee was the owner (or what share) of the specific piece of land alleged to have been the subject of the agreement to sell.
- The assessee's representative could not identify which specific parcel or the assessee's precise share, undermining the factual matrix.
- The AO did not appear to have sufficiently tried to establish the identity of Sh. Jaswant Singh or the two witnesses, and the inquiry was not taken to a logical conclusion despite issuance of a s.131 summons.
- The discrepancy in dates of receipt and deposit identified by the AO was not meaningfully addressed by either side in the record before the Tribunal.
- Remand and Direction to AO: In the interests of substantial justice, the Tribunal set aside the impugned order and remitted the matter to the file of the AO with directions to pass a speaking order in accordance with law, addressing the relevant facts. The Tribunal advised the assessee to make a full and proper representation before the AO, and warned that if there was abuse of trust reposed, the AO would be at liberty to pass an order on the basis of material available on record.
- Penalty Proceedings:
- Section 271(1)(c): Because the penalty appeal (ITA 1642) was dependent upon the quantum order, and the quantum order was set aside / remitted, the Tribunal held the penalty confirmed under section 271(1)(c) became infructuous. The assessing officer was free to take a view after the quantum proceedings are finalized; the order was set aside and the appeal dismissed as infructuous.
- Section 271(1)(b): The Tribunal noted that the penalty order related to the assessee's non-participation in assessment proceedings that resulted in an order under section 144 read with section 147. The CIT(A) in the quantum proceedings had admitted fresh evidence, and the penalty order did not specify the date of non-compliance. Given these peculiar facts and the assessee's plea of illiteracy and inability to understand legal intricacies (e.g., delay in filing appeals), the Tribunal quashed the penalty under section 271(1)(b).
Holding and Implications
Final Disposition:
- ITA 819/CHD/2017: Allowed for statistical purposes; the quantum order is set aside and remitted to the Assessing Officer to pass a speaking order after addressing the relevant facts.
- ITA 1642/CHD/2017: Dismissed as infructuous (penalty under section 271(1)(c) becomes infructuous in view of the remand of the quantum proceedings and is set aside).
- ITA 1651/CHD/2017: Allowed — penalty under section 271(1)(b) is quashed on the stated facts.
Implications and consequences:
- The AO must re-examine the quantum issue, address the ownership/possession facts regarding the specific land, verify identity and testimony of relevant persons (including steps taken under s.131), reconcile the timing discrepancies in bank deposits, and then pass a reasoned (speaking) order in accordance with law.
- The penalty under section 271(1)(c) as confirmed earlier is treated as infructuous pending the fresh decision in the quantum proceedings; the AO may take a view after the quantum is resolved.
- The penalty under section 271(1)(b) has been quashed in the present proceedings; the Tribunal's decision is limited to the facts and reasoning set out in the opinion (no broader precedent was elaborated in the text).
- No new binding legal precedent was formulated by the Tribunal in this opinion; the decision primarily remands factual and evidentiary questions to the AO for a reasoned determination.
These three appeals filed by the assessee are being decided by a common order for the sake of convenience assailing the correctness of the respective orders of the CIT(A) in 2009-10 assessment year.
2. In ITA 819/CHD/2017 the assessee assails the correctness of the order dated 16/02/2017 of CIT(A)-2 Ludhiana pertaining to 2009-10 assessment year passed in the quantum proceedings. Alongwith the said appeal the assessee also challenges the penalty imposed under section
271 (1)(c) of the Income Tax Act by the AO confirmed in appeal by the order dated 21.08.2017 of CIT(A) Ludhiana and also the penalty imposed by the AO u/s 271(1)(b) also confirmed by CIT(A)- 2 Ludhiana. ITA 819/CHD/2017
3. Before addressing the issue on merits, the Ld. AR was required to address the 8 days delay pointed out by the Registry. The Ld. AR inviting attention to the condonation of delay application on record specific para 2 of the same submitted that the assessee is an illiterate person, unaware of the law and its intricacies. Accordingly, since he was unaware of the procedures, the limitation of time was not understood by him. It was submitted that the delay has occurred on account of ignorance and was ITA 819,1642&1651/CHD/2017 A.Y. 2009-10 not intentional. Accordingly, it was his prayer that considering the facts, the same may be condoned.
4. The Ld. Sr.DR considering the application and the submissions had no objection to the delay being condoned.
5. The record shows that the appeal filed by the assessee was originally dismissed by the order dated 02.08.2017 and in the light of the submissions in MA 97/CHD/2017 dated 16/01/2015 the ex-parte order was recalled. In the aforesaid background, in the light of the submissions of the parties, the delay of 8 days pointed out by the Registry is condoned. Said order was pronounced accepting the explanation offered on behalf the assessee and taking note of the fact that no undue advantage has been derived by the assessee in filing the present appeal late and no vested right of the Revenue has been upset in case the delay is condoned. Satisfied by the explanation offered the delay of 8 days is condoned
6. In ITA/819/CHD/2017 the assessee assails the impugned order for sustaining the addition of Rs. 17,95,000/- made by the assessing officer. The relevant finding under challenge is extracted hereunder : 3.7 The assessing officer has reported that the appellant has claimed to have agreement to sell with Sh. Jaswant Singh, the purchaser with whom the agreement to sell dated 28.02.2006 was executed. However, during the course of the remand proceedings, the appellant has failed to produce Sh. Jaswant Singh, the purchaser with whom the agreement to sell dated 28.02.2006 was executed and also failed to produce the witness, Sh. Ranjit Singh to said biana. Therefore, according to the assessing officers report the contention of the appellant with regard to the amount deposited in the bank account could not be proved by the appellant. The appellant has failed to produce Sh. Jaswant Singh and the witness Sh. Ranjit Singh at the time of enquiry is carried out during remand report also in order to prove its contention. Accordingly, it is held that, the contention of the appellant that the amount deposited in the bank is on account of biana amount received from Sh.Jaswant Singh, as per agreement dated 28.02.2006, which was subsequently forfeited, is not acceptable. The assessing officer has also observed that the purchaser has not filed any suit before any Court against the heavy amount of biana i.e. Rs. 17,95,000/-, which was forfeited and retained by the appellant. As the appellant has failed to produce Sh. Jaswant Singh, the purchaser and Sh. Ranjit Singh, the witness although the onus was upon the appellant to produce them in order to prove his claim of cash deposit in his bank account has been received through Sh. Jaswant Singh. The AO has also reported that Sh. Jaswant Singh has also refused to receive the summons issued by this office, accordingly there is no doubt that the appellant has miserably failed, to prove its contention with regard to the fact that he has received the cash deposit on account of biana dated 28.02.2006. Therefore, the credit of the claim of the appellant with regard to this biana could not be established by the appellant. Therefore, the addition on this account deserves to be sustained.
7. The Ld. AR addressing the above facts submitted that the assessee was a coparcenary in a specific piece of land and in regard to the said land the assessee had entered into an agreement to sell on 28/02/2006 with Sh. Jaswant Singh. Since in terms of the said agreement, the transaction ITA 819,1642&1651/CHD/2017 A.Y. 2009-10 could not be completed, the amount offered as biana was forfeited by the assessee. In the remand proceedings, it was submitted that the assessee has not been able to produce the said person, however, summons were issued and sent by the assessing officer and were also got served upon the said person by the department. Thus, it was his prayer that in the peculiar facts, the assessee cannot be saddled with the addition. It was also his submission that subsequently the specific piece of land was sold by the assessee.
8. The Sr.DR Ms. Chandrakanta relied upon the impugned order. However she was unable to state as to whether the assessee owned the specific piece of land at the relevant point of time or not as the whole story revolves around the existence of the said fact.
9. I have heard the submissions and perused the material available on record. It is seen that qua the specific addition the following facts have been noted by the assessing officer in the remand report made available : "The contention of the assessee is not acceptable as regards the deposit of biana amount of Rs. 17,95,000/-. From the perusal of the bank statement, it is observed that the assessee has started depositing cash from 24.10.2008 onwards, whereas he has received Rs. 17,95,000/- on 28.02.2006 i.e. after a gap of almost three years. When pointed out to the assessee as to why the amount of Rs. 17,95,000/- was not deposited in the bank account from 28.02.2006 for almost three years, it has been stated by the assessee that the said amount was kept at home as the bank account was not operational and he was not sure that the biana will be forfeited. From the perusal of bank statement, it is observed that Rs. 19,50,000/- has been deposited on 04.12.2008, which will probably be the sale proceeds of two sale deeds for Rs.11,25,000/- and Rs.8,25,000/- dated 19.12.2008. However, to authenticate the facts, the assessee was given an opportunity to produce Sh. Jaswant Singh (the purchaser) with whom the agreement to sell dated 28.02.2006 was executed and biana amount was later on forfeited due to non-registration of sale deed. Since the onus was upon the assessee to produce the purchaser Sh. Jaswant Singh, he was asked to produce him on 18.07.2016, for examination. However, the assessee failed to produce him on the said date i.e. 18.08.2016 on the plea that Sh. Jaswant Singh could n't be contacted. He was again asked to produce him on 20.07.2016, but again he failed to produce. The assessee has been given last opportunity to produce Sh. Jaswant Singh on 22.07.2016. On 22.07.2016, the assessee was asked to produce either Sh. Jaswant Singh, the purchaser or Sh. Ranjit Singh, on of the witness to the biana dated 28.02.2006, on 25.07.2016. However, the assessee did not produce the purchaser Sh. Jaswant Singh or Sh. Ranjit Singh, the witness to the biana, on the ground that they are reluctant to come forward. It may not be out of place to mention here that this office has also issued summons u/s 131 of the Act, 1961 dated 20.7.2016 to Sh. Jaswant Singh, the purchaser to attend this office on 25.07.2016. However, Sh. Jaswant Singh has refused to receive the summons as per the report of the Notice Server. In view of the above, since the assessee has failed to produce Sh. Jaswant Singh, the purchaser with whom agreement to sell dated 28.02.2006 was executed and also failed to produce the witness, Sh. Ranjit Singh to the said biana, the contention of the assessee that the amount deposited in the bank is on account biana amount received from Sh. Jaswant Singh, as per agreement dated 28.02.2016, which was subsequently forfeited, is not acceptable at all, particularly keeping in view the fact that, the ITA 819,1642&1651/CHD/2017 A.Y. 2009-10 purchaser has not filed any suit before any court against the heavy amount of biana i.e. Rs. 17,95,000/- which was forfeited and retained by the assessee. Further, the assessee has failed to produce Shri Jaswant Singh, the purchaser and Shri Ranjit Singh, the witness although the onus was upon the assessee to produce them.
10. It is seen that on the relevant point that is whether the assessee was owner of a specific piece of land at the relevant time or not, it is seen that there is no discussion in the order as to whether the assessee at the relevant point of time owned the specific piece of land. The Ld.AR in his submissions has stated that the assessee was a coparcener in various pieces of land, however, he was also unable to address which specific piece of land was a subject matter of Agreement to Sell and also the specific share of the assessee in the specific piece of land. It is also seen that no effort has been made by the assessing officer to establish who Sh. Jaswant Singh is or also for that matter the two witnesses to the agreement. In the circumstances where the assessee has forfeited the biana offered by Jaswant Singh as per the alleged claim put forth, the occasion for the assessee to be capable of producing the said person does not arise. The claim having been put forth in the remand proceedings ideally should have been examined and carried to its logical question. The assessing officer after having issued notice to the said person under section 131 should have carried out an enquiry and carried the action to its logical conclusion. It is seen that the assessing officer has also in the aforesaid extract referred to hereinabove has referred to the dates on which the amounts are found deposited in the said bank account which aspect also the assessee has not addressed in the present proceedings. Accordingly, in the interests of substantial justice, the impugned order is set aside back to the file of the assessing officer with the direction to pass a speaking order in accordance with law addressing the relevant facts. The assessee in its own interests is advised to make full and proper representation before the AO as in the event of abuse of the trust reposed, AO would be at liberty to pass an order on the basis of material available on record. Said order was pronounced in the Open Court at the time of hearing itself.
11. In the result, ITA 819/CHD/2017 is allowed for statistical purposes. ITA-1642/CHD/2017
12. The issues raised in the present appeal are dependent upon the quantum order passed by the assessing officer. Accordingly, the penalty imposed in section 271(1)(c) and confirmed in appeal by the CIT(A) ITA 819,1642&1651/CHD/2017 A.Y. 2009-10 becomes infructuous in view of the order passed in the quantum proceedings. The assessing officer is free to take a view on the basis of material available on record after the passing of the order in the quantum proceedings. The orders are set aside.
13. The appeal is dismissed as infructuous. ITA-1651/CHD/ 2017
14. The assessee herein prays for quashing the penalty imposed under section 271(1)(b) of the Act. A perusal of the record shows that the penalty has been imposed wherein the assessee did not participate in the assessment proceedings before the assessing officer leading to the passing of the order under section 144 read with section 147 of the Act. A perusal of the record shows that the CIT(A) in the quantum proceedings admitted fresh evidence taking note of the fact that there were justifiable reasons for the assessee to submit additional evidence. On a perusal of the penalty order, it is seen that the specific date for non-compliance has not been noted. Accordingly, in the peculiar facts taking further notice of the peculiar facts and circumstances of the case where the assessee has pleaded that being illiterate and unable to understand the intricacies of law where admittedly he has not even understood the delay in filing of the appeal etc. Accordingly, the penalty imposed under section 271 (1) (b) is quashed. Said order was pronounced in the Open Court at the time of hearing itself.
15. In the result, ITA/819/CHD/2017 is allowed for statistical purposes, ITA/1642/CHD/2017 is dismissed as infructuous and ITA/1651/CHD/2017 is allowed. Order Pronounced in the Open Court on 28.02.2019. Sd/- ( ) (DIVA SINGH) # /Judicial Member ! ,- .-/ Copy of the order forwarded to :
1. / The Appellant -
2. / The Respondent -
3. // CIT
4. / ()/ The CIT(A)
5. - 2, & 2, 4/ DR, ITAT, CHANDIGARH
6. / Guard File / By order, / Assistant Registrar
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