2021 (2) TMI 529 - AT - Income Tax

Addition u/ 68 - case of the assessee was selected for scrutiny under CASS - cash deposits and saving bank account is more than the turnover cash - assessee is coming from Pakistan - main claim of the assessee is that the issue is squarely covered in favour of the assessee by the notification number 73/16/68/IT/A II dated 3/2/1969 issued by the Ministry of Finance (Department of revenue and insurance), New Delhi which are duly met by the assessee as assessee is coming from Pakistan, the source of the fund is not required to be explained - HELD THAT - Assessee brought 50 lakhs of Indian rupees in India through unofficial channel as claimed by the assessee. However, it is a matter of common knowledge as per information available in public domain; generally the exchange rate for one Indian rupee is ₹ 1.75 Pakistani rupees. Therefore it is highly improbable that a person gets ₹ 50 lakhs of Pakistani rupees and deposited in Indian bank ₹ 50 lakhs INR in Indian banks. In view of this assessee is also required to explain that where from he got the money and how much, what is the conversion rate at that prevail in time i.e. how many Pakistani rupees he paid for getting 50 lakhs Indian rupees for depositing in the bank account. The assessee is required to show the source of that some. As before the assessing officer assessee could not submit all the requisite details, the assessee submitted details according to his understanding before the CIT A, but without any enquiry, the evidence produced by the assessee were rejected. The assessee is not an Indian resident but has come from Pakistan as persecuted hindu community therefore naturally the assessee will not have the sufficient or foolproof evidences. This fact has also been considered in this notification number 5 dated 29/05 /1969 wherein it is provided that any claim by such migrants that the funds or the jewellery have been brought from the abovementioned countries, will be accepted only if the persons concerned produce adequate evidence to show that they had sufficient funds/wealth in those countries and that the transfer of the cash/jewellery to India can directly be linked with the said funds or wealth. These migrants will have to lead proper evidence like any other assessees, about the source of the cash/jewellery alleged to have been brought by them from these countries. In support of the claim that they had sufficient funds in those countries, they might produce before the income-tax authorities in India their bank accounts in those countries as also copies of the assessment orders passed in their cases by the income-tax authorities of those countries. The migrants would also then be required to prove that the amounts brought into India can directly be linked with the funds which they had possessed in those countries. Even it is also the request of the assessee that the learned assessing officer has not considered the evidence placed before him in view of the above circular therefore the matter should go back to the assessing officer. The revenue did not contest the above claim of the assessee. Even otherwise for the reasons stated above, we set-aside the whole issue back to the file of the learned assessing officer with a direction to examine the evidence produced by the assessee and test them in accordance with notification number 5 - Appeal of the assessee is allowed for statistical purposes

Summary

Issues Involved:
1. Validity of the assessment order.
2. Addition of ?49,50,000 as unexplained cash credits under Section 68 of the Income Tax Act, 1961.
3. Charging of interest under Section 234A/B/C/D of the Income Tax Act, 1961.
4. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of the Assessment Order:
The assessee challenged the assessment order dated 19-12-2016, claiming it was arbitrary and whimsical. The assessee argued that the order was affirmed by the CIT(A) without any justifiable basis, despite compliance with the Ministry of Finance's instructions as per Notification No. 73/16/68/IT/A.II dated 03-02-1969.

2. Addition of ?49,50,000 as Unexplained Cash Credits:
The primary issue was the addition of ?49,50,000 by the Assessing Officer (AO) as unexplained cash credits under Section 68 of the Income Tax Act. The assessee contended that the cash deposits were explained with sufficient evidence, including a declaration to the Income Tax Department on 09-05-2013, as per CBDT Circular No. 73A/2169 dated 20-02-1969. The AO, however, did not accept the explanation, citing the failure to prove the legal channel of transferring funds, details of checkpoints, and the source of cash deposits. The CIT(A) upheld the AO's decision, noting that the appellant failed to provide a direct link between the money brought from Pakistan and the cash deposits in Indian bank accounts. The CIT(A) also emphasized the lack of evidence regarding the conversion of Pakistani currency to Indian Rupees and the improbability of the appellant's claims, given the human behavior and probabilities.

3. Charging of Interest:
The assessee contested the charging of interest under Section 234A/B/C/D of the Income Tax Act. This ground was deemed consequential and was dismissed as it depended on the outcome of the main issue regarding the unexplained cash credits.

4. Initiation of Penalty Proceedings:
The initiation of penalty proceedings under Section 271(1)(c) was also challenged by the assessee. This ground was considered premature and was dismissed.

Conclusion:
The Tribunal set aside the issue of the addition of ?49,50,000 back to the AO for re-examination. The AO was directed to consider the evidence provided by the assessee in light of CBDT Circular No. 5 dated 29-05-1969, which offers concessions to migrants from Pakistan regarding the transfer of funds and personal jewelry. The AO was instructed to provide a proper opportunity for hearing and then decide the issue in accordance with the law. The appeal was allowed for statistical purposes, and the grounds related to interest and penalty were dismissed.