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TMI Blog2019 (8) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... human probabilities if there was no evidence whatsoever to the contrary it could have been resorted to draw certain inference. In the present case there appears to be overwhelming evidence to show the involvement of Mr. Chaturvedi acting on behalf of Mrs. Sneh Pathak for SMI. The CBI also did not choose to proceed against the Assessee and that discounts the case of any collusion between the Assessee and Mr. Chaturvedi along with Mr. Pathak. It does appear that the Assessee was at the highest used as a conduit by the other parties and did not himself substantially gain from these transactions. The concurrent view of both the CIT (A) and the ITAT that the addition of the aforementioned sum to the income of the Assessee was not warranted, does not call for interference. The question of law framed is accordingly answered in the affirmative i.e. in favour of the Assessee and against the Revenue. - ITA 927/2005 - - - Dated:- 22-8-2019 - S. MURALIDHAR AND TALWANT SINGH JJ. Appellant Through: Mr. Ajit Sharma, Senior Standing Counsel and Ms. Adeeba Mujahid, Junior Standing Counsel for Revenue. Respondent Through: Mr. Ajay Vohra, Senior Advocate with Mr. U. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transactions had led to the above credit entry into the bank account of the Assessee. On 6th February, 1992, 7,25,000 units of the UTI 1964 Scheme were purchased from SBH Funds Management Cell, Bombay at ₹ 14.20 each, for a total consideration of ₹ 1,02,95,000/-. SBH issued their bankers receipt for the same amount on the same date in lieu of the units sold by them. The payment of this amount was made by the Assessee by a cheque dated 6th February, 1992 drawn on Standard Chartered Bank ( SCB ) in favour of SBH, Bombay. 7. After purchasing the above shares, the Assessee sold the units on the same date to Mr. D. D. Chaturvedi. The Assessee explained to the AO that the Bank Receipt was purchased from SBH on 6th February, 1992 on behalf of Mr. Chaturvedi, who in turn had bought the same on behalf of M/s. Shri Maharaj Investment ( SMI ), which was a proprietory concern of Mrs. Sneh Pathak wife of Mr. Jaideep Pathak, the manager of SCB. The Assessee further explained that this bank receipt had been sold back to SBH on 4th March, 1992 for a consideration of ₹ 1,03,02,250/- on the instructions of Mr. Chaturvedi. The Assessee thus claimed that he had entered int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 69A of the Act. 11. During the proceedings, the Special Auditor in his report under section 142 (2A) of the Act pointed out that the Assessee had made payments in excess of ₹ 10,000/- otherwise than by crossed cheque or a crossed bank draft. This was held to be in violation of Section 40A (3) of the Act. Further, the amount of the 9 cheques to the extent of ₹ 3,43,450/- was disallowed under Section 40A (3) of the Act. ₹ 1,34,450/- was disallowed for failure to enter the transactions representing the amount into Chopris . 12. Aggrieved by the above order, the Assessee filed an appeal before the Commissioner of Income Tax (Appeals) [ CIT (A) ]. By the order dated 6th February, 1996, the CIT (A) held that there was no material on record to suggest that the draft of ₹ 1,02,95,000/- was utilised for the Assessee s own benefit. It was also held that there was no material to show that Assessee was acting in collusion with Mr. Chaturvedi. 13. The CIT (A) noted that certain assets were found by the Central Bureau of Investigation ( CBI ) in possession of Mr Chaturvedi, who then surrendered them to the CBI. The CIT (A) also h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the Assessee. He submitted that the ITAT also failed to appreciate that when Mr. Chaturvedi for whom the 7,25,000/- units of UTI 1964 scheme were purchased by the Assessee was questioned, he replied that the PO had been received from SMI, a proprietary concern of the wife of Mr. Jaideep Pathak. However, he was unable to produce any documentary evidence to substantiate this. This was also denied by SMI. The fact remained that in terms of the cheque dated 6th February, 1992 issued by the SCB addressed to SBH the proceeds of the PO were to be credited into the account of the Assessee. 19. Relying on the decision in CIT v. K. Chinnathamban (2007) 7 SCC 390 , Mr. Sharma submitted that in the above circumstances the onus to prove the source of ₹ 1,02,95,000/- was on the Assessee and he failed to discharge it. Reliance was also placed on the decision in Sumati Dayal v. Commissioner of Income Tax, Bangalore (1995) Supp 2 SCC 453 to urge that the burden of proof in the present case had shifted to the Assessee to prove the sources of income. 20. Mr. Ajay Vohra, learned Senior counsel for the Respondent/Assessee, referred to the correspondence between the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 1995 SCB confirmed to the Assessee that he did not have any bank account with them and that SCB had not filed any civil claim against the Assessee. Mr Vohra referred to the letter dated 25th September, 1995 from Mr. Chaturvedi to the Assessee giving a list of the securities and money deposited by Mr. Chaturvedi with the CBI amounting to ₹ 4,73,19,836/- consisting of drafts, shares and money. This letter also confirmed that the assets were held by Mr. Chaturvedi in his books in the name of SMI whose proprietor was Mrs. Sneh Pathak, the wife of Mr. Jaideep Pathak. This showed that the money was held by Mr. Chaturvedi on behalf of SMI. Additional evidence was also admitted by the CIT (A) at the time of appeal. 24. The above submissions have been considered. Apropos the question of law framed in this appeal, it is necessary first to refer to Section 69A of the Income Tax Act which reads as under: 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners. 27.3 In view of the statements of Mr. K. Palaniasamy the AO proceeded to frame assessment in his hands on protective basis and in the hands of the deposit holders for unexplained deposits. As far as Assessee is concerned, he could not establish the source of the deposit and there was no evidence to support his claim that the amount had been collected from members of the public. 27.4 It was held by the Supreme Court in CIT v. K. Chinnathamban that where the deposit stands in the name of third person and that person is related to the Assessee then in such a case the proper course would be to call upon the person in whose books the deposit appears or the person in whose names the deposit stands to explain such deposit. 27.5 In that case it was found that there was no evidence regarding the registration of firm or the source of investment. The onus of proving the source of deposit primarily rested on the persons in whose names the deposit appeared in various banks. Accordingly, the action of the department in making the individual assessment in the hands of the Assessee was upheld. Therefore, what turned the decision in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory. In such case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably. (See: Sreelekha Banerjee (supra) at p. 120) 28.4 As far as the merits of the case was concerned, it was observed as under: 7. There is no dispute that the amounts were received by the appellant from various race clubs on the basis of winning tickets presented by her. What is dispute is that they were really the winnings of the appellant from the races. This raises the question whether the apparent can be considered as real. As laid down by this Court, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. (See: Commissioner of Income Tax v. Durga Prasad More,(197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be made. In the said order dated 22/25th September, 1995 the Additional CIT noted the fact that the AO of Mr. Jaideep Pathak had held that there was an apparent case of financial quid pro quo against Mr. Pathak and had already added a sum of ₹ 5.68 crores, equal to the amount of said 15 POs, as Mr. Pathak s income from other sources. It was noticed therein that 13 out of these 15 POs were received by Mr. Anoop Jain, the Assessee and were utilised by him for purchasing the units and shares from different banks. 33. According to the Additional CIT the above facts appeared to be sufficient justification to the AO to suspect the Assessee s claim that the transactions relating to 13 POs of SCB were normal business transactions. He started investigation to find out the truth. The Additional CIT set out the gist of the evidence collected by the AO but added that it was not exhaustive nor is it possible for me to describe it fully due to time constraint. 34. However it was concluded that prima facie there appears to be a collusion between the Assessee and DDC in obtaining the 13 POs from Standard Chartered Bank through a financial quid pro qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case the evidence placed before the AO clearly indicated that Mr. Chaturvedi confirmed that the draft of ₹ 1,02,95,000/- was given by him to the Assessee and that the transactions of purchase of units were done by the Assessee on his behalf. Books of accounts maintained by Mr. Chaturvedi confirmed the above statement. 39. Added to this is the fact that CBI recovered securities and cash worth ₹ 4,73,19,836/- from Mr. Chaturvedi and he claimed that these were held on behalf of Mrs. Sneh Pathak, the proprietor of SMI. This was to be read with the statement of Mr. Jaideep Pathak, an employee of the SCB, stating that the drafts worth ₹ 5,68,74,958/- were issued by him on instructions of Mr. Hiten P.Dalal. 40. The two letters issued by SCB dated 21st August and 25th August, 1995 to the AO are significant. They clearly state in regard to the cheque of ₹ 1,02,95,000/- issued in favour of SBH that as per the records there were no written instructions from M/s Jain Company to this effect. They also confirmed that the money was not received back by SCB. The letter dated 25th August, 1995 in this regard is even more detailed. It was confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d modus operandi adopted have been discussed in details. 37. The theory of the A.O. is also not sustainable on another consideration. If the money belonged to the assessee and the purpose was to launder the same as is made out, then it has to be explained as to why Mr. DDC is supporting the contention of the assessee that the money was supplied by him which belonged to Shri Maharaj Investment. It was argued on behalf of the revenue that the assessee was acting in collusion with Mr. DOC and that is why the case of the assessee is being supported by him. 38. However, this contention is without any merit as even as per the case of the department, no money has been invested by Mr. DDC. If the assessee and Mr. DDC were acting in collusion then it stands to reason that both will be making the investments and not merely the assessee. No such investment by Mr. DDC is even alleged by the Department. Further, from the conduct of the parties and the subsequent events, it appears that no benefit was to accrue to Mr. DDC and if that is so then the story of collusion is not supported by the facts. As already stated, the chargesheet filed by CBI disproves this contention totally ..... X X X X Extracts X X X X X X X X Extracts X X X X
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