1. This appeal by the assessee is directed against the order of the CIT(A)-II, Pune dt. 12th Jan., 2004 for asst. yr. 2000-01.
"1. On the facts and in the circumstances of the case and in law, the CIT(A)-II is not justified in sustaining an addition of Rs. 25,000 on account of GP estimation and the said addition be deleted.
2. On the facts and in the circumstances of the case and in law, the CIT(A)-II Pune was not justified in confirming the addition of Rs. 6,73,000 under Section 68/69 of the Act though the sources of the investments were duly recorded in the books of accounts maintained.
The addition be deleted.
3. The assessee denies his liability to pay interest under Section 234A, 234B and 234C of the Act and the same be deleted from the assessment.
4. The appellant craves to leave, add/amend or alter any of the above grounds of appeal.
The ground No. 1 relating to the addition of Rs. 25,000 made by the AO and sustained by the CIT(A) was not pressed by the learned Authorised Representative of the assessee. It is accordingly rejected as not pressed.
The facts in brief are that the assessee deals in gold and silver ornaments and a survey was conducted at the business premises of the assessee under Section 133A of the Act on 3rd Nov., 1999. It appears that, as a result of survey, in the return filed by the assessee for asst. yr. 2000-01 on 28th July, 2000, an additional income of Rs. 4,05,173 was offered for tax as under:Cash 3,90,742Stock 14,431 ----------- 5. During assessment proceeding, the AO noticed cash credits in the books of account of the assessee as under: 6. The explanation given by the assessee was rejected by the AO and an addition of Rs. 6,73,000 was made under Section 68 of the Act. The CIT(A) confirmed the addition and his order has been challenged by the assessee in this appeal.
7. We have heard the rival submissions and have perused the orders of the authorities below. It is seen that before the AO and also before the CIT(A) the learned Authorised Representative of the assessee had explained that the impugned cash credit of Rs. 6,73,000 was out of cash withdrawals made from the 'Tijori account' during the period 1st July, 1999 to 27th Oct., 1999 as under : 8. The explanation given by the assessee was rejected by the AO for the reasons given in para 13.1 of the assessment as under : (i) the cash credits are explained as out of 'Tijori account' but no such Tijori account was maintained by the assessee either in the past or in future; (ii) assessee's Tijori account is in the form of petty cash book whereas the Tijori account is maintained for safe custody of the major portion of the cash balance; (iii) the cash was withdrawn and deposited without any reliability of explanation and the assessee's behaviour was opposed to the common prudent businessman; (iv) there was no need for the assessee to keep a separate Tijori account; (v) during survey, the assessee did not point out about the availability of unused cash; (vi) the assessee mainly relies on arithmetical accuracy about the availability of cash but there is no apparent verifiable proof; (vii) the assessee was trying to take undue advantage of the cash withdrawn in the period prior to survey.
9. In our opinion, the AO has rejected the assessee's explanation on irrelevant considerations. It is not the AO's case that the cash shown to have been withdrawn from the Tijori account from 1st July, 1999 to 27th Oct., 1999 was not available in the Tijori account. If sufficient cash was available in the Tijori account, it was not for the AO to question as to whether the assessee should have made withdrawals of cash from the Tijori account or not. Also it was not for the AO to question the need for maintaining a Tijori account. The CIT(A) while confirming the AO's action has observed in para 14 of his order as under : "When asked to explain the sources of the deposits of cash in his books of account on or after 6th Nov., 1999, the appellant submitted before the AO that the periodical deposits represented the periodical withdrawals made between the periods from 1st July, 1999 to 27th Oct., 1999 as noted above. The appellant has not given any reason for the periodical withdrawals of the various amounts and the purposes for which the said amounts were withdrawn ranging from Rs. 21,000 to Rs. 97,500. If these amounts were withdrawn from the cash book and debited to the so-called 'Tijori account' and not spent must have been available with the appellant much before he started redepositing such withdrawals in his books of account. This has not been done, but the redeposits were made periodically ranging from Rs. 3,000 to Rs. 85,000 over a period of one-and-half months, that too after the series of withdrawals were stopped. Such withdrawals and redeposit put a question mark on the genuineness of the transaction as well as the sources of the credits/deposits in the books of account. The amount withdrawn of Rs. 21,000 on 1st July, 1999 followed by subsequent withdrawals is not understandable. An inference could be made that the amounts withdrawn were either spent for the ongoing construction of the house property or for meeting the other expenses of the appellant, including the medical expenditure. Purposes for which the withdrawals were made have not been explained and the withdrawals could be considered to have been consumed by the appellant. The credits appearing from 6th Nov., 1999 to 24th Dec., 1999 could not be considered to come out of the periodical withdrawals made by the appellant from 1st July, 1999 to 27th Oct., 1999. Herein, the theory of preponderance of probability will come into play. The appellant's accounts are not very reliable and it is a fact that not only the appellant disclosed nearly Rs. 14 lakhs under VDIS 1997, but he was also found to have suppressed income to the extent of Rs. 4,05,173 as a result of survey. The valuer's report though legally not tenable in view of the judgment of the Hon'ble Supreme Court in the case in Smt. Amiya Bala Paul v. CIT (2003) 262 ITR 407 (SC), points out to the fact that the appellant had understated the cost of construction of the house property. The time gap between the withdrawals and the deposits is too large to be ignored and the withdrawals made more than 3 or 4 months prior to the deposit could not be considered to be available with the appellant for redeposit in absence of any plausible explanation. Under the circumstances, I hold that the AO was justified for the reasons mentioned in the assessment order in coming to the conclusion that the cash credited/deposited in the books of account of the appellant on various dates between 6th Nov., 1999 and 24th Dec., 1999 could not be considered to have been available from the periodical withdrawals made from July, 1999 to October, 1999. The onus cast under Section 68/69 of the IT Act, 1961, has not, therefore, been discharged by the appellant and accordingly, the addition of Rs. 6,73,000 is sustained and the ground of appeal raised by the appellant in this regard falls." 10. The inferences drawn by the AO and by the CIT(A) are impliedly based on two presumptions; one, that the assessee needed funds for undisclosed expenses between 1st July, 1999 to 27th Oct., 1999, and two, that the assessee had undisclosed income which was deposited in the books of account between 6th Nov., 1999 to 24th Dec., 1999. In our opinion, these two presumptions put together and the conclusions based on these presumptions suffer from logical fallacy. If the assessee needed funds for undisclosed expenses and at the same time, if the assessee was in possession of undisclosed income, then there was no need for the assessee to make withdrawals in the first instance and then to make deposits subsequently. The undisclosed income should have been straightway utilised for undisclosed expenses. If we consider the 'surrounding circumstances' and apply the test of 'human probabilities' as laid down by the Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) to the facts of this case as discussed above, the order of CIT(A) becomes unsustainable. The proximity between the period of withdrawals of cash (1st July, 1999 to 27th Oct., 1999) and the period of deposits of cash (6th Nov., 1999 to 24th Dec., 1999) puts the case of the assessee on a stronger footing. We accordingly delete the addition of Rs. 6,73,000 and allow the ground No. 2.
This ground relates to the levy of interest under Section 234A, 234B and 234C of the Act. The AO is directed to recompute the interest in accordance with law and to allow consequential relief to the assessee.