Income Tax Appeal No. 547 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 547 of 2008 Date of decision: 21.4.2011 Commissioner of Income Tax Jalandhar --- Appellant Versus M/s. Citizen Urban Co-op. Bank Ltd. Jalandhar --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Vivek Sethi, Advocate for the appellant-Revenue. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 15.2.2008 passed by the Income Tax Appellate Tribunal Amritsar Bench, Amritsar (in short “the Tribunal”) in ITA No. 115(ASR) 2003, relating to the assessment year 1999-2000. 2. The appeal was admitted by this Court for determination of the following substantial question of law: “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is right in holding that Section 68 Income Tax Appeal No. 547 of 2008 2 of the Income Tax Act, 1961 does not apply to the co- operative bank for assessing the unexplained credits as taxable income?” 3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the respondent-assessee is a co-operative society. It filed return of income for the assessment year 1999-2000 on 29.6.1999 declaring ‘Nil’ income. Later on, vide letter dated 1.2.2000, the assessee was informed that during the course of survey under Section 133A(1) carried at the Bank on 1.10.1999, certain accounts and transactions were noticed whereby the amounts contained in the FDRs were credited to those accounts and thereafter the cash was withdrawn and accounts were closed. In the wake of this situation, the assessee-bank was required to provide identity of those account holders, but the assessee expressed its inability to prove the genuineness of the creditors/depositors. Owing to failure of the assessee to do so, action under Section 68 of the Act was recommended and accordingly, a notice under Section 148 of the Act was issued to the assessee. Thereafter assessment was made under Section 143(3) of the Act vide order dated 28.3.2002 at an income of Rs. 59,41,593/-, by making addition of the said amount, on account of peak balance standing in the name of the various depositors. The Commissioner of Income-tax (Appeals) {in short “the CIT (A)”}, deleted the addition vide order dated 31.12.2002, made by the assessing officer. The Revenue carried appeal before the Tribunal. The order of the CIT(A) having been upheld and Revenue’s appeal dismissed, it is how the Revenue is in appeal before us. Income Tax Appeal No. 547 of 2008 3 4. We have heard learned counsel for the appellant and have perused the record. 5. The point in issue in this appeal is, whether the unexplained amount in the accounts of the account holders could be treated income of the assessee-bank under Section 68 of the Act, where the revenue had not established that there was connivance of the said account holders with the assessee-bank? 6. The Tribunal on appreciation of evidence came to the conclusion that there was no nexus of the said creditors with the bank and, therefore, the same could not be treated to be unexplained credits of the assessee. The findings recorded by the Tribunal in that behalf in paras 34 to 40 are as under: “34. Further, even on merits, the addition was uncalled for. Concerning account Nos. 8211, 8212 and 8213, the introducer was Shri Vijay Sethi, the deceased Managing Director of the assessee bank itself. The original investments were made in RMRD accounts of S.B. accounts with the Mithapur Branch of the assessee. These investments were made way back in 1992. It was only on maturity that they were transferred to the accounts under consideration. It has rightly been contended that the origin of these amounts falling in the earlier years, which fact has also been admitted by the A.O., they could not be brought to tax in the year under appeal, in the hands of the assessee. The learned CIT (A), thus, rightly deleted the addition in this regard. Income Tax Appeal No. 547 of 2008 4 35. The introducer of account Nos. 954. 955 and 956 was Shri Parmod Sharma, Accountant of the assessee-bank. He appeared before the A.O. in response to summons under Section 131 of the Act. He admitted knowing the account holders personally. The onus with regard to these accounts, thus, stood amply discharged. 36. S. Swaran Singh was the account holder of account No. 1108. He was one of the Directors of the bank and so he needed no independent introduction to open his account with the assessee firm. His independent existence also stands proved by the entries through clearing in account. 37. Shri Pawan Sharma was the introducer of account No. 1658. His statement was recorded by the A.O. under Section 131 of the Act. He also confirmed knowing the account holder. 38. Smt. Harsimaranjit Kaur, Prop. M/s. H.S. Gas Service owned up account No. 8268 of Shri J.P. Singh, which fact was got confirmed by the learned CIT(A) through the A.O assessing the said lady. 39. The above facts were duly taken into consideration by the learned CIT(A) while admitting the appeal. We do not find anything erroneous with the order of the learned CIT (A). 40. Not only this, in pursuance to the directions issued by the learned CIT(A), the assessee located further details/addresses of account holders. These details were Income Tax Appeal No. 547 of 2008 5 furnished to the A.O. vide letter dated 4.10.2005. A copy of this letter had been placed at pages 90-91 of the assessee’s paper book. This also boosts the stand taken by the assessee.” 7. The aforesaid findings have not been shown to be perverse or erroneous in any manner by the learned counsel for the Revenue. In the given facts, the amounts mentioned above cannot be said to be unexplained credits in the hands of the assessee, under Section 68 of the Act. The substantial question of law is, thus, decided against the Revenue and the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) April 21, 2011 JUDGE *rkmalik*