M/s. Jaydeepsing Zoravarsinh Zala, Bhavnagar V. The Income tax Officer,Ward-2(3), Bhavnagar

CO 46/AHD/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5195 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 12-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: A C SHAH
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Source of fund; Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABA D (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI A.N. PAHUJA, A.M. ) I.T.A. NO. 378/AHD./2009 ASSESSMENT YEAR : 2005-2006 INCOME TAX OFFICER, -VS.- SHRI JAYDEEPSI NH ZORAVARSINH ZALA, WARD-2(3), BHAVNAGAR BHAVNAGAR (PAN : AADPZ 4832 C) (APPELLANT) (RESPONDENT) & C.O. NO. 46/AHD/2009 (ARISING OUT OF I.T.A. NO. 378/AHD/2009) ASSESSMENT YEAR : 2005-2006 SHRI JAYDEEPSINH ZORAVARSINH ZALA -VS.- I NCOME TAX OFFICER, WARD-2(3), BHAVNAGAR BHAVNAGAR (CROSS OBJECTOR) (RESPONDENT) ASSESSEE BY : SHRI A.C. SHAH DEPARTMENT BY : SHRI R.K. DHANESTA, S R. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON BY THE ASSESSEE ARE AGAINST THE ORDER DATED 30.10.2008 OF LEARNED COMMISSIONER OF I NCOME TAX (APPEALS)-XX, AHMEDABAD FOR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IS AS UNDER :- THE LD. CIT(A.)-XX, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8,35,000/- MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED GIFTS U/S. 68 OF THE I.T. ACT WITHOUT P ROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON R ECORD BY THE A.O. 3. BRIEF FATS RELATING TO THE CONTROVERSY INVOLVED IN THE AFORESAID GROUND OF APPEAL ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED GIFTS FROM THE FOLLOWING SIX DONORS AMOUNT ING TO RS.8,35,000/- :- 2 ITA NO. 378/AHD/2009 & CO-46-AHD-2009 1. SHRI YOGENDRASINH S. GOHIL RS.1,50,000/- 2. SHRI LAGGADHIRSINH P. GOHIL RS.1,50,000/- 3. SHRI VELUBHA K. GOHIL RS. 85,000/- 4. SHRI MAHIPATSINH K. GOHIL RS.1,50,000/- 5. SHRI JORAVARSINH K. ZALA RS.2,00,000/- 6. SHRI JORUBHA A. GOHIL RS.1,00,000/- TOTAL RS.8,35,000/- IN ORDER TO VERIFY THE AUTHENTICITY AND GENUINENESS OF THE AFORESAID GIFTS, THE ASSESSING OFFICER SUMMONED THE DONORS TWICE. THE FIRST SUMMON WAS GIV EN ON 12.10.2007 AND THE SECOND WAS GIVEN ON 19.11.2007. THE SUMMONS WERE DULY SERVED U PON THE DONORS WHEREIN THEY WERE ASKED TO FURNISH THE FOLLOWING INFORMATION :- (I) PROOF OF IDENTITY, I.E. COPY OF ELECTION CARD, DRIV ING LICENSE, PAN CARD, ETC.; (II) COPY OF ALL BANK ACCOUNTS/ PASS BOOKS FINANCIAL YE AR 2004-05; (III) SOURCE OF THE GIFT MADE DURING FY 2004-05 TO THE VA RIOUS PERSONS/ PARTNERS OF M/S. GANESH STEEL ROLLING MILL AND M/S. JAI GANESH STEEL ROLLING MILL; (IV) COPY OF ACCOUNTS OF AGRICULTURAL INCOME AND EXPENDI TURE WITH THE COPY OF AGRICULTURE CROP SALE BILLS, ETC.; (V) COPY OF AGRICULTURAL LAND HOLDING FORM NO. 7/12 & 8A. IN COMPLIANCE TO THE FIRST SUMMONS, NEITHER OF THE DONORS WAS PRESENT PERSONALLY NOR WAS ANY ADJOURNMENT APPLICATION WAS RECEIVED. HOWEVER, IN R ESPONSE TO SECOND SUMMONS, MISS BANSRI TRIVEDI VIDE HER LETTER DATED 26.11.2007 HAD INFORM ED THAT THE DONORS HAVE APPOINTED HER AS THEIR ADVOCATE. SHE FURTHER INFORMED THAT DUE TO MARRIAGE CEREMONY OF HER BROTHER SHE WOULD NOT ABLE TO REPRESENT THE CASE OF HER CLIENT/ DONORS TILL 30 .11.2007. AT HER REQUEST, THE ASSESSING OFFICER EXTENDED THE TIME FOR COMPLIANCE TILL 3.12.2007. TH E ASSESSING OFFICER WAITED TILL 07.12.2007 BUT NO COMPLIANCE WAS MADE. 4. THEREAFTER IN THE ASSESSMENT ORDER, THE ASSESSIN G OFFICER MADE THE ADDITION OF RS.8,35,000/- FOR THE DETAILED REASONS GIVEN IN PAR A 3 AS UNDER :- 3 ITA NO. 378/AHD/2009 & CO-46-AHD-2009 SINCE THE DONORS FAILED TO ATTEND THE PROCEEDINGS PERSONALLY FOR VERIFICATION DUE ON BOTH SUMMONS, AS REGARDS THE GI FT MADE BY THEM TO THE ASSESSEE. IN THIS CIRCUMSTANCES THE IDENTITY, C REDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS NOT IN ANY MANNER PROVED HERE, SO AS TO BE ACCORDED DUE CONSIDERATION. WITH THIS FACTS T HE AMOUNT OF RS.8,35,000/- IS HELD AS ASSESSEE OWN UNACCOUNTED F UND WHICH HAS BEEN CREDITED BY THE ASSESSEE IN THE NAME OF THE ABOVE D ONORS UNDER THE COLORFUL DESIGN OF GIFT TO REGULARIZE AND ESTABLI SH THE SOURCE OF THE CAPITAL INTRODUCED BY THE ASSESSEE AS A PARTNER IN THE FIRMS FROM WHICH HE DERIVED HIS SHARE OF PROFIT AND INTEREST. THEREF ORE, AN AMOUNT OF RS.8,35,000/- IS ADDED U/S. 68 OF THE I.T. ACT, 196 1 CONSIDERING THE GIFT AS ASSESSEES UNEXPLAINED CASH CREDIT. 5. ON APPEAL, IN THE IMPUGNED ORDER THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OBSERVING THAT THE ASSESSEE HA S COMPLIED WITH ALL THREE INGREDIENTS OF THE PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 196 1, I.E. IDENTITY OF THE DONORS, CREDITWORTHINESS OF THE DONORS AND GENUINENESS OF T HE TRANSACTIONS BY SUBMITTING THAT ALL THE RELEVANT RECORDS AND THE DONORS WERE PRODUCED IN CO MPLIANCE WITH THE SUMMONS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ALSO STATED TH AT THE ASSESSING OFFICER MADE THE DONORS WAIT FOR AT LEAST THREE HOURS AT HIS OFFICE AND ALL OWED TO LEAVE HIS OFFICE BY SAYING THAT ALL THE RELEVANT RECORDS ARE WITH HIM AND THEIR PRESENCE IS NOT REQUIRED. ON THIS BASIS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TOOK THE VIEW THAT THE ASSESSING OFFICER HAS NOT LOOKED INTO THE ENTIRETY OF THE FACTS IN THE LIGHT OF EVID ENCES PRODUCED WHILE TREATING THE GIFTS RECEIVED BY THE ASSESSEE AS UNACCOUNTED INCOME UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. AGGRIEVED WITH THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, ON BEHALF OF REVENUE SHR I R.K. DHANESTA, LD. SR. D.R. APPEARED AND CONTENDED THAT IN THE ASSESSMENT ORDER, THE ASS ESSING OFFICER HAS RECORDED A CATEGORICAL FINDING THAT NONE OF THE DONORS WAS PRODUCED BEFORE HIM. THE LD. D.R. FURTHER POINTED OUT THAT NEITHER THE DONORS WERE RELATED TO THE DONEE NOR TH ERE WAS ANY OCCASION TO MAKE THE GIFT NOR THERE WAS ANY RECIPROCITY BETWEEN THEM REGARDING EXCHANGE OF GIFTS AND, THEREFORE, KEEPING IN VIEW THE RATIO OF THE DECISION OF THE HON'BLE ITAT, C BENCH, DELHI IN THE CASE OF ACIT VS.- RAJEEV TANDON REPORTED IN [2007] 108 ITD 560 (DEL.), THE S AID ADDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT ON AC COUNT OF BOGUS GIFTS. THE LD. D.R. FURTHER 4 ITA NO. 378/AHD/2009 & CO-46-AHD-2009 SUBMITTED THAT IN THE IMPUGNED ORDER, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW IN NOT TAKING INTO ACCOUNT THE RATIO OF DECI SION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAL CHAND KALRA VS.- CIT REPO RTED IN (1981) 22 CTR (P&H) 135. HE ACCORDINGLY CONTENDED THAT THE ORDER OF LEARNED COM MISSIONER OF INCOME TAX(APPEALS) IN THIS REGARD BE REVERSED AND THE ADDITION MADE BY THE ASS ESSING OFFICER AMOUNTING TO RS.8,35,000/- IN RESPECT OF BOGUS GIFTS BE RESTORED. 7. ON THE OTHER HAND, SHRI A.C. SHAH, LD. COUNSEL A PPEARING ON BEHALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW . THE LD. COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT, K BENCH, MUMBAI IN THE C ASE OF ITO VS.- INDUSTRIAL ROADWAYS REPORTED IN [2008] 112 ITD 293 (MUM.), WHEREIN IT W AS HELD THAT WHERE THE FIRST APPELLATE AUTHORITY ADMITTED FRESH EVIDENCE, IT IS NOT NECESS ARY THAT IN ALL CASES FIRST APPELLATE AUTHORITY SHOULD ALLOW AN OPPORTUNITY TO ASSESSING OFFICER UN DER RULE 2 OF RULE 46A. IN THIS DECISION, IT HAS BEEN HELD THAT RULE 2 OF RULE 46A IS NOT A RULE OF UNIVERSAL APPLICATION. IF ADDITIONAL EVIDENCES FURNISHED BY THE ASSESSEE BEFORE THE FIRS T APPELLATE AUTHORITY IS IN THE NATURE OF A CLINCHING EVIDENCE LEAVING NO FURTHER ROOM FOR ANY DOUBT OR CONTROVERSY, IN SUCH A CASE NO USEFUL PURPOSE WOULD BE SERVED BY PERFORMING THE RITUAL OF FORWARDING THE EVIDENCE/ MATERIAL TO ASSESSING OFFICER TO OBTAIN HIS REPORT. IN SUCH EXC EPTIONAL CIRCUMSTANCES, THE REQUIREMENT OF SUB-RULE (3) MAY BE DISPENSED WITH. THE LD. COUNSEL OF THE ASSESSEE ACCORDINGLY SUBMITTED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) BE UPHELD AND IT WILL NOT SERVE ANY PURPOSE IF FRESH INNINGS IS GIVEN TO ASSE SSING OFFICER TO MAKE ENQUIRY AS REQUIRED UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. 8. IN REPLY, THE LD. D.R. POINTED OUT THAT THE ASSE SSEE RECEIVED GIFTS FROM ALL THE DONORS IN CASH. ALL THE DONORS ARE UNRELATED. ALTERNATIVELY, THE LD. COUNSEL OF THE ASSESSEE SUGGESTED THAT EITHER THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE UPHELD OR THE MATTER BE RESTORED TO THE FILE OF ASSESSING OFFICER BY ALLOWI NG ASSESSEE AN OPPORTUNITY TO PRODUCE ALL THE DONORS. 9. RIVAL SUBMISSIONS WERE CONSIDERED. ADMITTEDLY, T HE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE ALL THE DONORS. NONE OF THE DONORS WAS P RODUCED. NONE OF THE DONORS APPEARS TO BE 5 ITA NO. 378/AHD/2009 & CO-46-AHD-2009 RELATED TO THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DECISION OF ITAT, K BENCH, MUMBAI IN THE CASE OF ITO VS.- INDUSTRIAL R OADWAYS REPORTED IN [2008] 112 ITD 293 (MUM.) IS INAPPLICABLE. LOOKING TO THE PECULIAR FAC TS THAT ALL THE DONORS ARE UNRELATED TO THE ASSESSEE, GIFTS WERE RECEIVED IN CASH, THE ASSESSIN G OFFICER WAS RIGHT TO ASK THE ASSESSEE TO PRODUCE ALL THE DONORS. WE, THEREFORE, SET ASIDE TH E ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSEE SHALL PRODUCE ALL THE DONORS, THE ASSESSIN G OFFICER MAY CONDUCT NECESSARY ENQUIRY AS PROVIDED UNDER SECTION 68 OF THE ACT AND RE-ADJUDIC ATE THE ADDITION OF RS.8,35,000/- AFRESH IN ACCORDANCE WITH LAW. 10. THE ONLY GROUND RAISED BY THE ASSESSEE IN HIS C ROSS OBJECTION IS AS UNDER :- THE CIT(A.) HAS ERRED IN CONFIRMING THE ADDITION O F RS.90,750/- BEING THE DEPOSITS RECEIVED FROM SIX PERSONS UNDER SEC. 68 ON THE GROUND THAT THE ASSESSEE HAS NOT FURNISHED THE EVIDENCES REGARDING THE SOURCES. 11. THE FACTS RELATING TO CONTROVERSY INVOLVED IN T HE AFORESAID GROUND OF CROSS OBJECTION ARE THAT THE ASSESSEE OBTAINED LOAN/ DEPOSIT AMOUNTING TO RS.90,750/- FROM THE FOLLOWING PERSONS :- SR. NO. NAME OF THE DEPOSITORS AMOUNT MODE OF LOAN 1. SHRI KAMABHAI BHAGVANBHAI RS.15,750/- CASH 2. SHRI CHANDUBHA NATHUBHA RS.15,000/- CASH 3. SHRI RAGHUVIRSINH BHURUBHA RS.15,000/- CASH 4. SHRI RAFIQUEBHAI MOHAMADBHAI RS.15,000/- CASH 5. SHRI HARISHCHANDRA FATEHSINH RS.15,000/- CASH 6. SHRI SHAKTISINH BALVANTSINH RS.15,000/- CASH TOTAL RS.90,750/- CASH IN SUPPORT OF THE AFORESAID LOAN, THE ASSESSEE FURN ISHED CONFIRMATIONS FROM ALL THE LENDERS. THE ASSESSING OFFICER SCRUTINIZED THE SAME AND NOTICED THAT ALL THE AFORESAID DEPOSITORS ARE NOT ASSESSED TO TAX AND THEY HAVE NOT EXPLAINED ABOUT T HEIR EARNING ACTIVITIES AND FROM WHICH SOURCE OF FUND THEY HAVE LENT THIS AMOUNT. THE ASSESSING O FFICER ACCORDINGLY TOOK THE VIEW THAT THE 6 ITA NO. 378/AHD/2009 & CO-46-AHD-2009 ASSESSEE HAS NOT ESTABLISHED ALL THE BASIC ELEMENTA RY CONDITIONS NAMELY, IDENTIFICATION OF THE LENDERS, GENUINENESS OF THE TRANSACTION AND CREDITW ORTHINESS OF THE DEPOSITORS. HE, THEREFORE, TREATED THE AMOUNT OF RS.90,750/- AS UNEXPLAINED UN DER SECTION 68 OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 12. ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE SAME FOR THE DETAILED REASONS GIVEN I N PARA 4.3, WHICH READS AS UNDER :- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND THE SUBMISSION MADE BY THE APPELLANT ALONG WITH THE MATERIALS ON R ECORD. SO FAR AS THE APPLICABILITY OF THE PROVISIONS OF SECTION 68 OF TH E ACT IS CONCERNED, THE A.O. IN MAKING ADDITION OF DEPOSITS OF RS.90,750/- TO THE RETURNED INCOME OF THE APPELLANT IS JUSTIFIED BECAUSE THE APPELLANT COULD NOT NARRATE THE ACTIVITY AND SOURCE OF EARNING IN ANY CASE OF DEPOS ITORS AND SINCE DEPOSITS ARE IN CASH, THE APPELLANT HAS FAILED TO SUBSTANTIA TE HIS CLAIM BY EXPLAINING MEANS OF EARNING OF THE DEPOSITORS, THEIR CREDITWOR THINESS AND GENUINENESS OF THE TRANSACTIONS BECAUSE ALL THE DEPOSITS WERE R ECEIVED BY THE APPELLANT IN CASH. THE DEPOSITORS ARE NOT ASSESSED TO TAX. ME RE FILING OF CONFIRMATIONS FROM THE DEPOSITORS DOES NOT MEAN THA T THE DEPOSITORS HAD THE CAPACITY OF GIVING LOANS TO THE APPELLANT. THE ONUS WAS OF THE APPELLANT TO PROVE THE IDENTITY OF THE DEPOSITOR, THEIR CREDI TWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WHICH HAS NOT BEEN FULLY DISCHARGED IN THIS CASE. IN SUCH CIRCUMSTANCES, I HOLD THAT THE A.O. W AS JUSTIFIED IN ADDING THE AMOUNT OF RS.90,750/- CLAIMED TO BE THE DEPOSITS RE CEIVED BY THE APPELLANT FROM SIX DIFFERENT DEPOSITORS TO THE TOTAL INCOME O F THE APPELLANT. HENCE, THE ADDITION MADE IS CONFIRMED AND THIS GROUND OF APPEA L IS REJECTED. 13. IN RESPECT OF THIS ADDITION, THE LD. D.R. POINT ED OUT THAT ONE MORE OPPORTUNITY BE ALLOWED TO THE ASSESSEE TO PROVE THE IDENTITY OF THE DEPOSI TORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE LD. D.R. STRONGLY OBJECTED TO THE PRAYER OF THE ASSESSEE. EVEN BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS NOT FUR NISHED ANY DETAILS IN THIS REGARD. 14. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 , ONUS IS ON THE ASSESSEE. IN THIS CASE, EVEN THE ASSESSEE HAS NOT PROVED THE IDENTITY OF THE DEP OSITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. FURTHER, THE ASSESSEE HAS NOT MADE ANY CASE TO RESTORE THIS ISSUE TO THE FILE OF 7 ITA NO. 378/AHD/2009 & CO-46-AHD-2009 ASSESSING OFFICER. WE, THEREFORE, INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMING THE ADDITION OF RS.9 0,750/-. 15. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL FILED BY THE REVENUE IS TREATED AS ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DI SMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 19.11.20 10 SD/- SD/- (A.N. PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19/ 11 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.