SHRI. PAWANKUMAR G. KEDIA(PROP. M/S. BHAWANI TEXTILES), MUMBAI V. ASST.C.I.T. CIRCLE14(1), MUMBAI

ITA 1161/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7753 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Gift; Additional evidence; Set aside
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.VP AND SHRI T.R. SOOD , AM I.T.A. NO.1161/MUM/2009 (ASSESSMENT YEAR : 2004-05) PAWANKUMAR G.KEDIA (PROP.M/S.BHAWANI TEXTILES), 2B/4, JAIHIND ESTATE, 4 TH FLOOR, DR. ATMARAM MERCHANT ROAD, BHULESHWAR, MUMBAI-400 002. PAN:ACCPK5715E VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-14(1), EARNEST HOUSE, 2 ND FLOOR, NARIMAN POINT, MUMBAI-400 021. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. J.P.BAIRAGRA RESPONDENT BY : MR.D.SONGATE, DR O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ADDITION OF RS.25, 04,195/- MADE UNDER SECTION 68 OF THE INCOME TAX ACT. 2. THE ASSESSEE IS AN INDIVIDUAL TRADING IN YARN AN D COMMISSION AND DEPOT AGENTS. HE FILED A RETURN OF I NCOME DECLARING TOTAL INCOME OF RS.13,63,800/-. WHILE SCR UTINIZING THE CAPITAL ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFI CER NOTICED THAT THE ASSESSEE HAS RECEIVED GIFT FROM FRIENDS AN D RELATIVES TO THE TUNE OF RS.25,04,194/-. AMONG THE GIFTS WERE FI VE SBI INDIA MILLENNIUM DEPOSITS (IMD) USD CUMULATIVE SERIES W ORTH US$10,000 EACH, WHICH WERE STATED TO HAVE BEEN RECE IVED AS GIFT FROM SMT. HANSA K.AGARWAL, AN NRI IN THE FINANCIAL YEAR ENDED 31.03.2002. THE ASSESSEE WAS CALLED UPON TO ADDUCE THE DETAILS AND EVIDENCE IN SUPPORT OF THE GIFT. IT WAS SUBMIT TED THAT THE GIFT WAS RECEIVED ON 27.6.2001 AND WAS PERFECTED BY DELIVERY, RECEIPT AND REGISTRATION IN THE FINANCIAL YEAR 2001 -02 AND THAT ONLY ACCOUNTING ENTRIES WERE PASSED IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05. IT WAS POI NTED OUT ITA NO.1161/MUM/09 2 THAT THE GIFT WAS RECEIVED FROM THE RELATIVE AND WA S EXEMPT FROM TAX. THE ASSESSEE ALSO FILED THE GIFT DECLARATION V ERIFIED ON 27.6.2001. THE ASSESSING OFFICER NOTICED THAT THE B ONDS WERE SUBMITTED TO THE BANK FOR NECESSARY ENDORSEMENTS ON LY ON 3.3.2006, WHICH WAS FIVE YEARS AFTER THE GIFT DEED. HE THEREFORE, SUSPECTED THE GENUINENESS OF THE ENDORSEMENTS. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE DID NOT FURN ISH ANY BANK STATEMENT OF THE DONOR REFLECTING THE PURCHASE OF T HE IMD BONDS EXCEPT A LETTER FROM HABIB BANK, AG, ZURICH REGARDI NG ACQUISITION OF THE IMD. THIS, ACCORDING TO THE ASS ESSING OFFICER, WAS NOT SUFFICIENT TO ESTABLISH THE FACT THAT THE D ONOR WAS POSSESSED OF ALL THE BONDS SO AS TO ENABLE HER TO G IFT THEM TO THE ASSESSEE. AFTER HOLDING THAT THE EVIDENCE BROUGHT O N RECORD WAS INSUFFICIENT TO ESTABLISH THE IDENTITY AND CREDITWO RTHINESS OF THE DONOR AND THE GENUINENESS OF THE TRANSACTION, THE V ALUE OF THE IMDS AMOUNTING TO RS.25,04,194/- WAS ASSESSED UNDER SECTION 68 OF THE INCOME TAX ACT. 3. ON APPEAL, THE ASSESSEE SUBMITTED FRESH EVIDENCE BEFORE THE CIT(A) IN THE FORM OF (I) STATEMENT OF SHRI KAI LASH AGARWAL, HUSBAND OF THE DONOR RECORDED ON 8.2.2008, BEFORE A NOTHER ASSESSING OFFICER, IN THE INCOME-TAX PROCEEDINGS OF ONE MR. MANOJ KUMAR KEDIA CONFIRMING THE CREDITWORTHINESS A ND THE FACTUM OF GIFT BY THE DONOR (II) LETTER DATED 4.3.2 008 WRITTEN BY THE DEPUTY COMMISSIONER OF INCOME TAX IN THE CASE O F SHRI MANOJ KUMAR KEDIA ACCEPTING THE CAPACITY OF THE DON OR (III) COPY OF CONFIRMATION CERTIFICATE DATED 26.9.2006 FROM ST ATE BANK OF INDIA, BAHRAIN BRANCH THAT THE DONOR AND HER HUSBAN D HAD PURCHASED IMDS WORTH US$ 17 MILLION AND (IV) COPY O F PAN CARD AND RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-0 2 OF MRS. HANSA K.AGARWAL, THE DONOR AND HER HUSBAND MR. KAIL ASH K. AGARWAL. THE ADDITIONAL EVIDENCE WAS NOT ADMITTED B Y THE CIT(A) ON THE GROUND THAT THEY WERE NOT ACCOMPANIED BY A F ORMAL ITA NO.1161/MUM/09 3 PETITION UNDER RULE 46A OF INCOME TAX RULES. HOWEV ER, HAVING SAID THIS, THE CIT(A) ALSO EXAMINED THE EVIDENCE AN D HELD THAT THEY ARE NOT RELEVANT TO THE ASSESSEES CASE, AS T HEY WERE RELEVANT TO ANOTHER CASE NAMELY SHRI MANOJ KUMAR KE DIA. DESPITE NOT ADMITTING THE ADDITIONAL EVIDENCE, THE CIT(A) WOULD APPEAR TO HAVE DEALT WITH THE PAPERS SUBMITTED BY T HE ASSESSEE ON MERITS ALSO. HE HELD THAT THE ADDITIONAL EVIDENC E HAD NO RELEVANCE OR ANY SIGNIFICANCE IN PROVING THE CREDIT WORTHINESS OF THE DONOR. THE ADDITION WAS THUS CONFIRMED. AS REGA RDS THE GENUINENESS OF THE TRANSACTION, THE CIT(A) WOULD AP PEAR TO HAVE THOUGHT THAT SINCE THE LETTERS/EVIDENCE ADDUCED BY THE ASSESSEE BEFORE HIM COULD NOT BE PRODUCED BEFORE THE ASSESSI NG OFFICER, THEY CANNOT BE RELIED UPON TO PROVE THE GENUINENESS OF THE TRANSACTION. FOR THESE REASONS, THE APPEAL OF THE A SSESSEE WAS DISMISSED. 4. THE ASSESSEE IS IN FURTHER APPEAL. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE BESIDES SUBMITTING THAT THE CIT(A) WAS NOT JUSTIFIED IN NOT ADMITTING THE ADDIT IONAL EVIDENCE, ALSO FILED THE FOLLOWING ITEMS OF EVIDENCE BEFORE U S AND SOUGHT FOR ADMISSION THEREOF UNDER RULE 29 OF THE ITAT RUL ES, 1963:- I) CERTIFICATE DATED 25.3.09 ISSUED BY SHRI S.M.JOSHI, CHARTERED ACCOUNTANT, DUBAI REGARDING NET WORTH OF MRS. HANSA KAILASH AGARWAL AS ON 31.12.2000 BEING US $ 26,3777,248. II) COPY OF BANK STATEMENTS OF HABIB BANK AG ZURICH IN RESPECT OF MRS. HANSA KAILASHKUMAR AGARWAL FOR THE PERIOD FROM 1.10.2000 TO 12.3.2001. III) COPY OF ACCOUNT OF MRS. HANSA K.AGARWAL IN THE BOOKS OF M/S. NISHANT, IMPORT & EXPORT CO., LLC., DUBAI. IV) REPORT OF THE AUDITORS OF NISHANT IMPORT & EXP ORT CO. LLC AJMAN ALONG WITH THE AUDITED STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31.12.2000. ITA NO.1161/MUM/09 4 V) COPY OF CERTIFICATE DATED 29.5.2007 ISSUED BY STATE BANK OF INDIA, BAHRAIN REGARDING THE AMOUNT OF DEPOSITS OF MRS. HANSA AGARWAL AND MR. KAILASH K.AGARWAL BEING AT US $ 2,283,000 AS ON 29.5.2007. HE SUBMITTED THAT THE AFORESAID ITEMS OF EVIDENCE S HOULD BE ADMITTED IN THE INTEREST OF JUSTICE. IT WAS POINTED OUT THAT SINCE THE DONOR WAS ABROAD IT TOOK TIME FOR THE ASSESSEE TO OBTAIN THE AFORESAID ITEMS OF ADDITIONAL EVIDENCE AND SINCE TH EY ARE RELEVANT FOR THE ISSUE UNDER CONSIDERATION IT WAS P RAYED THAT THEY SHOULD BE ADMITTED. HE HOWEVER FAIRLY STATED T HAT IF THE EVIDENCE IS ADMITTED, THEN MERITS OF THE SAME SHOUL D BE EXAMINED BY THE ASSESSING OFFICER. 5. WE FIND SUFFICIENT FORCE IN THE CONTENTION OF TH E LEARNED REPRESENTATIVE FOR THE ASSESSEE. BEFORE THE ASSESSI NG OFFICER, THE ASSESSEE ADDUCED EIGHT ITEMS OF EVIDENCE AS PER THE CHART FILED BEFORE US INCLUDING THE PHOTOCOPIES OF THE BONDS, D ECLARATION OF GIFT, COPY OF THE LETTER OF HABIB BANK AG, ZURICH, SHOWING THE ACQUISITION OF THE BONDS BY THE DONOR, COPY OF THE PASSPORT OF THE DONOR, COPY OF THE LETTER DATED 27.6.2001 ISSUE D BY HABIB BANK AG ZURICH TO STATE BANK OF INDIA, NRI BRANCH, MUMBAI GIVING DETAILS OF THE IMDS GIFTED AND NAME AND ADDR ESS OF THE DONE, COPY OF SBI LETTER SHOWING PLEDGE OF IMDS BY THE ASSESSEE FOR SANCTION OF O/D FACILITY, COPY OF THE CONFIRMAT ION ISSUED BY SBI REGARDING TRANSFER OF THE BONDS, LIEN OF THE BA NK ETC. THE ASSESSING OFFICER HAS NOT DISCUSSED ALL THE AFORESA ID ITEMS OF EVIDENCE IN THE ASSESSMENT ORDER. WHEN FURTHER EVID ENCE WAS ADDUCED BY THE ASSESSEE BEFORE THE CIT(A), THE CIT( A) INITIALLY STATED THAT THEY CANNOT BE ADMITTED IN THE ABSENCE OF A FORMAL PETITION, BUT LATER WOULD APPEAR TO HAVE EXAMINED T HE MERITS OF THE EVIDENCE. THIS IS NOT, IN OUR OPINION, A SATISF ACTORY WAY OF DEALING WITH THE ADDITIONAL EVIDENCE. IF HE IS NOT WILLING TO ITA NO.1161/MUM/09 5 ADMIT THE EVIDENCE, HE SHOULD NOT HAVE MADE ANY COM MENTS ABOUT THE MERITS OF THE EVIDENCE. LASTLY, WE ARE SA TISFIED THAT THE INTEREST OF JUSTICE REQUIRES THAT FIVE ITEMS OF EVIDENCE ADDUCED BEFORE US UNDER RULE 29 SHOULD BE ADMITTED BECAUSE THEY ARE DIRECTLY RELEVANT AND CONTAIN BANK STATEME NTS OF THE DONOR IN WHICH THE PURCHASE PRICE OF THE IMDS IS SA ID TO HAVE BEEN DEBITED. THE ADDITIONAL EVIDENCE ALSO CONTAIN S REPORTS OF THE AUDITORS INDICATING THE CREDITWORTHINESS OF THE DONOR. IN OUR OPINION, ALL THESE ITEMS OF EVIDENCE ARE RELEVANT T O THE ASSESSEES CASE AND THE INTEREST OF JUSTICE REQUIRES THAT THEY SHOULD BE ADMITTED. WE DIRECT ACCORDINGLY AND ADMIT THE SAME. THE ORDERS OF THE INCOME-TAX AUTHORITIES ARE SET ASIDE AND THE ASSESSMENT IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WH O SHALL EXAMINE ALL THE EVIDENCE ADDUCED BY THE ASSESSEE AND TAKE A FRESH DECISION REGARDING THE APPLICABILITY OF SECTION 68 IN ACCORDANCE WITH LAW. THE ASSESSEE SHALL BE GIVEN ADEQUATE OPPO RTUNITY OF PUTTING FORTH HIS CASE. 6. THE APPEAL IS THUS ALLOWED, BUT ONLY FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 1 0 TH DAY OF FEBRUARY, 2010. SD/- ( T.R. SOOD) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 10 TH FEBRUARY, 2010. SOMU ITA NO.1161/MUM/09 6 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-14 MUMBAI. 4. THE CIT(A)-XIV, MUMBAI 5. THE DR C BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI