PRIYANKA VINOD MOOLRAJANI, MUMBAI V. ITO WD 3(2), THANE

ITA 1198/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8789 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: DR P DANIEL
• Keywords: Unexplained cash credit; Gift; Benefit of exemption
• Section: 54F; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 1198/MUM/2009 (ASSESSMENT YEAR: 2005-06) SMT. PRIYANKA VINOD MOOLRAJANI INCOME TAX OFFICER - WARD 3(2) A/1, GROUND FLOOR, SUNIL RAJ CHS LTD. 'VARDAAN', MIDC, WAGLE INDL. ESTSTE KOPRI COLONY, THANE (3) 400603 VS. THANE (W) 400604 PAN - AFBPM 4757 Q APPELLANT RESPONDENT APPELLANT BY: DR. P. DANIEL RESPONDENT BY: SHRI S.K. SINGH O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- I, THANE DATED 28.11.2008 IN WHICH THE ASSESSEE HAS RAISED T HE FOLLOWING FOUR GROUNDS: - 1A. THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.10,00,000/- ON ACCOUNT OF GIFT RECEIVED BY THE A PPELLANT FROM A RELATIVE MRS. DEEPA DEVJANI OF DUBAI, UAE, BY HOL DING THE SAME TO BE INCOME LIABLE TO TAX UNDER SEC. 68 OF TH E I.T. ACT AS AN UNEXPLAINED CASH CREDIT. THE ADDITION CONFIRMED O N THE ABOVE ACCOUNT MAY PLEASE BE DELETED. 1B. THE LD. CIT (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT HAD DULY DISCHARGED THE ONUS THAT LAY UPO N HER U/S 68 OF THE I.T. ACT 1961 AND HENCE NO ADDITION WAS W ARRANTED IN HER HANDS ON THAT COUNT. 2. THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE AD DITION OF RS.1,00,000/- AT 10% OF THE GIFT AMOUNT BEING ESTIM ATED EXPENSES ALLEGED INCURRED FOR ORGANIZING THE GIFT. 3. THE LD. CIT (APPEALS) ERRED IN CONFIRMING THE AD DITION OF RS.8,25,282/- ON ACCOUNT OF SALE OF EQUITY SHARES O F M/S. ROBINSON IMPEX (I) LTD. BY HOLDING THE SALE PROCEED S TO BE INCOME LIABLE TO TAX UNDER SEC. 68 OF I.T. ACT AS A N UNEXPLAINED CASH CREDIT. THE ADDITION OF RS.8,25,282/- BEING N OT WARRANTED BY FACTS AND IN LAW MAY PLEASE BE DELETED. 4. THE LD. CIT (APPEALS) ERRED IN NOT APPRECIATING THE FACT THAT THE APPELLANT WAS ENTITLED TO THE BENEFIT OF EXEMPTION U/S 54F OF THE ITA NO. 1198/MUM/2009 SMT. PRIYANKA VINOD MOOLRAJANI 2 I.T. ACT, IN RESPECT OF REINVESTMENT OF LONG TERM C APITAL GAINS ARISING ON SALE OF EQUITY SHARES OF M/S. ROBINSON I MPEX (I) LTD. IN PURCHASE OF NEW RESIDENTIAL HOUSE PROPERTY AT MU LUND, MUMBAI IN DUE COMPLIANCE OF CONDITIONS IMPOSED BY T HE SAID SECTION. THE BENEFIT OF EXEMPTION U/S 54F MAY BE GR ANTED TO THE APPELLANT. 2. GROUND NOS. 1A,1B & 2 RELATE TO THE GIFT RECEIVED BY THE ASSESSEE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 AND ADDITION OF ` 1,00,000/- AS EXPENDITURE FOR OBTAINING THE GIFT ES TIMATED BY THE A.O. GROUND NO. 3 PERTAINS TO THE ISSUE OF SALE PROCEEDS BY SALE OF SHARES TREATED AS UNEXPLAINED CASH CREDIT BY THE A.O. AND GROUND N O. 4 IS CONSEQUENTIAL NON-ALLOWANCE OF CLAIM OF EXEMPTION UNDER SECTION 5 4F OF LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE ON SALE OF EQUITY SHA RES WHICH ARE TREATED AS UNEXPLAINED CASH CREDIT. 3. BRIEFLY STATED THE ASSESSEE IS IN THE BUSINESS OF T RADING IN TEXTILE CLOTH. DURING THE YEAR THE ASSESSEE HAS SHOWN IN HER CAPIT AL ACCOUNT A GIFT OF ` 10,00,000/- RECEIVED FROM HER MATERNAL SISTER, WHO IS AN NRI IN DUBAI. ASSESSEE FURNISHED A COPY OF THE CHEQUE INDICATING GIFT/COPY OF THE GIFT DEED DATED 25.05.2004, COPY OF THE PASSPORT OF SMT. DEVI DEVJANI. THE A.O. DID NOT AGREE WITH THE CLAIM OF THE GIFT AS THE DONOR W AS NOT PRODUCED BEFORE THE A.O. SINCE THE ASSESSEE FAILED TO PROVE THE IDENTIT Y AND CREDITWORTHINESS OF THE DONOR, GENUINENESS OF THE GIFT WAS NOT ACCEPTED AND THE GIFT WAS TREATED AS UNEXPLAINED CASH CREDIT. NOT ONLY THAT HE WAS OF THE OPINION THAT IT WAS AN ESTABLISHED PRACTICE THAT WHENEVER SUCH TRANSACT IONS ARE ARRANGED THERE IS A COST TO IT, WHICH IS 10% OF THE GIFT ARRANGED, ACCORDINGLY AN AMOUNT OF ` 1,00,000/- ON THE SO CALLED GIFT OF ` 10,00,000/- WAS ALSO BROUGHT TO TAX. THE CIT(A) CONFIRMED THE ADDITION. 4. THE LEARNED COUNSEL SUBMITTED THAT ASSESSEE HAS REC EIVED THE GIFT FROM THE MATERNAL SISTER, WHO IS A RELATIVE AND WHO IS STAYING IN DUBAI OVER A CONSIDERABLE PERIOD OF TIME. THE ASSESSEE HAS FUR NISHED THE EVIDENCE OF GIFT AND IDENTITY OF THE DONOR. WITH REFERENCE TO T HE PRODUCTION OF DONOR BEFORE THE A.O. IT WAS SUBMITTED THAT SHE BEING IN DUBAI AT THE TIME GIVEN BY THE A.O. SHE COULD NOT BE PRODUCED BEFORE THE A.O. BUT HER IDENTITY AND CREDITWORTHINESS WERE ESTABLISHED BEFORE THE A.O. W ITH REFERENCE TO ITA NO. 1198/MUM/2009 SMT. PRIYANKA VINOD MOOLRAJANI 3 CREDITWORTHINESS THE LEARNED COUNSEL SUBMITTED THAT ASSESSEE HAS FILED THE BALANCE SHEET AND P & L ACCOUNT FOR THE YEAR ENDING DECEMBER 2006 WHEREAS THE GIFT WAS RECEIVED IN THE YEAR ENDING 20 04-05 BY MISTAKE AND, THEREFORE, GIVEN AN OPPORTUNITY ASSESSEE WOULD BE I N A POSITION TO FURNISH EVIDENCE TO PROVE THE GIFT AS GENUINE. 5. THE LEARNED D.R., HOWEVER, SUPPORTED THE ORDER OF T HE AUTHORITIES. 6. WE HAVE CONSIDERED THE ISSUE. AS FAR AS THE GIFT IS CONCERNED IT IS THE CLAIM OF THE ASSESSEE THAT THE GIFT WAS RECEIVED FR OM HER RELATIVE AND IN SUPPORT FILED THE GIFT DEED COPY, PASSPORT AND ALSO TO PROVE THE CREDITWORTHINESS, VARIOUS BALANCE SHEETS OF NORTHWA Y TRADING LLC, PERTAINING TO THE BUSINESS OF THE SAID PERSON. HOWE VER, THE DOCUMENTS PLACED ON RECORD INDICATE THAT THESE FINANCIAL STAT EMENTS PERTAIN TO THE YEAR ENDING 31.12.2006 WHEREAS THE GIFT WAS RECEIVED ON 18.04.2004, SO THE STATEMENTS FOR THE YEAR ENDING 31.12.2004 ARE MATER IAL. SINCE IT IS ALSO ONE OF THE REASONS THAT THE DONOR WAS NOT PRODUCED BEFO RE THE A.O. IN THE GIVEN SHORT TIME, WE ARE OF THE OPINION THAT THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY TO ESTABLISH THE GENUINENESS OF THE GIF T BEFORE THE A.O. FOR THIS WE RESTORE THE ISSUE OF GENUINENESS OF THE GIFT BAC K TO THE FILE OF THE A.O. TO CONSIDER IT AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. GROUND NO. 1 IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO. 2 IS INCIDENTAL TO GROUND 1 AND A.O. EST IMATED 10% OF THE EXPENDITURE FOR OBTAINING THE ALLEGED GIFT. SINCE T HE GENUINENESS OF THE GIFT ITSELF IS RESTORED BACK TO THE FILE OF THE A.O. THI S GROUND ALSO IS TO BE ALLOWED BY RESTORING THE ISSUE BACK TO THE FILE OF THE A.O. TO CONSIDER IT AFTER EXAMINING THE GENUINENESS OF THE GIFT. HOWEVER, WE MAKE IT CLEAR THAT UNLESS THERE IS AN EVIDENCE THE AMOUNT CANNOT BE BROUGHT T O TAX AS DEEMED EXPENDITURE ON PRESUMPTIONS. WITH THESE DIRECTIONS THE ISSUE IN GROUND NO. 2 IS ALSO RESTORED TO THE FILE OF THE A.O. AS THESE TWO ISSUES GO TOGETHER. GROUND NO. 2 IS ALSO ALLOWED FOR STATISTICAL PURPOS ES. 8. GROUND NOS. 3 & 4 ARE LIKEWISE ON THE ISSUE OF ACCE PTING THE LONG TERM CAPITAL GAINS AND CONSEQUENT DISALLOWANCE OF DEDUCT ION UNDER SECTION 54F. THE A.O. WHILE ACCEPTING THE SALE OF SHARES AT ` 8,25,282/- IN THE ASSESSMENT ITA NO. 1198/MUM/2009 SMT. PRIYANKA VINOD MOOLRAJANI 4 ORDER DOUBTED THE PURCHASE OF SHARES AT ` 10,804/-. THE ASSESSEE, IT SEEMS, SUBMITTED THE DATE OF PURCHASE AS 13.05.2003 WHEREA S THE BROKERS BILL AND OTHER DETAILS INDICATE THAT THESE ARE ACQUIRED ON 2 2.04.2003. IT WAS THE SUBMISSION BEFORE THE CIT(A) THAT THE A.O. MADE ENQ UIRIES WITH REFERENCE TO ACQUISITION OF THE SHARES ON 31.05.2003 WHICH HAPPE NED TO BE A HOLIDAY WHEREAS THE ASSESSEE HAS ACQUIRED THE SHARES ON 22. 04.2003 THE EVIDENCE OF WHICH WERE NOT BEFORE THE A.O. BUT THE CIT(A) REJEC TED EVENTHOUGH IT WAS POINTED OUT TO HIM. IT WAS THE SUBMISSION OF THE LE ARNED COUNSEL THAT SINCE THE DATES FOR ENQUIRY WAS TAKEN WRONGLY BY THE A.O. THE REPORT FROM THE STOCK EXCHANGE DATED 26.12.2009 ALSO ON SIMILAR LIN ES AS MAY 31, 2003 WAS SATURDAY AND THERE WAS NO TREADING EXECUTED ON THAT DAY. WITHOUT AN OPPORTUNITY TO THE ASSESSEE, CONSEQUENT TO THE LETT ER RECEIVED FROM BOMBAY STOCK EXCHANGE THE A.O. VIDE ORDER DATED 31.12.2009 TREATED THE PURCHASES AS BOGUS AND CONSEQUENTLY THE SALE OF SHARES AND LO NG TERM CAPITAL GAINS WERE DOUBTED AND DENIED THE DEDUCTION UNDER SECTION 54F. IT AS HIS SUBMISSION THAT THE A.O. SHOULD HAVE VERIFIED THE P URCHASE OF SHARES ON 22.04.2003 AND IF PROPER ENQUIRY WAS MADE/ OPPORTUN ITY GIVEN THE GENUINENESS OF THE TRANSACTIONS CAN BE PROVED. THE LEARNED COUNSEL PLEADED THAT THE MATTER CAN BE RESTORED BACK TO THE A.O. SO THAT THE ASSESSEE CAN ESTABLISH THE GENUINENESS OF THE TRANSACTION. 9. THE LEARNED D.R. SUPPORTED THE ORDER OF THE A.O. 10. AS SEEN FROM THE ORDERS OF THE A.O., THE A.O. TOOK THE DATE OF PURCHASE OF 8,50,000 SHARES OF M/S. ROBINSON IMPEX (I) LTD. FOR AN AMOUNT OF ` 10,804/- AS ON 31.05.2003 WHEREAS THE DATE PERTAINS TO DELIVERY OF THE SHARES WHICH WAS MENTIONED IN THE STATEMENT OF LONG TERM CAPITAL GAINS BY THE ASSESSEE HERSELF. HOWEVER, THE BROKERS NOTE IN DICATE THAT THE SHARES ARE PURCHASED IN THE STOCK EXCHANGE ON 22.04.2003 VIDE SETTLEMENT NO. 20003017 AT ` 125/- PER SHARE. THE PAYMENT WAS STATED TO HAVE BEE N MADE IN APRIL 2003 ITSELF. HOWEVER, THE SHARE CERTIFICAT ES ISSUED IN THE NAME OF PRIYANKA VIMAL MOOLRAJANI VIDE REGISTER FOLIO NO. P 149 WAS DATED 31.05.2003. IT IS NOT CLEAR WHETHER THE SHARES WERE OBTAINED AFTER PURCHASE AS SUPPORTED BY BROKERS NOTE OR FRESH ISSUE OF SHAR ES ON 31.05.2003 AS SHARES ARE IN THE NAME OF ASSESSEE, NOT TRANSFERRED , AS CAN BE SEEN FROM THE ITA NO. 1198/MUM/2009 SMT. PRIYANKA VINOD MOOLRAJANI 5 CERTIFICATE AT PAGE 24 IN THE PAPER BOOK. IT IS NOT CLEAR WHETHER THESE WERE ISSUED ON ALLOTMENT OR PURCHASED SHARES AND IF THEY ARE PURCHASED ON 22.04.2003, HOW THEY ARE ISSUED IN ASSESSEE NAME ON 31.05.03. THESE ISSUES REQUIRE EXAMINATION AFRESH AS THE EARLIER EN QUIRY WAS WITH REFERENCE TO THE PURCHASE ON 31.05.2003 WHICH HAPPENED TO BE A HOLIDAY ON THE BOMBAY STOCK EXCHANGE. AS RIGHTLY SUGGESTED BY THE LEARNED COUNSEL THE ISSUE REQUIRE RE-EXAMINATION BY THE A.O., WHO IS DI RECTED TO KEEP IN MIND THE BROKERS NOTE DATED 22.04.2003, ISSUE OF CERTIF ICATE ON 31.04.2003 AND TO EXAMINE WHETHER THE ASSESSEE HAS PURCHASED THE SHAR ES AS CLAIMED AND ACCORDINGLY DETERMINE THE ISSUE AFRESH. THE CLAIM O F EXEMPTION U/S 54F BEING CONSEQUENTIAL TO THE DETERMINATION OF CAPITAL GAINS WAS ALSO RESTORED TO THE AO. WITH THESE DIRECTIONS GROUND NOS. 3 & 4 ARE ALSO RESTORED TO THE FILE OF THE A.O. FOR FRESH EXAMINATION AND DECISION THEREON. THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SUPPORT THE CLAIMS. 11. IN THE RESULT, APPEAL ALLOWED FOR STATISTICAL PURPO SES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JANUARY 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 19 TH JANUARY 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) I - THANE 4. THE CIT II, THANE 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.