MUKESH M RUPAREL, MUMBAI V. ITO 2(1)(4), MUMBAI

ITA 1220/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1205 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-04-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 23-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR V ANJANEYULUS S RANA
• Assessee Lawyers: S C TIWARIMS MEGHANA
• Keywords: Gift; Deemed dividend; Onus to prove; Bogus loan

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, MUMBAI. BEFORE S/SHRI S.V.MEHROTRA, AM & VIJAY PAL RAO,JM I.T.A NO. 1220/MUM/2009 ASSESSMENT YEAR: 2002-03 MUKESH M RUPAREL, V. THE I.T.O. 2(1)(4), 23/25, NIMKAR SOCIETY, MULUND COLONY, MUMBAI. MULUND (W), MUMBAI-82. PA NO.AABPR 0941 G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.C.TIWARI/MS MEGHANA RESPONDENT BY : DR V. ANJANEYULU/S.S.RANA O R D E R PER S.V.MEHROTRA, AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 26.11.2008 OF LD CIT (A)-II, MUMBAI CONFIRMING THE PENALTY OF RS.10,18,980/- IMPOSED BY THE AO U/S.271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2 002-03. 2. IN THIS CASE, THE OFFICE HAD ISSUED DEFECT MEMO, IN WHICH, IT WAS, INTER ALIA, POINTED OUT THAT THE APPEAL IS TIME BARRED BY 321 D AYS. IT WAS ON ACCOUNT OF THE FACT THAT IN FORM NO.36 DATED 18 TH FEBRUARY, 2009, THE DATE OF COMMUNICATION OF THE O RDER APPEALED AGAINST WAS MENTIONED AS 8.2.2008. THE RE PRESENTATIVE OF THE ASSESSEE HAS FILED A COMPILATION DATED 23.4.2010, IN WHICH LETTE R DATED 25 TH FEBRUARY, 2010 ADDRESSED TO REGISTRAR, ITAT, MUMBAI HAS BEEN FILED, IN WHICH , IT IS POINTED OUT THAT THERE IS A TYPOGRAPHICAL ERROR IN FORM NO.36 AND THE DATE OF R ECEIPT OF THE ORDER WAS 8.2.2009 AND NOT 8.2.2008. SINCE THE DATE OF CIT (A)S ORDE R IS 26.11.2008, THEREFORE, THERE IS NO REASON TO DOUBT THE CORRECTNESS OF THIS LETTER. TH E ASSESSEE HAD FILED THE APPEAL ON 23.2.2009 AND, THEREFORE, THE APPEAL IS WITHIN LIMI TATION. ITA NO.1220/M/2009 MUKESH M RUPAREL 2 3. AS REGARDS THE LESS FEE OF RS.9,500/- PAID BY TH E ASSESSEE, WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE PATNA HIG H COURT IN THE CASE OF DR AJITH KUMAR PANDEY V ITO, 310 ITR 195 (PAT), WHEREIN, IT WAS H ELD THAT PENALTY APPEALS WILL ENTAIL THE FIXED FEES OF RS.500/- AS PER CLAUSE (D) OF SECTION 253 (6) OF THE STATUTE. 4. NOW COMING TO THE MERITS OF THE CASE. BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE HAD FILED HIS RETURN OF INCOME DECLARING T OTAL INCOME AT RS.4,15,740/- EXCLUDING LONG TERM CAPITAL GAIN OF RS.1,03,275/-. THE ASSESS ING OFFICER NOTICED THAT THE ASSESSEE HAD CREDITED GIFT AMOUNT OF RS.5,35,000/- IN HIS CA PITAL ACCOUNT. FROM THE DETAILS AND AFFIDAVIT/CONFIRMATIONS FILED, HE OBSERVED THAT THE ASSESSEE HAD RECEIVED THE ALLEGED GIFTS FROM FOLLOWING PERSONS:- 1) PRABHAT RAJGOR RS.1,00,000/- 16.9.2001 2) KETAN H.SANGOI RS.1,00,000/- 24.8.2001 3) DEEPESH R JIVANI RS.2,35,000/-(USD 5000) 29.8.2 001 4) BHARAT T.THAKKAR RS.1,00,000/- 30.8.2001 HE, THEREFORE, VIDE HIS LETTER DATED 11.2.2004 REQU IRED THE ASSESSEE TO PRODUCE SHRI PRABHAKAR RAJGOR, KETAN H SANGOI AND BHARAT T.THAKK AR IN ORDER TO VERIFY THE CREDITWORTHINESS, RELATIONSHIP AND IDENTITY OF THE PERSONS WHO HAD ALLEGEDLY GIVEN GIFTS. HE ALSO REQUIRED TO PRODUCE THEIR BANK ACCOUNT, ACK NOWLEDGEMENT OF I.T.RETURN FILED, DESIGNATION OF THE ASSESSING OFFICER, CAPITAL ACCOU NT AND BALANCE SHEET FOR VERIFICATION. AS REGARDS GIFTS RECEIVED FROM DEEPES R JIVANI, RES IDING AT 89, BELGROVE, DR APARTMENT, 3C,KEARNEY, NEW YORK, N.I. 07032, HE REQUIRED THE A SSESSEE TO FILE LETTER FROM MR DEEPESH R. JIWANI MENTIONING THAT WHAT PROMPTED HIM TO GIFT US$ 5000 DUE TO MUTUAL LOVE AND AFFECTION TOWARDS MRS JAYSHREE M. RUPAREL, ASSESSEES DAUGHTER. ON 1.12.2004, THE ASSESSEE RECONFIRMED THAT HE HAD REC EIVED GIFTS OF RS.1 LAKH EACH FROM SHRI PRABHAKAR RAJGOR, KETAN H SANGOI AND BHARAT T. THAKKAR. HOWEVER, HE POINTED OUT THAT SINCE HE WAS UNABLE TO PRODUCE THE SAID PERSON S FOR VERIFICATION AS THEY HAVE SHIFTED TO SOME OTHER PLACES OUTSIDE MUMBAI, HE HAD NO OTHER MEANS TO CONTACT THEM AND, THEREFORE, IN ORDER TO BUY MENTAL PEACE AND R ELAXATION, THE GIFT WAS OFFERED AS INCOME. AS REGARDS GIFT RECEIVED FROM MR DEEPESH R . JIWANI, THE ASSESSEE POINTED OUT THAT HE HAD VERY FRIENDLY RELATIONSHIP WITH HIM AND ON HIS DAUGHTERS ATTAINING 18 YEARS OF AGE ON 25.10.2000, OUT OF MUTUAL LOVE AND AFFECT ION, MR D.R.JIWANI GRATUITOUSLY ITA NO.1220/M/2009 MUKESH M RUPAREL 3 FORWARDED US$ 5000 AS GIFT TO JAYSHREE RUPAREL( DAU GHTER OF THE ASSESSEE). HOWEVER, SINCE THE ASSESSEE WAS IN NEED OF FINANCE, HIS DAUG HTER GIFTED THE SAME TO HIM. HOWEVER, THIS AMOUNT WAS ALSO OFFERED AS ASSESSEES INCOME AND TAX WAS PAID THEREON. THE AO HELD THAT THE ASSESSEE HAD NOT BEEN ABLE TO DISCHARGE HIS BURDEN TO PROVE THE IDENTITY OF DONOR, HIS/HER CAPACITY TO GIVE GIFT AN D GENUINENESS OF GIFT RECEIVED AND, THEREFORE, INITIATED PENALTY PROCEEDINGS U/S.271(1) (C). THE AO HAD ALSO MADE ADDITION OF RS.11,30,000/- U/S. 2(22)(E), WHICH HAS BEEN DEL ETED BY THE TRIBUNAL. 5. IN THE PENALTY PROCEEDINGS, THE ASSESSEE DID NOT FURNISH ANY FURTHER EXPLANATION AND, THEREFORE, THE AO LEVIED THE PENALTY OF RS.10, 18,980/-. THE PENALTY WAS LEVIED, APROPOS, BOTH THE ADDITIONS I.E. UNEXPLAINED CASH C REDITS OF RS.5,35,000/- AND DEEMED DIVIDEND U/S.2(22)(E). 6. BEFORE THE LD CIT (A), IT WAS POINTED OUT THAT T HE ADDITION U/S.2(22)(E) HAS BEEN DELETED BY THE ITAT VIDE ORDER DATED 26.8.2008 IN I TA NO.2059/M/2007 AND, THEREFORE, NO PENALTY COULD BE SUSTAINED AGAINST THIS ADDITION . AS REGARDS ADDITION ON ACCOUNT OF GIFTS SURRENDERED BY THE ASSESSEE WAS CONCERNED, LD CIT (A) CONFIRMED THE PENALTY, INTER ALIA, POINTING OUT THAT THE ASSESSEE HAD NOT BEEN A BLE TO GIVE ANY EVIDENCE TO SHOW THAT THE CREDITS WERE FROM PERSONS WHO WERE IDENTIFIABLE , WHO HAD CAPACITY TO GIVE GIFTS AND THAT THE ALLEGED GIFTS WERE GENUINE. HE FURTHER OB SERVED THAT THE VALIDITY OF THE PENALTY PROCEEDINGS IS TO BE SEEN SOLELY FROM THE RETURN O F INCOME AND NOT WITH REFERENCE TO SUBSEQUENT CONCESSION MADE BY AN ASSESSEE ON THE AL LEGED BASIS TO BUY MENTAL PEACE AND RELAXATION. 7. LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAD FILED AFFIDAVITS/CONFIRMATIONS IN RESPECT OF GIFTS RECEI VED BY HIM. HE SUBMITTED THAT COMPLETE ADDRESS OF THE PARTIES WERE AVAILABLE WITH THE AO. IN THIS REGARD, HE REFERRED TO PAGE 2 OF PB, WHEREIN, THE DETAILS OF PARTIES WERE SUBMITT ED BEFORE THE AO. THESE ARE REPRODUCED HEREUNDER:- SR. NO . NAME & ADDRESS PAN/GR NO. BANK & BRANCH CH.NO . DATE AMOUNT US$ 1. PRABHABEN RAJGOR, OLD PARVATI NIWAS, FLAT NO.29, KARVE ROAD, WD. NO.1(5)/KLN ICHALKARNJI JANTA SAHAKARI BANK 8516 10.9.01 1,00,000 - ITA NO.1220/M/2009 MUKESH M RUPAREL 4 DOMBIVALI(W),MUMBAI- 421202 2. KETAN H.SANGOI, B/2, SHREE SARASWATI ANANTRAJ SOCIETY, KARAVE ROAD, NEAR SARASWATI SCHOOL, OPP. BHAGSHALA MAIDAN, DOMBIVALI(W). P.NO.AEEPS 3010G ICHALKARNJI JANTA SAHAKARI BANK 10556 24.6.01 1,00,000 - 3. DEEPESH R.JIWANI, 89, BELGROVE, DR.APT, 3 C. KEAMY, NEW YORK, NJ 07032 - FIRST UNION NATIONAL BANK 21200 025 29.8.01 2,35,485. 53 USD 5000 4. BHARAT T.THAKKAR, ROOM NO.5, SITARAM CHIKLE BUILDING, BHIMWADI, RAJENDRA PRASAD ROAD, MULUND(W), MUMBAI-80 W.NO.30(50 MANDVI CO.OP.BANK LTD. 18797 1 30.8.01 - 636485. 53 LD COUNSEL FOR THE ASSESSEE REFERRED TO PAGES 3 TO 5 OF PAPER BOOK, WHEREIN, THE CONFIRMATION AND AFFIDAVIT OF SHRI BHARAT T.THAKKAR IS CONTAINED, IN WHICH, HIS PAN NO. WAS ALSO GIVEN. LD COUNSEL FURTHER REFERRED TO PAG ES 6 TO 12 OF PB, WHEREIN, THE FOLLOWING DOCUMENTS RELATING TO PRABHABEN RAJGOR AR E CONTAINED:- A) AFFIDAVIT B) RETURN OF INCOME, CAPITAL A/C AND BALANCE SHEET C) COPY OF PASS BOOK, AMOUNT WITHDRAWN FROM THE BANK O N 12.9.2001 AND TRANSFERRED IN THE NAME OF MUKESH RUPAREL. HE ALSO REFERRED TO FOLLOWING DOCUMENTS IN REGARD T O SHRI KETAN H. SANGOI CONTAINED AT PAGES 13 TO 19 OF PAPER BOOK: A) CONFIRMATION LETTER B) AFFIDAVIT C) COPY OF ACKNOWLEDGEMENT IN FORM NO.2D D) STATEMENT OF TOTAL INCOME E) COPY OF PASS BOOK LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE THREE INDIAN DONORS WERE ASSESSED TO TAX. AS FAR AS ALLEGED GIFT FROM NRI WAS CONCERNED , LD COUNSEL POINTED OUT THAT THE AO DID NOT DISPUTE THE GIFT BUT ONLY WANTED CONFIRMATI ON. HE SUBMITTED THAT THIS GIFT WAS THROUGH BANKING CHANNEL. LD COUNSEL REFERRED TO AS SESSEES REPLY DATED 1.12.2004, AS REPRODUCED AT PAGE 3 OF THE ASSESSMENT ORDER, TO PO INT OUT THAT IN THE SAID LETTER, THE ASSESSEE DID NOT ADMIT THAT THE GIFTS WERE NOT GENU INE AND ONLY INFORMED HIS RELUCTANCE TO PRODUCE THE PARTIES. LD COUNSEL SUBMITTED THAT THE ASSESSEE HAD FURNISHED ALL THE ITA NO.1220/M/2009 MUKESH M RUPAREL 5 NECESSARY DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE GIFTS BUT ON ACCOUNT OF HIS INABILITY TO PRODUCE THE PARTIES, SURRENDERED THE G IFTS IN ORDER TO BUY PEACE. HE REFERRED TO VARIOUS CASE LAWS TO SUBMIT THAT MERELY ON ADMIS SION, PENALTY CANNOT BE LEVIED. HE ALSO RELIED ON THE FOLLOWING DECISIONS FOR THE PRO POSITION THAT MERELY SURRENDERING OF THE INCOME DOES NOT ENTITLE THE DEPARTMENT TO LEVY THE PENALTY: 1) HONBLE SUPREME COURT IN THE CASE OF CIT V. SURESH CHANDRA MITTAL, 251 ITR 9(SC) 2) HONBLE SUPREME COURT IN THE CASE OF SIR SHADI LAL SUGAR & GENERAL MILLS LTD & ANR. V CIT, 168 ITR 705 (SC) 3) HONBLE BOMBAY HIGH COURT IN THE CASE OF HAJI GAFF AR HAJI DADA CHINI, 169 ITR 33 (BOM) 4) HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. C.J.RATHNASWAMY, 223 ITR 5 (MAD) 5) HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. SAN KARAN, 241 ITR 825 (MAD) 8. LD D.R. SUBMITTED THAT SINCE THE ASSESSEE WAS NO T IN A POSITION TO ESTABLISH ALL THE RELEVANT INGREDIENTS, THEREFORE, SURRENDERED TH E AMOUNTS AND PREVENTED FURTHER ENQUIRIES. IN THIS REGARD, LD D.R. RELIED ON THE F OLLOWING DECISIONS TO SUBMIT THAT IN CASE THE ASSESSEE ADMITS THE INCOME, THE BURDEN OF REVEN UE STANDS DISCHARGED AND SHIFT TO THE ASSESSEE TO SHOW THAT THE ADMISSION WAS INCORRE CT OR ILLEGAL OR ANY REASON SUGGESTING THAT IT WAS NOT HIS CONCEALED INCOME, OT HERWISE, THE PENALTY IS LEVIABLE: 1) WESTERN AUTOMOBILES (INDIA) V CIT,112 ITR 1048( BOM) 2) H.V.VENUGOPAL CHETTIAR V CIT, 153 ITR 376 (MAD) 3) CIT V. KRISHNA & CO., 120 ITR 144 (MAD) LD D.R. SUBMITTED THAT ONCE THE ASSESSEE ADMITS HIS INCOME, THE SAME CANNOT BE RETRACTED. HE SUBMITTED THAT THE ENTIRE AFFAIR WAS PRE-PLANNED. IN THIS REGARD, HE REFERRED TO PAGE 8 OF PAPER BOOK FILED BY THE ASSES SEE, WHEREIN, ACKNOWLEDGEMENT OF RETURN IN CASE OF RAJGOR PRABHABEN H IS CONTAINED AND POINTED OUT THAT FROM THE CAPITAL ACCOUNT CONTAINED AT PAGE 10, THE NET WORTH OF THE ASSESSEE WAS RS.1,94,515/- AND, THEREFORE, IT WAS IMPROBABLE TO GIVE A GIFT OF A S UM OF RS.1 LAKH. SIMILARLY, HE REFERRED TO PAGE 16 OF PAPER BOOK, WHEREIN, THE ACKNOWLEDGEM ENT OF RETURN IN CASE OF KETAN H.SANGOI IS CONTAINED AND POINTED OUT THAT THE TOT AL INCOME RETURNED WAS ONLY ITA NO.1220/M/2009 MUKESH M RUPAREL 6 RS.49,422/- AND, THEREFORE, HE WAS NOT IN A POSITIO N TO GIVE GIFT OF RS.1 LAKH. HE, THEREFORE, IN SUM AND SUBSTANCE, SUBMITTED THAT IT WAS BOGUS LOAN. 9. LD COUNSEL FOR THE ASSESSEE, IN THE REJOINDER, S UBMITTED THAT THE AGREEMENT IS DIFFERENT FROM ADMISSION. THE ASSESSEE DID NOT ADM IT THE IMPUGNED AMOUNT AS HIS INCOME BUT ONLY AGREED TO PAY TAX ON THE SAME. HE SUBMITTED THAT THE AO DID NOT MAKE ENQUIRIES REGARDING CREDITWORTHINESS OF THE DO NORS AND FRESH ENQUIRIES AT THIS STAGE ARE NOT PERMISSIBLE. LD COUNSEL FOR THE ASSE SSEE SUBMITTED THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE . 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD OF THE CASE. IT IS NOW WELL SETTLED LAW THAT MERE ADMISSION OF INCO ME WILL NOT AUTOMATICALLY LEAD TO THE CONCLUSION THAT IT WAS A CONCEALED INCOME UNLESS TH E ASSESSEES EXPLANATION HAS BEEN FOUND TO BE FALSE. IN THE PRESENT CASE, WE FIND TH AT THE ASSESSEE HAD SUBMITTED VARIOUS EVIDENCES IN THE FORM OF CONFIRMATION LETTERS, AFFI DAVITS, BANK PASS BOOKS, ETC, BUT ONLY FAILED TO COMPLY WITH THE AOS REQUIREMENT TO PRODU CE THE PARTIES. THERE COULD BE SEVERAL REASONS FOR THE ASSESSEES INABILITY TO PRO DUCE THE PARTIES; ONE AMONG THEM MAY BE UNWILLINGNESS OF THE DONOR TO BE PRODUCED BEFORE THE AO. HOWEVER, THAT MAY BE A GOOD GROUND FOR TREATING THE IMPUGNED AMOUNT AS ASS ESSEES INCOME BUT WHEN IT COMES TO THE IMPOSITION OF PENALTY, THE DEPARTMENT IS REQ UIRED TO ESTABLISH THAT THE ASSESSEES EXPLANATION WAS SO IMPROBABLE THAT IT TOOK THE PLAC E OF FALSEHOOD. IT SHOULD BE SUCH AS IT NOT ACCEPTABLE TO ANY PERSON OF REASONABLE PRUDE NCE. IN OUR OPINION, THE DEPARTMENT HAS NOT BEEN ABLE TO REACH THIS STAGE AND MERELY ON THE BASIS OF SURRENDER MADE BY THE ASSESSEE ON ACCOUNT OF ITS INABILITY TO PRODUCE THE PARTIES, CONCLUDED THAT IT WAS THE ASSESSEES CONCEALED INCOME. WE ARE UNABLE TO SUBS CRIBE TO THIS VIEW. LD D.R. SUBMITTED THAT THE ASSESSEE PREVENTED FURTHER ENQUI RIES AND, THEREFORE, PENALTY IS LEVIABLE. IN OUR OPINION, THIS DEPENDS ON THE FACT S OF EACH CASE. AT WHAT STAGE AND AFTER SUBMITTING WHICH EXPLANATION, THE ASSESSEE SU RRENDERED THE AMOUNT IS VERY MATERIAL IN THIS REGARD. IN THE PRESENT CASE, WE F IND THAT THE ASSESSEE HAD GIVEN SUFFICIENT EVIDENCE BEFORE THE DEPARTMENT AND,THERE FORE, IT CANNOT BE SAID THAT THE ASSESSEE PREVENTED ANY ENQUIRIES BEING MADE BY THE DEPARTMENT EXCEPT THAT HE FAILED TO PRODUCE THE PARTIES ON ACCOUNT OF CERTAIN IMPEDI MENTS. NO ADVERSE CONCLUSION CAN BE ITA NO.1220/M/2009 MUKESH M RUPAREL 7 DRAWN FROM THIS. AS FAR AS LD DRS CONTENTION REGAR DING NET WORTH OF DONORS IS CONCERNED THAT, IN OUR OPINION, IS RELEVANT MAINLY AT THE TIM E OF MAKING ADDITION BUT WHEN IT COMES TO PENALTY THAT CANNOT BE HELD TO BE SUFFICIENT TO ATTRACT PENAL PROVISIONS. IN VIEW OF ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF LD CIT (A) AND ALLOW THE APPEAL FILED BY THE ASSESSEE. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 2 ND JULY, 2010 SD/- (VIJAY PAL RAO) (JUDICIAL MEMBER) SD/- (S.V. MEHROTRA) (ACCOUNTANT MEMBER) MUMBAI, DATED 2 ND JULY, 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-II, MUMBAI 4. COMMISSIONER OF INCOME TAX CITY-2-, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO.1220/M/2009 MUKESH M RUPAREL 8 DATE INITIALS 1. DRAFT DICTATED ON .2010 PS 2. DRAFT PLACED BEFORE AUTHOR 28.4.2010 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM/JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/J M 5. APPROVED DRAFT COMES TO THE SR. PS PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.1220/M/2009 MUKESH M RUPAREL 9