Nilam Mayank Kapadia, Surat V. The Income tax Officer,Ward-3(2), Surat

ITA 1244/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63149 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 21-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Principle of natural justice
• Section: 133(6)

Judgement Text

ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 1 FIT FOR PUBLICATIO N (J.M.) (A.M.) IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO. 1244/ AHD/2010. (ASSESSMENT YEAR: 2004-05) LATE SHRI MAYANK D.KAPADIA, LEGAL HEIR NILAM MAYANK KAPADIA, BUNGLOW NO.25, SHANTI PALACE SOCIETY, BEHIND NAVYUG COLLEGE, RANDER ROAD, SURAT-395 009 (APPELLANT) VS. INCOME TAX OFFICER, WARD 3(2), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: ABQPK 8011N APPELLANT BY : NONE WRITTEN SUBMISSIONS RESPONDENT BY : MR. T.SHANKAR, SR. D.R. ( )/ ORDER DATE OF HEARING : 5-11-2012 DATE OF PRONOUNCEMENT 23 -11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A)- II, SURAT DATED 29-1-2010 WHEREBY THE PENALTY OF RS .1,20,000/- LEVIED U/S. 271(1) (C) BY THE A.O. FOR ASSESSMENT YEAR 2004-05 HAS BEEN CONFIRMED. ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 2 2. NONE APPEARED ON BEHALF OF THE APPELLANT. HOWEVE R, ON THE BASIS OF THE WRITTEN SUBMISSIONS FILED ON 31-10-2012 AND THE MATERIAL AVAILABLE ON RECORD WE PROCEED TO DECIDE THE APPEAL. 3. IN THIS CASE RETURN OF INCOME DECLARING TOTAL IN COME OF RS.1,64,930/- WAS FILED ON 30-9-2004. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S.143(3) VIDE ORDER DAT ED 22-12-2006 AND THE TOTAL INCOME WAS DETERMINED AT RS.5,64,930/- AF TER MAKING ADDITIONS ON ACCOUNT OF BOGUS/UNPROVED GIFTS OF RS.4,00,000/-.T HE ADDITIONS WERE ALSO CONFIRMED BY CIT (A) VIDE ORDER DATED 31-10-2007. I T IS ON THE AFORESAID ADDITION ASSESSING OFFICER (A.O.) VIDE ORDER DATED 13-3-2009 LEVIED PENALTY OF RS.1,20,000/- U/S. 271(1) (C ) AND THE SAME WAS ALSO UPHELD BY CIT (A) VIDE ORDER DATED 29-1-2010. IT IS AGAINST THE AFORE SAID ACTION OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O . OBSERVED THAT ASSESSEE HAD RECEIVED GIFTS OF RS.5 LAC FROM VARIOU S PERSONS. ASSESSEE WAS ASKED TO PRODUCE SHRI ARVINDBHAI GOVANBHAI GAND HI AND SMT. KUSUMBEN GANDHI, BEING 2 DONORS OF GIFT OF RS.2 LAC EACH AND ALSO THEIR BANK ACCOUNTS AND RETURN OF INCOME. NO DETAILS WERE FILED BY ASSESSEE. A. O. CONDUCTED INQUIRY U/S. 133(6) FROM THE BANK OF T HE AFORESAID DONORS. FROM THE BANK STATEMENT RECEIVED, A.O. NOTICED THAT BOTH THE DONORS HAD DEPOSITED CASH OF RS.2 LAC EACH IN THEIR BANK ACCOU NTS AND ON SAME DATE THE AMOUNT WAS GIFTED TO THE ASSESSEE. A.O. THUS CO NCLUDED THAT THE ASSESSEE HAD ADOPTED COLOURFUL DEVICE TO AVOID PAYM ENT OF TAX BY ACCEPTING BOGUS/UNPROVED GIFTS OF RS.4 LACS. HE ACC ORDINGLY, TREATED RS.4 ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 3 LAC AS UNPROVED/ BOGUS GIFT AND ADDED TO THE TOTAL INCOME. THE AFORESAID ADDITION WAS ALSO CONFIRMED BY CIT (A). ON THESE AD DITIONS ASSESSING OFFICER LEVIED PENALTY OF RS.1,20,000/- U/S. 271(1) (C). 5. CIT (A) ALSO CONFIRMED THE PENALTY ORDER. WHILE CONFIRMING THE PENALTY, HE HAS INTERALIA HELD THAT DURING THE COUR SE OF APPELLATE PROCEEDINGS WITH RESPECT TO QUANTUM ADDITION, THE A .O. OF THE DONORS HAD INFORMED CIT (A) THAT ARVINDBHAI GANDHI HAD SHOWN B USINESS INCOME OF RS. 48,000/- AND INCOME FROM OTHER SOURCES OF RS.45 48/- FOR A.Y. 2004-05. NO CAPITAL ACCOUNT, PROFIT AND LOSS WAS AVAILABLE W ITH THE RETURN OF INCOME, AND THEREFORE THE ALLEGED GIFT OF RS.2 LAC WAS NOT VERIFIABLE. IN CASE OF SMT. KUSUMBEN GANDHI, THE A.O. INFORMED THAT ASSESSEE HA D DECLARED INCOME OF RS.25,612/- U/S. 44AF AND SHE HAD INTEREST INCOM E OF RS.12,487/-. ON THE BASIS OF THE AFORESAID INFORMATION, CIT (A) CON CLUDED THAT THE DONORS HAVE NOT DISCLOSED THE GIFTS IN THEIR RESPECTIVE RE TURNS OF INCOME. CIT (A) WAS FURTHER OF THE VIEW THAT THERE WAS NO NEED TO P ROVIDE ANY OPPORTUNITY TO ASSESSEE TO REBUT THE FINDINGS AS THEY WERE FINDING S OF FACTS AND EVEN IF ANY OPPORTUNITY IS GIVEN TO THE ASSESSEE IT WOULD B E OF NO VALUE OR SUBSTANCE. HE WAS THEREFORE OF THE VIEW THAT PRINCI PLES OF NATURAL JUSTICE WAS NOT VIOLATED. HE THUS CONCLUDED THAT THE DONOR S WERE OF SMALL MEANS AND SUCH PERSONS COULD NOT BE EXPECTED TO GIVE GIFT TO UNRELATED PERSONS. IN VIEW OF THE AFORESAID FINDINGS GIVEN AT THE TIME OF DECIDING THE QUANTUM APPEAL AND RELYING ON THE DECISION OF CIT VS. MOHAN AKALA (2007) 291 ITR 278 (SC) AND IN THE CASE OF RAJEEV TANDON VS. ACIT (2007) 294 ITR 488 (DEL.) HELD THE GIFT TO BE BOGUS AND THEREFORE HELD THAT THE A. O. WAS JUSTIFIED IN LEVYING PENALTY. ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 4 6. AGGRIEVED BY THE AFORESAID ORDER OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US ON THE DATE OF HEARING NONE APPEARED B UT HOWEVER WRITTEN SUBMISSIONS WERE FILED. IN THE SUBMISSIONS IT HAS BEEN SUBMITTED THAT THE ASSESSEE MR. MAYANK DEVENDRA KAPADIA DIED IN A FATA L CAR ACCIDENT ON 11- 6-2005 LEAVING BEHIND HIS WIFE, TWO MINOR DAUGHTERS AND WIDOW MOTHER. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LEGAL REPRESENTATIVE (I.E. WIDOW OF THE ASSESSEE) F ILED EVIDENCE (IDENTITY OF THE PERSONS, GIFT DEEDS AND DETAILS WHERE THE DONOR S WERE ASSESSED TO TAX). DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. WAS ALSO REQUESTED TO ISSUE SUMMONS TO THE DONORS FOR VERIFI CATION OF THE GENUINENESS OF THE GIFTS BUT A.O. IGNORED THE REQUE ST. IT IS ALSO SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E WIDOW OF THE ASSESSEE, ON THE BASIS OF DETAILS WHICH COULD BE GA THERED BY HER SUBMITTED THE NECESSARY EXPLANATIONS. THUS THE BONAFIDE EXPLA NATIONS OF THE LEGAL REPRESENTATIVE CANNOT BE REJECTED. IT WAS ALSO SUBM ITTED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE DISTINCT AN D DIFFERENT. AND THEREFORE IT IS NOT NECESSARY THAT IN ALL CASES WHE RE ADDITIONS HAVE BEEN MADE, THE PENALTY HAS TO BE NECESSARILY LEVIED. IT WAS THUS SUBMITTED THAT THE PENALTY BE DELETED. 8. ON THE OTHER HAND, THE LD. D.R. POINTED OUT TO T HE FINDINGS OF CIT (A) IN QUANTUM PROCEEDINGS WHEREIN HE HAS HELD THAT THE DONORS WERE OF SMALL MEANS AND DID NOT HAVE CAPACITY TO GIVE HUGE GIFTS. HE FURTHER SUBMITTED THAT IN CASE OF GIFTS, THE ONUS OF PROVING THE GIFT S WAS HIGHER THAN IN THE ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 5 CASE OF PROVING OF CASH CREDITS. HE THUS SUPPORTED THE ORDER OF A.O. AND CIT (A). 9. WE HAVE HEARD THE LD. D.R. AND PERUSED THE WRITT EN SUBMISSIONS AND MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSEE DIED IN A FATAL ROAD ACCIDENT ON 11-6-2005 LEAVING BEHIN D HIS WIFE, MINOR DAUGHTERS AND WIDOWED MOTHER. DUE TO THE ASSESSEES DEATH, THE ASSESSMENT PROCEEDINGS WERE ATTENDED BY HIS WIFE IN THE CAPACITY OF LEGAL REPRESENTATIVE. ASSESSEE HAD RECEIVED GIFTS OF RS. 5 LACS FROM VARIOUS PARTIES. ADDITIONS WERE MADE OF GIFTS AMOUNTING TO RS.4 LAC AS BOGUS/UNEXPLAINED GIFT FOR THE REASON THAT THE DONO RS WERE CONSIDERED TO BE OF SMALL AND NOT HAVING THE CAPACITY TO GIVE HUG E GIFTS. IN THE APPEAL AGAINST THE QUANTUM ADDITIONS, CIT (A) AFTER CONSID ERING THE INFORMATION GATHERED BY HIM FROM THE A.O. OF THE DONORS UPHELD THE ADDITION FROM THE APPELLATE ORDER IT IS SEEN THAT CIT (A) DID NOT PRO VIDE ANY OPPORTUNITY TO THE LEGAL REPRESENTATIVE TO REBUT HIS FINDINGS ON THE B ASIS OF MATERIAL COLLECTED BY HIM. EVEN THE DONORS WERE NEITHER EXAMINED BY TH E A.O. OF THE DONORS NOR BY CIT (A) EITHER DURING THE QUANTUM PROCEEDING S OR AT THE TIME OF PENALTY PROCEEDINGS. CIT (A) WAS OF THE VIEW THAT T HERE WAS NO NEED TO PROVIDE ANY OPPORTUNITY TO ASSESSEE TO REBUT THE FI NDINGS AND THE PRINCIPLES OF NATURAL JUSTICE WERE NOT VIOLATED. 10. THE QUESTION THAT ARISES UNDER THE FACTS OF THE PRESENT CASE IS THAT WHETHER LIABILITY OF PENALTY CAN BE FASTENED ON THE LEGAL HEIRS? ADMITTEDLY, THE ADDITION IN QUANTUM PROCEEDINGS HAS BEEN MADE O N THE BASIS THAT THE GIFTS AS CLAIMED BY THE ASSESSEE COULD NOT BE VERIF IED / PROVED. IT IS A FACT THAT IN THE QUANTUM PROCEEDINGS THE GIFTS WERE HELD TO BE BOGUS AND ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 6 THEREFORE BASED ON THE AFORESAID ADDITION THE LEVY OF PENALTY COULD HAVE BEEN SUSTAINED, BUT HOWEVER IN THE PRESENT CASE, CO NSIDERING THE PECULIAR CIRCUMSTANCES OF THE CASE AND MORE SO THE FOLLOWING REASONS, WE ARE OF THE VIEW THAT THE PENALTY CANNOT BE LEVIED. (1) THE DEATH OF THE ASSESSEE TOOK PLACE BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS; (2) ASSISTANCE GIVEN BY THE LEGAL HEIR OF THE ASSES SEE TO THE A.O. BY FURNISHING DURING THE ASSESSMENT PROCEEDINGS THE RE QUIRED MATERIAL THAT COULD BE GATHERED BY HER; (3) NO OPPORTUNITY WAS GRANTED TO THE LEGAL HEIR TO REBUT THE FINDINGS OF CIT (A) WITH RESPECT TO THE MATERIAL GATHERED DIREC TLY BY HIM AT THE BACK OF THE ASSESSEE AND THEREBY VIOLATING THE PRIN CIPLES OF NATURAL JUSTICE. (4) NON EXAMINATION OF THE DONORS EITHER BY THE A.O . OR BY CIT (A) EITHER DURING THE COURSE OF QUANTUM PROCEEDINGS OR AT THE TIME OF PENALTY PROCEEDINGS, BUT SIMPLY RELYING ON THE REPORT OF TH E A.O. OF THE DONORS. (5) NON ISSUANCE OF SUMMONS TO THE DONORS DESPITE T HERE BEING A SPECIFIC REQUEST MADE BY LEGAL HEIR AT THE TIME OF ASSESSMENT PROCEEDINGS. (6) LEGAL HEIR WAS NOT AWARE OF THE CLOSENESS OF TH E DECEASED WITH THE DONORS. ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 7 (7) THE EXPLANATIONS GIVEN BY THE LEGAL REPRESENTAT IVE HAS NOT BEEN PROVED TO BE NOT BONAFIDE. (8) IT BEING A SETTLED LAW THAT PENALTY AND QUANTUM PROCEEDINGS BEING DISTINCT AND THEREFORE IT IS NOT NECESSARY THAT IN ALL CASES OF ADDITION, PENALTY SHOULD NECESSARILY BE LEVIED. 11. CONSIDERING THE TOTALITY OF ABOVE FACTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, PENALTY LEVIED U/S. 271(1) (C) SHOULD BE DELETED. THUS THE GROUND OF THE ASSESSEE IS ALLOWED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 23 - 11 - 2012 . SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-II, SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO 1244 /AHD/2010 A.YR.. 2004 -05 8 1.DATE OF DICTATION 19 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 20 /11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..