Lalit Kumar Jagnani, Ranchi V. ITO, Dhanbad

ITA 157/RAN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0025 (ITAT-RANCHI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DEVESH PODDAR SHRI CHAUDH
• Keywords: Unexplained cash credit; Gift; Source of fund
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI SMC BENCH, RANCHI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER ITA NO.157/RAN/2015 ASSESSMENT YEAR :2010-11 LALIT KUMAR JAGANANI C/O. SRI S.K.PODDAR, ADVOCATE, UPPER BAZAR, BEHIND CENTRAL BANK, RANCHI-834 001 V S INCOME TAX OFFICER, WARD-1(4), LUBY CIRCULAR ROAD, DHANBAD PAN/GIR NO. : ACAPJ 9045 Q (APPELLANT ) .. (RESPONDENT) APPELLANT BY : SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY : SHRI CHAUDHURY ORAON, DR DATE OF HEARING :14-09-2016 DATE OF PRONOUNCEMENT : 16-09-2016 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 20.08.2015 OF COMMISSIONER OF INCOME TAX (APPEALS), DHANBAD RELATING TO ASSESSMENT YEAR (AY)2010-11. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE IS AS TO WHETHER THE CIT(A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE AO IN MAKING ADDITION OF A SUM OF RS.3 LACS U/S.68 OF THE INCOME TAX ACT, 1961, (ACT). 3. THE ASSESSEE IS AN INDIVIDUAL. HE FILED RETURN OF INCOME FOR AY 2010-11 DECLARING TOTAL INCOME OF RS.2,04,600/-. DU RING THE YEAR ASSESSEE HAS SHOWN TO HAVE RECEIVED CASH GIFTS OF R S.1 LAKH EACH FROM (1) SRI SUNIL KR. JAGNANI, BROTHER OF THE ASSESSEE, (2) SRI KEDAR NATH 2 ITA NO.157/RAN/2015 AY:2010-11 JAGNANI, FATHER OF THE ASSESSEE AND (3) SMT. SITA D EVI JAGNANI, MOTHER OF THE ASSESSEE. GIFT DECLARATIONS BY THE DONORS WE RE FILED BEFORE THE AO. ALL THE DONORS WERE INCOME-TAX ASSESSEES AND TH EIR RETURN OF INCOME, COPY OF BALANCE SHEET AND COMPUTATION OF IN COME WERE FILED. THE AO NOTICED FROM THE COMPUTATION OF INCOME FILED IN CASE OF THE DONORS THAT (1) SRI SUNIL KR. JAGNANI WAS HAVING MA IN SOURCE OF INCOME FROM RETAIL TRADE AND INCOME FROM THIS SOURCE HAD B EEN DECLARED AT RS.89,500/- ON A TURNOVER OF RS.4.80 LAKH I.E. NET PROFIT IS @ 18.65% OF TURNOVER, (2) SRI KEDAR NAWTDH JAGNANI WAS HAVIN G MAIN SOURCE OF INCOME FROM RETAIL TRADE AND INCOME FROM THIS SOURC E HAD BEEN DECLARED AT RS.1.24,400/- ON A TURNOVER OF RS.6.80 LAKH I.E. NET PROFIT IS @ 18.29% OF TURNOVER AND (3) SMT. SITA DEVI JAGN ANI WAS HAVING MAIN SOURCE OF INCOME FROM RETAIL TRADE AND INCOME FROM THIS SOURCE HAS BEEN DECLARED AT RS.1,49,100/- ON A TURNOVER OF RS.6.90 LAKH I.E. NET PROFIT IS @ 21.61% OF TURNOVER. 4. AS THE RATE OF NET PROFIT SHOWN IN CASE OF THE DONORS WAS ABNORMALLY HIGH, THE AO ISSUED SUMMONS U/S. 131 OF THE ACT WERE ISSUED TO ALL THE THREE DONORS FOR PERSONAL APPEARA NCE AND IT WAS ALSO SPECIFICALLY MENTIONED IN THE SUMMONS TO PRODUCE EV IDENCE TO PROVE THE INCOME EARNED DURING THE YEAR AS SHOWN IN THE C OMPUTATION OF INCOME. IN RESPONSE TO THE SUMMONS SRI SUNIL KR. JA GNANI ONLY APPEARED WHOSE STATEMENT ON OATH WAS RECORDED. STA TEMENT ON OATH MAINLY REVEALED THAT SRI SUNIL KR. JAGNANI RUNS A K IRANA SHOP AT CHASS HAVING TURNOVER OF AROUND RS.5 LAKHS. HIS FAMILY CO NSISTS OF HIMSELF, WIFE AND THREE SCHOOL GOING CHILDREN, ONE OF THE CH ILDREN STAYS WITH ONE OF THE RELATIVE SINCE SRI SUNIL KR. JAGNANI IS NOT FINANCIALLY SOUND TO MAINTAIN ALL THE CHILDREN AND WIFE ALSO EARNS RS.2, 500/- TO 3,000/- MONTHLY TO MAINTAIN THE FAMILY. NO EVIDENCE OF PURC HASE OR SALE ETC, AGAINST WHICH INCOME HAS BEEN SHOWN WAS PRODUCED. A CCORDING TO THE AO FROM THE STATEMENT ON OATH, IT WAS VERY SURPRISI NG THAT SRI SUNIL KR. 3 ITA NO.157/RAN/2015 AY:2010-11 JAGNANI CANNOT MANAGE HIS FAMILY ON HIS OWN AND HE IS MAKING GIFT TO HIS BROTHER WHO IS WELL ESTABLISHED. HENCE, THE AO HELD THAT THE CREDITWORTHINESS OF THE DONOR IS NOT PROVED AND ALS O THE SOURCE AND GENUINENESS OF THE GIFT WERE ALSO NOT PROVED SINCE THE GIFT IS MADE IN CASH. 5. AS FAR AS SRI KEDAR NATH JAGNANI AND SMT. SITA DEVI JAGNANI IS CONCERNED, THEY DID NOT APPEAR IN RESPONSE TO SUMMO NS U/S 131 ON THE GROUND THAT THEY ARE OUT OF STATION. HOWEVER, T HE AO ON PERUSAL OF THE COPY OF RETURN OF INCOME, BALANCE SHEET AND COM PUTATION OF INCOME WAS OF THE VIEW THAT THEY ALSO DID NOT FILE ANY EVI DENCE TO SHOW PURCHASE OR SALE ETC. AGAINST WHICH INCOME HAS BEEN SOWN AT A VERY HIGH RATE OF NET PROFIT MENTIONED AS ABOVE WAS PROD UCED. THE AO THEREFORE HELD THAT IN ABSENCE OF ANY EVIDENCE OF I NCOME EARNED CREDITWORTHINESS OF THE DONORS IS NOT PROVED AND AL SO THE SOURCE AND GENUINENESS OF THE GIFTS WERE NOT PROVED SINCE THE GIFTS ARE MADE IN CASH. THE AO THEREFORE TREATED THE GIFT OF RS.3 L AKHS RECEIVED BY THE ASSESSEE AND CREDITED TO CAPITAL ACCOUNT AS UNEXPLA INED CASH CREDIT U/S. 68 OF THE ACT, AND RS.3 LAKHS WAS ADDED TO THE TOTAL INCOME AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 6. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE AO AGREEING WITH THE VIEW OF THE AO. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. I HAVE HEARD THE SUBMISSION OF THE LEARNED COUNS EL FOR THE ASSESSEE WHO DREW MY ATTENTION TO THE EVIDENCE IN T HE FORM OF RETURN OF INCOME OF THE DONORS WHICH WAS ACCEPTED BY THE A SSESSING OFFICER OF THE DONORS. HE SUBMITTED THAT THE REVENUE AUTHORITI ES IN DISBELIEVING 4 ITA NO.157/RAN/2015 AY:2010-11 THE EXPLANATION OF THE ASSESSEE WITH REGARD TO GIFT S RECEIVED HAVE ATTEMPTED TO EXAMINE THE SOURCE OF THE DONORS IN TH E ASSESSMENT OF THE DONEE, WHICH IS NOT PERMISSIBLE IN LAW. THE LE ARNED DR RELIED ON THE ORDER OF THE AO. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, THE FIR ST ASPECT WHICH I NOTICE IS THAT THE SRI SUNIL KUMAR JAGNANI IS BROTH ER AND SHRI KEDER NATH JAGNANI IS FATHER AND SMT.SITA DEVI JAGNANI IS THE MOTHER OF THE ASSESSEE. THEREFORE, THERE IS EVERY JUSTIFICATION F OR THEM TO GIVE GIFTS TO THE ASSESSEE. THE ONLY ASPECT TO BE CONSIDERED I S ABOUT THE CREDITWORTHINESS OF THE DONORS. THE RETURNS FILED B Y THE DONORS SHOWING THE GIFT AND THE SOURCE OF FUNDS FOR MAKING THE GIF TS HAVE ALREADY BEEN DISCLOSED BY THE DONORS IN THEIR RETURNS OF INCOME. THE AO OF THE DONORS HAVE NOT DISBELIEVED THE CAPACITY OF THE DON ORS TO MAKE THE GIFTS IN QUESTION. ONCE THE THREE FACTS VIZ., IDEN TITY OF THE CREDITOR, HIS CAPACITY TO ADVANCE THE LOAN AND THE GENUINENESS OF THE TRANSACTION ARE ESTABLISHED, THEN THE ONUS SHIFTS ONTO THE DEPA RTMENT. THE ASSESSEE IN THE PRESENT CASE HAS BY FILING THE DOCU MENTS REFERRED TO IN THE ORDER OF ASSESSMENT PRIMA FACIE DISCHARGED THE BURDEN CAST ON HIM U/S.68 OF THE ACT. ONCE THE AFORESAID THREE FACTS V IZ., IDENTITY OF THE CREDITOR, HIS CAPACITY TO ADVANCE THE LOAN AND THE GENUINENESS OF THE TRANSACTION ARE PRIMA FACIE ESTABLISHED, THEN THE O NUS SHIFTS ONTO THE DEPARTMENT. THE AO IN THE PRESENT CASE HAS FOUND FA ULT WITH THE CAPACITY OF THE DONORS TO GIVE THE GIFT IN QUESTION TO THE ASSESSEE. AS WE HAVE ALREADY OBSERVED, THE BURDEN CAST ON THE AS SESSEE STANDS DISCHARGED THE MOMENT THE ASSESSEE PROVES THE IDENT ITY OF THE CREDITOR, HIS CAPACITY TO LEND AND THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE CANNOT BE FURTHER REQUIRED TO PROVE TH E SOURCE OF THE SOURCE OF THE MONEY OUT OF WHICH GIFT WAS GIVEN AS LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF S.HASTIMAL VS. CIT 49 ITR 273 (MAD). IN THE PRESENT CASE, I HAVE ALREADY SEEN THAT THE DONORS HAVE FILED THEIR RETURNS OF INCOME AND SUCH RETURNS OF INCOME HAVE 5 ITA NO.157/RAN/2015 AY:2010-11 BEEN ACCEPTED. THE SOURCE OF THE DONORS CANNOT THER EFORE BE GONE INTO IN THE ASSESSMENT OF THE ASSESSEE. I AM, THEREFORE, OF THE VIEW THAT THE ADDITION MADE U/S.68 OF THE ACT, IN THE FACTS A ND CIRCUMSTANCES OF THE PRESENT CASE CANNOT BE SUSTAINED. THE SAME IS DIRECTED TO BE DELETED. THE APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/09/2016 SD/- (N.V.VASUDEVAN ) JUDICIAL MEMBER RANCH , DATED 16/09/2016 *DKP ,PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT CONCERNED-LALIT KR. JAGNANI, C/O SRI S.K.PODDAR, ADVOCATE, UPPER BAZAR B/H CENTRAL BANK, RANCHI-834001 2. THE RESPONDENT CONCERNED-INCOME TAX OFFICER, WARD-1(4), LUBY CIRCULAR ROAD, DHANBAD 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FILE. BY ORDER, //TRUE COPY // SR.PS, ITAT, RANCHI