Narendra Kumar Sakaria, CHENNAI V. ACIT, CHENNAI

ITA 1745/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57901 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 02-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: T BANUSEKAR
• Keywords: Gift; Question of law
• Section: 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 1745/MDS/2011 ASSESSMENT YEAR : 2004-05 SHRI NARENDRA KUMAR SAKARIA, 16, KESAVA IYER STREET, CHENNAI-600 003. V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, BUSINESS CIRCLE-XI, CHENNAI. [PAN: AASPS7064C] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T. BANUSEKAR, CA RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL DATE OF HEARING : 31-01-2012 DATE OF PRONOUNCEMENT : 31-01-2012 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT(APPEALS)-IV, CHENNAI IN ITA NO. 88/08-09/A-IV D ATED 30-08-2011 FOR THE ASSESSMENT YEAR 2004-05. I.T.A. NO.1745/MDS/2011 2 2. SHRI T. BANUSEKAR, CA REPRESENTED ON BEHALF OF T HE ASSESSEE AND SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL REPRESENTED ON BEH ALF OF THE REVENUE. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE IS AN INDIVIDUAL, WHO IS A DEALER IN MADRAS STEELS AND TUBES. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD CLAIMED TO HAVE RECEIVED GIFT S AND LOANS FROM HIS NEPHEW, SHRI SUSHIL JAIN. IT WAS THE SUBMISSION THAT THE A SSESSEE HAD CLAIMED TO HAVE RECEIVED A GIFT OF ` 45 LAKHS AS ALSO A LOAN OF ` 45 LAKHS. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD AS KED THE ASSESSEE TO PROVE THE GIFT AND THE LOAN FROM SHRI SUSHIL JAIN. THE ASSES SEE HAD SUBMITTED THAT SHRI SUSHIL JAIN WAS HIS NEPHEW AND WAS WORKING WITH THE CITI B ANK AT NEW YORK AND THE GIFT WAS MADE OUT OF HIS OWN EARNINGS IN THE U.S. IT WA S THE SUBMISSION THAT SHRI SUSHIL JAIN WAS A NON-RESIDENT. THE ASSESSEE HAD A LSO PRODUCED THE STATEMENT OF ACCOUNT OF GLOBAL TRUST BANK LTD. NRO ACCOUNT OF SR I SUSHIL JAIN AS ALSO THE COPY OF GIFT DEED OF SHRI SUSHIL JAIN. THE ASSESSING OFFIC ER DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT THE LETTERS SENT TO SHRI SUSHIL JAIN TO HIS SECUNDERABAD ADDRESS WAS NOT RESPONDED TILL DATE AS ALSO ON ACCOUNT OF THE FACT THAT THE SAID SHRI SUSHIL JAIN HAD MADE A GIFT OF ` 45,19,425/- TO THE ASSESSEES WIFE AND AN AMOUNT OF ` 4,70,450/- TO THE ASSESSEES DAUGHTER. ON APPEAL AGAINST THE ADDITION, THE LEARNED CIT(A) HAD ALLOWED THE ASSESS EES APPEAL. ON FURTHER APPEAL, THE TRIBUNAL VIDE ITS ORDER IN ITA NO. 1942/MDS/200 7 DATED 29-02-2008 HAD ALLOWED THE REVENUES APPEAL AND RESTORED THE ORDER OF THE ASSESSING OFFICER. IT I.T.A. NO.1745/MDS/2011 3 WAS THE SUBMISSION THAT CONSEQUENT TO THE ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER HAD LEVIED THE PENALTY UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961 WHICH WAS ALSO CONFIRMED BY THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT AGAINST THE ORDER OF THE TRIBUNAL IN THE QUANTUM AS SESSMENT THE ASSESSEE HAD FILED AN APPEAL TO THE HON'BLE HIGH COURT OF MADRAS UNDER SECTION 260A AND THE SAME HAS ALSO BEEN ADMITTED. IT WAS THE SUBMISSION THAT IN THE COURSE OF PENALTY PROCEEDINGS THE ASSESSEE HAD AGAIN PRODUCED THE LET TER FROM THE COMPANY IN DUBAI WHEREIN IT HAD BEEN CATEGORICALLY ADMITTED THAT A S UM OF $ 2 LAKHS HAD BEEN GIVEN TO THE DONOR FOR THE TIMELY ADVICE AND CONSULTANCY PROVIDED TO THEM REGARDING PROCUREMENT OF GOODS. IT WAS THE FURTHER SUBMISSIO N THAT THE GIFT AND THE LOAN WAS TRANSFERRED OUT OF THE NRO ACCOUNT OF THE DONOR AT GLOBAL TRUST BANK AND THE CREDIT OF THE SUM INTO THE BANK WAS THROUGH TELEGRAPHIC TR ANSFER. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD DISPUTED THE SOURCE OF THE TRANSFER AND AS TO HOW IT WAS RELATABLE TO THE DONOR. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD PROVIDED THE CONFIRMATION LETTER FROM THE DONOR. THE LETTER BY THE ASSESSING OFFICER WAS ADDRESSED TO THE DONOR AT HIS ADDRESS IN SECUNDERAB AD WHEREAS THE DONOR WAS RESIDING IN USA. THE BANK ACCOUNT OF THE DONOR WAS ALSO PRODUCED. THE AMOUNT WAS CREDITED TO THE DONORS BANK ACCOUNT THROUGH TE LEGRAPHIC TRANSFER. IF THE ASSESSING OFFICER DID NOT BELIEVE THE DONORS CAPAC ITY, IT WAS UPTO THE ASSESSING OFFICER TO CONSIDER THE ISSUE IN THE HANDS OF THE D ONOR AND THE SAME COULD NOT HAVE BEEN CONSIDERED IN THE HANDS OF THE ASSESSEE. IT W AS THE SUBMISSION THAT IN ANY I.T.A. NO.1745/MDS/2011 4 CASE PENALTY WAS NOT LEVIABLE AS THE ASSESSEE HAD P ROVIDED THE EXPLANATION AS REQUIRED UNDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT AND THIS EXPLANATION PROVIDED BY THE ASSESSEE SUPPORTED BY EVIDENCES WAS A PLAUSIBLE EXPLANATION AND THIS EXPLANATION HAS ALSO NOT BEEN SHOWN TO BE FALS E. IT WAS THE FURTHER SUBMISSION THAT IN VIEW OF THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. INDEN BISLERS, REPORTED IN 240 ITR 943, THE MERE FA CT THAT CERTAIN DEDUCTION HAS BEEN DISALLOWED AND TREATED AS INCOME DOES NOT NECE SSARILY LEAD TO THE CONCLUSION THAT ASSESSEE WAS GUILTY OF FRAUD OR WILLFUL NEGLEC T. THERE CAN BE NO PRESUMPTION OF FRAUD OR NEGLECT WITHOUT ADDUCING ANY EVIDENCE WHAT SOEVER TO SUBSTANTIATE SUCH ASSERTION. IT WAS THE FURTHER SUBMISSION THAT IN V IEW OF THE DECISION OF THE LEARNED THIRD MEMBER IN THE CASE OF RUPAM MERCANTILES LTD. (IN LIQUIDATION) & ORS. V. DEPUTY COMMISSIONER OF INCOME-TAX, REPORTED IN 91 I TD 237 (AHD) (TM), A PLEA OR CLAIM WHICH IS HELD BY THE HIGH COURT TO GIVE RISE TO A SUBSTANTIAL QUESTION OF LAW, CANNOT BE TREATED TO BE FRIVOLOUS OR MALA FIDE AS T O ATTRACT LEVY OF PENALTY UNDER SECTION 271(1)(C). IT WAS THE SUBMISSION THAT IN T HE CIRCUMSTANCES, THE PENALTY AS LEVIED BY THE ASSESSING OFFICER AND AS CONFIRMED BY THE LEARNED CIT(A) WAS LIABLE TO BE DELETED. 4. IN REPLY, THE LEARNED JR. STANDING COUNSEL VEHEM ENTLY SUPPORTED THE ORDERS OF THE LEARNED CIT(A) AND THE ASSESSING OFFICER. I T WAS THE SUBMISSION THAT THE LOAN AND GIFT CLAIMED BY THE ASSESSEE TO HAVE RECEI VED FROM HIS NEPHEW HAD NOT BEEN ESTABLISHED BY THE ASSESSEE. IT WAS THE SUBMI SSION THAT THE TRIBUNAL ALSO IN I.T.A. NO.1745/MDS/2011 5 THE QUANTUM ASSESSMENT CONFIRMED THE ADDITION AS MA DE BY THE ASSESSING OFFICER. IT WAS THE FURTHER SUBMISSION THAT THE ASSESSEE HAD NOT PROVED THE SOURCE OR THE CAPACITY OF THE NEPHEW, SHRI SUSHIL JAIN TO GIVE TH E LOAN AND GIFT TO THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CI T(A) WAS LIABLE TO BE SUSTAINED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT TH E OUTSET WHAT IS NOTICED IS THAT THE ASSESSING OFFICER IS DISPUTING THE CAPACIT Y OF SHRI SUSHIL JAIN TO GIVE THE LOAN AND THE GIFT. UNDISPUTEDLY, THE GIFT AND THE LOAN HAD COME THROUGH PROPER BANKING CHANNELS. THE NRO ACCOUNT OF SHRI SUSHIL J AIN IS NOT SHOWING ANY CASH DEPOSIT BUT IS SHOWING CLEAR TELEGRAPHIC TRANSFER. THE SOURCE OF SHRI SUSHIL JAIN REPRESENTING $ 2 LAKHS PAYMENT FROM A DUBAI COMPANY FOR ADVICES GIVEN HAS ALSO BEEN PRODUCED. THE CLAIM OF THE GIFT AND LOAN FROM SHRI SUSHIL JAIN HAS BEEN FOUND TO BE PLAUSIBLE BY ONE APPELLATE AUTHORITY BEING TH E LEARNED CIT(A). EVEN IN THE PENALTY PROCEEDINGS THE ASSESSEE HAS CONTINUED TO H OLD ON TO HIS CLAIM AND THIS CLAIM MADE BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE. THUS ONCE IT IS NOTICED THAT THE ASSESSEE HAS GIVEN A PLAUSIBLE EXPLANATION AND THE EXPLANATION HAS HELD ITS FORT BEFORE THE LEARNED CIT(A) AND THAT THE EXPLANA TION IN THE QUANTUM ASSESSMENT HAS ALSO LED TO A SUBSTANTIAL QUESTION OF LAW BEING ADMITTED BY THE HON'BLE JURISDICTIONAL HIGH COURT, IT CANNOT BE SAID THAT T HE EXPLANATION IS AN UNSUPPORTABLE OR A FRIVOLOUS CLAIM SO AS TO GIVE RISE TO THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AS PER THE PROVISIONS OF SECTION 271(1 )(C) THERE IS A DUTY PLACED ON THE ASSESSEE TO REPLY TO THE PENALTY NOTICE AND TO GIVE THE PLAUSIBLE EXPLANATION. ONCE I.T.A. NO.1745/MDS/2011 6 THIS IS DONE, THE DUTY SHIFTS TO THE ASSESSING OFFI CER TO SHOW THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. EXPLANATION 1 TO S ECTION 271(1)(C) OF THE ACT IS CLEAR ON THIS ISSUE INSOFAR AS IT SPECIFICALLY USES THE T ERM FAILS TO OFFER AN EXPLANATION AND THE TERM OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE AS ALSO THE TERM EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE. HERE THE ASSESSEE HAS GIVEN AN EXPLANATION. THE EXPLANATION IS SUBSTANTIATED BY E VIDENCES. THE EXPLANATION HAS NOT BEEN SHOWN TO BE FALSE. IN THE CIRCUMSTANCES, PENALTY IS NOT LEVIABLE. IN THE CIRCUMSTANCES, THE ORDER OF THE LEARNED CIT(A) CONF IRMED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT STANDS REVERSED. IN T HE CIRCUMSTANCES THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. THE ORDER WAS PRONOUNCED IN THE COURT ON 31/01/2 012. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 31 ST JANUARY, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE