Shri Yashoda Nandan Agarwal, V. ITO,

ITA 21/DEL/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4749 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 06-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 05-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL GAUTAM SENIOR
• Keywords: Gift; Income from undisclosed sources; Opportunity of being heard; Principle of natural justice; Additional evidence
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.21/DEL/2009 (ASSESSMENT YEAR : 2003-04) SHRI YASHODA NANDAN AGRAWAL, VS. ITO, WARD 3, SADAR BAZAR, HALDWANI (UTTRANCHAL) HALDWANI (UTTRANCHAL) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MOHIT GUPTA, CA REVENUE BY : SHRI SUNIL GAUTAM, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS)-II, DEHRADUN DATED 10.09.2008. 2. THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 2 8.11.2003 DECLARING TOTAL INCOME OF RS.2,18,783/-. THE ASSESSEE IS AN I NDIVIDUAL RUNS PROPRIETORSHIP FIRM IN THE NAME OF YASHODANANDAN NA VAL KISHORE AND ENGAGED IN THE BUSINESS OF WHOLESALE TRADING OF FOO D GRAINS AND TRUCK PLYING HAVING OFFICE AT SADAR BAZAR, HALDWANI, DISTT. NAIN ITAL. DURING THE YEAR, ASSESSEE HAS CLAIMED TO HAVE RECEIVED THREE GIFTS O F RS.5 LACS EACH FROM THREE PERSONS. THE ASSESSING OFFICER HAS INVESTIGATED THE ISSUE AND MADE THE ITA NO.21/DEL/2009 2 ADDITION TO THE TOTAL INCOME OF ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES. THE CIT (A) HAS CONFIRMED THE ADDITION BY HOLDING A S UNDER :- 6.7 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE COUNSEL OF THE APPELLANT AND THE FACTS ELABORATELY STATED IN T HE ASSESSMENT BY THE AO. IT IS OBSERVED THAT THE APPELLANT HAS CL AIMED TO HAVE RECEIVED GIFTS OF RS.5 LAKHS EACH, FROM SHRI SHIV K UMAR AGARWAL, SHRI HARI LAL GUPTA AND SHRI RAM DEV AGARW AL ALL HAVING THEIR RESIDENTIAL ADDRESSES AT KOLKATA WHICH HAVE BEEN MENTIONED IN THE ASSESSMENT ORDER. THE AO HAS ISSUE D LETTERS TO THE DECLARED ADDRESSES OF THE DONORS AND SUCH LETTE RS IN THE CASE OF TWO DONORS CAME BACK UNSERVED AND IN THE CASE OF THE THIRD DONOR EVEN THOUGH THE LETTER WAS NOT UNSERVED, NO R EPLY CAME FROM SUCH DONOR. THE AO HAS ANALYZED FROM THE INCOM E TAX RETURNS OF THE DONORS THAT THEY HAD MEAGRE INCOME A ND THEY WERE NOT IN A POSITION TO MAKE SUCH SUBSTANTIAL AMOUNT O F GIFTS OUT OF THEIR OWN SOURCES. IN REALITY, THE DONORS HAVE RECE IVED GIFTS FOR THE PURPOSE OF MAKING GIFTS WHICH INDICATE THAT THE GIFTS WERE ACTUALLY ORGANIZED OUT OF THE OWN FUNDS OF THE APPE LLANT OR HIS ACCORI1PLISHES. INCIDENTALLY, THE AO HAS POINTED OU T THAT DRAFTS FOR GIFTS BY TWO SEPARATE PERSONS WERE FOUND TO BE MADE FROM THE SAME BANK BRANCH BEARING CONSEQUENT NUMBERS WHI CH CAST REASONABLE DOUBT ABOUT THE GENUINENESS OF SUCH DONO RS TO BE IN A POSITION TO MAKE SUCH GIFTS TO THE APPELLANT. THE S URROUNDING CIRCUMSTANCES WHICH HAVE BEEN PLACED ON RECORD DO N OT FIT INTO PROBABILITIES OF THE ACTUAL TRANSACTION OF THE IMPU GNED GIFTS FUND SO I AM IN AGREEMENT WITH THE ACTION OF THE AO IN T REATING SUCH AGGREGATE GIFTED AMOUNT OF RS.15 LAKHS AS INCOME FR OM UNDISCLOSED SOURCES AND NO INTERFERENCE IS CALLED F OR IN THIS RESPECT. HENCE GROUND NOS. (II), (III) AND (IV) ARE REJECTED . 3. NOW, THE ASSESSEE IS IN APPEAL BEFORE US BY TAKI NG THE FOLLOWING GROUND:- THE LEARNED CIT (A) ERRED IN FACT AND IN LAW IN CO NFIRMING THE ADDITION OF RS.15,00,000/- WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.21/DEL/2009 3 4. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD . AR SUBMITTED THAT ASSESSMENT WAS FRAMED U/S 143(3) BY THE ITO-3, HALD WANI ON 30.03.2006 AND MADE AN ADDITION OF RS.15 LACS ON ACCOUNT OF GIFT R ECEIVED FROM THREE FRIENDS OUT OF NATURAL LOVE AND AFFECTION. THE ASSESSING OF FICER DID NOT ACCEPT THE ASSESSEES CONTENTION EVEN WHEN ALL THE DOCUMENTARY EVIDENCES IN THE FORM OF AFFIDAVITS OF DONORS, PAN NUMBERS, COMPUTATION AND RETURN OF INCOME, FINANCIAL STATEMENTS AND BANK STATEMENTS ALONG WITH NECESSARY EXPLANATION WERE FURNISHED BEFORE THE ASSESSING OFFICER. THE AS SESSING OFFICER RELIED PRIMA FACIE ON THE FACT THAT THE LETTERS ISSUED TO THE DONORS WERE NOT DELIVERED TO THEM OUT TO NON-AVAILABILITY AT THE PLACE OF RES IDENCE. THE LD. AR SUBMITTED THAT THEY HAVE BEEN REPORTED AS OUT OF STATION. THE LD. AR ALSO SUBMITTED THAT WHEN ASSESSEE WAS CONFRONTED BY THE ASSESSING OFFIC ER, THE ASSESSEE HIMSELF CONTACTED THEM PERSONALLY AND THEY RECONFIRMED THE TRANSACTION DIRECTLY IN THE MONTH OF APRIL 2007 BY WHICH TIME THE ORDER WAS PAS SED BY THE ASSESSING OFFICER. THE ASSESSEE SUBMITTED AN APPLICATION UNDE R RULE 46A OF THE INCOME-TAX RULES, 1962 FOR ADMITTING THESE ADDITION AL EVIDENCES SUBMITTED IN THE FORM OF RECONFIRMATION OF THE DONORS ON 08.08.2 008 WHEREIN THEY CONFIRMED THE GIFT GIVEN TO THE ASSESSEE AND SINCE THESE WERE RECEIVED BY THE ASSESSEE AFTER THE ASSESSMENT PROCEEDINGS WERE OVER , THESE EVIDENCES MUST HAVE BEEN ADMITTED BY THE CIT (A) AND SHOULD NOT HA VE CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON ACCOUNT OF THE ADDITION OF THE GIFT AS INCOME FROM ITA NO.21/DEL/2009 4 UNDISCLOSED SOURCES. HE FURTHER SUBMITTED THAT CIT( A) MADE HIS ORDER IN HASTE AND WITH A BIASED FRAME OF MIND AS HE HAS NOT RECOR DED ANY REASONS FOR NOT ADMITTING THE ADDITIONAL EVIDENCES NOR HE HAS REMAN DED THE ISSUE TO THE ASSESSING OFFICER FOR CROSS-EXAMINATION. THE ASSESS EE DESERVES TO BE PROVIDED AN OPPORTUNITY OF BEING HEARD AND DESERVES TO BE ADMITTED ADDITIONAL EVIDENCE AS PER RULE 46A OF INCOME-TAX RULES. THERE FORE, THE CIT (A)S ORDER WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION. THE LD. AR ALSO RELIED ON THE FOLLOWING CASE LAWS FOR THE ISSUE OF ADMITTING ADDITIONAL EVIDENCES PLACED BEFORE THE CIT (A) :- (I) IN CIT V. UNITED TOWERS (I) (P.) LTD. [2008] 1 72 TAXMAN 267 (DELHI ), THE HON'BLE DELHI HIGH COURT H ELD THAT COMMISSIONER (APPEALS) IS UNDER STATUTORY OBLI GATION TO PUT ANY ADDITIONAL MATERIAL/EVIDENCE TAKEN ON RECORD BY HIM TO ASSESSING OFFICER BEFORE MAKING ANY DECISION ADVERS E TO HIM ON BASIS OF THAT MATERIAL. (II) IN DCIT, CENTRAL CIRCLE -47, MUMBAI V. PANTALO ON RETAIL (I) LTD. [2008] 21 SOT 523 (MUM.} THE HON'BLE MUMBA I ITAT BENCH RESTORED THE MATTER BACK TO THE CIT -(A) WITH THE FOLLOWING REMARKS: 'THE FIRST APPELLATE AUTHORITY CANNOT USE ANY EVIDE NCE PRODUCED BEFORE HIM UNDER SUB-RULE (4) OF RULE 46A WITHOUT GIVING A REASONABLE OPPORTUNITY OF HEARING TO THE OTHER PARTY TO EXAMINE SUCH EVIDENCE AND ALSO TO PR ODUCE ANY EVIDENCE OR DOCUMENT IN REBUTTAL OF THE ADDITIO NAL EVIDENCE PRODUCED BEFORE THE CIT(A) UNDER RULE 46A (4). SINCE THE ID. CIT(A) HAS FAILED TO OBSERVE THE PRIN CIPLES OF NATURAL JUSTICE, HIS ORDER IS LIABLE TO BE SET ASID E AND THE MATTER RESTORED TO HIM FOR RE-ADJUDICATION IN ACCOR DANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEA RING TO BOTH THE PARTIES. WE HOLD ACCORDINGLY AND CONSEQUEN TLY SET ASIDE THE ORDER OF THE ID. CIT(A) AND RESTORE T HE MATTER ITA NO.21/DEL/2009 5 TO HIS FILE WITH THE DIRECTION TO OBSERVE THE PRINC IPLES OF NATURAL JUSTICE AND DISPOSE OFF THE ISSUE AFRESH IN ACCORDANCE WITH LAW. ' (III) IN CIT V. RANJIT KUMAR CHOUDHURY [2007] 162 TAXMAN 257 (GAU) IT WAS HELD THAT THE LEARNED CIT(A PPEALS) IS NOT COMPETENT TO STRAIGHTWAY ADMIT THE FRESH EVI DENCE WITHOUT ALLOWING AN OPPORTUNITY TO THE ASSESSING OFFICER AS REQUIRED UNDER SUB-RULE (3) OF RULE 46A. (IV) IN ITO V. OM MOTORS STORE [20091 30 SOT 31 (ASR.)(URO) IT WAS HELD THAT AS THE MANDATORY REQUI REMENT OF PROVISIONS OF RULE 46A HAS NOT BEEN KEPT IN VIEW BY THE CIT(A) WHILE ADMITTING FRESH EVIDENCE THE ORDER OF THE CIT (APPEALS) WAS SET ASIDE AND RESTORED THE APPEAL TO HIS FILE F OR DECIDING THE SAME AFRESH AS PER LAW AFTER COMPLYING WITH THE REQ UIREMENTS OF RULE 46A. NEEDLESS TO SAY THAT WHILE REDECIDING THE MATTER, BOTH THE PARTIES SHALL BE ALLOWED A REASONABLE OPPORTUNI TY OF BEING HEARD. IN VIEW OF THE FACTS OF THE CASE, THE STATUTORY PRO VISIONS OF LAW AND THE JUDICIAL PRONOUNCEMENTS IN THE SPIRIT O F RULE 46A BASED ON THE PRINCIPLES OF NATURAL JUSTICE WERE NOT MET AND THEREFORE THE ORDER OF THE LD. CIT (A) IS BAD IN LA W AND NEEDS TO BE QUASHED BY THE HON'BLE BENCH. HE PLEADED THAT IN VIEW OF THESE DECISIONS OF HON'B LE HIGH COURTS, DOCUMENTS SUBMITTED BEFORE THE CIT (A) SHOULD HAVE BEEN ADMIT TED AND THE ORDER OF CIT (A) DESERVES TO BE SET ASIDE ON ACCOUNT OF THIS COU NT ALSO. 4.1 LD. AR ALSO SUBMITTED THAT EVEN ON MERITS, THE ADDITION IS BAD IN LAW. LD. AR SUBMITTED THAT DOCUMENTARY EVIDENCES IN THE FORM OF AFFIDAVITS OF DONORS, PAN NUMBERS, COMPUTATION AND RETURN OF INCO ME, FINANCIAL STATEMENTS AND BANK STATEMENTS ALONG WITH NECESSARY EXPLANATIONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH HAS BEEN REC ONFIRMED AND ITA NO.21/DEL/2009 6 RESUBMITTED BEFORE THE CIT (A) AND HE FINALLY RELIE D ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P.) LTD REPORTED IN 216 CTR 195 (SC) AND ALSO THE FOLLOWING CASE LAWS : (I) BHAV SHAKTI STEEL MINES (P.) LTD. VS. CIT (20 09) 179 TAXMAN 25 (DELHI) (II) CIT V DIVINE LEASING & FINANCE LTD. (2007) 299 ITR 268 (DELHI) (III) CIT V. GANGOUR INVESTMENT LTD. (2009) 179 TAX MAN 1 (DELHI) (IV) CIT V. DIAMOND PRODUCTS LTD. (2009)177 TAXMAN 331 (DELHI) (V) CIT V. SATISH KUMAR( 2009) 181 TAXMAN 72 (P & H ) (VI) CIT V. LAUL TRANSPORT CORPORATION (2009) 180 T AXMAN 185 (P & H) HE PLEADED TO ALLOW THE APPEAL OF THE ASSESSEE. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSING OFFICER ISSUED SEPARAT E NOTICES TO THESE ALLEGED THREE DONORS. THE NOTICE ISSUED TO SHRI HARI LAL GU PTA AND SHRI SHIV KUMAR AGARWAL CAME UNSERVED AND THE LETTER ISSUED TO ANOT HER DONOR, SHRI RAM DEV AGARWAL NEITHER RECEIVED BACK NOR ANY REPLY WAS REC EIVED. THE ASSESSING OFFICER HAS ALSO EXAMINED THE CAPACITY OF THESE ALL EGED DONORS. SHRI SHIV KUMAR AGARWAL HAS DECLARED TOTAL INCOME OF RS.45,95 1/- AND AGRICULTURAL INCOME OF RS.49,002/-. THE CAPITAL ACCOUNT SHOWS TH AT HE HAS RECEIVED A GIFT OF RS.4 LACS DURING THE PERIOD RELEVANT TO THE SAME ASSESSMENT YEAR. HE HAS ALSO SHOWN GIVEN A GIFT OF RS.5 LACS. AFTER THE CLE ARANCE OF CHEQUE OF RS.5 LACS ON 27.12.2002, A MEAGER BALANCE OF RS.1,473/- REMAINED IN HIS BANK ACCOUNT. SIMILARLY, IN THE CASE OF SHRI HARI LAL GU PTA, THE INCOME DECLARED WAS ONLY OF RS.1,14,960/- FOR THE RELEVANT ASSESSME NT YEAR. HE HAS SHOWN ITA NO.21/DEL/2009 7 GIFTS RECEIVED ON MARRIAGE AND BIRTHDAY PARTY OF RS .8,50,000/-. THE BANK ACCOUNT OF THE DONOR SHOWS THAT HE HAS DEPOSITED A SUM OF RS.5 LACS ON 11.01.2003 AND HAS WITHDRAWN THE SAME ON THE SAME D AY AND AFTER THAT THE BALANCE REMAINED ONLY OF RS.2,266/-. THE THIRD DONO R, SHRI RAM DEV AGARWAL HAS ALSO DECLARED A MEAGRE INCOME OF RS.87,450/-. H E HAS ALSO SHOWN A RECEIPT OF GIFT OF RS.5 LACS AND THE SAME AMOUNT WA S SHOWN AS GIFTED TO THE ASSESSEE. THE BANK ACCOUNT OF THE ALLEGED DONOR SHO WS THAT RS.5 LACS WAS DEPOSITED ON 27.12.2002 AND WAS WITHDRAWN ON THE SA ME DAY. THE BALANCE IN THE BANK ACCOUNT REMAINED OF RS.1,113/- ONLY. ON T HE BASIS OF THESE FACTS, THE ASSESSING OFFICER REACHED AT A CONCLUSION THAT THES E PERSONS WERE NOT FINANCIALLY CAPABLE TO MAKE SUCH HUGE AMOUNT AS GEN UINE GIFTS. THERE WAS NO OCCASION FOR MAKING SUCH GIFTS. THE PATTERN OF THE GIFTS WAS AGAINST THE HUMAN PROBABILITIES. THEREFORE, IN VIEW OF THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DURGA PRASAD MORE REPORTED IN 8 2 ITR 540 (SC) AND SUMATI DAYAL VS CIT REPORTED IN 214 ITR 801, THESE GIFTS WERE BOGUS AND THE ADDITION HAS BEEN RIGHTLY CONFIRMED BY THE CIT (A). 6. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE HA VE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AFTER HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT CIT (A) SHOULD HAVE ADMITTED THE ADDITION AL EVIDENCES FILED BY THE ASSESSEE. ASSESSEE SUBMITTED RECONFIRMATION FROM TH E DONORS AS ADDITIONAL EVIDENCE. CIT (A) NEITHER RECORDED REASONS FOR REJE CTION OF ADDITIONAL ITA NO.21/DEL/2009 8 EVIDENCE NOR REMAND REPORT WAS CALLED FOR FROM THE ASSESSING OFFICER. IN OUR CONSIDERED VIEW, CIT (A) COULD HAVE BEEN FORWARDED THESE ADDITIONAL EVIDENCES FOR VERIFICATION TO THE ASSESSING OFFICER FOR CALLING HIS VIEW IN THE REMAND REPORT. THE CIT (A) HAS ALSO NOT DISMISSED T HE ASSESSEES APPLICATION FILED UNDER RULE 46A OF THE INCOME-TAX RULES, 1962 WITH A SPEAKING ORDER. THEREFORE, IN THE INTEREST OF JUSTICE AND EQUITY, W E FIND IT APPROPRIATE TO REMAND THE MATTER TO THE FILE OF THE CIT (A) TO DEC IDE THE ISSUE DE NOVO, AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD. WE ORDER A CCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 27 TH DAY OF AUGUST, 2013. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 27 TH DAY OF AUGUST, 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-II, DEHRADUN. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.