ACIT-3, Kanpur V. Smt SHASHI GUPTA, Kanpur

ITA 233/LKW/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54788 (ITAT-LUCKNOW)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Assessee Lawyers: RAKES GARG
• Keywords: Gift; Depreciation; Earning of tax free income; Onus to prove
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B : LUCKNOW BEFORE SHRI H. L. KARWA, HONBLE VICE PRESIDENT AND SHRI N. K. SAINI, ACCOUNTANT MEMBER I.T.A. NO.233/LKW/11 ASSESSMENT YEAR:2006-2007 A.C.I.T.-3, VS. SMT. SHASHI GUPTA, KANPUR. 128/43, F-KIDWAI NAGAR, KANPUR. PAN:ACEPG0481D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. K. BAJAJ, SR. D. R. RESPONDENT BY: SHRI RAKES GARG, ADVOCATE ORDER PER N. K. SAINI: THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST THE ORDER DATED 28/01/2011 OF CIT(A)-II, KANPUR RELEVANT TO ASSESSMENT YEAR 2006-2007. IN THIS APPEAL THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ` 5,00,000/- ON ACCOUNT OF FREIGHT & CARTAGE, LOADING UNLOADING EXPENSES WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. IN DOING SO, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS NOT APPRECIATED THE FACT THAT THE PAYMENTS WERE MADE TO THE VARIOUS PARTIES BY 2 SPLITTING THE AMOUNTS BELOW ` 20,000/- IN PLACES AND CIRCUMSTANCES WHICH WERE NOT COVERED AS PROVIDED IN RULE 6DD OF THE INCOME TAX RULE, 1962. THE ASSESSEE FAILED TO BROUGHT ANY SUBSTANTIVE OR COGENT MATERIAL ON RECORD FROM WHICH THE CONTENTION OF THE ASSESSEE COULD BE JUSTIFIED AS REASONABLE. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF `1 2,00,000/- ON ACCOUNT OF UNEXPLAINED GIFTS WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITIONS FROM 20% TO 15% MADE ON ACCOUNT OF DISALLOWANCES UNDER VARIOUS EXPENSES WITHOUT ASSIGNING ANY REASON FOR DOING SO. WHEREAS THE ASSESSING OFFICER HAS PASSED THE ORDER AFTER TAKING INTO CONSIDERATION THE FACTS AND MATERIAL OF THE CASE AND ALSO AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. 5. THAT THE ORDER OF THE LEARNED CIT(A)-II, KANPUR DATED 28/01/2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 05/09/2008 BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL MENTIONED ABOVE AND/OR TO ADD ANY FRESH GROUNDS AS AND WHEN IT IS REQUIRED TO DO SO. 2. GROUND NO. 1 AND 2 ARE CORRELATED AND RELATE TO THE DELETION OF ADDITION OF ` 5,00,000/- MADE BY THE ASSESSING OFFICER OUT OF FREIGHT & CARTAGE, LOADING & UNLOADING EXPENSES. 3 3. THE FACTS RELATED TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 30/10/2006 DECLARING AN INCOME OF ` 30,87,728/- WHICH INCLUDED CAPITAL GAIN OF ` 87,500/-. THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961 (IN SHORT, THE ACT) ON 15/05/2007. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER MADE THE ADDITION OF ` 5,00,000/- BY OBSERVING IN PARA 4 OF THE ASSESSMENT ORDER DATED 05/09/2008 AS UNDER: 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT HAS BEEN SEEN THAT ASSESSEE HAS DEBITED ` 1,12,91,593/- AS FREIGHT & CARTAGE AND ` 19,56,218/- AS LOADING & UNLOADING EXPENSES. FROM A PERUSAL OF THE PARTY LEDGERS IN RESPECT OF THESE EXPENSES, IT IS SEEN THAT THE MODUS OF PAYMENTS IN MOST OF THE INSTANCES WAS THROUGH CASH, WITH THE INDIVIDUAL ENTRIES BEING SPLIT UP INTO FIGURES BELOW ` 20,000/-. DATE PARTICULARS DR. AMOUNT CR. AMOUNT -------- --------------- --------------- -------------- 12 JAN BY FREIGHT & CARTAGE JRNL. 1,350.00 BEING FREIGHT TRUCK NO. 92E-2612 JH.DEPO 12 JAN TO CASH PYMT. 15,800.00 BEING CASH PAID 13 JAN BY FREIGHT & CARTAGE JRN. 1,350.00 BEING FREIGHT TRUCK NO.92E-2612 JH.DEPO 13 JAN TO CASH PYMT. 16,500.00 BEING CASH PAID 13 JAN BY FREIGHT & CARTAGE JRN. 1,350.00 BEING FREIGHT TRUCK NO. 92E-2612 JH.DEPO 15 JAN TO CASH PYMT. 18,700.00 BEING CASH PAID 17 JAN TO CASH PYMT. 19,600.00 BEING CASH PAID 18 JAN BY FREIGHT & CARTAGE JRN. 1,350.00 BEING FREIGHT TRUCK NO. 92E-2612 JH.DEPO 18 JAN TO CASH PYMT. 14,500.00 BEING CASH PAID 19 JAN BY FREIGHT & CARTAGE JRN. 1,350.00 BEING FREIGHT TRUCK NO. 92E-2612 JH.DEPO 19 JAN BY FREIGHT & CARTAGE JRN. 1,350.00 BEING FREIGHT TRUCK NO. 92E-2612 JH.DEPO 4 19 JAN BY FREIGHT & CARTAGE JRN. 1,350.00 BEING FREIGHT TRUCK NO. 92E-2612 JH.DEPO 20 JAN TO CASH PYMT. 18,500.00 BEING CASH PAID AS CLEARLY DEPICTED FROM THE ABOVE THAT THE PAYMENTS OVER ` 20,000/-HAVE BEEN MADE TO ONE SHRI BRIJENDRA SINGH AGAINST THE RENDERING OF SERVICES OF SINGLE TRUCK NO.92E-2612 IN BETWEEN THE PERIOD 12 JANUARY TO 20 JANUARY. HOWEVER, PAYMENTS HAD BEEN SPLIT UP INTO VALUES BELOW ` 20,000/- BETWEEN THIS PERIOD JUST TO CIRCUMVENT THE DISALLOWANCE U/S 40A(3) OF THE INCOME-TAX ACT, 1961. IF THIS CLAIM OF SPLITTING ONE TRANSACTION OF FREIGHT THROUGH A SINGLE TRUCK INTO 7 PARTS IS ENTERTAINED, THEN BY A LOGICAL EXTENSION ANY AND EVERY SUCH BILL EXCEEDING ` 20,000/- ON WHICH 40A(3) IS ATTRACTED CAN BE SPLIT UP INTO INDIVIDUAL UNITS OF PURCHASE BELOW ` 20,000/- AND NO DISALLOWANCE WILL BE ATTRACTED IN ANY CASE. THEREFORE THE CLAIM OF THE ASSESSEE THAT THESE ARE 7 DIFFERENT TRANSACTIONS IS BEING DISALLOWED. SIMILAR PRACTICE HAS ALSO BEEN DONE IN THE CASE OF SHRI NAKUL SINGH AS CLEAR FROM THE FOLLOWING: DATE PARTICULARS DR. AMOUNT CR. AMOUNT -------- --------------- --------------- -------------- 21 APR BY FREIGHT & CARTAGE JRNL. 12,000.00 BEING FREIGHT TRUCK NO. 78AT-3651 MALLAWAN DEPO. 21 APR TO CASH PYMT. 12,000.00 BEING CASH PAID FOR FREIGHT 26 APR BY FREIGHT & CARTAGE JRNL. 12,000.00 BEING FREIGHT TRUCK NO. 78AT-3651 MALLAWAN DEPO. 26 APR TO CASH PYMT. 12,000.00 BEING CASH PAID FOR FREIGHT 28 APR BY FREIGHT & CARTAGE JRNL. 12,500.00 BEING FREIGHT TRUCK NO. 78AT-3651 MALLAWAN DEPO. 26 APR TO CASH PYMT. 12,500.00 BEING CASH PAID FOR FREIGHT IN THE CASE OF MS. RADHA TEWARI, MS. MAMTA SINGH, MS. PHOOLMATI AND IN SIMILAR OTHER CASES TOO, THE SAME MODUS HAS BEEN ADOPTED BY THE ASSESSEE. FROM A PERUSAL OF THE PARTY LEDGER, HUGE PAYMENTS HAVE BEEN MADE TO THEM IN CASH. THE RELIEF PROVIDED IN RULE 6DD IS ALSO NOT CALLED FOR AS THE 5 PAYMENTS HAVE NOT BEEN MADE AT A PLACE DEVOID OF ANY BANKING FACILITY. THE SAME MODUS OPERANDI HAD BEEN ADOPTED BY THE ASSESSEE WHILE MAKING PAYMENT UNDER THE HEAD 'LOADING UNLOADING EXPENSES'. IN THE LIGHT OF THE ABOVE FACTS, IT IS EVIDENTLY CLEAR THAT ASSESSEE HAS TRIED TO CIRCUMVENT THE PROVISIONS OF SECTION 40A(3) OF THE INCOME-TAX ACT, 1961, AND ACCORDINGLY, AN ADDITION OF RS 5,00,000/- IS BEING MADE AND ADDED TO TOTAL INCOME OF THE ASSESSEE U/S 28 OF THE INCOME TAX ACT, 1961. 4. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT A COPY OF ACCOUNT OF FREIGHT & CARTAGE EXPENSES OF ` 1,12,91,593.00 AND LOADING & UNLOADING EXPENSES OF ` 19,56,218.00 ALONG WITH CONFIRMED PARTYS LEDGER ACCOUNTS AS WELL AS COMPARATIVE TRADING RESULTS WERE FURNISHED. HOWEVER, THE ASSESSING OFFICER MADE AD HOC ADDITION OF ` 5,00,000.00 ON THE ASSUMPTION THAT THE ASSESSEE HAD TRIED TO CIRCUMVENT THE PROVISIONS OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THAT OUT OF ABOVE AMOUNT, DECLARATION IN FORM NO. 15-1 U/S 194C(3)(1) FOR NON-DEDUCTION OF TDS ON PAYMENTS AGGREGATING TO ` 61,85,600.00 HAD BEEN OBTAINED AND FILED WITH THE DEPARTMENT AND ON THE BALANCE AMOUNT OF ` 25,24,505.00, TDS HAD BEEN DULY DEDUCTED. IT WAS FURTHER STATED THAT THE RECEIVERS OF THOSE PAYMENTS WERE MOSTLY OWNERS OF ONE OR TWO TRUCKS WITH WHOM SINGLE 6 TRANSACTION OF FREIGHT RANGES BETWEEN ` 1000/- TO ` 15000/- AND THERE WAS NO CONTRACT THAT THEY WOULD REGULARLY DO THE TRANSPORTATION FOR THE ASSESSEE. IT WAS ALSO STATED THAT THE OWNERS OF THE TRUCKS INSISTED & DEMAND FOR PAYMENT IN CASH AT SITE (WHICH WAS FAR FROM AND DEVOID OF PLACES HAVING BANKING FACILITY) TO MEET AT LEAST THEIR FUEL COST AND IT IS USUAL IN THIS TYPE OF BUSINESS TO MAKE CASH PAYMENTS TO SOME OF THOSE TRANSPORTERS. IT WAS SUBMITTED THAT NONE OF SUCH PAYMENTS HAD BEEN MADE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AND THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT WHEN A SINGLE TRANSACTION OF FREIGHT & CARTAGE WAS BETWEEN ` 1,000/- TO ` 15,000/-, HOW COULD THAT PAYMENT BE SPLIT INTO FIGURE BELOW ` 20,000/-. IT WAS STATED THAT JUST BECAUSE PAYMENTS HAD BEEN MADE IN CASH, NO AD HOC DISALLOWANCE COULD BE MADE BY THE ASSESSING OFFICER WITHOUT BRINGING ANYTHING ADVERSE ON RECORD. 4.1 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, POINTED OUT THAT ON PERUSAL OF THE INDIVIDUAL LEDGER ACCOUNTS OF THE PAYEES, IT WAS SEEN THAT NONE OF THE INDIVIDUAL PAYMENTS MADE BY THE ASSESSEE EXCEEDED ` 20,000/- IN CASH. THEREFORE, THERE WAS NO QUESTION OF ANY DISALLOWANCE U/S 40A(3) OF THE ACT. HE ALSO OBSERVED THAT THE ASSESSING OFFICER HAD MADE DISALLOWANCE WITHOUT BRINGING ANY ADVERSE 7 MATERIAL ON RECORD EXCEPT FOR STATING THAT PAYMENTS HAD BEEN MADE IN CASH. ACCORDING TO HIM, AD HOC DISALLOWANCE IN THE TRADING ACCOUNT COULD NOT BE SUSTAINED UNLESS A CASE IS MADE OUT BY THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNT, WHICH HAD NOT BEEN DONE. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. NOW THE DEPARTMENT IS IN APPEAL. 5. THE LEARNED D.R. REITERATED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER AND STRONGLY SUPPORTED THE ASSESSMENT ORDER DATED 05/09/2008. 6. IN HIS RIVAL SUBMISSIONS, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON THE RECORD. IT IS NOTICED THAT THE ASSESSING OFFICER ALTHOUGH REPRODUCED THE LEDGER ACCOUNT OF SHRI BRIJENDRA SINGH AND SHRI NAKUL SINGH AT PAGE NO. 2 OF THE ASSESSMENT ORDER AND STATED THAT THE PAYMENTS OVER ` 20,000/- HAVE BEEN MADE TO SHRI BRIJENDRA SINGH AGAINST THE RENDERING OF SERVICES OF SINGLE TRUCK NO. 92E-2612. HOWEVER, HE HAS NOT POINTED OUT ANY INSTANCE WHERE THE PAYMENT EXCEEDING ` 20,000/- WAS MADE IN CASH. THE LEARNED CIT(A) CATEGORICALLY STATED THAT NONE OF THE INDIVIDUAL PAYMENTS MADE BY THE ASSESSEE 8 EXCEEDED ` 20,000/- IN CASH. IT IS RELEVANT TO POINT OUT THAT THE PROVISIONS CONTAINED IN SUB SECTION (3) OF SECTION 40A ARE AMENDED BY THE FINANCE ACT, 2007 WITH EFFECT FROM 01/04/2008 AND READ AS UNDER: (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. 7.1 IN THE AMENDED PROVISIONS IT HAS BEEN PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF AN EXPENDITURE EXCEEDING ` 20,000/- SINGLY OR IN AGGREGATE TO A PERSON IN A DAY OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT. EARLIER THE WORD AGGREGATE OF PAYMENTS WAS NOT THERE. THE RELEVANT PROVISIONS BEFORE THE AMENDMENT AS APPLICABLE TO THE FACTS OF THE PRESENT CASE WERE AS UNDER: (3)(A) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MADE IN A SUM EXCEEDING TWENTY THOUSAND RUPEES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE; (B) WHERE AN ALLOWANCE HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF ANY LIABILITY INCURRED BY THE ASSESSEE FOR ANY EXPENDITURE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR (HEREINAFTER REFERRED TO AS SUBSEQUENT YEAR) THE ASSESSEE MAKES PAYMENT IN RESPECT THEREOF, OTHERWISE THAN BY AN 9 ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, THE PAYMENT SO MADE SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS INCOME OF THE SUBSEQUENT YEAR IF THE AMOUNT OF PAYMENT EXCEEDS TWENTY THOUSAND RUPEES: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER THIS SUB-SECTION WHERE ANY PAYMENT IN A SUM EXCEEDING TWENTY THOUSAND RUPEES IS MADE OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. 7.2 FROM THE ABOVE PROVISIONS IT IS CLEAR THAT PRIOR TO AMENDMENT WITH EFFECT FROM 01/04/2008, THE CONDITION WAS THAT A PAYMENT FOR ANY EXPENDITURE SHOULD NOT HAVE EXCEEDED ` 20,000/- AND THE WORD AGGREGATE OF PAYMENTS WAS NOT THERE. AS WE HAVE ALREADY POINTED OUT THAT IN THE INSTANT CASE NO SINGLE ENTRY RELATING TO CASH PAYMENT EXCEEDED ` 20,000/- HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. THEREFORE, THE AD HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED AND THE LEARNED CIT(A) RIGHTLY DELETED THE SAME. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 10 8. THE NEXT ISSUE VIDE GROUND NO. 3 RELATES TO THE DELETION OF ADDITION OF ` 12,00,000/-. THE ASSESSING OFFICER MADE THIS ADDITION BY OBSERVING IN PARA 5 OF THE ASSESSMENT ORDER DATED 05/09/2008 AS UNDER: 05. FROM A PERUSAL OF THE CAPITAL ACCOUNT OF SMT. SHASHI GUPTA, IT IS SEEN THAT A GIFT OF ` 12,00,000/- HAS BEEN RECEIVED BY THE ASSESSEE FROM HER FATHER SRI RAM KRISHAN GUPTA AND MOTHER SMT. SHAKUNTALA GUPTA. THE ASSESSEE WAS ASKED TO EXPLAIN THE CREDITWORTHINESS OF THE ALLEGED DONORS. SPECIFICALLY, VIDE ORDER SHEET ENTRY DATED 14/07/2008 ASSESSEE WAS REQUIRED TO PROVE: 'TO PROVE IDENTITY, CREDITWORTHINESS OF DONOR AND GENUINENESS OF TRANSACTION IN RESPECT OF GIFTS RECEIVED.' IN RESPONSE, THE ASSESSEE HAS SUBMITTED THAT HER PARENTS HAVE BEEN ASSESSED TO TAX IN THE YEAR UNDER CONSIDERATION. IN SUPPORT OF THIS, THE RETURNS FILED BY HER FATHER AND MOTHER ALONG WITH BANK ACCOUNTS HAVE ALSO BEEN SUBMITTED BY HER. ON PERUSING THE SAME, THE FOLLOWING POINTS HAVE BEEN NOTICED :- (I) THE RETURNS OF HER PARENTS AS SUBMITTED BY THE ASSESSEE REFLECT GROSS TAXABLE INCOME AT ONLY ` 83,702/- AND `1 ,43,397/- AS AGAINST THE ALLEGED GIFTS OF ` 5,00,000/- AND `7 ,00,000/- RESPECTIVELY. (II) IN THE BANK ACCOUNTS OF ALLEGED DONOR, IT WAS SEEN THAT THERE ARE HUGE CREDITS IN CASH IN THE DATES IMMEDIATELY PRECEDING THE DATE ON WHICH THE STATED GIFTS HAVE BEEN GIVEN. VIDE ORDER SHEET ENTRY DATED 21/07/2008 THIS FACT WAS ALSO CONFRONTED TO THE ASSESSEE: IT IS SEEN THAT SMT. SHAKUNTALA DEVI HAS A RETURNED INCOME OF ONLY `83,000/- WHEREAS IMMEDIATELY 11 PRECEDING THE DATE ON WHICH STATED GIFT OF ` 5,00,000/- HAS BEEN GIVEN THERE ARE CREDITS OF ` 4 LAKHS ETC. IN HER BANK ACCOUNT. REQUIRED TO EXPLAIN WITH NECESSARY CONFIRMATIONS & DETAILS.' HOWEVER, THE CREDITWORTHINESS AS WELL AS THE GENUINENESS OF THE ALLEGED GIFT TRANSACTION COULD NOT BE ESTABLISHED BY THE ASSESSEE. KEEPING IN VIEW THE ABOVE FACTS, ASSESSEE HAS FAILED TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE SAID GIFTS. THEREFORE, THE SAME IS TREATED AS UNEXPLAINED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 9. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT, THE ASSESSEE HAD SUBMITTED ADDRESSES OF THE DONORS, COPY OF THE LETTERS CONFIRMING GIFTS IN FAVOUR OF THE ASSESSEE, COPY OF THEIR INCOME TAX RETURNS, COPY OF THE BANK STATEMENTS OF THE DONORS, COPY OF THE STATEMENT OF ASSETS AND LIABILITIES OF THE DONORS. IT WAS FURTHER STATED THAT THE DONORS WERE HER PARENTS AND HAD BEEN ASSESSED TO TAX SINCE LAST 20 YEARS. IT WAS ALSO SUBMITTED THAT THE DONORS HAD INTEREST EARNING, INVESTMENTS IN NSC, FDRS, BONDS, KVP AND OTHER CONCERNS, AS WELL AS AGRICULTURE INCOME. IT WAS POINTED OUT THAT INCOME OF LATE SHRI RAM KRISHNA GUPTA, FATHER OF THE ASSESSEE, WAS ` 1,94,376.00 (GROSS TOTAL INCOME ` 1,64,276.00 AND AGRICULTURE INCOME OF ` 30,100.00) AND THAT THE CREDITS IN HIS BANK ACCOUNT HAD BEEN OUT OF MATURITY/REPAYMENT OF THOSE INVESTMENTS AND NONE OF THE CREDITS WERE IN CASH EXCEPT RS.10,000/-. SIMILARLY, IT WAS EXPLAINED THAT THE 12 INCOME OF SMT. SHAKUNTATA GUPTA, MOTHER OF THE ASSESSEE, WAS AT ` 95,702.00 (GROSS TOTAL INCOME OF `83,702/- AND EXEMPT INCOME `12,000/-). THE SAID INCOME WAS FROM THE INVESTMENTS WHICH WERE CREDITED IN HER BANK ACCOUNT OUT OF MATURITY/REPAYMENT OF THOSE INVESTMENTS AND NONE OF THE CREDITS WERE IN CASH. THEREFORE, THE ONUS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION HAD BEEN DULY DISCHARGED BY THE ASSESSEE. SO THERE WAS NO REASON FOR TREATING SUCH GENUINE GIFTS AS INCOME FROM UNEXPLAINED SOURCE. 9.1 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT IT WAS NOT CLEAR AS TO HOW THE ASSESSING OFFICER GOT THE IMPRESSION THAT IN THE BANK ACCOUNT OF THE ALLEGED DONOR AND HAD SEEN THAT THERE WERE HUGE CREDITS IN CASH ON THE DATES IMMEDIATELY PRECEDING THE DATE ON WHICH STATED GIFTS HAD BEEN GIVEN. THE LEARNED CIT(A) CATEGORICALLY STATED THAT ON PERUSAL OF THE BANK ACCOUNTS OF THE DONORS, IT WAS FOUND THAT THERE WERE NO SUCH CASH ENTRIES. ACCORDING TO HIM, IN A TRANSACTION INVOLVING GIFTS, THREE THINGS HAVE TO BE PROVEN:- IDENTITY OF THE DONOR, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE DONOR. THE LEARNED CIT(A) POINTED OUT THAT IN THE PRESENT CASE, IDENTITY OF THE DONORS WAS NEVER AN ISSUE AND SINCE THE DONORS WERE PARENTS OF THE ASSESSEE, THE GENUINENESS OF THE GIFTS COULD NOT BE 13 QUESTIONED. THE AMOUNTS HAD BEEN RECEIVED THROUGH BANKING CHANNELS FROM THE REGULAR BANK ACCOUNTS OF THE DONORS WHO WERE INCOME TAX PAYEES AND HAD CONSIDERABLE INVESTMENTS AND THAT NO CASH WHATSOEVER HAD BEEN INTRODUCED IN THEIR BANK ACCOUNTS BEFORE MAKING SUCH GIFTS TO THE ASSESSEE. WHICH PROVED CREDITWORTHINESS OF THE DONORS. THUS ONUS OF PROVING IDENTITY, GENUINENESS OF TRANSACTION & CREDITWORTHINESS OF THE DONORS STOOD ADEQUATELY DISCHARGED. THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY GONE THROUGH THE MATERIALS AVAILABLE ON THE RECORD. THE COPIES OF THE BANK ACCOUNTS OF THE DONOR SMT. SHAKUNTALA GUPTA, MOTHER OF THE ASSESSEE, FROM WHOM A GIFT OF ` 5,00,000/- WAS RECEIVED AND OF LATE SHRI RAM KRISHNA GUPTA, DECEASED FATHER OF THE ASSESSEE, FROM WHOM A GIFT OF ` 7,00,000/- WAS RECEIVED BY THE ASSESSEE, ARE PLACED AT PAGE NO. 7 TO 9 OF THE ASSESSEES PAPER BOOK. IN THE BANK ACCOUNT OF SMT. SHAKUNTALA GUPTA, CASH ENTRY OF ` 30,000/- ON 29/05/2001, ` 4,000/- ON 27/09/2002, ` 7,000/- ON 10/10/2003 AND ` 2,000/- ON 13/10/2003 ARE APPEARING. ALL OTHER ENTRIES PERTAINING TO DEPOSITS WERE ON ACCOUNT OF INTEREST, MATURITY OF KISAN VIKAS PATRA, FDRS. ETC. IN THE ACCOUNT OF LATE SHRI RAM KRISHNA GUPTA, NO CASH DEPOSIT WAS THERE IN THE SAVINGS BANK ACCOUNTS, THEREFORE, THE 14 OBSERVATIONS OF THE ASSESSING OFFICER THAT HUGE CREDITS IN CASH ON THE DATES IMMEDIATELY PRECEDING THE DATE ON WHICH GIFTS WERE GIVEN WERE THERE, WAS TOTALLY WRONG. IT IS ALSO NOT IN DISPUTE THAT THE DONORS (PARENTS OF THE ASSESSEE) WERE ASSESSED TO TAX AND HAVING THE BALANCE IN THEIR RESPECTIVE BANK ACCOUNTS WHICH WAS GENERATED MAINLY ON ACCOUNT OF MATURITY OF FDRS, KISAN VIKAS PATRA, INTEREST ON SAVINGS BANK ACCOUNT ETC. THEREFORE, ALL THE INGREDIENTS NECESSARY TO ESTABLISH A GENUINE GIFT I.E. IDENTITY OF THE DONOR, HIS/HER CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WERE PROVED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION AND THE LEARNED CIT(A) RIGHTLY DELETED THE SAME. WE, THEREFORE, DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 11. THE LAST ISSUE VIDE GROUND NO. 4 RELATES TO THE DISALLOWANCE OUT OF VARIOUS EXPENSES. 12. THE FACTS RELATED TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAD INCURRED TELEPHONE EXPENSES OF ` 83,677/-, TRAVELLING EXPENSES OF ` 73,998/- CAR RUNNING AND MAINTENANCE OF ` 1,04,932/- AND DEPRECIATION ON CAR AMOUNTING TO ` 90,343/-. THE ASSESSING OFFICER DISALLOWED 1/5 TH I.E. 20% OF 15 THE ABOVE EXPENSES CONSIDERING THE ELEMENT OF PERSONAL USE AND THAT MOST OF THE PAYMENTS HAD BEEN MADE IN CASH. 13. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) WHO RESTRICTED THE DISALLOWANCE @15% INSTEAD OF 20% MADE BY THE ASSESSING OFFICER. NOW THE DEPARTMENT IS IN APPEAL. 14. THE LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD, WE ARE OF THE OPINION THAT IN SUCH TYPE OF CASES, PERSONAL USE OF TELEPHONE AND CAR ETC. BY THE ASSESSEE CANNOT BE RULED OUT PARTICULARLY WHEN ALL THE EXPENSES WERE NOT SUBJECT TO VERIFICATION FULLY. HOWEVER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER @20% OF THE EXPENSES, WITHOUT ANY BASIS, APPEARS TO BE EXCESSIVE. IN OUR OPINION, THE LEARNED CIT(A) WAS FAIR AND REASONABLE IN RESTRICTING THE DISALLOWANCE @15%. WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A). ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENT APPEAL. 16 16. GROUND NO. 5 & 6 ARE GENERAL IN NATURE, SO DO NOT REQUIRE ANY COMMENT ON OUR PART. 17. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. (THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12/08/2011) SD/. SD/. ( H. L. KARWA ) (N. K. SAINI) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 12/08/2011 *SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR