ACIT (OSD) 2(3), MUMBAI V. BHARAT H GAJRIA, MUMBAI

ITA 2554/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79303 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIVANLAL LAVIDIYA
• Assessee Lawyers: N H GAJRIA
• Keywords: Gift
• Section: 56(2); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI . . , , BEFORE SHRI I. P. BANSAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 2554/MUM/2012 ( / ASSESSMENT YEAR: 2006-07) ASST. CIT (OSD)-2(3), ROOM NO. 552, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 / VS. BHARTA H. GAJRIA 272, ENTERPRISE APARTMENT, FORJET MILL ROAD, MUMBAI-400 036 ./ ./PAN/GIR NO. AAEPG 0194 M ( /APPELLANT ) : ( !' / RESPONDENT ) # $ / APPELLANT BY : SHRI JIVANLAL LAVIDIYA !' # $ / RESPONDENT BY : SHRI N. H. GAJRIA % &'( # )* / DATE OF HEARING : 07.07.2014 DATE OF ORDER : 07.07.2014 + / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI (CIT(A) FOR SHO RT) DATED 20.01.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR TH E ASSESSMENT YEAR (A.Y.) 2006-07 VIDE ORDER DATED 11.12.2009. 2. THE BRIEF FACTS OF THE CASE TO THE EXTENT RELEVA NT, ARE THAT THE ASSESSEES FATHER, SHRI HIRANAND T. GAJRIA, A NON-RESIDENT, INVESTED A SUM OF RS.29 LACS BY WAY OF SHARE CAPITAL IN A COMPANY, M/S. S W METAFORM PVT. LTD., IN WHICH HE AND HIS FAMILY MEMBERS WERE 2 ITA NO. 2554/MUM/2012 (A.Y. 2006-07) ASST. CIT (OSD) VS. BHARTA H. GAJRIA THE PRINCIPAL STAKEHOLDERS, ON 28.03.2005, I.E., DU RING THE FINANCIAL YEAR (F.Y.) 2004-05. THE SAME WAS APPROPRIATED (IN THE FOLLOWING YEAR) A S, RS.9 LACS TOWARDS SELF, AND THE BALANCE SUM AS RS.10 LACS EACH IN THE NAME OF THE A SSESSEE, HIS SON, AND SHRI HIREN N. GAJRIA, HIS GRANDSON. THESE FACTS WERE EXPLAINED BY THE ASSESSEE, ON BEING ENQUIRED IN RESPECT OF THE SAID GIFT OF RS.10 LACS APPEARING BY WAY OF A CREDIT IN HIS CAPITAL ACCOUNT IN THE RELEVANT YEAR, FURTHER STATING VIDE HIS LETTER DATED 25.11.2009, THAT HIS FATHER, SINCE EXPIRED (ON 28.08.2009), WAS A NON-RESIDENT FOR ALM OST 65 (50) YEARS, STAYING IN GULF AND JAPAN. HE WAS AT THE RELEVANT TIME, HAVING RETIRED, STAYING WITH HIS ELDEST SON, SHRI N. H. GAJRIA, AND THE AMOUNT INVESTED IN M/S. S W METAFOR M PVT. LTD. HAD BEEN SOURCED BY HIM PRINCIPALLY BY WAY OF LOAN FROM UTI BANK AGAINS T HIS NRI FIXED DEPOSITS. THE ASSESSING OFFICER (A.O.) DID NOT FIND THE SAME CONV INCING IN-AS-MUCH AS NO GIFT DEED HAD BEEN FURNISHED TO PROVE THE GENUINENESS OF THE GIFT . ACCORDINGLY, THE SAME WAS CONSIDERED AS NOT GENUINE, AND TREATED AS THE ASSES SEES INCOME FROM UNEXPLAINED SOURCES. IN APPEAL, THE ASSESSEE FURNISHING THE BANK ACCOUNT /S TO ESTABLISH THE SOURCE OF THE FUNDS, IN VIEW OF THE LD. CIT(A) THE CREDITWORTHINE SS HAD BEEN ESTABLISHED. IN FACT, THE GIFT BEING FROM A FATHER TO HIS SON, I.E., A LINEAL ASCENDANT, STANDS EXCEPTED BY THE PROVISO TO SECTION 56(2)(V), SO THAT THE SAID SECTION WOULD NOT STAND TO BE ATTRACTED IN THE INSTANT CASE. HE, ACCORDINGLY, DIRECTED ITS DELETION. AGGRI EVED, THE REVENUE IS IN APPEAL, RAISING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN TREATING CREDIT IN THE CAPITAL ACCOUNT OF ASSESSEE, REPRESENTING SHARE APPLICATION AMOUNT WITH M/S. METAFORM PVT. LTD. AS A GIFT NOT SUBJECT TO TAX, BY ERRONEOUSLY HOLDING THAT IT IS A SUM OF MO NEY AND IS COVERED BY THE PROVISION OF SECTION 56(2)(V) OF THE IT ACT 196 1? 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN TREATING CREDIT IN THE CAPITAL ACCOUNT OF THE ASSESSEE AS A SUM OF MONEY WHEN THE SHARE APPLICATION AMOUNT HAD BEEN D EPOSITED WITH M/S. METAFORM PVT. LTD. IN F.Y. 2004-05 AND THE RIGHT TR ANSFERRED TO THE ASSESSEE IN F.Y. 2005-06 ONLY? 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3 ITA NO. 2554/MUM/2012 (A.Y. 2006-07) ASST. CIT (OSD) VS. BHARTA H. GAJRIA THERE IS NO QUESTION OF APPLICATION OF SECTION 56(2 )(V) IN THE INSTANT CASE IN-AS- MUCH AS THE GIFT IS NOT OF A SUM OF MONEY, EVEN A S SOUGHT TO BE CLARIFIED BY THE A.O. VIDE PARA 5.3 OF HIS ORDER. THE WHOLE CONFUSION WIT H REGARD TO THE SAID SECTION ARISES, AS WE SEE IT, DUE TO OMISSION OF THE WORD NOT IN THE LATTER PART OF THE FOLLOWING SENTENCE APPEARING IN THE SAID PARAGRAPH, I.E., AFTER THE WO RD ARE AND BEFORE THE WORD APPLICABLE: HENCE, THE SAME CANNOT BE TREATED AS A SUM OF MONE Y AND THUS, PROVISIONS OF SECTION 56(2)(V) ARE APPLICABLE BY AN Y STRETCH OF IMAGINATION.. ON THIS BEING POINTED OUT TO THE LD. DEPARTMENTAL R EPRESENTATIVE (DR) DURING HEARING, TIME WAS SOUGHT BY HIM TO CHANGE THE GROUNDS OF APP EAL. WE CONSIDER THIS AS LUDICROUS IN-AS-MUCH AS THE REVENUE FILES AN APPEAL WITHOUT A S MUCH AS UNDERSTANDING WHAT THE CASE OF THE A.O. IS. EVEN SO, WE WOULD HAVE READILY ALLOWED THE SAME, HAD THERE BEEN ANY SUBSTANCE THEREIN, AS IT CANNOT BE THAT WE GRANT TI ME TO MANUFACTURE OR DISCOVER A GROUND/S TO SUSTAIN OR JUSTIFY AN APPEAL. WE HA VE ALREADY CLARIFIED THAT REFERENCE TO SECTION 56(2) FOR THE PURPOSE IS MISPLACED; THE GIF T BEING NEITHER OF A SUM OF MONEY NOR COVERED BY THE PROVISION IN-AS-MUCH AS IT IS COVERE D BY THE PROVISO TO THE SECTION. THE A.O. HAS ADDED THE AMOUNT, TREATING IT AS UNEX PLAINED AND NOT GENUINE, WITHOUT IN ANY MANNER SHOWING AS TO HOW - THE ASSES SEE HAVING ADDUCED EVIDENCE AS TO THE MONEY (CAPITAL) UNDER REFERENCE FLOWING TO THE COMPANY, A FAMILY CONCERN, AS BEING FROM HIS FATHERS BANK ACCOUNT/S, EVIDENCING ALSO T HE SOURCE THEREOF - AND ON WHAT BASIS COULD THE SAME BE TREATED AS SO. ABSENCE OF A GIFT DEED, WHICH IS ONLY TOWARD ESTABLISHING THE FACTUM OF A GIFT, WOULD NOT MAKE THE GIFT NOT G ENUINE. HOW, WE WONDER, WOULD A GIFT DEED, MAKE A GIFT, THE EXISTENCE OF WHICH IS NOT IN DOUBT, GENUINE ? BOTH THE NATURE AND THE SOURCE OF THE SUM ARE PRIMA FACIE DULY EXPLAINED. THERE IS, UNDER THE CIRCUMSTANCES, NOTHING TO DOUBT THE CAPACITY OF THE DONOR OR THE G ENUINENESS OF THE GIFT, BEING FROM THE FATHER TO HIS SON, DISTRIBUTING, AS IT APPEARS TO U S, THE CAPITAL EQUALLY (OR ALMOST SO) BETWEEN HIMSELF, HIS SON (THE ASSESSEE), AND THE FA MILY OF HIS ELDEST SON, SHRI N. H. GAJRIA. UNLESS, THEREFORE, THE REVENUE BRINGS MATER IAL ON RECORD WHICH IS ABSENT, 4 ITA NO. 2554/MUM/2012 (A.Y. 2006-07) ASST. CIT (OSD) VS. BHARTA H. GAJRIA IMPUGNING THE SAID EVIDENCES OR LEADING TO AN ADVER SE INFERENCE AND DISLODGING THE CASE AS MADE OUT BY THE ASSESSEE, ITS CHARGE OF NON-GEN UINENESS IS WITHOUT ANY BASIS EITHER ON FACT OR IN LAW AND, THUS, NOT MAINTAINABLE. ACCORDINGLY, EVEN CONSIDERING FROM THE STAND POINT OF SECTION 68, UNDER WHICH PROVISION WE CONSIDER THE REVENUES CASE, IMPUGNING THE CREDIT BY WAY OF GIFT, TO FALL UNDER, WE FIND NO MERIT IN THE REVENUES CASE AND, ACCORDINGLY, NO REASON TO INTERFERE WITH THE IMPUGNED ORDER. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ,-). ' # , # ) /0 ORDER PRONOUNCED IN THE OPEN COURT ON JULY 07, 2014 SD/- SD/- (I. P. BANSAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER % ( MUMBAI; 1& DATED : 07.07.2014 '.&../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. % 2) ( ) / THE CIT(A) 4. % 2) / CIT - CONCERNED 5. 5'67 !)&89 , * 89- , % ( / DR, ITAT, MUMBAI 6. 7:; <( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , % ( / ITAT, MUMBAI