M Nageswar Rao, Berhampur V. ITO, Berhampur

ITA 263/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4360 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 13-05-2011
• Court: TRIBUNAL
• Department Lawyers: A K PATRADR
• Assessee Lawyers: D K SETH
• Keywords: Unexplained investment; Gift
• Section: 68

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, (SMC) BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER ITA NO.2 63/CTK/2011 (ASSESSMENT YEAR 2003 - 04) M.NAGESWAR RAO, PROP.KASHI VISWANATHAN & SONS,COCOANUT MARKET,BERHAMPUR PAN: AACHM 7424 G VE RSUS INCOME - TAX OFFICER, WARD 2,BERHAMPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI D.K.SETH, AR FOR THE RESPONDENT SHRI A.K.PATRA,DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED CIT (A) IN CONFIRMING A PURPORTED ADDITION OF 2,55,000 BROUGHT TO TAX BY THE ASSESSING OFFICER BY HOLDING THE SAME AS UNEXPLAINED INVESTMENT U/S.69A OF THE INCOME - TAX ACT,1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SMALL RETAIL TRADER O F SPICES FILED RETURN OF INCOME IN THE STATUS OF HUF AT 85,423. THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDINGS U/S.143(3)/147 CONSIDERED THE RECEIPTS OF THREE DRAFTS TOTALING 2,55,000 FROM SINGAPORE. THIS AMOUNT WAS DIRECTLY TAKEN BY THE ASSESSEE TO HIS CAPITAL ACCOUNT WHICH WAS TO BE VERIFIED AS AMOUNTS GIFTED TO THE ASSESSEE BY HIS SON IN LAW SHRI DEVANANDA PATRA, OF THE KARTA OF THE HUF N.NAGESWAR RAO, THE ASSESSEE. IN A DETAIL FINDING BY TAKING STATEMENT FROM SHRI DEVANANDA PATRA WHO IS EMPLOY ED IN A HANK IN SINGAPORE, THE FACT FINDING LED THE ASSESSING OFFICER TO HOLD THAT THIS MONEY WAS RECEIVED BY THE ASSESSEE ONLY TO INFLATE THE AVAILABILITY OF FUNDS FOR INVESTMENT IN THE IMMEDIATELY SUCCEEDING FINANCIAL YEAR. HE CONCLUDED THAT THE CREDIBIL ITY OF THE TRANSACTION IS NOT ACCEPTABLE AND THE AMOUNT OF 2,55,OOO CREDITED TO THE BANK ACCOUNT OF HUF IS TREATED AS UNEXPLAINED MONEY IN TERM OF SECTON69A. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONFIRMED THE SAME BY HO LDING THAT SHRI ITA NO.2 63/CTK/2011 2 DEVANANDA PATRA, THE SON IN LAW DRAWING SALARY AS SOFTWARE ENGINEER IN THE UNION BANK OF INDIA OF SWITZERLAND HAD OBTAINED LOAN FROM OTHER FINANCIAL INSTITUTIONS TO MAKE GIFT TO HIS FATHER IN LAW, THE ASSESSEE. IN OTHER WORDS, THE ASSESSING OFFICER HELD THAT NO GIFT COULD BE MADE BY BORROWING WHICH GIFT WAS ACTUALLY THE MONEY NOT BELONGING TO THE DONOR WAS RIGHTFULLY TAXED BY THE ASSESSING OFFICER IN THE HANDS OF THE ASSESSEE BEFORE HIM U/S.69A. THE ASSESSEE APPELLANT THEREAFTER SUPPORTED TH E UNDISPUTED FINDING OF FACTS NAMELY THE DRAFT COPIES DRAWN IN INDIAN BANKS SINGAPORE BRANCH AND THAT THE FACT THAT THE BANK ACCOUNT OF HUF IN INDIA HAD ACKNOWLEDGED WAS THE ONLY PROOF WITHOUT ANY GIFT DEED. HE NOTED THAT NON - RESIDENT INDIANS HAVE TO DISCH ARGE THE ONUS THAT LIED UPON THEM TO ESTABLISH THAT THEY HAD THE CAPACITY AND CREDITWORTHINESS TO MAKE SUCH GIFT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD RECEIVED GIFTS FROM SON IN LAW TOTALING 2,25,OOO ON THREE DIFFERENT D ATES WHICH HAVE BEEN NOTED BY THE ASSESSING OFFICER IN HIS ORDER. THESE DEMAND DRAFTS WERE RECEIVED DRAWN FROM SBI, SINGAPORE AND BANK OF INDIA, SINGAPORE BRANCH. THESE GIFTS WERE CONFIRMED BY SHRI SHRI DEVANANDA PATRA, SON IN LAW, IN WRITING AS WELL AS BY PERSONAL APPEARANCE BEFORE THE ASSESSING OFFICER. SHRI DEVANANDA PATRA IS EMPLOYED AS SOFTWARE ENGINEER IN THE UNION BANK OF INDIA, SING A PORE AND WAS HAVING A GROSS ANNUAL INCOME OVER 12 LAKHS. HE OWNS A FLAT IN SINGAPORE AND PLOT OF LAND AT BERHAMPUR TH EREFORE THE CREDITWORTHINESS AS STATED TO BE FOUND FAULT WITH BY THE ASSESSING OFFICER AND THE LEARNED CIT(A) HAS NOT BEEN DEMOLISHED. THESE GIFTS THEREFORE CANNOT BE HELD AN ARRANGEMENT BY THE ASSESSEE HIMSELF FOR THE PURPOSE OF TAXING UNDER THE PROVISION S OF SECTION 69A. THE FACTS AS NOTED BY THE ASSESSING OFFICER FOR TAXATION U/S.69 THEREFORE CAN LEAD TO THE FINDING THAT THE ASSESSEE OWED THIS MONEY TO THE SAID SHRI DEVANANDA PATRA WAS COMPOUND BY THE LEARNED CIT(A) ITA NO.2 63/CTK/2011 3 HOLDING A VIEW THAT THE ADDITION WOULD HAVE BEEN CONFIRMED U/S.68. IN OTHER WORDS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION U/S.68 OR 69A HAVE TO BE UNDERSTOOD ON THE BASIS OF FACTS BROUGHT ON RECORD AND NOT MERELY PRESUMPTION AND ASSUMPTION AS HAVE BEEN DETAILED IN THE ORDERS OF THE RESPECTIVE FORUMS BELOW. WHEN THE ASSESSEE IS INSISTING THAT THEY WERE THE GIFTS AND NOT LOANS WERE UTILIZED IN THE BANK ACCOUNT OF THE ASSESSEE WHICH WAS EXPLAINED TO BOTH THE AUTHORITIES. FOR THIS PURPOSES HE HAS RELIED ON THE DECISIONS OF THE ITAT, IN THE CASES OF ATMARAM J .MANGHIRAMALANI (HUF) (67 LTD 289(MUMBAI BENCH), MAYAWATI V. DCIOT (113 UI 178 )(DELHI A BENCH), SONU AGARWAL V. ITO (29 SOT 478)(LUCKNOW BENCH), AND DCIT V. VIJAY PRAKASH (HUF) (120 TTJ 429) (AMRITSAR BRANCH). ALL THESE CITATIONS CAME TO THE CONCLUSION THAT GIFTS CANNOT BE BROUGHT TO TAX EITHER UNDER THE PROVISIONS OF SECTON68 OR UNDER THE PROVISIONS OF SECTION 69A. ON IDENTICAL FACTS IN THE PRESENT CASE THESE AMOUNT COULD NOT BE ADDED AND THEREFORE, THE LEARNED AR OF TH E ASSESSEE PRAYED FOR DELETION THEREOF. 4. THE LEARNED DR OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE INDICATING THAT MENTIONING OF SECTION 69A WAS ERRONEOUS ON THE PART OF THE ASSESSING OFFICER INSOFAR HE WAS ON THE FACTS WAS BROUGHT ON RECORD BY HIM ON PAGES 2 AND 3 OF HIS ORDER CLEARLY INDICATE THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE CREDITS IN THE BANK. HAVING TAKEN THE STATEMENT FROM SHRI DEVANANDA PATRA HE WAS ABLE TO ESTABLISH THAT SHRI DEVANANDA PATRA DID NOT HAVE THE CRED ITWORTHINESS TO MAKE SUCH DRAFTS WHICH WAS AN ARRANGEMENT BY THE ASSESSEE ITSELF. THE ADDITION THEREFORE WAS RIGHTLY CONFIRMED BY THE LEARNED CIT(A) U/S68. 5. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON MY CAREFUL C ONSIDERATION OF THE FACTS, I AM INCLINED TO HOLD THAT A PARTICULAR ADDITION LEADING TO APPLICABILITY OF A PARTICULAR SECTION NAMELY ITA NO.2 63/CTK/2011 4 SECTION 68 OR 69A HAS TO BE UNDERSTOOD ON THE BASIS OF FINDING OF FACT AS HAS BEEN INCORPORATED BY THE ASSESSING OFFICER IN HIS ORDER. ASSUMING BUT NOT ACCEPTING THAT THE ADDITION WAS TO BE BROUGHT TO TAX U/S.68 AND NOT 69A AS NOTED BY THE ASSESSING OFFICER HAVE TO HOLD THE VIEW THAT THE ONUS THAT LAY UPON THE ASSESSEE TO DISCHARGE BY IDENTIFYING THE LOAN CREDITORS IDENTITY, C REDITWORTHINESS AND GENUINENITY OF THE TRANSACTION HAS BEEN NOTED BY THE ASSESSING OFFICER HIMSELF. AFTER HAVING TAKEN THE STATEMENT U/S.131, THE ASSESSING OFFICER COULD NOT THEREFORE PROCEED TO HOLD THAT IT COULD BE TAXED U/S.69A INSOFAR AS THE ASSESSEE H AD DIRECTLY CREDITED HIS CAPITAL ACCOUNT ON THE ENCASHMENT OF THESE DRAFTS. IT IS NOBODYS CASE THAT THE AMOUNT HAD BEEN UTILIZED BY THE ASSESSEE FOR THE BENEFIT OF THE HUF. THE LEARNED CIT(A) THEREFORE ERRED IN GIVING A FINDING THAT THE BANK STATEMENTS IN DICATING THE CREDITWORTHINESS OF LOAN CREDITOR WAS TO BE FURNISHED ALONG WITH THE BANK STATEMENT OF HUF THEREFORE BECAME IMMATERIAL TO THE EXTENT THAT THE SOURCE OF SOURCE WAS NOT TO BE ESTABLISHED BY THE ASSESSEE. THE ASSESSEE HAD DISCHARGED THE ONUS OF I DENTIFYING THE DONOR NAMELY SHRI DEVANANDA PATRA, SON IN LAW, THE GENUINENESS OF THE TRANSACTIONS NAMELY THE BANK DRAFT FROM SINGAPORE DEPOSITED IN HIS ACCOUNT AND THE CREDITWORTHINESS OF THE LOAN CREDITOR (DONOR) BY FURNISHING HIS STATEMENT ON OATH U/S.13 1 WHEN HE IE EMPLOYED IN SINGAPORE, EARNING SUBSTANTIAL INCOME WAS NOT TO BE CONFIRMED BY WAY OF PRODUCING HIS BANK ACCOUNT COPY IN SINGAPORE. IT IS NOT THE CASE OF THE ASSESSING OFFICER, THE SON IN LAW HAD PURCHASED THESE DRAFTS FROM THE UNACCOUNTED INCOM E OF THE ASSESSEE OR HIS OWN TO BE DEPOSITED IN THE ASSESSEES BANK ACCOUNT. ASSUMING IT TO BE A LOAN TAKEN BY THE SON IN LAW THEREFORE BEARS NO RELEVANCE IN THE CASE OF THE ASSESSEE BEFORE ME. ON THE BASIS OF THESE FACTS AND ON THE BASIS OF CASH LAWS CITE D AT THE BAR, I AM OF THE VIEW THAT THIS AMOUNT CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE EITHER ITA NO.2 63/CTK/2011 5 UNDER THE PROVISIONS OF SECTION68 OR 69A OF THE ACT. THEREFORE, THE SAID ADDITION OF 2,25,000 IS DIRECTED TO BE DELETED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY O F THE ORDER FORWARDED TO : 1. THE APPELLANT: M.NAGESWAR RAO, PROP.KASHI VISWANATHAN & SONS,COCOANUT MARKET,BERHAMPUR. 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 2,BERHAMPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE ) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.