Shri Hareshchandra Mohanlal Bijlani, Anand V. The Income tax Officer, Ward-1, Anand

ITA 2750/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6602 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 18-06-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH SRDR
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained cash credit; Gift; Depreciation; Set aside
• Section: 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.2750/AHD/2007 [ASSTT.YEAR 2003-04] SHRI HARESHCHANDRA MOHANLAL BIJLANI VS INCOME TAX O FFICER PROP. H.M.CONSULTANCY, SAI RAM WARD-1, ANAND OPP. VAIBHAV BUNGALOWS VIDHYANAGAR ROAD, ANAND PAN NO.ACEPB2181R (APPELLANT) (RESPONDENT) REVENUE BY :SMT. NEETA SHAH, SR-DR ASSESSEE BY: SHRI S.N.DIVA TIA, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-IV, BARODA IN APPEAL NO. CAB/O V-A-320/05-06 DATED 24-03- 2007. THE ASSESSMENT WAS FRAMED BY THE ITO WARD-1, ANAND U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 23-01- 2006, FOR ASSESSMENT YEAR 2003-04. 2. THE FIRST ISSUE IN THIS APPEAL OF THE ASSESSEE I S AGAINST THE ORDER OF CIT(A), CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKIN G ADDITION OF GIFT RECEIVED FROM SHRI SANJAY PATEL AMOUNTING TO RS.7.99 LAKH AS UNEX PLAINED CASH CREDIT. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2.1 TO 2.4 :- 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND /OR ON FACTS IN CONFIRMING THE GIFT OF RS.7,99,000/- RECEIVED FROM SHRI SANJAY PATEL AS UNEXPLAINED CASH CREDIT INSPITE OF RELEVANT MATERIAL/EVIDENCE PRODUC ED BY THE APPELLANT. ITA NO.2750/AHD/2007 A.Y. 2003-04 SH. HARESHCHANDRA M BIJLANI V. ITO WD-1, ANAND PAGE 2 2.2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE UPHELD THE GIFT RECEIVED F ROM SHRI SANJAY PATEL AS UNEXPLAINED CASH CREDIT. 2.3 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT TH E APPELLANT HAD COMPLETELY DISCHARGED THE BURDEN COST UPON IT TO PROVE THE AFO RESAID GIFT IN VIEW OF THE MATERIAL PRODUCED BEFORE HIM. 2.4 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT TH E IMPUGNED GIFT CANNOT BE HELD TO BE NON-GENUINE, MERELY BECAUSE EQUAL AMOUNT WAS DEPOSITED IN NRE ACCOUNT BY THE DONOR INSPITE OF BALANCE IN THE SAID ACCOUNT. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE ASSESSEE IS AN INDIVIDUAL AND CARRYING ON PROPRIETARY BUSINESS AS LABOUR CONTRACTOR. HE FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR 2 003-04 ON 30-09-2003 DECLARING TOTAL INCOME AT RS.1,55,230/- AND DURING THE ASSESS MENT PROCEEDINGS THE ASSESSING OFFICER NOTICED FROM THE CAPITAL ACCOUNT OF THE ASS ESSEE THAT THERE IS A CREDIT FOR AN AMOUNT OF RS.7.99 LAKH AND THIS IS BY WAY OF GIFT R ECEIVED FROM SHRI SANJAY PATEL VIDE CHEQUE NO.3670044 OF NRE ACCOUNT DATED 06-03-2003 W ITH INDIAN BANK, NADIAD BRANCH. THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE GIFT VIS--VIS RELATIONSHIP, OCCASION, IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTION IN RESPECT THIS GIFT. THE ASSESSEE VIDE HIS SUBMISSION DATED 29-09-2005 FILED THE DETAILS OF GIFT ALONG WITH A COPY OF DECLARATION OF GIFT, COPY OF P ASS-PORT OF DONOR, CHEQUES NO. ETC. AND ALSO MADE SUBMISSIONS THAT THIS GIFT IS RECEIVE D BY ASSESSEE FROM NRE ACCOUNT OF SHRI SANJAY PATEL MAINTAINED WITH INDIAN BANK, N ADIAD BRANCH BY ACCOUNT PAYEE CHEQUES DATED 06-03-2003 AND COLLECTING BANK HAS CE RTIFIED THAT THIS GIFT SO RECEIVED WAS FROM NRE ACCOUNT. HE ALSO SUBMITTED THAT THE D ONOR OF THE GIFT HAS EXECUTED GIFT DEED NOTARIZED, ADMITTING THE GIFT. THE ASSESS EE ALSO STATED THAT THE FAMILY OF THE DONOR AND HIS FAMILY WERE STAYING AT NEARBY AT NADI AD FOR QUITE A LONG TIME BEFORE DONOR PROCEEDED FOR USA, BUT THE DONOR AND ASSESSEE ARE MAINTAINING INTIMATE RELATIONSHIP. OUT OF LOVE & AFFECTION FOR GAURAV, WHO IS AN ELECTRONIC ENGINEER, SON OF ASSESSEE, SHRI SANJAY PATEL, THE DONOR OFFERED A LL SUPPORT TO HIM TO CALL HIM AT USA FOR HIS BRIGHT FUTURE. AS A GESTURE OF HIS LOVE & AFFECTION TO ASSESSEES SON, HE DONATED THIS AMOUNT AS GIFT WITHOUT ANY EXPECTATION PURELY TO ENCOURAGE AND ALLOW HIM TO GO ABROAD FOR HIGHER STUDY AND DEVELOPING BR IGHT FUTURE. BUT UNFORTUNATELY ON REPEATED EFFORTS HE COULD NOT GET THE VISA TO USA B UT LATER ON HE GOT ADMISSION IN UNIVERSITY OF UNITED KINGDOM AND HAS PROCEEDED TO U .K IN THE MONTH OF SEPTEMBER, ITA NO.2750/AHD/2007 A.Y. 2003-04 SH. HARESHCHANDRA M BIJLANI V. ITO WD-1, ANAND PAGE 3 04 AND IS STILL THERE AND HAS COMPLETED M.SC. IN EL ECTRONICS & ELECTRICAL. THE AO EXAMINED NRE ACCOUNT OF SHRI SANJAY PATEL AND HE WA S NOT SATISFIED WITH THE EXPLANATION SUBMITTED BY THE ASSESSEE. ACCORDINGLY, HE CALLED INFORMATION U/S.133(6) OF THE ACT FROM BRANCH MANAGER OF INDIAN BANK. THE BANK REPLIED VIDE LETTER DATED 05-12-2005 STATING THAT ON DATED 07-03-2003 THEY HA VE PURCHASED A CHEQUES BEARING NO.446800 DATED 06-03-2005 DRAWN ON ICICI B ANK, AHMEDABAD FOR RS.8,06,140/- AND AFTER DEDUCTING THEIR CHARGES THE Y HAVE CREDITED RS.7.99 LAKH TO THE BENEFICIARY ACCOUNT. THE CHEQUES WAS SENT TO T HEIR SERVICE BRANCH AHMEDABAD FOR COLLECTION AND THE SAME WAS REALIZED ON 17-03-2 003 AND ALONG WITH THIS REPLY THEY HAVE ALSO PLACED ON RECORD A COPY OF NRERSB AC COUNT NO.16039 OF MR. SANJAY PATEL, USA, FOR THE MONTH OF MARCH03. ACCORDING TO THE AO, THE STATEMENT CLEARLY INDICATED THAT ON 07-03-2003, A CREDIT OF RS.7.99 L AKH WAS EFFECTED IN ACCOUNT, WHICH WAS DEBITED ON THE NEXT DATE I.E. ON 08-03-2003 FOR THE ENTIRE AMOUNT OF RS.7.99 LAKH DESPITE OF HE WAS HAVING A CREDIT BALANCE OF R S.4,48,759/- AS ON 07-03-2003. IN VIEW OF ABOVE CIRCUMSTANCES, IT CREATED SUSPICIO N IN THE MIND OF THE ASSESSING OFFICER THAT FROM WHOM CHEQUE WAS PURCHASED AND CRE DITED TO THE DONORS ACCOUNT, AND WAS TRANSFERRED IN THE FORM OF GIFT TO THE BENE FIT OF THE ASSESSEE. THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND MADE A DDITION OF THIS GIFT AS UNEXPLAINED CASH CREDIT. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE ACTION OF THE AO VIDE PARA-2.4 AND 2.5 OF HIS APPELLATE ORDER AS UNDER:- 2.4 I HAVE CAREFULLY CONSIDERED THE ORDER OF THE A SSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. THE BASIC QUESTION WH ICH ARISES IS WHY WAS THE GIFT WHICH WAS MEANT FOR FURTHER STUDIES OF THE ADU LT SON OF THE APPELLANT NOT MADE TO HIM BUT TO HIS FATHER. THE COMMITMENT AS TO LD BY THE A.R. WAS TO THE SON. THE GIFT IF ANY COULD HAVE BEEN MADE DIRECTLY TO HIM. WHAT WAS THE NEED TO BRING THIS AMOUNT INTO THE CAPITAL ACCOUNT OF TH E APPELLANT WHEN IT WAS MEANT ONLY FOR THE SON. THE APPELLANT HAS NOT BEEN ABLE TO SATISFACTORILY EXPLAIN WHY THE EXACT AMOUNT OF RS.7,99,000/- WAS D EPOSITED IN THE NRE ACCOUNT OF THE DONOR WHEN THERE WAS ALREADY A CREDI T BALANCE STANDING IN THAT ACCOUNT. BY AMENDMENT TO SECTION 56(2) OF THE INCOM E TAX ACT EFFECTED FROM 1 ST SEPTEMBER, 2004, THE INCOME TAX ACT RECOGNIZES THE FACT THAT ONLY RELATIVES ARE LIKELY TO MAKE REAL GIFTS OUT OF NATURAL LOVE A ND AFFECTION. THE DEFINITION OF RELATIVES HAS BEEN GIVEN A WIDE DEFINITION. THE PUR POSE OF THIS AMENDMENT IS TO PRIMARILY TACKLE FOREIGN GIFTS FROM NON RELATIVE S FOUND TO BE LARGELY BOGUS. MERE AFFIDAVIT OF THE DONOR OR BANKERS CERTIFICATE AS PROOF OF RECEIPT IN FOREIGN COUNTRY DOES NOT CONSTITUTE SUFFICIENT EVIDENCE. ITA NO.2750/AHD/2007 A.Y. 2003-04 SH. HARESHCHANDRA M BIJLANI V. ITO WD-1, ANAND PAGE 4 2.5 IN VIEW OF THE FACT THAT THE APPELLANT COULD NO T SATISFACTORILY EXPLAIN THE REASON, THE SOURCE OF GIFT AND ESTABLISH BEYOND DOU BT THE GENUINENESS OF TRANSACTION, I UPHOLD THE ACTION OF THE ASSESSING O FFICER TREATING THE GIFT OF RS.7,99,000/- AS UNEXPLAINED CASH CREDIT U/S.68 OF THE INCOME TAX ACT AND CONFIRM THE ADDITION MADE BY HIM. AGGRIEVED AGAINST THE ORDER OF CIT(A), CONFORMING T HE ACTION OF THE ASSESSING OFFICER IN TREATING THE GIFT AS UNEXPLAINED CASH CREDIT, AS SESSEE CAME IN SECOND APPEAL BEFORE US. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE, SHRI S.N. DIVATIA ARGUED AND REITERATED THE SAME ARGUMENTS AND STATED THAT IDENT ITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IS PROVED AND THERE IS LOVE & AFFECTION BETWEEN THE FAMILIES AND TO HELP ASSESSEES SON, THE DONOR, SHR I SANJAY PATEL HAS MADE THIS GIFT AND THIS IS SUPPORTED BY GIFT DEED NOTARIZED, INCLU DING HIS PASSPORT, NRE ACCOUNT AND IN VIEW OF THESE, HE STATED THAT THIS IS GENUIN E GIFT. ON THE OTHER HAND, LD. SR- DR SMT. NEETA SHAH STATED THAT, NO DOUBT, THE IDENT ITY AND CREDITWORTHINESS OF THE DONOR IS ESTABLISHED BUT THE GENUINENESS OF TRANSAC TION IS NOT ESTABLISHED AND NORMALLY SUCH NRI GIFTS ARE JUST TO AVOID TAX OR FO R CAPITAL FORMATION. SHE STATED THAT DOUBT OF THE ASSESSING OFFICER THAT THIS CHEQUES BE ARING NO.446800 DATED 06-03- 2005 DRAWN ON ICICI BANK AHMEDABAD FOR A SUM OF RS. 8,06,140/- HAS COME FROM WHERE IS STILL NOT ESTABLISHED BY ANY DOCUMENTARY E VIDENCE. SHE SAID THAT THERE IS NO CORROBORATION OF AMOUNT COMING FROM NRE ACCOUNT MAI NTAINED BY SHRI SANJAY PATEL IN USA TO THIS CHEQUE. ACCORDINGLY, SHE STATED THAT THIS ISSUE NEEDS RE-VERIFICATION AT THE LEVEL OF ASSESSING OFFICER, AND IN CASE THE ASS ESSEE WANTS TO PROVE OTHERWISE HE HAS TO LEAD EVIDENCES THAT THIS CHEQUE HAS COME FRO M THE ACCOUNT OF SHRI SANJAY PATEL, USA. 6. HAVING HEARD THE RIVAL CONTENTIONS AND GOING THR OUGH THE FACTS OF THE CASE, WE FEEL THAT THERE IS NO DOUBT ABOUT THE IDENTITY AND CAPACITY OF DONOR SHRI SANJAY PATEL BUT THE GENUINENESS OF TRANSACTION IS NOT PROVED AN D NEXUS IN THE TRANSACTION IS NOT ESTABLISHED BY FILING DOCUMENTARY EVIDENCE THAT THI S MONEY HAS TRAVELED FROM USA. EVEN NOW BEFORE US THE ASSESSEE HAS NOT ADDUCED ANY EVIDENCE AND THE ASSESSING OFFICER HAS RECORDED A FINDING, WHICH READS AS UNDE R:- ITA NO.2750/AHD/2007 A.Y. 2003-04 SH. HARESHCHANDRA M BIJLANI V. ITO WD-1, ANAND PAGE 5 WHILE EXAMINING THE SAME IT IS NOTICED THAT THE DO NATION WAS MADE BY ONE NRI, VIZ. SANJAY PATEL, USA, THROUGH AN NRE ACCOUNT HELD BY HIM IN INDIAN BANK, NADIAD BRANCH. AS THE EXPLANATION SUBMITTED B Y THE ASSESSEE WAS NOT TO THE SATISFACTION, THE INFORMATION WAS COLLECTED U/S.133(6) OF THE ACT, FROM THE BRANCH MANAGER, INDIAN BANK, NADIAD. THE BANK H AS REPLIED VIDE LETTER DATED 05/12/2005 STATING THAT ON DATED 07/03/03 THE Y HAVE PURCHASED A CHEQUES BEARING NO.446800 DATED6/3/05 DRAWN ON ICIC I BANK, AHMEDABAD FOR RS.806140/- AND AFTER DEDUCING THEIR CHARGES TH EY HAVE CREDITED RS.7,99,000/- TO THE BENEFICIARY ACCOUNT. THE CHEQU ES WAS SENT TO THEIR SERVICE BRANCH, AHMEDABAD FOR COLLECTION AND THE SA ME WAS REALIZED ON 17.03.2003. ALONGWITH THE REPLY THEY HAVE ALSO PLAC ED ON RECORD A COPY OF THE NRERSB ACCOUNT NO.16039 OF MR. SANJAY PATEL, USA, F OR THE MONTH OF MARCH, 2003. ACCORDINGLY, TO INVESTIGATE THIS FACT THAT THIS CH EQUE CAME FROM USA, WHICH WAS PURCHASED BY INDIAN BANK, NADIAD, AND SAME WAS DRAW N ON ICICI BANK AHMEDABAD. THE ASSESSEE HAS TO LEAD EVIDENCE TO TH AT EFFECT AND ACCORDINGLY, THIS ISSUE IS SET ASIDE TO THE FILE OF AO FOR LIMITED PU RPOSE. ACCORDINGLY, FOR LIMITED PURPOSE THIS ISSUE IS SET ASIDE TO THE FILE OF AO A ND ALLOWED FOR STATISTICAL PURPOSE. 7. THE NEXT TWO ISSUES ARE REGARDING DISALLOWANCE O F EXPENSES ON ACCOUNT OF LABOUR EXPENSES, DEPRECIATION AND VEHICLE EXPENSES. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING GROUND NO. 3.1-3.2 AND 4.1-4.2 AS UNDER:- 3.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND /OR ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.4,140 OUT OF LABOUR EXPENSES . 3.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD CIT(A) OUGHT NOT HAVE CONFIRMED THE DISALLOWANCE OF RS.4,140 OUT OF LABOUR EXPENSES. 4.1 THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN CONFIRMING THE DISALLOWANCE @ 1/4 TH OUT OF DEPRECIATION AND VEHICLE EXPENSES. 4.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED DISALLOWANCE TO THE EXTENT OF 1/4 TH OUT OF DEPRECIATION AND VEHICLE EXPENSES. 7. HAVING HEARD THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS OF THE CASE AND WE FIND THAT THE ASSESSEE HAS DECLARED VERY NOM INAL PROFIT FROM CONTRACT AT RS.6,280/- AS AGAINST THE CONTRACT RECEIPT OF RS.3 LAKH. THE ASSESSING OFFICER WORKED OUT THE DISALLOWANCE OF RS.4,140/- AS THE AS SESSEE HAS PAID ADDITIONAL AMOUNT RANGING TO RS.300 TO 400 AND EVEN FOR THE MO NTH OF MARCH, IT WAS RS.900. ITA NO.2750/AHD/2007 A.Y. 2003-04 SH. HARESHCHANDRA M BIJLANI V. ITO WD-1, ANAND PAGE 6 AS THERE WAS NO EXPLANATION, THE AO DISALLOWED ONLY RS.4,140/- AND THE SAME WAS CONFIRMED BY CIT(A). EVEN NOW BEFORE US, THE ASSESS EE COULD NOT ADDUCE ANY EVIDENCE THAT THIS IS NOT EXCESSIVE. ACCORDINGLY, WE CONFIRM THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE. 7.1 AS REGARDS TO DISALLOWANCE TO DEPRECIATION AND PETROL EXPENSES, WE FIND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.1,09,10 5/- AND PETROL EXPENSES AT RS.6,575/-. IT IS NOT DENIED THAT THERE IS NO PERS ONAL USER IN MOTOR CAR AND ON THAT BASIS THE ASSESSING OFFICER DISALLOWED 1/4 TH OF THE EXPENSES AT RS.28,920/-. THE CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER. AF TER GOING THROUGH THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT NO DOUBT DISALLOWANCE IS TO BE MADE ON ACCOUNT OF PERSONAL USER AS THERE IS NO DENIAL TO THE SAME, BU T WE RESTRICT THE DISALLOWANCE AT 1/6 TH . ACCORDINGLY, THE ASSESSING OFFICER WILL RE-COMPU TE THE DISALLOWANCE. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS DAY OF 9TH APRIL,2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 09/04/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- IV, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD