Sri. S. Nagaraja Reddiar, Alappuzha V. The ADCIT, Alappuzha

ITA 3/COCH/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3880 (ITAT-COCHIN)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 09-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Gift; Deemed dividend
• Section: 68

Judgement Text

ITA NO./03/COCH/2016 1 , IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN . . , ., ! ! ! ! BEFORE S/SHRI B. P. JAIN, AM & GEORGE GEORGE K., JM ' ' ' ' ./ I.TA NO.03/COCH/2016 ( #$ % /ASSESSMENT YEAR : 2011-12) SHRI S. NAGARAJA REDDIAR, LAKSHMI SADANAM, MULLACKAL, ALAPPUZHA. VS THE ADDITIONAL COMMISSIONER OF INCOME TAX, ALAPPUZHA RANGE, ALAPPUZHA. ( &' &' &' &' /ASSESSEE APPELLANT) ( ( (( ( ) ) ) ) &' &'&' &' /REVENUE -RESPONDENT) & . . ' ./PAN NO. AFEPR 5347A &' * + /ASSESSEE BY SHRI R. SREENIVASAN, FCA ( ) &' * + /REVENUE BY SHRI A. DHANARAJ, SR. DR ,- * ./ / DATE OF HEARING 09/08/2016 0 % * ./ /DATE OF PRONOUNCEMENT 26/09/2016 1 1 1 1 /ORDER PER B.P. JAIN, AM: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A), KOTTAYAM DATED 08/12/2015 FOR THE AY 2011- 12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE OFFICERS BELOW WERE NOT JUSTIFIED IN CONFIR MING THE ADDITION OF RS.3,65,173 AS DEEMED DIVIDEND U/S. 2(22)(C). 2. THE OFFICERS BELOW DID NOT APPRECIATE THE FACT THAT RS.1,80,000/- OUT OF THE ABOVE SUM REPRESENTS REPAYMENT OF SHARE CAPITAL AND BALANCE OUT OF ITA NO./03/COCH/2016 2 RESERVES AND SURPLUS, BEFORE WINDING UP AND IF AT A LL TREATED AS DIVIDEND IT IS NOT TAXABLE IN THE HANDS OF THE APPELLANT. 3. THE COMMISSIONER OF INCOME TAX WENT WRONG IN CON FIRMING THE INCLUSION OF RS.18,823/- STATED TO BE DIFFERENCE IN OPENING BALA NCE, FOR THE REASON THAT, NO DETAILS HAVE BEEN PRODUCED. IN FACT RECONCILIATION STATEMENT WAS FILED BEFORE THE ASSESSING OFFICER AND COMMISSIONER OF IN COME TAX(APPEALS). 4. THE OFFICERS BELOW WERE NOT JUSTIFIED IN CONFIRM ING THE ADDITION OF RS.2.53 CRORES, BEING GIFT RECEIVED FROM THE APPELLANTS SO N IN LAW AND DAUGHTER IN SHARJAH, UAE, FOR THE REASON THAT, SUCH AMOUNTS GIF TED HAVE NOT BEEN TRANSFERRED FROM THE DONORS ACCOUNT AND PROOF HAS N OT BEEN ADDUCED. 5. THE OFFICERS BELOW FAILED TO APPRECIATE THE FAC T THAT THE APPELLANT HAD ESTABLISHED, THE IDENTITY OF THE DONORS, GENUINENES S OF THE TRANSACTION AND THEIR CAPACITY TO GIFT SUCH AMOUNTS. 6. THE OFFICERS BELOW WENT WRONG IN CALLING FOR SO URCE OF SOURCE IN SUCH TRANSACTION, WHICH IS NEVER CONTEMPLATED UNDER THE ACT. 7. FOR THE ABOVE REASON AND OTHER REASONS AS MAY BE ADDUCED AT THE TIME OF HEARING YOUR APPELLANT PRAYS THE GROUNDS MAY BE CONSIDERED FAVOURABLY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE SHRI S. NAGARAJA REDDIAR IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR 2011-12, THE A SSESSEE HAD RETURNED A TOTAL INCOME OF RS. 12,77,480/-. THIS WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT AND LATER ON SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) WAS ISSUED, INITIALLY BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, ALLEPPEY AND THEREAFTER BY THE ADDITIONAL COMMISSIONER OF INCOME TAX, KOTTAYAM . 4. GROUND NOS. 1 AND 2 PERTAINS TO ADDITION OF RS .3,65,173 AS DEEMED DIVIDEND U/S. 2(220(C). ACCORDING TO THE ASSESSING OFFICER, AN AMOUNT OF RS. 1 LAKH AND RS.2,65,713/- IS SEEN CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE WHICH WAS ITA NO./03/COCH/2016 3 EXPLAINED TO BE THE REPAYMENT OF SHARE CAPITAL IN A COMPANY CALLED ALLEPPEY HOSPITAL PVT. LTD., WHICH WAS WOUND UP. THE RECEIP T ISSUED BY THE COMPANY FOR FOR RS.1 LAKH SHOWS THAT THE AMOUNT REPRESENTS REP AYMENT OF SHARE CAPITAL IN FULL AND FINAL SETTLEMENT. THE BALANCE SUM OF RS.2,65,7 13/- REPRESENTS SHARE OF THE ASSESSEE IN THE SURPLUS FUNDS OF ALLEPPEY HOSPITAL PVT. LTD. THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 2(22)(C) OF T HE INCOME TAX ACT AND ASSESSED THE AMOUNT AS DIVIDEND AS IT IS STATED TO BE DISTRIBUTED ON LIQUIDATION OF THE COMPANY. 5. THE NEXT ADDITION PERTAINS TO AN AMOUNT OF RS. 18,823/- STATED TO BE THE DIFFERENCE BETWEEN THE OPENING BALANCE SHOWN IN THE WEALTH STATEMENT FILED AS ON 01/04/2010 AND OPENING CREDIT BALANCE APPEARI NG IN THE BOOKS AS ON THAT DATE. 6. THE MAJOR ADDITION PERTAINS TO AN AMOUNT OF R S.2,53,00,000/- STATED TO BE CREDITS IN THE FEDERAL BANK A/C. NUMBER 10501001100 23 IN THE NAME OF THE ASSESSEE WHICH WAS EXPLAINED TO BE THE GIFT RECEIVE D FROM HIS DAUGHTER AND SON-IN-LAW WHO ARE RESIDING IN SHARJAH, UAE. THE D ETAILS ARE AS UNDER:- DATE AMOUNT NARRATION IN STATEMENT CONTENTS OF CERT IFICATE FROM BANK 1.6.2010 5000000 DDA-ANSARI DD NUMBER 608549 DATED 1.6.2010 FROM AL ANSARI EXCHANGE ABU DHABI ITA NO./03/COCH/2016 4 11.6.2010 2500000 DDA-ANSARI 608632 DATED 12.6.2010 RECEIVED FROM AL ANSARI EXCHANGE, ABU DHABI 11.6.2010 2500000 DDA-ANSARI 608611 DATED 12.6.2010 RECEIVED FROM AL ANSARI EXCHANGE, ABU DHABI 22.10.2010 2800000 DDA-ANSARI DD NO. 76106537 DATE D 18/10/2010 OF AL ANSARI EXCHANGE, UAE, ABU DHABI 22.10.2010 3000000 DDA-ANSARI DD NO. 76106538 DATED 18/10/2010 OF AL ANSARI EXCHANGE, UAE, ABU DHABI 10/11/2010 1000000 1050100110023 FED FAST REMITTANCE UAE EXCHANGE CENTRE 7.1.2010 5000000 DDA ANSARI DD NO. 076106945 DATED 2/1/2011 REMITTANCE FROM AL ANSARI EXCHANGE, ABU DHABI. 10.1.2011 2500000 105010010023 FED FAST REMITTANCE RECEIVED FROM GLOBAL EXCHANGE. 17.2.2011 500000 -DO- FED FAST REMITTANCE FROM GLOBAL EXCHANGE 18.2.2011 5000000 -DO- FED FAST REMITTANCE FROM GLOBAL EXCHANGE 25300000 7. JOINT CONFIRMATION FROM DAUGHTER AND SON-IN-LA W WERE ALSO FILED. THE CONTENTS OF THE JOINT CONFIRMATION ARE AS UNDER:- I DR. RAMKUMAR PRESENTLY RESIDING IN TWIN TOWER, A L NABHA, SHARJAH, UAE HEREBY CONFIRM THAT I HAVE MADE PERIODICAL REMITTAN CES IN THE FORM OF GIFT ITA NO./03/COCH/2016 5 TO MY FATHER IN LAW S. NAGARAJA REDDIAR, LAKSHMI SA DANAM MAHESWARI, ALAPPUZHA DURING THE FINANCIAL YEAR 2010-11. SUCH AMOUNTS TOTALING TO RS.2,53,00,000/- HAVE BEEN REMITTED TO HIS FEDERAL BANK SB ACCOUNT WITH ALAPPUZHA BRANCH THROUGH MONEY EXCHANGE AL ANSARI E XCHANGE IN SHARJAH, DUBAI, (UAE). HAVING DONE MY POST GRADUATION IN DENTISTRY, I HAVE BEEN DESIGNATED AS SPECIALIST A MAXILLO FACIAL SURGEON, VISIT VARIO US HOSPITALS AND CLINICS IN UAE AND ALSO RENDER PRIVATE CONSULTATIONS AND WAS T HE PRINCIPAL AND ACADEMIC DIRECTOR OF ONE OF THE PRIVATE COLLEGE. M Y WIFE MRS. SREE BINDU IS RUNNING A HOME BOUTIQUE AND IS ALSO SUPPLYING HO ME NEEDS IMPORTED FROM OTHER COUNTRIES. I AM SETTLED HERE FOR THE PA ST TEN YEARS PLUS. WE ARE NON RESIDENTS AND DO NOT HAVE PERMANENT ACCOUNT NUM BER. 8. ACCORDING TO THE ASSESSING OFFICER, THE ABOVE C ONFIRMATION IS NOT SATISFACTORY AND THE ASSESSEE WAS ASKED TO CLARIFY CERTAIN QUEST IONS POSED BY THE ASSESSING OFFICER. IN REPLY ANOTHER JOINT CONFIRMATION WAS F ILED. THE CONTENTS ARE AS UNDER: THIS IS IN REFERENCE WITH YOUR QUERIES TO MYSELF A ND MY WIFE SREE BINDU THROUGH MR. SREENIVASAN, CHARTERED ACCOUNTANT, ALLE PPEY. PLEASE FIND BELOW THE ANSWERS TO EACH OF THE QUERIES BY NUMBER. I AM A MAXILLO FACIAL SURGEON, AGED 41 YEARS. I DID MY UNDERGRADUA TION AND POST GRADUATION AT MGR MEDICAL UNIVERSITY, CHENNAI. I W AS WORKING IN INDIA FOR TWO AND A HALF YEARS AS LECTURER AT MEENAKSHI AMMAL DENTAL COLLEGE. MY WIFE SREE BINDU AGED 38 YEARS HAS DONE BSC CHEMISTR Y AND RUNS HER HOME BOUTIQUE AND TUTORS CHILDREN AT OUR RESIDENCE IN SH ARJAH (PLEASE FIND ATTACHED DEGREE CERTIFICATES). MY IN LAWS RESIDE A T LAKSHMI SADANAM MULLACKAL, ALLEPPEY. WE MAKE SURE THAT WE VISIT A COUPLE OF TIMES IN A YEAR TO INDIA. I ALSO HAD TRAVELLED FOR ACADEMIC P URPOSES FOR VISITING COLLEGES, CME PROGRAMMES, DELIVERING LECTURES AND S CIENTIFIC EVENTS. IN MY BUSY SCHEDULE I DONT REMEMBER AND DO NOT KEEP A TRACK OF MY TRAVEL SCHEDULES Q (4,5 AND 6). I HAVE BEEN EMPLOYED FROM 2000 ONWARDS AND MY WIFE RUNS A BOUTIQUE AND TUTORS CHILDREN. ON AN AVERAGE FROM 2003 ONWARDS MY GROSS INCOME IS 720K (AED) ANNUALLY (PLE ASE FIND EMPLOYMENT DETAILS) I HAVE MULTIPLE BANK ACCOUNTS IN THE UAE O F WHICH SOME ARE ACTIVE AND OTHERS ARE NOT. AS WE CHANGE EMPLOYERS, THE SALARY GETS CREDITED TO THE PARTICULAR BANK ACCOUNT WHERE THE E MPLOYER DOES HIS BANKING. THE HOUSING ALLOWANCE, TA EXTRA WORKING H OURS, OUTSIDE ITA NO./03/COCH/2016 6 CONSULTATIONS, VISITING AND OTHER REMUNERATIONS ARE PAID AS CASH. THE MONEY TRANSFERRED TO MY FATHER IN LAW HAS BEEN OUR ACCUMULATED SAVINGS FROM 2003 ONWARDS. IT HAS BEEN TRANSFERRED TO HIM FROM AL-ANSARI, UAE EXCHANGES IN SHARJAH AND DUBAI. HOPE WE HAVE BEEN ABLE TO FURNISH ALL DETAILS TO YOUR QUERIES. 9. ACCORDING TO THE ASSESSING OFFICER, AFTER EXA MINATION OF THE REPLY, THE VITAL QUESTION WHICH HAS NOT BEEN ANSWERED WAS WHETHER TH E DONOR HAS ANY PROOF THAT MONEY TRANSFERRED TO THE ACCOUNT OF THE ASSESS EE WERE FROM THEM AND FROM THEIR OWN SOURCE. ACCORDING TO HER, THE BANK STATEMENT OF THE DONOR DO NOT INDICATE THAT THE MONEY HAS BEEN TRANSFERRED BY THEM. ACCORDING TO THE ASSESSING OFFICER, THE CONFIRMATION OR CLARIFICATIO N IS NOT ACCEPTABLE AS NEITHER THE BANK DETAILS NOR BANK STATEMENT THROUGH WHICH T HEY HAVE STATED TO HAVE GIVEN THE ALLEGED GIFT HAVE BEEN FILED. ACCORDING TO HER, THE IDENTITY OF THE DONOR, THE CAPACITY TO GIVE GIFT AND GENUINENESS OF THE TRANSACTION, THE 3 REQUIREMENTS HAVE NOT BEEN FULFILLED. 10. THE ASSESSEE CLARIFIED THAT THERE IS NO POINT IN CALLING FOR THE BANK ACCOUNT AS THE ASSESSEE HAS STATED THAT HE HAS KEPT THE INC OME OTHER THAN SALARY WHICH HE HAS RECEIVED IN CASH, AS BANK ACCOUNT WOULD NOT EARN ANY INTEREST. FURTHER, IT WAS ALSO CLARIFIED, THAT IT WOULD BE UNFAIR FOR A FATHER IN LAW TO DEMAND THE BANK ACCOUNT PARTICULARS FROM HIS SON-IN-LAW AND DA UGHTER WHO ARE NOT DEPENDENT UPON HIM. IT WAS ALSO CLAIMED BY THE ASS ESSEE THAT THE IDENTITY OF THE DONOR HAS BEEN ESTABLISHED AND THE MONEY HAS BE EN ROUTED THROUGH BANKING CHANNELS FROM OVERSEAS AND THE DONORS WERE NOT MEN OF STRAW. ITA NO./03/COCH/2016 7 11. ACCORDING TO THE ASSESSING OFFICER, THE ASSE SSEE HAD BEEN UNABLE TO PROVE THAT THE AMOUNT DEPOSITED IN HIS BANK ACCOUNT WERE FROM HIS SON-IN-LAW AND DAUGHTER. THE SON-IN-LAW AND DAUGHTER HAVE B EEN UNABLE TO PROVE THAT THEY HAVE TRANSFERRED MONEY TO THE ACCOUNT OF THE A SSESSEE. THEREFORE, SHE CONCLUDED THAT THE SOURCE OF THE DEPOSIT AND IDENTI TY OF THE DEPOSITORS AS CLAIMED BY THE ASSESSEE IS UNPROVED. THE CONFIRMAT ION IS STATED TO BE UNSUBSTANTIATED AND CANNOT BE ACCEPTED. THE DONORS HAVE NOT ESTABLISHED THAT THEY HAVE CAPACITY TO GIVE GIFT. MERELY BECAU SE THE DONORS CLAIM TO BE NON-RESIDENT, IT DOES NOT MEAN THAT THE DEPARTMENT CANNOT ENQUIRE INTO THEIR SOURCE AND THEIR CAPACITY TO GIVE GIFTS. YET ANOTH ER REASON STATED BY THE ASSESSING OFFICER FOR DIS-PROVING THE GIFT, IS THAT IN THE CONFIRMATION IT IS STATED THAT SON-IN-LAW IS RESIDING AT SHARJAH, BUT THE TRA NSFERS WERE MADE THROUGH EXCHANGE IN ABU DHABI AND NOT FROM SHARJAH AND DUBA I AS CLAIMED IN THE CONFIRMATION. BOTH THESE PLACES ARE SITUATED 100 K M APART AND IT IS UNLIKELY THAT A PERSON WOULD TRAVEL SEVERAL KMS TO TRANSFER MONEY . IT IS ALSO STATED THAT THE DONORS WERE NOT ABLE TO CORRECTLY MENTION THE EXCHA NGE THROUGH WHICH THE TRANSACTION TOOK PLACE. 12. SHE HAS ALSO REFERRED TO CASES OF THE HONBLE APEX COURT REPORTED IN 107 ITR 938 AND 50 ITR 1 WHEREIN IT IS STATED TO HAVE H ELD THAT THE ONUS OF PROVING THAT A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY A PERSON IS ON THAT ITA NO./03/COCH/2016 8 PERSON. FURTHER, ACCORDING TO HER, MERELY BECAUSE ALLEGED DONORS ARE ABROAD, IT DOES NOT PREVENT THE DEPARTMENT FROM ENQUIRING I NTO THE SOURCE, I.E., TO SAY THAT THE DEPARTMENT CAN ENQUIRE INTO THE SOURCE OF SOURCE. ACCORDINGLY, THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS S OUGHT TO INTRODUCE MONEY IN HIS BOOKS BY USING THE NAME OF HIS SON-IN-LAW AN D DAUGHTER FOR THAT PURPOSE, EVEN THOUGH A CONFIRMATION IS PURPORTLY SENT BY HER SON-IN-LAW AND DAUGHTER. 13. THE ASSESSING OFFICER HAS HELD THAT THE IDENT ITY OF THE DONOR IS NOT PROVED. SOURCE OF THE CREDIT IS NOT ESTABLISHED AND EVEN IF THE DONORS HAVE SOURCE TO GIFT THIS AMOUNT, THE MONEY HAS NOT COME FROM THEM. ACCORDINGLY, SHE ADDED AN AMOUNT OF RS.2,53,00,000/-. 14. THE LD. COUNSEL FOR THE ASSESSEE, SHRI R. SREE NIVASAN, FCA WAS HEARD. AS REGARDS THE ADDITION OF RS.3,65,713/- BEING THE REP AYMENT OF SHARE CAPITAL OF THE COMPANY, ALLEPPEY HOSPITAL PVT. LTD., THE AMOUN T OF RS.1.8 LACS REPRESENTS THE ORIGINAL SHARE CAPITAL AND THE BALANCE AMOUNT O F RS.1,85,713/- REPRESENTS THE SHARE OF THE ASSESSEE IN THE RESERVES AND OTHER SURPLUS OF THE COMPANY. ACCORDING TO THE LD. COUNSEL, THIS IS OUT OF THE SA LE PROCEEDS OF THE COMPANIES PROPERTY. IF AT ALL ANY TAX SHOULD BE LEVIED, IT S HOULD BE ON THE COMPANY AND NOT ON THE RECIPIENT SHAREHOLDER. FURTHER, IT WAS ALSO STATED THAT THE ASSESSEE HAD SHOWN IN THE WEALTH STATEMENT AN AMOUNT OF RS.1 ,80,000/- AS INVESTMENT IN ALLEPPEY HOSPITAL PVT. LTD., AND TO THIS EXTENT, IT IS ONLY REPAYMENT OF SHARE ITA NO./03/COCH/2016 9 CAPITAL AND CANNOT BE TAXED. COPY OF THE WEALTH ST ATEMENT FOR THE YEAR ENDING 31/03/2010 AND 31/03/2011 WAS ALSO FILED, WH EREIN UNDER MOVABLE PROPERTIES IN ITEM NO. 10, SHOWS INVESTMENT IN ALLE PPEY HOSPITAL PVT. LTD. AT RS.1,80,000/-. ACCORDING TO THE LD. COUNSEL, SECTI ON 2(22)(C) DEALS WITH THE DISTRIBUTION MADE TO THE SHAREHOLDERS OF THE COMPAN Y, ON LIQUIDATION, TO THE EXTENT TO WHICH LIQUIDATION IS ATTRIBUTABLE TO THE ACCUMULATED PROFITS OF THE COMPANY IMMEDIATELY BEFORE THE LIQUIDATION. IT WAS REITERATED THAT THE PAYMENTS HAVE BEEN MADE BY THE COMPANY TO THE ASSES SEE BEFORE THE COMPANY WAS LIQUIDATED, SO MUCH SO THE PROVISIONS O F SECTION 2(22)(C) IS NOT APPLICABLE AND THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE PRINCIPAL VALUE PLUS THE SURPLUS, IN THE MANNER IN WHICH IT HAS BEEN DONE IS TOTALLY ERRONEOUS. THE ASSESSEE FINALLY STATED THA T THIS WILL BE ONLY IN THE NATURE OF DIVIDEND WHICH IS EXEMPT UNDER THE PROVISIONS OF INCOME TAX ACT IN THE HANDS OF THE RECIPIENT. 15. AS REGARDS THE ADDITION OF RS.18,823/- STATE D TO BE THE DIFFERENCE BETWEEN THE OPENING BALANCE SHOWN IN THE WEALTH STATEMENT A S ON 1/4/2010 AND OPENING BALANCE APPEARING IN THE BOOKS AS ON THAT D ATE, IT WAS EXPLAINED BY THE LD. COUNSEL THAT SUBSEQUENT TO THE CLOSING OF T HE ACCOUNT AFTER CREDITING THE NET RESULT AND BEFORE CARRYING OVER THE BALANCE TO THE NEXT YEARS BOOKS, SOME AMOUNT FROM OTHER ACCOUNTS WERE TRANSFERRED TO THE CAPITAL ACCOUNT WHICH HAS RESULTED IN THE DIFFERENCE. RECONCILIATI ON TO THIS EFFECT WAS ALSO FILED ITA NO./03/COCH/2016 10 BEFORE THE ASSESSING OFFICER, COPY OF WHICH IS ALSO FILED BEFORE US. THEREFORE, THE LD. COUNSEL STATED THAT IT WAS ONLY ON A MISCON CEPTION OF THE FIGURES THAT THE ASSESSING OFFICER HAS PROCEEDED TO MAKE THE ADD ITION. 16. AS REGARDS THE INCLUSION OF RS.2,53,00,000/- STATED TO BE THE CREDIT IN THE FEDERAL BANK ACCOUNT OF THE ASSESSEE U/S. 68, AT TH E OUTSET THE LD. COUNSEL REITERATED THAT IT IS A FACT THAT THE AMOUNTS HAVE COME THROUGH PROPER BANKING CHANNEL FROM OUTSIDE THE COUNTRY, SO MUCH SO THE GE NUINENESS OF THE TRANSACTION REMAINS PROVED. A JOINT CONFIRMATION H AS BEEN FILED BY THE ASSESSEE FROM HIS SON-IN-LAW AND DAUGHTER, WHO ARE RESIDING IN SHARJAH, UNITED ARAB EMIRATES. THUS, THE IDENTITY OF THE DONORS REMAIN E STABLISHED. AS FAR AS THEIR CAPACITY TO PAY THIS AMOUNT, THE EDUCATIONAL QUALIF ICATION THE DETAILS OF WHICH WERE FILED WITH THE ASSESSING OFFICER, ACCORDING TO THE LD. COUNSEL, WOULD SHOW THAT THE SON-IN-LAW IS A SPECIALIST MAXILLO FACIAL SURGEON. HE IS A MUCH SOUGHT AFTER PERSON IN THE WHOLE OF UNITED ARAB EMIRATES. THE ASSESSEES DAUGHTER WAS ALSO RUNNING A BOUTIQUE WHICH ALSO EARNED SUBSTANTI AL REVENUE. THUS, THE LD. COUNSEL CONTENDED THAT THE CAPACITY OF THE DONOR AL SO REMAINS ESTABLISHED. ACCORDING TO HIM THE 3 CONDITIONS ENUMERATED IN SEC TION 68 REMAIN SATISFIED, NAMELY, GENUINENESS OF THE TRANSACTION, IDENTITY OF THE PERSON, AND THEIR CAPACITY. ITA NO./03/COCH/2016 11 17. ACCORDING TO THE LD. COUNSEL, THE WHOLE ADDI TION HAS BEEN MADE ON FLIMSY GROUND. FIRSTLY THE ASSESSING OFFICER HAS P ROCEEDED THAT THE DONORS ARE RESIDING IN A PLACE AT SHARJAH, WHEREAS THE REMITTA NCE HAVE BEEN MADE THROUGH EXCHANGE IN ABU DHABI WHICH IS A FAR AWAY P LACE. THE ASSESSING OFFICER HAS NOT PROPERLY APPRECIATED THAT THE HEAD QUARTERS OF THE AL-ANSARI EXCHANGE IS LOCATED IN ABU DHABI , HAVING BRANCHES ALL OVER THE UNITED ARAB EMIRRATES, FROM WHERE REMITTANCE CAN BE MADE. THE ADDRESS OF THE H.O. WOULD BE SHOWN IN ALL REMITTANCES. THAT DOES NOT MEAN THA T THE ASSESSEE HAD TRAVELLED ALL THE WAY TO ABU DHABI TO MAKE EACH REM ITTANCE. IT WAS ALSO REPRESENTED THAT THE DONOR BEING THE SON-IN-LAW OF THE ASSESSEE IS A FREE LANCER AND VISITS ALMOST ALL THE MAJOR HOSPITALS IN UNITED ARAB EMIRATES. THIS CARDINAL FACT HAS BEEN GIVEN A GO BY THE ASSESSING OFFICER. FURTHER, THE LD. COUNSEL ALSO CONTENDED THAT THE ASSESSEE WAS UNABLE TO PRODUCE T HE BANK ACCOUNT DETAILS OF THE DONORS, WHICH WAS VERY WELL EXPLAINED, THAT IT IS NOT POSSIBLE FOR A FATHER- IN-LAW TO ASK HIS SON-IN-LAW ABOUT THE PERSONAL DET AILS AND THE BANK ACCOUNT, WHICH WOULD BE EMBARRASSING AND AWKWARD. THIS IS N OT CONTEMPLATED UNDER THE PROVISIONS OF SECTION 68. THE ASSESSING OFFICE R HAS PROCEEDED ON THE THEORY THAT THE ASSESSEE IS LIABLE TO SUBSTANTIATE THE SOU RCE OF SOURCE, DE-HORS OF THE PROVISIONS OF SECTION 68. THE LD. COUNSEL ALSO SUB MITTED THAT THE DOCTRINE OF SOURCE OF SOURCE, ORIGIN OF ORIGIN CANNOT BE APPLIE D UNIVERSALLY WITH REFERENCE TO THE FACTS OF EACH CASE. THE ASSESSEE HAS PRODUCE D ALL THAT IS CONTEMPLATED U/S. 68. ITA NO./03/COCH/2016 12 18. HE REITERATED THAT THE WORD IDENTIFIABLE WOULD MEAN THAT THE CONDITION OR FACT OF A PERSON OR BEING THAT SPECIFIED UNIQUE PER SON, OR THING. THE IDENTIFICATION OF THE PERSON WOULD INCLUDE THE PLAC E OF WORK, THE FACT THAT HE WAS ACTUALLY CARRYING ON THE WORK AND RECOGNITION I N THE EYES OF THE PUBLIC. THE ACTUAL AND TRUE IDENTITY OF THE PERSON IS THE W ORK UNDERTAKEN BY HIM. THIS SHOULD BE THE CORRECT AND TRUE LEGAL POSITION. THE MONEY HAS BEEN RECEIVED BY THE ASSESSEE THROUGH REGULAR BANKING CHANNEL WHI CH IS ALSO NOT UNDER DISPUTE. THE CREDIT WORTHINESS OF THE DONOR ALSO R EMAINS ESTABLISHED BY VIRTUE OF THEIR QUALIFICATION. THE CONFIRMATION FILED BY THE DONOR CANNOT BE DISBELIEVED ON THE FACE OF IT. THE LD. COUNSEL ALSO DREW OUR A TTENTION TO AN APPELLATE ORDER IN THE CASE OF THE SAME ASSESSEE FOR THE ASSESSMENT YEAR 1995-96 AS RENDERED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOC HI IN I.T.A. NO.9/ALPY/2000-01 DATED 14/6/2002. HE DREW OUR ATT ENTION TO PARA 9.1 AT PAGE 30 OF THE APPELLATE ORDER WHEREIN A SIMILAR IS SUE HAS ARISEN. IN THAT YEAR, THE ASSESSEE HAD RECEIVED IN HIS FEDERAL BANK ACCOU NT AN AMOUNT OF GIFT RS.20,50,000/- FROM HIS BROTHER WHO WAS CARRYING ON A BUSINESS IN DUBAI. IN THE SWORN STATEMENT, THE ASSESSEE EXPLAINED THAT THE GI FT WAS FROM HIS BROTHER IN DUBAI AND FURTHER EXPRESSED HIS INABILITY TO PRODUC E THE DONOR OR HIS BANK PASS BOOK, SHOWING THE WITHDRAWAL. HOWEVER, A CONFIRMAT ION WAS FILED TO THE ASSESSING OFFICER, WHO TREATED THIS AMOUNT AS UNEXP LAINED INVESTMENT OF THE ASSESSEE. AT PARA 9.3 IN PAGE 31, IT WAS HELD THAT THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS OF PROVIDING THE CONFIRMATION LETT ER FROM THE DONOR AND THE ITA NO./03/COCH/2016 13 BURDEN WAS ON THE DEPARTMENT TO DISPROVE THE ASSESS EES CLAIM. IT WAS ALSO SUBMITTED THAT A SIMILAR GIFT RECEIVED FROM THE SAM E DONOR HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE SUBSEQUENT YEAR. I T WAS FINALLY HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS UNCALLED FOR SINCE THE DONOR HAS CONFIRMED THE FACT BY GIVING A CONFIRMATION LETTER. THE DONOR COULD NOT BE PRODUCED SINCE HE WAS MANAGING 3 BUSINESS ESTABLISH MENTS IN DUBAI AND THE ASSESSING OFFICER EXPECTING THE ASSESSEE TO PRODUCE THE BANK PASS BOOKS OF THE DONOR IN DUBAI IS SIMPLY UNPRACTICAL, SINCE TH E ASSESSEE HAS NO RIGHT TO CALL FOR THE PASS BOOK OF THE DONOR. ACCORDINGLY, THE L D. COUNSEL HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT ON SO UND BASIS. THOUGH THE DEPARTMENT FILED APPEAL BEFORE ITAT FOR THE YEAR 19 95-96 ON VARIOUS OTHER POINTS, THIS WAS NOT TAKEN UP AS A GROUND. COPIES OF THE ORDERS OF THE LD. CIT(A) AND ITAT HAVE ALSO BEEN FILED. HE HAS FINALLY CONC LUDED THAT THE FACTS IN THE PRESENT YEAR ARE IN NO WAY DIFFERENT FROM THAT OF A SSESSMENT YEAR 1995-96. THE ASSESSEES SON-IN-LAW HAS ALSO GIFTED IN THE EARLIE R YEARS, WHICH HAS BEEN ACCEPTED. THEREFORE, THE LD. COUNSEL CONCLUDED THA T THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION O F RS.2.53 CRORES. 19. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSI NG OFFICER AND THE LD. CIT(A) AND REITERATED THAT THE CONDITION MENTIONED UNDER S ECTION 68 HAS NOT BEEN SATISFIED IN FULL BY THE ASSESSEE AND STATED THAT T HE ORDER OF LOWER AUTHORITIES MAY BE CONFIRMED. ITA NO./03/COCH/2016 14 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE FACTS OF THE CASE. AS REGARDS THE SUM OF RS.3,65,713/- BEING THE AMOUNT RECEIVED BY THE ASSESSEE FROM ALLEPPEY HOSPITAL PVT. LTD., IT IS SE EN FROM THE WEALTH STATEMENT THAT RS.1,80,000/- REPRESENTS SHARE CAPITAL AND THE BALANCE IS STATED TO BE THE AMOUNT RECEIVED FROM THE SURPLUS OF THE COMPANY BEF ORE LIQUIDATION. AS STATED BY THE LD. COUNSEL, SURPLUS IF ANY OF THE COMPANY, HAS TO BE TAXED IN THE HANDS OF THE COMPANY. THE AMOUNT RECEIVED BY THE ASSESS EE CAN ONLY BE IN THE NATURE OF DIVIDEND WHICH IS EXEMPT FROM TAX. THERE FORE, THE PROVISIONS OF SECTION 2(22)(C) ARE NOT APPLICABLE TO THIS CASE, S INCE THAT WOULD COME TO OPERATION ONLY AFTER THE LIQUIDATION OF THE COMPANY . IN VIEW OF THE ABOVE FINDING, WE HOLD THAT THE ADDITION OF RS.3,65,713/- IS NOT WARRANTED AND HENCE DELETED. 22. AS REGARDS THE ADDITION OF RS.18,823/- STATED TO BE DIFFERENCE BETWEEN THE OPENING BALANCE AS ON 1/4/2010 AS PER THE WEALTH ST ATEMENT AND THE OPENING BALANCE AS PER LEDGER, THOUGH THE ASSESSEE HAD FILE D RECONCILIATION STATEMENT, IT APPEARS THAT SOME PARTIES ACCOUNT HAVE BEEN TRAN SFERRED TO THE CREDIT OF THE ASSESSEE. WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE CLAIM AND TO GRANT APPROPRIATE RELIEF. ITA NO./03/COCH/2016 15 23. AS REGARDS THE MAJOR ADDITION OF RS.2.53 CROR ES, STATED TO BE THE CREDIT IN THE FEDERAL BANK ACCOUNT REPRESENTING GIFTS RECEIVE D FROM THE ASSESSEES SON- IN-LAW AND DAUGHTER WHO ARE SETTLED IN SHARJAH, THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSESSEE HAD NOT PRODUCED BANK ACCOUNT PARTICULARS OR COPIES OF THE BANK ACCOUNT OF THE DONORS. SHE HAS ALSO HELD THAT THE REMITTANCES HAVE BEEN MADE FROM AL-ANSARI EXCHANGE LOCATED IN ABU DHABI WHEREAS THE ASSESSEE IS RESIDING AT SHARJAH WHICH I S A FARAWAY PLACE AND IT IS HARD TO BELIEVE THAT EVERY TIME THE DONOR TRAVELS U PTO ABU DHABI TO MAKE THE REMITTANCE. IT IS VERY WELL CLARIFIED BY THE LD. C OUNSEL THAT THE HEAD QUARTER OF AL-ANSARI EXCHANGE IS LOCATED IN ABU DHABI AND BRAN CHES ARE SPREAD OVER ENTIRE UNITED ARAB EMIRATES. WHATEVER, REMITTANCES ARE MADE FROM ANY BRANCH, THE DETAILS WOULD CONTAIN THE ADDRESS OF TH E HEAD OFFICE. THAT DOES NOT MEAN THAT ANY REMITTANCE THROUGH AL ANSARI EXCH ANGE FROM ANY PART OF UNITED ARAB EMIRATES HAVE TO GO OVER TO ABU DHABI F OR MAKING THE REMITTANCE. 24. AS REGARDS THE CASE LAWS RELIED UPON BY THE A SSESSING OFFICER AT PARA 9 AT PAGE 7 OF THE ASSESSMENT ORDER, THE LD. COUNSEL FIL ED COPIES OF THE SAID ORDERS AND REITERATED THAT THE FACTS THEREON ARE NOT AT AL L APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 25. IN OUR VIEW THE CONFIRMATIONS ALONG WITH THE Q UALIFICATION CERTIFICATES FURNISHED BY THE DONORS SATISFY THE INGREDIENTS CON TEMPLATED U/S. 68. FURTHER ITA NO./03/COCH/2016 16 THE DONORS HAVE ALSO STATED THAT THEY HAVE MULTIPLE BANK ACCOUNT IN UNITED ARAB EMIRATES OF WHICH SOME ARE ACTIVE AND OTHERS A RE NOT. AS THEY CHANGE EMPLOYERS, THE SALARY GETS CREDITED TO THE PARTICUL AR BANK ACCOUNT WHERE THE EMPLOYER DOES HIS BANKING. ALLOWANCES LIKE HOUSING , TRAVELLING, EXTRA WORKING HOURS, OUTSIDE CONSULTATIONS, VISITING AND OTHER RE MUNERATIONS ARE PAID IN CASH. THEY HAVE CONFIRMED THAT THE MONEY TRANSFERRED TO T HE ASSESSEE IS OUT OF THE ACCUMULATED SAVINGS FROM 2003 ONWARDS AND THE TRANS FER HAS BEEN EFFECTED THROUGH AL-ANSARI, UAE EXCHANGE AT SHARJAH AND DUBA I. THAT APART RELIANCE HAS BEEN PLACED ON AN APPELLATE ORDER OF THE VERY S AME ASSESSEE FOR THE ASSESSMENT YEAR 1995-96 IN I.T.A. NO. 9/ALPY/2000-0 1 DATED 14/6/2002 DECIDED BY THE LD. CIT(A)-IV, KOCHI WHEREIN SIMILAR ISSUED HAS BEEN CONSIDERED AND IT HAS BEEN HELD IN THAT CASE THAT GIFT RECEIVED BY TH E ASSESSEE FROM HIS BROTHER SETTLED IN DUBAI IS GENUINE. THE DEPARTMENT HAS AL SO ACCEPTED THIS. 26. RESPECTFULLY FOLLOWING THE ABOVE DECISION A ND ALSO CONSIDERING THE ARGUMENTS PUT FORTH BY THE LD. COUNSEL FOR THE ASSE SSEE, WE HOLD THAT THE INCLUSION OF A SUM OF RS.2.53 CRORES AS INCOME IN T HE HANDS OF THE ASSESSEE WAS NOT WARRANTED AND WE HEREBY DELETE THE ADDITION MAD E ON THIS SCORE. ITA NO./03/COCH/2016 17 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26- 09-2016. SD/- SD/- ( . ) (GEORGE GEORGE K.) ( . . ) (B. P. JAIN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER & /PLACE: /COCHIN 2 /DATED: 26 TH SEPTEMBER, 2016 GJ/ 1 * (.3 43%. /COPY TO: 1. &' /SHRI S. NAGARAJA REDDIAR, LAKSHMI SADANAM, MULLACK AL, ALAPPUZHA. 2. () &' /THE ADDITIONAL COMMISSIONER OF INCOME TAX, ALAPPUZ HA RANGE, ALAPPUZHA. 3. ,5 . ( )/THE COMMISSIONER OF INCOME-TAX(APPEALS), KOTTAYAM . 4. ,5 . /THE PRINCIPAL COMMISSIONER OF INCOME-TAX, KOTTAYAM . 5. 367 (. , /THE DR/ITAT, COCHIN BENCH. 6. 79 :- /GUARD FILE. 1, /BY ORDER ; /ASSISTANT REGISTRAR - .