ITO 19(1)(3), MUMBAI V. SABINA KHAN, MUMBAI

ITA 3497/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8818 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 13-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 02-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY
• Assessee Lawyers: STANY SALDANHA
• Keywords: Gift; Corroborative evidences
• Section: 142(1); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 3497/MUM /2011 ASSESSMENT YEAR : 2003-04 INCOME TAX OFFICER 19(3)(4), ROOM NO. 304, 3 RD FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012. VS. MS. SABINA KHAN, ST. JOHN BAPTIST ROAD, BANDRA (W), MUMBAI - 400 050. PAN AAHPK2452J (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI V. KRISHNAMOORTHY ASSESSEE BY : SHRI STANY SALDANHA DATE OF HEARING 13-9-2012 DATE OF PRONOUNCEMENT 26-9-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DTD. 25-02-2011 PASSED BY THE LD. CIT(A) 30, MUMBA I FOR THE A.Y. 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE AN INDIVIDUAL DERIVES INCOME FROM DRESS DESIGNING AND T.V. SERIAL PRODUCTIONS. THE RETURN OF INCOME WAS FILED DECLARING TOTAL INCOME O F RS. 6,72,950/- ALONG WITH TAX AUDIT REPORT U/S 44AB OF THE INCOME TAX AC T, 1961 (THE ACT). THE A.O. AFTER PROCESSING OF THE RETURN U/S 143(1) OF THE ACT, SELECTED THE CASE FOR SCRUTINY AND ACCORDINGLY ISSUED NOTICES U/ S 143(2) AND 142(1) OF ITA NO. 3497/MUM/2011 2 THE ACT ALONG WITH LETTER CALLING FOR VARIOUS DETAI LS. IN THE ABSENCE OF ANY COMPLIANCE BY THE ASSESSEE, THE A.O. ISSUED ANOTHER NOTICE U/S 142(1) DTD. 5-8-2005. IN RESPONSE, THE ASSESSEE FILED A LE TTER SEEKING ADJOURNMENT ON THE GROUND THAT THE DETAILS REQUIRED ARE UNDER COMPLIANCE. THE A.O. ISSUED ANOTHER NOTICE U/S 142 (1) OF THE ACT DTD. 26-8-2005. IN RESPONSE, THE ASSESSEE FILED CERTAIN DETAILS WHICH HAS BEEN MENTIONED IN PARA 4 OF THE ASSESSMENT ORDER. THERE AFTER, THE A.O. ISSUED VARIOUS NOTICES U/S 142(1) OF THE ACT, HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE SAME. THUS THE A.O., IN THE ABSENC E OF ANY COMPLIANCE, OBSERVED THAT HE LEFT WITH NO ALTERNATIVE BUT TO CO MPLETE THE ASSESSMENT U/S 144 OF THE ACT ON THE BASIS OF MATERIAL AVAILAB LE ON RECORD. IN PARA 8 OF THE ASSESSMENT ORDER, THE A.O. OBSERVED THAT IN ASSESSEES CAPITAL ACCOUNT WITH LAMEES ENTERTAINMENT FACTORY SHOWS A RECEIPT OF GIFT OF RS. 2,50,000/-. IN PARA 9 OF THE ASSESSMENT ORDER, THE A.O. OBSERVED THAT IN ASSESSEES CAPITAL ACCOUNT (MS. SABINA KHAN) SHO WS RECEIPT OF GIFT OF RS. 10,20,000/-. IN THE ABSENCE OF ANY MATERIAL TO PROVE THE GENUINENESS OF THE GIFTS, THE A.O. ADDED BOTH THESE GIFTS I.E R S. 2,50,000/- AND RS. 10,20,000/- AGGREGATING TO RS. 12,70,000/- TO THE I NCOME OF THE ASSESSEE U/S 68 OF THE ACT. IN PARA 10 OF THE ASSESSMENT OR DER, THE A.O. OBSERVED THAT IN THE P&L ACCOUNT OF LAMEES ENTERTAINMENT FA CTORY THE ASSESSEE HAS SHOWN GROSS RECEIPTS OF RS. 96,96,541/- AND HAS CLAIMED SERIAL PRODUCTION EXPENSES OF RS. 89,71,106/- AND ALSO OTH ER EXPENSES. IN THE ABSENCE OF ANY DETAILS OF EXPENSES, THE A.O. ESTIMA TED PROFIT AT 30% OF ITA NO. 3497/MUM/2011 3 GROSS RECEIPTS OF RS. 97,96,541/- WHICH HE WORKED O UT AT RS. 29,38,962/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN PARA 11 OF THE ASSESSMENT ORDER THE A.O. OBSERVED T HAT IN THE ACCOUNT OF DRESS DESIGNING THE ASSESSEE HAS SHOWN GROSS RECEIP TS OF RS. 15,23,083/- AGAINST WHICH THE ASSESSEE HAS CLAIMED EXPENSES OF RS. 13,08,052/-. IN THE ABSENCE OF ANY DETAILS OF EXPEN SES, THE A.O. ESTIMATED @ 30% OF GROSS RECEIPTS OF RS. 15,23,083/ - WHICH HE WORKED OUT AT RS. 4,56,924/- AND ADDED THE SAME TO THE TOT AL INCOME OF THE ASSESSEE. THE A.O. AFTER MAKING SOME OTHER DISALLO WANCES I.E. OUT OF MOTOR CAR EXPENSES OF RS. 89,330/- AND OUT OF LOW W ITHDRAWAL OF RS. 70,000/-, COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 47,87,568/- VIDE ORDER DTD. 21-3-2006 PASSED U/S 144 OF THE ACT . 3. ON APPEAL, THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION AND REMAND REPORT OF THE A.O. ON THE ISS UE OF ESTIMATION OF NET PROFIT IN RESPECT OF LAMEES ENTERTAINMENT FACT ORY RESTRICTED THE NET PROFIT RATE AT 10% OF THE GROSS RECEIPT AND THUS SU STAINED THE ADDITION OF RS. 9,79,654/- AND DELETED THE BALANCE AMOUNT OF AD DITION OF RS. 19,59,308/-. THE LD. CIT(A), ON THE ESTIMATION OF N ET PROFIT OF RS. 4,56,924/- BEING 30% OF GROSS RECEIPT OF RS. 15,23, 083/- IN RESPECT OF DRESS DESIGNING ACCOUNT, WHILE OBSERVING THAT THE R ATE APPLIED AT 30% APPEARS TO BE EXCESSIVE, RESTRICTED THE SAME AT 15% OF THE GROSS RECEIPT WHICH HE WORKED OUT TO RS. 2,28,462/- AND DELETED T HE BALANCE AMOUNT OF ADDITION OF RS. 2,28,452/-. ON THE ADDITION OF MOTOR CAR EXPENSES, THE ITA NO. 3497/MUM/2011 4 LD. CIT(A) DELETED THE SAME. ON THE ADDITION OF LO W WITHDRAWALS, THE LD. CIT(A) RESTRICTED THE ADDITION TO RS. 50,000/- AND ALLOWED A RELIEF OF RS. 20,000/-. ON THE ADDITION OF GIFT OF RS. 12,70,000 /-, THE LD. CIT(A) OBSERVED THAT DURING THE YEAR THE ASSESSEE HAS RECE IVED GIFT OF RS. 9,60,000/- FROM MS. NILOFER PESHIMAM (SISTER OF THE ASSESSEE), RS. 1,60,000/- FROM MR. AZIZ KHAN (FATHER OF THE ASSESS EE) AND RS. 1,50,000/- FROM MR. NAJEEB PESHIMAM (BROTHER- IN-LA W OF THE ASSESSEE) AGGREGATING TO RS. 12,70,000/-. IN SUPPORT OF THE GIFT OF RS. 9,60,000/- RECEIVED FROM MS. NILOFER PESHIMAM, IT WAS SUBMITTE D BY THE ASSESSEE THAT THE DONOR WAS WORKING IN THE US FOR THE PAST S EVERAL YEARS. SHE WAS MARRIED TO MUBIN PESHIMAM IN US IN 1997. LATER, THE Y SEPARATED IN DECEMBER 2000. A DEED SEPARATION WAS ALSO PREPARED. AS PER THE DEED OF SEPARATION, SHE WAS AWARDED COMPENSATION OF A SUM O F US $ 36,000.00 AND OUT OF THIS AMOUNT SHE HAD GIFTED A SUM OF US $ 20,000 EQUIVALENT TO INR 9,60,000/- TO HER SISTER I.E. THE ASSESSEE A ND IN SUPPORT, COPY OF PASS BOOK ALONG WITH AND DEED OF SEPARATION WAS FIL ED. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION IN THIS REGARD OBSERVED THAT THE CAPACITY AND CREDITWORTHINESS OF THE DONOR CANN OT BE QUESTIONED, THE A.O. HAS NOT COMMENTED ANYTHING ABOUT THIS IN THE R EMAND REPORT, THEREFORE, ALL THE INGREDIENTS OF A VALID GIFT ARE PRESENT IN THE CASE OF THE DONOR OF THE ASSESSEE AND HENCE HE DELETED THE ADDI TION OF RS. 9,60,000/-. AS REGARDS GIFT OF RS. 1,60,000/- RECE IVED FROM MR. AZIZ KHAN, IT WAS SUBMITTED BY THE ASSESSEE THAT HE IS F ATHER OF THE ASSESSEE ITA NO. 3497/MUM/2011 5 WHO HAD BEEN WORKING WITH A PETROLEUM COMPANY (BHA RAT PETROLEUM ERSTWHILE BURMAH SHELL) AND HAS RETIRED. HE HAD BE EN WORKING FOR OVER 35 YEARS. ON HIS RETIREMENT HE HAD RECEIVED PF AND OTHER RETIREMENT BENEFITS AND OUT OF THE SAME, HE HAD GIFTED RS. 1,6 0,000/- TO THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE SAM E, DELETED THE ADDITION OF GIFT OF RS. 1,60,000/-. AS REGARDS THE GIFT FRO M MR. NAJEEP PESHIMAM RS. 1,50,000/-, THE LD. CIT(A) OBSERVED THAT NOTHIN G HAS BEEN DISCLOSED ABOUT THE CREDITWORTHINESS OF THE DONOR, THEREFORE, HE CONFIRMED THE ADDITION OF RS. 1,50,000/- MADE BY THE A.O. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN REDUCING THE ESTIMATED PROFIT OF M/S LAMEE;S ENTERTAINMENT FACTORY FROM 30% TO 10% CONSIDERING T HE SUBMISSION OF BILLS WITHOUT APPRECIATING THE FACTS THAT THE ASSES SEE HAS NEITHER ATTENDED BEFORE THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS NOR AT THE TIME OF REMAND REPORT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN REDUCING THE ESTIMATED REPORT OF SHABINA KHAN (DRESS DESIGNER) FROM 30% TO 15% CONSIDERING T HE SUBMISSION OF THE ASSESSEE, WITHOUT APPRECIATING THE FACTS THAT T HE ASSESSEE HAS NEITHER ATTENDED BEFORE THE ASSESSING OFFICER AT THE TIME A SSESSMENT PROCEEDINGS NOR AT THE TIME OF REMAND REPORT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING THE RELIEF OF RS. 11,20,000/- OUT OF TOTAL ADDITION OF RS. 12,70,000/- MADE BY A.O. ON A CCOUNT GIFTS, CONSIDERING THE SUBMISSION OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS NEITHER ATTENDED BEFORE THE ASSESSING OFFICER AT THE TIME ASSESSMENT PROCEEDINGS NOR AT THE TIME OF REMAND REPORT. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. ITA NO. 3497/MUM/2011 6 5. AT THE TIME OF HEARING THE LD. D.R. SUBMITS THAT INSPITE OF VARIOUS OPPORTUNITIES PROVIDED TO THE ASSESSEE, THE ASSESSE E HAS FAILED TO PRODUCE BOOKS OF ACCOUNTS ALONG WITH RELEVANT DETAI LS, THEREFORE, THE A.O. WAS JUSTIFIED IN ESTIMATING THE INCOME OF THE ASSES SEE BY APPLYING 30% RATE OF PROFIT ON THE SALES SHOWN BY THE ASSESSEE. HE FURTHER SUBMITS THAT SINCE THE ASSESSEE HAS FAILED TO ATTEND BEFORE THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS AND AT THE TIME OF REMAND RE PORT, THE A.O. WAS JUSTIFIED IN TREATING THE GIFT OF RS. 12,70,000/- A S UNEXPLAINED INCOME U/S 68 OF THE ACT. HE FURTHER SUBMITS THAT THE LD. CIT(A) WITHOUT APPRECIATING THE FACTS HAS ERRED IN ALLOWING THE RE LIEF TO THE ASSESSEE TO THE EXTENT OF GIFTS OF RS. 11,20,000/-. HE, THEREF ORE, SUBMITS THAT THE ORDER PASSED BY THE A.O. BE RESTORED. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITS THAT THE ASSESS EE HAS FILED THE DETAILS OF BANK ACCOUNT, PARTY-WISE GROSS RECEIPTS, DETAILS OF SERIAL PRODUCTION EXPENSES, PARTY-WISE DETAILS OF CONSUMABLES ALONG W ITH BILLS, CONFIRMATION OF GIFTS ALONG WITH COPY OF PASS PORT AND COPY OF PROPERTY SETTLEMENT AGREEMENT APPEARING AT PAGE 1 TO 144 OF THE ASSESSEES PAPER BOOK, THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ABOVE ADDITIONS MADE BY THE A.O. HE, THEREFORE, SUBMITS T HAT THE ORDER PASSED BY THE LD. CIT(A) BE UPHELD. ITA NO. 3497/MUM/2011 7 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE HAS FILED THE TAX AUDIT REPORT AND OTHER FINANCIAL STAT EMENTS. WE FURTHER FIND THAT THE A.O. WHILE OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF EXPENSES, ESTIMATED THE PROFIT AT 30% OF THE GROSS RECEIPTS IN BOTH TRADING ACCOUNTS WHICH WAS REDUCED BY THE LD. CIT(A) AT 10% IN THE ACCOUNT OF M/S LAMEES ENTERTAINMENT FACTORY AND 15 % IN THE ACCOUNT OF DRESS DESIGNING. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDINGS OF THE L D. CIT(A), THE BASIS FOR APPLYING 30% PROFIT RATE ON THE SALES DISCLOSED BY THE ASSESSEE AND THE ITEMS OF EXPENSES WHICH ARE NOT ALLOWABLE AS BUSINE SS EXPENDITURE, WE ARE OF THE VIEW THAT ORDER PASSED BY THE LD. CIT(A) IN THIS REGARD DOES NOT CALL FOR ANY INTERFERENCE AND ACCORDINGLY THE GROUN D NO. 1 & 2 TAKEN BY THE REVENUE ARE REJECTED. 8. AS REGARDS THE RELIEF ALLOWED BY THE LD. CIT(A) IN RESPECT OF GIFT RECEIVED BY THE ASSESSEE OF RS. 9,60,000/- FROM MS. NILOFER PESHIMAM, SISTER OF THE ASSESSEE, WE FIND THAT THE LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS PROVED THE CAPACITY AND CREDITWORTHINE SS OF THE DONOR INASMUCH AS THE ASSESSEE HAS ALSO FILED COPY OF SEP ARATION DEED DTD. 20-12-2000 WHEREIN THE DONOR WAS AWARDED US $ 36,0 00.00 AND OUT OF THE SAME THE DONOR HAS GIFTED US $ 20,000 EQUIVALEN T TO RS. INRS. 9,60,000/- TO THE ASSESSEE. IN THE ABSENCE OF ANY C ONTRARY MATERIAL ITA NO. 3497/MUM/2011 8 PLACED ON RECORD BY THE REVENUE AND KEEPING IN VIEW THE GIFT WAS RECEIVED BY THE ASSESSEE FROM HER CLOSE RELATION I. E SISTER, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN DEL ETING THE ADDITION OF GIFT RS. 9,60,000/- MADE BY THE A.O. 9. AS REGARDS THE OTHER GIFT OF RS. 1,60,000/- RECE IVED FROM MR. AZIZ KHAN, FATHER OF THE ASSESSEE, WE FIND THAT THE CONF IRMATION LETTER FILED BY THE ASSESSEE APPEARING AT PAGE 92 OF THE ASSESSEES PAPER BOOK READS AS UNDER:- AZIZ KHAN A/65, ASHIANA, ST. JOHN BAPTIST ROAD, BANDRA (WEST) , MUMBAI 400 050 TO WHOMSOEVER IT MAY CONCERN THIS IS TO CONFIRM THAT I MR. AZIZ KHAN RESIDING AT A/65, ASHIANA, ST. JOHN BAPTIST ROAD, BANDRA (WEST) HAVE GIFTED A SUM OF RS . 1,60,000/- (ONE LAX SIXTY THOUSAND) OUT OF LOVE AND AFFECTION TO MY DAUGHTER MS. SHABINA KHAN ON 10-6- 2002 OUT OF MY SAVINGS. AZIZ KHAN (THUMB IMPRESSION) WE FURTHER FIND THAT BEFORE THE LD. CIT(A) THE ASSE SSEE HAS EXPLAINED THE GIFTS RECEIVED IN PARA 8 OF THE WRITTEN SUBMISSION APPEARING AT PAGE 89- 90 OF THE ASSESSEES PAPER BOOK AS UNDER:- . THE ABOVE AMOUNTS HAVE BEEN RECEIVED THROUGH PROPER BANKING CHANNELS AND THE SAME ARE REFLECTED IN THE BANK STATEMENTS. (COPY OF CONFIRMATION AND BANK STATEMENTS ENCLOSED) (ANNEXURE V). MOREOVER, THE MAJORITY OF AMOUNT OF GIFTS HAVE BEEN RECEIVED FROM NON RESIDENT FAMILY MEMBERS AND IN RESPECT OF LOCAL GIF T FROM THE FATHER OF THE ASSESSEE. GIFTS RECEIVED ARE NOT TAXABLE AS PER TH E PROVISIONS OF THE ACT. ITA NO. 3497/MUM/2011 9 CONSIDERING THE GIFTS ARE FULLY EXPLAINED IN RESPEC T OF IDENTITY OF THE PERSON AND RECEIPTS THROUGH PROPER BANKING CHANNELS THE SAME SHOULD NOT BE ADDED. FROM THE ABOVE WE FIND THAT THE ASSESSEE EXCEPT FIL ING THE CONFIRMATION AND BANK STATEMENT BEFORE THE LD. CIT(A) HAS NOT FI LED ANY SUPPORTING EVIDENCE OF THE GIFT GIVEN BY MR. AZIZ KHAN TO PROV E THE SOURCE, CAPACITY AND CREDITWORTHINESS OF THE DONOR AND EVEN AT THIS STAGE, THE LD. COUNSEL FOR THE ASSESSEE HAS FAILED TO FILE THE SAME. IN T HIS VIEW OF THE MATTER WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT DISCHARGE D THE BURDEN AS PROVIDED UNDER THE PROVISIONS OF SECTION 68 OF THE ACT AND, THEREFORE, THE A.O. WAS JUSTIFIED IN MAKING THE ADDITION OF RS. 1, 60,000/- AS UNEXPLAINED INCOME U/S 68 OF THE ACT AND ACCORDINGL Y WE, WHILE REVERSING THE ORDER OF THE LD. CIT(A) ON THIS ACCOU NT RESTORE THE ORDER OF THE A.O. TO THIS EXTENT. THE GROUND TAKEN BY THE R EVENUE IS, THEREFORE, PARTLY ALLOWED. 10. IN THE RESULT, REVENUES APPEAL STANDS PARTLY A LLOWED ORDER PRONOUNCED ON 26-9-2012. SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 26-9-2012. RK ITA NO. 3497/MUM/2011 10 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 30, MUMBA I 4. COMMISSIONER OF INCOME TAX CENTRAL CITY 19 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI