ITO, CHENNAI V. Ms. K.R.Kalaimathy, CHENNAI

ITA 357/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51996 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-10-2011
• Assessment Year: 1995-1996
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D ANAND
• Keywords: Gift; Income from undisclosed sources; Rule of consistency; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 357/MDS/2011 (ASSESSMENT YEAR : 1995-96) THE INCOME-TAX OFFICER BUSINESS WARD VI(3) CHENNAI (APPELLANT) VS. M/S. K.R. KALAIMATHY NO. 8 PERUMAL II STREET PURASAWAKKAM, CHENNAI 600 007. PAN NO. AGEPK 9873 D (RESPONDENT) ASSESSEE BY : SHRI D. ANAND, ADVOC ATE DEPARTMENT BY : SHRI SHA JI P. JACOB, SR. DR. DATE OF HEARING : 17.10.2011 DATE OF PRONOUNCEMENT : O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY DEPARTMENT FOR THE ASSE SSMENT YEAR 1995-96 AGAINST THE ORDER DATED 12.11.2010 OF COMMI SSIONER OF INCOME TAX [A]-II, CHENNAI. I.T.A. NO. 357/MDS/2011 2 2. THE BRIEF FACTS OF THE CASE AS NARRATED BY THE A SSESSING OFFICER IN THE ASSESSMENT ORDER ARE THAT IT IS SEEN FROM TH E RECORDS AVAILABLE IN THIS CHARGE THAT NUMBER OF ASSESSEES HAD ADMITTED HAVING RECEIVED LOANS/GIFTS FROM THE SAID SHRI CHIN NAIAH BOSE AND DETAILED ENQUIRIES WERE MADE AS FOLLOWS: SL. NO. RECIPIENT AMOUNT DATE DATE OF RBIS APPROVA L RELATIONSHIP 1. SENTHAMARAI RS. 10 LAKHS 9.3.95 19.2.96 KANNAPANS BROTHER 2. K. KANNATHAL RS. 10 LAKHS 9.3.95 19.2.96 SISTER OF SHRI SENTHAMARAI 3. S. TIRUVALAGU RS. 10 LAKHS 9.3.95 19.2.96 BROTHER OF SENTHAMARAI 4. S. CHELLAMMAL RS. 10 LAKHS 9.3.95 19.2.96 WIFE OF SENTHAMARAI 5. S.P. THAVAMANI RS. 20 LAKHS 9.3.95 19.2.96 BROTHER-IN-LAW OF SENTHAMARAI 6. T. JAYABHARATHI RS.20 LAKHS 9.3.95 19.2.96 SISTER OF SENTHAMARAI 7. T. KANNAGI RS. 10 LAKHS 9.3.95 19.2.96 SISTER-IN-LAW (BROTHERS WIFE) OF SETHAMARAI 8. G. MALLIGA RS.30,68,100 2.8.95 19.2.96 EX-MLA 9. G. SELVARAJ RS. 15,34,050 2.8.95 19.2.96 MALLIGAS BROTHER 10. M. MALARKODI RS. 15,34,050 2.8.95 19.2.96 SISTER OF MANIMEGALAI 11. S. MANIMEGALAI RS. 15,34,050 2.8.95 19.2.96 SISTER-IN-LAW OF MALLIGA I.T.A. NO. 357/MDS/2011 3 ALLEGED GIFTS GIVEN BY CHINNIAH BOSE : 1. K.R. DEVAKIAMMAL RS. 15 LAKHS 2. G. SULOCHANA RS.20 LAKHS 3. K.R. KALAIMATHI RS.20 LAKHS 4. P.R. GANAPATHY RS.20 LAKHS 5. K. KALAIRAJAN RS.20 LAKHS 3. THE ASSESSING OFFICER ALSO OBSERVED THAT THE DET AILS GIVEN ABOVE WOULD CLEARLY INDICATE THAT THE ASSESSEE, HIS FAMILY MEMBERS AND CLOSE ASSOCIATES HAVE SYSTEMATICALLY FOLLOWED A MODUS OPERANDI WHEREBY ALLEGED NRI LOANS/GIFTS HAVE BEEN USED TO E XPLAIN THE SOURCES FOR THE INVESTMENT THEY HAD MADE OVER A PER IOD OF YEARS. HE FURTHER OBSERVED THAT SIMILAR GIFTS RECEIVED BY SMT. G. SOLOCHANA WAS HELD TO BE BOGUS IN THE ORDER PASSED U/S 158BD OF THE INCOME- TAX ACT, 1961 DATED 27.8.1997 FOR BLOCK PERIOD 1986 -87 TO 1996-97. THE ASSESSING OFFICER FURTHER OBSERVED THAT AS IN T HE CASE OF CASH CREDITS, IN THE CASE OF GIFTS ALSO, AND PARTICULARL Y, IN THE CASE OF NRI GIFTS, THE ONUS IS ON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE DONORS AND THE GENUINENESS OF THE TRANSACTION. IT I S WELL ESTABLISHED I.T.A. NO. 357/MDS/2011 4 BY A SERIES OF DECISIONS OF THE HON'BLE SUPREME COU RT, NAMELY KALEKHAN MOHAMED HANIF VS. CIT 50 ITR 1, GOVINDARAJ ULU MUDALIAR VS. CIT 34 ITR 807 AND CIT VS. DEVI PRASAD VISWANAT H PRASAD 72 ITR 94 THAT THE ONUS OF PROVING THE SOURCES OF ANY MONE Y RECEIVED BY THE ASSESSEE IS UPON HIM. IN THE CASE UNDER CONSID ERATION, THE ASSESSEE HAVING FAILED TO ESTABLISH THE GENUINENESS OF THE ALLEGED GIFT FROM THE ABOVE SAID DONORS THE TRANSACTION UND ER CONSIDERATION HAS TO BE HELD TO BE A BOGUS ONE AND THE RECEIPT OF MONEY SHOULD BE BROUGHT TO TAX AS HIS UNEXPLAINED INCOME. THE A SSESSING OFFICER FURTHER STATED THAT THE NRI SHRI CHINNAIAH BOSE HAS ALSO ADVANCED LOAN AND GIVEN GIFT TO VARIOUS PERSONS WHO ARE ASSE SSEES RELATIVES, FRIENDS AND ASSOCIATES. THESE WERE EXAMINED IN DET AIL AND FOUND TO BE BOGUS IN ALL THE CASES. FOR THE SAKE OF CONVENI ENCE, THE FINDING GIVEN IN THE CASE OF SMT. T. KANNAGI ASSESSED IN TH E CIRCLE IN RESPECT OF THE LOAN TRANSACTION WITH THE SAID NRI SHRI CHIN NAIAH BOSE WAS THAT THE ASSESSEE HAD NOT DISCHARGED HER ONUS FOR E STABLISHING THE CREDIT AS GENUINE. THE ASSESSING OFFICER FURTHER R ELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F SUMATI DAYAL VS. CIT 214 ITR 801 [SC] AND STATED THAT IT WAS HEL D BY THE HON'BLE I.T.A. NO. 357/MDS/2011 5 SUPREME COURT THAT THE SURROUNDING CIRCUMSTANCES AN D THE TEST OF HUMAN PROBABILITIES IS ONE OF THE METHODS TO DECIDE THE GENUINENESS OR OTHERWISE OF A TRANSACTION. THE ASS ESSING OFFICER ALSO RELIED ON THE DECISION OF THE MUMBAI A BENCH OF THE TRIBUNAL IN THE CASE OF SMT. RAJARANI GUPTA VS. DCIT REPORTE D IN 72 ITD 155 AND OBSERVED THAT IN A SIMILAR CASE INVOLVING NRI G IFTS AND SIMILAR METHOD ADOPTED INDICATED THE INSTANCE OF A DESIGN AND MONEY LAUNDERING EXERCISE AND NOT GENUINE GIFTS. THEREFO RE, THE WAS OF THE OPINION THAT THIS WAS A CASE OF MONEY LAUNDERIN G ON THE PART OF THE ASSESSEE WHEREBY THE ASSESSEE HAD BROUGHT INTO HIS BOOK UNEXPLAINED INCOME WHICH HAS NOT BEEN DISCLOSED TO THE DEPARTMENT AND WHICH HAS SURFACED AS INVESTMENT IN THE SUBSEQUENT YEARS AND ADDED RS. 20 LAKHS AS INCOME FROM UNDISCL OSED SOURCES TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE SAID ORDER OF THE ASSESSI NG OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A) AND C HALLENGED THE ORDER OF THE ASSESSING OFFICER IN ASSESSING RS. 20 LAKHS GIFTS RECEIVED BY THE ASSESSEE AS INCOME FROM UNDISCLOSED SOURCES. I.T.A. NO. 357/MDS/2011 6 5. DURING THE ASSESSMENT PROCEEDINGS BEFORE THE LD. CIT(A), LEARNED AR OF THE APPELLANT SUBMITTED THAT THE A.O. HAS ASSESSED THE GIFT AS INCOME FROM UNDISCLOSED SOURCES COMPLET ELY RELYING ON THE EXTRACTS FROM THE ORDERS OF SMT. T. KANNAGI. S HE SUBMITTED THAT SIMILAR ADDITION WAS MADE IN THE CASE OF SHRI P.R. GANAPATHY ALSO ON ACCOUNT OF GIFT RECEIVED FROM SHRI CHINNIAH BOSE. SHE SUBMITTED THAT IN A COMBINED ORDER IN THE CASES OF SMT. T. KANNAGI AND SHRI P.R. GANAPATHY, THE HON'BLE B BENCH OF I TAT, CHENNAI (ORDERS DATED 09.02.2004 IN ITA NOS. 310, 311 & 148 /MDS/2002) HELD THAT THE GIFTS/LOANS GIVEN BY SHRI CHINNIAH BO SE ARE GENUINE AND DELETED THE ADDITIONS MADE BY TREATING THE GIFT S/LOANS AS INCOME FROM UNDISCLOSED SOURCES. 6. THE LEARNED AR ALSO SUBMITTED TO THE LD. CIT(A) THAT ON FURTHER APPEAL BY THE INCOME-TAX DEPARTMENT AGAINST THE HON'BLE ITAT ORDERS (IN THE CASE OF SMT. T. KANNAGI AND SHR I P.R. GANAPATHY) THE HON'BLE MADRAS HIGH COURT DECIDED TH E ISSUE IN FAVOUR OF THE APPELLANTS VIDE ORDER DATED 20.12.200 4 IN TAX CASE (APPEALS) NOS. 926 TO 928 OF 2004. SHE SUBMITTED T HAT IN VIEW OF I.T.A. NO. 357/MDS/2011 7 THE ORDERS OF THE HON'BLE ITAT AND HON'BLE MADRAS H IGH COURT IN THE CASE OF SMT. KANNAGI, THE ADDITION MADE IN THE HAND S OF THE APPELLANT BASED ON THE ORDERS OF SMT. T. KANNAGI IS NOT JUSTIFIED AND SHOULD BE DELETED. 7. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, DELETED THE ADDITION. 8. THE LD. D.R. VEHEMENTLY ARGUED AND SUPPORTED THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. A.R. OF THE A SSESSEE SUPPORTED THE ORDER OF THE LD. CIT(A) AND FURTHER SUBMITTED T HAT THE DONOR IS SISTERS HUSBAND AND THE ASSESSEE IS THE SISTER-IN- LAW OF THE DONOR AND THAT SHRI P.R. GANAPATHY IS THE CO-BROTHER OF T HE DONOR. HE, THEREFORE, SUBMITTED THAT SINCE THE GIFTS WERE RECE IVED WITHIN THE FAMILY AND FROM THE FAMILY MEMBERS, THE SAME CANNOT BE HELD TO BE BOGUS. HE ALSO SUBMITTED THAT THE GIFTS WERE RECEI VED THROUGH BANKING CHANNEL. HENCE ADDITION MADE BY THE ASSESS ING OFFICER WAS RIGHTLY DELETED BY THE LD. CIT(A) AND THAT THE ORDE R OF THE LD. CIT(A) SHOULD BE CONFIRMED AND APPEAL OF THE REVENUE SHOUL D BE DISMISSED. I.T.A. NO. 357/MDS/2011 8 9. HE FILED BEFORE US THE ORDER OF THE CHENNAI A BENCH OF THE TRIBUNAL IN THE CASE OF SMT. G. SULOCHANA DEVI VS. DCIT, CENTRAL CIRCLE II(1) DATED 29.01.2010 IN IT(SS)A NO. 79/MDS /2003 FOR BLOCK ASSESSMENT PERIOD 1986-87 TO 1996-97 AND SUBMITTED THAT THE ORDER RELIED UPON BY THE ASSESSING OFFICER IN THE CASE OF THIS ASSESSEE FOR MAKING ADDITION IN THE HANDS OF THE PRESENT ASSESS EE HAS BEEN REVERSED BY THE TRIBUNAL. FURTHER, HE FILED BEFORE US COPY OF THE CONSOLIDATED ORDER OF THE HON'BLE MADRAS HIGH COURT DATED 20.12.2004 IN THE CASE OF CIT VS. P.R. GANAPATHY AN D SMT. T. KANNAKI IN TAX CASE [APPEALS] NOS. 926 TO 928 OF 20 04 AND SUBMITTED THAT THE RELIANCE OF THE ASSESSING OFFICE R ON ASSESSMENT ORDERS OF THESE ASSESSEES FOR MAKING ADDITION IN TH E HANDS OF THE PRESENT ASSESSEE FOR GIFTS WAS ALSO REVERSED BY THE TRIBUNAL AND THE ORDER OF THE TRIBUNAL WAS CONFIRMED BY THE HON'BLE MADRAS HIGH COURT IN FURTHER APPEAL. HE FURTHER SUBMITTED THAT AS SIMILAR GIFTS IN SIMILAR FACTS AND CIRCUMSTANCES RECEIVED BY OTHE R RELATIVES OF THE ASSESSEE HAVE BEEN DELETED BY THE TRIBUNAL AND THE HON'BLE JURISDICTIONAL HIGH COURT, THEREFORE, THE ORDER OF THE LD. CIT(A) I.T.A. NO. 357/MDS/2011 9 NEEDS TO BE CONFIRMED AND APPEAL OF THE REVENUE NEE DS TO BE DISMISSED. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED TO HAVE RECEIVED NRI GIFTS OF RS. 20 LAKHS FROM SHRI CHINNAIAH BOSE. THE ASSESSING O FFICER ADDED THE SAME TO THE INCOME OF THE ASSESSEE BY DISBELIEVING THE GENUINENESS OF THE GIFTS. ON APPEAL, THE LD. CIT(A) DELETED TH E ABOVE ADDITION BY OBSERVING AS UNDER: 8. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AR. THE ADDITION MADE BY THE A.O. WAS BASED ON THE ORDE RS IN THE CASE OF SMT. T. KANNAGI. SINCE THE ADDITION MADE I N THE CASE OF SMT. T. KANNAGI WAS DELETED BY HON'BLE ITAT HOLD ING THAT THE GIFTS/LOANS FROM SHRI CHINNIAH BOSE ARE GENUINE AND THE SAME HAS BEEN CONFIRMED BY THE HON'BLE MADRAS HIGH COURT, THE ADDITION MADE IN THE CASE OF APPELLANT CANNOT B E SUSTAINED. ACCORDINGLY, THE ADDITION OF RS. 20,00, 000/- ON ACCOUNT OF GIFT RECEIVED FROM SHRI CHINNIAH BOSE AS INCOME FROM UNDISCLOSED SOURCES MADE IN THE ASSESSMENT ORDER IS DELETED . I.T.A. NO. 357/MDS/2011 10 11. BEFORE US, THE LD. D.R. COULD NOT POINT OUT ANY SPECIFIC MISTAKE IN THE ORDER OF THE LD. CIT(A) AND ALSO COU LD NOT POINT OUT ANY SUFFICIENT REASON TO INTERFERE WITH THE ORDER O F THE LD. CIT(A) WHO HAD FOLLOWED THE ORDERS OF THIS TRIBUNAL WHICH WAS ALSO CONFIRMED BY THE HON'BLE MADRAS HIGH COURT. WE FIN D THAT NO DISTINGUISHABLE FEATURES FROM THE FACTS IN THE CASE OF SMT. T. KANNAGI AND SHRI P.R. GANAPATHY [SUPRA] COULD BE PO INTED OUT BY THE REVENUE BEFORE US. THE TRIBUNAL, IN THE CASE O F SHRI P.R. GANAPATHY HAS DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE AND IN THE SUBSEQUENT CASE OF SHRI P.R. PERUMAL IN ITSSA N O. 37/MDS/2007 ORDER DATED 7.3.2008, THIS TRIBUNAL IN PARA 3.6 HAS HELD AS UNDER: '3.6 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RELEVANT RECORDS. WE FIND THAT THIS TRIBUNAL IN THE CASE OF S HRI P.R. GANAPATHI & ORS. CITED ABOVE HAS NOT DOUBTED THE CAP ACITY OF SHRI CHINNIAH BOSE WHO HAD ADVANCED SUMS. IT WAS HEL D THAT CONFIRMATION IS AVAILABLE WITH THE DEPARTMENT, IDEN TITY OF THE PARTY IS NOT DOUBTED, THE LETTER GIVEN BY SHRI CHIN NIAH BOSE CLEARLY SHOWS THAT HE HAD ADVANCED LOAN TO THE ASSE SSEE. IN THE LIGHT OF AFORESAID DISCUSSION, IN OUR OPINION, WHEN T HIS TRIBUNAL I.T.A. NO. 357/MDS/2011 11 IN THE CASE OF SIMILAR GIFT / LOAN BY THE SAME DONOR HAS ACCEPTED THE CAPACITY OF THE DONOR AND GENUINENESS O F THE SUMS GIVEN BY HIM, RULE OF CONSISTENCY DEMANDS THAT WE FO LLOW THE SAME. IN THIS REGARD HON'BLE APEX COURT DECISION IN THE CASE OF HONDA SIEL POWER PRODUCTS LTD. VS. CIT (2007) 295 I TR 466 (SC) IN THE CONTEXT OF CONSIDERING A CO-ORDINATE BENCH D ECISION BY THE TRIBUNAL HAD HELD THAT, 'RULE OF PRECEDENT' IS A N IMPORTANT ASPECT OF LEGAL CERTAINTY IN THE RULE OF LAW. FURTHE R, AS HELD BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. L.G. RAMAMURTHI (1977) 110 ITR 453 (MAD), IT IS MANDATORY ON OUR PART TO FOLLOW THE CO-ORDINATE BENCH DECISION ON SA ME SET OF FACTS. IT IS HELD IN THIS CASE (HEAD NOTES): 'NO TRIBUNAL OF FACT HAS ANY RIGHT OR JURISDICTION TO COME TO A CONCLUSION ENTIRELY CONTRARY TO THE ONE REACHED BY A NOTHER BENCH OF THE SAME TRIBUNAL ON THE SAME FACTS. IT MAY BE THAT THE MEMBERS WHO CONSTITUTED THE TRIBUNAL AND DECIDED ON THE EARLIER OCCASION WERE DIFFERENT FROM THE MEMBERS WH O DECIDED THE CASE ON THE PRESENT OCCASION. BUT WHAT IS RELEVA NT IS NOT THE PERSONALITY OF THE OFFICERS PRESIDING OVER THE TRIBUNAL OR I.T.A. NO. 357/MDS/2011 12 PARTICIPATING IN THE HEARING, BUT THE TRIBUNAL AS AN INSTITUTION. IF IT IS TO BE CONCEDED THAT SIMPLY BECAUSE OF THE C HANGE IN THE PERSONNEL OF THE OFFICERS WHO MANNED THE TRIBUNAL IT IS OPEN TO THE NEW OFFICERS TO COME TO A CONCLUSION TOTALLY CON TRADICTORY TO THE CONCLUSION WHICH HAD BEEN REACHED BY THE EARL IER OFFICERS MANNING THE SAME TRIBUNAL ON THE SAME SET O F FACTS, IT WILL NOT ONLY SHAKE THE CONFIDENCE OF THE PUBLIC IN JUDICIAL PROCEDURE AS SUCH, BUT IT WILL ALSO TOTALLY DESTROY SUC H CONFIDENCE. THE RESULT OF THIS WILL BE CONCLUSIONS BA SED ON ARBITRARINESS AND WHIMS AND FANCIES OF THE INDIVIDUA LS PRESIDING OVER THE COURTS OR THE TRIBUNALS AND NOT REACHED OB JECTIVELY ON THE BASIS OF THE FACTS PLACED BEFORE THE AUTHORITIES. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT, WE SET ASIDE THE ORDER OF AUTHORITY BELOW AND DECIDE THE ISSUE IN FAVOUR OF T HE ASSESSEE. ' 12. IN VIEW OF THE ABOVE AND IN THE ABSENCE OF ANY DISTINGUISHABLE FACTS POINTED OUT BY THE REVENUE, WE, RESPECTFULLY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL PASSED IN THE CASE O F SMT. KANNAGI AND SHRI P.R. GANAPATHY [SUPRA], CONFIRM THE ORDER OF THE LD. CIT(A) IN THE PRESENT APPEAL ALSO. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A. NO. 357/MDS/2011 13 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 21 ST OCTOBER, 2011. SD/- SD/- (GEORGE MATHAN) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 21 ST OCTOBER, 2011. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE