VIVEK M MANGLA, THANE V. ITO WD 3(4), THANE

ITA 3788/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79027 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 02-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: N M PORWAL
• Keywords: Gift; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NOS. 1248/MUM/2009 & 3788/MUM/2012 ( / ASSESSMENT YEAR: 2005-06) VIVEK M. MANGLA PROP. HOTEL MAHARAJA, 35, DEEPAK SOCIETY, DR. MOOSE ROAD, OPP. NAUKAVIHAR, TALAVPALI, THANE (W), MUMBAI-400 602 VS. ITO, WARD 3(4), THANE ! ' ./PAN/GIR NO. AAXPM 1937 F ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#&' / APPELLANT BY : SHRI N. M. PORWAL $%!#&' / RESPONDENT BY : SHRI NEERAJA PRADHAN ( )*&+, / DATE OF HEARING : 10.04.2014 -./&+, / DATE OF PRONOUNCEMENT : 20.06.2014 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE DIRECT ED AGAINST THE SEPARATE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)-I, MUMB AI (CIT(A) FOR SHORT), DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASS ESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2005-06 VIDE ORDER DATED 20.12.2007 AND THE LEVY OF PENALTY U/S.271(1)(C) CO NSEQUENT THERETO VIDE ORDER DATED 25.03.2010. 2 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO ITA NO. 1248/MUM/2009 2. THE ISSUE ARISING IN THE QUANTUM PROCEEDINGS IS THE MAINTAINABILITY IN LAW OF THE INVOCATING SECTION 68 OF THE ACT IN THE FACTS AND C IRCUMSTANCES OF THE CASE. 3.1 THE LAW IN THE MATTER IS WELL SETTLED, SO THAT A CASH CREDIT APPEARING IN THE ASSESSEES BOOKS OF ACCOUNT HAS TO BE PROVED AS TO ITS NATURE AND SOURCE, FAILING WHICH, SECTION 68, WHICH IS A RULE OF EVIDENCE, DEEMING TH E AMOUNT CREDITED AS THE ASSESSEES UNEXPLAINED INCOME FOR THE RELEVANT YEAR, MAY STAND ATTRACTED. FURTHER, THAT THE BURDEN OF PROOF HAS TO BE DISCHARGED ON THE PARAMETERS OF IDENTITY AND CREDITWORTHINESS OF THE CREDITOR, AND THE GENUINENESS OF THE CREDIT TRANSACTION. THE ISSUE IS THUS PRIMAR ILY FACTUAL, SO THAT IT IS REQUIRED TO BE DETERMINED IN EACH CAS E WHETHER THE BURDEN OF PROOF STANDS DISCHARGED BY THE ASSESSEE IN THE FACTS AND CIRCUMS TANCES OF THE CASE, WHICH WOULD BE QUA EACH CREDIT. 3.2 IT SHALL BE RELEVANT TO RECOUNT THE BACKGROUND FACTS OF THE CASE, CREDIT-WISE, AS GATHERED FROM THE ASSESSMENT ORDER. THE ASSESSEE, A N INDIVIDUAL, RESIDENT OF THANE, MAHARASHTRA, RECEIVED GIFTS FOR AN AGGREGATE OF RS. 42.01 LACS DURING THE RELEVANT YEAR FROM SEVERAL (NINE) PERSONS, AS UNDER: SR. NO. NAME OF PERSON/DONOR AMOUNT OF GIFT (IN RS.) 1. MOHANSHYAM MANGALA (HUF) 3,00,000 2. ANITA M. MANGLA 1,00,000 3. JYOTI P. NAIRI, SANTACRUZ, MUMBAI 3,00,000 4. RAM LAKHAN SINGH, BHANDUP 3,50,000 5. CHETAN M. MORJARIA, UGANDA 8,00,000 6. PAWAN CHURIWALA, DUBAI (UAE) 7,51,000 7. RAMESH VERMA, MUMBAI 6,00,000 8. VIJAY VERMA, MUMBAI 3,00,000 9. GOPAL VERMA, MUMBAI 7,00,000 TOTAL 42,01,000 THE SAME WERE SUBJECT TO TEST ON THE PARAMETERS OF IDENTITY AND CREDITWORTHINESS (OF THE DONORS) AND GENUINENESS (OF THE CREDIT TRANSACTIONS ) IN THE VERIFICATION PROCEEDINGS 3 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO INITIATED BY ISSUE AND SERVICE OF NOTICE U/S.143(2) . THE GIFTS HAVING BEEN TREATED AS GENUINE IN THE CASE OF FIRST TWO DONORS (OF THE MAN GLA FAMILY), WE DELINEATE THE FACTS AS RECORDED BY THE ASSESSING OFFICER (A.O.) ONLY FOR T HE BALANCE GIFTS AGGREGATING TO RS.38.01 LACS FROM THE REMAINING SEVEN (7) CREDITOR S, AS UNDER: I) JYOTI P. NAIRI, MUMBAI (RS.3 LACS) : THE GIFT WAS ACKNOWLEDGED. HOWEVER, APART FROM ASCR IBING THE SOURCE OF THE GIFT TO THE REPAYMENT OF LOAN TO ONE, M/S. CARGO VISION SEA FREIGHT (I) PVT. LTD., NOTHING WORTH MENTION WAS ADDUCED BY THE ASSESSEE. THE BASI S OF THE GIFT IS STATED AS LOVE AND AFFECTION, WHILE NO RELATIONSHIP WITH THE DONEE OR EVEN OCCASION FOR THE GIFT HAD BEEN STATED, MUCH LESS ESTABLISHED. THE GIFT WAS ACCORDI NGLY TREATED AS NON-GENUINE. II) RAMLAKHAN PARASNATH SINGH, MUMBAI (RS.3.50 LACS ): THOUGH THE GIFT WAS ACKNOWLEDGED, THE SOURCE OF TH E MONEY GIFTED WAS STATED TO BE THE COMMUTED VALUE OF THE PENSION AND GRATUITY R ECEIVED BY THE DONOR AT A TOTAL OF RS.3.70 LACS UPON RETIREMENT AS PRINCIPAL OF A SCHOOL. THE BANK BALANCE ON THE RECEIPT OF THE RETIREMENT BENEFIT STOOD AT RS.3.72 LACS . THE BANK BALANCE WITH THE DONOR LEFT AFTER MAKING THE GIFT (FOR WHICH NO OSTENSIBLE REASON HAD BEEN CITED) WAS ONLY AT RS.22,521/-. IT WAS EXTREMELY ODD THAT ANY PERSON WOULD GIFT - A ND ALMOST THE WHOLE OF HIS LIFE-TIME SAVINGS OR OF YEARS OF TOIL TO ANYONE, MUCH LESS A STRANGER, AND THAT TOO IN THE EVENING OF HIS LIFE, WHEN HIS CAPACITY FOR GENERATING THE INCO ME STANDS SUBSTANTIALLY REDUCED. NO RELATIONSHIP OR OCCASION FOR THE GIFT STANDS SPECIF IED. THE GIFT WAS, ACCORDINGLY, TREATED AS NOT GENUINE. III) CHETAN PURUSHOTTAM MORJARIA, UGANDA (RS.8 LACS ) : THE GIFT, THE SOURCE OF WHICH IS A FOREIGN REMITTA NCE FROM ABROAD IN THE LOCAL (MUMBAI) BANK ACCOUNT OF THE NRI DONOR (AT RS.8 LAC S), STANDS ACKNOWLEDGED. NO BASIS FOR THE GIFT HAS HOWEVER BEEN STATED IN-AS-MUCH AS NO RELATIONSHIP WITH THE ASSESSEE OR OCCASION FOR THE GIFT THERETO IN NO UNSUBSTANTIAL S UM HAS BEEN SPECIFIED. THE GIFT WAS ACCORDINGLY TREATED AS NOT GENUINE. IV) PAWAN BANWARILAL CHURIWALA, UAE (RS.7.51 LACS) : THE GIFT, THE SOURCE OF WHICH IS FOREIGN REMITTANC E FROM ABROAD IN THE LOCAL (MUMBAI) BANK ACCOUNT OF THE NRI DONOR BY WAY OF TE LEGRAPHIC TRANSFER BY ASIA EXCHANGE FOR RS.8.78 LACS, STANDS ACKNOWLEDGED. TH ERE WAS ALMOST NIL BALANCE IN ACCOUNT PRIOR TO THE REMITTANCE, RECEIVED THUS FOR THE PURPOSE OF MAKING THE GIFT. NO EVIDENCE, OTHER THAN STATING OF GOOD RELATIONSHIP ( WITH THE ASSESSEE), HAS BEEN SPECIFIED BY THE DONOR IN JUSTIFICATION OF THE GIFT. THE GIFT WAS, ACCORDINGLY, TREATED AS NON-GENUINE. 4 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO V TO VII) RAMESH VERMA (RS.6 LACS) / VIJAY VERMA (R S.3 LACS) / GOPAL VERMA (RS.7 LACS), MUMBAI THE FACTS CHARACTERIZING THESE GIFTS BY THREE MEMBE RS OF A FAMILY BEING ALMOST IDENTICAL, THE SAME ARE TAKEN TOGETHER TO AVOID REP ETITION. THE GIFTS STAND ACKNOWLEDGED. THE PERUSAL OF THE RESPECTIVE BANK ACCOUNTS ALL WIT H THE SAME BANK BRANCH, OF THE DONORS, AS FURNISHED BY THE ASSESSEE THE DONORS FAILING T O RESPOND TO THE SUMMONS ISSUED BY THE A.O., REVEALED THEM TO BE ENJOYING CREDIT FACILITY FROM THE BANK, OSTENSIBLY FOR THE BUSINESS PURPOSES, AND THE GIFT AMOUNT BEING OUT OF THE SAID BORROWING. NO RELATIONSHIP WITH THE DONORS FOR THE GIFTS OR OCCASION THEREFOR STANDS SPECIFIED. THE GIFTS WERE ACCORDINGLY TREATED AS NOT GENUINE. THE ASSESSEE WAS UNABLE TO IMPROVE ITS CASE THE G IFTS HAVING BEEN TREATED AS THE ASSESSEES UNEXPLAINED INCOME U/S.68 IN ASSESSMENT, STOOD MADE IN THE APPELLATE PROCEEDINGS, EVEN AS HE RELIED ON THE DECISION IN T HE CASE OF KRISHNAKUMAR K. ASHAR VS. ACIT (IN ITA NO.9355/MUM/2004 DATED 21.02.2008/PB PGS. 8 7-94). NO CONVINCING REASON/S HAD BEEN GIVEN FOR MAKING THE GIFT/S. WHY WOULD ANYONE GIFT HIS HARD EARNED MONEY, WHICH IN ONE CASE REPRESENTS RETIREMENT FUND S AND IN THREE CASES BORROWED FUNDS, TO ANY OTHER FOR NO OSTENSIBLE REASON. IN FACT, NO RELATIONSHIP WITH THE DONOR HAD BEEN SPECIFIED, MUCH LESS PROVED, SO THAT IT BECOMES A C ASE OF GIFT/S TO A STRANGER, WHILE THE SAME (RELATIONSHIP) AND A PERSONAL BOND BETWEEN THE DONOR AND DONEE IS THE PRIME MOVER OF A GIFT. THE SAME, THEREFORE, FAILS ON THE TEST O F HUMAN PROBABILITY. THE GENUINENESS OF THE GIFT CANNOT BE DETERMINED WITHOUT LOOKING INTO THE CONSPECTUS OF THE FACTS AND CIRCUMSTANCES OF THE CASE, INCLUDING THE SURROUNDIN G CIRCUMSTANCES. THE ADDITION WAS ACCORDINGLY CONFIRMED, PLACING RELIANCE, BESIDES ON CIT VS. P. MOHANAKALA [2007] 291 ITR 278 (SC) , DECISIONS IN THE CASE OF GURBACHAN SINGH JAGGI VS. CIT 165 TAXMANN 505 (P&H) AND ITO VS. NAVIN KUMAR AGARWAL (IN ITA NO.3312/DEL/2004 DATED 18.07.2008), ALSO REPRODUCING THERE-FROM. AGGRIEVED, THE ASSESSE E IS IN SECOND APPEAL. 4. BEFORE US, WHILE THE ASSESSEE REITERATED ITS STA ND, STATING OF THE GIFTS HAVING BEEN CONFIRMED AND, FURTHER, MADE THROUGH BANKING CHANNE L, WITH THE DOCUMENTS ESTABLISHING THE IDENTITY AND CAPACITY OF THE CREDITOR BEING NOT REBUTTED, THE LD. DR RELIED ON THE ORDERS BY THE AUTHORITIES BELOW, PLACED RELIANCE ON THE DE CISIONS IN THE CASE OF CIT VS. VINOD 5 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO CHUGH [2012] 204 TAXMAN 89 (P & H)(MAG.)/ [2011] 15 TAXMA NN.COM 343 (P & H); ARVIND KUMAR MOHNANI VS. ITO [2011] 129 ITD 117 (JAB)(TM) AND ITO VS. MUKESH BHANUBHAI SHAH [2009] 29 SOT 464 (MUM). 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD, GIVING OUR CAREFUL CONSIDERATION TO THE MATTER. 5.1 TO BEGIN WITH, WE MAY EMPHASIZE THAT THOUGH THE ONUS TO PROVE THE CREDIT ON THE PARAMETERS AFORE-STATED (REFER PARA 3.1 ABOVE) IS O N THE ASSESSEE, THE DISCHARGE OR NOT SO THEREOF IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS LARGELY A MATTER AND, CONSEQUENTLY, SUBJECT TO A FINDING, OF FACT. THE SAME, AS WELL AS THE BURDEN OF PROOF ITSELF, WOULD THUS VARY WITH THE FACTS AND CIRCUMSTANCES OF EACH CASE. THE WHOLE PREMISE OF THE PROVISION (S. 68), IT NEEDS TO BE APPRECIATED, IS A SATISFACT ORY EXPLANATION, I.E., AS APPEALS TO A REASONABLE, PRUDENT PERSON, AND WHICH STANDS CLARIF IED BY THE APEX COURT IN P. MOHANAKALA (SUPRA) TO MEAN A PROPER, REASONABLE AND ACCEPTABLE EXPLANATION. IN CASE OF A GIFT, WE MAY THOUGH MENTION THAT THE BURDEN OF PR OOF, AND PARTICULARLY FROM THE STAND- POINT OF THE GENUINENESS, IS ALL THE MORE IN-AS-MUC H AS THE DONOR, WITHOUT ANY CONSIDERATION, EXCEPT OSTENSIBLY EMOTIONAL SATISFAC TION, RELINQUISHES HIS ENTIRE RIGHTS IN THE PROPERTY BEING GIFTED FOREVER, SO THAT THE TEST OF HUMAN PROBABILITIES ASSUMES CRITICAL SIGNIFICANCE (REFER: SUMATI DAYAL [1995] 214 ITR 801 (SC)). THE COURTS HAVE DISCOUNTENANCED AND, IN FACT, COME DOWN HEAVILY ON THE PRACTICE AND PHENOMENON OF GIFTS, OBSERVED ONLY IN THE FILES OF THE INCOME-T AX PAYERS, IN COMPLETE CONTRADISTINCTION TO THE EXPERIENCE OF EVERY DAY REAL LIFE WHERE GIFT S, EVEN FROM NEAR AND DEAR ONES, ARE HARD TO COME BY, AND CAN BE REGARDED AS ONLY RARE A ND EXCEPTIONAL, MOVED AND OCCASIONED BY (SAY) COMPELLING CIRCUMSTANCES, AS FO R EXAMPLE A DIRE NEED, A MEDICAL EMERGENCY/BILL, ETC. OF THE DONEE OR HIS/HER FAMILY , OF THE CASE. WE ARE REMINDED OF THE FAMOUS OBSERVATIONS BY THE HONBLE MADRAS HIGH COUR T IN ADDL. CIT VS. C.R. RANGANATHAN CHETTY [1985] 153 ITR 456 (MAD) (AT PG. 466)), EVEN AS MA NY SUCH ABOUND THE JUDICIAL PRONOUNCEMENTS AND ANNALS, WHICH WE QU OTE AS UNDER: LOOK AT THE WAY THE GIFTS WERE MADE. NOT ONLY WERE THEY MADE TO OTHER PEOPLE'S CHILDREN, BUT SOME OF THEM WERE MADE TO OT HER PEOPLE'S WIVES. IN 6 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO ANY PLACE, EXCEPTING IN A TAX COURT, GIFTS TO OTHER PEOPLE'S WIVES EVEN IF THEY ARE WIVES OF CO-PARTNERS, WOULD RAISE A HOST O F QUESTIONS AND NOT A FEW EYE-BROWS, EXCEPTING WHEN THERE IS AN UNDERSTANDING NOD, 'AH, IT IS ALL FOR PURPOSES OF INCOME-TAX'. THE ITO SAW THE FACTS WITH A LAYMAN'S EYES, WHICH WAS THE CORRECT WAY TO LOOK AT THEM. THE TRIBUNAL F OR THEIR PART, HOWEVER, GOT INVOLVED IN THE CONVOLUTIONS OF THE MITAKSHARA LAW OF GIFTS AND BROUGHT TO BEAR A DRY AND UNREAL LEGALISTIC APPROACH TO THE APPLICATION OF SECTION 64, WHICH THE PROVISION DOES NOT CALL FOR, IF WE UNDERS TAND CM. KOTHARI'S CASE ( SUPRA ) ARIGHT. THE TRIBUNAL IN ARVIND KUMAR MOHNANI (SUPRA) AND ISHRAWATI DEVI VS. ITO [2008] 298 ITR (AT) 313 (ALL.) HAS DISCUSSED THIS ISSUE COMPRE HENSIVELY, ISSUING GUIDELINES FOR ASCERTAINING THE GENUINENESS OF A GIFT, COVERING VA RIOUS FACETS OF THE MATTER, AFTER AN EXTENSIVE REVIEW OF THE CASE LAW ON THE SUBJECT. TH E DECISIONS RELIED UPON BY THE TRIBUNAL IN KRISHNAKUMAR K. ASHAR (SUPRA), RELIED UPON BY THE ASSESSEE, STAND ALSO DI SCUSSED BY THE TRIBUNAL IN THESE CASES, OPINING, IN SUM, THAT ALL THE FACTS AND CIRCUMSTANCES HAVING A BEARING IN THE MATTER WOULD NEED TO BE TAKEN INTO A CCOUNT AND, THEREFORE, A DECISION HAS TO BE TAKEN ON A CONSPECTUS THEREOF. WE MAY AGAIN REIT ERATE THAT THE DECISION QUA THE VALIDITY OF THE SATISFACTION OR OTHERWISE OF THE A. O. WITH THE ASSESSEES EXPLANATION, ON WHICH THE INVOCATION OF SECTION 68 ESSENTIALLY HING ES, IS PRINCIPALLY A MATTER OF FACT. 5.2 EXAMINING THE FACTS OF THE CASE, WE FIND THE AS SESSEES CASE AS TOTALLY UNPROVED. THE ONLY REASON ADVANCED BY THE ASSESSEE FOR THE GIFTS IS THAT HE BEING A YOUNG MAN OF 28 YEARS, ON THE THRESHOLD OF HIS CAREER AS A REAL ESTATE DEVELOPER, WAS HELPED WITH THESE FUNDS. TRUE, IT COULD BE, BUT ONLY FROM VERY CLOSE AND NEAR AND DEAR ONES WHO WOULD COMPLETELY IDENTIFY THEMSELVES WITH THE ASSESSEE AN D HIS SUCCESS. SURELY, A GIFT UNDER THESE CIRCUMSTANCES WOULD NOT BE MADE TO A STRANGER S OR RELATIVE STRANGER OR PERHAPS EVEN ACQUAINTANCE BUT ONLY TO ONE WITH WHOM THE DONOR EN JOYS A HIGH LEVEL OF PERSONAL RELATIONSHIP AND EMOTIONAL BONDING. NO RELATIONSHIP , HOWEVER, HAS BEEN SPECIFIED IN THE INSTANT CASE FOR ANY DONOR. HOW THE DONOR/S KNOWS THE ASSESSEE OR HIS FAMILY ? HOW AND UNDER WHAT CIRCUMSTANCES SUCH CLOSE TIES, SO AS TO IDENTIFY WITH THE ASSESSEE (OR HIS FAMILY) CAME TO BE DEVELOPED ? HAVE THE DONOR/S GIFTED ANY SUM TO THE ASSESSEE ( OR HIS FAMILY MEMBERS) AT ANY TIME IN THE PAST, WHICH WOUL D GENERALLY START WITH SMALL SUMS? 7 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO WHETHER ANY GIFT HAS BEEN SIMILARLY MADE TO THE ASS ESSEE (OR HIS FAMILY MEMBERS) ANY TIME IN FUTURE? HAVE THE ASSESSEE (OR EVEN HIS FAMI LY MEMBERS) AT ANY TIME GIFTED TO THE DONORS (OR THEIR FAMILIES); LOVE AND AFFECTION BEIN G ALMOST CERTAINLY A TWO-WAY PROCESS? HAVE, IN FACT, THE DONOR/S GIFTED LIKE AMOUNT TO AN YONE IN THEIR OWN FAMILIES? THESE AND SUCH LIKE QUESTIONS, ANSWERS TO WHICH WOULD FORM TH E CRUX OF THE ASSESSEES EXPLANATION IN-AS-MUCH AS IT IS THE GENUINENESS OF THE GIFT THA T HAS BEEN DOUBTED, REMAIN COMPLETELY UNADDRESSED AND UNANSWERED. RATHER, THEY EVEN DO NO T STAND TO BE POSED IN-AS-MUCH AS THERE IS NO WHISPER OF ANY PERSONAL RELATIONSHIP OR THE BASIS OF LOVE AND AFFECTION AND GOOD RELATIONS CITED IN JUSTIFICATION OR AS THE R EASON FOR THE GIFT/S. THEN, AGAIN, WHAT IS THE FINANCIAL STANDING OF THE DONOR/S, I.E., QUITE APART FROM THEIR RELATIONSHIP, IF ANY, WITH THE ASSESSEE. THE SAME HAS NOWHERE BEEN DEMONSTRATE D. THE VALUE OF THE MONEY, LIKE ANY OTHER MATERIAL THING IN LIFE, IS RELATIVE. RS.1 LAC , FOR EXAMPLE, WOULD CARRY SIGNIFICANT VALUE FOR THE SAME BY DIFFERENT PERSON, ASSUMING A CAPITAL BASE OF RS.5 LACS; RS.10 LACS; RS.100 LACS; RS.1000 LACS, AND SO ON. IN ALMOST ALL THE CASES, THE BANK ACCOUNTS REVEAL NO SIGNIFICANT SUMS, WITH THE MONEY GIFTED ARRIVING IN AND EXITING THE BANK ACCOUNT THROUGH WHICH THE GIFT IS BEING ROUTED. IN FACT, EVEN THE I MMEDIATE SOURCE OF THE FUNDS WITH THE DONORS HAS NOT BEEN EXPLAINED, EXCEPT IN THE CASE O F RAM LAKHAN SINGH, MUMBAI, IN WHICH CASE THE SAME, I.E., THE RETIREMENT FUNDS, IN ALMOST THEIR TOTALITY, DISPROVE THE ASSESSEES CASE RATHER THAN ESTABLISHING THE CREDIT WORTHINESS. FURTHER, FOR THE THREE MEMBERS OF THE VERMA FAMILY, THE AMOUNT GIFTED, AS APPARENT FROM THE BANK ACCOUNTS FURNISHED, ARE SOURCED FROM LOAN FUNDS. APART FROM THE LEGAL ISSUE OF WHETHER THE SAME WOULD QUALIFY AS A GIFT, WHICH COULD ONLY BE OF ONE S OWN PROPERTY, I.E., OVER WHICH ONE HAS ABSOLUTE RIGHTS, INCLUDING OF DISPOSITION, AS W ELL AS THE PROPRIETARY ISSUE IN-AS-MUCH AS THE BANK HAD ADVANCED FUNDS ONLY FOR BUSINESS PU RPOSES, IT RAISES SERIOUS DOUBTS QUA THE GENUINENESS OF THE GIFTS, BESIDES IN NO MANNER ESTABLISHING THE CREDIT-WORTHINESS OF THE DONORS, IF NOT ACTUALLY DISPROVING IT. 5.3 WE ARE, FOR THE REASONS AFORE-STATED, IN COMPLE TE AGREEMENT WITH THE FINDINGS BY THE REVENUE CITED (SUPRA) (PARA 3.2), AND ENDORSE A ND UPHOLD THE REVENUES ACTION IN 8 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO CONSIDERING THE IMPUGNED CREDITS, CLAIMED TO BE GIF TS, AS UNPROVED ON THE ANVIL OF SECTION 68 OF THE ACT AND, ACCORDINGLY DEEMED AS THE ASSESS EES INCOME THERE-UNDER. WE DECIDE ACCORDINGLY. ITA NO. 3788/MUM/2012 6. IN THE PENALTY PROCEEDING, THE ASSESSEES CASE W AS PRINCIPALLY ON THE GROUND THAT AN INCORRECT CLAIM DOES NOT BY ITSELF AMOUNT TO FUR NISHING INACCURATE PARTICULARS OF INCOME, SO AS TO QUALIFY FOR THE LEVY OF PENALTY U/ S.271(1)(C). THE SAME STOOD LEVIED AND SUSTAINED ON THE BASIS THAT THE GIFTS UNDER REFEREN CE WERE TOTALLY UNPROVED. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WITHOUT DOUBT, THE PENALTY FOR CONCEALMENT, OR FURNISHING INACCURATE, PARTICULARS OF INCOME, IS NOT AUTOMATIC AND IT IS OPEN FOR THE ASSESSEE TO, DESPITE AN ADDI TION TO ITS RETURNED INCOME IN ASSESSMENT, MAKE OUT A CASE FOR NON-LEVY OF PENALTY U/S.271(1)( C) BY FURNISHING A PLAUSIBLE EXPLANATION, ESCHEWING THE APPLICATION OF EXPLANATION 1 TO SECTION 271(1)(C), WHICH DEEMS THE CONCEALMENT AND/OR FURNISHING INACCURATE PARTICULARS OF INCOME IN THE ABSENCE OF ANY EXPLANATION, OR THE EXPLANATION BEING FOUND AS FALSE, OR BEING UNSUBSTANTIATED. THE ASSESSEE, HOWEVER, HAS NOT FURNISHED ANY EXPLANATIO N, I.E., WHICH COULD BE REGARDED AS PROPER OR ACCEPTABLE, FROM THE STANDPOINT OF A LAYM AN OR A REASONABLE PERSON. THE FINDINGS WITH REGARD TO THE CAPACITY (OF THE DONORS ) OR THE GENUINENESS (OF THE GIFTS) BEING NOT PROVED ARE ESSENTIALLY FINDINGS OF FACT, ARRIVE D AT IN ASSESSMENT ON A CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND, THEREF ORE, HAVE PERSUASIVE VALUE IN THE PENALTY PROCEEDINGS AS WELL. NO IMPROVEMENT TO ITS CASE, HOWEVER, STOOD MADE BY THE ASSESSEE AT, IN FACT, ANY STAGE OF THE PENALTY PROC EEDINGS, INCLUDING BEFORE US. THAT AN INCORRECT CLAIM DOES NOT BY ITSELF AMOUNT TO FURNIS HING INACCURATE PARTICULARS OF INCOME IS NOT A STATEMENT OF FACT, BUT OF LAW, AND WE ARE UNA BLE TO APPRECIATE ITS IMPORT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE EXPLANATION U/S .68 BEING PRIMARILY A MATTER OF FACT. NO IMMEDIATE SOURCE OF GIFT, EXCEPT IN ONE CASE FOR GIFT OF RS.3.50 LACS (BY SHRI 9 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO RAMLAKHAN SINGH) HAS BEEN CLARIFIED, MUCH LESS ESTA BLISHED, SO THAT THE CAPACITY IS NOT PROVED. IN FACT, BARRING ONE CASE, THERE IS ALMOST NO BALANCE IN THE ACCOUNT BOTH PRIOR TO AND AFTER THE GIFT, WHICH IS THUS USED AS A CONDUIT FOR MAKING THE GIFT, WHILE IN THREE CASES (FOR GIFTS FOR RS.16 LACS), THE GIFTS ARE MADE OUT OF BORROWED FUNDS, IN EITHER CASE, DISPROVING CAPACITY. IN THE SOLE EXCEPTION OF THE S OURCE BEING CLARIFIED, THE GIFT WAS MADE OUT OF RETIREMENT FUNDS, AND WHICH, IN THE ABSENCE OF ANY RELATIONSHIP WITH THE DONEE OR OTHER REASONS FOR MAKING THE GIFT, OPERATES TO DISC REDIT THE ASSESSEES CASE OF HAVING RECEIVED A VALID, GENUINE GIFT. THE GENUINENESS OF THE GIFTS, AGAIN, REMAIN COMPLETELY UNPROVED IN THE ABSENCE OF ANY PERSONAL RELATIONSHI P BEING CLAIMED, MUCH LESS PROVED. AS IT WOULD APPEAR TO US, THE CREDITS ONLY REPRESEN T LAUNDERING OF HIS MONEY BY THE ASSESSEE, MASQUERADED AS GIFTS. THE RECEIPT BY THE ASSESSEE, IT NEEDS TO BE APPRECIATED, AS CLARIFIED BY THE APEX COURT TIME AND AGAIN (REFER, INTER ALIA , P. MOHANAKALA (SUPRA) AND SUMATI DAYAL (SUPRA)), IS ITSELF AN EVIDENCE OF RECEIPT OF INCOM E, SO THAT WHERE NOT EXPLAINED SATISFACTORILY AS TO ITS NATURE AND SOURC E, THE SAID EVIDENCE REMAINS UNREBUTTED, AND IS ACCORDINGLY LIABLE TO BE REGARDED AS THE ASS ESSEES INCOME. THE STATUTORY PRESUMPTION U/S. 68 IS THAT THE RECEIPT IS OF INCOM E NATURE. IT IS ALSO TRITE THAT NO EXCEPTION IS FORTHCOMING ON THE BASIS THAT THE INCOME, SO BRO UGHT TO TAX, IS DEEMED AS THE ASSESSEES INCOME; SECTION 68 BEING IN FACT ONLY A RULE OF EVI DENCE, FOLLOWING THE GENERAL PRINCIPLES OF COMMON LAW JURISPRUDENCE. WE ACCORDINGLY CONFIRM THE LEVY OF PENALTY, WHICH IS AT 100% OF THE TAX SOUGHT TO BE EVADED, FINDING NO INF IRMITY, LEGAL OR FACTUAL, THEREIN. WE DECIDE ACCORDINGLY. 8. IN THE RESULT, THE ASSESSEES APPEALS ARE DISMIS SED. 1/+23451+& 61&+7 ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 20, 2014 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 8* MUMBAI; 9 DATED : 20.06.2014 10 ITA NOS.1248/M/2009 & 3788/M/2012 (A.Y. 2005-06) VIVEK M. MANGLA VS.ITO )3 ROSHANI , SR. PS !' # $%&' (!'% COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( :+ ; < / THE CIT(A) 4. ( :+ / CIT - CONCERNED 5. =)>?$3+3@4 ,@4/ ( 8* / DR, ITAT, MUMBAI 6. ?5A* GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , ( 8* / ITAT, MUMBAI