SHRI MOHIT CHAWLA, Jaipur V. ITO, Jaipur

ITA 40/JPR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59531 (ITAT-JAIPUR)
• Duration Of Justice: 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA; SUNIL GOYAL
• Keywords: Gift; Retrospective amendment; Procedural lapse; Bonafide mistake
• Section: 143(3); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NO.40/JP/2012 ASSESSMENT YEAR : 2007-2008 SHRI MOHIT CHAWLA VS. THE INCOME TAX OFFICER, A-62, JANTA COLONY, WARD 7 (4), JAIPUR. JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAVEEN SARASWAT RESPONDENT BY : SHRI D.K. MEENA & SHRI SUNIL GOYAL DATE OF HEARING: 25.01.2012 DATE OF PRONOUNCEMENT : 31.01.2012 ORDER PER SHRI N.L. KALRA, A.M. 1. THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER O F LD. CIT (A)-III JAIPUR DATED 4.10.2011. 2. THE FIRST GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT (A) HAS ERRED IN UPHOLDING THE ADDITION U/S 56(2)(V) OF THE ACT WHILE THAT SECTION IS NOT A PPLICABLE FOR A.Y. 07-08. THE LD. CIT (A) HAS OBSERVED AS UNDER: I HAVE CAREFULLY CONSIDERED THE ABOVE CONTENTION OF THE LD. AR AND FOUND THE SAME AS CORRECT TO SOME EXTENT AS THE ADDITION TOWA RDS UNPROVEN/NON-GENUINE GIFT SHOULD HAVE BEEN MADE U/S.68 OF THE IT ACT AND NOT UNDER THE SEC. 56(2)(V), AS MENTIONED IN THE ASSESSMENT ORDER. HOWEVER, IN MY C ONSIDERED OPINION, THIS SHORT OF OMISSION CAN ONLY BE TERMED AS PROCEDURAL LAPS A S SUCH. THE COURTS HAVE DECIDED THAT A PROCEDURAL IRREGULARITY IN THE FISCA L MATTER WILL NOT RENDER THE ASSESSMENT ORDER AB INITIO VOID, AS SUCH. THE ABOVE VIEWS HAVE BEEN BORROWED FROM THE FOLLOWING CASE LAWS:- SARABJIT SINGH 234 ITR 641 (DELHI) M.S. KIMTEE 151 ITR 73 (MP) ACCORDINGLY IT IS HELD THAT THE WRONG MENTIONING OF SECTION TOWARDS MAKING AN ADDITION, WOULD NOT AFFECT THAT VALIDITY OF THE ASS ESSMENT ORDER AS SUCH. CONSEQUENTLY, THIS GROUND OF APPEAL IS REJECTED. 2 3. WE HAVE HEARD BOTH THE PARTIES. THE A.O. HAS MAD E ADDITION U/S 68 BY HOLDING THAT THE GIFT IS ACTUALLY THE AMOUNT BELONGING TO HIM AND AL SO HELD THAT THE AMOUNT IS TO BE INCLUDED IN INCOME U/S 56(2)(V) HOWEVER, IF GIFT IS GENUINE THE N THE SAME IS TO BE INCLUDED U/S 56(2)(VI) AND NOT 56(2)(V). HENCE WE HOLD THAT IF TRANSACTION OF GIFT IS GENUINE THEN IT IS TO BE ADDED U/S 56(2)(VI) AND IF GIFT IS NOT GENUINE THEN THE AMOUN T IS TO BE ADDED U/S 68. HOWEVER AMOUNT WAS NOT INCLUDIBLE U/S 56(2)(V). HE AGREE WITH THE FIND ING OF LD. CIT (A) THAT MENTION OF WRONG SECTION WILL NOT INVALIDATE THE ORDER. 4. THE SECOND GRIEVANCE OF THE ASSESSEE IS THAT LD. CIT (A) HAS NOT APPRECIATED THE FACT THAT GIFT WAS VOID AS THE SAME WAS REVOKED BEFORE THE AC TUAL TRANSFER OF THE FUNDS BETWEEN PAYEE AND PAYER. 5. THE A.O. NOTICED FROM THE DETAILS FILED THAT ASS ESSEE HAS RECEIVED A GIFT OF RS.5 LAKH FROM COUSIN. SINCE GIFT WAS TAXABLE U/S 56(2)(V) AND THE REFORE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY A SUM OF RS.5 LAKH BE NOT TAXED. THE ASSESSEE W AS ASKED TO PRODUCE DONOR ALONGWITH HIS BOOKS OF ACCOUNT. BEFORE THE LD. A.O. IT WAS STATED THAT THE DONER HAS ASKED THE SUM TO BE TREATED AS LOAN. AN AFFIDAVIT OF DONOR DATED 21.12.2009 WAS FILED AND THE AMOUNT IS SHOWN AS LOAN IN THE BALANCE SHEET OF SO CALLED DONOR. THE A.O. AFTER CO NSIDERING THE REPLY OF THE ASSESSEE RECORDED THE FOLLOWING FINDING: I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE VE RY CAREFULLY AND IT WILL BE APPROPRIATE TO SUMMARIZE THE FACTS OF THE CASE AT T HIS POINT:- VIDE LETTER DATED 25.11.2009 THE ASSESSEE SUBMITTED THAT HE HAS RECEIVED A GIFT OF RS.5,00,000/- FROM HIS BUAS SON SH. BAHUL ASSESSEE IN THE INSTANT CASE). THIS QUESTION REMAINS UNANSWERED. FROM THE ABOVE IT IS ALSO CLEAR THAT THE ASSESSEE O NLY AFTER BEING QUESTIONED IN THIS REGARD HAS COME-UP WITH THIS REPLY, WHICH IS N OTHING BUT AN AFTER THOUGHT TO ESCAPE FROM HIS TAX LIABILITY. 3 APART FROM THIS THE ASSESSEE HAS CHOSEN NOT TO PROD UCE THE SAID DONOR FOR VERIFICATION. FROM THE ABOVE IT IS EVIDENT THAT ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN AS TO HOW A PERSON AFTER RELINQUISHING HIS ABSOLUTE RIGHTS, TIT LE & INTEREST CAN REGAIN/RECLAIM HIS RIGHTS, TITLE & INTEREST IN A PARTICULAR THING, SPECIALLY WHEN THE OTHER PERSON HAS ACQUIRED THOSE RIGHTS, TITLE & INTEREST SIMULTA NEOUSLY. FURTHER THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE CREDITWORTHIN ESS OF THE DONOR AS WELL AS THE GENUINENESS OF THE TRANSACTION. THUS, THIS IS JUST A COLORFUL DEVICE ADOPTED BY THEASSESSEE TO INTRODUCE HIS UNDISCLOSED MONEY ROUT ED THROUGH THE BANKING CHANNELS AND SHOWN AS A GIFT FROM HIS COUSIN BROTHE R. FOR THIS I RELY ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MCDOWELL AND CO. LTD. VS CTO [1985] REPRTED IN 22 TAXMAN 11/154 ITR 148 IN W HICH IT IS HELD THAT, TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITHIN TH E FRAMEWORK OF LAW. COLORABLE DEVICES CANNOT BE PART OF TAX PLANNING AND IT IS WR ONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IS HONORABLE TO AVOID THE PAYMENT O F TAX BU DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HO NESTLY WITHOUT RESORTING TO SUBTERFUGES. CONSIDERING THESE FACTS TOGETHER WITH THE SUBMISSIONS MADE BY THE A/R I AM OF THE OPINION THAT THIS MONEY REPRESENTS THE ASSESSEES OWN MONEY AND ROUTED IN HIS BOOKS AS GIFT. FURTHER SAID THE GIFT IS ALSO NOT COVERED WITH THE EXEMPTION U/S 56(2)(V) OF THE I.T. ACT, 1961, I, TH EREFORE, ADD THE SAME TO THE INCOME OF THE ASSESSEE. 6. BEFORE THE LD. CIT (A), THE ASSESSEE MADE THE SU BMISSIONS WHICH ARE SUMMARIZED AS UNDER: (I) SH. BEHUL CHANDRA HAS GIVEN A CONFIRMATION AND HAS STATED THAT HE HAS GIVEN A LOAN. (II) BALANCE SHEET OF SH. BEHUL CHANDRA FILED AND C OPY OF BANK ACCOUNT OF PROPRIETORSHIP CONCERN M/S. DOT SQUARE TECHNOLOGIES ALSO FILED. (III) AFFIDAVIT OF SH. BEHUL CHANDRA WAS FILED IN W HICH HE EXPLAINED THE REASONS OF REVOKING THE GIFT BEFORE IT WAS RECEIVED BY DONE AN D ASKED HIM TO TREAT THE SAME AS LOAN. 7. THE LD. CIT (A) HAS RECORDED THE FOLLOWING FINDI NG: 4 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE AO AND THE SUBMISSIONS MADE BY THE LD. AR, I.R.O., THE ISSUE UNDER CONSIDERATIO N. IT IS SEEN THAT THE AO HAS MADE THE ABOVE ADDITION ON THE GROUND THAT THE CLAI M OF GIFT OF RS.5 LACS RECEIVED FROM ONE OF THE RELATIVE OF THE APPELLANT WAS CONSI DERED AS UNPROVED AND NON- GENUINE. THE AO HAS REACHED TO THE ABOVE CONCLUSION FOR THE REASONS THAT THE APPELLANT HAS CHANGE HIS STAND SUBSEQUENTLY, I.R.O. , THE GIFT AND THE SAME WAS CLAIMED AS LOANS TRANSACTION AND ALSO THE DONOR OF THE GIFT DID NOT APPEAR BEFORE HIM, I.R.O., THE AFFIDAVIT WAS SUBMITTED ON HIS BEH ALF. AFTER CONSIDERING THE ALL THE RELEVANT ISSUES OF THE IMPUGNED MATTER, I FIND SUFF ICIENT FORCE AND MERIT IN THE STAND OF THE AO, FOR THE FOLLOWING REASONS:- IT IS AN ADMITTED PRINCIPLE THAT A TRANSACTION OF G IFT RECEIVED IS AKIN TO THE CASH CREDIT ONLY, THEREFORE, THE ASSESSEE IS REQUIRED TO PROVE THREE IMPORTANT THINGS LIKE IDENTITY, CAPACITY AND A GENUINENESS OF THE TRANSAC TION. IN THE INSTANT CASE THE APPELLANT COULD COMPLIED WITH THE FIRST TWO CONDITI ONS ONLY, HOWEVER, FOR THE REASONS DISCUSSED IN ENSUING PARAS, THE GENUINENESS OF SUCH TRANSACTION WAS FOUND NOT PROVEN IN DESIRED MANNER. THE APPELLANT HAS FAILED TO JUSTIFY THE SHIFT IN HI S STAND OF RECEIVING THE GIFT FROM THE CLOSE RELATIVE TO TERM THE SAME AS LOAN TRANSAC TION, AT ASSESSMENT LEVEL. THIS PARTICULAR ASPECT ASSUMES MORE SIGNIFICANCE, WHEN A GIFT DEED DATED 12.6.2006 WAS DUELY EXECUTED IN THIS REGARD. THUS, THERE CAN NOT BY ANY BONAFIDE MISTAKE ON THE PART OF THE APPELLANT/DONOR, AS CLAIMED, UNDER THE GIVEN CIRCUMSTANCES. THE FILING OF THE AFFIDAVIT BY THE DONOR HAS ALSO N O RELEVANCE, FOR THE REASONS THAT THE DONOR DID NOT APPEAR BEFORE THE AO FOR NECESSAR Y VERIFICATION IN THIS REGARD. THE ABOVE INFERENCE IS BASED ON THE DECISION OF HON BLE ASSAM HIGH COURT GIVEN IN THE CASE OF CHOWKCHAND BALABUX (41 ITR 465). ACC ORDINGLY I AM AGREED WITH THE AO THAT THE TRANSACTION UNDER CONSIDERATION, WA S A GIFT TRANSACTION ONLY AND NOT A LOAN TRANSACTION, AS CLAIMED. AS STATED ABOVE THAT MERE IDENTIFICATION OF THE DON OR AND GIFT RECEIVED FROM BANKING CHANNELS IS NOT SUFFICIENT TO PROVE THE GEN UINENESS OF THE GIFT. THE BURDEN ON THE ASSESSEE TO PROVE THAT THE DONOR HAD MEANS A ND GIFT WAS GENUINE, MADE OUT OF LOVE AND AFFECTION. THE FOLLOWING DECISION ARE F OUND RELEVANT, I.R.O., THE PRINCIPLES DISCUSSED ABOVE:- IN VIEW OF THE FACTS AND CIRCUMSTANCE AS DISCUSSED HEREINABOVE, IT IS HELD THAT THE GENUINENESS ASPECT OF THE GIFT TRANSACTION, UNDER C ONSIDERATION IS NOT PROVED AS SUCH. IT IS ALSO AN ESTABLISHED PRINCIPLE, AS ENUMERATED IN THE CASE OF K.P. VARGHESES (131 ITR 597) (SC), THAT THE ONUS IS ON THE PERSON WHO CLAIMS THAT WHAT IS APPARENT IS NOT A REAL TRANSACTION. HERE THE DOCUME NTS SUBMITTED WITH RETURN OF INCOME AND AT INITIAL STAGE OF THE ASSESSMENT PROCE EDINGS, DID SUGGEST THAT THE TRANSACTION UNDER CONSIDERATION WAS A GIFT ONLY. HO WEVER, SUBSEQUENTLY THE APPELLANT HAS TRIED TO PORTRAY THE SAME AS LOAN WIT H OUT ASSIGNING ANY COGENT REASONS IN THIS REGARD. THUS THE CLAIM OF THE APPEL LANT IS FOUND UNTENABLE. 5 IN VIEW OF THE ABOVE DETAILED DELIBERATION, I FIND THE STAND OF THE AO OF MAKING THE ADDITION TOWARDS THE GIFT OF RS.5 LACS, AS PROPER A ND JUSTIFIED, UNDER THE GIVEN CIRCUMSTANCES. 8. WE HAVE HEARD BOTH THE PARTIES. THERE IS REVOCAT ION DEED AND THE CONTENTS OF SUCH DEED ARE AS UNDER: THAT DECLARATION OF GIFT MADE ON 12.6.2006 IS HER EBY STANDS REVOCATED. THAT AMOUNT OF RS.5 LAC GIVEN THROUGH CHEQUE NO.711 85 DATED 12.6.2006 IS A LOAN NOT A GIFT. THE PARTY OF THE FIRST PART HEREBY ADMITS THAT HE W AS DOMINATED BY THE WISHES OF ELDERS I.E. HARIS CHANDRA JI (FATHER) AND BRIJ MOHA N CHAWLA (MATERNAL UNCLE) WHILE EXECUTING THE GIFT DEED DATED 12.6.2006 AND T HE GIFT WAS GIVEN UNDER THEIR EMOTIONAL UNDUE INFLUENCE AND ADVISE WITHOUT REALIZ ING THE CONSEQUENCES. AFTER EXECUTING THE DEED, THE PARTY OF FIRST PART SOUGHT INDEPENDENT ADVISE FROM HIS WIFE AND OTHER RELATIVES AND REALIZED THE GRAVE MIS TAKE OF GIFTING HIS HARD EARNED MONEY. ON EXPLAINING THE FACT OF EMOTIONAL UNDUE IN FLUENCE, THE PARTY OF SECOND PART HAS ALSO ADMITTED THE FACT AND AGREED TO REVOK E THE GIFT DEED, WHICH IS IN FACT VOID AB-INITIO. THAT PARTY OF FIRST PART IS HAVING CONTINUED POSSES SION OF SAID AMOUNT IN CAPACITY OF LENDER. THAT PARTY OF SECOND PART HAS CONSENTED AND GIVEN H IS CONCURRENCE FOR REVOCATION OF DECLARATION OF GIFT IMMEDIATELY AFTER SIGNING TH E SAME. IN WITNESSES WHEREOF THIS DEED OF REVOCATION MADE O N THIS 13 TH DAY OF JUNE, 2006 BETWEEN. BEHUL CHANDRA MOHIT CHAWLA. 9. SH. BEHUL CHANDRA IN HIS BALANCE SHEET AS ON 31 ST MARCH 2007 SHOWN MOHIT CHAWLA AS A PARTY TO WHOM ADVANCE IS GIVEN. THERE ARE OTHER PER SONS TO WHOM SH. BEHUL CHANDRA HAS MADE ADVANCES UPTO 31.3.2007 TO THE EXTENT OF RS.93,00,0 00/-. WE HAVE NOTICED THAT NAME OF MOHIT CHAWLA IS NOT APPEARING AT THE END OF THE LIST. THE ASSESSEE ALSO FILED RETURN OF INCOME FOR THE A.Y. 08-09 AND IN THAT BALANCE SHEET, THE ASSESSEE SHOWN SH. BEHUL CHANDRA AS CREDITOR. ASSESSMENT OF ASSESSEE FOR THE A.Y. 08-09 WAS MADE U/S 143(3) SH. BEHUL CHANDRA IS INCOME 6 TAX ASSESSEE AT PAN AERPC7034B. IT IS TRUE THAT ASS ESSEE HAS NOT PRODUCED SH. BEHUL CHANDRA. WE THEREFORE FEEL THAT THE ISSUE OF REVOCATION OF G IFT IS TO BE ASCERTAINED FROM SHR. BEHUL CHANDRA AND FOR THIS PURPOSE, THE A.O. MAY EXAMINE SH. BEHU L CHANDRA. HENCE ISSUE RAISED IN GROUND OF APPEAL NO. 2 IS SET ASIDE. 10. GROUND OF APPEAL NO.3 IS THAT LD. CIT (A) HAS E RRED IN CONFIRMING THE ADDITION OF RS.5,00,000/- U/S 68 OF I.T. ACT DESPITE THE AVAILA BILITY OF EVIDENCE OF IDENTITY AND CREDITWORTHINESS OF THE LENDER. 11. THE ASSESSEE HAS FILED SUFFICIENT EVIDENCES. SH . BEHUL CHANDRA IS AN INCOME TAX ASSESSEE AND HAS SHOWN THE AMOUNT IN HIS BALANCE SHEET. PAYM ENT HAS BEEN THROUGH BANKING CHANNEL. HENCE IT IS NOT A CASE WHERE PROVISIONS OF SECTION 68 ARE TO BE INVOKED. HENCE ADDITION U/S 68 IS NOT MAINTAINABLE AND AMOUNT CAN NOT BE ADDED U/S 68 OF I.T.ACT. 12. BEFORE US THE LD. A/R HAS RAISED THE FOLLOWING ADDITIONAL GROUND. THE ASSESSMENT PROCEEDINGS U/S 143(3) ARE ILLEGAL AND VOID AB INITIO AS THE REQUIRED NOTICE U/S 143(2) WAS NOT SERVED TO ASSESSEE WITHIN THE STIPULATED TIME LIMIT. 13. RETURN IN THIS CASE WAS FILED ON 31.7.2007. AS PER PROVISO TO SECTION 143(2), THE NOTICE U/S 143(2) WAS TO BE SERVED ON OR BEFORE 31.7.2008. PROVISO TO SECTION 143(2) WAS AMENDED W.E.F. 1.4.2008 AND IT WAS PROVIDED THAT NOTICE IS TO BE ISSUED WITHIN 6 MONTHS OF THE FINANCIAL YEAR IN WHICH RETURN IS FILED. THE LUCKNOW BENCH ON IDENTICAL FACTS HELD THAT NOTICE U/S 143(2) IS NOT VALID. REF TO I.T.O V/S DLG ENTERPRISES (P) LTD . 53 DTR 65. IN THE CASE BEFORE THE LUCKNOW BENCH, THE RETURN WAS TREATED AS FILED IN JUNE 2007 AND THE BENCH HELD THAT NOTICE ISSUED ON 8.10.2008 IS ADMITTEDLY BEYOND PERIOD OF 12 MONTHS. IN THE INSTANT CASE THE NOTICE IS ISSUED BEYOND PERIOD OF 12 MONTHS AND HENCE NOTICE IS NOT VALID. NO OTHER DECISION WAS BROUGHT TO OUR 7 KNOWLEDGE. IT WAS FURTHER SUBMITTED THAT NOTICE WAS NOT SERVED UPON THE ASSESSEE. SECTION 292 BB IS OF NO HELP TO REVENUE AS THE SPECIAL BENCH HA S HELD THAT SECTION 292BB HAS NO RETROSPECTIVE EFFECT AND IS APPLICABLE TO ASSESSMENT YEAR 2008-09 AND SUBSEQUENT ASSESSMENT YEARS. KUBER TOBACCO PRODUCTS P LTD. 28 SOT 292 (DELHI)(S.B.) 15. THE HONBLE APEX COURT IN THE CASE OF ACIT V HO TEL BLUE MOON 35 DTR (SC) 1 HELD THAT OMISSION ON THE PART OF A.O. TO ISSUE NOTICE U /S 143(2) IS NOT A PROCEDURAL IRREGULARITY AND IS NOT CURABLE. HENCE THE ASSESSMENT ORDER IS NOT VALI D IN THE EYE OF LAW AND THE SAME IS CANCELLED. THE ASSESSMENT ORDER IS CANCELLED AND THE APPEAL I S ALLOWED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 31.01.201 2 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.01.2012 *S.KUMAR* COPY FORWARDED TO:- 1. SHRI MOHIT CHAWLA, A-62, JANTA COLONY, JAIPUR. 2. THE INCOME TAX OFFICER, WARD 7(4), JAIPUR. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.40/JP/2012 BY ORDER A.R., I.T.A.T., JAIPUR