Shri Haresh R.Ruchandani, Surat V. The Income tax Officer,Ward-5(2), Surat

ITA 42/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6783 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G D BALVA
• Assessee Lawyers: M K PATEL
• Keywords: Unexplained cash credit; Gift; Set aside
• Section: 133(6); 143(2); 264; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.42/AHD/2009 (ASSESSMENT YEAR:-2005-06) SHRI HARESH R RUCHANDANI, OPP. NAFIS CHAMBERS, POST OFFICE LANE, ZAMPA BAZAR, SURAT V/S INCOME-TAX OFFICER, WARD- 5(2), SURAT PAN: ABAPR 4877 R [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI M K PATEL, AR REVENUE BY:- SHRI G D BALVA, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 03- 11-2008 OF THE LD. CIT(APPEALS)-III, SURAT, FOR THE ASSESSMENT YEAR 2005-06, RAISES THE FOLLOWING GROUNDS:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WELL A S ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.5,00,000/- ON ACCOUNT OF GIFT RECEIVED TREATED AS AL LEGED UNEXPLAINED CASH CREDITS U/S 68 OF THE I.T. ACT. 2 IT IS THEREFORE PRAYED THAT THE ABOVE ADDITION MAY P LEASE BE DELETED AS LEARNED MEMBERS OF THE TRIBUNAL MAY DEEM IT PROPER. 3 APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY G ROUND(S) EITHER BEFORE OR IN THE COURSE OF THE HEARING OF THE APPEAL. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.2,18,524/- FILED ON 31-10-2005 BY THE ASSESSEE, SELLING PROCESSED GREY CLOTH, AFTER BEING PROCESSED U/S 143 (1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS TH E ACT], WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 05-09-2006.DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT AN AMOUNT OF RS.5,00,000/- HAD BEEN CREDITED IN THE CAPITAL ACCO UNT OF THE ASSESSEE ON ACCOUNT OF GIFT RECEIVED FROM ONE SHRI MUKESH S ITA NO.42/ AHD/2009 2 DHANJANI. THE AO ASKED THE ASSESSEE TO FURNISH CO PY OF RETURN OF INCOME ALONG WITH ENCLOSURES, BANK STATEMENT AND CA PITAL A/C. OF SHRI MUKESH S. DHANJANI. HOWEVER, THE LD. AR ON BEH ALF OF THE ASSESSEE FILED MERELY A COPY OF DECLARATION OF GIFT AND CONFIRMATION OF SHRI MUKESH S. DHANJANI AND DID NOT SUBMIT COPY OF HIS RETURN OF INCOME, CAPITAL A/C. OR BANK STATEMENT. IN RESPONSE TO A LETTER DATED 13/11/2007 AS TO WHY THE SO CALLED GIFT OF RS.5,00, 000/- RECEIVED FROM SHRI MUKESH DHANJANI BE NOT TREATED AS UNEXPLA INED CASH CREDIT U/S 68 OF THE ACT IN THE ABSENCE OF ANY SUPP ORTING EVIDENCE, THE ASSESSEE DID NOT CARE TO RESPOND. SINCE PAN OF SHRI MUKESH DHANJANI MENTIONED IN THE DECLARATION OF THE GIFT W AS FOUND TO BE INCORRECT WHILE LETTER DATED 21/11/2007 ISSUED TO H IM U/S 133(6) OF THE ACT AT THE ADDRESS MENTIONED IN THE DECLARATION OF GIFT WAS RETURNED UN-SERVED BY THE POSTAL AUTHORITIES, THE A O SHOWCAUSED THE ASSESSEE O EXPLAIN AS TO WHY THE SO CALLED GIFT OF RS.5,00,000/- BE NOT TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF TH E ACT. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 11-12-2007 SUBMITTED AS UNDER:- 'A COPY OF DECLARATION OF GIFT SIGNED BY THE DONOR ALONG WITH COPY OF DEMAND DRAFT FOR RS.5,00,000/- WAS FILED EA RLIER. I HAD OBTAINED A COPY OF BANK STATEMENT OF THE DONOR FOR THE RELEVANT PERIOD AND THE COPY OF ACKNOWLEDGMENT OF RETURN OF INCOME FRO A.Y 2005-06. HOWEVER, I SEEN TO HAVE LOST THOSE DOC UMENTS DURING THE FLOODS OF AUGUST 2006. I AM NOT IN A POS ITION TO OBTAIN THOSE DOCUMENT AGAIN FROM THE DONOR.' 2.1 HOWEVER, THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND ADDED AN AMOUNT OF RS.5,00,000/- BY WAY OF UNEX PLAINED CASH CREDIT U/S 68 OF THE ACT WITH THE FOLLOWING OBSERVA TIONS: 4.3. THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE IS OBV IOUSLY VAGUE AND CONTRARY TO THE FACT OF THE CASE. THE LOSS OF REL EVANT DOCUMENTS OF GIFT IN THE FLOOD OF AUGUST 2006 IS ABSOLUTELY AN AFTER THO UGHT BECAUSE THE ASSESSEE HAS NEVER BEFORE HIS SUBMISSION DATED 11/12/2007 CLA IMED ANY LOSS OCCURRED IN THE FLOOD OF AUGUST 2006. IN CASE THE DOCU MENTS HAVE BEEN LOST THE ASSESSEE OUGHT TO HAVE OBTAINED THE SAME F ROM THE DONOR SO AS TO DISCHARGE THE LEGAL OBLIGATION LAID UPON HIM A S PER THE PROVISION OF ITA NO.42/ AHD/2009 3 SEC 68 OF THE I.T. ACT, 1961. THE SPECIFIC QUERIES REGARDI NG INCORRECT PAN AND MAILING ADDRESS OF THE DONOR WERE NOT COMPLIED BY THE ASSESSEE. HIS SUBMISSION IS SILENT IN THIS BEHALF. THE WORDS OF THE ASSESSEE THAT HE IS NOT IN A POSITION TO OBTAIN DOCUMENTARY EVIDENCES AGAIN FRO M THE DONOR MAKE IT CLEAR THAT THE GIFT CREDITED TO HIS, CAPITAL A/C. WA S NOT GENUINE. THE IDENTITY OF THE DONOR, HIS CREDIT WORTHINESS AND GENUIN ENESS OF THE GIFT TRANSACTION ARE NOT PROVED IN THE CASE OF THE ASSESSEE. UN DER THE CIRCUMSTANCES, THE GIFT OF RS.5,00,000/-IS TREATED AS UNEXP LAINED CASH CREDIT U/S 68 OF THE I.T. ACT AND ADDED TO HIS TOTAL IN COME. 3 ON APPEAL, THE LEARNED CIT(A) UPHELD THE ADDITION IN THE FOLLOWING TERMS:- BEFORE ME ALSO THE LD. AR SUBMITTED COULD NOT FILE A NY EVIDENCE IN SUPPORT OF HIS CLAIM OF GIFT BEING GENUINE AND THEREFO RE SINCE EVEN THE IDENTITY OF THE DONOR, WHAT TO TALK OF HIS CREDITWORTH INESS OR GENUINENESS OF TRANSACTIONS, HAS NOT BEEN ESTABLISHED, I AM OF THE CONSIDE RED VIEW THAT THE CLAIM OF HAVING RECEIVED THE GIFTS IS BOGUS AND THE CASH CREDIT HAS RIGHTLY BEEN TREATED AS UNEXPLAINED U/S 68 OF THE IT ACT . ADDITION IS THEREFORE CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS NOW IN A POSITION TO PRODUCE THE DONOR IN ORDER TO ESTABLIS H THE GENUINENESS OF THE GIFT. ACCORDINGLY, THE LD. AR PLEADED THAT A T LEAST ONE FINAL OPPORTUNITY BE PROVIDED IN ORDER TO ESTABLISH THE G ENUINENESS OF THE GIFT. THE LD. AR ADDED THAT IN THE EVENT THE ASSESS EE FAILS TO PRODUCE THE DONOR BEFORE THE AO, THE ADDITION SHOULD BE TRE ATED AS SUSTAINED. THE LEARNED DR, ON THE OTHER HAND, WHILE SUPPORTING THE IMPUGNED ORDER CONTENDED THAT THE ONUS WAS ON THE ASSESSEE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF THE TRANSACTIONS. SINCE THE ASSESSEE IN THIS CASE MISER ABLY FAILED TO PROVE ALL THESE INGREDIENTS, THE ADDITION SUSTAINED BY THE CIT(A) MAY BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, THE ASSESSEE FAILED TO ESTA BLISH THE IDENTITY AND CREDITWORTHINESS OF THE DONOR AS ALSO GENUINENESS OF TR ANSACTIONS BEFORE THE AO ITA NO.42/ AHD/2009 4 AND THE LD. CIT(A). THERE IS NO MATERIAL BEFORE US A S REGARDS OCCASION OF THE GIFT OR OF RELATIONSHIP OF THE DONOR AND DONEE OR EVEN I N RESPECT OF NATURAL LOVE AND AFFECTIONS MENTIONED IN THE GIFT DEED. MERELY BECAUSE MONEY IS CLAIMED TO HAVE BEEN TRANSFERRED THROUGH BANKING CHANNEL, IT IS NOT EN OUGH TO ESTABLISH THE GENUINENESS OF GIFT. THE HUMAN PROBABILITY HAS TO BE CO NSIDERED AS TO WHY DONOR IS PROMPTED TO GIVE GIFT TO THE ASSESSEE. THIS QUESTION I S REQUIRED TO BE ANSWERED BECAUSE AS CONTRARY TO LOAN, IN THE CASE OF GIFT, DONOR LOSES HIS HARD EARNED CAPITAL IN FAVOUR OF THE DONEE FOR EVER WHEREAS IN TH E CASE OF LOAN, THE CREDITOR RETAINS THE RIGHT TO RECOVER THE MONEY FROM THE ASSESSEE. THEREFORE, ONUS IS HEAVIER ON THE ASSESSEE IN A CASE OF GIFT AS COMPARED TO THE CASE OF CREDIT. IN SAJAN DASS AND SONS V. CIT [2003] 264 ITR 435 (DELHI), HON'BLE DELHI HIGH COURT HELD THAT MERE IDENTIFICATION AND SHOWING MOVE MENT THROUGH BANKING CHANNELS IS NOT SUFFICIENT. SIMILAR VIEW WAS TAKEN IN SAND EEP KUMAR V. CIT (293 ITR 294) (DEL), JASPAL SINGH 290 ITR 306 (P & H), Y ASH PAL GOEL ,310 ITR 75/76(P&H) AND RAJEEV TANDON VS. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA NO. 77 OF 2007 DATED 13.7.2007 AS ALSO IN SUBHASH CHANDER SEKHRI V. DEPUTY CIT [2007] 290 ITR 300 (P&H). HONBLE RAJASTHAN HIGH COURT IN CHAINSUKH RATHI VS. CIT (2009) 270 ITR 360 (RAJ.) HELD THAT EVEN OCCASION IS RELEVANT FOR FINDING OUT WHETHER GIFT IS GENUINE. IF THERE IS NO OCCASION, GIFT CANNOT BE ACCEPTED AS GENUINE. SIMILARLY, LAYING IMPORTANCE ON THE RELATIONSHIP OF DONOR AND DONEE FOR DETERMINING THE GENUINENESS OF THE GIF T, THEIR LORDSHIPS OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF LAL CHAND KALRA V. CIT REPORTED IN [1981] 22 CTR 135 HAVE HELD THAT WHERE THERE WAS NO OCCASION AND THE ALLEGED DONOR WAS A STRANGER, THE AMOUNT RECEIVED IN A GIFT REPRESENTS CON CEALED INCOME OF THE ASSESSEE. APPLYING THE RATIO OF AFORESAID DECISIONS OF THE HONB LE S.C. AND HIGH COURTS, WE ARE OF THE OPINION THAT :- (I) MERE IDENTIFICATION OF DONOR AND SHOWING MOVEMENT S OF GIFT AMOUNT THROUGH BANKING CHANNELS IS NOT SUFFICIENT TO PROVE THE GENUINENE SS OF THE GIFT; (II) SINCE THE CLAIM OF THE GIFT IS MADE BY THE ASSESSEE, THE ONUS LIES ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF THE PERSON MAKING THE GIFT BUT ALSO HIS CAPACITY TO MAKE SUCH A GIFT. THE ASSESSEE HAS TO PROVE THAT THE MONEY HAS ACTUALLY BEEN RECEIVED AS A GIFT FROM DONOR; ITA NO.42/ AHD/2009 5 (III) IT IS THE BURDEN OF THE ASSESSEE TO SHOW AND DEMO NSTRATE WHAT KIND OF RELATIONSHIP OR WHAT KIND OF LOVE AND AFFECTION THE D ONOR HAS WITH THE ASSESSEE, AND TO EXPLAIN CIRCUMSTANCES IN WHICH GIFTS WERE MADE; IV) IF THE EXPLANATION AS REGARDS THE CLAIM OF THE GIF T OFFERED BY THE ASSESSEE IS NOT PROPER, REASONABLE AND ACCEPTABLE ONE, AN INEVITA BLE CONCLUSION WOULD BE DRAWN THAT THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION , AS THE EXPRESSION 'THE ASSESSEE OFFERS NO EXPLANATION' MEANS THE ASSESSEE OFFERS NO PROPER, REASONABLE AND ACCEPTABLE EXPLANATION[(SEE P. MOHANAKAL A 291 ITR 278 (SC)]; (V) THE OPINION OF THE A.O. FOR NOT ACCEPTING THE EXPL ANATION OFFERED BY THE ASSESSEE AS NOT SATISFACTORY OR PROPER OR REASONABLE OR ACCE PTABLE IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE OPINION OF THE A.O. IS REQU IRED TO BE FORMED OBJECTIVELY WITH REFERENCE TO THE MATERIAL AVAILABLE ON RECORD. A PPLICATION OF MIND IS THE SINE QUA NON FOR FORMING THE OPINION BY THE A.O; AND (VI) IN CASES WHERE THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATURE AND SOURCE OF THE MONEY RECEIVED BY THE ASSESSEE IS NOT SATISF ACTORY, THERE IS, PRIMA FACIE, EVIDENCE AGAINST THE ASSESSEE, VIZ, THE RECEIPT OF M ONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME, AND, IF HE FAILS TO REBU T IT, IT CAN BE HELD AGAINST THE ASSESSEE THAT IT WAS A RECEIPT OF AN INCOME NATURE. 5.1 IN THE INSTANT CASE BEFORE US, THOUGH SUFFICIENT OPPORTUNITY HAS BEEN PROVIDED BY THE LOWER AUTHORITIES TO THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE GIFT, THE LD. AR HAS NOW CLAIMED BEFORE US THAT A FINAL OPPORTUNITY BE GIVEN TO PRODUCE THE DONOR BEF ORE THE AO IN ORDER TO ESTABLISH THE GENUINENESS OF THE GIFT. IN THESE CIRCUMSTANCES, IN THE INTEREST OF JUSTICE, WE CONSID ER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH THE DIRECTIONS TO ALLOW A FINAL OPPORTUNITY TO THE ASSESSEE FOR PRODUCING THE DONOR AND ESTABLISHING THE GENUINENESS OF THEIR CLAIM OF GIFT. THEREAFTER, THE AO MAY PASS A SPEAKING ORDER IN ACCORDA NCE WITH LAW IN THE LIGHT OF OUR AFORESAID OBSERVATIONS AND VARIOUS JUDICIAL PRON OUNCEMENTS INCLUDING IN THE CASE OF CIT V. P. MOHANAKALA [2007] 291 ITR 278 (SC). IN THE EVENT THE ASSESSEE DOES NOT PRODUCE THE DONOR AND FAILS TO ESTABLISH THE GENUINENESS OF THE CLAIM OF GIFT, THE ADDITION SUSTAINED BY THE LD. CIT(A) SHOULD BE TREATED AS UPHELD. WITH THESE OBSERVATIONS, GROUND NOS.1 &2 IN THE APPEAL ARE DISPOSED OF. ITA NO.42/ AHD/2009 6 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND NO.3 IN THE APPEAL, ACCORDINGLY, T HIS GROUND IS DISMISSED. 7. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US. 8. IN THE RESULT, SUBJECT TO OUR DIRECTIONS IN PAR A 5.1 ABOVE, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 3 -05-2011 SD/- SD/- ( T K SHARMA ) JUDICIAL MEMBER (A.N.PAHUJA) ACCOUNTANT MEMBER DATED : 3-05-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI HARESH R RUCHANDANI, OPP. NAFIS CHAMBERS, P OST OFFICE LANE, ZAMPA BAZAR, SURAT 2. THE ITO, WARD-5(2), SURAT 3. CIT CONCERNED 4. CIT(A)-III, SURAT 5. DR, ITAT, AHMEDABAD BENCH-D, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD