KAILASHPATI GUPTA ( PROP. SHOREWALA TEXTILES, MUMBAI V. ITO WD 15(1)(1), MUMBAI

ITA 4866/MUM/2008

• Counselvise Citation: 486619914 RSA 2008
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 06-06-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 29-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHAHI
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Principle of natural justice; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.4866/MUM/2008(A.Y. 2001-02) SHRI KAILASHPATI GUPTA, (PROP. SHOREWALA TEXTILES) 68,MIRZA STREET, ZAVERI BAZAR, MUMBAI 03. PAN:AADPG 3194J (APPELLANT) VS. INCOME TAX OFFICER , WARD 15(1)(1), ROOM NO.116, MATRU MANDIR, GRANT ROAD, MUMBAI 7. (RESPONDENT) ITA NO.243/MUM/2008(A.Y. 2001-02) SMT. KANTADEVI GUPTA, (PROP. K.D.TEXTILES) 68,MIRZA STREET, ZAVERI BAZAR, MUMBAI 03. PAN:AADG 3264H (APPELLANT) VS. INCOME TAX OFFICER , WARD 15(1)(1), ROOM NO.116, MATRU MANDIR, GRANT ROAD, MUMBAI 7. (RESPONDENT) APPELLANTS BY : SHRI K.SHIVRAM RESPONDENT BY : SHRI V.V.SHAHI ORDER PER N.V.VASUDEVAN, J.M, ITA NO.4866/M/08 IS AN APPEAL BY THE ASSESSEE AG AINST THE ORDER DATED 11/6/2008 OF CIT(A) XV, MUMBAI RELATING TO AS SESSMENT YEAR 2001- 02. ITA NO.243/M/08 IS ALSO AN APPEAL BY THE ASSES SEE AGAINST THE ORDER DATED 29/10/2007 OF CIT(A) XV, MUMBAI RELATING TO A SSESSMENT YEAR 2001- 02. BOTH THESE APPEALS INVOLVE IDENTICAL ISSUE ARI SING UNDER IDENTICAL FACTS 2 AND CIRCUMSTANCES. WE, THEREFORE, DEEM IT PROPER T O PASS THIS CONSOLIDATED ORDER. ITA NO.4866/M/08: 2. THE ASSESSEE IN THIS CASE IS AN INDIVIDUAL. HE IS IN THE BUSINESS OF TRADING IN CLOTH AND ACTING AS COMMISSION AGENT IN THE NAME AND STYLE OF M/S. SHOREWALA TEXTILES. FOR A.Y 2001-02 THE ASSE SSEE FILED THE RETURN OF INCOME ON 25/10/2001 DECLARING TOTAL INCOME OF RS. 3,95,840/-. THE RETURN WAS PROCESSED UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 (THE ACT) ON 11/10/2002. LATER ON A NOTICE UNDER SECTION 148 OF THE ACT DATED 26/4/2005 WAS ISSUED AND SERVED ON THE ASSESSEE ON 27/4/2005. THE REASONS RECORDED BY THE ASSESSING OFFICER BEFORE IS SUING NOTICE UNDER SECTION 148 READS AS FOLLOWS: DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS IN THE CASE OF MRS. DEEPA SHOREWALA, IT WAS FOUND THAT SHE HAD RECEIVED CERTAIN GIFT FROM ONE MR. CHHANULAL JHUNJHUNWALA, AN NRI THROUGH HIS NRE ACCOUNT WITH INDIA OVERSEAS BANK, NARIMAN POINT, MUMBAI. T HEREFORE, INVESTIGATIONS WERE CARRIED OUT THROUGH THE F.T. AN D RESEARCH DIVISION OF CENTRAL BOARD OF DIRECT TAXES WITH THE SINGAPORE TAX AUTHORITIES. IT IS INFORMED BY THE SINGAPORE TAX AUTHORITIES THAT T HE DONOR MR. CHHANULAL JHUNJHUNWALA, HAD NOT DISCLOSED THE FACT OF HAVING NRE ACCOUNT WITH INDIAN OVERSEAS BANK, NARIMAN POINT, M UMBAI, BEFORE THE SINGAPORE TAX AUTHORITIES. THEREFORE, IT WAS H ELD AS A NON GENUINE RECEIPT IN THE HANDS OF MRS. DEEPA SHOREWALA AND B ROUGHT TO TAX UNDER SEC. 68 OF THE INCOME TAX ACT, 1961. MR. KAILASHPATI GUPTA, ASSESSED IN THIS CHARGE HAS ALSO RECEIVED A GIFT OF RS. 5,50,000/- ON 13/4/2000 FROM CHHANULAL JHUNJ HUNWALA, NAMED HEREINABOVE FROM THE SAID NRE ACCOUNT. THERE FORE, THIS IS ALSO REQUIRED TO BE BROUGHT TO TAX AS NON GENUINE RECEIP T /GIFT IN HIS HANDS DURING THE ASSESSMENT YEAR 2001-02. THEREFORE, I HA VE REASON TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS.5,50,00 0/- HAS ESCAPED ASSESSMENT. NOTICE UNDER SECTION 148 ISSUED. ITO 15(1)(1), MUMBAI. 3 3. THE ASSESSEE BY A LETTER DATED 2/12/2005 REQUEST ED THE ASSESSING OFFICER TO FURNISH THE REASONS RECORDED BEFORE ISSU ING NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE IN THIS LETTER SPECIF ICALLY REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRI VE SHAFT VS. ITO , 259 ITR 19(SC), WHEREIN IT WAS HELD THAT THE ASSESSING OFFICER IS BOUND TO FURNISH REASONS AND THE ASSESSEE HAS RIGHT TO FILE OBJECTIONS AGAINST THE SAME AND THAT THE ASSESSING OFFICER SHOULD DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. THE REASONS WERE ULTIMATELY FURNIS HED TO THE ASSESSEE ONLY ON 28/11/2006. THE ASSESSING OFFICER PASSED AN ORD ER UNDER SECTION 147 R.W.S. 143(3) OF THE ACT ON 19/12/2006. THE ASSESS EE BY LETTER DATED 11/12/2006 SUBMITTED BEFORE THE ASSESSING OFFICER T HAT SINCE THE REASONS HAVE BEEN FURNISHED AT THE FINAL STAGE OF COMPLETIO N OF ASSESSMENT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO FILE OBJECTIONS AND TH AT THE OPPORTUNITY TO CHALLENGE THE VALIDITY OF INITIATION OF REASSESSMEN T PROCEEDINGS AS CONTEMPLATED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFT(SUPRA) CANNOT BE EFFECTIVELY DONE. THESE OBJECTIONS WERE NOT CONSIDERED BY THE ASSESSING OFFICER IN THE ORDE R PASSED UNDER SECTION 147 OF THE ACT. 4. WITH REGARD TO THE VALIDITY OF THE GIFTS RECEIVE D BY THE ASSESSEE FROM MR.CHHANULAL JHUNJHUNWALA, WHICH IS THE PURPOSE FOR WHICH THE REASSESSMENT PROCEEDINGS WERE INITIATED, THE ASSESS EE FILED THE FOLLOWING DOCUMENTS TO SUBSTANTIATE THE GIFTS RECEIVED BY HIM FROM MR. CHHANULAL JHUNJHUNWALA (A) LETTER DATED 28/9/2000 BY CHHANUL AL JHUNJHUNWALA BEING COVERING LETTER ALONG WITH THE CHEQUE OF RS. 6,20,000/- DRAWN ON INDIAN OVERSEAS BANK, NARIMAN POINT BRANCH, MUMBAI -21 AS GIFT TO THE ASSESSEE. (B) DECLARATION OF GIFT BY CHHANULAL JH UNJHUNWALA DULY EXECUTED BEFORE THE COMMISSIONER FOR OATHS, HONGKONG. THE D ECLARATION DULY MENTION THAT SUM OF RS.6,20,000/- WAS GIFTED TO TH E ASSESSEE OUT OF LOVE AND AFFECTION. (C) A COPY OF THE PASSPORT ISSUED ON 9/10/1997 VALID UPTO 4 2/4/2005 WAS ALSO FILED. A COPY OF THE DONORS BAN K ACCOUNT WITH IOB, NARIMAN POINT, MUMBAI WAS ALSO FILED. 5. THE ASSESSING OFFICER REFERRED TO THE FACT THAT THE SINGAPORE TAX AUTHORITIES HAVE INFORMED THE INDIAN TAX AUTHORITIE S THAT THE DONOR HAD NOT DISCLOSED THE FACT OF HIS HAVING AN NRI ACCOUNT WIT H IOB, NARIMAN POINT, MUMBAI AND, THEREFORE, THE GENUINENESS AND CREDIT W ORTHINESS OF THE ALLEGED DONOR HAD NOT BEEN ESTABLISHED. THE ASSESSEE WAS E XAMINED IN THE COURSE OF ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER AND AFTER SUCH EXAMINATION THE ASSESSING OFFICER WAS OF THE VIEW T HAT THE ASSESSEE WAS NOT IN A POSITION TO ESTABLISH RELATIONSHIP WITH THE DO NOR. FURTHER THE AO ALSO FOUND THAT FROM THE VERY SAME DONOR FOUR FAMILY MEM BERS OF THE ASSESSEE HAD ALSO RECEIVED GIFTS. THE AO WAS OF THE VIEW TH AT THERE WAS NO BLOOD RELATIONSHIP BETWEEN THE DONOR AND THE DONEE. FOR ALL THE ABOVE REASONS THE AO TREATED THE GIFTS IN QUESTION AS BOGUS AND ADDED THE VALUE OF THE GIFT AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT . 6. BEFORE CIT(A) THE ASSESSEE REITERATED ITS STAND ON THE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. THE CIT(A) HELD THAT THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND, THEREFORE, THE REASSESSMENT PROCEEDINGS WERE VALIDL Y INITIATED. WITH REGARD TO THE NON-FURNISHING OF THE REASONS RECORDED AND N ON-CONSIDERATION BY THE AO OF THE OBJECTIONS REGARDING VALIDITY OF INITIATI ON OF REASSESSMENT PROCEEDINGS THE CIT(A) HELD AS FOLLOWS: 2.3 AS REGARD TO THE APPELLANTS QUESTION ON THE REOPENING OF ASSESSMENT IN LIGHT OF THE DECISION OF SUPREME CO URT IN THE CASE OF G.R.N. DRIVESHAFT INDIA LTD. VS. ITO 259 ITR 19 IS CONCERNED, I FIND THAT THE APPELLANT ASKED THE AO TO SUPPLY THE REASO N TO BELIEVE VIDE HIS LETTER DATED 5/12/2005 WHICH WAS SUPPLIED BY TH E AO ON 4/12/2006. NO DOUBT THERE WAS DELAY IN SUPPLYING T HE REASON TO BELIEVE RECORDED BY THE AO TO THE APPELLANT BUT THA T ITSELF DOES NOT VITIATE THE LEGALITY OF PROCEEDING TAKEN U/S. 147. THEREAFTER, THE APPELLANT DOES NOT APPEARS TO HAVE RAISED ANY OBJEC TION ON THE POINT OF REASON TO BELIEVE BEFORE THE AO. NOW, THE APPELLAN TS QUESTION THAT THE 5 AO HAS NOT FOLLOWED THE DUE PROCESS OF LAW AS PROPO UNDED BY THE HONBLE SUPREME COURT IN THE CASE OF G.R.N. DRIVESH AFT INDIA LTD. VS. ITO 259 ITR 19 DOES NOT CARRY MUCH WEIGHT IN VIEW O F THE FACT THAT THE AO HAS SUPPLIED THE REASON TO BELIEVE TO THE APPELL ANT, THOUGH BELATEDLY AND THE APPELLANT HAS NOT RAISED ANY SPEC IFIC OBJECTION ON SUCH REASON TO BELIEVE. NEVERTHELESS, THE APPELLAN T HIMSELF HAS FILED RETURN IN RESPONSE TO NOTICE U/S. 147 AND COMPLIED WITH ALL THE REQUIREMENT AND DETAILS CALLED FOR BY THE AO TO THE EXTENT POSSIBLE. THEREFORE, I HOLD THAT THE PROCEEDINGS U/S.147 IS LEGALLY VALID AND NO INTERFERENCE IS REQUIRED TO BE MADE ON THIS POINT. ACCORDINGLY, GROUND NO.1 IS DISMISSED. THE CIT(A) UPHELD THE ORDER OF THE A.O. ON THE GENU INENESS OF THE GIFT ALSO. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO.243/MUM/2008: 7. THE FACTS IN THIS APPEAL ARE IDENTICAL TO THE FA CTS AS STATED IN THE CASE OF ITA NO.4866/M/08. THE QUANTUM OF GIFT INVOLVED IN THIS APPEAL IS A SUM OF RS. 25 LACS. THE ASSESSEE IN THIS CASE IS AN IN DIVIDUAL. SHE IS ALSO IN THE BUSINESS OF TRADING IN CLOCK AND ACTING AS COMMISSI ON AGENT. THE OTHER FACTS ARE SIMILAR TO THE FACTS AS IT PREVAILED IN T HE CASE OF KAILASHPATHI GUPTA IN ITA NO.4866/M/08. 8. THE GROUNDS OF APPEAL IN BOTH THESE APPEALS RAI SED BY THE ASSESSEE ARE AS FOLLOWS: ITA NO.4866/M/08: GROUNDS: 1) REOPENING U/S. 147: (I) THE HONBLE CIT(A) ERRED IN LAW AND FACTS IN UPHOLD ING THE RE- OPENING OF ASSESSMENT U/S. 147 OF THE ACT AND REASS ESSMENT OF INCOME U/S.143(3) R.W.S. 147 OF THE ACT WITHOUT F OLLOWING PRINCIPLES OF NATURAL JUSTICE AS LAID DOWN BY SUPRE ME COURT IN THE CASE OF GRN DRIVESHAFT. THE REASON GIVEN BY HIM BY DOING SO WRONG CONTRARY TO THE FACTS OF THE CASE AND AGAINST PROVISIONS OF LAW HENCE THE ASSESSMENT REQUIRES TO BE CANCELLED. 6 (II) THE HONBLE CIT(A) FAILED TO APPRECIATE THAT THE RE -OPENING OF ASSESSMENT AND REASSESSMENT UNDER SECTION 147 OF TH E ACT WAS BASED ON WRONG FACTS AND INFORMATION HENCE BAD IN L AW, THE ASSESSMENT REQUIRES TO BE CANCELLED. 2) ADDITION OF RS. 6.20 LACS ON ACCOUNT OF GIFT: (I) THE HONBLE CIT(A) ERRED IN LAW AND FACTS IN U PHOLDING THE ADDITION OF RS.6.20 LACS TO INCOME U/S. 68 OF THE ACT BY HOL DING THE GIFT RECEIVED BY THE ASSESSEE AS IN GENUINE AND UNEXPLAINED. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACT S OF THE CASE. (II)THE HON. CIT(A)ERRED IN LAW AND FACTS IN UPHOLD ING THE ADDITION OF RS. 6.20 LACS ON ACCOUNT OF GIFT SOLELY ON THE BASI S OF SURMISES, PRESUMPTIONS, ASSUMPTIONS AND SO CALLED SURROUNDING CIRCUMSTANCES WITHOUT ANY EVIDENCE TO SUPPORT ITS BASIS, REJECTIN G ALL EVIDENCE, EXPLANATIONS AND DETAILS PROVING IDENTITY OF THE DO NOR, SOURCE OF GIFT, CAPACITY OF THE DONOR AND RELATIONSHIP. THE ADDITI ON TO INCOME IS REQUIRED TO BE DELETED. (III) THE HON. CIT(A) OUGHT TO HAVE ACCEPTED THE GI FT OF RS. 6.20 LACS RECEIVED BY APPELLANT AS GENUINE ON THE BASIS OF EV IDENCES PROVIDING IDENTITY, SOURCES, CAPACITY AND RELATIONSHIP IN THE FACTS OF THE CASE AND PROVISIONS OF LAW AND SHOULD NOT HAVE TRAVELED BEYO ND THE PROVISIONS OF LAW ON SO CALLED VAGUE TERM THE SURROUNDING CIRCUMS TANCES, SURMISES, PRESUMPTIONS AND ASSUMPTIONS TO UPHOLD THE ADDITION . (IV)THE HON. CIT(A) AND LD. A.T FAILED TO APPRECIAT E THAT MAIN BASIS FOR REOPENING THE ASSESSMENT AND MAKING ADDITION TO IN COME WAS NON- DISCLOSURE OF INDIA BANK ACCOUNT BY DONOR IN HIS TA X RETURNS AT SINGAPORE AS REPORTED BY CBDT ON REFERENCE WHEN THE WORLDWIDE INCOME AND ASSETS ARE NOT REQUIRED TO BE DISCLOSED IN ANY COUNTRY INCLUDING INDIA UNLESS THE ASSESSEE IS RESIDENT OF THAT COUNTRY AND ASSESSEE HAS NO CONTROL OVER THE ACTIVITIES AND COM PLIANCES BY THE DONOR. ITA NO.243/M/08:- GROUNDS: 1) REOPENING U/S. 147: (I) THE HONBLE CIT(A) ERRED IN LAW AND FACTS IN UPHOLD ING THE RE- OPENING OF ASSESSMENT U/S. 147 OF THE ACT AND REASS ESSMENT OF INCOME U/S.143(3) R.W.S. 147 OF THE ACT WITHOU T FOLLOWING PRINCIPLES OF NATURAL JUSTICE AS LAID DOWN BY SUPRE ME COURT IN THE CASE OF GRN DRIVESHAFT. THE REASON GIVEN BY HIM BY 7 DOING SO WRONG CONTRARY TO THE FACTS OF THE CASE AN D AGAINST PROVISIONS OF LAW. (II) THE HONBLE CIT(A) FAILED TO APPRECIATE THAT THE RE -OPENING OF ASSESSMENT AND REASSESSMENT UNDER SECTION 147 OF TH E ACT WAS BASED ON WRONG FACTS AND INFORMATION HENCE BAD IN LAW, THE ASSESSMENT REQUIRES TO BE CANCELLED. 2) ADDITION OF RS. 25 LACS ON ACCOUNT OF GIFT: (I) THE HONBLE CIT(A) ERRED IN LAW AND FACTS IN U PHOLDING THE ADDITION OF RS.6.20 LACS TO INCOME U/S. 68 OF THE ACT BY HOL DING THE GIFT RECEIVED BY THE ASSESSEE AS IN GENUINE AND UNEXPLAINED. THE REASONS GIVEN BY HIM FOR DOING SO ARE WRONG AND CONTRARY TO THE FACT S OF THE CASE. (II)THE HON. CIT(A)ERRED IN LAW AND FACTS IN UPHOLD ING THE ADDITION OF RS. 25 LACS ON ACCOUNT OF GIFT SOLELY ON THE BASIS OF SURMISES, PRESUMPTIONS, ASSUMPTIONS AND SO CALLED SURROUNDING CIRCUMSTANCES WITHOUT ANY EVIDENCE TO SUPPORT ITS BASIS, REJECTIN G ALL EVIDENCE, EXPLANATIONS AND DETAILS PROVING IDENTITY OF THE DO NOR, SOURCE OF GIFT, CAPACITY OF THE DONOR AND RELATIONSHIP HENCE THE AD DITION TO INCOME IS REQUIRED TO BE DELETED. (III) THE HON. CIT(A) OUGHT TO HAVE ACCEPTED THE GI FT OF RS. 25 LACS RECEIVED BY APPELLANT AS GENUINE ON THE BASIS OF EV IDENCES PROVIDING IDENTITY, SOURCES, CAPACITY AND RELATIONSHIP IN THE FACTS OF THE CASE AND PROVISIONS OF LAW WITHOUT CONSIDERING EXTRANEOUS FA CTORS AND PRESUMPTIONS. (IV)THE HON. CIT(A) AND LD. A.T FAILED TO APPRECIAT E THAT MAIN BASIS FOR REOPENING THE ASSESSMENT AND MAKING ADDITION TO IN COME WAS NON- DISCLOSURE OF INDIA BANK ACCOUNT BY DONOR IN HIS TA X RETURNS AT SINGAPORE AS REPORTED BY CBDT ON REFERENCE WHEN THE WORLDWIDE INCOME AND ASSETS ARE NOT REQUIRED TO BE DISCLOSED IN ANY COUNTRY INCLUDING INDIA UNLESS THE ASSESSEE IS RESIDENT OF THAT COUNTRY. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. ON THE ISS UE OF VALIDITY OF INITIATION OF ASSESSMENT PROCEEDINGS, WE FIND THAT THE ASSESSEE HAD SPECIFICALLY ASKED FOR THE REASONS RECORDED BEFORE ISSUE OF NOTICE UNDER SECTION 147 OF THE ACT. THE SAME WAS NOT FURNISHED TO THE ASSESSEE WITHIN A REASONABLE TIME. AS WE HAVE ALREADY SEEN THE REASO NS WERE FURNISHED ONLY 28/11/06 AND THE ORDER OF ASSESSMENT WAS PASSED ON 19/12/2006 IN THE CASE OF BOTH THE ASSESSEE. AS LAID DOWN BY THE HON BLE SUPREME COURT IN 8 THE CASE OF GRN DRIVESHAFT (SUPRA) IT WAS MANDATORY FOR THE AO TO SUPPLY REASONS RECORDED FOR REOPENING THE ASSESSMENT AND I NVITE OBJECTIONS FILED BY THE ASSESSEE. ADMITTEDLY THIS WAS NOT DONE BY THE AO. THEREFORE, IT WOULD BE PROPER TO SET ASIDE THE ORDER OF THE CIT(A) ON T HIS ISSUE AND REMAND THE SAME TO THE AO TO COMPLY WITH THE REQUIREMENTS AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE GRN DRIVESHAFT (S UPRA). 10. THE SPECIFIC STAND OF THE ASSESSEE BEFORE THE A O IN ITS LETTER DATED 11/12/2006(IN THE CASE OF KAILASHPATI GUPTA) WAS TH AT THE DONOR SHRI CHHANULAL JHUNJHUNWALA WAS A RESIDENT OF HONGKONG A ND THAT THE REVENUE HAS MADE ENQUIRIES FROM THE TAX DEPARTMENT AT SINGA PORE AND, THEREFORE, THE VERY BASIS ON WHICH THE PROCEEDINGS WERE SOUGHT TO BE INITIATED WERE ERRONEOUS. IN THIS REGARD IT WAS ALSO SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE MIGHT BE PAYING TAX IN S INGAPORE BUT THAT WILL NOT MAKE HIM TAX RESIDENT OF SINGAPORE. IT WAS ALSO S UBMITTED THAT THE SINGAPORE HAS A TAXATION SYSTEM WHEREBY INCOME SOUR CED IN SINGAPORE ARE CHARGED TO TAX IN SINGAPORE. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THE MAIN REASON FOR REOPENING THE ASSESSMENT AS WEL L AS FOR MAKING THE IMPUTED ADDITIONS TREATING THE GIFTS AS UNEXPLAINED IS THE CORRESPONDENCE WITH THE SINGAPORE AUTHORITIES WHICH PRIMA FACIE CA NNOT BE THE BASIS TO DOUBT THE GENUINENESS OF THE GIFTS. IT WAS ALSO AR GUED THAT THE FACT THAT THE INDIAN BANK ACCOUNT IS NOT DISCLOSED AT SINGAPORE B Y ITSELF WILL NOT RENDER GIFTS AS NOT GENUINE. IN THIS REGARD IT WAS ALSO A RGUED THAT THE REASONS GIVEN BY THE AO FOR TREATING THE GIFTS AS NON GENUINE ARE VAGUE AND IN THE LIGHT OF THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE THE GIFTS HAVE TO BE ACCEPTED AS GENUINE. 11. THE LD. D.R HOWEVER PLACED RELIANCE ON THE ORDE RS OF THE REVENUE AUTHORITIES. 9 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE A RE OF THE VIEW THAT BOTH ON THE ISSUE OF VALIDITY OF INITIATION OF REAS SESSMENT PROCEEDINGS AS WELL AS THE GENUINENESS OF THE GIFTS THE ORDERS OF THE C IT(A) HAVE TO BE SET ASIDE AND THE CASE REMANDED TO THE AO FOR FRESH CONSIDERA TION. ADMITTEDLY THE BASIS ON WHICH THE REASSESSMENT PROCEEDING WERE INI TIATED IS THE INFORMATION WHICH THE REVENUE OBTAINED FROM SINGAPORE TAX AUTHO RITIES. IT HAS BEEN THE PLEA OF THE ASSESSEE THAT THE DONOR WAS NOT A TAX R ESIDENT OF SINGAPORE AND THAT ENQUIRIES HAVE BEEN MADE WITH A WRONG COUNTRY. THIS OBJECTION HAS NOT BEEN MADE BY THE AO OR THE CIT(A). MOREOVER TH E CORRESPONDENCE BASED ON WHICH REASSESSMENT PROCEEDINGS WERE INITIATED HA S NOT BEEN CONFRONTED TO THE ASSESSEE. THE LAW IS WELL SETTLED THAT THE REVENUE CANNOT USE ANY ADVERSE MATERIAL AGAINST THE ASSESSEE UNLESS THE SA ME IS CONFRONTED TO THE ASSESSEE AND OPPORTUNITY AFFORDED TO THE ASSESSEE T O EXPLAIN THE ADVERSE MATERIAL AGAINST IT. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF THE CIT(A) AND DIRECT THE AO TO EXAMINE THE VALIDITY OF INITIA TION OF REASSESSMENT PROCEEDINGS AS WELL AS GENUINENESS OF THE GIFTS AFR ESH. THE AO WILL PROVIDE A COPY OF THE CORRESPONDENCE RECEIVED FROM SINGAPORE TAX AUTHORITIES. THE ASSESSEE WILL BE GIVEN AN OPPORTUNITY OF BEING HEAR D BEFORE DECIDING THE ISSUE. THE GENUINENESS OF THE GIFTS WILL ALSO BE E XAMINED AFRESH BY THE AO. FOR STATISTICAL PURPOSES BOTH THE APPEALS ARE TREAT ED AS ALLOWED. 13. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF JUNE, 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 10 TH JUNE.2011 10 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RH BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. 11 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 6/6/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 7/6/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER