JCIT RG 24(2), MUMBAI V. KISHOR V. SONI, MUMBAI

ITA 5059/MUM/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71750 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 26-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Gift; Business income; Search and seizure; Source of fund; Cost of acquisition; Fair market value; Onus to prove
• Section: 45(2); 143(3); 50C; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 5059/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) DY. CIT-24(2), ROOM NO.601, 6 TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 / VS. KISHOR V. SONI 302, ABHIRAM APARTMENT, INDRAVAN COMP., DATT MANDIR ROAD, MALAD (E), MUMBAI-400 097 ! ./' ./PAN/GIR NO. AAKPS 8348 F ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# % / APPELLANT BY : SHRI P. K. SINGH $!# & % / RESPONDENT BY : DR. K. SHIVARAM ' ()* & + / DATE OF HEARING : 26.09.2013 ,-. & + / DATE OF PRONOUNCEMENT : 22.11.2013 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-34, MUMBAI (CIT(A) FOR SH ORT) DATED 15-4-2011, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR T HE ASSESSMENT YEAR (A.Y.) 2007-08 VIDE ORDER DATED 30-12-2009. THE APPEAL RAISES THRE E ISSUES, WHICH WE SHALL TAKE UP IN SERIATIM. 2 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI 2.1 THE FIRST ISSUE IS IN RESPECT OF ASSESSMENT OF INCOME AS SHORT TERM CAPITAL GAINS (STCG IN SHORT) BY THE ASSESSING OFFICER (AO) AT RS.27,93,103/-, SINCE DELETED BY THE FIRST APPELLATE AUTHORITY. THE BRIEF FACTS, WHICH A RE SIMPLE AND UNDISPUTED, ARE THAT THE ASSESSE, AN INDIVIDUAL ENGAGED IN TRADING OF DIAMON DS, GARMENTS AND SHARES, PURCHASED PLOT NOS. A-29 & A-29A AT JANATA COLONY, ROUND CIRC LE, JAIPUR FROM ONE, M/S. MOTI DEVELOPERS, JAIPUR ON 16-11-2006 FOR A CONSIDERATIO N OF RS.1.21 CRORES. THE PURCHASE WAS SHOWN AS AN INVESTMENT IN ACCOUNTS. ON THE SAME DAY, THE ASSESSEE ENTERED INTO ANOTHER AGREEMENT WITH ONE, M/S. ASHIRWAD BUILTECH PVT. LTD. (ABPL FOR SHORT), A JAIPUR BASED COMPANY IN THE CONSTRUCTION BUSINESS, FOR CONSTRUCTION OF A MULTISTORIED BUILDING ON THE SAID PLOTS OF LAND, ALSO ISSUING GE NERAL POWER OF ATTORNEY (GPOA) IN FAVOUR OF THE DEVELOPER, ALLOWING POSSESSION THERET O ON THE SAME DATE ITSELF (I.E., 16-11- 2006). THE GPOA THOUGH EXCLUDED THE RIGHT TO SELL. BOTH THE PARTIES WERE TO SHARE THE CONSTRUCTION EQUALLY, I.E., AT 50% EACH. THE SALE O F FLATS, UPON CONSTRUCTION, WAS TO BE BY THE ABPL, AND THE ASSESSEE WAS BOUND TO SIGN THE CO NVEYANCE DEEDS AS EXECUTED, I.E., IN FAVOUR OF THE BUYERS OF THE FLATS (THIRD PARTIES). IN THE VIEW OF THE AO, THERE WAS A TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE ACT U PON ENTERING INTO WITH AGREEMENT AS WELL AS ISSUING GPOA IN FAVOUR OF AND ALLOWING POSS ESSION TO THE DEVELOPER (ABPL). THE ASSESSEE HAD, THEREFORE, TRANSFERRED HIS INTERE ST IN LAND FOR ONE HALF OF THE BUILT-UP AREA TO COME UP AT THE SAID SITE, I.E., 11585.5 SQ. FT (THE TOTAL PROPOSED AREA BEING 23,170.50 SQ.FT./PB PG.40). IT IS NOT NECESSARY THA T THE CONSIDERATION FOR THE TRANSFER OF A CAPITAL ASSET IS IN TERMS OF MONEY ONLY. A CAPITAL ASSET COULD BE EXCHANGED FOR ANOTHER, THE BUILT-UP AREA IN THE INSTANT CASE. THAT THE SAM E WOULD REQUIRE BEING VALUED, IS A MATTER INCIDENT, AND WOULD NOT DETRACT FROM THE FACT THAT THE CAPITAL GAIN HAD ACCRUED. NO DOUBT THE BUILT-UP AREA IS YET TO BE CONSTRUCTED, BUT THA T WOULD ONLY IMPLY DISCOUNTING ITS VALUE. THE READY RECKONER FOR AN ADJOINING BUILDING, I.E., ADJACENT TO THE SITE WHERE THE PROPOSED BUILDING WAS TO COME UP, AS ON 27-2-2007, WAS TAKEN AS THE BASIS OF VALUATION. A DISCOUNT FACTOR OF 5% WAS APPLIED TO ACCOUNT FOR TH E TIME DIFFERENCE. THE FULL VALUE OF THE CONSIDERATION ARISING ON THE TRANSFER WAS WORKED OU T TO RS.1,48,93,103/-, RESULTING IN A CAPITAL GAIN OF RS.27.93 LAKHS, AND WHICH WOULD BE A SHORT TERM CAPITAL GAIN. 3 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI 2.2 IN APPEAL, THE SAME STOOD DELETED. THE AO, IN V IEW OF THE LEARNED CIT(A), HAD MISLED HIMSELF. THERE WAS NO TRANSFER OF OWNERSHIP OF OR BENEFICIAL RIGHTS IN THE PROPERTY. THE POSSESSION HAD BEEN ALLOWED ONLY FOR THE LIMITE D PURPOSE OF ITS DEVELOPMENT, I.E., TO EXECUTE AND GIVE EFFECT TO THE DEVELOPMENT AGREEMEN T BY CONSTRUCTING THE PROPOSED BUILDING. EVEN IF CONSTRUED AS A TRANSFER, THE SAME COULD NOT RESULT IN ANY AGAIN ON THE SAME DATE. NO DEVELOPMENT WORK HAD BEEN DONE AND, F URTHER, NO AMOUNT RECEIVED EITHER BY THE ABPL OR BY THE ASSESSEE DURING THE YEAR, I.E ., FROM A THIRD PARTY. THERE WAS AS SUCH NEITHER ANY GENERATION OF REVENUE NOR ANY DILU TION OF OWNERSHIP RIGHTS. ACCORDINGLY, NO TRANSFER AND, CONSEQUENTLY, NO GAIN HAD ARISEN I N THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ADDITION BEING DELETED, THE REVENUE IS IN APPEAL. 3. WE HAVE HEARD PARTIES, AND PERUSED THE MATERIAL ON RECORD. 3.1 BEFORE US, THE REVENUES CASE WAS THAT THE ASSE SSEE HAS AGREED TO TRANSFER HIS INTEREST IN PROPERTY (TO THE EXTENT OF 50% OF THE L AND) FOR A CONSIDERATION, THOUGH IN KIND, ALLOWING POSSESSION TO THE TRANSFEREE. CAPITAL GAIN HAD THUS ACCRUED. THE CONSIDERATION HAS BEEN REASONABLY VALUED, ADOPTING THE READY RECK ONER RATE FOR A CONSTRUCTED PROPERTY ON AN ADJOINING PIECE OF LAND, SUITABLY DISCOUNTING THE SAME FOR ALLOWANCE OF THE TIME FACTOR INASMUCH AS THE CONSTRUCTION WOULD COME UP O NLY IN DUE COURSE OF TIME. THE ASSESSEES CASE, ON THE OTHER HAND, IS THAT THE RE IS NO CASE FOR ACCRUAL OF CAPITAL GAIN INASMUCH AS ALL THAT HAS TRANSPIRED IS THAT TH E ASSESSEE HAS ENTERED INTO A DEVELOPMENT AGREEMENT, AGREEING TO SHARE OF 50% OF THE CONSTRUCTED SPACE. IT IS ONLY WHEN THE FLATS ARE CONSTRUCTED AND POSSESSION THERE OF ALLOWED TO THE ASSESSEE, THAT THE TRANSACTION CAN BE SAID TO BE COMPLETE, GIVING RISE TO INCOME, IF ANY. THE ADOPTION OF READY RECKONER RATE IS ALSO NOT PROPER INASMUCH AS IT IS NOT A CASE OF APPLICATION OF SECTION 50C OF THE ACT. IN ANY CASE, HOW COULD CAPITAL GAIN OF RS.27.93 LAKHS ARISE DURING THE COURSE OF THE SAME DAY ITSELF. THAT IS, EVEN IF A V ALUE IS TO BE ASCRIBED TO THE TRANSFER, THE SAME COULD NOT EXCEED RS.1.21 CRORES, THE PURCHASE COST. IN FACT, THE AGREEMENT VALUE OF THE AGREEMENT AS ON THE DATE OF THE AGREEMENT WAS R S.89,15,940/-, EVEN AS POINTED OUT TO THE AO DURING THE COURSE OF ASSESSMENT (PAPER BOOK (PB) PAGES 21-25, AT 25). 4 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI 3.2 WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER, TO FIND BOTH THE SIDES TO BE ONLY PARTIALLY CORRECT, AND HAVING MISDIRECTED THEM SELVES TO SOME EXTENT. IN OUR CLEAR VIEW, IT IS A CASE OF A TRANSACTION IN THE NATURE O F TRADE ENTERED INTO BY THE ASSESSEE WITH A DEVELOPER FOR THE DEVELOPMENT OF HIS PROPERTY, IMME DIATELY ON ITS PURCHASE. THE SAME IS, THUS, ONLY IN THE NATURE OF STOCK-IN-TRADE, NOTWITH STANDING THAT THE ASSESSEE HAS REFLECTED ITS PURCHASE IN HIS ACCOUNTS AS AN INVESTMENT, WHIC H IS NOT DETERMINATIVE OR CONCLUSIVE OF THE MATTER. NO GAIN OR INCOME, THUS, STANDS TO ARIS E TO EITHER PARTY ON ACCOUNT OF THE TRANSACTION. IT IS ONLY AS AND WHEN THE FLATS ARE S OLD UPON CONSTRUCTION, TO THIRD PARTIES, THAT INCOME WOULD ARISE EQUALLY TO BOTH THE PARTIES , I.E., AT 50% EACH. IT IS ONLY AT THAT STAGE THAT INCOME WOULD STAND TO BE GENERATED. EVEN IF THE FLATS ARE OR ARE TO BE EARMARKED (WHICH THOUGH DOES NOT APPEAR TO BE THE C ASE), IT IS ONLY ON THE SALE OF FLATS ALLOTTED OR FALLING TO THE ASSESSEES SHARE, THAT A NY INCOME WOULD ARISE TO HIM. WHILE THE TOTAL CONSTRUCTION COST, AS INCURRED, WOULD BE THE COST OF ITS FLATS, OR AS THE CASE MAY BE, THE SHARE THEREIN, TO ABPL, THE ASSESSEES COST STA NDS CRYSTALLIZED AT RS.1.21 CRORES. THAT IS, THE COST OF THE ASSESSEES SHARE IN THE PROJECT , BEING 50% OF THE TOTAL CONSTRUCTION (WHICH WOULD THUS ALSO INCLUDE 50% OF THE LAND) WOU LD BE RS.1.21 CRORES. ONE COULD HAVE CONSIDERED OF THE LAND BEING A CAPITAL ASSET I N THE ASSESSEES HANDS, WITH 50% OF IT (AND NOT THE ENTIRE, AS ASSUMED BY THE AO) BEING TR ANSFERRED TO THE BUILDER FOR A CONSIDERATION, IF IN THE FACTS AND CIRCUMSTANCES OF THE CASE THERE HAD BEEN AN INDICATION TO THAT EFFECT, AS WHERE IT IS ATTENDED BY A TIME LAG, SO AS TO BE CONSIDERED AS A CASE OF CONVERSION (OF A CAPITAL ASSET) INTO STOCK-IN-TRADE U/S. 45(2) OF THE ACT. THE ACQUISITION OF LAND, WHICH IS AGAIN FROM A DEVELOPER, AND THE DEVE LOPMENT AGREEMENT BEING ALMOST SIMULTANEOUS, WE FIND NO SCOPE FOR APPLICATION OF S ECTION 45(2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER, EVEN IF A VALUE WAS TO BE ASCRIBED TO THE TRANSFER OF 50% OF THE PROPERTY IN LAND (BY THE ASSESSEE) AND, CORRESPONDINGLY, TO 50% OF THE CONSTRUCTION (BY THE BUILDER), I.E., FORMING CONSIDERATION FOR EACH OTHER. THE TWO MAY NOT BE AT PAR, GIVING THE IMPRESSION OF A PROFIT/LOSS ARISING TO THE PARTIES, WHICH WOULD BE EQUAL AND OPPOSITE. HOWEVER, THE SAME HAS NO BASIS IN FACT/S AS NO VALU E TO THE SAME HAS BEEN ASCRIBED BY THE 5 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI PARTIES, AND NO VALUE IS TO BE PASSED BETWEEN THEM ON THAT ACCOUNT, I.E., THE DIFFERENCE IN THEIR RESPECTIVE COSTS, AS RS.60.50 LACS IN THE ASS ESSEES CASE. THE GENUINENESS OF THE ARRANGEMENT IS NOT IN DOUBT, AND IT IS TO BE BORNE IN MIND THAT THE TRANSACTION BEING EXECUTED ON THE SAME DATE, NO INCREASE IN VALUE CAN BE LIGHTLY INFERRED. BESIDES, IT ALSO NEEDS TO BE APPRECIATED THAT THE ACTUAL COST OF CON STRUCTION WOULD BE OVER A PERIOD IN FUTURE, AND IS THUS NOT CERTAIN. THE PARTIES CAN, T HUS, ONLY BE CONSIDERED TO HAVE MADE AN ESTIMATE OF THE SAME (CONSTRUCTION COST), AND ON TH AT BASIS FOUND IT TO MATCH WITH THE PURCHASE/FAIR MARKET VALUE OF LAND (RS.1.21 CRORES) , SO THAT BOTH BECAME EQUAL SHARERS OF THE DEVELOPED PROPERTY, THEREBY BECOMING EQUAL STAK E-HOLDERS IN THE PROJECT. 3.3 THE REVENUE HAS EMPHASIZED ON CLAUSE 12 OF THE AGREEMENT, WHEREBY THE SALE OF THE FLATS IS TO BE DONE BY THE BUILDER, WITH THE AS SESSEE BEING BOUND TO SIGN THE CONVEYANCE DEEDS. IN OUR VIEW, NOTHING MATERIAL TUR NS ON THIS CONDITION. THE BUILDER HAVING ACQUIRED ONLY THE DEVELOPMENT RIGHTS, BEING DENIED THE RIGHT TO SELL PER THE MOU, NON-COOPERATION BY THE ASSESSEE IN CONVEYING THE BU ILT-UP AREA TO THIRD PARTIES, WHICH ONLY WOULD GENERATE REVENUE FOR BOTH OF THEM, WOULD JEOPARDIZE THE ENTIRE PROJECT, PLACING THE ASSESSEE IN AN ADVANTAGEOUS POSITION. F URTHER THE ASSESSEE, BEING ENTITLED TO 50% OF THE BUILT-UP AREA, COULD AT ANY TIME INSIST ON THE SAID AREA BEING ALLOTTED/ALLOCATED TO HIM, I.E., IF IT CONSIDERS THE FLATS BEING UNDER -SOLD/SOLD BY THE BUILDER TO ITS DETRIMENT. 3.4 FOR THE FOREGOING REASONS, WE STATE OF NO CAPIT AL GAINS ARISING TO THE ASSESSEE DURING THE RELEVANT YEAR, WHO WOULD THOUGH STAND TO BE ASSESSED FOR BUSINESS INCOME ON THE ACTUAL SALE OF HIS SHARE OF PROPERTY, FORMING A PART OF HIS TRADING STOCK. CONTINUING FURTHER, IT MAY BE ARGUED THAT IT IS NOT A CASE EIT HER PARTY BEFORE US. WE ARE AFRAID, WE ARE NOT MOVED BY THIS ARGUMENT. IT IS THE CORRECT LEGAL POSITION THAT IS RELEVANT, AND NOT THE VIEW THAT THE PARTIES MAY TAKE OF THEIR RIGHTS IN T HE MATTER (REFER: CIT V. C. PARAKH & CO. (INDIA) LTD . [1956] 29 ITR 661 (SC); KEDARNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC)). HAVING CONSTRUED THE ISSUE IN LARGER TER MS, I.E., THE TAXABILITY OF THE INCOME, IF ANY, ARISING OUT OF THE IMPUGNED TRANSACTION, WE FO UND IT RELEVANT TO FIRSTLY CHARACTERIZE THE TRANSACTION ON A CONSIDERATION OF THE CONSPECTU S OF THE CASE. THE ASSESSEE HAS, IN OUR 6 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI VIEW, ONLY SOUGHT TO EXPLOIT THE MARKET POTENTIAL O F HIS LAND, BUYING IT FROM ONE DEVELOPER AND CONTRACTING IT TO ANOTHER FOR CONSTRU CTION. THE ONLY DIFFERENCE IS THAT THE CONSIDERATION FOR THE SAME, RATHER THAN BEING IN CA SH, IS IN KIND, I.E., A DEFINED SHARE IN THE AREA TO BE CONSTRUCTED. THAT, FURTHER, WOULD ON THA T ACCOUNT, NEITHER PRECLUDE THE TRANSFER (WHICH THOUGH WOULD ONLY BE AS 50% OF THE TOTAL LAN D AREA) NOR THE CONCOMITANT CAPITAL GAIN. THE VALUATION, HOWEVER DIFFICULT, IS TO BE MA DE, WORKING AS FAIR AN ESTIMATE AS THE CIRCUMSTANCES MADE ADMIT (REFER A.R. KRISHNAMURTHY VS. CIT [1989] 176 ITR 417 (SC)), EVEN AS WAS ADMITTED TO BY THE LD. AR DURING HEARIN G. HOWEVER, AS OBSERVED EARLIER, WE FOUND THE TRANSACTION TO BE MORE IN THE NATURE OF A JOINT EFFORT TO COMMERCIALLY EXPLOIT THE LAND, EACH PARTY AGREEING TO SHARE THE RISK AND REW ARD FROM THE ACTIVITY, LEVERAGING ITS ADVANTAGE AND DEPLOYING ITS RESOURCES; THE ASSESSEE IN THE FORM OF A SUITABLY LOCATED LAND, AND THE DEVELOPER, ITS CONSTRUCTION APPARATUS/EXPER TISE. EACH PARTY RETAINS SUITABLE CONTROL OVER THE TRANSACTION. THE MOU AND THE GPOA, THUS, RAISE THE ISSUE OF THE NATURE OF THE TRANSACTION, RATHER THAN OF BEING A TRANSFER OR NOT SO; BOTH THE PARTIES HAVING AN EQUAL STAKE IN THE SUCCESSFUL EXECUTION OF THE PROJ ECT. THE SAME ACCORDINGLY STANDS CHARACTERIZED BY US AS ADVENTURE IN THE NATURE OF T RADE FOR BOTH THE ASSESSEE AND, OF COURSE, THE DEVELOPER. WE ANSWER THE QUESTION ARISI NG BEFORE US ACCORDINGLY. THE DECISION IN THE CASE REPORTED IN CHATURBHUJ DWARKADAS KAPADIA OF BOMBAY VS. CIT [2003] 260 ITR 491 (BOM) AND CIT VS. GEORGE HENDERSON AND CO. LTD. [1967] 66 ITR 622 (SC) RELIED UPON BY THE REVENUE, BOTH OF WHICH WE HAVE PERUSED, WOULD BE UNDER THE CIRCUMSTANCES, TO NO MOMENT. FURTHER, IN TERMS OF THE RESULT, IT IS ONLY THE ASSESSEE WHO WOULD STAND TO BE SUCCESSFUL INASMUCH AS NO INC OME ARISES FOR BEING TAXED FOR THE CURRENT YEAR. WE DECIDE ACCORDINGLY. 4. THE FACTS IN RELATION TO SECOND GROUND ARE THAT THE ASSESSEE AVAILED OF UNSECURED LOANS FOR RS.12 LAKH FROM TWO PARTIES, I.E., M/S DE NIM WASHERS (RS.8 LAKHS) AND M/S. DEEP LAUNDARY (RS.4 LAKHS). THE ASSESSEE HAVING FAI LED TO PRODUCE CONFIRMATIONS FROM THE STATED CREDITORS, THE SAME STOOD ADDED UNDER SE CTION 68 OF THE ACT. ON A REMAND REPORT BEING CALLED FOR IN THE APPELLATE PROCEEDING S, THE LOAN FOR RS.8 LAKHS STOOD PROVED. QUA THE LOAN OF RS.4 LAKHS, THE AO WAS OF THE VIEW THA T THOUGH CONFIRMATION HAD BEEN 7 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI PRODUCED, THE RETURN OF INCOME; BANK STATEMENT; ETC ., WERE NOT, SO THAT THE SAME CANNOT SAID TO BE PROVED, I.E., ON THE PARAMETERS OF IDENT ITY, CAPACITY AND GENUINENESS. THE LD. CIT(A), HOWEVER, FOUND THE OBJECTION UNSUSTAINABLE, AS ONCE A CONFIRMATION, BEARING AN ADDRESS AND PAN OF THE CREDITOR, HAD BEEN FURNISHED , IT WAS FOR THE AO TO VERIFY THE SAME AND ARRIVE AT A CONCLUSION AS TO THE GENUINENESS OF THE TRANSACTION. THE AO HAD FOUND NOTHING WRONG WITH THE CONFIRMATION. THE ADDITION QUA THE SAME WAS ALSO ACCORDINGLY DIRECTED TO BE DELETED. AGGRIEVED, THE REVENUE IS I N APPEAL. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. BEFORE US, THE CASE OF BOTH THE PARTIES WAS ALONG THE SAME LINES, I.E., AS BEFORE THE AUTHORITIES BELOW. WE HAVE GONE THROUGH THE REMAND REPORT DATED 31-3-2011 (PB PGS. 164-166). DESPITE ALLOWANCE OF OPPORTUNITY THROUGH THE SAID PROCEEDINGS, ONLY A S MUCH AS A CONFIRMATION HAS BEEN FILED BY THE ASSESSEE (PB PG. 83). THE ONUS TO ESTA BLISH THE GENUINENESS AND, CONSEQUENTLY, TO PROVE A CREDIT UNDER SECTION 68 IS ON THE ASSESSEE, AND THE SAME EXTENDS TO ESTABLISHING THE IDENTITY AND CAPACITY (OF THE C REDITOR) AND THE GENUINENESS (OF THE CREDIT TRANSACTION). THE ONLY DOCUMENT FURNISHED BY THE ASSESSEE IS A CONFIRMATION FROM THE CREDITOR, AND WHICH WOULD ADMITTEDLY ONLY ESTAB LISH THE IDENTITY OF THE CREDITOR. NO DOUBT THE AO HAS NOT VERIFIED THE SAME. THAT, HOWEV ER, WOULD NOT MAKE ANYTHING IT MORE THAN A CONFIRMATION AND, THUS, WOULD NOT LEAD TO ES TABLISHING THE CAPACITY OF THE CREDITOR OR THE GENUINENESS OF THE TRANSACTION. THE ONLY IMP LICATION OF ITS NON-VERIFICATION BY THE AO WOULD OF THE ACCEPTANCE OF THE CONFIRMATION AS S UCH, AND WHICH, AS AFORESAID, WOULD ONLY CONFIRM THE IDENTITY OF THE CREDITOR, AND NO F URTHER. FURTHER, DESPITE AN ADVERSE REPORT BY THE AO, NEITHER ANY MATERIAL BEFORE THE LD. CIT( A) NOR BEFORE US, I.E., IN THE APPELLATE PROCEEDINGS, DESPITE LAPSE OF ANOTHER TWO AND-A-HAL F YEARS, HAS BEEN FURNISHED. THE REVENUES RELIANCE OF SECTION 102 OF EVIDENCE ACT I S ALSO APPOSITE. UNDER THE CIRCUMSTANCES, WE ARE OF THE CLEAR VIEW THAT THE AS SESSEE HAS FAILED TO DISCHARGE THE BURDEN OF PROOF CAST UPON HIM U/S. 68 QUA THE CREDIT OF RS.4 LAKHS, REFLECTED AS UNSECURED LOAN FROM M/S. DENIM WASHERS. THE ADDITION IN ITS R ESPECT IS, ACCORDINGLY, CONFIRMED, SETTING ASIDE ITS DELETION BY THE LD. CIT(A). WE DE CIDE ACCORDINGLY. 8 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI 6. THE THIRD AND FINAL GROUND BY THE REVENUE IS IN RESPECT OF ADDITION FOR A SUM OF RS.30 LAKHS RECEIVED BY HIM FROM HIS SISTER THROUGH THE BANKING CHANNEL (I.E., VIDE DD NO.113622 DATED 27-11-2006, DRAWN ON BANK OF BARODA , DUBAI MAIN BRANCH)(PB PGS. 89-90). THE SAME WAS EXPLAINED BY THE ASSESSEE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS TO BE BY WAY OF A GIFT FROM HIS ELDER S ISTER, MRS.YOGINI MAYUR SAGAR, SETTLED IN DUBAI, U.A.E. FOR THE LAST 30 YEARS. HER HUSBAN DS FAMILY HAS BEEN RESIDING IN DUBAI FOR THE LAST 40-42 YEARS, AND WAS SAID TO BE FINANC IALLY VERY CAPABLE. HOWEVER, AS THERE IS NO INCOME TAX OR CORRESPONDING TAX ON INCOME IN U.A .E., NO FINANCIAL DOCUMENT OR OTHER MATERIAL COULD BE FURNISHED IN SUPPORT. THE AO ASSE SSED THE SAME U/S. 68 IN VIEW OF THE NON-PROVING THE CREDIT OF THE OWNER, DRAWING ON THE DECISION IN THE CASE OF SANJEEV BATRA VS. ASST. CIT [1999] 69 ITD 23 (DEL). THE SAID DECISION AGAIN IN VOLVES AN NRI GIFT FOR RS.25 LAKHS RECEIVED BY THE ASSESSEES MINOR SON. T HE ASSESSEE HAVING FAILED TO ESTABLISH THE GENUINENESS OF THE GIFT AND THE FINANCIAL CAPAC ITY OF THE DONOR, THE ADDITION STOOD CONFIRMED BY THE TRIBUNAL. IN APPEAL, THE MATTER WAS REMANDED BACK TO THE AO. THE ASSESSEE FILED THE BANK STATEMENT OF JOINT BANK ACCOUNTS OF THE DONOR-SISTE R WITH HER DAUGHTERS, NAMELY, TEJAL MAYUR SAGAR (FOR THE PERIOD 29-9-05 TO 27-12-06) AN D SHEETAL MAYUR SAGAR (FROM 29-12- 05 TO 17-12-2006), WITH BANKERS EMIRATES NBD, MEBAK BRANCH, DUBAI. THE DAUGHTERS WERE EMPLOYED IN DUBAI, AND COPIES OF THEIR PASSPOR TS AS WELL AS LETTERS FROM THEIR EMPLOYERS WERE ALSO FURNISHED (PB PGS. 91-162). THE SOURCE OF FUNDS IN THE SAID ACCOUNTS WAS THE REGULAR DEPOSITS IN THE SAID ACCOUNTS. OF T HE TOTAL CREDIT OF RS.30 LACS (2,47,650 DIRHAM), 1,50,000 DIRHAM (75,000 DIRHAM FROM EACH J OINT ACCOUNT) HAD BEEN TRANSFERRED THEREFROM TO THE INDIVIDUAL ACCOUNT OF MS. YOGINI M AYUR SAGAR WITH BANK OF BARODA, DUBAI MAIN BRANCH. THE ENTIRE SUM HAD BEEN TRANSFER RED TO THE ASSESSEES SAVINGS BANK ACCOUNT WITH BANK OF BARODA, MALAD (EAST) BRANCH ON 27-11-2006. FURTHER, ANOTHER SUM OF 1,00,000 DIRHAM HAD BEEN CREDITED TO THE DONOR S ACCOUNT ONLY A DAY PRIOR TO THE DATE OF TRANSFER, I.E., ON 25-11-2006. THE SOURCE OF THE SAME WAS EXPLAINED TO BE THE REALIZATION PROCEEDS OF FDR CREDITED ALONG WITH INT EREST. IN THE VIEW OF THE LD. CIT(A), THE AO HAD DOUBTED THE TRANSACTION DUE TO THE NON-P RODUCTION OF THE EVIDENCE TO 9 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI SUBSTANTIATE THE EXPLANATION WITH REGARD TO IT BEIN G THE PROCEEDS OF A FDR. THE SAME IS NOT TOWARD THE SOURCE OF CREDIT BUT THE SOURCE OF S OURCE. EVEN SECTIONS 56(2)(V) AND 56(2)(VI) WERE NOT APPLICABLE AS THE CREDIT/GIFT WA S FROM A RELATIVE, I.E., SISTER. NO ADDITION WAS ACCORDINGLY CALLED FOR. AGGRIEVED, THE REVENUE IS IN APPEAL. 7. WE HAVE HEARD PARTIES, AND PERUSED THE MATERIAL ON RECORD. 7.1 THE REVENUE HAS IMPUGNED THE CREDIT ONLY TO THE EXTENT OF 1,00,000 DIRHAM, CLAIMED AS REPRESENTING THE SALE PROCEEDS OF FIXED DEPOSIT/S, I.E. AT RS.12.11 LAKHS, OUT OF TOTAL CREDIT OF RS.30 LAKHS (2,47,650 DIRHAM). THE SUM HAS WITHOUT DOUBT BEEN TRANSFERRED TO FINANCE THE ASSESSEES PURCHASE OF T HE JAIPUR PLOTS. IN FACT, EVEN THE DONORS BANK ACCOUNT WITH BANK OF BARODA, DUBAI MAIN BRANCH , FROM WHICH THE FUNDS STAND REMITTED, STOOD OPENED ONLY FOR THE SAID PURPOSE, I .E., ON 22.11.2006, A FEW DAYS PRIOR TO THE REMISSION (PB PG. 88). CLOSE RELATIVES, AS A SI STER, CAN BE EXPECTED TO CONTRIBUTE AT SUCH TIMES, PARTICULARLY WHEN THEY ARE FINANCIALLY CAPABLE, AS IS CLAIMED TO BE. HOWEVER, THE CAPACITY WOULD NEED TO BE PROVED, WHILE NO EVIDENCE TOWARD THE SAME HAS BEEN PRODUCED . A TOTAL OF 2.50 LAC DIRHAM (DH.) HAS BEEN CREDITE D TO THE DONARS BANK ACCOUNT WITH BANK OF BARODA ON 26-11-2006, OF WHICH 1.50 LA C DH. IS FROM THE JOINT BANK ACCOUNT WITH HER DAUGHTERS (75000 DH. EACH) WITH BANKER EMI RATES, AND 1,00,000 DH. FROM A JOINT ACCOUNT WITH DAUGHTER TEJAL M. SAGAR WITH STA NDARD CHARTERED BANK, DUBAI MAIN BRANCH. THE CREDITS IN THE BANK ACCOUNT WITH BANKER EMIRATES, AS IT APPEARS, BELONG TO THE DAUGHTERS, WITH THE ASSESSEE BEING ONLY A JOINT ACCOUNT HOLDER. COMING TO THE SUM OF 1,00,000 DH., THE SAME FORMS PART OF A CREDIT OF 1, 92,352 DH. ON 25-11-2006 TO THE BANK ACCOUNT WITH STANDARD CHARTERED BANK, WHICH IS STAT ED TO REPRESENT THE SALE PROCEEDS ON A FIXED DEPOSIT (PB PGS. 87-89). AGAIN, NO EVIDENCE TOWARD THE SAME HAS BEEN BROUGHT ON RECORD . THE DONOR IS STATED TO BE IN THE BUSINESS OF TAIL ORING AND FASHION DESIGNING FOR THE RELEVANT PERIOD (BY THE NAME YOGINIZ TAILORING & FA SHION DESIGNING). NO BALANCE-SHEET, BANK STATEMENT, ETC. OF THE SAID BUSINESS, MUCH LES S FOR THE RELEVANT PERIOD, HAS BEEN PRODUCED. THE STANDARD CHARTERED BANK ACCOUNT (PB P G.87) IS NOT A REGULAR BANK ACCOUNT OF A BUSINESS; THE ACCOUNT STATEMENT (WHICH IS FOR A PERIOD OF 16-2-2006 TO 16-2-2007) BEARING ONLY TWO OTHER ENTRIES, I.E., FOR A CASH DE POSIT (500 DH. ON 01-4-2006) AND A CREDIT 10 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI FOR INTEREST (180.60 DH. ON 25-11-2006). THE SAID I NTEREST IS ON THE DEPOSIT (AED) ACCOUNT (#938 1222 7001), CREDIT IN RESPECT OF WHIC H AT 192352 DH. IS STATED TO BE ON THE LIQUIDATION OF THE SAID DEPOSIT. THE AMOUNT OF INTEREST WOULD SUGGEST THAT THE DEPOS IT ACCOUNT OBTAINED FOR A VERY SHORT PERIOD OF TIME . WE, ON THE BASIS OF MATERIAL ON RECORD, ARE CLEARLY UNABLE TO EVEN LINK THE SOURCE OF THE S UM GIFTED WITH OR CONFIRM IT TO BE REPRESENT THE DONORS PROPERTY, MUCH LESS STATE OF HER TO BE FINANCIALLY CAPABLE, I.E., AT THE RELEVANT TIME, SO AS TO BE IN A POSITION TO GIFT RS .30 LAKHS TO HER BROTHER. AS AFORE-STATED, EVEN 1.5 LAKH DH. TRANSFERRED FROM THE JOINT BANK A CCOUNTS WITH HER DAUGHTERS, REPRESENTS, ON THE BASIS OF THE MATERIAL ON RECORD, THEIR MONIE S, AND NOT THE DONORS AND, FURTHER, BEING UP TO A YEARS SALARY/INCOME. AS SUCH, THERE IS NOTHING TO SHOW THAT THE SAME REPRESENTS THE TRANSFERORS OWN MONEY, WHICH ONLY W OULD MAKE THE EXPLANATION OF THE SAME BEING A GIFT VALID. FURTHER, THIS IS DESPITE T HE FACT THAT THE AO EXPRESSED RESERVATION WITH REGARD TO THE SOURCE OF THE CREDIT (1,00,000 D H.); THE SAME IN FACT FORMING THE BASIS OF HIS OBJECTION PER THE REMAND REPORT (PB PG.166), WHEREAT ONLY EVIDENCE IN RELATION TO CREDITS WAS ADDUCED BY THE ASSESSEE, AND THE FURTHE R FACT THAT THE REVENUE IS IN APPEAL. APART FROM THE ONUS TO SUBSTANTIATE ITS CASE BEING ON THE ASSESSEE, THE ABSENCE OF THE SAME WOULD ENTITLE THE REVENUE TO TAKE AN ADVERSE V IEW (REFER SECTION 102 OF THE EVIDENCE ACT AS ALSO CIT VS. KRISHNAVENI AMMAL [1986] 158 ITR 826 (MAD.). THE LD. CIT(A) HAS NOT EXPRESSED ANY CONTRARY FINDING. HIS STATING THAT THE SAME AMOUNTS TO SEEKING OR REQUIRING TO PROVE THE SOURCE OF SOURCE IS MISCONCEIVED. A BANK ACCOUNT BY ITSELF IS ONLY A CHANNEL FOR TRANSFERRING/ROUTING F UNDS. ONLY WHEN THE FUNDS DEPOSITED THEREIN ARE SHOWN TO BE OF THE ACCOUNT HOLDER, CAN THE SAME BE SAID TO REPRESENT THE ACCOUNT HOLDERS MONEY OR ASSET, SO THAT HIS CAPITA L BECOMES THE SOURCE OF THE CREDIT UNDER REFERENCE. THAT BEING NOT SO, MERELY TRANSFER OF FUNDS THROUGH THE BANKING CHANNEL WOULD BY ITSELF NOT PROVE THE SOURCE OF A CREDIT U/ S.68 OF THE ACT. 7.2 THEN AGAIN THERE IS ALSO THE ISSUE OF HER CAPAC ITY, AS NOBODY COULD BE EXPECTED TO GIFT A SUBSTANTIAL/MAJOR PORTION OF HIS WEALTH. ALL THAT HAS BEEN SAID BY THE ASSESSEE IN THIS REGARD IS THAT THERE IS NO TAX OF INCOME IN DUBAI, SO THAT NO DOCUMENT AS TO HER FINANCIAL CAPACITY COULD BE PRODUCED (REFER PARA 8 OF THE LET TER DATED 23-12-2009 AT PB PAGE 28). 11 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI EXPRESSION OF OPINION ON THE SAME, BASED ON AN OBJE CTIVE ASSESSMENT OF FACTS, COULD ARISE ONLY ON THE FACTS BEING BROUGHT ON RECORD, AND WHIC H HAVE NOT BEEN. HOW COULD UNDER THE CIRCUMSTANCES WE WONDER THE AOS NON SATISFACTION W ITH THE ASSESSEES EXPLANATION AS TO THE NATURE AND SOURCE OF THE CREDIT BE CONSIDERED A S NOT REASONABLE, SO AS TO BE AFFIRMED. HERE IT IS ALSO PERTINENT TO NOTE THAT IF AND TO TH E EXTENT THE GIFT DOES NOT REPRESENT THE DONORS MONEY, THE SAME WOULD ALSO BE LIABLE TO BE ADDED TO THE DONORS INCOME UNDER SECTION 56(2)(VI) OF THE ACT. 7.3 IN VIEW OF THE FOREGOING, WE ARE UNABLE TO FIND ANY INFIRMITY IN THE AOS NON- SATISFACTION WITH THE ASSESSEES EXPLANATION WITH R EGARD TO BOTH, THE NATURE AS WELL AS THE SOURCE OF THE IMPUGNED CREDIT, AS REQUIRED TO U/S.6 8 AND, RESULTANTLY, TO UPHOLD THE FINDING/S TO THE CONTRARY BY THE LD. CIT(A). WE, AC CORDINGLY, FIND THE REVENUES IMPUGNING THE DELETION OF THE ADDITION FOR RS.12,11 ,387/- U/S.68 AS SUSTAINABLE IN LAW. WE ACCORDINGLY, SET ASIDE ITS DELETION BY THE LD. CIT( A). WE DECIDE ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED. 0. 1 ) & / ) 2 & 34 ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 22, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; 5( DATED : 22.11.2013 $ . ' . /PKM, ( . / PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. ' 6 ( ) / THE CIT(A) 4. ' 6 / CIT - CONCERNED 5. 9):; $ (<= , + <=. , ' * / DR, ITAT, MUMBAI 6. ;>? @* / GUARD FILE 12 ITA NO. 5059/MUM/2011 (A.Y. 2007-08) DY. CIT VS. KISHOR V. SONI ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI