The ACIT, 3(1), V. Smt. Vandana Jhavar,

ITA 522/IND/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2795 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 10-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Keywords: Gift; Residential status
• Section: 131; 68; 69

Judgement Text

PAGE 1 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ACUPJ5034H I.T.A.NO. 521/IND/2007 A.Y. : 2004-05 ACIT, SHRI PRANAV KUMAR JHAVAR, 3(1), VS 1/1, NEW PALASIA, INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : AECPJ1308J I.T.A.NO. 522/IND/2007 A.Y. : 2004-05 ACIT, SMT. VANDANA JHAVAR, 3(1), VS 1/1, NEW PALASIA, INDORE. INDORE. APPELLANT RESPONDENT PAN NO. : AECPJ1320E I.T.A.NO. 528/IND/2007 A.Y. : 2004-05 ACIT, SHRI ANIL JHAVAR, 3(1), VS 1/1, NEW PALASIA, INDORE. INDORE. APPELLANT RESPONDENT APPELLANTS BY : SHRI K.K.SINGH, CIT DR RESPONDENT BY : SHRI PRAKASH JAIN AND SHRI PAGE 2 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR V.K.JHAVAR, CAS DATE OF HEARING : 15.06.2010 O R D E R PER V.K. GUPTA, A.M. ALL THESE APPEALS FILED BY THE REVENUE BELONG TO CO NNECTED ASSESSEES AND INVOLVE COMMON ISSUES, HENCE, THESE W ERE HEARD TOGETHER AND WERE DISPOSED OF FOR THE SAKE OF CONVENIENCE BY THIS CONSOLIDATED ORDER. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRSTLY, WE SHALL TAKE UP REVENUES APPEAL IN I.T.A .NO. 521/IND/2007 4. THE GROUND RAISED BY THE REVENUE IN THIS APPEAL R EADS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CR EDIT, INTRODUCED BY THE ASSESSEE IN THE SHAPE OF GIFTS. 5. THE FACTS, IN BRIEF, ARE THAT THE AO FOUND THAT A S UM OF RS. 1,34,33,484/- HAD BEEN CREDITED IN THE BANK ACCOUNT AS WELL AS IN THE CAPITAL ACCOUNT OF THE ASSESSEE FOR THE YEAR ENDED ON 31.3.2004. PAGE 3 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR THE AO, ON FURTHER, INQUIRY FOUND THAT THIS AMOUNT REPRESENTED PREMATURE ENCASHMENT OF RESURGENT INDIA BONDS. THE AO REQUIRE D THE ASSESSEE TO EXPLAIN THE NATURE OF IMPUGNED AMOUNT. THE ASSESSEE SUBMITTED THAT HE HAD RECEIVED THE GIFTS OF RESURGENT INDIA BONDS IN THE PREVIOUS YEAR 1999-2000 AND 2000-01 IN U.S.A. FROM THREE PERSONS TOTALING TO US $ 4 LAKHS IN THE FORM OF RESURGENT INDIA BONDS OUT OF W HICH RESURGENT INDIA BONDS WORTH US$ 2 LAKHS WERE ENCASHED PREMATURELY IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE SUBMITTED THE DETAILS O F SUCH GIFTS AS UNDER :- S.NO. DONORS NAME DATE OF DECLARATION CERTIFICATE REG.FOLIO AMOUNT IN US$ 1. HASMUKH RAI NATHULAL GHAGDA 11.04.2000 C071437 TO C071446 413064 1 LAKH 2. ASHOK PAHLAJANI 11.04.2000 C057491 TO C057500 160622 1 LAKH 3. A.B.N.AMRO BANK N. V. 18.06.1999 C019349 TO C019358 AND C019361 TO C019370 133193 2 LAKH PAGE 4 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR THE AO, THEREAFTER, NOTED THE DETAILS OF ESTATE OF ASSESSEE IN U.S.A. AND THE ACTIVITIES UNDERTAKEN BY HIM THERE. THEREAFTER, THE AO ALSO COLLECTED THE DETAILS OF SIMILAR GIFTS RECEIVED BY THE FATHE R AND MOTHER OF THE ASSESSEE FROM THE SAME DONORS AND ALSO FROM THE ASS ESSEE. THE AO FURTHER EXAMINED THE MODUS OPERANDI REGARDING THE M IS-USE OF RIBS. THE AO FURTHER RECORDED THE STATEMENT OF THE ASSESSEE U /S 131 TO GET THE TRUTH. THE AO HELD THAT IRRESPECTIVE OF ANY PROVISION IN R .I.B. SCHEME REGARDING IMMUNITY FROM INCOME TAX, THE SOURCE OF C APITAL REMAINED UNEXPLAINED AS TRANSFER OF MONEY THROUGH HAWALA TRA NSACTION DID NOT HAVE ANY IMMUNITY UNDER THE INCOME-TAX ACT, 1961, T HOUGH A GENUINE GIFT OF R.I.B. WAS NOT TAXABLE I.E., DOCTORED HAWAL A TRANSACTION TO CONVERT UNACCOUNTED MONEY INTO WHITE MONEY IN THIS MANNER W AS NOT ALLOWABLE. THE AO ALSO DREW SUPPORT OF SUCH VIEW BY THE SPEEC H OF THE FINANCE MINISTER AND SOME JUDICIAL DECISIONS, PARTICULARLY OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. JAWAHAR LAL OSWAL AS REPORTED IN 190 CTR 56. ACCORDINGLY, HE HELD THAT T HE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE GIFTS ALLEGEDLY RECEIV ED FROM HIS ROOM MATS OF FATHER. THE AO ALSO MADE AN ADDITION FOR EXPENSE S INCURRED FOR GETTING BOGUS FOREIGN GIFTS TO THE TUNE OF RS. 4,23,810/- @ 2.25 % OF THE GIFT AMOUNT. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED A N APPEAL BEFORE THE LD. CIT(A), WHEREIN APART FROM SUBMITTING THE DETAILS O F STAY OF THE ASSESSEE PAGE 5 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR AT U.S. AND TAX TREATMENT OF RIBS, THE ASSESSEE SUB MITTED THAT ALL THE THREE CONDITIONS AS PER THE PROVISIONS OF SEC68 I.E. IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WERE PROVED WIT H SUPPORTING DOCUMENTS. HENCE, THE AOS ACTION WAS CASE OF MERE SUSPICION AS THE AO DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT I T WAS A CASE OF ARRANGED GIFTS. THE LD.CIT(A) DELETED THE IMPUGNED ADDITION BY HOLDING THAT SUCH GIFTS WERE RECEIVED IN ASSESSMENT YEARS 2 000-01 & 2001-02, HENCE, THESE COULD NOT BE CONSIDERED IN THE YEAR UN DER CONSIDERATION. THE RELEVANT FINDINGS OF THE LD.CIT(A) ARE AS UNDER :- 4.3 NOW REVERTING BACK TO GROUND NO.2, IT IS NOT IN DISPUTE THAT RIBS WERE RECEIVED/ACQUIRED IN PREVIOUS YEARS RELEV ANT TO ASSESSMENT YEAR 2000-01 AND 2001-02. THE AOS CLAIM IS THAT THE APPELLANT HAS ACQUIRED THESE BONDS THROUGH HIS UNAC COUNTED MONEY. IF THAT BE SO, THEN APPROPRIATE YEARS OF TAX ATION OF SUCH AMOUNT WOULD BE ASSESSMENT YEARS RELEVANT TO THE FI NANCIAL YEARS IN WHICH SUCH BONDS WERE ACQUIRED/RECEIVED. SO ALSO , THE EXPENSES FOR ACQUIRING THESE BONDS BY WAY OF PREMIUM MONEY, WOULD ALSO HAVE BEEN INCURRED DURING SUCH FINANCIAL YEARS ONLY AND NOT IN THE YEAR UNDER CONSIDERATION. THUS, THE AOS ACTION IN BRINGING TO TAX THE AMOUNT OF RS. 2,68,66,968 U/S 68 OF INCOME-TAX ACT AND FURTHER ADDITION OF RS. 4,23,810/- FOR PREMIUM PAID FOR ACQ UIRING SUCH PAGE 6 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR BONDS CANNOT BE SUSTAINED IN THE YEAR UNDER CONSIDE RATION BOTH ON FACTS AND IN LAW. ACCORDINGLY, BOTH THESE ADDITIONS ARE HEREBY DIRECTED TO BE DELETED. THE AO WOULD BE FREE TO CON SIDER APPROPRIATE ACTION IN RELATION TO THESE AMOUNTS IN THE APPROPRIATE ASSESSMENT YEARS IN ACCORDANCE WITH LAW. 4.4 LASTLY, IT MAY BE OBSERVED THAT IN VIEW OF THE AFORESAID FINDINGS ARRIVED ABOUT TAXABILITY OF SUCH AMOUNT IN THE YEAR OF RECEIPT/ACQUISITION OF SUCH RIBS, THE ISSUE WHETHER SUCH RIBS WERE ACQUIRED BY WAY OF GIFT ALSO IS NOT ADJUDICATED UPO N AND THE AO WILL BE FREE TO EXAMINE THE MATTER AFRESH IN THE LI GHT OF FACTS ALREADY AVAILABLE ON RECORD AND FURTHER EVIDENCES, DETAILS AND SUBMISSIONS ADVANCED BY THE APPELLANT. THE AO SHAL L, HOWEVER, BE ADVISED TO EXAMINE THE CLAIM OF SUCH GIFTS KEEPING IN VIEW THE LATEST DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. P.MOHANAKALA , 291 ITR 278 ( S. C.), IN WHICH VARIO US LEGAL ISSUES, RAISED IN CONNECTION WITH CLAIM OF SUCH GIFTS, HAVE BEEN EXAMINED IN DETAIL.: 6. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. SENIOR D.R. NARRATED THE FACTS AND CONTENDE D THAT IN THE YEAR OF RECEIPTS OF GIFTS OF SUCH RIBS, THE ASSESSE E WAS A RESIDENT OF INDIA AS PER THE PROVISIONS OF THE ACT. HOWEVER, THE ASSE SSEE DID NOT DISCLOSE PAGE 7 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR THE FACT OF RECEIPT OF SUCH GIFTS IN THE RETURNS OF THOSE YEARS NOR IN THE BALANCE SHEET. HENCE, THE CONDUCT OF THE ASSESSEE W AS NOT APPROPRIATE AND ,IN THESE CIRCUMSTANCES, WHEN THE ASSESSEE ENCASHED SUCH BONDS PREMATURELY AND RECEIVED THE AMOUNT THEREOF IN HIS BANK ACCOUNT AND SHOWED THE SAME IN HIS CAPITAL ACCOUNT IN THE YEAR UNDER CONSIDERATION, THE AO RIGHTLY INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT FOR THE REASON THAT AS PER THE PROVISIONS OF THIS SECTION, WHENEVER ANY SUM WAS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE, WHICH W AS NOT SUITABLY EXPLAINED, THE PROVISIONS OF SECTION 68 COULD BE AP PLIED. HE FURTHER ELABORATED ON THIS POINT THAT IT WAS NOT A DISPUTED FACT THAT THE IMPUGNED SUM I.E. AMOUNT RECEIVED ON PREMATURED ENCASHMENT O F RIBS WAS BROUGHT INTO BOOKS IN THE YEAR UNDER CONSIDERATION. HENCE, THE PROVISIONS OF SECTION 68 WERE TO APPLY ON THAT BASIS AND, ACCORDI NGLY, THE LD. CIT DR CONTENDED THAT THE LD.CIT(A) WAS NOT RIGHT IN LAW I N HOLDING THAT SINCE RIBS WERE RECEIVED /ACQUIRED IN ASSESSMENT YEAR 200 0-01, 2001-02, HENCE, THE APPROPRIATE YEAR OF TAXATION WERE THOSE YEARS AND, THEREFORE, NO ACTION COULD BE TAKEN IN THIS YEAR. THE LD. CIT DR FURTHER CONTENDED THAT IF THAT VIEW WAS ACCEPTED, THEN WHEN THE CASH WAS I NTRODUCED IN A PARTICULAR YEAR AND THE SOURCE THEREOF WAS EXPLAINE D AS ACCUMULATION OVER LAST 10 YEARS FOR WHICH NO RETURNS HAD BEEN FILED, THEN, IT COULD NOT BE SAID THAT THE AO WAS BARRED FROM EXAMINING SUCH CASH INT RODUCED IN THE PAGE 8 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR BOOKS OF ACCOUNT IN THAT RELEVANT YEAR OR THE AO SH OULD REOPEN THE CASES OF EARLIER YEARS. THE LD. CIT D.R. FURTHER CONTENDE D THAT IF THE VIEW OF LD.CIT(A) WAS TO BE ACCEPTED, THEN, THE TRIBUNAL CO ULD GIVE DIRECTION TO EXAMINE THE GENUINENESS OF THE GIFTS IN THOSE YEARS , WHICH WOULD LIFT THE BAR OF LIMITATION. ON THIS ASPECT, A QUERY WAS POSE D TO THE LD. CIT DR AS TO WHY THE AO DID NOT MAKE ANY PROTECTIVE ADDITION OR SUBSTANTIVE ADDITION IN THOSE YEARS BY REOPENING THE CASES AS A T THE RELEVANT POINT OF TIME, THERE WAS NO SUCH LIMITATION ON THE POWERS OF THE AO. THE LD. CIT DR ON THIS ASPECT MERELY SUBMITTED THAT THE AO DID NOT DO SO, BECAUSE HIS ACTION OF MAKING THE ADDITION IN THE YEAR UNDER CONSIDERATION WAS IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE LD. CIT DR THEREAFTER ALSO REFERRED TO VARIOUS PAGES OF THE PAPER BOOK TO SHOW THE MANNER IN WHICH SUCH GIFTS WERE RECEIVED AND ON THAT BASIS CONTENDE D THAT IT WAS APPARENT THAT SUCH GIFTS WERE NOTHING BUT ARRANGED ONE. THE LD. CIT DR ALSO DREW OUR ATTENTION TO THE OBSERVATIONS OF THE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF JAWAHARLAL OSWAL AS REGARD TO THE GENUI NENESS OF THE GIFTS ON THE CASE BEFORE THE HON'BLE HIGH COURT AS MENTIONED BY THE ASSESSING OFFICER AT PAGE 10 OF THE ASSESSMENT ORDER AND CONT ENDED THAT THOSE OBSERVATIONS WERE RELEVANT IN THE PRESENT CASE. THE BENCH, HOWEVER, OPINED THAT NO GROUND WAS RAISED IN THIS REGARD NO R THE LD. CIT(A) HAD DECIDED THE ISSUE ON MERITS. HENCE, HOW THE TRIBUNA L COULD ADJUDICATE PAGE 9 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/200 7 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR UPON THE MERITS OF THE ISSUE WITHOUT BEING EXAMINED BY THE LD.CIT(A) AT THE FIRST INSTANCE. THE LD. CIT DR DID NOT SUBMIT A NYTHING ON THIS ASPECT. 8. THE LD.COUNSEL FOR THE ASSESSEE ALSO NARRATED THE FACTS AND CONTENDED THAT IN THE YEAR UNDER CONSIDERATION WHEN THE AMOUNT WAS CREDITED IN THE CAPITAL ACCOUNT/BANK ACCOUNT OF THE ASSESSEE, THE SOURCE THEREOF WAS DULY EXPLAINED AND, THEREFORE, THERE WA S NO REASON TO MAKE THE ADDITION U/S 68 IN THE YEAR UNDER CONSIDERATION . THE LD. COUNSEL FURTHER CONTENDED THAT THE FACT OF RECEIPT OF THESE GIFTS I N ASSESSMENT YEARS 2000- 01 AND 2001-02 WAS NOT IN DISPUTE. HENCE, THE GENUI NENESS OF SUCH GIFTS COULD BE EXAMINED ONLY IN THOSE YEARS. THE LD. COUN SEL FURTHER STATED THAT THERE WAS NO LEGAL REQUIREMENT TO DECLARE RECEIPT O R SUCH GIFTS IN THOSE YEARS, HENCE, THE CONDUCT OF THE ASSESSEE COULD NOT BE SAID TO BE OF DUBIOUS NATURE. THE LD. COUNSEL FURTHER CONTENDED T HAT THIS ISSUE WAS DIRECTLY COVERED BY THE DECISION OF HON'BLE ALLAHAB AD HIGH COURT IN THE CASE OF KANCHAN SINGH VS. CIT, AS REPORTED IN 221 C TR (ALL) 456, WHEREIN ON THE IDENTICAL FACTS, THE HON'BLE COURT H AD HELD THAT AMOUNT FOUND DEPOSITED IN THE ASSESSEES BANK ACCOUNT IN A SSESSMENT YEAR 2004- 05 HAVING BEEN EXPLAINED BY THE ASSESSEE AS REPRESE NTING MATURITY AMOUNT OF FOUR RIBS BY ONE N.R.I. OF 1 ST OCTOBER, 1998, AND GIFTED TO THE ASSESSEE ON 10 TH JULY, 1999, COULD NOT BE ADDED IN THE HANDS OF THE ASSESSEE U/S 69 OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT INDORE PAGE 10 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI BAL KISHAN AGARWAL IN I.T.A.NO. 434/IND/2008 FOR ASSESSMENT YEAR 2004- 05 ORDER DATED 16 TH APRIL, 2010, ALSO HELD SO IN IDENTICAL CIRCUMSTANCE S, HENCE, THE PRESENT CASE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THIS DECISION ALSO. APART FROM THIS, THE LD. COUNSEL ALSO RELIED ON THE DECIS ION OF THE HON'BLE M.P. HIGH COURT IN THE CASE OF HARLAL MANNULAL VS. CIT, AS REPORTED IN 147 ITR 11, WHEREIN THE HON'BLE COURT HAD HELD THAT IN A CASE WHERE THE ASSESSEE WAS FOUND IN THE POSSESSION OF A SUM OF RS . 20,000/- ON OCTOBER, 1971, BEING FINANCIAL YEAR 1971-72, HENCE, SUCH UNE XPLAINED MONEY COULD BE ASSESSED U/S 69A IN ASSESSMENT YEAR 1972-7 3 AND NOT IN 1973-74 IN THE YEAR IN WHICH THE ASSESSEE MADE INVESTMENT O UT OF SUCH AMOUNT AND IN SUCH A CASE PROVISIONS OF SECTION 68 WERE NO T APPLICABLE AS THE AMOUNT ADDED WAS OUTSIDE THE BOOKS OF ACCOUNT OF TH E ASSESSEE. ON THIS BASIS, THE LD. COUNSEL CONTENDED THAT EVEN IF THE P ROVISIONS OF SECTION 69A WERE APPLIED ON THE BASIS ALSO, THE ADDITION CAN BE MADE ONLY IN THE YEAR OF RECEIPTS OF SUCH BONDS BY WAY OF GIFTS. 9. THE LD. CIT DR, IN THE REJOINDER, CONTENDED THAT TH E DEPARTMENT WAS NOT EXAMINING THE CREDITWORTHINESS/SOURCE OF PU RCHASE OF SUCH BONDS BY THE DONOR(S) RATHER IT WAS DISPUTING THE GENUIN ENESS OF GIFTS OF SUCH BONDS BY THE ORIGINAL HOLDERS TO THE ASSESSEE. THE LD. CIT DR FURTHER PAGE 11 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR SUBMITTED THAT THE CASE LAWS RELIED ON BY THE ASSES SEE WERE FACTUALLY DIFFERENT. 10. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 11. AS FAR AS THE YEAR OF RECEIPT OF SUCH RESURGENT IND IA BONDS BY WAY OF GIFTS ARE CONCERNED, WE FIND THERE IS NO DISPUTE THAT SUCH BONDS WERE RECEIVED BY THE ASSESSEE BY WAY OF GIFTS IN FINANCI AL YEARS 2000-01 AND 2001-02. IT IS ALSO NOTED THAT IN THE YEAR UNDER CO NSIDERATION THE SUM RECEIVED BY WAY OF PREMATURE ENCASHMENT OF SUCH RES URGENT INDIA BONDS HAS BEEN CREDITED IN THE BANK ACCOUNT OF THE ASSESS EE AND A CREDIT ENTRY HAD BEEN MADE IN THE CAPITAL ACCOUNT. AS FAR AS SOU RCE OF SUCH CREDIT ENTRIES ARE CONCERNED, THE SAME IS BEYOND DOUBT PRE MATURE ENCASHMENT OF SUCH RIBS, HENCE, IT CANNOT BE CONSIDERED AS UNEXPL AINED. WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE HON'BLE ALLAHBAD H IGH COURT IN THE CASE OF KANCHAN SINGH (SUPRA). THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT ARE REPRODUCED AS UNDER FOR THE SAKE OF READY REFERENCE:- 19. IN THE PRESENT CASE, ADDL. CIT HAS DOUBTED THE GENUINENESS OF THE GIFT MAINLY ON THE GROUND THAT THE ASSESSEE IN HIS STATEMENT STATED THAT SHE MET DONOR WHEN SHE WAS IN CLASS VI OR VII AT HER PAGE 12 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR GRAND PARENTS' PLACE. AFTER THAT SHE DID NOT MEET HIM. THE IDENTITY OF THE PERSON IS NOT ESTABLISHED BECAUSE HE IS NOT AVAILABLE ON A GIVEN ADDRESS. ON RECORD THERE IS ONE DECLARATION DT. 8TH FEB., 2006 STATING THAT HE MADE THIS GIFT OF RS. 40,000 DOLLAR S TO MS. KANCHAN SINGH, BUT THE DONOR IS NOT AVAILABLE FOR CONFIRMING THE SAME ON THE ADDRESS GIVEN IN THE DECLARATION NOR IS THE DONEE AWARE OF HIS PRESENT ADDRESS. IN THESE CIRCUMSTANCES, IT IS HELD THAT THE IDENTITY OF THE DONOR IS DOUBTFUL. WHAT IS THE SOURCE OF THESE FORTY THOUSAND DOLLARS, WHAT ARE THE ASSETS AND LIABILITIES; NOTHING IS KNOWN EVEN TO THE DONEE, I.E., THE BENEFICIARY. ON THE BASIS OF THE AFORESAID LETTER OF THE ADDL. CIT, THE ITO HELD THAT THE' GIFT OF RS. 26,78,504 FROM THE ALLEGED DONOR. SHRI CHHAGAN LAL KAPADIA, WHOSE IDENTITY AND CREDITWORTHINESS ASSESSEE FAILED TO ESTABLISH IS NOTHING ELSE BUT ASSESSEE'S OWN MONEY ROUTED THROUGH SOME FICTITIOUS PERSON PAGE 13 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR AND. THE SAME IS ADDED IN THE INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES. THIS VIEW OF THE ASSESSING AUTHORITY HAS BEEN CONFIRMED BY THE CIT IN REVISION. 20. THE QUESTION FOR CONSIDERATION IS WHETHER THE AUTHORITIES BELOW ARE JUSTIFIED IN DOUBTING THE GENUINENESS OF THE TRANSACTION OF THE GIFT AND EVEN ASSUMING THAT THE TRANSACTION OF THE GIFT WOULD BE DOUBTFUL WHETHER THE ASSESSEE HAS FAILED TO PROVE THE NATURE AND SOURCE OF THE AMOUNT OF RS. 26,78,504 WHICH WAS FOUND CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE WHICH WAS ADMITTEDLY THE MATURITY AMOUNT OF THE BOND STANDING IN THE NAME OF SRI K.C. KAPADIA, AS REQUIRED UNDER S. 69 OF THE IT ACT AND WHETHER THE SAID AMOUNT CAN BE TREATED AS THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION? 21. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES, PAGE 14 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR WE ARE OF THE VIEW THAT THE ASSESSING AUTHORITY WAS NOT JUSTIFIED IN TREATING THE AMOUNT OF RS. 26,78,504/- AS AN INCOME OF THE ASSESSEE FROM OTHER SOURCES IN THE YEAR UNDER CONSIDERATION. 22. THE REASONS FOR ARRIVING AT A CONCLUSION ARE AS FOLLOWS : 1 . FOUR RESURGENT INDIA BONDS OF 10,000 US DOLLARS EACH WERE PURCHASED ON 1ST OCT.,2003 ON THE APPLICATION OF SRI K.C. KAPADIA, WHICH IS ESTABLISH ED FROM THE APPLICATION SENT BY THE CHIEF MANAGER, 581 , NRI BRANCH, MUMBAI. 2 . SUCH BONDS COULD BE PURCHASED ONLY BY NRI AGAINST THE FOREIGN CURRENCY. ADMITTEDLY, THE BON DS WERE PURCHASED AGAINST US DOLLARS. THUS, THE SOURC E OF THE MONEY FOR THE PURCHASE OF THE BOND, BEING US DOLLARS IS OUTSIDE INDIA. 3 . THE BONDS REVEAL THAT THEY WERE TRANSFERABLE AND, PAGE 15 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR ACCORDINGLY, THEY WERE TRANSFERRED IN FAVOUR OF THE ASSESSEE BY SRI K.C. KAPADIA. 4. AS A RESULT OF TRANSFERS OF SUCH BONDS IN FAVOUR OF THE ASSESSEE, THE ASSESSEE RECEIVED THE MATURITY AMOUNT FROM THE SBI AND CREDITED IN HER ACCOUNT. LETTER OF THE CHIEF MANAGER, SBI, NRI BRANCH, MUMBAI, DT. 28TH 'FEB., 2006, CONFIRMS THE TRANSFERS BY WAY OF GIFT TO THE ASSESSEE BY SRI K.C. KAPADIA . 5 UNDISPUTEDLY, IN PURCHASING THE FOUR BONDS THE INVESTMENTS WERE MADE ON 1ST OCT., 1998, AND NOT IN THE YEAR UNDER CONSIDERATION AND IN THE YEAR UNDER CONSIDERATION, NAMELY, IN THE ASSESSMENT YEAR 2004 - 05 ONLY THE MATURITY AMOUNTS OF THE BOND WERE RECEIVED. 6 . THUS, SO FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED, THE SOURCE AND NATURE OF DEPOSIT ARE FUL LY ESTABLISHED AND THE QUERY WITH REGARD TO THE INVESTMENT MADE IN PURCHASING THE BONDS COULD BE PAGE 16 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR MADE ONLY IN THE FINANCIAL YEAR 1998-99 RELEVANT TO THE ASSESSMENT YEAR 1999-2000 AND NOT IN THE YEAR UNDER CONSIDERATION . 7 . AFTER THE AMENDMENT IN S. 5(IIIE) OF THE GT ACT B Y THE FINANCE (NO. 2) ACT OF 1991, GIFT COULD BE MADE TO THE PERSON OTHER THAN RELATIVES ALSO. THE OMISSION OF THE WORD 'RELATIVE' IN THE SECTION SHOWS THAT THE AMENDMENT WAS MADE TO PROMOTE THE GIFT BY NRI TO THE PERSONS OTHER THAN RELATIVES TO ENCOURAGE INFLO W OF FOREIGN MONEY IN INDIA THROUGH GIFTS. 8 . SRI. K.C. KAPADIA, BY CONFIRMATORY LETTER DT. 8TH FEB., 2006 DULY NOTARIZED BY NOTARY PUBLIC OF NEW JERSEY, HAS CONFIRMED THE GIFT OF FOUR SUCH BONDS. THE LETTERS WRITTEN BY THE ASSESSING AUTHORITY WERE RET URNED UNSERVED WITH THE REMARK 'NOT DELIVERABLE AS ADDRESSED UNABLE TO FORWARD' DOES NOT MEAN THAT SRI K.C. KAPADIA, WAS NOT TRACEABLE AND WAS NOT IN EXISTENCE. THERE MAY BE SO MANY REASONS THAT THE PAGE 17 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR LETTER COULD NOT BE DELIVERED. MERELY BECAUSE THE ASSESSEE COULD NOT TELL ANY OTHER ADDRESS OF SRI K. C. KAPADLA, IT CANNOT BE INFERRED THAT SRI K.C. KAPADI A WAS/IS NOT IN EXISTENCE AND HIS IDENTITY IS DOUBT FUL. 9. THE APPLICATION MOVED BY SRI K.C. KAPADIA FOR THE PURCHASE OF FOUR BONDS WITH THE S8I, THE ISSUE OF THE BONDS IN THE NAME OF SRI K.C. KAPADIA AGAINST US DOLLARS IS BY ITSELF AN EVIDENCE TO PROOF THE IDENTITY OF SRI K.C. KAPADIA. 23. IN THE FACTS AND CIRCUMSTANCES AND THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THAT THERE IS NO REASON TO DOUBT THE GENUINENESS OF THE GIFT BY SRI K.C. KAPADIA TO THE ASSESSEE. IN ANY VIEW OF THE MATTER, THE ASSESSEE WAS ABLE TO ESTABLISH THE NATU RE AND SOURCE OF THE MONEY. THE NATURE AND SOURCE OF THE MONEY FOUND DEPOSITED IN THE BANK ACCOUNT OF TH E ASSESSEE WERE THE MATURITY AMOUNTS OF THE FOUR BOND S WHICH WERE PURCHASED BY SRI K.C. KAPADIA ON 1ST OCT., 1998. THEREFORE, SO FAR AS YEAR UNDER PAGE 18 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR CONSIDERATION IS CONCERNED, THE NATURE AND SOURCE ARE FULLY ESTABLISHED. THERE IS NO EVIDENCE TO SHOW THAT THE DEPOSIT IN THE BANK ACCOUNT WAS THE INCOME FROM OTHER SOURCES OF THE ASSESSEE FOR THE YEAR UND ER CONSIDERATION. 24. IN VIEW OF THE ABOVE, THE IMPUGNED ORDER OF THE CIT, DT. 12 TH JUNE, 2007 IS LIABLE TO BE SET ASIDE AND IT IS HELD THAT THAT ITO HAS ERRED IN TREATING THE MATURITY AMOUNT OF RS. 26,78,504 OF THE FOUR RESURGENT INDIA BONDS AS AN INCOME FROM OTHER SOURCES IN THE ASSESSMENT YEAR 2004-05. 25. IN THE RESULT, WRIT PETITION IS ALLOWED. THE IMPUGNED ORDER OF THE CIT DT. 12TH JUNE, 2007 IS SE T ASIDE. THERE SHALL BE NO ORDER AS TO COSTS. 12. IN OUR VIEW, THE ABOVE DECISION IS NOT FACTUALLY DI FFERENT AS CONTENDED BY THE LD. CIT DR RATHER THE FACTS ARE I DENTICAL, AND IT GIVES ANSWER TO ALL THE POINTS RAISED BY THE REVENUE IN APPEAL BEFORE US. WE FURTHER FIND THAT THE DECISION OF THE TRIBUNAL IN I .T.A.NO. 434/IND/2008 (SUPRA) ALSO SUPPORTS THE CLAIM OF THE ASSESSEE. HE NCE, HAVING REGARD TO PAGE 19 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR THESE DECISIONS, WE HOLD THAT THE IMPUGNED AMOUNT C ANNOT BE ASSESSED U/S 68 IN THE YEAR UNDER CONSIDERATION. 13. BEFORE PARTING, WE MAY ADD THAT IT IS A CASE OF GIF T RECEIVED IN KIND AND, THEREFORE, THE CONTENTION OF THE LD. CIT DR TH AT THE ACCUMULATED CASH INTRODUCED IN THE BOOKS IN ONE PARTICULAR YEAR CAN BE ADDED U/S 68 IN THAT PARTICULAR YEAR IS NOT RELEVANT AS THE NATURE OF BO TH THESE ASSETS IS DIFFERENT. WE FURTHER FIND NO MERIT IN THE CONTENTI ON OF THE ASSESSEE THAT THE TRIBUNAL SHOULD GIVE A DIRECTION TO EXAMINE THE GENUINENESS OF THE GIFTS IN ASSESSMENT YEARS 2000-01 AND 2001-02 FOR T HE SIMPLE REASON THAT THE AO, BEING A QUASI-JUDICIAL AUTHORITY, CANNOT BE SAID TO BE IGNORAMT OF THE PROVISIONS OF LAW AND THE YEAR OF APPLICATION O F SUCH PROVISIONS AND, THEREFORE, IT WAS A BOUNDEN DUTY OF THE AO TO TAKE PRECAUTIONARY STEPS AS PER LAW AT THAT TIME AND FOR SUCH LAPSE OF THE AO W ITHOUT HAVING ANY APPARENT AND JUSTIFIED REASON, SUCH DIRECTION CANNO T BE GIVEN. 14. IN THE RESULT, THE FILED BY THE REVENUE IS DISMISS ED. 15. IN OTHER APPEALS, IDENTICAL ISSUE IS INVOLVED WHERE IN THE AO HAS MADE ADDITION OF SAME NATURE PROTECTIVE AS WELL AS ON SUBSTANTIVE BASIS. HOWEVER, THE FACTS ARE THE SAME, HENCE, FOR THE REA SONS GIVEN IN I.T.A.NO. 521/IND/2007, WE DISMISS THESE APPEALS OF THE REVEN UE ALSO. PAGE 15 OR 15 PAGE 20 OF 20 -. I.T.A.NOS. 521, 522 & 528/IND/20 07 SHRI PRANAV KUMAR JHAVAR, SMT. VANDANA JHAWAR & SHR I ANIL JHAVAR THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 23 RD JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD JUNE, 2010. CPU* 16186