THE ITO 13(2)(2), MUMBAI V. SHRI MANILAL K. GALA, MUMBAI

ITA 5274/MUM/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7924 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-08-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: VIPUL B JOSHI; SEEMA G DAL AL
• Keywords: Gift; Earning of tax free income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVA N, JM ITA NO.5274/MUM/2007 : ASST.YEAR 2004-2005 THE INCOME TAX OFFICER WARD 13(2)(2) MUMBAI. VS. SHRI MANILAL K.GALA M/S.GALA EMBROIDERIES 113/15, KESHAVJI NAIK ROAD MUMBAI 400 009 PAN : AALPG8986C. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURENDRA KUMAR RESPONDENT BY : SHRI VIPUL B.JOSHI & MS.SEEMA G.DAL AL O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 08.05.2007 IN RELATION TO ASSESSMENT YEAR 2004-2005 . 2. FIRST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.1.45 CRORES MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE SHOWED TO HAVE RECEIVED GIFT OF RS.1.4 5 CRORES IN HIS BALANCE SHEET FROM HIS BROTHER SHRI JAYANTILAL K.GALA. ON BEING C ALLED UPON TO FURNISH NECESSARY DETAILS IN SUPPORT OF THE GIFT, THE ASSESSEE FURNIS HED COPIES OF GIFT DEED, RETURN OF INCOME ALONG WITH COPY OF CAPITAL ACCOUNT AND BALAN CE SHEET OF THE DONOR. TO VERIFY THE GENUINENESS OF THE GIFT, THE A.O. RECORD ED STATEMENT OF THE ASSESSEE U/S.131 IN WHICH THE ASSESSEE ADMITTED THAT HE RECE IVED THE SAID GIFT FROM HIS REAL BROTHER. THE ASSESSING OFFICER REQUIRED THE ASSESSE E TO PRODUCE THE DONOR FOR EXAMINATION. IN THE ABSENCE OF THE ASSESSEE PRODUCI NG THE DONOR, THE A.O. ISSUED SUMMONS U/S.131 TO THE DONOR FOR ATTENDING HIS OFFI CE. IN RESPONSE TO THAT IT WAS SUBMITTED BY THE DONOR THAT HE WAS UNDERGOING MEDIC AL TREATMENT OF DR.A.P.PATKAR AS HE WAS SUFFERING FROM ELZHEIMER. COPY OF MEDICAL CERTIFICATE WAS ALSO ENCLOSED. ITA NO.5274/MUM/2007 SHRI MANILAL K.GALA. 2 THE ASSESSING OFFICER NOTED THAT THERE WAS NO OCCAS ION FOR THE ASSESSEE TO RECEIVE THE SAID GIFT. IT WAS ALSO SEEN THAT THE DONOR HAD GIVEN GIFTS TO OTHER FAMILY MEMBERS ALSO. CONSIDERING THESE FACTS THE ASSESSING OFFICER CAME TO HOLD THAT THE SAID GIFT WAS INGENUINE. HE, THEREFORE, MADE ADDITI ON OF RS.1.45 CRORES U/S.68 OF THE ACT. IN THE FIRST APPEAL THE LEARNED CIT(A) GOT CON VINCED WITH THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE AND ORDERED FOR THE DELETION OF ADDITION. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSEE RECEIVED A GIFT OF RS.1.45 CRORES FROM HIS REAL BROTHER, SHRI JAYANTILAL K.GALA. THE PAYMENT WAS MADE THROUGH BANKING CHANNEL. WE ARE IN AGREEMENT WITH THE SUBMISSIONS MADE BY TH E LD. DR THAT THE MERE FACT OF HAVING MADE THE GIFT THROUGH CHEQUE IS NOT CONCLUSI VE OF THE GENUINENESS OF THE GIFT. WHEN WE ADVERT TO THE FURTHER FACTS OF THE INSTANT CASE, IT IS NOTICED THAT THE DONOR IS ASSESSED TO TAX IN MUMBAI ITSELF. COPY OF RETURN ALONG WITH CAPITAL ACCOUNT AND BALANCE SHEET OF THE DONOR IS AVAILABLE ON RECO RD. THE TOTAL INCOME OF THE ASSESSEE INCLUDING EXEMPT INCOME IS MORE THAN RS.1 CRORE FOR THIS YEAR. FROM THE CAPITAL ACCOUNT OF THE DONOR IT CAN BE SEEN THAT TH ERE IS OPENING BALANCE OF RS.24.52 CRORES AND AFTER MAKING GIFTS TO THE ASSESSEE AND O THER RELATIVES, STILL HIS CLOSING CAPITAL STANDS AT RS.23.92 CRORES. COPIES OF THE C APITAL ACCOUNT ALONG WITH BALANCE SHEET WERE DULY FILED BY THE DONOR WITH THE INCOME TAX DEPARTMENT ALONG WITH HIS INCOME TAX RETURN. THE A.O. HAS NOT RECORDED ANY FI NDING CONTROVERTING THESE FACTS, MORE SO, WHEN THE ENTIRE MATERIAL WAS PLACED BEFOR E HIM. THE MAIN REASON FOR THE DISALLOWANCE BY THE A.O. IS THAT THERE WAS NO OCCAS ION ON WHICH THE GIFT WAS MADE. WE ARE NOT CONVINCED WITH THIS REASON AS IT IS A CA SE OF GIFT BY ONE BROTHER TO ANOTHER AND THE FORMER HAVING SUFFICIENT CAPACITY O F GIVING GIFT. SIMPLY BECAUSE THE DONOR DID NOT APPEAR BEFORE THE ASSESSING OFFICER, THE GENUINENESS OF THE GIFT CANNOT BE DOUBTED AS IT CAN BE SEEN THAT THE DONOR WAS SUFFERING FROM ILLNESS AND THIS FACT WAS BROUGHT TO THE NOTICE OF THE A.O. ON SUMMONS ISSUED. AFTER GETTING REPLY FROM THE DONOR, THE ASSESSING OFFICER DID NOT PROCEED FURTHER IN DEPUTING ITA NO.5274/MUM/2007 SHRI MANILAL K.GALA. 3 INCOME TAX INSPECTOR OR ADOPTED ANY OTHER WAY OF RE CORDING THE STATEMENT OF SHRI JAYANTILAL K.GALA. THE ADDITION U/S.68 CAN BE MADE WHEN THE IDENTITY OR CAPACITY OF THE CREDITOR IS NOT PROVED OR THE GENUINENESS OF TR ANSACTION IS UNDER THE SHADOW OF DOUBT. ALL THESE THREE INGREDIENTS ARE DULY SATISFI ED IN THE INSTANT CASE INASMUCH AS IT IS PROVED THAT THE DONOR IS ASSESSEES BROTHER, HIS CAPACITY IS PROVED BY HIS INCOME AND NET WORTH AS APPEARING FROM HIS CAPITAL ACCOUNT AND BALANCE SHEET. THE GENUINENESS OF TRANSACTION IS ALSO ESTABLISHED BY T HE FACT THAT AFTER MAKING GIFT THROUGH BANKING CHANNEL, HE DISCLOSED THE FACT OF M AKING SUCH GIFT THROUGH HIS CAPITAL ACCOUNT IN THE INCOME TAX RETURN FILED BY H IM. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) WAS JUSTIFIED IN ORDERING FOR THE DE LETION OF THIS ADDITION. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. 4. THE ONLY OTHER GROUND IS AGAINST THE DIRECTION O F THE LEARNED CIT(A) TO TREAT RS.8 LAKHS AS SALE CONSIDERATION OUT OF TOTAL SALE CONSIDERATION OF RS.11 LAKHS. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE SOLD FAC TORY PREMISES AND DECLARED LOSS OF RS.6,60,009, WHICH WAS CLAIMED AS CARRIED FORWARD. ON VERIFICATION OF THE DETAILS IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAD SO LD THE PREMISES FOR RS.11 LAKHS WHEREAS THE SALE CONSIDERATION WAS SHOWN AT RS.8 LA KHS FOR CALCULATING GAIN / LOSS. ON BEING CALLED UPON TO EXPLAIN THE REASON AS TO WH Y SALE CONSIDERATION WAS TAKEN AT RS.8 LAKHS ONLY, THE ASSESSEE STATED THAT WHEN T HE BUILDING WAS SOLD, IT WAS IN THE OCCUPATION AND PHYSICAL POSSESSION OF THE CONFI RMING PARTY, M/S.UNIWOOD SYSTEMS WHO WAS EARLIER ALLOWED BY THE ASSESSEE TO USE AND OCCUPY THE PREMISES. IT WAS STATED THAT THE AGREEMENT OF SALE DID MENTION T HAT A SUM OF RS.3 LAKHS WAS PAID TO THE CONFIRMING PARTY AND ONLY A SUM OF RS.8 LAKHS WAS PAID TO THE ASSESSEE. NOT CONVINCED WITH THE SUBMISSION OF THE ASSESSEE, THE A.O. CONSIDERED THE SALE CONSIDERATION AT RS.11 LAKHS AND COMPUTED LOSS TO B E CARRIED FORWARD AT RS.3,60,009. THE LEARNED CIT(A) OVERTURNED THE ASSE SSMENT ORDER ON THIS ISSUE. ITA NO.5274/MUM/2007 SHRI MANILAL K.GALA. 4 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS SEEN FROM THE COPY OF SALE DEED AT PAG E 15 ONWARDS OF THE PAPER BOOK THAT THERE ARE THREE PARTIES VIZ. THE ASSESSEE, M/S .UNIWOOD SYSTEMS, THE CONFIRMING PARTY AND THE BUYER. PAGE 17 OF THE PAPER BOOK WHIC H IS INTERNAL PAGE 3 OF THE DEED OF ASSIGNMENT INDICATES THAT THE ASSESSEE WAS PAID A SUM OF RS.8 LAKHS AND THE CONFIRMING PARTY WAS PAID A SUM OF RS.3 LAKHS WHO W AS IN OCCUPATION OF THE PREMISES. THIS FACT IS FURTHER BORNE OUT FROM LAST PAGE OF THE DEED OF ASSIGNMENT SHOWING THAT M/S.UNIWOOD SYSTEMS RECEIVED A SUM OF RS.3 LAKHS. THESE FACTS INDICATE THAT THE PROPERTY WHICH BECAME THE SUBJECT MATTER OF SALE WAS IN THE POSSESSION OF M/S.UNIWOOD SYSTEMS AND AT THE TIME OF ITS SALE BY THE ASSESSEE, THEY STAKED THE CLAIM AND GOT A SUM OF RS. 3 LAKHS AS CONSIDERATION FOR VACATING THE PREMISES. IT IS NOT RELEVANT THAT M/S.UNIWOOD SYSTE MS WAS NOT LESSER. WHAT IS RELEVANT TO CONSIDER THE POSSESSION OF THE PREMISES BY ANY OTHER MEANS, WHICH FACT HAS NOT BEEN DENIED BY THE AO. THE FACT THAT THEY VACATED THE PREMISES AT THE TIME OF SALE BY THE ASSESSEE AND GOT A SUM OF RS. 3 LAKH S IS AMPLY ESTABLISHED FROM THE SALE DEED. AS THE ASSESSEE RECEIVED ONLY A SUM OF R S.8 LAKHS AS CONSIDERATION OF SALE, IN OUR CONSIDERED OPINION, THE LEARNED CIT(A) WAS JUSTIFIED IN DIRECTING TO CONSIDER THE SALE CONSIDERATION AT THAT LEVEL ALONE . WE, THEREFORE, UPHOLD THE IMPUGNED ORDER. 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH, 2011 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 25 TH MARCH, 2011. DEVDAS* ITA NO.5274/MUM/2007 SHRI MANILAL K.GALA. 5 COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.