Dinesh Jain, New Delhi V. DCIT, New Delhi

ITA 604/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1022 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Keywords: Unexplained investment; Gift; Search and seizure; Cost of acquisition; Fair market value
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.C.SHARMA, AM ITA NO.604/DEL/2009 ASSESSMENT YEAR : 2005-06 SHRI DINESH JAIN, 201, SURYAKIRAN BUILDING, 19, KASTURBA GANDHI MARG, NEW DELHI. PAN NO.ADBPJ2732Q. VS. DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-21, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJESH JAIN, CA. RESPONDENT BY : SHRI MANISH GUPTA, DR. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 7.1.2009 FOR THE AY 2005-06. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE I NCOME TAX ACT WERE CONDUCTED ON 9.12.2003 IN THE RESIDENTIAL/BUSINESS PREMISES O F THE RELATED PERSONS/CONCERNS OF BEGUM GUTKHA GROUP OF CASES. ON THE BASIS OF DO CUMENTS FOUND DURING THE COURSE OF SEARCH AND THE STATEMENT RECORDED, VARIOU S ADDITIONS WERE MADE BY THE AO WHICH MAINLY RELATE TO GIFTS RECEIVED BY THE ASS ESSEE DURING THE YEARS UNDER CONSIDERATION, INVESTMENT ON ACCOUNT OF PURCHASE OF VARIOUS PROPERTIES AND THE CASH FOUND DURING THE COURSE OF SEARCH ETC. WHILE FRAMING ASSESSMENT U/S 153A, THE AO OBSERVED THAT AS PER THE DOCUMENTS FOUND, TH E ASSESSEE AND HIS MINOR CHILDREN WERE IN RECEIPT OF GIFTS FROM VARIOUS FRIE NDS VIZ. SHRI NARESH JAIN AND SHRI ANIL JAIN. THESE PERSONS APPEARED BEFORE THE AO AN D THEIR STATEMENTS WERE RECORDED U/S 131. THE ADDITION WAS ALSO MADE ON AC COUNT OF ALLEGED UNEXPLAINED INVESTMENT IN PURCHASE OF VARIOUS PROPERTIES LIKE P ROPERTY NO.49, RAMA ROAD, ITA-604/DEL/2009 2 NEW DELHI WHICH WAS PURCHASED FOR RS.24,45,000/- WH EREIN ASSESSEE WAS IN RECEIPT OF INCOME OF RS.3 LAKHS P.A. THE AO OBSERV ED THAT ASSESSEE HAS MADE HEAVY INVESTMENT IN INCOME YIELDING ASSETS AND THAT RENTAL INCOME GENERATED BY THOSE ASSETS WAS DISPROPORTIONATELY HIGH WHEN COMPA RED WITH THE INVESTMENT SHOWN TO HAVE BEEN MADE IN THEM. AS PER AO, THIS D ISPROPORTIONATE YIELDING OF INCOME PRIMA FACIE/SUFFICIENTLY INDICATES THAT THE DOCUMENTED INVESTMENT HAS BEEN SUPPRESSED SUBSTANTIALLY. IN THIS CONNECTION, THE ASSESSEE WAS ASKED TO EXPLAIN WHAT THE COST OF ACQUISITION, IGNORING THE DOCUMENTED INVESTMENT, SHOULD NOT BE TAKEN AT THE FAIR MARKET VALUE AND WHILE DOI NG SO WHY THE PROVISIONS OF RULE 3 OF PART B OF THE 3 RD SCHEDULE 3 TO THE WEALTH TAX ACT NOT BE TAKEN HELP OF BOTH FOR THE PURPOSES OF INCOME TAX AND FOR THE PUR POSE OF WEALTH TAX ASSESSMENT. THE AO STATED THAT IN THE ENTIRE BLOCK PERIOD COMPR ISING AY 1998-99 TO 2004-05 MANY PROPERTIES HAVE BEEN ACQUIRED BY THE ASSESSEE, WHICH ARE DULY DECLARED IN THE INCOME TAX RETURNS. FURTHER DURING THE PROCEED INGS U/S 153A/143(3) OF THE ACT, THE DETAILED CHARTS OF VARIOUS PROPERTIES ACQU IRED BY DIFFERENT ASSESSEES OF THE GROUP, SUBSTANTIATING THE SOURCE OF INVESTMENT, HAV E BEEN FURNISHED AND ARE AVAILABLE ON RECORDS. THE AO ALSO MADE A REFERENCE TO THE VALUATION CELL IN RESPECT OF THE PROPERTY SO PURCHASED BY THE ASSESSE E FOR ASCERTAINING THE FAIR MARKET VALUE OF THE PROPERTY ON THE VERY SAME DATE WHEN THE ASSESSMENT ORDER WAS PASSED. THE AO RESORTED TO PROVISIONS OF WEALTH TA X ACT FOR ARRIVING AT THE FAIR MARKET PRICE OF THESE PROPERTIES AND MADE ADDITION ON THE BASIS OF DIFFERENCE BETWEEN FAIR MARKET VALUE SO ARRIVED AT AS PER THE PROVISIONS OF SCHEDULE 3 OF WEALTH TAX RULES. IT WAS SUBMITTED BY THE ASSESSEE THAT ALL THE PROPERTIES SO PURCHASED WERE DULY SUPPORTED BY PROPER CONVEYANCE DEED/SALE DEED AND VALUE OF WHICH HAS DULY BEEN ACCEPTED BY THE SUB REGISTRAR F OR THE PURPOSE OF STAMP DUTY VALUATION. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS NOT PAID ANY AMOUNT OVER AND ABOVE THE CONSIDERATION STATED IN THE SAID SALE DEE D. IT WAS ALSO STATED THAT THIS FACT CAN FURTHER BE VERIFIED BY SELLER OF RESPECTIVE PRO PERTIES WHOSE ADDRESS IS GIVEN IN THE RESPECTIVE SALE DEEDS. IT WAS ALSO BROUGHT TO THE NOTICE OF THE AO THAT IT WAS A CASE OF SEARCH AND NO INCRIMINATING MATERIAL WHATSO EVER HAS BEEN SEIZED OR CAME ITA-604/DEL/2009 3 TO THE NOTICE OF THE DEPARTMENT WHICH OTHERWISE PRO VES THAT INVESTMENT IN PROPERTIES HAS BEEN UNDERSTATED. BY REFERRING TO T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K.P.VERGHESE 131 ITR 597, IT WAS CONTENDED BY LEARNED AR THAT ONUS LIES ON THE DEPARTMENT TO PROVE THAT SOME CONSIDERATION OVER AND ABOVE THE CONSIDERATION STATED IN THE SALE DEED HAVE BEEN INVESTED AND THAT NO ADDITION CAN BE MADE ON PRESUMPTION AND SUSPICIONS. 3. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. THE LEARNED AR FAIRLY CONCEDED THAT ISSUE IS COVERED BY ORDER OF ITAT IN ASSESSEES OWN CASE, DATED 30.9.2009, WHEREIN FOLLOWING WAS TH E OBSERVATION OF THE TRIBUNAL:- THE GROUND TAKEN BY THE ASSESSEE WITH REGARD TO TH E ADDITION MADE ON ACCOUNT OF VARIOUS GIFTS RECEIVED BY THEM AND TH EIR CHILDREN, FROM THE RECORD WE FOUND THAT COPY OF GIFT DEED AND OTHE R DOCUMENTS RELATING TO THE GIFTS WERE SEIZED BY THE AUTHORIZED OFFICIAL DURING THE COURSE OF SEARCH AND THESE DOCUMENTS WERE SEIZED VI DE ANNEXURE NO.LP-4/A-2, LP 6/A-43. THE ASSESSEE SUBMITTED THA T THE AO SUMMONED THE DONORS AND RECORDED THEIR STATEMENT IN THE PROCEEDINGS U/S 131 OF THE ACT AND THE DONORS FURNI SHED THEIR BANK STATEMENTS, FINANCIAL STATEMENTS LIKE BALANCE SHEET S OF THEIR FIRMS, COPY OF INCOME TAX RETURNS FOR THE LAST SIX YEARS F OR DEMONSTRATING THE CAPACITY FOR MAKING GIFTS. IT WAS FURTHER SUBM ITTED THAT THE DONORS DULY DISCLOSED THE NATURE OF RELATIONSHIP WI TH THE FAMILY AND EXPLAINED THE REASONS FOR GIVING GIFTS TO THE APPEL LANT AND HIS MINOR CHILDREN. THE ASSESSEE ALSO SUBMITTED THE COPY OF STATEMENTS OF BOTH THE DONORS RECORDED BY THE AO. THESE STATEMENTS AR E SAID TO HAVE BEEN RECORDED BY THE AO AROUND SIX TO NINE MONTHS B ACK BEFORE PASSING THE ASSESSMENT ORDER ON 8.11.2007. THE ASS ESSEE SUBMITTED THAT THE COPIES OF THE STATEMENTS WERE NEVER CONFRO NTED TO THE ASSESSEE BY THE AO INSPITE OF HIS SPECIAL REQUEST M ADE BY HIM IN RESPONSE TO SHOW CAUSE NOTICE ISSUED BY THE AO BEFO RE PASSING THE ASSESSMENT ORDER. THE ASSESSEE PLEADED THAT THE AD DITION MADE ON ACCOUNT OF GIFT IS TOTALLY ARBITRARY AND THE SAME I S MADE ON SUSPICION ONLY. BEING NOT SATISFIED WITH THE REPLIES OF THE ASSESSEE, THE ADDITION WAS MADE BY THE AO AND THE SAME WAS CONFIR MED BY CIT(A), AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US WITH RESPECT TO THE VARIOUS ADDITIONS MADE IN THE HANDS OF DIFFERENT ITA-604/DEL/2009 4 ASSESSEES ON ACCOUNT OF GIFTS RECEIVED BY THEM. FR OM THE DETAILS OF THE FACTS BROUGHT ON RECORD BY THE AO IT IS VERY CL EAR THAT THE ASSESSEE IS IN THE HABIT OF SHOWING GIFTS IN LARGE SUMS IN HIS NAME AND IN THE HANDS OF OTHER FAMILY MEMBERS. IT HAS B EEN CONCLUSIVELY ESTABLISHED BY THE AO THAT THE TWO DONORS BY NAME S H.NARESH JAIN AND SH.ANIL JAIN ARE ONLY A NEIGHBOURS WITHOUT ANY RELATIONSHIP WITH THE FAMILY OF THE APPELLANT. IT IS TOTALLY UN IMAGINABLE TO THINK THAT THE NEIGHBOURS COULD GIVE MILLIONS OF RUPEES T O UNKNOWN PERSONS WITHOUT ANY CONSIDERATION. GIFTS USUALLY F LOW FROM CLOSE BLOOD RELATIONS AND CHILDHOOD FRIENDS. THAT TOO ON LY ON AN IMPORTANT OCCASIONS. MOSTLY THESE GIFTS ARE PREVALENT AMONG RELATIONS AND THEY ARE RECIPROCAL IN NATURE. MOST OF THESE GIFTS ARE IN KIND AND CASH GIFTS DO EXISTS BUT THEY ARE IN SMALL DENOMINATION. SELDOM WE SEE HUGE SUMS OF LANDS OF RUPEES AS GIFTS ESPECIALLY TO MINORS. IN THIS CASE THE APPELLANT HAS CLARIFIED THAT HE HAS NOT GI VEN GIFTS TO ANY OF THESE PERSONS EARLIER OR IN SUBSEQUENT PERIOD. HEN CE THE CONCEPT OF RECIPROCATION IS TOTALLY LACKING IN THE INSTANT CAS E. IT IS ARGUED THAT OUT OF INDEBTEDNESS TO SH. DINESH JAINS FATHER THE GIFTS WERE GIVEN. BUT NO FURTHER DETAILS WERE PRODUCED HOW THESE TWO DONORS WERE INDEBTED TO FAMILY OF THE APPELLANT. FURTHER THE F INANCIAL CAPACITY TO GIVE LAKH OF RUPEES ALSO LACKING IN THIS CASE. MER E FACT THAT THE AMOUNTS WERE ROUTED THROUGH BANK ACCOUNT DOES NOT I PSE FACTOR PROVES THE CREDITABILITY OF THE DONORS BEYOND DOUBT . TO GIVE LAKHS OF RUPEES AS GIFTS TO NEIGHBOURS THE PERSON SHOULD HAVE BEEN WORTH CRORES OF RUPEES HAVING INCOME OF SUBSTANTIAL NATUR E. NO SUCH CONFIRMATIONS ARE FORTHCOMING TO ESTABLISH THE FINA NCIAL SOUNDNESS OF THESE TWO DONORS. ANOTHER FACT TO BE SEEN HERE IS NEITHER THE DONORS GIVEN GIFTS TO OTHERS NOR THE ASSESSEE RECEIVED GIF TS FROM OTHER CLOSE RELATIONS. IT ONLY FRUCTIFIES THE BELIEF THAT THE GIFTS ARE NOTHING BUT ASSESSEES OWN INCOME WHICH ARE PLOUGHED BACK AS GI FTS THROUGH OTHER PERSONS. BY REFERRING TO THE VARIOUS DECISIO NS REPORTED AT 109 ITD 288, 165 TAXMAN 505, 270 ITR 368 AND 292 ITR 55 2, THE AUTHORITIES BELOW CAME TO THE CONCLUSION THAT GIFTS ARE NOTHING BUT ASSESSEES OWN MONEY RECEIVED BACK UNDER THE GUISE OF GIFTS FROM UNKNOWN PERSONS. IN THE CASE OF ANIL KUMAR 292 I TR 552, THE HON'BLE DELHI HIGH COURT HAS CATEGORICALLY HELD THA T THE ONUS LIES ON ASSESSEE TO ESTABLISH THE IDENTITY AS WELL AS THE F INANCIAL CAPACITY OF DONOR. IN THE CASE OF CHAIN SUKH RATHI 270 ITR 3 68, ALTHOUGH GIFT WAS GIVEN BY FATHER TO THE SON, STILL IT IS HELD TH AT UNDISCLOSED INCOME OF THE ASSESSEE IN THE ABSENCE OF ANY OCCASION. TH E CIT(A) HAS ALSO FORTIFIED THE FINDINGS OF THE AO BY OBSERVING THAT CONSISTENTLY THE COURTS ARE OF THE OPINION THAT APART FROM IDENTITY AND CREDITWORTHINESS, THE GENUINENESS OF THE TRANSACTIO N IS OF VITAL ISSUE IN GIFTS. UNLESS OCCASION AND RELATIONSHIP IS ESTABLISHED, THE GIFTS ITA-604/DEL/2009 5 CANNOT BE HELD AS GENUINE. FROM THE PERUSAL OF FAM ILY DETAILS IT CAN BE SEEN THAT A NUMBER OF CLOSE RELATIONS ARE AVAILA BLE BUT NONE OF THEM HAD GIFTED ANY SUMS TO THE ASSESSEE. HOWEVER, ASSESSEE COULD RECEIVE SUBSTANTIAL AMOUNTS AS GIFTS FROM A REMOTEL Y CONNECTED PERSONS. ASSESSEE ALSO COULD NOT CONFIRM TO THE FA CT THAT HE KNEW THE DONORS INTIMATELY. THIS TYPE OF ONE-SIDED GIFT S OF SUBSTANTIAL AMOUNTS NOT ASSOCIATED WITH ANY OCCASION FROM RELAT IVELY UNKNOWN PERSONS IN SUCCESSIVE YEARS DEFIES ANY AMOUNT OF LO GIC. AS DISCUSSED IN PRECEDING PARAS THE WHOLE TRANSACTION IS DESIGNED TO SHOW HUGE AMOUNTS AS GIFTS WITHOUT ANY LIABILITY OF PAYING TAXES. THE FINDINGS SO RECORDED BY THE LOWER AUTHORITIES C OULD NOT BE CONTROVERTED BY THE LEARNED AR BY BRINGING ANY MATE RIAL, MUCH LESS A COGENT MATERIAL SO AS TO PERSUADE US TO DEVIATE F ROM THE ALLEGED FINDING. WE THEREFORE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF THE LOWER AUTHORITIES IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF BOGUS GIFTS. IN THE RESULT, THE GROUNDS TAKEN BY A LL THE ASSESSEES WITH REGARD TO GIFTS IN VARIOUS YEARS, ARE BEING DISMISS ED. 4. AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR U NDER CONSIDERATION ARE IN PARI-MATERIA, RESPECTFULLY FOLLOWING THE ORDER OF T HE TRIBUNAL NARRATED ABOVE, WE CONFIRM THE ACTION OF THE LOWER AUTHORITIES WITH RE GARD TO ADDITION MADE ON ACCOUNT OF GIFTS. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER, 2009. SD/- SD/- (R.P.TOLANI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24.11.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-604/DEL/2009 6