ITO, V. Dr. Naveen Patalappa,

ITA 632/BANG/2013

• Counselvise Citation: 63221114 RSA 2013
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Gift

Judgement Text

ITA.632/BANG/2013 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.632/BANG/2013 (ASSESSMENT YEAR : 2009-10) INCOME-TAX OFFICER, WARD -5(4), BANGALORE ..APPELLANT V. DR. NAVEEN PATALAPPA, NO.694, II MAIN, 8 TH BLOCK, KORAMANGALA, BANGALORE ..RESPONDENT PAN : AOWPP0352A ASSESSEE BY : NONE REVENUE BY : SHRI. P. DHIVAHAR, JCIT HEARD ON : 15.06.2015 PRONOUNCED ON : 30 .06.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, IT IS AGGRIEV ED THAT ADDITION OF RS.19,15,000/- AND RS.10,14,500/- MADE BY THE AO FO R UNEXPLAINED GIFTS AND UNEXPLAINED CAPITAL INVESTMENT RESPECTIVELY WERE DE LETED BY THE CIT (A)-II, BANGALORE, VIDE HIS ORDER DT.11.02.2013. ITA.632/BANG/2013 PAGE - 2 02. FACTS APROPOS ARE THAT ASSESSEE, A MEDICAL PROF ESSIONAL HAD FILED HIS RETURN OF INCOME DECLARING INCOME OF RS.2,16,360/-. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND THAT ASSESSEE HAD CLAIMED VAR IOUS GIFTS FOR JUSTIFYING HIS INVESTMENT IN AN IMMOVABLE PROPERTY AND IN THE CAPI TAL OF ONE M/S. KESHAVA NETHRALAYA. GIFTS CLAIMED BY THE ASSESSEE TO HAVE BEEN RECEIVED FROM HIS BROTHER, FATHER, MOTHER AND PATERNAL UNCLE WERE DIS BELIEVED BY THE AO FOR WANT OF EVIDENCE. AN ADDITION OF RS.45,24,673/-, WAS MAD E. SUCH ADDITION INTER ALIA INCLUDED A SUM OF RS.21,75,000/- CLAIMED TO HAVE B EEN RECEIVED FROM ASSESSEES UNCLE SHRI DODDANNA KRISHNA AND RS.10,14 ,500/- STATED TO HAVE BEEN INVESTED BY THE ASSESSEE IN THE CAPITAL OF KESHAVA NETRALAYA. LATTER AS PER THE AO WAS NOT REFLECTED IN HIS RETURN OF INCOME. 03. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE CIT (A). OUT OF THE ADDITION MADE FOR THE GIFT CLAIMED TO HAVE BEEN REC EIVED FROM SHRI. DODANNA KRISHNA, CIT (A) DELETED A SUM OF RS.19,15,000/- A ND SUSTAINED ONLY RS.2,60,000/-. CIT (A) ALSO DELETED THE ADDITION O F RS.10,14,500/- CONSIDERED BY THE AO AS UNEXPLAINED INVESTMENT IN CAPITAL OF K ESHAVA NETHRALAYA. FOR GIVING RELIEF TO THE ASSESSEE ON THE CLAIM OF GIFT FROM DODDANNA KRISHNA, ASSESSEES PATERNAL UNCLE, CIT (A) RELIED ON A REMA ND REPORT FROM THE AO. REMAND REPORT WAS SOUGHT, SINCE ASSESSEE PRODUCED L ETTERS SIGNED BY DODDANNA KRISHNA, IN SUPPORT OF THE GIFT. IN THE REMAND REP ORT, AO HAD MENTIONED AS UNDER : ITA.632/BANG/2013 PAGE - 3 3. GIFT OF RS.21.75 LAKHS FROM SRI DODDANNA KRISHN A, PATERNAL UNCLE OF THE ASSESSEE : SRI PATALAPPA,( ASSESSEE'S FATHER) AND HIS BROTHER SRI. DODDANNA KRISHNA MAINTAIN A JOINT ACCOUNT WITH CITI BANK,VID E NRE ALC NO.5536584805. THE AMOUNT RECEIVED IN THE BANK ACCO UNT HAS BEEN PERIODICALLY WITHDRAWN BY THE ASSESSEE'S FATHER, SR I PATALAPPA. THERE ARE NO ENTRIES IN THE BANK ACCOUNT TO PROVE THAT PA YMENT HAS BEEN MADE TO THE ASSESSEE. THE COPIES OF INCOME TAX RETURNS F ILED BY SRI. DODDANNA KRISHNA, IN USA DOES NOT SHOW OR STATE THAT SRI. DO DDANNA KRISHNA HAS GIVEN GIFT TO ANYBODY. SRI PATALAPPA,( ASSESSEE'S FATHER) HAS TRANSFERRED FUNDS FROM THE CITI BANK JOINT ALC (WITH SRI. DODDANNA KRISHNA) TO HIS BANK ACCOUNT IN APEX BANK BEARING NO.4141, INSTEAD OF TRANSFERRING THE FUNDS DIRECTLY TO THE ASSESSEE, SRI NAVEEN PATALAPPA. IT IS EVIDENT F ROM THIS FACT THAT THE FUNDS WERE NEVER TRANSFERRED DIRECTLY FROM SRI. DOD DANNA KRISHNA ACCOUNT TO SRI NAVEEN PATALAPPA'S ACCOUNT. IT IS CL EAR FROM THIS THAT IT IS A COLOURABLE DEVICE AND AN AFTER THOUGHT TO SHOW TH ESE FUNDS AS SOURCE FOR ACQUIRING AN IMMOVABLE PROPERTY. THE FUNDS TRANSFERRED TO SRI PATALAPPAS (ASSESSEE S FATHER) A/C NO.4141 FROM CITI BANK JOINT ACCOUNT WAS THEREAFTER TRANSFERRED TO ASSESSEES A/C 4932. FOR THE SAKE OF CLARITY, THE SAME IS EXPLAINED AS UNDER : THERE ARE NO EVIDENCE WITH RESPECT TO THE GIFT RECE IVED FROM SRI DODDANNA KRISHNA, PATERNAL UNCLE OF THE ASSESSEE, E XCEPT FOR A PHOTOCOPY OF AN UNDATED LETTER PURPORTED TO HAVE BE EN SIGNED BY SRI DODDANNA KRISHNA. THE SAID LETTER DOES NOT STATE TH AT SRI DODDANNA KRISHNA HAD GIVEN A GIFT TO THE ASSESSEE. IT ONLY S TATES THAT AS ON 15/06/2008 AN AMOUNT OF RS.21.75 LAKHS HAS BEEN PAID TO THE AS SESSEE. THERE ARE NOBANK ENTRIES TO PROVE THE PAYMENT MADE TO THE ASSESSEE. THE PASSPORT COPY OF SRI. DODDANNA KRISHNA ALSO REV EALS THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009- 10, SRI. DODDANNA KRISHNA HAS NOT VISITED INDIA. SUCH BEING THE CASE, THE PAYMENT COULD NOT HAVE BEEN RECEIVED BY THE ASSESSEE IN CASH. ITA.632/BANG/2013 PAGE - 4 FOR THE DETAILED REASONS MENTIONED ABOVE, THE ORDER OF THE ASSESSING OFFICER MAY BE UPHELD AND THE ADDITION OF RS.21.75 LAKHS MAY BE CONFIRMED. WITHOUT PREJUDICE TO THE ABOVE, ASSESSEES CLAIM FO R RECEIPT OF GIFT OF RS.21,75,000/- IS ALSO NOT ACCEPTABLE FOR THE FOLLO WING REASONS : SRI PATALAPPA'S A /C APEX BANK SRI NAVEEN PATALAPPA'S A /C ACCOUNT NO.4141 APEX BANK ACCOUNT NO.4932 DATE AMOUNT DATE AMOUNT 22/07/2008 RS.5,00,000 29/08/2008 RS.10,00,00O 10/08/2008 RS.4,00,000 02/09/2008 RS. 5,00,000 27/08/2008 RS.4,00,000 05/09/2008 RS.2,15,000 16/09/2008 RS. 50,000 24/10/2008 RS. 2,00,000 27/09/2008 RS.5,00,000 --- --- 26/11/2008 RS. 1 ,00,000 -- - --- THE ABOVE ACCOUNTS SHOW THAT UP TO 27/08/2008, SRI PATALAPPA'S ACCOUNT RECEIVED AMOUNTS TO THE EXTENT OF RS.13,00,000/- FR OM THE A/C OF SRI. DODDANNA KRISHNA. SUBSEQUENTLY, FUNDS WERE TRANSFER RED FROM SRI. DODDANA KRISHNA'S ACCOUNT TO THIS PATALAPPA'S ACCOUNT ON RS . 16.09.2008. SRI. PATALAPPA, ( ASSESSEE'S FATHER)TRA NSFERRED FUNDS FROM HIS ACCOUNT TO THE ASSESSEE, SRI NAVEEN PATALAPPA'S ACC OUNT, A SUM OF RS.17, 15,000/-, ON THREE OCCASIONS, TILL 05/09/2008. THUS , T HERE IS A DEFICIT OF RS.4,15,000/- BETWEEN THE FUNDS RECEIVED AND FUNDS TRANSFERRED. F URTHER FUNDS WERE RECEIVED ON TRANSFER FROM CITI BANK ACCO UNT TO SRI PATALAPPA'S ACCOUNT- RS.50,000/- ON 16/09/2008 AND RS.5,00,0001 - ON 27109/2008. BOTH THESE AMOUNTS H AVE NOT BEEN TRANSFERRED TO ASSESSEE'S ACCOUNT. SRI. DODDANNA KRISHNA, IN HIS LETTER STATES THAT AS ON 15/06/2008 AN AMOUNT OF RS.21.75 LAKHS HAS BEEN PAID TO SRI NAVEEN PATAL APPA. FURTHER, HE HAS NOT MENTIONED THAT THE FUNDS WERE TRANSFERRED FROM HIS ACCOUNT TO SRI PATALAPPA'S ALE (ASSESSEE'S FATHER) AND THEREAFTER IT WAS TRANSFERRED TO NAVEEN PATALAPP'S A/ C. AS ON 15/06/2008, SRI NAVEEN PATALAPPA'S BANK ACCOUNT DOES NOT SHOW A NY RECEIPT OF RS.21,75,0001-FROM SRI. DODDANNA KRISHNA. THIS DEARLY SHOWS THAT SRI NAVEEN PATALAPPA HAS NEVER RECEIVED A GIFT OF RS.21,75,000/- FROM SRI. DODDANNA KRISHNA. ITA.632/BANG/2013 PAGE - 5 THE FOLLOWING VIEWS ARE WELL SUPPORTED BY THE DECIS IONS OF VARIOUS ITATS AND HIGH COURTS : IN CASES WHERE THE EXPLANATION OFFERED BY ASSESSEE ABOUT THE NATURE AND SOURCE OF THE MONEY RECEIVED BY ASSESSEE WAS NOT SATISFACTORY, THERE IS PRIMA FACIE EVIDENCE AGAINST ASSESSEE, NAMELY, THE RECEIPT OF MONEY. THE BURDEN IS ON THE ASSESSEE TO REBUT THE SAME. IN THE CASE OF CASH CREDITS THE ONUS IS ON THE ASSE SSEE TO ESTABLISH THE IDENTITY AND THE CAPACITY OF THE CRED ITOR AS ALSO THE GENUINENESS OF THE TRANSACTION. SIMILAR IS THE POSI TION IN REGARD TO GIFT. IN FACT, THE DEGREE OF PROOF IN THE CASE OF A GIFT WOULD BE HEAVY. MERE FACT THAT THE MONEY HAD BEEN RECEIVED IN INDIA IN F OREIGN EXCHANGE FROM ABROAD WOULD NOT BE SUFFICIENT TO ABSOLVE THE ASSESSEE OF THE BURDEN OF ESTABLISHING THE IDENTITY AS WELL AS FINA NCIAL CAPACITY OF THE DONORS AND GENUINENESS OF THE GIFTS . MERE MOVEMENT OF ALLEGED GIFT AMOUNT THROUGH BANKIN G CHANNELS IS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE GIFT AS WELL SETTLED VIDE VARIOUS DECISIONS. THE AO HAD NOT ACCE PTED THE ASSSESSEE'S CLAIM FOR THE REASON THAT ASSESSEE HAD FAILED TO PROVE THE GENUINENESS OF THE FACTUM OF GIFT ON THE FACTS POIN TED BY HIM IN HIS ORDER. THUS, ASSESSEE'S CONTENTION THAT AS THE AMOU NT WAS ROUTED THROUGH BANKING CHANNELS, ASSESSEE HAD BEEN ABLE TO ESTABLISH AND PROVE THAT THE AMOUNT WAS RECEIVED BY WAY OF GIFT H AD NO FORCE. ON THAT COUNT ALONE, ASSESSEE'S CLAIM COULD NOT BE ACC EPTED ON THE BASIS OF DOCUMENTS, THAT IS, CONFIRMATION AND AFFIDAVIT O F DONORS. IT COULD NOT BE SAID THAT ASSESSEE HAD BEEN ABLE TO DISCHARG E HIS ONUS TO ESTABLISH THE CAPACITY OF THE DONOR TO MAKE SUCH A GIFT , AND TO SHOW WHAT KIND OF RELATIONSHIP THE DONOR HAD WITH ASSESS EE AND WHAT WAS THE OCCASION FOR GIVING SUCH A GIFT. ITA.632/BANG/2013 PAGE - 6 MERE IDENTIFICATION OF DONOR OR RECEIPT OF AMOUNT T HROUGH BANKING CHANNELS IS NOT SUFFICIENT TO SATISFY THE CONFIRMIN G THE ADDITION OF THE SUM RECEIVED BY ASSESSEE AS A BOGUS GIFT EVEN THOUGH TH E SAME WAS RECEIVED THROUGH BANKING CHANNELS AND HOLDING THAT AFTER HAV ING PROVED THE CREDIBILITY AND CAPACITY OF DONOR, IT WAS FURTHER N ECESSARY FOR THE DONEE TO PROVE THE OCCASION FOR MAKING THE GIFT. IDENTITY, CREDITWORTHINESS AS WELL AS GENUINENES S OF THE GIFT WERE REQUIRED TO BE PROVED BY ASSESSEE AND ONLY FILING D ECLARATION OF GIFT DEED WOULD NOT BE SUFFICIENT TO PROVE THE GENUINENESS OF THE TRANSACTION. MORE SO, LOVE, AFFECTION AND OCCASIONS OF GIFT WAS TO BE PROVED. 04. CIT (A) WHILE GIVING PARTIAL RELIEF TO THE ASSE SSEE ON THE GIFT OF RS.21,75,000/- CLAIMED TO HAVE BEEN RECEIVED FROM S HRI. DODANNA KRISHNA, HELD AS UNDER: 3.8 AS REGARDS THE ADDITION OF RS.21,75,000/TREATI NG THE GIFT CLAIMED TO HAVE BEEN RECEIVED FROM HIS PATERNAL UNCLE SHRI DOD DANNA KRISHNA AS UNEXPLAINED, IT SEEN FROM THE AO'S REMAND REPORT TH AT SHRI DODDANNA KRISHNA HAD TRANSFERRED ON SIX OCCASIONS FROM HIS B ANK ACCOUNT TO SHRI PATALAPPA'S BANK ACCOUNT NO .4141 WITH APEX BANK A SUM OF RS.19,50,000/- OUT OF WHICH A SUM OF RS.19,15,000/- WAS TRANSFERRED ON FOUR OCCASIONS TO THE APPELLANT'S ACCOUNT NO.4932 W ITH THE SAME BANK. THESE FIGURES ARE AVAILABLE IN THE AO'S REMAND REPO RT. BEYOND THIS, THE APPELLANT HAS NOT BEEN ABLE TO PROVE THE AVAILABILI TY OF FUNDS FROM THE GIFT RECEIVED FROM SHRI DODDANNA KRISHNA EVEN DURING THE APPEAL PROCEEDINGS BEFORE ME. I AM, THEREFORE, INCLINED TO ACCEPT THE AVAILABILITY OF SOURCE TO THE EXTENT OF RS.19,15,000/- AND CONFI RM THE ADDITION OF RS.2,60,000/-. ITA.632/BANG/2013 PAGE - 7 05. VIS-A-VIS ADDITION OF RS.10,14,500/-, OBSERVATI ON OF THE CIT (A) WERE AS UNDER : 3.10 THE ADDITION OF RS.10,14,500/- MADE U/S 69 OF THE ACT BY THE AO ON THE GROUND THAT THE INVESTMENT MADE BY APPELLANT IN M/S KESHAVA NETRALAYA WAS NOT DECLARED IN THE RETURN OF INCOME BUT ONLY IN THE STATEMENT OF AFFAIRS FOR THE ASSESSMENT YEAR IN QUE STION AND NOT IN THE STATEMENTS OF AFFAIRS RELEVANT FOR THE ASSESSMENT Y EARS 2007-08 AND 2008- 09. IN THIS REGARD, THE APPELLANT HAS SUBMITT ED THAT THIS BUSINESS WAS STARTED ONLY DURING THE YEAR ENDED 31/3/2009. H OWEVER, THE APPELLANT HAS FURNISHED A COPY OF THE RETURN OF INC OME FILED BY HIM FOR THE ASSESSMENT YEAR 2009-10 WHEREIN THE INCOME FROM THE SAID BUSINESS HAS BEEN DECLARED IN THE RETURN OF INCOME. APART FR OM THIS, THE APPELLANT HAS SHOWN THE DETAILS OF INVESTMENTS BY PREPARING B ALANCE SHEETS FOR HIS BUSINESS AND EXPLAINED WITH BANK STATEMENTS THE SOU RCES FOR THE INVESTMENTS MADE OUT OF BORROWALS MADE IN THIS BUSI NESS. HENCE, THE INVESTMENT OF RS.10,14,500/- MADE BY THE APPELLANT IN M/S. KESHAVA NETHRALAYA STANDS EXPLAINED AND THE ADDITION MADE B EING UNJUSTIFIED IS DELETED. ITA.632/BANG/2013 PAGE - 8 06. LD. DR SUBMITTED BEFORE US THAT CIT (A) HAD ACC EPTED THE CLAIM OF ASSESSEE, DISREGARDING THE REMAND REPORT GIVEN BY T HE AO. 07. NOBODY APPEARED ON BEHALF OF THE ASSESSEE. 08. WE HAVE PERUSED THE ORDERS AND HEARD THE CONTEN TIONS OF THE LD. DR. WHAT WE FIND IS THAT IN RESPECT OF THE GIFTS CLAIME D TO HAVE BEEN RECEIVED FROM DODDANNA KRISHNA, ASSESSEE HAD PRODUCED CONFIRMATI ON LETTERS. SUM OF RS.19,15,000/- WERE TRANSFERRED FROM DODDANNA KRISH NAS ACCOUNT TO ASSESSEES FATHER PATALAPPAS BANK ACCOUNT FROM WHERE IT WAS L ATER TRANSFERRED TO THE ASSESSEES ACCOUNT. SINCE THE TRANSACTIONS WERE TH ROUGH BANK AND IT WAS SUPPORTED BY THE CONFIRMATION LETTER ISSUED BY DODD ANNA KRISHNA AND CONSIDERING THE CLOSE RELATIONSHIP, WE ARE OF THE O PINION THAT CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION TO THE EXTENT OF RS.19,15,000/-. 09. HOWEVER, VIS-A-VIS THE ADDITION OF RS.10,14,500 /- THERE IS CONTRADICTION BETWEEN THE FINDING OF THE AO THAT ASSESSEE HAD NOT FURNISHED A RETURN OF INCOME WHICH REFLECTED THE BUSINESS OF KESHAVA NETH RALAYA AND THE FINDING OF THE CIT (A) THAT THE INCOME FROM THE SAID BUSINESS WAS DECLARED IN THE RETURN OF INCOME. IT IS ALSO NOT CLEAR WHETHER THE ASSESSEE HAD JUSTIFIED THE INTRODUCTION OF CAPITAL THROUGH ANY CASH-FLOW ACCOUNT. WE ARE O F THE OPINION THAT THIS ISSUE REQUIRES A FRESH LOOK BY THE AO. WE, THEREFORE, SE T ASIDE THE ORDER OF CIT (A) IN ITA.632/BANG/2013 PAGE - 9 SO FAR AS IT RELATES TO THE ADDITION OF RS.10,14,50 0/- AND REMIT IT BACK TO THE FILE OF AO, FOR CONSIDERATION THEREOF. 10. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF J UNE, 2015. SD/- SD/- (SMT. P. MADHAVI DEVI) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER