SHAILESHKUMAR M. GANDHI, MUMBAI V. ITO 11(3)(3), MUMBAI

ITA 645/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3466 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 24-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S N RAJU
• Assessee Lawyers: VIJAY JOSHI
• Keywords: Unexplained cash credit; Gift
• Section: 143(3); 142(1); 56; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI RAJENDRA, AM AND SHRI SANDEEP GOSAIN, J M ./ I.T.A. NO. 645/MUM/2013 ( / ASSESSMENT YEAR: 2005-06) SHAILESHKUMAR M. GANDHI 8/1/17, MOUNT VIEW, MAROL MAROSHI ROAD, BHAWANI NAGAR, ANDHERI (E) MUMBAI-400 0059. / VS. ITO-11(3)(3), AAYAKAR BHAVAN, CHURCHGATE, MUMBAI. ./ ./PAN/GIR NO. AARPG 8885G ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VIJAY JOSHI / RESPONDENT BY : SHRI B.S.N. RAJU / DATE OF HEARING : 03/11/2015 !'# / DATE OF PRONOUNCEMENT : 18/03/2016 $% / O R D E R PER SANDEEP GOSAIN, J. M.: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 7, DATED 30. 10.2012 FOR A.Y. 2005-06 WHEREBY CIT(A) HAS DISMISSED THE APPEAL FILED BY TH E ASSESSEE AGAINST THE ORDER OF AO DATED 21.12.2009 ON THE GROUNDS OF APPEAL MENTIO NED HEREIN BELOW. 2 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN ALLOWING ADDITION OF AN AMOUNT OF RS.2,00,000/- RECEIVED AS GIFT DURING THE F.Y. 2004- 05 AS UNEXPLAINED CASH CREDIT. THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE VARIOUS FACTS AS WEL L AS SUBMISSIONS MADE AND THE MERITS OF THE GIFT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN TREATING THE GENUINE GIFT AS UNEXPLAI NED CASH CREDIT WITHOUT ANY JUSTIFICATION WHEN ALL THE FACTS WERE BEFORE HI M AND THE DONOR WAS PERSONALLY EXAMINED BY AO. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ALLOWED THE VARIOUS CONTENT IONS OF APPELLANT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS)HAS ERRED IN RELYING ON PROVISIONS OF S.56 (2)(V) AS MENDED BY FINANCE ACT, 2004 WITHOUT APPRECIATING THE FACT THA T THE SAME IS NOT APPLICABLE SINCE THE SAME WAS AMENDED MUCH AFTER TH E GIFT WAS RECEIVED BY THE APPELLANT. THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) OUGHT TO HAVE ALLOWED THE VARIOUS CONTENTIONS OF APPELLANT U NDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PROFESSIONAL AND HAD FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3 ,44,774/- ON 21.10.2005. THE SAME WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT , 1961. THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES U/S 142(1) AND 1 43(2) OF THE INCOME TAX ACT, 1961 WERE ISSUED AND THEREAFTER THE ASSESSMENT ORD ER WAS PASSED U/S 143(3) OF THE INCOME TAX ACT BY THE AO VIDE ORDER DATED 31.08.200 7. THEREAFTER THE COMMISSIONER OF INCOME TAX -11 MUMBAI PASSED ORDER U/S 263 OF THE I.T. ACT THEREBY SETTING ASIDE THE ORDER OF ASSESSMENT TO V ERIFY THE GIFT OF RS.2,00,000/- RECEIVED BY THE ASSESSEE FROM HIS FRIEND. THEREAFTE R A FRESH NOTICE U/S 143(2) WAS SERVED UPON THE ASSESSEE AND AFTER SEEKING THE REPL Y, AO PASSED THE ORDER OF ASSESSMENT DATED 21.12.2009 THEREBY MAKING ADDITION OF RS.2,00,000/-. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE FILED APPEAL BEFORE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE CASE OF THE ASSESS EE HAD DISMISSED THE APPEAL VIDE ITS ORDER DATED 30.10.12 AND CONFIRMED THE ADDITION S MADE BY THE AO. 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE FILED THE PRESENT APPEAL BEFORE US ON THE GROUNDS MENTIONED HEREIN ABOVE. 4 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO GROUND NOS. 1-2: 4. THE LD. AR REPRESENTING THE ASSESSEE, SUBMITTED BEFORE US THAT THE ASSESSEE HAD RECEIVED GIFT OF RS.2,00,000/- FROM MR. JITESH N. MEHTA WHO IS A SENIOR MEMBER AND IS A VERY CLOSE FAMILY FRIEND. DURING A. Y. 2005-06, THE SAID SHRI JITESH N. MEHTA HAD GIFTED AN AMOUNT OF RS.2,00,000 /- VIDE CHEQUE NO.132339 DRAWN ON HDFC BANK LTD, GHATKOPAR BRANCH, MUMBAI. I N THIS RESPECT, THE LD. AR DREW OUR ATTENTION TO THE COPY OF THE CONFIRMATION LETTER FROM DONOR, DONORS BANK PASSBOOK/STATEMENT, INCOME TAX RETURN COPY ETC. IT WAS FURTHER SUBMITTED THAT THE DONOR BELONGS TO GUJRAT AND ASSESSEE IS ALSO FROM G UJRAT AND THEREFORE BEING FROM THE SAME NATIVE PLACE AND BEING GUJRATIES THEY HAVE CLOSE FAMILY RELATIVES THEY HAVE CLOSE AMONG FOR THE LAST 15 YEARS AND THEREFOR E THERE WAS A GOOD FRIENDSHIP BETWEEN THE PARTIES. 4.1 LD. AR ALSO DRAWN OUR ATTENTION TO THE DETAIL S UBMISSIONS MADE BY HIM BEFORE THE AO AND SUBMITTED THAT THE AO HAD WRONGLY MADE ADDITIONS OF RS.2,00,000/- RECEIVED AS GIFT AND IN THIS RESPECT CIT(A) HAS ALSO NOT CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND HAD WRONGLY PAS SED ORDER. AS PER APPELLANT THE CIT(A) HAS BASED HIS FINDINGS ONLY ON THE GROUND TH AT THE DONOR WAS NOT RELATED TO THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE PROVIS ION OF SECTION 56(2)(V) ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE AM ENDMENT CLAUSE (V) IN SUB-SECTION 5 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO (2) OF SECTION 56 WAS INSERTED BY FINANCE ACT 2004 AND WAS EFFECTIVE FROM 1.09.2004 BUT THE TRANSACTION IN THE PRESENT CASE A RE BEFORE THAT I.E. ON 02.07.2004. 4.2 ON THE OTHER HAND LD. DR APPEARING ON BEHALF OF THE REVENUE RELIED UPON THE DETAILED ORDER PASSED BY THE LOWER AUTHORITIES AND REQUESTED FOR DISMISSING THE APPEAL AND SUBMITTED THAT THOUGH THE DONOR HAS BEEN ESTABLISHED, BUT THE DONOR IS NOT RELATED TO THE DONEE AND DONOR BEING SALARIED P ERSON EARNING A SALARY OF RS.2.55 LAKHS AS SALARY AND HENCE IT IS NOT POSSIBLE FOR HI M TO GIFT TO RS.2,00,000/- TO HIS FRIEND. IT WAS FURTHER SUBMITTED BY THE LD. DR THAT THE CREDITWORTHINESS AND CAPACITY OF THE DONOR HAS NOT BEEN ESTABLISHED BY T HE ASSESSEE. 5. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND PERUSED THE ORDERS PASSED BY THE LOWER AUTHORITIES. LD. CIT(A) WHILE DISMISSI NG THE APPEAL FILED BY THE ASSESSEE HAD MADE THE FOLLOWING OBSERVATIONS. I HAVE CONSIDERED THE AOS ORDER AS WELL AS THE AP PELLANTS ARS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT INS PITE OF THE ACQUAINTANCE AND HIS RELATION WITH THE DONOR WHICH WAS DEVELOPED IN THE LAST 15 YEARS AS CLAIMED BY THE APPELLANT, IT NOWHE RE MAKES TO COMPLY THE NECESSITY WHAT HAS BEEN INTENDED TO BE COMPLIED FOR THE EXEMPTION OF GIFT FOR TAXABILITY AS ENVISAGED UNDER CLAUSE (V) O F EXPLANATION TO THE PROVISO OF SUB CLAUSE(V) OF SUB SECTION-2 OF SECTIO N 56 OF THE ACT. HENCE, THE APPELLANT'S ALL ARGUMENTS LACK ON THIS SCORE FO R GETTING EXEMPTION 6 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO FROM TAXABILITY, BEING GIFT. FURTHER TO THAT, EVEN I FIND THAT WHEN THE DONOR WAS MERELY GETTING SALARY OF RS.2.55 LACS P.A . AND THAT TOO TO A PERSON WHO LOST HIS EMPLOYMENT WHEN HE WAS ASSISTED BY THE APPELLANT. BESIDES THIS, IN THE CITY OF MUMBAI WHEN A PERSON I S GETTING A MEAGER SUM AS SALARY, IT IS REALLY DIFFICULT TO BELIEVE TH AT HE COULD SAVE A SUM OF RS.6,70,000/- IN ONE FINANCIAL YEAR AND STILL GIFT THE SUM IN THE F.Y. 2004- 05 TO THE APPELLANT AS WELL AS TO HIS SON AND WIFE. FURTHER TO THAT, I AM OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY QUESTIO NED THE CAPACITY OF THE DONOR TO GIFT SO MUCH AMOUNT TO THE APPELLANT W HEN HE HIMSELF IS NOT HAVING SUFFICIENT SOURCES FOR HIS OWN. MAKING SUCH HUGE GIFT OF RS.2,00,000/- CAN NOT BE BELIEVED TO BE GENUINE AND JUSTIFIED. HENCE, I AM IN AGREEMENT WITH THE AO'S FINDING THAT THE GIFT WAS COMPLETELY UNEXPLAINED AND HENCE IN MY CONSIDERED VIEW THE AO HAS RIGHTLY HELD THE AFORESAID SUM OF RS.2,00,000/- - AS UNEXPLAINED CASH CREDIT. ACCORDINGLY THE ADDITION SO MADE BY THE AO IS CONFI RMED. THUS, APPELLANT'S THESE GROUND OF APPEAL ARE DISMISSED. 5.1 WE HAVE ANALYSE THE FINDINGS RERECORDED BY THE LD. CIT(A) AND AFTER CONSIDERING THE REASON WHILE DISMISSING THE APPEAL BY CIT(A), WE FOUND THAT THE CIT(A) HAS BASED ITS FINDINGS ON THE BASIS OF APPLI CABILITY OF PROVISION OF SECTION 56(2)(V) OF THE INCOME TAX ACT. IT WAS FURTHER MENT IONED BY THE LD. CIT(A) THAT THE DONOR WAS GETTING SALARY OF RS.2.55LAKHS P.A. T HEREFORE IT WAS NOT POSSIBLE TO GIVE RS.2,00,000/- AS GIFT TO THE ASSESSEE. THEREFO RE ON THIS BASIS LD. CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO. 7 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO 5.2 WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSE AS WELL AS THE REVENUE AND AFTER CONSIDERING THE SAME WE ARE OF TH E CONSIDERED VIEW THAT THE PROVISION OF SECTION 56(2)(V) ARE NOT APPLICABLE IN THE PRESENT CASE. THE PROVISION OF SECTION 56(2)(V) ARE REPRODUCED BELOW: THE PROVISIONS OF SECTION 56 HAVE BEEN AMENDED BY INSERTING CLAUSE (V) IN SUB-SECTION (2) BY FINANCE ACT, 2004 AND THE FOR THE PURPOSE OF CONVENIENCE OF REFERENCE, THE SAME IS REPRODUCED HE RE UNDER: (V) WHERE ANY SUM OF MONEY EXCEEDING TWENTY-FIVE T HOUSAND RUPEES IS RECEIVED WITHOUT CONSIDERATION BY AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY FROM ANY PERSON ON OR AFTER THE 1 ST DAY OF SEPTEMBER,2004 [BUT BEFORE THE 1 ST DAY OF APRIL 2006], THE WHOLE OF SUCH SUM: PROVIDED THAT THIS CLAUSE SHALL NOT APPLY TO ANY SU M OF MONEY RECEIVED- (A) FROM ANY RELATIVE; OR (B) ON THE OCCASION OF THE MARRIAGE OF THE INDIVIDUAL; OR (C) UNDER A WILL OR BY WAY OF INHERITANCE; OR (D) IN CONTEMPLATION OF DEATH OF THE PAYER; OR (E) FROM ANY LOCAL AUTHORITY AS DEFINED IN THE EXPLANAT ION TO CLAUSE (20) OF SECTION 10; OR 8 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO (F) FROM ANY FUND OR FOUNDATION OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR HOSPITAL OR OTHER MEDICAL INSTITUTIO N OR ANY TRUST OR INSTITUTION REFERRED TO IN CLAUSE (23C) OF SECTI ON 10; OR (G) FROM ANY TRUST OR INSTITUTION REGISTERED UNDER SECT ION 12AA.] EXPLANATION- FOR THE PURPOSE OF THIS CLAUSE, RELAT IVE MEANS- I. SPOUSE OF THE INDIVIDUAL; II. BROTHER OR SISTER OF THE INDIVIDUAL; III. BROTHER OR SISTER OF THE SPOUSE OF THE INDIVIDUAL; IV. BROTHER OR SISTER OF EITHER OF THE PARENTS OF THE INDIVIDUAL; V. ANY LINEAL ASCENDANT OR DESCENDANT OF THE INDIVIDUA L; VI. ANY LINEAL ASCENDANT OR DESCENDANT OF THE SPOUSE OF THE INDIVIDUAL; VII. SPOUSE OF THE PERSON REFERRED TO IN CLAUSE (II) TO (VI).] FROM THE AFORE MENTIONED PROVISION IT IS CLEAR THA T THE PROVISION OF SECTION 56(2)(V) HAS BEEN AMENDED BY INSERTING CLAUSE(V) B Y FINANCE ACT,2004 AND THE SAME WAS APPLICABLE ON THE TRANSACTIONS TAKEN PLACE BETWEEN 01.09.04 TO 01.04.06 WHEREIN IN THE PRESENT CASE, THE TRANSACTION HAD TA KEN MUCH BEFORE THE SAID TIME I.E. ON 02.07.04 THEREFORE, AMENDMENT PROVISION OF SECTI ON 56(2)(V) ARE PROSPECTIVE IN NATURE AND NOT RETROSPECTIVE IN NATURE AND THUS ARE APPLICABLE W.E.F. 1.09.04. LD. 9 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO CIT(A) HAS APPLIED THE AMENDED PROVISION WITH RETRO SPECTIVE EFFECT. THIS INTERPRETATION OF CIT(A) IS IMPROPER AND BAD IN LA W AND IS THUS UNSUSTAINABLE. 5.3 FURTHER AS PER THE FACTS OF THE PRESENT CASE, A SUM OF RS.2,00,000/- WERE DELIVERED AS GIFT BY JITESH MEHTA TO THE ASSESSEE T HROUGH ACCOUNT PAYEE CHEQUE AND THE SAID AMOUNT HAS BEEN CREDITED IN THE ACCOUNT OF THE ASSESSEE WHICH MEANS THAT THE GIFT AMOUNT WAS TRANSFERRED BY JITESH MEHTA TO THE ASSESSEE AND THE SAME WAS ALSO ACCEPTED BY THE ASSESSEE. THERE IS NO PRE COND ITION IN SECTION 122 OR123 OF TRANSFER OF PROPERTY ACT WHICH DEFINES GIFT THAT TH E DONOR OR DONEE SHOULD BE RELATED TO EACH OTHER. HOWEVER IN THE INCOME TAX AC T THERE WAS AN AMENDMENT IN SECTION 56(2)(V) WHICH WAS BROUGHT INTO EFFECT BY F INANCE ACT, 2004 AND WAS EFFECTIVE FROM 1 ST SEPTEMBER, 2004. HOWEVER, IN THE PRESENT CASE THE GIFT WAS RECEIVED BEFORE THE AMENDMENT PROVISION COME ON TO THE STATUTE BOOKS I.E. 02.07.2004 THEREFORE AMENDED PROVISIONS ARE NOT APP LICABLE TO THE FACTS OF THE CASE. AND EVEN OTHERWISE AS PER THE FACTS BROUGHT OUT ON THE RECORD SHRI JITESH MEHTA WAS HAVING FRIENDLY RELATION WITH THE ASSESSEE THER EFORE HE WAS COMPETENT TO GIVE THE SAID AMOUNT BY WAY OF GIFT TO THE ASESSEE. 10 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO 5.4 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCU MSTANCES AND THE PROVISION OF LAW, WE DIRECT THE AO TO DELETE THE ADDITION. WITH ABOVE OBSERVATIONS WE ALLOW THESE GROUNDS OF APPEAL. 6. GROUND NO. 3 IS GENERAL IN NATURE AND NEEDS NO S EPARATE ADJUDICATION IN VIEW OF THE DECISION ON ABOVE GROUNDS. 7. IN THE RESULT, THE ASESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2016 SD/- SD/- (RAJENDRA) (SANDEEP GOSAIN) $ / ACCOUNTANT MEMBER &' $ / JUDICIAL MEMBER ( ) MUMBAI; *$ DATED :18.03.2016 PS. ASHWINI / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ''12 , 12# , ( ) / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE 11 ITA NO. 645/MUM/2013 (A.Y. 2005-06) SHAILESHKUMAR M. GANDHIVS.ITO / BY ORDER, / !'# (DY./ASSTT. REGISTRAR) #$ %, ( ) / ITAT, MUMBAI