INCOME-TAX OFFICER- 19(2)(2), MUMBAI V. SMT. RUKHSANA S. CONTRACTOR, MUMBAI

ITA 6710/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2624 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 21-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM; AJAY P SINGH
• Keywords: Gift; Business income; Set aside
• Section: 2; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI N.V. VASUDEVAN, J.M. AND SHRI A.L. GEHL OT, A.M. ITA NO. 6710/M/08 ASSESSMENT YEAR: 2005-06 INCOME TAX OFFICER, APPELLANT ROOM NO. 309, 3 RD FLOOR, PIRAMAL CHAMBERS, LALLBAUG, PAREL, MUMBAI 400 012. VS. SMT. RUKHSANA S. CONTRACTOR, RESPONDENT 601, SEA SPRKLE, OPP. M.C. SCHOOL, JUHU ROAD, SANTACRUZ(W), MUMBAI 400 054 (PAN AACPC5493M) APPELLANT BY : MR. AARSI PRASAD RESPONDENT BY : SHRI K. SHIVARAM & SHRI AJAY P. SINGH ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A)-XIX, MUMBAI, ON 4 TH SEPTEMBER, 2008 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN THE REVENUE HAS RAI SED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDI TION OF RS. 70,27,529/- MADE BY THE AO AS UNEXPLAINED CASH CRED ITS WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE CREDITWORTHINESS OF THE DONORS WHO MADE GIFTS TO TH E ASSESSEE. THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT THE TR ANSACTION MADE THROUGH PROPER BANKING CHANNEL IS SUFFICIENT TO PRO VE THE GENUINENESS OF THE TRANSACTION WITHOUT ESTABLISHING THE FINANCIAL CAPACITY OF THE DONORS. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. ITA NO. 6710/M/08 SMT. RUKHSANA S. CONTRACTOR 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSE SSEE HAS SHOWN IN CAPITAL ACCOUNT AN AMOUNT OF RS. 70,20,529/- REC EIVED AS GIFT. THE GIFTS AMOUNTING TO RS. 68 LAKH RECEIVED BY THE ASSE SSEE FROM HER HUSBAND MR. SIRAJ KUMAR, CONTRACTOR WHO IS NRI AND DOING BUSINESS IN DUBAI. ANOTHER GIFT OF RS. 2,27,529/- WAS RECEIV ED BY THE ASSESSEE FROM HER BROTHER MR. MANSOR SUTERWALA, WHO IS RESID ING IN USA. THE ASSESSEE FURNISHED CONFIRMATION AND OTHER DETAILS B EFORE THE AO. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE CREDITWORTHINESS, AND CAPACITY OF THE DONORS TO MAK E GIFTS. THE AO MADE THE ADDITION U/S 68 OF THE ACT. THE CIT(A) AFT ER EXAMINING THE ISSUE IN DETAIL AND HELD THAT THE ASSESSEE HAS PROV ED ALL THE INGREDIENTS, SUCH AS, IDENTITY, GENUINENESS AND CRE DITWORTHINESS OF THE DONORS. THE RELEVANT FINDINGS OF THE CIT(A) IN RESPECT OF THE CREDITWORTHINESS IS REPRODUCED BELOW:- AS REGARDS THE CREDITWORTHINESS OR CAPACITY OF THE DONORS, THE AO HAS RAISED DOUBTS. FROM THE WRITTEN SUBMISSION M ADE BEFORE THE AO AS WELL AS IN APPEAL PROCEEDINGS IT IS OBSER VED THAT THE OPENING BALANCE IN THE CAPITAL ACCOUNT OF THE DONOR HUSBAND WAS RS. 1,34,02,868/-. AFTER ADJUSTING THE WITHDRAWALS FOR THE YEAR WHICH INCLUDES GIFTS OF RS. 68,00,000/- TO WIFE (AP PELLANT) AND RS. 54,00,000/- HE STILL HAS ABOUT RS. 90 LAKHS LEF T IN BALANCE. THE DONOR IS REGULARLY ASSESSED TO IN INDIA IN WARD -19(1)(4). THE FINANCIAL CAPACITY OF THE DONOR IS AMPLY DEMONSTRAT ED. THE BUSINESS INCOME OF THE YEAR OF THE DONOR IS AN IRRE LEVANT CONSIDERATION. THE OTHER RELATED OBSERVATION OF THE AO THAT THE PERSONAL INCOME AND EXPENDITURE SHOWN A LOSS OF RS. 43 LAKHS IS NOT BORNE OUT BY FACTS BROUGHT ON RECORD. IN FACT R S. 43.16 LAKHS REPRESENTS EXCESS OF WITHDRAWAL OVER INCOME WHICH I NCLUDES RS. 1.22 CRORES AS GIFTS GIVEN. THE FACT OF GIVING GIFT S IS DEMONSTRATED IN THE STATEMENTS. COMING TO THE SMALL GIFT RECEIVED FROM THE BROTHER IN USA IT IS OBSERVED THAT THE APPELLANT HAD FILED AN AFFIDAVIT GIVING FULL DETAILS, CHEQUES, ETC. IT WAS SWORN STATEMENT MADE IN USA BY THE DONOR (BROTHER). COPY OF INCOME TAX RETURN OF MR. M ANSOOR SUTERWALA FOR 2005-06 BEFORE THE AUTHORITIES IN USA WAS ALSO FILED WHICH SHOWED RETURNED INCOME OF $ 69,400 WHIC H WHEN CONVERTED INTO INDIAN CURRENCY COMES TO ABOUT RS. 3 1.58 LAKHS. WHAT THE DONOR GIFTED WAS $5000 ONLY WHICH IS LESS THAN 8% OF HIS TOTAL INCOME EARNED. ITA NO. 6710/M/08 SMT. RUKHSANA S. CONTRACTOR 3 SINCE THE AO DID NOT ISSUE ANY NOTICE OR SUMMONS TO THE DONORS WHO COULD NOT BE PRODUCED BY THE ASSESSEE IT CANNOT BE INFERRED THAT THE DONORS DID NOT RESPOND TO THE NOTICE. THERE IS NO DENIAL OR REPUDIATION BY ANY DONOR THAT THEY HAVE NOT GIVEN ANY GIFTS TO THE APPELLANT. MOREOVER, THE GIFTS HAVE BEEN GIVEN BY THE HUSBAND TO HIS WIFE AND BY A BROTHER TO HIS SISTER. IT IS A NATURAL INS TINCT TO GIVE GIFTS TO THE CLOSELY RELATED PERSONS. BOTH THE DONORS ARE DIRECTLY AND CLOSELY RELATED TO THE APPELLANT. THERE IS NOTHING ON RECORD NO INVESTIGATED BY THE AO THAT THERE WAS ANY CONSIDERA TION FOR MAKING THE GIFTS. TO SUM UP THE APPELLANT HAS FULFILLED ALL THE PROPO SITIONS OF A LAW IN THE CONTEXT OF SECTION 68 OF THE ACT WHICH I S BASED ON DISTILLIATION OF THE PRECEDENTS ON THE SUBJECT. THE RE IS HARDLY ANY ADVERSE MATERIAL TO INFER OTHERWISE THAT THE GIFT I S NON-GENUINE. AS SUCH THE ADDITION ON BOTH THE ACCOUNTS AMOUNTING TO RS. 70,27,529/- IS DELETED. 3. THE LEARNED DR HAS RELIED ON THE ORDER OF THE AO WHEREAS THE LEARNED AR HAS RELIED UPON THE ORDER OF CIT(A). 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE AO MADE THE ADDITION U/S 68 OF THE ACT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE EVIDENCE IN SUPPORT OF CREDITWORTHINESS OF THE DONORS. ON PERUS AL OF THE ORDER OF CIT(A) WE FIND THE FACT THAT THE OPENING BALANCE IN CAPITAL ACCOUNT OF THE DONOR/ASSESSEES HUSBAND IS RS. 1,34,02,868/-. IN CASE OF ASSESSEES BROTHER MR. MANSOOR SUTERWALA THE RETURN ED INCOME IN THE INDIAN RUPEES IS RS. 31.58 LAKHS FILED BEFORE THE U .S. AUTHORITIES, OUT OF WHICH THE ASSESSEES BROTHER HAS GIFTED RS. 2,27 ,529/-. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE FURNISHED SUFFICIENT EVIDENCE AND ESTABLISHED THE CREDITWORTH INESS OF THE DONORS. IN THE LIGHT OF THE ABOVE DISCUSSION, WE CO NFIRM THE ORDER OF CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENU E IN THIS REGARD. ITA NO. 6710/M/08 SMT. RUKHSANA S. CONTRACTOR 4 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED ON THIS 30 TH DAY OF DECEMBER, 2009. SD/- SD/- (N.V.VASUDEVAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 30 TH DECEMBER, 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, D BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV S.NO. DESCRIPTION DATE INITLS 1. DRAFT DICTATED ON 24.12.09 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 29.12.09 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER