2014 (7) TMI 419 - AT - Income Tax

Appeal partly allowed, remanded for further verification. Assessee's right to be heard emphasized.

The appeal was partly allowed for statistical purposes, with several issues remanded to the AO for further verification and examination. The Tribunal ... Assessment of Gift amount – Proof of source of the gift - Held that:- The AO in the original assessment proceedings had assessed the gift only for the reason the donor did not explain the source for making the gift. In the present proceedings - the AO assessed the gift amount again for the reason that there is contradiction in the dates of making gift - the assessee had received loans from the donor in the earlier years and the said loan was converted into the gift - If that is so, the sources for making gift stands explained - the necessity of receiving gifts from specified relatives have been introduced into the Act only from the succeeding assessment year – thus, there was no reason to assess the gift receipt during the year - for the limited purpose of verifying the claim – the matter is remitted back to the AO - Decided in favour of Assessee. Assessment of Loan receipt – Held that:- The assessee has repaid a sum of ₹ 4.00 lakhs to Shri Vikram G Menda on 03.11.2003 – the cheque was realised on 06.11.2003 and he has used the proceeds to give a sum of ₹ 3,50,000/- to the assessee on 09.11.2003 - the source of the amount stands explained - In respect of the amount of ₹ 3,20,000/-, the lender Shri Deepak G Menda has encashed the mutual fund units and realised a sum of ₹ 3,19,141/- and the same was credited into his bank account on 25- 08-2003 - the lender has used the amount to make a deposit of ₹ 3,20,000/- into Fixed deposit - Shri Vikram G Menda has used the proceeds to advance a sum of ₹ 3,20,000/- to the assessee - the sources for giving the loan of ₹ 3,20,000/- also stands explained - Shri Vikram D Menda is also assessed to Income tax and he has been filing return of income for the past several years - there is no reason to suspect the credit worthiness of Shri Vikram D Mehta – thus, the order of CIT(A) is set aside – Decided in favour of Assessee. Assessment of loan amount - Held that:- The identity of the creditor stands proved since he happens to the son of the assessee and the details of his name, address, bank details, confirmation obtained from him etc. have been furnished - The genuineness of the transaction is also stands proved since the funds were received through banking channels - With regard to the credit worthiness, the assessee has furnished only copies of income tax return filed by the creditor - the lender was only 29 years old and the possibility of earning tuition income is remote - the assessee has failed to prove the credit worthiness of this creditor - the contentions of the assessee cannot be accepted that the receipt of money by way of cheque proves the credit worthiness of the creditor - the level of income declared in his return of income, thus, the order of the CIT(A) is upheld that the assessee has failed to prove credit worthiness of this creditor – Decided against Assessee. Assessment of Car Loan – Held that:- There was a closing balance of ₹ 1,84,811/- as at 31.3.2004 - the assessee has furnished a copy of ICICI bank statement - the AO has made the addition only on the reasoning that the assessee has failed to furnish necessary details - the relevant details have been furnished in the paper book requires examination – thus, the order of the CIT(A) is set aside and the matter is to be remitted back to the AO for fresh examination – Decided in favour of Assessee. Assessment of Sundry creditors balance – Held that:- There is no reason to suspect the remaining two purchases - In respect of M/s Gayatri Textiles, the assessee did not furnish the ledger account copy and hence we are unable to analyse the same – assessee submitted that the AO has made the addition without affording necessary opportunity to the assessee – the matter is remitted back to the AO – Decided in favour of Assessee. Addition relating to the difference in the cost of Flat – Held that:- The addition has been made only for want of reconciliation of the investment cost with sources - The explanations and details furnished by the assessee explains the sources - they require examination at the end of the AO – thus, the matter is remitted back to the AO for fresh examination – Decided in favour of Assessee. Unexplained source in purchase of flat – Held that:- Since the issue relating to Tridev Flats has been remitted back to the AO, thus, this matter is also liable to be remitted back to the AO – Decided in favour of Assessee. Issues Involved:Assessment of Gift amount, Assessment of Loan receipts, Assessment of Car Loan amount, Assessment of Sundry creditors balance, Assessment of difference in the cost of Flat, Assessment of unexplained source in purchase of flat.Detailed Analysis:1. Assessment of Gift amount of Rs. 1,60,000/-:The assessee received a gift of Rs. 1,60,000/- from H.T. Gajwani. The AO initially assessed the gift due to lack of proof of source. During the proceedings, the assessee provided return acknowledgements and a gift declaration from the donor. However, discrepancies in the dates led the AO to reassess the gift. The CIT(A) confirmed the assessment, citing the lack of a proper gift deed, unspecified source, and no blood relationship. The Tribunal noted that the necessity of receiving gifts from specified relatives was introduced in the subsequent year. The Tribunal set aside the matter to the AO for verification of the claim that the gift was from converted loan amounts received in earlier years.2. Assessment of Loan receipt of Rs. 6,75,000/-:The AO assessed a loan of Rs. 6,70,000/- from Shri Vikram D Menda, the assessee's son, due to doubts about his income sources. The Tribunal found that the loan transactions were through cheques, and the lender's bank statements and income tax returns substantiated the source of funds. The Tribunal concluded that the creditworthiness of Shri Vikram D Menda was proven and directed the AO to delete the assessment of Rs. 6,70,000/-.3. Assessment of Loan receipt of Rs. 1,45,000/-:The AO assessed a loan of Rs. 1,45,000/- from Dilip D Menda, another son of the assessee, due to doubts about his income and age. The Tribunal noted that while the identity and genuineness of the transaction were proven, the creditworthiness was not. Given the lender's age and low declared income, the Tribunal upheld the CIT(A)'s decision to confirm the assessment.4. Assessment of Car Loan amount of Rs. 1,84,819/-:The AO added the car loan amount due to lack of details. The assessee provided a bank statement showing a car loan from ICICI Bank. The Tribunal set aside the matter to the AO to examine the details and take a decision based on the provided information.5. Assessment of Sundry creditors balance of Rs. 9,31,896/-:The AO conducted inquiries with only five out of 24 sundry creditors and made additions based on those inquiries. The Tribunal found that the AO was not justified in making additions without material evidence for the remaining creditors. The Tribunal directed the AO to delete the addition for 23 creditors and to re-examine the details for M/s Gayatri Textiles after giving the assessee an opportunity to be heard.6. Assessment of Rs. 4,84,280/-, being the difference in the cost of Flat:The AO made an addition due to a lack of reconciliation of the investment cost with sources. The assessee provided a reconciliation statement showing contributions from his wife. The Tribunal set aside the matter to the AO to examine the reconciliation and explanations provided by the assessee and to make a decision accordingly.7. Assessment of Rs. 1,11,180/- as unexplained source in purchase of flat:The AO added Rs. 1,11,180/- as unexplained investment in the flat. The assessee claimed that the reconciliation statement explained the sources. The Tribunal set aside this issue to the AO for re-examination along with the issue of the cost difference in the flat.Conclusion:The appeal was partly allowed for statistical purposes, with several issues remanded to the AO for further verification and examination. The Tribunal emphasized the necessity of giving the assessee an opportunity to be heard in all matters.