TaxTMI 
TaxTMI 
TaxTMI 
2010 (10) TMI 905
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....ction 131 was also issued which was not complied with. Since, no explanation was brought on record by the assessee, the Assessing Officer completed the assessment after relying on the decision-Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), Northern Bengal Jute Trading Co. Ltd. v. CIT [1968] 70 ITR 407 (Cal.). Since none appeared, the assessment was completed under section 144. 5. In appeal the learned CIT(A) has dismissed the appeal of the assessee while relying on the decision-Sajan Dass & Sons v. CIT [2003] 264 ITR 435 (Delhi) and has brought on record the complete details of the donors who have given gifts and has discussed the capacity etc., of the donors at length while dismissing the appeal. 6. The assessee is in appeal before us. 7. The Counsel of the assessee has brought to our notice that the assessment was completed keeping in mind no accounts maintained under section 144. There was no proper opportunity of hearing to the assessee for explaining the gift. The assessee has filed paper book with brief facts and submissions and citations relied. The complete details of the donors including their PAN, cheque numbers for giving gifts, date and amounts and relied on the decisi....
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....d capacity was declared on record with additional record like financial statement, income expenditure accounts and copy of the return. The learned DR has not brought on record any reasonable material before us to falsify the claim of the assessee except the summons were issued but were not complied with and the donors have not been examined leading for addition. Since the assessee has brought on record the PAN and donation paid through banking channel it is substantiated and reasonable for us to conclude that identity, transaction and capacity was proved. At this stage the sources to sources cannot be proved. The Assessing Officer has to take into account the material on record, which includes PAN, return of income, income expenditure account, balance sheet, affidavit, confirmation, bank account from where the money was gifted. Therefore, we are of the opinion that the addition made by the Assessing Officer is unjustifiable and unreasonable. Our views get support from the orders i.e., CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78 (SC), Khandelwal Constructions v. CIT [1997] 227 ITR 900 (Gau.), Jalan Timber's case (supra), CIT v. Sundaram Fasteners Ltd. [1997] 223 ITR 455 &....
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....er has also issued notice under section 143(2). The assessee has filed relevant materials before him and assessment was completed after discussion. Here, issuance of summons under section 131 and its non-compliance does not lead to the conclusion that the addition made for non-satisfaction for gifts while passing assessment order under section 144 is misleading because of non-application of mind. Since the learned Counsel appeared and filed relevant records, the Assessing Officer has not issued another summon nor the learned CIT(A) considered the material record produced before him which are on record before us. Therefore, it is presumed that the Revenue is targeting the assessee by having undue, unjustified additions which cannot be sustained in the eyes of law and within the provisions of the Act; whereas it is expected from the Revenue that the orders of assessment and appeal should be reasonable with application mind. 15. In the result, we allow the appeal of the assessee by deleting the addition which is confirmed by the learned CIT(A). ITA No. 104/Gau./2006 : Assessment year 2002-03 16. The appeal is directed at the instance of the assessee. 17. The Assessing Officer whil....
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....e is partly allowed. 27. In the result, all the appeals of the assessees are disposed of as discussed above in the order. ORDER B.R. Kaushik, Accountant Member. - I have perused the order of the ld. Judicial Member. With due respect for the reasons discussed hereinafter, I do not agree with him that the amount of Rs. 9,33,000 in the case of Smt. Madhu Raitani and Rs. 8,00,000 in the case of Smt. Sumita Raitani, both residing at Nirmal Sagar Apartments, Old Post Office Lane, Rehabari, Guwahati, treated as undisclosed income of the respective assessees for the reasons that the claim of gifts were found not genuine by the lower authorities, deserves to be deleted as held by him as per his proposed order. 2. The facts of these cases are similar. The Assessing Officer made the additions treating the claim of gifts as discussed above as not genuine for the following reasons :- (1)The substantial amount of gifts were given by third parties who were neither the relative of the assessee nor there was any occasion of giving the gifts. (2)The alleged donors were not having enough income to take care of their own personal expenses. (3)The gifts were shown by cheque but the amount of gif....
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....er of the ITAT was not valid. In the case of Jalan Timbers (supra ) it was held that the Tribunal, did not make any endeavour to give any cogent reason why the income-tax returns filed by the creditors and accepted by the Income-tax Officer should be ignored. With due respect, these decisions are, therefore, not applicable to the facts of the cases before us. 5. With due respect the claim of gifts cannot be accepted only because the alleged donors have filed returns of income below taxable limit and shown the gifts in their respective balance sheets, in view of the detailed reasons given by the lower authorities. With due respect, we cannot also reverse the findings of the lower authorities merely accepting the submissions of the assessee. 6. In the case of Sumati Dayal (supra) it was held by the Hon'ble Apex Court that : ".....in view of section 68 of the Income-tax Act, 1961, where any income is found credited in the books of the assessee for any previous year it may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfac....
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....capacity of the donors and the genuineness of the transactions could not be proven. The action of the lower authorities cannot, therefore, be considered wrong. 10. In the case of CIT v. Shanti Swarup [2002] 255 ITR 655 (Punj. & Har.) the reference was rejected because the finding had been given by the ITAT on pure appreciation of evidence in the form of affidavits of the creditors whose statements were also recorded by the lower authorities and only after perusing the evidence recorded by the appropriate authority. Since the parties were neither produced for examination nor their statements were recorded nor any other evidence was filed in the case before us, the claim of gifts, with due respect, cannot be accepted and the decision in the case of Shanti Swarup ( supra) is not applicable to the facts of the case before us. 11. The Hon'ble President as Third Member in the case of Ashok Kumar Narwania v. ITO [2005] 95 ITD 103 (Chd.) (TM) has held that since the assessee had failed to show that the alleged donor had the capacity and sufficient income to make the gifts in question the assessee's claim of gift could not be accepted as established and the additions made by the Assessing....
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....ble President, ITAT under section 255(4) of Income-tax Act, 1961. The question referred in these cases is common and the same reads as under :- "Whether on the facts and circumstances of the case, the lower authorities were justified in considering the amount of Rs. 9,33,000 in the case of Smt. Madhu Raitani and Rs. 8,00,000 in the case of Smt. Sumita Raitani claimed to have been received as gift by the respective assessees as their income from undisclosed sources?" 2. The facts and issue of these cases in respect of aforesaid two assessees are identical, except variation in amount of gift and persons claimed to have made gifts to the assessee. The ld. Members also have proposed their common orders in respect of these two appeals. Therefore, for the sake of convenience, I dispose of these appeals by this consolidated order and deal with the first appeal in the case of Smt. Madhu Raitani [IT Appeal No. 51 (Gauhati) of 2006]. ITA No. 51 (Gau.) of 2006 (Smt. Madhu Raitani) 3. At the time of hearing before me, the learned counsel for the assessee narrated the facts of the case as found by the ld. Members and then made his submission in support of the order proposed by ld. J.M. The ....
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....before the Assessing Officer, nor were they produced by the assessee. 5. The addition was upheld by the ld. CIT(A). He observed that the persons claimed to have made gifts were not relatives of the assessee. He further stated that merely furnishing of PAN and return of income of the alleged donors declaring income below the taxable limit and in some cases involving marginal tax effect did not establish the capacity of the donors to make gifts. According to the ld. CIT(A), cash in hand of the aforesaid persons as shown in their respective balance sheet was abnormally high. He also doubted the genuineness of the alleged gifts by stating that the donors did not have any F.D. or other investments and that the income was too small to meet their own expense. He thus upheld the action of the Assessing Officer and relied on the following decisions in support of his finding :- Sumati Dayal's case (supra) Sajan Dass & Sons' case (supra) Lall Chand Kalra v. CIT [1981] (Punj. & Har.) 6. Aggrieved with the said appellate order of ld. CIT(A), the assessee preferred appeal before the Tribunal on the following two issues :- (A)Vide Ground No. 1 - The department erred in making addition under....
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....plicable to the facts of the present assessee. According to the ld. A.M., the claim of gifts cannot be accepted, because the alleged donors have filed returns showing income below taxable limit and they reflected the gifts in their respective balance sheets. Concurring with the reasons given by the lower authorities, he held that the findings of the authorities below cannot be reversed merely accepting the submissions of the assessee. He further held that the real test is that identity and capacity of the creditor as also the genuineness of the transaction should be established by the assessee and in this case the capacity of the donors and genuineness of the transactions having not been proved, the claim of the assessee has been rightly rejected by the lower authorities. He thus proposed for confirmation of the addition of Rs. 9,33,000 made under section 68 of the Act on account of bogus gift. In support of his said conclusion, the ld. A.M. relied on the Third Member decision of ITAT, Chandigarh in the case of Ashok Kumar Narwania ( supra), apart from decisions which have also been relied upon by the ld. CIT(A) and mentioned in para-5 above. 9. The learned counsel for the assesse....
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...., therefore, these returns are to be considered as, accepted in terms of section 143(1) of the Act. In this connection, he placed reliance on (i) P.K. Sethi v. CIT [2006] 286 ITR 318 (Gauhati) and (ii) Asstt. CIT v. Kamini Finance & Investment Co. Ltd. [2002] (Gauhati) (Mag.). 12. In regard to the observation of the lower authorities duly endorsed by the ld. A.M. that the source of income of the donors does not permit them to make gifts to the assessee, the learned counsel submitted that the lower authorities have failed to establish by any cogent material that the assessee's undisclosed money came back to her en-route bogus gifts. He placing reliance on the following judicial pronouncements submitted that the addition made by the lower authorities disbelieving the genuine gifts, which has been confirmed by the ld. A.M. in his proposed order, may be deleted and the order of ld. J.M. be upheld :- (a) CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) (b) Nemi Chand Kothari's case (supra) (c) Orissa Corpn. (P.) Ltd.'s case (supra) (d) CIT v. Bedi & Co. (P.) Ltd. [1998] 230 ITR 580 (SC) (e) CIT v. Currency Investment Co. Ltd. [2000] 241 ITR 494 (Cal.). 13. The ld. D....
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....iance on Smt. Shanta Devi v. CIT [1988] 171 ITR 532 (Punj. & Har.) held as under :- "The Assessing Officer before invoking the power under section 68 must be satisfied that there are books of account maintained by the assessee and the cash credit is recorded in the said books of account and if the assessee fails to satisfy the Assessing Officer, the said sum so credited has to be charged to income-tax as the income of the assessee of that previous year. The existence of books of account is a condition precedent for invoking of the power. Discharging of burden is a subsequent condition. If the first point is not fulfilled the question of burden of proof does not arise. .... In the facts and in the circumstances, section 68 had no application at all to this case." [Emphasis supplied] The ratio of the said decision of Hon'ble jurisdictional High Court is squarely applicable to the case of the present assessee. Admittedly, the assessee maintains no books of account and that is why the Assessing Officer in his assessment order has also written against the method of account as 'No A/cs'. It is an established position that existence of books of account maintained by the assessee i....
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....r, the Assessing Officer has recorded the finding that "Summon under section 131 was issued which was also not complied with by the assessee." It is, therefore, evident that no notice was ever issued on the donors asking their appearance before the Assessing Officer in relation to the gifts made by them. The above facts have also been brought on record by the ld. CIT(A) in his order where he has stated that "Though the Assessing Officer has not brought the details of the donors vividly in the assessment order, it would be very relevant to extract the details on the basis of the documents furnished before the Assessing Officer". Even the ld. CIT(A), who is enjoying powers coterminus with the Assessing Officer, has also failed to verify the genuineness of the gift from the donors and held on surmise and conjecture that the gifts were nothing but colourable device to evade tax. 18. It is also not disputed that all the donors have filed their returns of income for assessment year 2002-03 and paid taxes accordingly. It is stated at the bar by the learned counsel for the assessee that no proceedings in regard to these returns have been initiated by the department and, therefore, the sam....
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....the assessee. The Hon'ble Supreme Court in the case of Daulat Ram Rawatmull (supra) has held that the onus of proving that the apparent is not real was on the party who claimed it to be so. The revenue could not bring any conclusive evidence to establish that donors from whom the gifts were received were bogus and the assessee's own undisclosed money came back to her en-route bogus gifts. The above position is also supported by the decision of the Hon'ble Gauhati High Court in the case of Nemi Chand Kothari (supra), wherein their Lordships of jurisdictional High Court while explaining the scope of section 68 of the Act has observed as under :- ".... The logical conclusion, therefore, has to be that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer to the transactions, which took place between the assessee and his creditor but the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is, under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited." Accordi....
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....ce of the respondent, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence." The above decision of Hon'ble Supreme Court was with regard to loan taken by the assessee while the appeal before the Tribunal is relating to gifts received by the assessee. However, in the case of cash credit, the assessee has to prove the identity of the creditor, the creditworthiness of the creditor and the genuineness of the transaction so as to discharge the burden lay upon him. Similarly in the case of gift, the donee has to prove the identity of the donor, the creditworthiness of the donor and the genuineness of the gift so as to discharge the onus. Thus, ingredients which are required to be proved to discharge the onus of proving the cash cred....
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....llant did not really participate in any of the races, except purchasing the winning tickets after the events. The Chairman of the Settlement Commission expressed dissenting opinion and stated that the assessee has produced the evidence in support of the credits in the form of certificates from Racing Clubs. The Hon'ble Supreme Court upheld the majority view of the Settlement Commission and held at page 808 of the report as under :- "The observation by the Chairman of the Settlement Commission that "fraudulent sale of winning tickets is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the Direct Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972, whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc., was withdrawn. Similarly, the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place....
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....le Delhi High Court rendered on different set of facts is directly on the issue involved in the case of the present assessee, inasmuch as, to reiterate, the undisputed facts in the present case are that all the donors have confirmed having made gifts by them to the assessee. 25. The ld. A.M. also relied on Third Member decision in the case of Ashok Kumar Narwania (supra) to hold that the addition made by the Assessing Officer and confirmed by the ld. CIT(A) was justified. In this case also, the ld. Third Member gave the decision on entirely different set of facts. In that case, the alleged donor had denied having made any gift to minor daughters of the assessee. The assessee also could not have produced any evidence in support of income of the donor. It was in this context that the ld. Third Member has concluded that gifts said to have been received by the minor daughters of the assessee could not be accepted as genuine in view of the uncontroverted statement of the alleged donor denying such gifts and stating that he had no capacity to make gifts and, therefore, the alleged gifted money has to be treated as assessee's income from undisclosed sources as the minor daughters had no ....