TaxTMI 
TaxTMI 
2013 (11) TMI 931
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....p; 4. Because in any view, and without prejudice to the above grounds, additions made, interest charged u/s 234A and 234B, and the Assessment Order passed are wrong, illegal, without proper opportunity, bad in law and against the facts and law of the case." 3. The brief facts of the case are that the case of the assessee was reopened under section 147 of the Income Tax Act, 1961 ('the Act' hereinafter) after recording following reasons:- (Page no.1) "An information has been received from the Addl. Commissioner of Income Tax, Range-1, Agra vide letter F. No. LTCG/Addl. CIT/R-1/Agra/2007-08/1933 dated 20-3-2008 regarding bogus entries of Long Tem/Short Term Capital Gain and bogus gifts etc. has been found bogus as a result of enquiries made by the Inv. Wing. On enquiries it has been found that the bank accounts from which money has been transferred to various beneficiaries have been operated by certain stock brokers who have been providing entries to the beneficiaries by showing them transaction made by them in purchase and sale of shares of certain companies, gifts from certain persons, which in fact never took place. The ....
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....mstantial evidences, etc. are to be considered while deciding the taxation matters. The Income-tax authorities can penetrate the veil and go behind the façade to ascertain the truth. They cannot put blinkers on their eyes while examining the genuineness of transaction. At the present conditions of the society when no person would part with even a small amount as gift without any reason, occasion and even relationship, how it can be accepted that a person in Delhi can give gift to the strangers having no relationship or consideration? The AO held that it is a clear cut example of a tax avoidance, which is not permissible as per the decisions of the Hon'ble Supreme Court mentioned above. 6. The A.O. made addition as under:- "In view of the above Court decision and the facts of the case that the assessee has introduced his unaccounted money to the tune of Rs. 1,00,000/- under the garb of bogus gift entry and the same is, therefore, added under section 68 of the I.T. Act, 1961 under the head Income from Other Sources to the income of the assessee from undisclosed sources. Since it has been held that the assessee has taken gift entries, a commission....
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....g the original return filed by the appellant in which the alleged gift has not been shown. In this regard, I would like to rely on following decisions of the Hon'ble Supreme Court and jurisdictional High Court in which the reopening of assessment on the basis of report of the Investigation Wing and other officers of the Income Tax Department was held to be valid:- 1. Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 450 (SC) 2. ITO v. Purshottam Dass Bangur 224 ITR 362 (SC) 3. Brij Mohan Agarwal v. ACIT [2004] 268 ITR 400 (All.) Here, it may also be noted that the initial return filed by the assessee (appellant) for the relevant assessment year was only processed u/s. 143(1)(a) and no scrutiny of this return was carried out by the department u/s. 143(3). Therefore, the genuineness of the gift Rs. 1,00,000/- claimed to have bean received by the assessee from Shri Sanjeev Goyal could not be examined before the receipt of the above information. It has already been held by the Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhavery Stock Brokers Pvt. Ltd. (2007) 161 Taxman 316that the return processe....
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....d in initiating proceeding u/s 147 after receiving the information of the nature as discussed in the assessment order and also discussed in para no.3 of this order keeping in view the decision of the Hon'ble Supreme Court in case of CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra). Now, the next question to be examined with regard to validity of proceeding u/s.147 is that whether the AO was justified in reopening the proceeding after receiving information from Addl. CIT, Range-1 and whether the contention raised by the appellant in this regard that the reasons recorded are on untrue facts is correct or not. In this regard also, I rely on the judgment of the Hon'ble Supreme Court in case of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) in which the Hon'ble Supreme Court has analyzed the scope of newly substituted section 147 in the Income Tax Act, 1961 w.e.f. 01.04.89. The relevant portion of this decision is reproduced as under :- "The scope and effect of section 147 as substituted with effect from 1.4.89, as also sections 148 to 152 are substantially different from the provisions as they stood prior to su....
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.... tax department, even then the Hon'ble Supreme Court in the above cited case held that reopening of the case u/s. 147 was valid because the audit objection gave a cause or justification for reopening of the case. In the present case, the AO is on more strong footing because in this case, there was no objection from any authority outside the department on the income disclosed by the appellant but proper information was gathered by the Income Tax Department on the basis of investigation carried out by its investigation wing that certain brokers were found involved in giving entries of bogus capital gain and bogus gift and the name of the assessee (appellant) was also found from their records as beneficiaries of such entry. Therefore, the principle laid down by the Hon'ble Supreme Court for reopening of the assessment u/s. 147 in case of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) is found to be more appropriate in the present case because the Supreme Court has held in this decision that if the AO for whatever reason (here the reason with the AO is that he got information from the Investigation Wing through his Range Addl. CIT that this assessee has received an entry....
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.... by brokers (which was examined by the Investigation Wing) along with draft making charges of Rs. 250/- paid to the bank out of which, a demand draft dated 11.06.2000 of Rs. 1,00,000/- was prepared and given to the assessee which was later deposited in his bank account by clearing on 17.06.2000 and subsequently, during the proceeding u/s.147, this amount was claimed to have been received by the assessee as gift but genuineness of such gift could not be substantiated by him because of his failure to produce the donor as well as to explain his relationship with the donor and occasion of receiving the gift and found to be just entry as per the information of the Investigation Wing. Therefore, such information on the basis of which this case was reopened cannot be said to be untrue at least in substance, though there may be slight mistake in recording the name of the person in whose name the alleged bank account existed from where the alleged money was paid claimed to be gift by the assessee (appellant). At the time of recording the reasons, the AO was not required to make all the enquiries and the information given in the report of the Investigation Wing was sufficient for him to draw....
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.... ITR 435, CIT v. Anil Kumar [2001] 292 ITR 552 (Del), Sandeep Kumar (HUF) v. CIT [2007] 293 ITR 294 (Del), Rajeev Tandon v. ACIT 294 ITR 488 (Del), & ITO v. Naveen Kumar Agarwal [2008] 25 SOT 253 (Delhi) and the decision of Punjab & Haryana High Court in the case of Tirath Ram Gupta v. CIT 304 ITR 145 and the decision of Hon'ble ITAT, Agra in the case of Smt. Satyawati Singhal v. ITO, Agra vide ITA No.04/Agr/2006 dated 27.04.2007, I am of the considered opinion that the gifts of Rs. 1,00,000/- shown by the appellant is not genuine gift and hence, they are receipt of money of an income nature as held by the Hon'ble Supreme Court in the case of CIT v. P. Mohankafa (supra) and hence, this amount is correctly added by the AO in the income of the assessee (appellant) holding it his unaccounted money under the garb of bogus gift entry and therefore, I confirm the addition of Rs. 1,00,000/- made in the assessment order. 6.11 As regards to addition of Rs. 2,000/- on account of commission paid for obtaining the entry of gift challenged in Ground No.2 is concerned, I have confirmed the decision of the AO holding receipt of Rs. 1,00,000/- in the hand of the a....
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.... and private business practice. Since the details of real affairs relating to receipt of Rs. 1,00,000/- was not provided by the appellant, such presumption is justified in view of section 114 of the Evidence Act, 1872. Therefore, I also confirm the decision of the AO to estimate this amount at 2% which comes to Rs. 2000/-. The addition of this amount of commission of Rs. 2000/- is confirmed by me as the addition of the gift being unexplained money is confirmed by me. 6.12 As both the addition of Rs. 1,00,000/- and Rs. 2,000/- as challenged in Ground No.2 has been confirmed by me as discussed above, the Ground No.2 is dismissed." 9. The ld. Authorised Representative submitted that the assessee was not dealing in shares. The details given in reasons recorded and finally addition made is different. The ld. Authorised Representative submitted that wrong/incorrect reasons have been recorded. The ld. Authorised Representative submitted that reasons cannot be supplemented. The ld. Authorised Representative submitted that there is no reason to believe, therefore, reopening itself is bad in law. The ld. Authorised Representative in support of his contention relied upon f....
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....the validity of said notice. In the counter-affidavit filed by the respondent, it was stated that Investigation Wing of the Department conducted search and seizure operations under section 132 against some share brokers. It was revealed in said operation that the assessee was involved in bogus transactions of shares with some share brokers, and sale of shares shown by him in his return of income was incorrect. It was thus alleged by the respondents that in such circumstances, they had a reasonable ground to believe that income of the assessee had escaped assessment for which proceedings under section 148 were to be initiated.3. The assessee was a HUF and Brij Mohan Agarwal is the karta of the family. The relevant assessment was year 2001-02. It was alleged in para 6 of the petition that the main source of income of the petitioner is from house property. The assessee enjoys income from the house property which is said to be commercial premises. It is alleged in para 7 of the petition that during financial year 1999 the petitioner purchased 8,400 shares of M/s. Charismatic Trade links Ltd. and the purchase of these shares was duly shown in the relevant income-tax return for that year....
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....assessment year 2001-02 has claimed profit of Rs. 7,62,282 for long-term capital gain on sale of 8,400 shares for Rs. 7,89,180 and has claimed income-tax chargeable @ 10 per cent as special rate. From the finding of the investigation wing and as per the record the respondent had reason to believe that the assessee has diverted and has concealed his income of Rs. 5,98,800 by disclosing it to be sale proceeds of shares which is not correct as no real transaction of dealing in shares had even taken place. The assessee alleged in para 20 of the writ petition that the purchase of shares is not in dispute, the sale of these shares is also not in dispute. The aforesaid shares have not been transferred in favour of M/s. Yadav & Co. by the concerned company. Merely on the basis of the statement of a third person, reassessment proceedings cannot be initiated against the petitioner. It is alleged in para 22 of the writ petition that the sale value of shares have been disclosed and has been accepted and there is no dispute in respect of sale value of the shares. The complete sale value has been shown in the original return of income filed by the petitioner and hence i....
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....about the allegations in the counter-affidavit. All that the Court has to see at this stage as to whether it can be said that the authority concerned had reason to believe that the assessee had concealed his income or that the correct income of the assessee has escaped assessment. In view of the investigation made by the Investigation Wing of the Department, relevant and very material facts have come before the respondent No. 1 that the petitioner was concealing his income by indulging in bogus transactions. All that is required at the stage of issuing of notice under section 148 is that the belief of the ITO must be that of an honest and reasonable person based upon reasonable grounds and not on mere suspicion, gossip or rumours. 17. In the present case, we are of the opinion that the belief of the respondent No. 1 was an honest and reasonable belief on the material which he had received from the Investigation Wing of the Department. In Ranbir Engg. Mills Store v. ITO [1980] 126 ITR 512 (Punj. & Har.), consequent upon craids conducted by the Income-tax Department on certain brokers and examination of the books of a certain person, it was found that many o....
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....is of the Bombay Stock Exchange Directory and other information. The said letter was received by the ITO on 26-3-1974. On 27-3-1974, he issued a notice under section 147(b) whereby the assessee was informed that the ITO had the reason to believe that assessee's income chargeable to tax for the assessment year 1969-70 had escaped assessment and, therefore, the assessing authority proposed to reassess the income for the said assessment year and the assessee was required to deliver to him a return in the prescribed form of his income for the said year. Feeling aggrieved by the said notice, the assessee filed writ petition. The High Court had held that on the facts and in the circumstances of the case, it could not be said that the ITO had in his possession information in consequence of which he could have reason to believe that income chargeable to tax had escaped assessment for the relevant assessment years. The notices were, therefore, quashed. On appeal to Supreme Court held as under :- "The High Court has proceeded on the basis that the said letter of Shri Bagai did not contain any information and that there was neither evidence of manipulation nor ev....
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....e was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the ITO had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned judgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. No order as to costs." 14. In the light of the above discussions and judgments, if I consider the facts of the case under consideration, I do not see any substance in the submissions of the ld. Authorised Representative that the reasons recorded on account of sale of shares and addition made on different account of gift, is different because in the reasons recorded it is clearly stated about both types of transactions bogus entries of long term/short term capital gain and bogus gifts. It is also relevant to state that information received from....
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....credit in the hands of the donee because donee credited gift amount his/her capital account and being treated as own money/capital. Normally such credit entry in capital account can be made only of the transaction which has been processed through the provisions of the Income Tax Act. It appears from reading of section 68 of the Act that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee then, it is for the Income-tax Officer to be satisfied whether the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly the persons from whom money is alleged to have been received actually existed or not. Secondly depending upon the facts of each case, the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depos....
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.... by applying the test of human probabilities. It has been further held as under:- "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 18. I would also like to refer one more judgment of Hon'ble Apex Court in the case of P. Mohanakala (supra). In this case, following questions have been answered....
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....rom the foreign donor. He noticed that the gifts have been sent in the name of Ariavan Thottan and received by A. Srin ivasan and others who are all his family members. Each one of them is an individual assessee. All the assessees were summoned and their statements have been recorded by the Assessing Officer. Srinivasan who is the key person in his statement said that he knew Sampathkumar for the last 20 years and he had been helping Sampathkumar prior to 1985 by paying Rs. 100 to 200 every month as he had no source of income to get himself educated. Sampathkumar in his own statement stated that he was in Indonesia up to the year 1992 and employed as an engineer. Thereafter, he shifted to England and started consultancy profession there. Later in the end of the year 1994-95, he joined New Century Machinery Ltd., Cheshire, SK 16 4xS and became its director in 1996. It is in his statement that he is paying taxes in England from his income earned in England. As far as his Indian income is concerned, he stated that he filed the returns for the assessment years 1996-97 and 1997-98 before the Income-tax Officer, Ward 1(4), CBE only on October 23, 1997. His investment in Indian companies ....
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....e explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority. All the decisions cited and referred to hereinabove are required to be appreciated and understood in the light of the law declared by this court in Sumati Dayal [1995] Supp 2 SCC 453. Whether the High Court was justified in interfering with the concurrent finding of fact arrived at by all the authorities including the Tribunal? The Assessing Officer found that all the so-called gifts came from Ariavan Thotan and Suprotoman. The assessees did not declare that they are the aliases of Sampathkumar. It is only an afterthought they have come forward with the said plea. The Assessing Officer also found that the gifts were not real in nature. Various surroundings circumstances have been relied upon by the Assessing Officer to reject the explanation offered by the assessees. The Commissioner of Appeals confirmed the findings and conclusion drawn by the Assessing Officer. The Tr....
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....contention of the ld. Authorised Representative is rejected. During the hearing, the ld. Authorised Representative referred a copy of gift deed which is at page no.6 of assessee's Paper Book. A question was asked that in the gift deed it is stated that the gift was given out of love and affection, therefore, what evidences have been filed by the assessee. The ld. Authorised Representative failed to point out any material or evidence in this regard that the gift was given out of love and affection. Apart from the above, I find that the CIT(A) has given his finding that there is no relationship between the donor and donee assessee. There is no occasion for giving of gift. The donor is neither produced by the assessee for examination, nor is traceable at the given address by the A.O. to verify the correctness of the gift deed and affidavit purported to have been issued by him, which is only a photocopy as filed by the assessee. During the assessment proceeding, creditworthiness of donor as well as the genuineness of the gift is not established. The CIT(A) held that, this amount is correctly added by the A.O. in the income of the assessee holding it his unaccounted money under the ....