TaxTMI 
TaxTMI 
2009 (1) TMI 906
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....s of ₹ 3,38,442." The brief facts relating to ground No. 1 are that the AO noted that the assessee has received gifts in cash totalling to ₹ 76,75,000 from 15 different persons. Accordingly, the show-cause notice was issued to the assessee. Summons under s. 131 were issued to the donors and subsequently 10 out of 15 donors appeared before the AO whose statements on oath were recorded. The finding in respect of each donor by AO is summarized in the following chart : Sl. Alleged donor Gift Gift Appeared Return Last Remarks 4. Sabbir Rafiq 5,50,000 No Yes 2004-05 Depariya 5. Sahin Safi 4,50,000 No Yes 2003-04, 2004-05 Dhorajiwala 6. Raees Rafiq 5,50,000 No Yes 2003-04, 2004-05 Depariya 7. Faruk 5,00,000 No Yes 2004-05 Mohmad H. Ghaniwala 8. Mohmed Saif 5,50,000 No Yes 2002-03, 2004-05 Abdul Sattar Visavadarwala 9. Anwar Gani 4,50,000 No Yes 2004 balances not explained-says gift was given on demand from A. 54,267 Trades in plastics scrap-no business premises opening capitals balances not explained. 48,093Trades in grey clothes-no business premises-gift allegedly given at the instances of father 54,662 Deals in cut....
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....r Lahorimal vs. CIT (2006) 200 CTR (Guj) 109 : (2006) 280 ITR 512 (Guj); 2. Addl. CIT vs. Hanuman Agarwal (1984) 40 CTR (Pat) 15 : (1985) 151 ITR 150 (Pat); 3. CIT vs. Shree Gopal & Co. (1994) 117 CTR (Gau) 357 : (1993) 204 ITR 285 (Gau); 4. Jalan Timbers vs. CIT (1997) 137 CTR (Gau) 649 : (1997) 223 ITR 11 (Gau); 5. Khandelwal Constructions vs. CIT (1998) 145 CTR (Gau) 65 : (1997) 227 ITR 900 (Gau); 6. Dy. CIT vs. Rohini Builders (2003) 182 CTR (Guj) 373 : (2002) 256 ITR 360 (Guj). On the basis of the decision in the case of Rohini Builders (supra) it was contended that the assessee is not supposed to prove the source of source. He was fair enough to concede that five donors did not appear. It is only the ten donors who appeared before the AO out of which nine have PAN. The five donors being ladies who were Pardanashin and therefore, did not appear. He carried out to the assessment order and the statement made by each of the donors. It was vehemently contended that the assessee has complied with all the ingredients of s. 68. It was also contended that to the extent the donors had confirmed the gifts and they were the income-tax assessees, if any addition is to be made, ....
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..... yr. 2004-05 showed that all of them had declared the income below ₹ 60,000. In respect of case law relied on by the assessee it was pointed out that those cases are not applicable to the facts of the case before us. On question from the Bench whether any action has been taken in those cases, whether the donors have confirmed in the statements recorded under s. 131 that they have given the gifts, the learned Departmental Representative said no action has been taken in those cases so far as he is aware of but he vehemently contended that the onus is on the assessee to prove the identity, creditworthiness and genuineness of the transactions. The assessee in this case has failed to prove all the ingredients and the addition has rightly been made by the AO and sustained by the CIT(A). We have carefully considered the rival submissions, and perused the material on record as well as the orders of the tax authorities. We have also gone through all the decisions relied upon before us by the both the parties. In order to appreciate the contentions urged before us, it would be appropriate to reproduce the provisions of s. 68 of the Act : "68. Cash Credits-Where any sum is foun....
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....f natural justice and provisions of s. 68. The expression "the assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books of account maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory must be based on proper appreciation of the material and other surrounding circumstances available on record. The opinion of the AO is to be based on appreciation of the material on record. The word "may" used in s. 68 provides discretion to the AO. In general the word "may" is an auxiliary verb clarifying the meaning of another verb of expressing an ability, contingency, possibility or probability. When used in a statute in its ordinary sense the word is permissive and not mandatory. But where certain conditions are provided in the statute and on the fulfilment thereof a duty is cast on the authority concerned to take an action, then on fulfilment of those conditions the word may take the character of "shall" and then it becomes mandatory. In s. 68, we find that there are no such condit....
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.... a given case and the Court(s) dealing with the same has to find out the true colour of the impugned transaction. The various Courts have given their verdicts with regard to the genuineness or ingenuity of the cash credits involved in the cases they were dealing with, in their own way. The gist of most of such decisions is that the onus to establish the identity and the creditworthiness of the creditor(s) and the genuity of the transaction(s) of a cash credit in question is cast upon the assessee. For a cash credit two parties are required. One is the assessee and the other is the cash creditor. No one can deposit his own money with himself in order to get benefit of s. 68. Another person should have deposited a sum of money with the assessee. This 'another person' cannot be a fictitious person but he should be a real person, who can be also a legal juristic person, which is permitted under the Act. The other person should have deposited his 'own money' and not the money of the assessee. Therefore, a maxim is created that if the real person deposits his own money with the assessee, the deposit is genuine and nothing else. In a sense all the three (sic) overall accepted generally,....
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.... in the spirit. The spirit of a decision is its soul. Yes, to follow the letter only is not that harmful, but the unfortunate part of it is, that the letters are torn out of context from a given judgment and the same are put where it does not fit. In this melee, the real meaning of a decision is lost. The most useful precedents are usually lost when only from an excerpt of a decision, entirely different meanings are drawn by different people. In the case before us this is an admitted fact that all the donors are income-tax assessees but it is only 13 persons who are having PAN. Shri Faruk Mohmad H. Ghaniwala and Smt. Irham Iqbal Tumbi did not have any PAN. Out of 15 donors only 10 donors appearing at serial Nos. 1 to 10 appeared before the AO, copies of their capital accounts and copies of acknowledgements of their IT returns were also filed. They accepted in the statements recorded under s. 131 that they have gifted the money to the assessee. We do not agree with the submission of the learned Departmental Representative that any person could have appeared before the AO and would have confirmed that they have given the gifts. Merely appearing before the AO does not prove the ident....
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.... by way of bank draft. The donor appeared before the AO and confirmed the gift made. The evidences for the source of gift were available with him. The Tribunal however held that motivation for making gift was not established and the addition was upheld. When the matter went before the High Court, the Hon'ble High Court held that the Tribunal failed to note the fact that the identity of the donor was established, donor having appeared in person before the AO, the genuineness of the transaction was established, not only by the receipt of the bank draft but also by the fact of the transaction having borne the gift-tax. The primary onus which rested with the assessee thus stood discharged. If the Revenue was not satisfied with the source of the funds in the hands of the donor, it was upto the Revenue to take appropriate action. The addition of ₹ 50,000 was held to be not justified. In the case of Mitesh Rolling Mills (P) Ltd. vs. CIT (supra) the facts were that the assessment under s. 144 was completed at total income of ₹ 2,50,127 while the return was filed at nil. While framing the assessment, the AO observed that the income under the head 'Business' is returned at nil, ....
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....ther sum of ₹ 80,000 to be disclosed one. The Tribunal confirmed the order of the first appellate authority. The Hon'ble High Court confirmed the order of the Tribunal and ₹ 2,33,414 was treated as undisclosed income of the assessee. When the matter went before the Supreme Court, the Hon'ble Supreme Court held : "Held, reversing the decision of the High Court, on the facts, that in reaching the conclusion that out of the capital of ₹ 3,33,414 credited in the books of the assessee on 30th March, 1948, assets of the value of ₹ 2,33,414 represented undisclosed income of the assessee, the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially or properly instructed as to the relevant law could come to such a finding. The business carried on by the assessee at Lahore was a reasonably large business though its extent could not be verified by any reliable material produced by the assessee; there was no material on which it could be said that the ornaments, jewellery and cash brought by the assessee and kept in the sealed trunk were of the value of only ₹....
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.... learned Departmental Representative but no action seems to have been taken in the cases of the donors. This is also a fact on record that the assessee has not commenced the business. The restaurant was under construction only. The assessee therefore could have not earned this much income from the business. The onus is on the assessee to prove the source of the amounts received by him. The assessee has produced some of the donors out of which nine are having PANs. Therefore, to the extent the five parties have not confirmed which are appearing at serial Nos. 11 to 15 amounting to ₹ 5,50,000, ₹ 5,75,000, ₹ 5,75,000, ₹ 4,50,000 and ₹ 4,75,000 totalling to ₹ 26,25,000, there is no evidence on record about the confirmations from the donor side that they have gifted the money to the assessee. We, therefore, confirm the addition to the extent of ₹ 26,25,000. Now coming to the gift received from Faruk Mohmad H. Ghaniwala amounting to ₹ 5,00,000, since the assessee could not place on record his PAN, therefore, we also treat this gift to be non-genuine and the addition in that regard is also confirmed. In respect of the other gifts received b....
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.... and accordingly the addition to the extent of ₹ 1,50,000 is deleted and for ₹ 50,000 the addition is confirmed. Thus, this ground stands partly allowed. Ground No. 3 relates to the addition of ₹ 52,000 due to low household withdrawal. The AO noted that there was withdrawal of ₹ 68,000 for the whole year. The AO has estimated the household expenses at ₹ 1,20,000 and therefore, made an addition of ₹ 52,000. When the matter went in appeal before the CIT(A), the CIT(A) confirmed the addition by observing as under : "14. It has been contended by the Authorised Representative that the assessee resided in a joint family. The AO had not brought any material evidence on record to show that the withdrawals of ₹ 68,000 was on the lower side, nor did he substantiate his estimation of household expenses at ₹ 10,000 per month. The addition therefore, was made clearly on conjectures and surmises. 15. I have carefully considered both the positions. The assessee is an influential businessman who runs a restaurant called 'Silver Nest'. He maintained two residential premises. He would thus have had to incur expenditure not only on the mainten....