2012 (9) TMI 1170

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....e CIT (appeal) fails to appreciate that there was  no evidence to disapprove the gift. 6. That CIT appeal erred in not appreciating the law laid  down by Hon'ble Delhi High Court on the issues involve. 7. That the CIT failed to appreciate that order of I.T.O. is  based on presumption and guess work contrary to the  documentary evidence submitted by applicant. 8. That the order of CIT appeal is bad in law."   2.  Besides, in ITA No. 1724/Del/2010 vide ground no. 9 the assessee has also questioned charging of interest u/s 234 B of the Act.  3. From the above common grounds we find that the issues involved are as under:   (i) As to whether re-opening initiated is valid? (ii) As to whether the gifts in question were genuine? (iii) The third issued raised in ITA No. 1724/Del/2010 is regarding the validity of charging of interest u/s 234 B of the Act.    4.  There is no dispute that facts are identical in both the appeals.   Issue No.-1   5. The relevant facts are that the assessee's derived interest income from deposits in the banks and also from post office....

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....specific allegation against the assessees that the gifts donated by him to them were bogus. The AO on the basis of general statements by Mr. Harish Kumar imagined that the gifts donated by him to the assessee are bogus. The ITO during the assessment proceedings only called Mr. P.L. Bajaj by issuing notice u/s 131 to investigate gift given by Mr. Harish Kumar to him. He accepted that entry was accommodation entry and ITO was justified in adding the same to the income of Mr. Harish Kumar. But no notice u/s 131 was ever issued by the ITO to other persons, whose names appeared in the bank account of Mr. Harish Kumar, neither he enforced their attendants nor made any investigation in relation to the gifts given by Mr. Harish Kumar to Mr. Ramesh Chawla (HUF) or Ms. Kanika Chawla, the assessees herein. The Ld. AR pointed out further that the AO while issuing notice u/s 148 completely ignored that the IT Act has got amended w.e.f. A.Y. 2005-06 by Finance Act (No. 2)  2004, where the gift to the person other than relatives is taxable as income from other sources u/s 56 (2) (v). In the present case reopening is legally not correct because these gift were executed in August/ September 20....

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....ees had furnished copy of gift deeds, and affidavits of Mr. Harish Kumar (page no. 27 & 28 of the paper book). He contended that in his statements recorded by the AO, Mr. Harish Kumar has not made any adverse comments in respect of gifts given to the assessees nor has raised any dispute regarding authenticity and correctness of gift deeds and affidavits. Neither the Assessing Officer nor Ld. CIT (A) has allowed the request of the assessee to cross-examine Mr. Harish Kumar in order to support the reasons recorded for the assessment and consequential addition even after repeated request. In support the ld. AR  referred page no. 11 and 12 of the paper book. The AO has made additions in question treating the gifts as bogus on the basis of general statements of the donor despite this fact that identity of donor and his creditworthiness is not undisputed. The amount in gift has been given through banking channel through account payee cheque. The said bank account has been declared by Mr. Harish Kumar in his statements made before the AO and the same was also subjected to scrutiny when his assessment was framed. The donor is PAN Card holder what he does in his books of account, donee....

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....cifically that the gifts in question given by him to the assessees were bogus and the money involved therein was the money of the assessees which came to him and in lieu thereof he had issued cheques of gift amount. The assessees were also not given opportunity to cross-examine Mr. Harish Kumar. It is an established proposition of law that statement of a person without affording opportunity to cross-examine him by the affected person cannot be relied upon and used against the said person. Thus keeping in mind the above discussed facts and in the absence of a positive evidence beyond doubt that the gifts amount were actually of the assessees, there was no reason to doubt the genuineness of the gifts in question. Besides, it also remained to examine by the AO that the donor had already paid tax on the amount gifted to the assessees. The Ld. AR has placed reliance on a decision of Hon'ble Jurisdictional High Court in the case of Pawan Kumar Jain Vs. CIT (Supra) where the assessee had contended that L had filed a return for the assessment year 2006-07 declaring income of Rs. 1,48,50,705/- and had paid tax. The Hon'ble High Court held that the revenue had not suffered any loss, in asmuc....