TaxTMI 
TaxTMI 
2013 (7) TMI 1248
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..... Shri K.Sirajudeen is the proprietor of M/s.S.T.Travels and partner in M/s.S.T.Couriers and M/s.N.R.Associates. Shri K.Navaskani is also carrying on business in the same field. Their brother Shri K.Ansari is a non resident Indian carrying on business activities in the Kingdom of Saudi Arabia (KSA) and other Arabian countries. He is designated as the General Manager of M/s.S.T.Cargo S.P.C. in Bahrain at Manama. He is also associated with M/s. Supreme Worldwide Cargo Express, M/s.Skyline International Cargo Agency, operating in KSA, Kuwait and Dubai and other Arabian countries. The main business carried on by M/s. S.T.Cargo SPC, Bahrain is providing forwarding and stevedoring services. M/s.Skyline International Cargo Agency is engaged in cargo movements and logistics. The other business interest is that of international courier services. 3. Shri K.Ansari, as per the accounts and details produced by the assessees, has remitted funds from abroad in favour of the assessees, who are his brothers. In the previous year relevant to the assessment year 2009-10 Shri K.Ansari had remitted Rs. 35,14,579/- into the account of Shri K.Sirajudeen. In the previous years relevant to the assessmen....
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....he total amount thus remitted by Shri Ansari and reflected in the capital accounts of the assessees, thus comes to Rs. 11,86,66,902/-. 5. In the course of the assessment proceedings, the Assessing Officer proposed to treat all the above foreign remittances as unexplained cash credits under section 68 of the Act, for the reason that the assessees have failed to adduce evidences to prove that these amounts were remitted by Shri K.Ansari from his foreign accounts. The assessees tried to explain before the Assessing Officer with various details that these amounts have been remitted by Shri K.Ansari from abroad and Shri K.Ansari had sufficient sources to make such remittances in their favour. They furnished the bank statements before the Assessing Officer to show that all the remittances have been made through banking channels. The statements were obtained from Standard Chartered Bank, with which the assessees are maintaining regular accounts. The bank has certified that all these remittances have been received from foreign bank accounts. The assessees have also produced copies of authorization for fund transfer from abroad to the Indian bank accounts. These advices were issued by Ex....
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....essees. 9. Having the Assessing Officer made the above stated additions under section 68 and the Commissioner of Income-tax(Appeals) confirmed these additions, the assessees have come in appeals before us praying for the deletion of the above additions on the ground that the lower authorities have come to an unsustainable finding in the light of the speaking evidences produced before them. The only issue raised in all these appeals, therefore, is the question of addition made by the assessing authority under section 68 in these files. The facts are similar; the grounds are the same and the issue is the same. Therefore, all these appeals are disposed of by this common order. 10. We heard Shri B.Ramakrishnan, the learned chartered accountant appearing for the assessees. The learned chartered accountant has submitted that the assessees have produced all the essential and necessary evidences before the lower authorities to prove that the disputed amounts were remitted by Shri K.Ansari from abroad in favour of the assessees. The learned chartered accountant explained that the identity of the donor is established, the means of transfer of funds are proved, the creditworthiness of t....
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....43 (Del). 13. In the above cases the Hon'ble courts have held that mere identification of the donor and showing the movement of the amounts through banking channels is not sufficient to prove the genuineness of gifts. There must be some occasion to make a gift either to a relative or a friend and flow of funds cannot be a regular feature. The burden in respect of a gift is somewhat heavier than the burden of a loan, as the gift is a gratis payment and involves consideration of human conduct. 14. The learned Commissioner of Income-tax has also heavily relied on the judgment of the Hon'ble Supreme Court rendered in the case of CIT vs. P.Mohanakala, 291 ITR 278. In the said judgment the Hon'ble Supreme Court has examined the various segments of the statute stated in section 68 whereby an addition made under section 68 is justified or not justified. Section 68 provides that an addition may be made when the assessee offers no explanation about the nature and source of such credits found in the books, or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. The court held that the expression "the assessee offers no explanation" means....
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.... only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 3. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. 4. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. 5. In case where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory, there is, prima facie, evidence against the assessee. 6. The burden is on the assessee to rebut the prima facie evidence and if he fails to rebut it, it can be held against the assessee and it was a receipt of income nature. 18. The observation made by the Hon'ble Madras High C....
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.... have been made directly by Shri K.Ansari by debiting his accounts maintained in foreign countries. As already stated, all the payment advices issued by the foreign exchange agencies are in the name of the assessees. The necessary payments were made through Bahrain Exchange Company WLL and Al Mulla International Exchange Co. Ltd. by persons like M/s. A.A.Siddiq, Hassan, M.Mohamed Ismail, Abbas, Mohd. Hassan and A.A.Siddiq. In many cases it is not Shri K.Ansari who has directly remitted funds through exchange companies for issuing payment advices in favour of the assessees. But, the question is whether the mere fact that the amounts were remitted by other persons through the exchange companies will lead to a finding that such funds did not belong to the donor Shri K.Ansari? Shri K.Ansari is holding a senior position of General Manager in the company by name M/s. S.T.Cargo SPC at Manama in Bahrain. His full name in foreign records as per his passport is Ansari Kader Meera Gani. As already stated, he is associated with other businesses in KSA, Kuwait, etc. It is the name of Shri K.Ansari that is given in the Director's Report of S.T.Cargo SPC, available at page 68 of the paper-book. T....
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.... and no direct remittance by Shri K.Ansari. One of the additional objections raised by the Commissioner of Income-tax(Appeals) is that the assessees have not proved the exact relationship with the donor Shri K.Ansari. Even the Assessing Officer has no such case. Throughout the proceedings before the lower authorities the assessees have produced evidences wherein the names of Shri Ansari as well as the assessees are intermingled and Shri Ansari had filed confirmations before the Assessing Officer to state that he has remitted funds in favour of his brothers, who are the assessees in these cases. We do not understand as to what provoked the Commissioner of Incometax(Appeals) to raise such an unexpected objection that the assessees have not proved the exact relationship with the donor Shri K.Ansari. It is writ large on the materials available on record that Shri K.Ansari and the assessees are brothers. 24. The next additional objection raised by the Commissioner of Income-tax(Appeals) is that the assessees have not explained the occasions on which the gifts were made by way of remittances. It is to be seen that Shri K.Ansari has not made the gifts on any particular occasion. The as....
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....certificate shows that within a period of seven years, i.e. from 2004 to 2010, Shri Ansari was paid a total remuneration of 8,27,226 Kuwati Dinars as remuneration. This is equivalent to a sum of 12,92,21,170/- Indian Rupees. Therefore, there is no factual support to the finding of the Commissioner of Income-tax(Appeals) that Shri K.Ansari had no resources to remit large sums to the extent of more than Rs. 11 crores to his brothers in India. Taking the remunerations from M/s.Skyline International Cargo Agency and M/s.Supreme Cargo Express together, the income of Shri K.Ansari during the relevant period was more than Rs. 13 crores. 26. It is also necessary to see that the Commissioner of Income-tax(Appeals) has called for a remand report from the assessing authority regarding the nature of gifts received by the assessees from Shri K.Ansari. In the remand report submitted by the Assessing Officer, the relevant contentions raised by the assessees have been found to be correct on the basis of reexamination of the records made by him. It is stated in the remand report that all the foreign remittances were directly credited in the bank accounts of the assessees on the basis of the tran....
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....ned. Therefore, the full circle of the events has come to a logical conclusion, whereby there is no ground to disbelieve the explanations offered by the assessees. It is not a case where the assessees have established only the identity of the donor and the mode of transfer of funds. The assessees have proved all the necessary ingredients of the claim made by them. 29. The Hon'ble Supreme Court in the case of CIT vs. P.Mohanakala, 291 ITR 278, among other things, has held that "the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion." In the present case, the finding of the Assessing Officer has been arrived at without adhering to any of the observations made by the Hon'ble Supreme Court. When the assessees have produced all the credible evidences to support the transfer of funds from abroad, the Assessing Officer is rhetorically....