2007 (7) TMI 661 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment framed under sections 147/148 of the IT Act, 1961.
2. Service of notice under section 148 of the IT Act, 1961.
3. Reliance on the statement of the donor, Smt. Sukhdev Kaur.
4. Presence of the advocate during the recording of the donor's statement.
5. Opportunity given to the assessee to controvert the affidavit filed by the donor.
6. Justification for rejecting the affidavit of the donor dated 8th Jan., 2003.
7. Capacity and genuineness of the gift given by the donor.
8. Overall genuineness of the gift and the donor's capacity to give the gift.

Detailed Analysis:

1. Validity of Reassessment under Sections 147/148 of the IT Act, 1961:
The assessee contended that the reassessment framed under sections 147/148 was invalid due to non-service of notice under section 148. However, the Tribunal upheld the reassessment, noting that the assessee had filed a return in response to the notice and actively participated in the assessment proceedings. This conduct amounted to a waiver of the right to claim non-service of notice, rendering the reassessment valid.

2. Service of Notice under Section 148 of the IT Act, 1961:
The assessee argued that the notice under section 148 was not served at the correct address. The Tribunal found that the assessee's participation in the assessment proceedings and filing of the return in response to the notice constituted a waiver of the requirement for proper service under section 282. The Tribunal cited several case laws to support the principle that procedural irregularities in the service of notice do not invalidate the reassessment if the assessee had knowledge of the notice and participated in the proceedings.

3. Reliance on the Statement of the Donor, Smt. Sukhdev Kaur:
The assessee claimed that the statement of Smt. Sukhdev Kaur was recorded at their back and should not be relied upon. The Tribunal found that the statement was recorded in the presence of the assessee's counsel, Shri V.K. Mittal, who was given the opportunity to cross-examine the donor. The Tribunal upheld the findings of the CIT(A) that the statement was recorded properly and could be relied upon.

4. Presence of the Advocate during the Recording of the Donor's Statement:
The assessee contended that their advocate was not present during the recording of the donor's statement. The Tribunal noted that the donor confirmed the presence of Shri V.K. Mittal, advocate for the assessee, during the recording of her statement and that he was given the opportunity to cross-examine her. This contention was rejected based on the clear evidence of the advocate's presence and participation.

5. Opportunity Given to the Assessee to Controvert the Affidavit Filed by the Donor:
The assessee argued that they were not given reasonable opportunity to controvert the affidavit filed by the donor. The Tribunal found that the AO had provided the assessee with an opportunity to respond to the affidavit, and the assessee had filed written submissions in response. The Tribunal upheld the CIT(A)'s finding that reasonable opportunity was given.

6. Justification for Rejecting the Affidavit of the Donor Dated 8th Jan., 2003:
The AO rejected the affidavit dated 8th Jan., 2003, purportedly filed by the donor, as she categorically denied having given any gift or filed such an affidavit. The Tribunal upheld the rejection of the affidavit, noting that the donor's statement and the supporting affidavit filed later clearly contradicted the claims made in the earlier affidavit.

7. Capacity and Genuineness of the Gift Given by the Donor:
The AO added the gift amount as unexplained cash credit under section 68, finding that the donor did not have the capacity to give the gift, there was no blood relation or occasion for the gift, and the circumstances were highly suspicious. The Tribunal upheld this finding, agreeing with the AO and CIT(A) that the assessee failed to prove the genuineness of the gift and the donor's capacity to give it.

8. Overall Genuineness of the Gift and the Donor's Capacity to Give the Gift:
The Tribunal concluded that the assessee failed to prove the genuineness of the gift and the donor's capacity. The donor's statement and the circumstantial evidence indicated that the gift was not genuine. The Tribunal upheld the addition of the gift amount as unexplained cash credit under section 68, dismissing the assessee's appeal.

Conclusion:
The appeal of the assessee was dismissed on all grounds, with the Tribunal upholding the reassessment and the addition of the gift amount as unexplained cash credit. The Tribunal found that the assessee had waived the right to claim non-service of notice, the donor's statement was reliable, and the assessee failed to prove the genuineness and capacity of the donor to give the gift.