2013 (11) TMI 1281 - AT - Income Tax

Income from undisclosed sources - Income from rent Agricultural Income - Addition u/s 68 Applicability of sec. 68 section 68 would has no application where the assessee was not maintaining any books of account Following Ms. Mayawati vs. DCIT, 2007 (11) TMI 328 - ITAT DELHI-A - The relationship was not necessary for making the gift the contention that the transaction entered into was merely an accommodation entry in the absence of any evidence being brought on record cannot be accepted. The onus is on the assessee to prove the identity, creditworthiness and the capacity of the donor - the donor had prima facie capacity to make a gift to the Donnee - Even it was also held that at the relevant time Indian currency could not be deposited in an NRE account - the AO was not correct in law in making the addition in the case of the assessee again in set aside proceedings - The AO was duty bound to provide the opportunity to cross examination - the proposition that if the request for permission to cross examine persons on the basis of whose statement the additions are made if not allowed the principles of natural justice stand violated and the order of the assessment is not valid - This is an admitted fact that in this case the AO could not produce Mohd. Shamim for the cross examination of the assessee - The basis of the addition is the statement of Mohd. Shamim whose statement has been recorded at the back of the assessee - Once the AO could not produce Mohd. Shamim for cross examination in view of the decision of this Tribunal dated 3rd July, 2006 no doubt the AO was bound to re-determine this issue on the basis of the other relevant material available on record Additions made by the AO was rejected Appeal Partly Allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the gift from Sh. Mohd. Shamim Khan.
3. Application of Section 68 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was barred by limitation by 111 days. The assessee filed an affidavit explaining the delay, citing illness and the absence of their authorized representative. The Tribunal, considering the affidavit and medical prescriptions, condoned the delay, stating that the assessee was prevented by reasonable cause from filing the appeal within the stipulated time.

2. Validity of the Gift from Sh. Mohd. Shamim Khan:
The main contention was the addition of Rs. 2,20,000/- on account of an alleged gift from Sh. Mohd. Shamim Khan. The Assessing Officer (AO) could not produce Sh. Mohd. Shamim Khan for cross-examination as he was in Dubai. Consequently, the AO disregarded his statement and examined the available records. The AO found it improbable that Sh. Mohd. Shamim Khan, a person of moderate means, would gift substantial amounts to unrelated individuals. The AO noted that the total gifts of Rs. 13 lakhs exceeded the total remittances of Rs. 12 lakhs from Saudi Arabia, indicating that the gifts were not genuine. The AO concluded that the gifts were funded by cash deposits in various bank accounts rather than foreign remittances. The CIT(A) confirmed this addition.

3. Application of Section 68 of the Income Tax Act:
The Tribunal considered the identical case of Avinash Chand & Sons where similar additions were deleted. It was noted that the assessee did not maintain any books of account, and therefore, Section 68, which pertains to unexplained cash credits in the books of accounts, was not applicable. The Tribunal highlighted that the AO failed to produce the donor for cross-examination, violating the principles of natural justice. It was pointed out that the AO relied on the donor's statement recorded at the back of the assessee, which was unjustified. The Tribunal referenced several judicial precedents, including the case of Ms. Mayawati vs. DCIT, which established that passbooks provided by banks do not qualify as books of accounts under Section 68. The Tribunal concluded that the AO's addition was not supported by sufficient evidence and deleted the addition.

Conclusion:
The Tribunal allowed the assessee's appeal, emphasizing that the AO did not provide adequate evidence to substantiate the addition and failed to follow due process by not producing the donor for cross-examination. The decision was pronounced in the open court on 8.2.2013.