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2019 (10) TMI 853 - AT - Income TaxAddition of gift - addition u/s 68 - HELD THAT - Regarding these three gifts, assessee could not establish the credit worthiness of the transaction and it is by now a settled position of law that the assessee has to establish identity and creditworthiness of the donor as well as genuineness of the transaction. Regarding Abbubakar, deposit of ₹ 2.20 lakhs in question could not be properly explained even by Abbubakar in course of statement recorded by the AO u/s 131 and it is also noted by the AO that this deposit is not on account of conversion of dollars whereas other deposits of very smaller amount were on account of conversion of dollars. When the deposit of ₹ 2.20 Lacs in the bank account of Abubaker could not be explained by Mr. Abubaker and such deposit is not on account of dollar conversion as other deposits, it has to be accepted that the creditworthiness of the donor and genuineness of the transaction is not established and under these facts, we find no infirmity in the order of CIT (A) on this issue. Regarding gift from P.V. Gangadharan, it is true that he could not be located because of his death but it is also true that P.V Gangadharan was not related to the assessee in any manner. Merely because money has come through banking channels, genuineness of the transaction is not established, even if we accept that identity and credit worthiness is established. Gift to unrelated person is not a normal human behavior. No relationship with Gangadharan has been pointed out whether blood relationship or friendship or any other relationship. Similarly, in respect of Oswal Pinto, even correct address could not be brought on record by the assessee. This is also not shown that Oswal Pinto is related with assessee in any manner whether blood relationship, friendship or any other relationship. Hence, on this issue, regarding these three gifts, we find no reason to interfere with the order of the CIT(A). Additions of each being loan from Maxim Lobo and Madhukmar - AO came to conclusion that genuineness of the transaction was not proved by the assessee. He made addition of this amount also. It is by now settled position of law that in respect of addition u/s 68 in respect of cash credit, the assessee has to establish three ingredients i.e. identity of the creditor, credit worthiness of the creditor and genuineness of the transaction. Regarding loan from Madhukumar, he has in fact denied about any loan to assessee and he was an employee with assessee only with a monthly salary of ₹ 2000 per month. Regarding Maxim Lobo, assessee could not provide even correct address. Hence, we are satisfied that the assessee could not establish identity of both these creditors and their credit worthiness and genuineness of the transaction and hence, on this issue also, we find no reason to interfere with the order of the CIT(A) Additions each in respect of two blank cheques each from A.H. Timbers and Jyothi Apparels - HELD THAT - As submission was brought to the knowledge of the assessee by the AO and the AO stated in the assessment order that in spite of this, assessee did not have anything to say by filing reconciliation or rebut the evidence given by him in the form party s own statement. In the synopsis filed before us also, it is stated by the ld. AR of the assessee that these advances were given by the assessee out of pigmy collections made by the assessee from various parties and hence, source of these two advances by the assessee is explained. Regarding source of advances, general statement is made that the same is out of pigmy collections from various parties without giving even any one name of such parties and hence, on this issue also, we find no reason to interfere with the order of the CIT(A). Addition being advance to M/s.Kumble Associates - no confirmation has been brought on record from M/s Kumble Associates in support of the contention of the assessee that this cheque was given by them without any loan given by the assessee to him or any other person. Hence, we find no reason to interfere with the order of the CIT(A) on this issue also. Addition in respect of deposit in KSRTC - HELD THAT - This submission of the assessee is not acceptable because father-in-law of assessee, Raghuram Hegde and never stated at any time during the course of his statement recorded on 12/4/2001 and 4/5/2001 that he had made said payment on behalf of his son-in-law. No evidence has been brought on record before us in support of this contention that this amount was deposited by the father-in-law of the assessee with KSRTC and on refund of that amount from KSRTC, this was gifted by his father-in-law to the assessee. In absence of any evidence in support of this contention, we find no reason to interfere with the order of the CIT(A) on this issue also. Addition in respect of insufficient drawings - HELD THAT - As stated by the assessee before AO that his monthly expenditure is ₹ 3,000 to ₹ 5,000 per month and he was meeting the same out of his drawings only and not from any other source. Regarding expenses towards house warming, it was submitted that by assessee before the AO that only a few family members were invited and the total expenses were about ₹ 15,000/- although it was noted that as per the statement of assessee s wife, minimum 100 persons including relatives and friends had been invited for function. AO estimated the expenses of the assessee at ₹ 6,500/- p.m. for entire block period. In this manner, he worked out expenses of ₹ 7,99,500/-. Total drawing shown by the assessee and his wife is ₹ 2,65,353/- and shortage of ₹ 5,34,147/- was added. We find that the assessee himself has admitted before AO that his monthly expenses are around ₹ 3,000 to ₹ 5,000/- per month and the AO has estimated such monthly expenses at ₹ 6,500/- per month and computed total expenses during block period of 123 months at ₹ 7,99,500/- without making any separate addition in respect of house warming party. As per details of club expenses noted by the AO at page 25 of the assessment order, such club expenses are ₹ 31,944/- during October 1998 to March 1999 and in addition to that, telephone expenses of about ₹ 1500/- p.m. during February 1996 to May 1999 as per details noted by the AO at page 25 of the assessment order. Under these facts, estimation of monthly household expenses of ₹ 6500/- per month during block period is not excessive/unreasonable and hence, on this issue also, we find no reason to interfere with the order of the CIT(A).
Issues Involved:
1. Validity of search. 2. Unexplained investment in residential flats. 3. Gifts received from various persons. 4. Loans received from individuals. 5. Unaccounted payments to Mr. John D Souza. 6. Advances to A.H. Timbers and Jyothi Apparels. 7. Advance to Kumble Associates. 8. Unexplained cash credit from KSRTC. 9. Insufficient drawings. 10. Interest under section 158BFA(1). Detailed Analysis: 1. Validity of Search: The Tribunal was directed by the Karnataka High Court to examine the validity of the search. However, the assessee chose not to press this issue, and the additional grounds regarding the validity of the search were rejected as not pressed. 2. Unexplained Investment in Residential Flats: The assessee contested an addition of ?55,000 for unexplained investment in a residential flat. The AO noted a discrepancy between the investment declared by the assessee and the information received from the construction company. The Tribunal restored the matter to the AO for fresh decision, directing that the reply from the construction company be confronted to the assessee and the details of the closed bank account from which the payment was made be provided. 3. Gifts Received from Various Persons: The assessee disputed additions related to gifts from Abbubakar (?1.20 lakhs), P.V. Gangadharan (?1.30 lakhs), and Oswal Pinto (?1 lakh). The Tribunal upheld the AO's findings, noting that the assessee failed to establish the creditworthiness and genuineness of the transactions. Abbubakar could not explain a significant deposit in his account, Gangadharan was deceased, and the assessee could not provide a correct address for Oswal Pinto. 4. Loans Received from Individuals: The assessee contested additions of ?50,000 each from Maxim Lobo and Madhukumar. The Tribunal upheld the AO's findings, noting that Madhukumar denied giving any loan and was an employee earning ?2,000 per month. The address for Maxim Lobo was insufficient, and the assessee could not establish the identity, creditworthiness, or genuineness of the transactions. 5. Unaccounted Payments to Mr. John D Souza: The Tribunal had previously restored this issue to the AO for fresh decision, directing that the assessee be given an opportunity to cross-examine John D Souza. The Tribunal reiterated this direction in the present proceedings. 6. Advances to A.H. Timbers and Jyothi Apparels: The assessee contested additions of ?50,000 each for advances to A.H. Timbers and Jyothi Apparels. The Tribunal upheld the AO's findings, noting that the assessee's explanation regarding the source of the advances was not substantiated with specific details or evidence. 7. Advance to Kumble Associates: The assessee contested an addition of ?35,000 related to an advance to Kumble Associates. The Tribunal upheld the AO's findings, noting that no confirmation was provided from Kumble Associates to support the assessee's contention that the cheque was given as surety without any loan transaction. 8. Unexplained Cash Credit from KSRTC: The assessee contested an addition of ?2,43,900 related to a deposit from KSRTC. The Tribunal upheld the AO's findings, noting that the assessee failed to provide evidence that the amount was deposited by his father-in-law and subsequently gifted to the assessee. 9. Insufficient Drawings: The assessee contested an addition of ?1.50 lakhs for insufficient drawings. The Tribunal upheld the AO's estimation of monthly household expenses at ?6,500 per month, noting that this estimation was reasonable given the club and telephone expenses incurred by the assessee. 10. Interest Under Section 158BFA(1): The assessee's contention regarding interest under section 158BFA(1) was noted as consequential, and no specific arguments were advanced. Conclusion: The appeal was partly allowed for statistical purposes, with specific issues restored to the AO for fresh decision and other grounds rejected based on the findings of the AO and CIT(A). The Tribunal directed the AO to provide the assessee with adequate opportunities to present evidence and cross-examine relevant individuals where necessary.
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