2013 (11) TMI 931 - AT - Income Tax

Unexplained income - Bogus entries in books of accounts - Receipt of gift not disclosed - CIT upheld disallowance - Held that - assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority - A.O. issued summon under section 133(6) of the Act to the donor Shri Sanjeev Goyal but he did not comply to that summon. Before the CIT(A), the A.O. contended that on sending notice under section 133(6) to the donor it was returned back un-served with the remarks of Postal Authority that nobody of the name of Shri Sanjeev Goyal lives on that address. The assessee expressed his inability to produce the donor. Under the circumstances, the A.O. has discharged his onus but the assessee failed in this regard, therefore, the contention of the ld. Authorised Representative is rejected. During the hearing, the ld. Authorised Representative referred a copy of gift deed. A question was asked that in the gift deed it is stated that the gift was given out of love and affection, therefore, what evidences have been filed by the assessee. The ld. Authorised Representative failed to point out any material or evidence in this regard that the gift was given out of love and affection. Apart from the above, I find that the CIT(A) has given his finding that there is no relationship between the donor and donee assessee. There is no occasion for giving of gift. The donor is neither produced by the assessee for examination, nor is traceable at the given address by the A.O. to verify the correctness of the gift deed and affidavit purported to have been issued by him, which is only a photocopy as filed by the assessee. During the assessment proceeding, creditworthiness of donor as well as the genuineness of the gift is not established. The CIT(A) held that, this amount is correctly added by the A.O. in the income of the assessee holding it his unaccounted money under the garb of bogus gift entry and therefore, he confirmed the addition of ₹ 1,00,000/- made in the assessment order. As regards to addition of ₹ 2,000/- on account of commission paid for obtaining the entry of gift, the CIT(A) held that since he has confirmed the decision of the A.O. holding receipt of ₹ 1,00,000/- in the hands of the assessee as unexplained gift being his unaccounted money, the CIT(A) found that the A.O. has made this addition because he found that the gift of ₹ 1,00,000/- shown by the assessee was not a real gift but a receipt of money in the form of income and such entries are given by the entry giver only after charging of some commission. The CIT (A) held that that the amount of ₹ 1,00,000/- received by the appellant is not a real gift and it is an entry of bogus gift, now the question arises whether such entry would be given by someone without charging any commission. As per human conduct and common market practice of giving of entry, it is not possible to take entry without paying commission - Following decision of Brij Mohan Agarwal Versus Assistant Commissioner Of Income-Tax And Another 2004 (4) TMI 61 - ALLAHABAD High Court and Commissioner of Income-Tax Versus P. Mohanakala 2007 (5) TMI 192 - SUPREME Court - Decided against assessee.

Summary

Issues Involved:
1. Validity of proceedings under Section 147 of the Income Tax Act.
2. Addition of Rs. 1,00,000 under Section 68 for a gift received.
3. Addition of Rs. 2,000 as commission on the impugned gift.
4. Legality of interest charged under Sections 234A and 234B.

Issue-wise Detailed Analysis:

1. Validity of Proceedings under Section 147:
The assessee challenged the reopening of the assessment under Section 147, arguing that the reasons recorded were incorrect and that the original return was not considered. The court found that the Assessing Officer (AO) had valid reasons to believe income had escaped assessment based on information from the Investigation Wing regarding bogus entries of capital gains and gifts. The court referenced the Supreme Court's ruling in *ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd.*, which clarified that only the first condition (reason to believe income had escaped assessment) needs to be satisfied for reopening under Section 147, not both conditions required under the old provisions. The court upheld the reopening, stating that the AO had sufficient cause and justification based on the investigation report.

2. Addition of Rs. 1,00,000 under Section 68:
The AO added Rs. 1,00,000 to the assessee's income under Section 68, treating it as unaccounted money disguised as a gift. The assessee failed to produce the donor for examination, and the donor's address was found to be incorrect. The court noted that the assessee did not establish the donor's creditworthiness or the genuineness of the gift. The court referenced the Supreme Court's ruling in *CIT v. P. Mohankala*, which emphasized that the burden of proof lies on the assessee to establish the genuineness of the gift. The court upheld the addition, concluding that the gift was not genuine and was rightly added as the assessee's unaccounted income.

3. Addition of Rs. 2,000 as Commission:
The AO added Rs. 2,000 as commission for obtaining the bogus gift entry, estimating it at 2% of the gift amount. The court upheld this addition, invoking Section 114 of the Evidence Act, which allows the court to presume the existence of facts likely to have happened based on common human conduct and business practices. The court reasoned that it is improbable to obtain such entries without paying a commission, and the assessee failed to provide evidence to the contrary.

4. Legality of Interest Charged under Sections 234A and 234B:
The court found that the interest charged under Sections 234A and 234B was consequential to the additions made and directed the AO to adjust the interest accordingly.

Conclusion:
The court dismissed the appeals, confirming the validity of the proceedings under Section 147, the addition of Rs. 1,00,000 under Section 68, the addition of Rs. 2,000 as commission, and the consequential interest charges under Sections 234A and 234B. The court emphasized that the assessee failed to substantiate the genuineness of the gift and the related transactions, leading to the upholding of the AO's additions and actions.