9911796707
TMI Blog2010 (10) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, no such books having been maintained, there is no legal scope to intervene provisions of section 68 and as such, in my opinion, the ld. J.M. has rightly deleted the addition made on such premise. For arriving at the conclusion that the gift was not genuine and the same was undisclosed income of the assessee, the department ought to have brought on record evidence for such specific finding. Here in this case the department could not bring on record any evidence except alleging on presumption and suspicion that the gifts were bogus and represented assessee s undisclosed income. In these circumstances, this observation of the department, which was acceded to by the ld. A.M., without any conclusive material cannot lead to the inference that the amount was not gift but undisclosed income of the assessee. Reliance in this regard is placed on the decision of Hon ble Supreme Court in the case of Bedi Co. (P.) Ltd. [ 1998 (2) TMI 2 - SUPREME COURT] and decision of Currency Investment Co. Ltd. [ 1999 (6) TMI 12 - CALCUTTA HIGH COURT] wherein it has been held that when the assessee has disclosed the identity of the parties from whom it purchased shares and to whom it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g undisclosed income for Rs. 9,33,000 and directed for initiating penalty proceedings under sections 271(1)( c ) and 272A(1)( c ). 3. The assessee has filed return on 31-3-2003 for Rs. 21,78,660. The return was processed and selected for scrutiny and, therefore, notice under section 143(2) was issued. 4. During the hearing the assessee was asked to produce 7 persons to ascertain the donors capability etc. Summons under section 131 was also issued which was not complied with. Since, no explanation was brought on record by the assessee, the Assessing Officer completed the assessment after relying on the decision Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), Northern Bengal Jute Trading Co. Ltd. v. CIT [1968] 70 ITR 407 (Cal.). Since none appeared, the assessment was completed under section 144. 5. In appeal the learned CIT(A) has dismissed the appeal of the assessee while relying on the decision Sajan Dass Sons v. CIT [2003] 264 ITR 435 (Delhi) and has brought on record the complete details of the donors who have given gifts and has discussed the capacity etc., of the donors at length while dismissing the appeal. 6. The assessee is in appeal before us. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement etc., balance sheet along with cheque numbers and bank s details. From the above facts it is brought on record by the assessee that all the donors are taxpayers have filed the returns showing the gifts, routed through banking channel and the assessee has filed the confirmation/affidavit to substantiate the claim of the assessee for genuineness of the gift. 12. Since the assessee has disclosed the PAN, the mode of payment, through bank therefore, the identity and capacity was declared on record with additional record like financial statement, income expenditure accounts and copy of the return. The learned DR has not brought on record any reasonable material before us to falsify the claim of the assessee except the summons were issued but were not complied with and the donors have not been examined leading for addition. Since the assessee has brought on record the PAN and donation paid through banking channel it is substantiated and reasonable for us to conclude that identity, transaction and capacity was proved. At this stage the sources to sources cannot be proved. The Assessing Officer has to take into account the material on record, which includes PAN, return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved the genuineness of the gifts on the basis of PAN of the donors, bank pass book, by filing copies of the returns along with financial statements and other possible evidences. Therefore, we are of the definite view that the assessee has proved the gifts to be genuine. The efforts of the learned CIT(A) for dismissing the appeal on the ground of low and non-taxable income will not meet the end of justice to the Revenue unless the learned CIT(A) considers the relevant records before him. The Assessing Officer has also issued notice under section 143(2). The assessee has filed relevant materials before him and assessment was completed after discussion. Here, issuance of summons under section 131 and its non-compliance does not lead to the conclusion that the addition made for non-satisfaction for gifts while passing assessment order under section 144 is misleading because of non-application of mind. Since the learned Counsel appeared and filed relevant records, the Assessing Officer has not issued another summon nor the learned CIT(A) considered the material record produced before him which are on record before us. Therefore, it is presumed that the Revenue is targeting the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er should have applied their minds for considering the records placed before them i.e., PAN, bank statements, returns etc. Not doing so, the mere addition because of low and non-taxable income will not serve the purpose to meet the end of justice to the parties before us. 24. In the result, while relying on the decision relied by the assessee Anand Ram Raitani s case ( supra ) we allow the grounds of appeal against the revenue. 25. Ground Nos. 5 and 6 were not pressed and therefore, the same are dismissed. 26. In the result, the appeal of the assessee is partly allowed. 27. In the result, all the appeals of the assessees are disposed of as discussed above in the order. ORDER B.R. Kaushik, Accountant Member. - I have perused the order of the ld. Judicial Member. With due respect for the reasons discussed hereinafter, I do not agree with him that the amount of Rs. 9,33,000 in the case of Smt. Madhu Raitani and Rs. 8,00,000 in the case of Smt. Sumita Raitani, both residing at Nirmal Sagar Apartments, Old Post Office Lane, Rehabari, Guwahati, treated as undisclosed income of the respective assessees for the reasons that the claim of gifts were found not genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t observed that in a reference under section 256(1) it was not expected to re-appreciate the evidence and circumstances and to arrive at a finding on such appreciation and differ from the conclusion of the statutory authority or the appellate authority. Thus, with due respect, the ratio of the decision in the case of Shree Gopal Co. ( supra ) is not applicable to the facts of the case before us. Similarly, in the case of Raichand Kothari (HUF) v. CIT [1997] 223 ITR 250 (Gau.) it was held that the decision of the CIT(A) was reversed by the ITAT without a reasoned order and, therefore, the order of the ITAT was not valid. In the case of Jalan Timbers ( supra ) it was held that the Tribunal, did not make any endeavour to give any cogent reason why the income-tax returns filed by the creditors and accepted by the Income-tax Officer should be ignored. With due respect, these decisions are, therefore, not applicable to the facts of the cases before us. 5. With due respect the claim of gifts cannot be accepted only because the alleged donors have filed returns of income below taxable limit and shown the gifts in their respective balance sheets, in view of the detailed reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as gifts were received by way of cheques and the identity of the creditors and the fact of amount received by cheques were established. It was also held by the Hon ble Jurisdictional High Court that : "In order to establish the receipt of a cash credit, as required under section 68 of the Income-tax Act, 1961, the assessee must satisfy three conditions, viz., ( i ) identity of the creditor, ( ii ) genuineness of the transaction, and ( iii ) creditworthiness of the creditor." 9. With due respect, in the cases before us the amount of gifts discussed above claimed to have been received by the respective assessees were on different facts as the capacity of the donors and the genuineness of the transactions could not be proven. The action of the lower authorities cannot, therefore, be considered wrong. 10. In the case of CIT v. Shanti Swarup [2002] 255 ITR 655 (Punj. Har.) the reference was rejected because the finding had been given by the ITAT on pure appreciation of evidence in the form of affidavits of the creditors whose statements were also recorded by the lower authorities and only after perusing the evidence recorded by the appropriate authority. Since the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) of the Income-tax Act, 1961, for the opinion of the Third Member. The question framed is as under : "Whether on the facts and circumstances of the case the lower authorities were justified in considering the amount of Rs. 9,33,000 in the case of Smt. Madhu Raitani and Rs. 8,00,000 in the case of Smt. Sumita Raitani claimed to have been received as gift by the respective assessees as their income from undisclosed sources?" THIRD MEMBER ORDER D.K. Tyagi, Judicial Membe (As a Third Member) . - Since there was a difference of opinion between the ld. Members constituting "Guwahati Bench" of ITAT, Guwahati in respect of the aforesaid two appeals, I was nominated as Third Member by the Hon ble President, ITAT under section 255(4) of Income-tax Act, 1961. The question referred in these cases is common and the same reads as under : "Whether on the facts and circumstances of the case, the lower authorities were justified in considering the amount of Rs. 9,33,000 in the case of Smt. Madhu Raitani and Rs. 8,00,000 in the case of Smt. Sumita Raitani claimed to have been received as gift by the respective assessees as their income from undisclosed sources?" 2. The facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing section 68 of the Act. The reasons for such conclusion by the Assessing Officer and consequential addition to the total income were as below, which are also mentioned in para-2 of the proposed order of ld. A.M. : ( a )That substantial amount of gifts were given by third parties who were neither the relative of the assessee nor there was any occasion of giving the gifts. ( b )That the alleged donors were not having enough income to take care of their own personal expenses. ( c )That the gifts were shown by cheque but the amount of gifts were deposited in the bank accounts of the person concerned just before the issue of cheques for the alleged gifts. ( d )That prior to cash deposits utilized for alleged gifts, the cash balance in the bank accounts was nominal and subsequent to the gifts also, the cash balance in the respective accounts remained nominal. ( e )That summons issued were not complied with. Neither the parties appeared for examination before the Assessing Officer, nor were they produced by the assessee. 5. The addition was upheld by the ld. CIT(A). He observed that the persons claimed to have made gifts were not relatives of the assessee. He further sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heets, cash flow statement and confirmation/affidavits, except the bank account of Dinesh Kumar. The assessee was not required to prove the source of the source. ( iii )That although summons issued for producing the donors were not complied with, but the assessee has filed all the details of the donors and, therefore, the identity and capacity was declared on record with additional record like financial statement, income and expenditure accounts, IT returns etc. ( iv )That ld. D.R. has not brought on record any reasonable material before the Tribunal to falsify the claim of the assessee, except stating that that summons issued were not complied with by the donors, who could not be examined by the Assessing Officer. 8. The ld. A.M. in his proposed order differed with the views taken by the ld. J.M. by holding that the gifts are shown to have been received in cash from the third parties who are themselves not man of means. He thereafter distinguished the cases relied on by the ld. J.M. and held that these decisions are not applicable to the facts of the present assessee. According to the ld. A.M., the claim of gifts cannot be accepted, because the alleged donors have filed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the gifts from the respective donors, which are already on record. In their balance sheets, the gifts given to the assessee have been duly shown. He further submitted that no notice or summon under section 131 was ever issued by the Assessing Officer to the donors, which is evident from the assessment order itself. The ld. CIT(A) also without verification of genuineness of the gift indulged into speculation and confirmed the finding of the Assessing Officer that the gifts were nothing but colourable device to evade tax. He further submitted that the assessee has got no legal power to enforce the attendance of her donors before the Assessing Officer and as such addition on the ground that she had not produced donors cannot be sustained. Reliance was placed on Asstt. CIT v. India Tyre House [2001] 72 TTJ (Gauhati) 316 . 11. The learned counsel reiterated that all the donors are assessed to tax and paid taxes on their income declared for assessment year 2002-03. No proceedings in regard to these returns have been initiated by the department and, therefore, these returns are to be considered as, accepted in terms of section 143(1) of the Act. In this connection, he placed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed order relying on the decision of Hon ble jurisdictional High Court in the case of Anand Ram Raitani ( supra ) has held that in the case of the assessee, section 68 cannot be invoked. The facts before the Hon ble jurisdictional High Court were that the Assessing Officer found that there was a cash credit of Rs. 2 lakhs standing in the name of six persons including minors. The Assessing Officer asked the assessee to produce the creditors, but the assessee replied that the parties had confirmed the credits by their letters given earlier. The Assessing Officer observed that the assessee did not give any reason for non-production of the creditors in spite of the specific direction given by him. He examined the records of some of these parties and held that those parties would not have made the credits as claimed by the assessee. The Assessing Officer also observed that as the assessee was reluctant to produce the persons for verification, the cash credit could not be accepted. On the aforesaid facts, their Lordships of Hon ble jurisdictional High Court allowing the appeal of the assessee and placing reliance on Smt. Shanta Devi v. CIT [1988] 171 ITR 532 (Punj. Har.) held a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting the expenses of earning that income, to ascertain the net increase (profit) or decrease (loss) in the trader s net worth for the period. The balance-sheet lists the assets and liabilities and equity accounts of the company. It is prepared as on a particular day and the accounts reflect the balances that existed at the close of business on that day. The profit and loss account and the balance-sheet are not books of account as contemplated under the provisions of the Act ." [Emphasis supplied]. 17. Even on merits also, in my considered opinion, the ld. J.M. has rightly deleted the addition of Rs. 9,33,000 made under section 68 of the Act. From the orders of the ld. Members as well as lower authorities, I find that the assessee has furnished the copies of Acknowledgement of IT returns for assessment year 2002-03 of all the donors along with challans evidencing payments of tax, computation of income, balance sheet, declaration confirming the gift, etc., in support of her getting the gifts from the respective donors, which are already on record and placed on pages 20 to 50 of the paper book. In his assessment order, the Assessing Officer has recorded the finding that "Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give any cogent reason why the income-tax returns filed by the creditors and accepted by the Assessing Officer should be ignored. Further, the Commissioner (Appeals), after properly appreciating the materials before him, arrived at the conclusion that the creditors had the capacity to advance the loans to the assessee. Thus, the appeal was to be dismissed." 19. Further, I find that one of the reasons the ld. A.M. took for endorsing the action of the revenue authorities was that summons issued were not complied and neither the parties appeared for examination before the Assessing Officer, nor were they produced by the assessee. The ITAT, Gauhati Bench in the case of India Tyre House ( supra ), has held that the assessee cannot be asked to do something which is beyond its control; assessee has got no legal power to enforce the attendance of his creditors before the Assessing Officer and as such addition on the ground that he had not produced creditors cannot be sustained. 20. The ld. A.M. further stated in his proposed order endorsing the observation of CIT(A) that the source of income of the donors does not permit them to make gifts to the assessee. The Hon ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this connection, the decision of Hon ble Supreme Court in the case of Orissa Corpn. (P.) Ltd. ( supra ) would be squarely applicable. The facts in the case of Orissa Corpn. (P.) Ltd. ( supra ) were that the assessee was a private limited company which has claimed to have received the loan of Rs. 1,50,000 from three creditors. The assessee has produced before the Assessing Officer the confirmation of the creditors and their GIR Nos. The assessee could not produce the creditors and the summons issued under section 131 by the Assessing Officer were returned with the remark of the postal authorities "left". Therefore, the Assessing Officer treated the sum of Rs. 1,50,000 as unexplained cash credit. The ITAT deleted the addition. The order of the ITAT was upheld by the High Court. On appeal by the Revenue, their Lordships of Hon ble Supreme Court held as under : "that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout any conclusive material cannot lead to the inference that the amount was not gift but undisclosed income of the assessee. Reliance in this regard is placed on the decision of Hon ble Supreme Court in the case of Bedi Co. (P.) Ltd. ( supra ) and decision of Hon ble Calcutta High Court in the case of Currency Investment Co. Ltd. ( supra ), wherein it has been held that when the assessee has disclosed the identity of the parties from whom it purchased shares and to whom it sold the shares, genuineness of the transaction cannot be denied merely because the assessee could not produce the brokers through whom the share were sold. 23. Further, in his proposed order, the ld. A.M. as also the ld. CIT(A) relying on the decision of Hon ble Supreme Court in the case of Sumati Dayal ( supra ) held that the assessee failed to prove the capacity of the donor and genuineness of the transactions and thus confirmed the addition. The facts in the case of Sumati Dayal ( supra ) were that the assessee has claimed to have won the substantial amount in the horse race in two consecutive assessment years. When the matter reached to the Settlement Commission, it was held by the majority v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts relating to that issue only. While in the case of the assessee, she received gifts aggregating to Rs. 9,33,000 from seven donors who were her family friends. Therefore, the decision in the case of Sumati Dayal ( supra ) is not applicable to the case of the assessee. 24. The ld. A.M. has also relied on the decision in the case of Sajan Dass Sons ( supra ), which was also relied upon by the ld. CIT(A). In the said case, decision was rendered on entirely different set of facts of that case. In that case the Tribunal found that the signature of the creditor did not tally with the signature on his Passport and further the creditor has categorically denied making of any gift to any person at any point of time and also the opening of any bank account from which the alleged gift was made. Basing on these undisputed facts and evidence on record, the Tribunal upheld the addition made by the lower authorities. When the matter went to the Hon ble Delhi High Court, their Lordships found the said findings of the Tribunal as pure findings of fact and thus declined to interfere as no substantial question of law did arise out of such findings of fact. Therefore, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,20,000 AGOPG6941L 2. Mampi Sarkar Rs. 1,00,000 ATMPS2088K 3. Radha Sarkar Rs. 1,20,000 ATTPS7364R 4. Jhuma Kar Rs. 1,20,000 AKMPK0641Q 5. Purnima Dey Rs. 1,00,000 AEQPD9029A 6. Archana Paul Rs. 1,00,000 AJGPP7746M 7. Indra Kumar Keswani Rs. 1,40,000 1-701/1(4)/GHY Total Rs. 8,00,000 28. For the reasons discussed in the case of Smt. Madhu Raitani vide ITA No. 51 (Gau.)/2006, I concur with the proposed order of ld. J.M. in deleting the addition of Rs. 8 lakhs under section 68 of the Act. 29. The matter will now go to the regular Bench for passing the order as per the majority view. ORDER Per Bench. - Since there was a difference of opinion between the ld. Members constituting the Division Bench of ITAT, Guwahati in these cases of two assessees, the matter was referred to the ld. Third Member under section 255(4) of Income-tax Act, 1961 for his opinion in regard to one common question referred to therein. 2. The ld. Third Member vide his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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