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TMI Blog2008 (8) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, learned CIT(A) has erred in law and on facts in confirming the action of learned AO in making addition of ₹ 11,00,000 on account of gift from Mr. Ashutosh Varshney by holding the same as unproved and by making further addition of 10 per cent on account of some imaginary commission. 4. That having regards to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in confirming the action of learned AO in rejecting the books of accounts and has erred in making disallowance of ₹ 11,56,208 on account of alleged unverifiable, excessive and unreasonable expenses. 5. That having regard to the facts and circumstances of the case, learned CIT(A) has erred in law and on facts in confirming the action of learned AO in making disallowance of ₹ 2,29,250 out of transport commission by holding the same as excessive. 6. That in any view of the matter and in any case, assessment order passed making additions/disallowances is bad in law and against the facts and circumstances of the case and the same has been passed without giving adequate opportunity of being heard. 7. That having regard to the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. 5. As correctly submitted by learned Authorised Representative ground No. 2 is a general ground and does not require any adjudication. Therefore, this ground is not being decided. 6. Most of the preliminary facts of ground No. 3 have been already narrated but other relevant facts of this issue are that, vide notice dt. 25th Nov., 2005, the assessee was requested by learned AO to produce the donor Shri Ashutosh Varshney. The assessee replied through letter filed on 26th Dec., 2005, stating therein that : "As regards the production of Shri Ashotosh Varsheny the donor of ₹ 10 lacs to the assessee, the assessee most humbly submits that the full particulars of gifts, source of money for gift and full income-tax particulars and postal address of the donee have already been furnished to your Honour, and if your Honour wish the personal attendance of the donor he may be summoned by your Honour." 7. The AO wanted the assessee to produce the donor before him in person. The donor was assessed with the same circle. During the course of his (donor's) assessment proceedings, his statement (of Shri Ashutosh Varshney) was recorded on 4th March, 2006. In that statement givin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was called upon to appear in person on 14th Dec., 2005. The assessee avoided to appear in person since 14th Dec., 2005 and then submitted a certificate of doctor advising rest w.e.f. 8th March, 2006 to 31st March, 2006 on the basis of hypertension. Without commenting on the report of doctor, it was needless to say that the assessee had deliberately avoided to appear in person w.e.f. 14th Dec., 2005 till date. (vii) The assessee was in the habit of receiving gift from exporters. Apart from gift of ₹ 10 lacs received from Ashutosh Varshney, another gift of ₹ 5 lacs in financial year 2004-05 was shown to have been received from Shri Makhan Lal Arora, an exporter, who was found giving accommodation entries to unrelated person to the extent of more than one crore. It is also seen that the assessee has avoided to intimate the gift received from Shri Makhan Lal Arora, even though he was specifically asked to furnish complete details of gift given/received by him. The non-furnishing of such information is also a strong pointer of the fact that no genuine gift was received and only accommodation entries were taken. (viii) Shri Ashutosh Varshney has surrendered income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 11,00,000 under s. 69 of the Act, after discussing various judicial pronouncements. Further, by presuming that the assessee may have paid a commission @ 10 per cent on the gift amount of ₹ 10,00,000 an addition of Rs. one lac was also made. Thus on account of gift total addition of ₹ 11 lacs has been made. 2. The assessee, being aggrieved, took this matter before learned CIT(A). The learned CIT(A) has confirmed this addition and repeated the reasons given by learned AO in different words. The assessee is further aggrieved. 3. We have heard rival submissions. Both the parties have taken similar arguments as were taken before. The learned Authorised Representative Shri Rakesh Gupta has drawn support from various judicial pronouncements which according to him help assessee's case. All the relevant evidences which were available before authorities below have also been produced before us. Before we discuss the defense of the assessee it is pertinent to mention that the genesis of this addition can be found in the donor's case, that the donor had built up capital from his tax exempt export income which was being utilized in giving gifts to parties to ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidenced by gift deed. Shri Ashutosh Varshney, who is assessed with the same circle, has admitted to have given a gift of ₹ 10 lacs to this assessee. A statement of Shri Ashutosh Varshney was recorded in which he has confirmed this gift. The assessee while explaining his case requested the AO to summon Shri Ashutosh Varshney to confirm this fact again but since he had already confirmed this fact, learned AO did not call him. So what is apparent, not that gift was not made but that it was made. 1. The learned AO has mentioned that none of the donees to whom Mr. Varshney gave gifts was related with him by blood or by marriage The appellant was a close friend of Mr. Varshney who gave him the impugned gift without any consideration. There is no such statutory requirement that the donor and donee must be related with each other by blood or by marriage and only then it can be said that gift is genuine. Therefore, this contention of learned AO is misplaced and meaningless. Moreover latest judicial view on this aspect favours the case of the assessee. 2. As regards learned AO's contention that Mr. Varshney never received any gift from any person, thus how could it be believed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld in his assessment as income on the gifts made by him. But learned AO in the case of Mr. Varshney, as reproduced at pp. 4 and 5 of the assessment order, nowhere has mentioned that the income of ₹ 3,00,000 was the commission of alleged bogus gifts. Rather it has been mentioned therein that Mr. Varshney surrendered the income of ₹ 3,00,000 but without telling the nature of such income. Therefore, learned AO is trying to read something which is not there. 7. It is mentioned that prior to the receipt of gift the appellant withdrew ₹ 11,00,000 in cash from the bank which gives strong suspicion that the gift was purchased by paying cash. This allegation of learned AO is based on suspicion. Suspicion cannot partake the character of evidence. Learned AO has himself mentioned that cash withdrawn was utilized for meeting out expenses. That being so, where is the scope for alleging that this very cash was used in paying to Mr. Varshney for purchasing the gift. It is not out of place to mention that huge cash was withdrawn by the assessee ordinarily from his bank account and cash book for the purpose of business as is evident from such withdrawals made in the past and futu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'relationship' between the donor and donee for making a gift may have many 'facets'. Impetus which impels a person to make a gift may be emotional, spiritual, obligational, attitudinal, amongst others. There is no such statutory requirement in this regard. This relationship has to be judged in the light of the attending circumstances. Gift is not merely an attribute of a relation by blood or by marriage alone. Many a times a question may be asked as to why the gift has been made to 'X' and not to 'Y' who is placed in the same category (by relation or otherwise). Sometimes it is queried when a person making a gift never received a gift in his lifetime then why should he make a gift to others. These arguments are actually not relevant for deciding whether a gift is genuine or not. If alms are given to a beggar, how one can imagine that the beggar should also give alms to others. If the names of all the donees are not remembered by the donor at a particular time it cannot be said no gift was made. A person may not remember the names at a given point of time. Many a times one forgets the name of a very near and dear person. As far as occasion of making a gift is concerned that is def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. 1. We are not agreeable with the AO when he ignores the confirmatory letter, gift deed and the statement of the donor. What else is required from the assessee to prove the genuinity of a gift. To give a gift is the exclusive choice and prerogative of the donor so it is difficult to generalize as to between what relations, and on what occasions a gift if made, would be treated as genuine. The facts of this case are that Shri Varshney gave a gift of ₹ 10 lacs to the assessee and confirmed this fact by executing gift deed, by making a statement on both; he is a man of means, therefore in our considered opinion, such overwhelming evidences cannot be overlooked even if one may suspect that such gifts may have been maneuvered. While deciding an issue we have to go by rules, by evidences on record and the law. The direct evidences cannot be ignored on the basis of mere ipse dixit; there has to be contrary evidences on record for that matter. 2. The proof of a 'gift' is like proving a cash creditor. Under s. 68 of the Act, the subject of cash credit has assumed ominous overtures over the years. This subject has been one of the major areas of litigation in taxation. To underst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame are that some unscrupulous assessee(s) use this method i.e., of cash credit, as a device to channelise black money. The Government needs funds for various purposes like maintenance of law and order, defence, social/health services, etc., and it raises funds from various sources including taxation. Justice Holmes of US Supreme Court, has long ago rightly said that tax is the price, which we pay for a civilized society. It is the 'cupidity of the taxpayer and the stupidity of the tax collector' which results in either the loss of taxes or harassment of the taxpayer. But all the cash credits cannot be christened as dubious because the assessee(s) have to take deposits in the regular course of their business(es) and such cash credits can definitely be genuine one. Therefore, when this method is (mis) used it becomes the duty of the legislature to nip these types of activities by enacting a provision of law. This provision was brought on the statute in the form of s. 68. By this provision, a thin line has been drawn between the genuine and non-genuine transactions. Over the years various Courts have drawn their receptive (sicrespective) 'lines' in the given facts of their respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein it has been held that mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction as genuine. Many a times, this limited ratio of the above decision is applied to rebut the argument of the assessee that the deposit has been received through account payee cheque. But they lose sight of fact that the above decision was rendered under entirely distinguishable facts. In the above case, the identity of the cash creditors was not at all established. Unfortunately, the ratio of various decisions is used to suit their requirements in piecemeal. It is well-settled law to apply a decision on a given fact of a particular case, it has to be applied in its entirety and without tearing it out of context. Likewise, the decision of Hon'ble Supreme Court in the case of Roshan Di Hatti (supra) where it has been held as under : "The law is well-settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are read in a hurry and in isolation because we are living in a fast moving society. Only the headnotes of a decision which are usually drafted by publishers etc., according to their understanding of the matter are perused by concerned persons, which many a times carry wrong meaning of a decision. The decision has to be read in its entirety to arrive at a correct ratio decidendi. 5. The decision in the Precision Finance (P) Ltd. (supra) is always relied to deny the claim of the assessee that the payment through account payee cheque has been held as not a sacrosanct and it cannot establish the transaction as genuine. 1. With due respect, it is stated that this is not the gist of the above decision. The decision has to be read in its entirety, along with the facts of the given case. 2. It is in the background of the above facts, it was held by the Hon'ble Calcutta High Court as above. 3. This decision is very much in the line of various other decisions on the subject and does not give any different finding from the others. 4. For a cash credit, two parties are required. The one is the assessee and the other is the cash creditor. No one can deposit his own money with himself in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the laws of the land before he can preach the taxpayer to abide by the law. The taxman has to conduct himself in a way which is friendly to the taxpayer by showing that he is not an enemy but a friend. This friendly manner, if adopted by the taxman should also be shown to be so overtly as well as covertly. All the precedents simply guide the decision maker in a given facts of a particular case and it is he who has to apply his judicial mind with all the prudence at his command to decide that case. More often than not the ratio of a decision is followed only by adopting its letters. The decision has to be followed both in its letter as well as the spirit. The spirit of a decision is its soul. Yes, to follow the letter only is not that harmful, but the unfortunate part of it is, that the letters are torn out of context from a given judgment and the same are put where it does not fit. In this melee, the real meaning of a decision is lost. The most useful precedents are usually lost when only from an excerpt of a decision, entirely different meanings are drawn by different people. In this regard, the examples of the famous decisions in the cases of CIT vs. Steller Investment Ltd. (19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1980) 126 ITR 63 (Cal) have held that in the case of cash credit entry it is necessary for the assessee to prove not only the identity of the creditors but also to prove the capacity of the creditors to advance the money and the genuineness of the transaction. If this case is read in its entirety it would be clearly revealed that the Judges did not want the assessee to do an impossible act. In the light of the given facts of that case it was held that it was a question of fact whether the onus to prove the capacity has been discharged in a particular case or not. In that case, the assessee was not able to discharge even the preliminary onus cast on him, in this regard. But, if one goes by the headnote or a limited finding of the above Calcutta case, he would be misled. Therefore, both the decisions have almost the identical ratio but the misreading of the two creates confusion. Thus, it is always a factual matrix of a given case, which has to decide the fate of given cash credit. The onus to prove that the apparent is not the real is on the person who claims it to be so, it was mandated by the Hon'ble apex Court as back as in the year 1973 by deciding a case of CIT vs. Daulatram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m can be genuine. These are to be doubted to a certain limit and thereafter the doubts should not be perennial. 2. Specially turning to the question of gift, what is required to be proved is that the gift is genuine. For that purpose, the identity of the donor, the creditworthiness of the donor, and the genuineness of the transaction of gift (deposit or giving of gift) are required to be established or proved. The proof of "genuineness of gift" involves the proof of the above three ingredients. But many times the proof of "genuineness of the gift" is equated with the proof of the "genuineness of transaction of gift"-which is one of the three ingredients as has been mentioned above. What is genuineness of the transaction of the gift-it is the proof of the fact that the amount of gift did really travel from the donor to the donee. Meaning thereby the 'money' of the donor changed hands and reached to the assessee, and not the money of the assessee himself was made to travel in the guise of money of the donor. That is precisely the doubt of the learned AO in the case in hand. The donor had accepted the factum of giving money as gift to this assessee. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being through proper channels, the AO is not justified in making addition of the amounts of gift on presumptions and assumptions. Similarly, while rending the decision of Nek Kumar vs. Asstt. CIT (2004) 191 CTR (Raj) 207, the Hon'ble Rajasthan High Court has clearly held that when the donor gives an affidavit and also files declaration that she had given a gift to the assessee and there being no material evidence whatsoever to show that the money was deposited by the assessee or by any relative in the bank from where it came back to the assessee, the gift cannot be treated as ingenuine and therefore, addition is not justified. Likewise, there are many other decisions which are mentioned in assessee's written submission, which support his case. In the face of these decisions and in the light of the clear facts of this case, the impugned gift is held to be genuine and the impugned addition is hereby deleted by setting aside the finding of learned CIT(A). 1. The facts of ground No. 5 are that the AO has made an addition of ₹ 11,56,208 out of freight payment, on the ground that freight payable to the truck owners shown by the assessee @ 90.50 per cent of the freight receipts was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with reference to 5.50 per cent on ₹ 2,10,21,979 at ₹ 11,56,208 and has disallowed the same and has added it to the total income of the assessee. The learned CIT(A) has followed suit and has confirmed this addition. 1. There is no dispute with regard to receipts. The AO has accepted the receipt declared by the assessee. The assessee has challenged the rejection of books. For nonproduction of GR (goods receipt), it has been argued that truck receipt slips (TRS), which are maintained by the assessee, contain all the required information which the learned AO asked for his GR slips. In this connection learned Authorised Representative has invited our attention to forwarded few copies of TRS which are placed at paper book 34 onwards. We have examined them. These slips do contain lorry number, challan number, weight, packaging, destination, lorry freight, advances to drivers, and to be paid to the driver on delivery. We have examined these sample lorry account slips, which depict entire information, which is contained in GR slips. 2. From the available records, it is evidenced that the assessee had produced the books of accounts before learned AO. A letter dt. 14th Dec., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself accepted this figure at 91.5 per cent. We are in agreement with learned counsel that any bald estimate devoid of any evidence or valid basis is not sustainable in the eyes of the law. In our opinion, following decisions, on which learned Authorised Representative has relied, support his case. These decisions are : (i) Jhandu Mal Tara Chand Rice Mills vs. CIT (1969) 73 ITR 192 (P&H); (ii) Dhakeswari Cotton Mills Ltd. vs. CIT (1954) 26 ITR 775 (SC); (iii) Radhuvar Mandal Harihar Mandal vs. State of Bihar 8 STC 770 (SC). 1. We may add that in the given facts and the circumstances of the case, the absence of GR slips would not have any adverse impact because truck slips prepared contain all relevant and possible details of the consignor and these slips were produced before AO and were impounded by him. Therefore, all the observations made by learned AO for disallowance of freight paid are not valid either on facts or in law. The disallowance is simply ad hoc. Therefore, this addition is hereby ordered to be deleted. Ground No. 4 is allowed. 2. The ground No. 5 pertains to disallowance of ₹ 2,29,250 out of transport commission to assessee's son Shri Vinod Kumar Gupta. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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