Case Law Details
HIGH COURT OF GUJARAT
Commissioner of Income-tax-VI
versus
Bhanwarlal Sharma
TAX APPEAL NO. 713 OF 2012
Date of Pronouncement – 21.02.2013
ORDER
Ms. Sonia Gokani, J.
Revenue has challenged the order of the Income Tax Appellate Tribunal dated 20.4.2012. In this appeal preferred under section 260-A of the Income Tax Act (‘the Act’ here-in-after), the appellant has challenged the impugned order by proposing following substantial questions of law for our consideration:
“(A) Whether the Appellate Tribunal has substantially erred in deleting the addition of Rs. 74,40,000/- on account of unexplained cash credit?
(B) Whether the Appellate Tribunal has substantially erred in nor properly appreciating the facts and the material on record and therefore the order of the Income Tax Appellate Tribunal is perverse?
Facts in this case are narrated in a capsulized form :
2. For the assessment year 2003-2004, respondent assessee had shown receipt of gifts to the tune of Rs. 74,40,000/- from 24 different persons received through 24 demand drafts issued in December 2002. The Assessing Officer doubted seriously the genuineness of the gift on various criteria adopted by him and he issued the show cause notice to the respondent assessee and also letters to all the donors under section 133(6) of the Income tax Act. Although confirmations were received, no reply was received and hence after a detailed discussion, the said amount was added to the income of the assessee. He also found absence of personal appearance of assessee objectionable. Absence of any relations between the donor and donee and a wide gap in their economical strata also weighed with the Assessing Officer in disbelieving genuineness of such gifts of huge sum.
3. Aggrieved by such addition, when challenged by the assessee before the CIT(Appeals), it also concurred with the findings of the Assessing Officer. CIT (Appeals) also was of the opinion that the occasion which necessitated these gifts was not specified. The same have been given on a particular day by the donors after having purchased the same by consecutive demand drafts of the same bank. Explanation of the appellant was not found palatable and accordingly CIT(A) had turned down the say of the assessee of deleting said amount from computation of his income.
4. Aggrieved by the same, when respondent assessee approached the Income Tax Appellate Tribunal (‘ITAT’ for short), such addition made by the Assessing Officer and confirmed by CIT(A) was deleted. Therefore, the present appeal with the aforementioned substantial questions of law.
5. Learned counsel Mrs. Mauna Bhatt appearing for the Revenue has forcefully submitted before us that the Tribunal by its findings has attempted to shift the onus on the department by saying that motivation of gift transaction is irrelevant. She further submitted that all the 24 donors are unrelated and hail from a moderate economic strata and it is highly unlikely that on the very same day, they would all gift the assessee huge amount of gift with different demand drafts drawn from the same bank.
6. She heavily relied on the decisions of the Apex Court rendered in case of CIT v. P. Mohanakala [2007] 291 ITR 278 and decision of Punjab and Haryana High Court given in case of Subhash Chand Verma v. CIT [2009] 311 ITR 239. She urged therefore that the findings of the Tribunal are perverse and give rise to the substantial questions of law, therefore.
7. On having considered the submissions of the learned counsel and on having examined the materials on record with her assistance, this Tax Appeal is not entertained for the reasons to follow hereinafter.
8. Before adverting to the facts of this case, decision sought to be relied upon, rendered in case of P. Mohanakala (supra) need to be discussed where the Apex Court has held that the burden is on the assessee to 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 being treated as a receipt of the income.
9. In the matter before the Apex Court the assessee had received foreign gifts from one common donor and payments were made by instruments issued by foreign banks and credited to the respective account of the assessees by negotiation through a bank in India. Court also noted that the explanation of the assessee was not found satisfactory nor was there any material which was capable of leading to the conclusion that such gifts were genuine in nature. Thus on account of not offering proper, reasonable and acceptable explanation as regards sum found credited in the account of the assessee, addition was made under section 68 of the Act. Based on factual matrix available with the Apex Court, such gifts were held non genuine.
10. As far as decision of Subhash Chand Verma (supra), is concerned, the Court held that mere identification of the donor and establishing movement of gift through banking channels, would not be sufficient to establish their genuineness. There are other criteria also which will be required to be considered at the time of considering the plea of genuine gift.
11. In the instant case, as can be noted from the findings of the Tribunal, Assessing Officer had not summoned any of the donors. However, it had issued the letters under section 133(6) of the Act. Assessing Officer had also called for confirmation letters which were received by it. The assessee also had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of acknowledgment of returns of the donors along with computation and balance sheet. It also found that all the donors were assessed to tax except one who was based at USA. On thus having found identity of the donors so also creditworthiness and genuineness of the transaction having been established, Tribunal did not accept the say of the Revenue that the gifts were bogus.
12. Tribunal also relied on the decision of this Court rendered in case of Muralidhar Lahorimal v. CIT [2006] 280 ITR 512. In the said decision also identity of the donor had been established beyond any semblance of doubt and genuineness of the transaction was also established not only by the receipt of bank draft but also by other contemporaneous record. The Revenue although in that case also was not satisfied with the source of fund in the hands of donor and yet, the Court held it was for the Revenue to take appropriate steps in that event, but, that would not lead to question genuineness of transaction. We find that the case of the assessee respondent in the matter on hand can be largely equated with the one decided by this Court in case of Muralidhar Lahorimal (supra). However, those decisions relied upon by the Revenue discussed herein above have materially and substantially different factual aspects.
13. Again, we also are of the opinion that essentially this case is based on material that had been adduced by the assessee before the Revenue Authorities. Tribunal while upholding the say of the assessee and deleting the addition made by both the adjudicating authorities have given cogent and sufficiently acceptable reasons for arriving at positive conclusions that such gifts are genuine and the transactions are creditworthy.
14. We are conscious that various aspects discussed by both the Assessing Officer and CIT(A) were causing concern to those authorities. Gifts to assessee by 24 different unrelated persons, residing at different places in Mumbai on the same day, with the draft of huge sum from the same bank and deposit within a span of 2 to 3 days would raise the eyebrows. Their non reply of letter under section 133(6) and non appearance of assessee personally may further strengthen such suspicion coupled with difference in economic strata of assessee and that of these persons. Yet, these questions do not cross the realm of suspicion to enter the sphere of proof, let alone the arena of convincing evidence. Tribunal could with the aid of cogent reasonings convince us why such material proof was sufficient to accept the version of assessee and uphold his request to delete the addition of entire amount from the computation of his income.
15. We find no perversity in such conclusion so as to hold that this gives rise to any question of law much-less any substantial question of law.
16. Tax appeal in view of the above discussion, is dismissed.
In this case the case of revenue was weak for the reasons that AO did not summon the donors. He had issued the letters under section 133(6) of the Act. Assessing Officer had also called for confirmation letters which were received by it. The assessee also had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of acknowledgment of returns of the donors along with computation and balance sheet.
The AO had not taken exercise of cross examination of tax records of donors to establish whether they had sources to donate sums donated.
Most important thing which the AO must enquire is whether his assessee had potential source of income which could yield black income and so the assessee could resort to introduce his black money as white money by way of gifts, or other form of capital receipts or non-taxable income. Such potential sources can be “make easy money posts” as politicians, bureaucrats etc, coming ot power where there is scope of making fast money or if the assessee had earned taxable income and such income is understated and balck money received is routed in banks in form of gifts as can be in case of sale of landed property at very low disclosed consideration etc.
The AO must work hard if he want to succeed in additions he made.If additions are made just for making addition and to harass assessee and raising huge demands, the fate will be like one we have in this case and also in case of Miss. Mayawati.