IN THE ITAT JAIPUR BENCH ‘B’
Income Tax Officer, Ward – 5(2), Jaipur
IT Appeal No. 889 (Jp.) of 2009
[Assessment year 2006-07]
June 22, 2012
Sanjay Arora, Accountant Member – This is an Appeal by the Assessee directed against the order by the Commissioner of Income-tax (Appeals)-II, Jaipur (‘CIT (A)’ for short) dated 16-09-2009, dismissing the assessee’s appeal contesting its assessment u/s. 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) vide order dated 17-12-2008 for the assessment year (AY) 2006-07.
2.1 The assessee, an individual, returned his income for the year on 02-07-2006 at Rs. 4.18 lacs, including Rs. 3.52 lacs from counseling and delivering lectures. Two cash deposits of Rs. 5.00 lacs each were found credited in his joint (with his wife, Smt. Pragati Awasthi) bank account with HDFC bank on 28-06-2005 and 29-06-2005, by the Assessing Officer (AO) during the course of the assessment proceedings. In verification, on being called upon to explain the nature and source of the same, the assessee submitted the copy of a letter dated 10-01-2004 by his late father, Shri Guru Prasad Awasthi, stating that he is gifting the said sum in cash, which he had kept aside for his old age/hospitalization, to the assessee, his only son. The AO, however, did not find the same acceptable. There was, firstly, no independent material to evidence the gift. Secondly, there was no material to evidence the source of the money with the father, the donor. There was also considerable time gap between the date of gift (Jan. 10, 2004) and the deposit of the cash received in the assessee’s bank account (end June, 2005). The said deposit was therefore considered as unexplained, and deemed as the assessee’s income u/s. 69A of the Act.
2.2 In appeal, the assessee was not able to improve his case in any manner. The money was, vide gift letter dated 10-01-2004, stated to be the sale proceeds of a land at his father’s (donor’s) home town, Gopalpur (near Itawa) in Uttar Pradesh (U.P). However, no evidence toward the same had been furnished. Also, there was no explanation as to why the money was kept in cash for such a long time, particularly considering that the assessee is a highly literate person. The addition was, accordingly, confirmed. Aggrieved, the assessee is in second appeal.
3.1 Before us, the ld. AR would submit that it was relevant and important to understand the back-ground facts of the case. The assessee, who is a highly educated person, was working at a senior position in a private company at Mumbai, and had to move to Jaipur to attend to his ailing father, who was suffering from cancer. Shri Guru Prasad Awasthi, the assessee’s father, expired on March 10, 2004 at Jaipur, and subsequently the assessee moved back to Mumbai. During his period of residence at Jaipur, the assessee was appointed by the State Govt. in an advisory capacity for the SSI sector and, accordingly, earned some income by way of counseling as well as lecturing students and other interest groups, disclosing a (net) income of Rs. 1.96 lacs and Rs. 1.56 lacs from the two activities respectively for the relevant previous year, i.e., April, 2005 to Mach, 2006. The cash for Rs. 10.00 lacs given by his father was deposited by the assessee in his regular bank account during this period, and which the Department has considered as unexplained, i.e., as to its nature and source. Why would the assessee, if he harbored any wrong intentions, deposit the same in his regular bank account? The same only goes to prove the assessee’s bona fides. All the three ingredients of a genuine credit, i.e., identity, capacity, and genuineness, which though are applicable only to a credit u/s. 68, and not to the monies, etc. u/s 69A of the Act, are, however, satisfied in the facts and circumstances of the case. The identity is proved inasmuch as the letter dated 10-01-2004 (P.B. Page 20) is signed by the assessee’s father, whose signatures have not been doubted by the Revenue. The letter itself states the source of money, viz. the sale of land in U.P. The insistence on evidence of the said sale (of land) would amount to requiring establishing the source of source. It is also to be borne in mind that the assessee’s father is no more and, therefore, it was/is not possible to furnish all the relevant documents; the assessee also having moved over to Mumbai. That the assessee’s father was a man of means is also proved by the fact that he gifted another Rs. 13.75 lacs to the assessee vide the same letter (dated 10-01-2004), and which amount has been accepted by the Revenue. How could it then take a different stand as far as the cash of Rs. 10.00 lacs deposited in bank account is concerned? The gift being only from the assessee’s father, there cannot possibly be any issue as regards the genuineness of the transaction. Further, the gift letter itself states of the money having been kept aside by the father for his old age and medical expenses, and which cannot be doubted considering his advanced age and illness, and on which again no doubt has been expressed. However, as the entire expenditure on his father’s medical treatment was incurred by the assessee, his son, the entire sum of Rs. 10.00 lacs was available with the assessee. Further, with regard to the Revenue’s stand of the gift being not evidenced, an affidavit dated 17-03-2010 from the assessee’s wife is being produced (PB page 13 and 14), averring that the money was given in her presence. The indulgence of the court for admission thereof as an additional evidence was also prayed for.
3.2 On being queried with regard to incurring the medical/hospitalization expenses by the assessee, the ld. AR expressed his inability to exhibit the same with any material or evidence. On being further questioned by the Bench to explain the time lag of close to 18 months between the receipt of cash and its deposit in bank, or even 16 months, reckoning the date of his father’s passing as the relevant date, by which time only the amount may be considered as available, i.e., free from any encumbrance; he, again could not furnish any satisfactory answer.
3.3 Finally, he placed reliance on some case laws, which rather form part of the assessee’s paper-book. Each of the said orders was browsed during the course of hearing itself, with the Bench finding the same as prima facie not applicable in the facts and circumstances of the case.
3.4 The ld. DR, on the other hand, would rely on the orders of the authorities below.
4. We have heard the parties, and perused the material on record, giving our careful consideration to the matter.
4.1 Our first observation in the matter is that the assessee has relied upon, per his written submissions, on the decision, inter alia, in the case of Mangilal Agarwal v. Asstt. CIT  300 ITR 372/ 163 Taxman 399 (Raj.). The same, though not adverted to during the course of hearing nor finding place in the decisions enclosed by the assessee in its paper-book, shall nevertheless be dealt with, being by the hon’ble jurisdictional High Court and, therefore, binding on us. The said decision stands perused. However, we find the same as inapplicable in the facts and circumstances of the case. The reliance by the assessee thereon is on the basis that once an explanation stands advanced by the assessee, the onus shifts to the Revenue. That, in fact, represents trite law. But the moot question is: Whether the assessee has discharged the burden of proof on it in proving satisfactorily the nature and source of the amount deposited in his bank account in June, 2005? If, so, which is a question of fact, there is no question of the said amount being considered as his income, or of the provision of section 69A being invoked in the instant case, unless, of course, the Revenue brings some material to the contrary, showing the assessee’s explanation to be false or materially incorrect, etc. In fact, the hon’ble High Court itself has put a caveat in its said decision when it states that the creditor, in whose name the deposit stands, admits of having advanced the money under reference, then the assessee’s onus to that extent stands satisfied. That is, the principle of jurisprudence, to press which decision is being pressed come into play when the assessee has met the primary onus on it. Reference, in this context, is also drawn to our observations/findings at paras 4.2 to 4.6 of this order, upon examining the assessee’s explanation, as well as those at para 4.7, issued in sum, on conclusion of the said exercise.
In our view, the ratio of the aforesaid decision lies in that, that there has to be a nexus between the facts found and the conclusions drawn. Merely because the explanation by ‘X’, in whose name the money is found deposited, is found to be false, it cannot by itself lead to the conclusion that the said amount belongs to ‘Y’. The said ratio is again clearly inapplicable in the facts of the present case. This is as the amount has been found to be deposited in the assessee’s own bank account, i.e., the ownership thereof is proved as well as admitted. The only question, thus, is whether it represents the assessee’s unexplained income, or he has furnished a satisfactory explanation with regard to its nature and source. Reference in this context, clarifying the law in the matter, may be made to the decision in the case of Chuharmal v. CIT  172 ITR 250/38 taxman 190 (SC) and CIT v. K Chinnathamban  292 ITR 682/162 Taxman 459 (SC).
4.2 We may next examine the assessee’s explanation, i.e., on its merits. To state that the three ingredients of identity, capacity and genuineness, are not applicable, being so only in the case of the credit u/s. 68 of the Act, is in complete contradiction to the well-settled law, as explained by the higher courts of law. The explanation, be it u/s. 68 or s. 69 or s. 69A of the Act, etc., which provisions are themselves rules of evidence, statutorily incorporated, to be rendered by assessee is qua the nature and source of the subject matter of the explanation, viz. the credit, money, bullion, investment, etc. Why, the decision relied upon, as for example in the case of Dy. CIT v. Prakash H Shroff  3 SOT 171 (Ahd.), itself clarifies it to be so.
4.3 As regards the three ingredients, we find that though the document (gift letter dated 10-01-2004) is neither witnessed nor attested, yet no doubt stands expressed by the Revenue in respect of the identity of the donor, the assessee’s father. The same, therefore, has to be considered as established.
4.4 As regards the donor’s capacity, we find that no material whatsoever in its respect has been furnished by the assessee at any stage, including before us. In fact, all that in our view the assessee was required to show in this regard is to exhibit the source of the gift money, as stated in the gift letter, and which he has abysmally failed to. The assessee’s father, being a patient of cancer and over 90 years of age (in January, 2004), the sale of land could not have been transacted by him without the active assistance of other family member/s. In any case, could the assessee, his only son, and so close to his father, be ignorant of the same? We think not. Further, quite apart from the assessee’s ignorance of the same, i.e., assuming so, why we wonder the fact of the sale of land (and its proceeds) could not be evidenced? The ld. DR raised an aspect in this regard, and which we deem as pertinent, i.e., that substantial amount would have also been spent on his medical treatment, which was the prime reason for the assessee shifting to Jaipur. True, and the expenditure on the same has a direct relation with the resources available with the assessee’s father and, thus, his capacity. No doubt, the assessee claims to have met the entire medical expenditure on his father’s treatment, but the same is again only a bald statement, de hors any material. If the assessee has incurred the expenditure, he could furnish the relevant details; the money in any case would have only been withdrawn from his bank account/s or from other accounted source/s. We state this aspect, not only for the reason that the ld. DR raised the same, but as the same flows directly from the assessee’s explanation of no amount of Rs. 10.00 lacs, specifically set aside by the father for his illness and old age, was actually spent and remained completely intact despite his prolonged illness/treatment.
There are thus serious gaps in the assessee’s explanation, which also impinge on the genuineness aspect of the transaction/s. Also, we may clarify that in requiring the assessee to evidence the stated source (gift), the assessee is only being called upon to establish the source, the onus for which is on him, and not the source of the source, as he claims. If, for example, the money is stated by the assessee to have been received by him by way of a gift, the same is only acceptable in law where the donor’s capacity, among others, is satisfactorily exhibited by the assessee. Or even de hors his capacity, i.e., in the facts of a given case, the source from which the amount is claimed to have arisen is shown. As in the instant case, if the fact of the ownership of the land (asset) (which is in fact the source), and of its liquidation, is – at the minimum – shown. It is only then that the onus shifts to the Revenue, who, to dislodge the same, would have to show some infirmity in the assessee’s explanation. For example, as, that the said asset was liquidated long back (so that it could not be accepted as the source of the relevant funds), or that the asset could not possess the stated value, or that the money was used somewhere else, etc., and unless it does so, with credence, the assessee’s explanation will hold. In fact, in the facts and circumstances of the present case, and even as the assessee’s explanation qua proving the donors’ capacity does not travel beyond making a bald assertion, we find that the Revenue has raised a very valid argument. That is, even assuming the receipt of money from the stated source (which though cannot be a matter of presumption), i.e., the sale of land by the assessee’s father; he being a chronic patient of a usually fatal ailment, in advanced age, where even normal medical expenses run high, availability of a surplus of Rs. 10.00 lacs would still be in considerable doubt. The assessee meets this by stating to have met all the medical bills of his father, though again without the support of any material. The assessee’s case thus becomes a no-getter, whichever way we look at it. The capacity of the ostensible donor thus remains totally unproved. As afore-stated, and as would also be apparent from the foregoing, the assessee’s explanation is also inflicted by inference of lack of genuineness, which stems from the factual and circumstantial gaps in his explanation, which is unsubstantiated, and which we shall examine next.
4.5 Further on, why did the assessee keep the money with him in cash for so long? Rather, all through, i.e., prior to its deposit in June, 2005; first by the assessee’s father (the date of receipt by him being undisclosed), and then by him. Even if liquidity was preferable in view of the imminent and impending medical expenditure, which again points to the volume of expenditure that such an illness normally entails, it was only required to be parked in a savings bank account. Likewise, by the assessee. It is common knowledge and experience that money in bank is much safer, besides would yield some interest income. In fact, this becomes all the more incumbent, i.e., apart from being normal, preferable and prudent, considering the assessee’s explanation that the medical expenditure was to be incurred only by him. The time lag of eighteen (18) months in depositing the cash in bank is, under the circumstances, inexplicable.
4.6 The assessee’s statement of the Revenue having accepted the gift for another sum of Rs. 13.75 lacs, also vide the same letter, and which would thus estopp it from impugning the bank deposits under reference, as well as from seeking proof of capacity of his father, i.e., by implication, only needs to be stated to be rejected. Firstly, the capacity is not something absolute, but only relative. One may have capacity, or may be shown to have capacity, for, say, Rs. 10 lacs, while another for Rs. 1 lac, and yet another for Rs. 100 lacs, and so on. Two, the amount of Rs. 13.75 lacs has been reflected nowhere, i.e., either in the assessee’s accounts, which are stated to be not maintained, or as cash-in-hand in the balance-sheet as at the year-end, drawn nevertheless, or by way of an investment. As such, there is no occasion for the Revenue to seek an explanation for any credit or asset from the assessee. The question of it having expressed satisfaction or otherwise with the said explanation, or of being satisfied therewith, therefore, just does not arise. The assessee’s argument of having established his bona fides in view of the money being deposited in his regular bank account would also be to no avail. Does the assessee mean to imply that he has some other unaccounted bank accounts as well, in which the amount could have been deposited? To pay the tax, legitimately due, and to recover the same, is the bounded duty of the citizen and the State respectively [refer: Mc. Dowell &Co. Ltd. v. CTO  154 ITR 148/22 Taxman 11 (SC).
4.7 The assessee has also, per its written submissions, sought to make out a case of lack of opportunity. Nothing, in fact, could be more inconsistent with facts or farther from truth. In fact, to be fair to the assessee, no such argument was raised by the ld. AR during hearing before us. Rather, we observe no ground to that effect as having been raised before the first appellate authority as well. The assessee’s explanation centers around the gift letter dated 10-01-2004, and the attending circumstances (of his father’s illness, and subsequent death) which have not been doubted, and duly considered by both the authorities below. There is no case of lack of opportunity; the hearing of his appeal having been in fact specifically adjourned by the tribunal on earlier occasion(s), only to enable the assessee to adduce any evidence in support of his explanation, and toward which the ld. AR was also enquired during hearing, though expressed his inability.
The assessee written submissions of an earlier date (March 16, 2010) raise lengthy arguments qua admission of additional evidence by the tribunal. However, no argument toward the same was advanced before us and, accordingly, not responded to by the Revenue. Save, of course, in respect of the affidavit by his wife. Our examination of the said materials nevertheless, claimed to be ‘additional evidence’, purportedly in substantiation of the assessee’s explanation, which has been found seriously wanting with regard to the capacity and genuineness aspect of the transaction, reveals no such substantiation. The said evidence is, in the main, in the form of an affidavit by the assessee’s wife, and the bank account statement reflecting the deposits. The fact of bank deposit/s is an admitted fact, while the assessee’s wife only reiterates what the assessee has said in the matter. The question is not of doubting the same, or of having not issued an explanation per se, but one which could be regarded as so in law, i.e., a proper, reasonable and acceptable explanation as regards the nature and source of the money found deposited in his bank account [refer: CIT v. P. Mohanakala  291 ITR 278/161 Taxman 169. And, even as we are prepared to make an allowance for the gift as having been made, under the peculiar circumstances of the case, by an ailing father to his son, in private, and within the four walls of the house, the lack of factual and circumstancial evidence/s in support of the same is overwhelming, and the veracity of what stands stated totally unproved.
4.8 We may also advert to the decisions cited by the assessee. The decision in the case of Prakash H. Shroff (supra) rather, assists the Revenue case inasmuch as, as afore-stated, it only clarifies that the three ingredients of identity, capacity and genuineness have to be proved by the assessee, which in the facts of that case it was found to have.
The decision in the case of Zafrul Hassan Iraqi v. ITO  68 ITD 276 (Jp.), is qua opportunity, which has been found to be afforded in abundance to the assessee in the instant case, and no case for lack of opportunity to be made out. This aspect of the matter stands addressed by us at para 4.7 of this order.
The addition in the case of Asstt. CIT v. Nem Prakash Khandaka Jain  35 TTJ (Jp.) 382 was found unsustainable in law, being based on a mere suspicion of the assessee having perpetrated a fraud on the Revenue.
The decision in the case of ITO v. Nagardas Jashraj  28 ITD 386 (Ahd.) concerns the scope of legal fiction introduced by section 69A of the Act, and which stands discussed hereinabove; the matter stands well-settled by the apex court (refer: Chuharmal (supra) and K. Chinnathamban (supra)).
The decision in the case of Asstt. CIT v. Radhey Shyam Bansal  68 TTJ (Rajkot) 136 rests on the appreciation of the facts of that case; the tribunal finding the assessee to have met the burden of proof on it by furnishing the relevant documents, which were not rebutted by the Revenue. The same is, thus, distinguishable on facts.
5. In view of the foregoing, we confirm the application of sec. 69A in the instant case by the Revenue and, accordingly, dismiss the assessee’s Ground No. 1.
6. The second ground by the assessee is in respect of the addition in the sum of Rs. 1,47,605/-, made by estimating his income from counseling and lecturing at Rs. 5.00 lacs, as against Rs. 3.52 lacs disclosed by the assessee, in the absence of maintenance of any books of account, so as to be able to substantiate the disclosed business income in any manner. The ld. CIT(A) also confirmed the addition on the same basis; there being no material with the assessee which could be relied upon in support of the disclosed income or enable its verification by the Revenue. Aggrieved, the assessee is in second appeal.
7. We have heard the parties, and perused the material on record.
7.1 The assessee admittedly has not maintained any books of account, which he is required to do u/s. 44AA of the Act. We state so as even if the assessee’s contests his profession – he stands appointed in an advisory capacity by the State Government – as being of ‘technical consultancy’, which is among the professions specified by the said provision, the income from his profession admittedly exceeding Rs. 1.20 lacs, the same would stand to be covered u/s. 44AA(2) of the Act. Now, if an assessee maintains books of account, which are found to be defective, in the sense that they are not correct and complete, for true income to be deducible there-from, so that the same are liable to be rejected and income estimated, there is no reason that it should not be so when the assessee admittedly does not maintain books of account, or though maintains them, does not produce them before the assessing authority. The power of estimation under such circumstances with the AO thus cannot in law be denied. A different view in the matter would imply that the assessee is free not to maintain the books of account or, where maintained; the same being required for several other purposes as well, not produce them before the AO, who would be precluded from making an estimate of the income, and which clearly cannot be.
7.2 So, however, it is again trite that there has to be some basis with the AO in enhancing the assessee’s income as declared, and which we find as completely absent in the present case. Though the ld. DR during hearing sought to factor in the high living cost, or of the assessee maintaining a good living standard, we are not prepared to countenance any such claim at this stage. This is as there is no mention of any such factor while estimating the assessee’s income, or its consideration while confirming it, in the orders of the authorities below, so that the Revenue can not make out a new case now. The AO, in our view, was required to call for all the relevant information, so as to base and rest his estimate of higher income on some definite and valid basis, and, without doubt, the living expenses and/or maintenance costs (for self and family) is definitely one such. This was in fact all the more incumbent in the present case as the assessee’s father was undergoing treatment for a fatal illness, expenditure on which is claimed to have been met by the assessee independently. However, no such exercise having been undertaken by the AO, we are not inclined to accept any higher estimate de hors any basis for the same. Accordingly, the addition supposing a higher income is, in our view, not sustainable in law, and is thus directed for deletion. We decide accordingly.
8. In the result, the assessee’ appeal is partly allowed.