IT : Where donor was not related to assessee and he was neither produced for examination nor was he traceable at given address, addition of amount of gift as income from undisclosed sources under section 68 was justified
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[2013] 33 taxmann.com 434 (Agra - Trib.)
IN THE ITAT AGRA BENCH 'SMC'
Anil Kumar Singhal
v.
Income-tax Officer, Ward 1(1), Agra*
A.L. GEHLOT, ACCOUNTANT MEMBER
IT APPEAL NOS. 408 & 413 (AGR.) OF 2012
[ASSESSMENT YEAR 2001-02]
[ASSESSMENT YEAR 2001-02]
FEBRUARY 28, 2013
Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credits [Gifts] - Assessment year 2001-02 - Assessing Officer reopened assessment on receiving information from Investigation Wing regarding bogus entries of gifts and capital gains - Whether, information from enquiry by Investigation Wing formed reason to believe that income had escaped assessment and reopening of assessment under section 147 was justified - Held, yes - Whether, mere identification of donor and showing movement of gift through banking channel was not sufficient to prove genuineness of gift, and onus to establish identity of donor, his capacity to make such gift and genuineness of transaction was on assessee - Held, yes - Whether, where there was no relationship between donor and donee, and donor was neither produced by assessee for examination nor was he traceable at given address to verify correctness of gift deed, addition of amount as income from undisclosed sources under section 68, and also for commission for taking such gift entries was justified - Held, yes [Para 22] [In favour of revenue]
FACTS
| ■ | The case of the assessee was reopened under section 147 after information was received from ACIT regarding bogus entries of long term /short term capital gain and bogus gift, found as a result of enquiries by Investigation Wing. On enquiry, it was found that bank accounts from which money was transferred to various beneficiaries, assessee being one of them, were operated by certain stock brokers who showed bogus transactions of sale and purchase of shares and bogus gifts from certain persons. | |
| ■ | The assessee objected to the reopening of assessment and filed copy of gift deed, affidavit from donor and copy of return of donor. Assessee also contended that the initial return filed by him had not been considered, although the amount claimed to be received as gift was not disclosed in it. | |
| ■ | As the donor had not complied with the summons issued by the Assessing Officer and copy of his bank account had also not been produced, the Assessing Officer added the amount as income from undisclosed sources under section 68. Since it was held that assessee had taken gift entries, commission at 2 per cent of amount was also added for taking such gift entries. | |
| ■ | On appeal, the Commissioner (Appeals) upheld the addition made by the Assessing Officer. | |
| ■ | On second appeal: |
HELD
| ■ | In the case of Brij Mohan Agarwal v. Asstt. CIT [2004] 268 ITR 400/140 Taxman 317 (All.), it was held that the belief of the Assessing Officer was an honest and reasonable belief on the material which he had received from the Investigation Wing of the Department. Consequent upon raids conducted by the Income-tax Department on certain brokers and examination of the books of a certain person, it was found that many of the transactions recorded in the books of the assessee as loans were accommodation entries in which no moneys had passed and the so-called lenders were name-lenders only. It was held that the proceedings under section 148 by the Assessing Officer had been validly initiated. | |
| ■ | In the case of ITO v. Purushottam Das Bangur [1997] 224 ITR 362/90 Taxman 541 (SC), it was held that, on the basis of the information contained in the letter of Deputy Director, Investigation, and the documents annexed to it, the ITO could have had reason to believe that the fair market value of the shares was far more than the sale price and the market quotations from Calcutta Stock Association shown by the assessee at the time of original assessment were manipulated ones, and as a result income chargeable to tax had escaped assessment. It could not be said that the information that was contained in the letter was not definite information and it could not be acted upon by the ITO for taking action under section 147(b). [Para 13] | |
| ■ | In the light of the above judgments and the facts of the case under consideration, there is no substance in the submissions of the assessee that the reasons recorded on account of sale of shares and addition made on account of gift, is different, because in the reasons recorded, it is clearly stated about both types of transactions i.e. bogus entries of long term/short term capital gain and bogus gifts. It is also relevant to state that after receiving information from ACIT and after applying his mind, the Assessing Officer found that there was escapement of income. The information was received on 20-3-2008 and the Assessing Officer issued notice under section 148 on 26-3-2008. Thus, there was sufficient time with the Assessing Officer to apply his mind. The Apex Court in the case of Purushottam Das Bangur (supra), held that notice issued on next day after receipt of letter from Deputy Director, under section 148, was a valid notice. The facts of the case under consideration are identical to the facts of the case of Brij Mohan Agarwal (supra). The judgment is of the jurisdictional High Court and is bound to be followed. Accordingly, following the same, the Assessing Officer has rightly issued notice under section 148. [Para 14] | |
| ■ | It is found that the Commissioner (Appeals) recorded a fact that the assessee did not disclose the receipt of amount of gift in his initial return of income. Therefore, the Assessing Officer rightly took action under section 148. [Para 15] | |
| ■ | Coming to the merit of the case, the ordinary meaning of gift is a transfer by one person to another, of any existing movable or immovable property made voluntarily or without consideration of money or money's worth. In legal effect, there cannot be a 'gift' without giving and taking. The giving and taking are the two contemporaneous reciprocal acts which constitute a 'gift'. Donor gives gift in money or money's worth, taking love and affection from donee. To examine the issue from point of view of the provisions of Income tax Act, the nature of the transaction is to be seen. Its nature is credit in the hands of the donee because donee is credited with gift amount in his/her capital account treating it as own money/capital. It appears from reading of section 68 that whenever a sum is found credited in the books of account of the assessee, then irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee then, it is for the Income-tax Officer to be satisfied whether said explanation is correct or not. The use of the words 'any sum found credited in the books' in section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as gift. There is no quarrel with the proposition that a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift and since the claim of a gift is made by the assessee, the onus lies on him not only to establish the identity of the donor but his capacity to make such a gift. The assessee is required to prove three important conditions, namely, (i) the identity of the creditor, (ii) the capacity of the creditor to advance the money, and (iii) the genuineness of the transaction. What evidence would be sufficient to establish the said conditions or what material would be relevant in a particular case, would depend on the facts of each case. There cannot be one general guiding yardstick in the matter. [Para 16] | |
| ■ | Generally, the assessees furnish various types of material/evidence/gift deed, confirmation etc. The Apex Court, in the case of CIT v. Durga Prasad More [1971] 82 ITR 540, held that science has not yet invented any instrument to test the reliability of the evidence placed before a court or Tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. | |
| ■ | It was further held that "an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. A party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." [Para 17] | |
| ■ | In case of CIT v. P. Mohanakal , [2007] 291 ITR 278/161 Taxman 169 (SC), it was held that may be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence. [Para 21] | |
| ■ | In the light of above judgments, if the contention of the assessee that the Assessing Officer did not examine donor is considered, it is relevant to note that the Assessing Officer issued summon under section 133(6) to the donor, but he did not comply to that summon. Before the Commissioner (Appeals), the Assessing Officer 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 the donor lived on that address. The assessee expressed his inability to produce the donor. Under the circumstances, the Assessing Officer has discharged his onus but the assessee failed in this regard, therefore, the contention of the assessee is rejected. During the hearing, the assessee referred a copy of gift deed in which it was stated that the gift was given out of love and affection. However, the assessee 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, it is found that the Commissioner (Appeals) has given his finding that there is no relationship between the donor and donee assessee. There was no occasion for giving of gift. The donor was neither produced by the assessee for examination, nor was traceable at the given address by the Assessing Officer 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 was not established. The Commissioner (Appeals) held that, the amount was correctly added by the Assessing Officer in the income of the assessee holding it as his unaccounted money under the garb of bogus gift entry and therefore, he confirmed the addition made in the assessment order. As regards to addition on account of commission paid for obtaining the entry of gift, the Commissioner (Appeals) held that since he had the amount of gift shown by the assessee was not a real gift but a receipt of money in the form of income, such entries were given by the entry giver only after charging some commission. As per human conduct and common market practice of giving of entry, it is not possible to take entry without paying commission. Therefore, no error is found in the order of the Commissioner (Appeals). [Para 22] | |
| ■ | The judgments cited by the assessee are distinguishable on facts. In the case of CIT v. S.K. Jain , [2013] 214 Taxman 10/31 taxmann.com 390 (All.), the creditworthiness was established by filing return of income of donor and his wife, but in the case under consideration the relevant return for the year under consideration was not filed. | |
| ■ | In the result, both the appeals of the assessee are dismissed. [Para 27] |
CASE REVIEW
Brij Mohan Agarwal v. Asstt. CIT [2004] 268 ITR 400/140 Taxman 317 (All.) (para 14); ITO v. Purushottam Das Bangur [1997] 224 ITR 362/90 Taxman 541 (SC) (para 14); CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) (para 22) and CIT v. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 (SC) (para 22) followed.
CIT v. S.K. Jain [2013] 214 Taxman 10/31 taxmann.com 390 (All.) (para 23); Kanchan Singh v. CIT [2008] 174 Taxman 383 (All.) (para 23) andCIT v. Ram Dev Kumar Chitlangia [2009] 315 ITR 435 (Raj.) (para 23) distinguished.
CASES REFERRED TO
CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) (para 5), NDT Systems v. ITO [W.P No. 2710 of 2010, dated 4-12-2012] (para 9), Jay Bharat Maruti Ltd. v. CIT [2009] 180 Taxman 192 (Delhi) (para 9), Arvind Poly Cot Ltd. v. Asstt. CIT [1996] 222 ITR 280/[1997] 92 Taxman 393 (Guj.) (para 9), Tin Mfg. Co.of India v. CIT [1996] 222 ITR 323 (All.) (para 9), CIT v. P.R. Ganapathy [2012] 210 Taxman 572/26 taxmann.com 354 (SC) (para 9), CIT v. Arun Kumar Kothari [2013] 31 taxmann.com 258 (Raj.) (para 9), CIT v. S.K. Jain [2013] 214 Taxman 10/31 taxmann.com 390 (All.) (para 10), Kanchan Singh v. CIT [2008] 174 Taxman 383 (All.) (para 10), CIT v. Ram Dev Kumar Chitlangia[2009] 315 ITR 435 (Raj.) (para 10), ITO v. Purushottam Das Bangur [1997] 224 ITR 362/90 Taxman 541 (SC) (para 12), CIT v. P. Mohanakala, [2007] 291 ITR 278/161 Taxman 169 (SC) (para 12), Ram Lal Agarwal v. CIT [2006] 280 ITR 547/[2005] 149 Taxman 342 (All.) (para 12) andBrij Mohan Agarwal v. Asstt. CIT [2004] 268 ITR 400/140 Taxman 317 (All.) (para 13).
K.C. Agarwal for the Appellant. K.K. Mishra for the Respondent.
ORDER
1. These are appeals filed by the assessee against two different orders, both dated 28.02.2012, passed by the ld. CIT(A)-I, Agra for the Assessment Years 2001-02.
2. The assessee has raised the following grounds of appeal :-
| "1. | Because in any, view, the ld. C.I.T. (A) has erred in confirming the proceedings u/s 147, and the Order passed u/s 147/143(3) of the Income-tax Act. | |
| 2. | Because in any view, the addition confirmed by ld. CIT(A) of Rs.1,00,000/- made u/s 68 of gift received is perverse, arbitrary, unjust, wrong, illegal and against the facts and law of the case. | |
| 3. | Because in any view, the addition confirmed by the ld. CIT(A) of Rs.2,000/- as so called commission @ 2% on above impugned addition of Rs.1,00,000/- on mere surmises and conjectures is wrong and illegal. | |
| 4. | Because in any view, and without prejudice to the above grounds, additions made, interest charged u/s 234A and 234B, and the Assessment Order passed are wrong, illegal, without proper opportunity, bad in law and against the facts and law of the case." |
3. The brief facts of the case are that the case of the assessee was reopened under section 147 of the Income Tax Act, 1961 ('the Act' hereinafter) after recording following reasons:- (Page no.1)
"An information has been received from the Addl. Commissioner of Income Tax, Range-1, Agra vide letter F. No. LTCG/Addl. CIT/R-1/Agra/2007-08/1933 dated 20-3-2008 regarding bogus entries of Long Tem/Short Term Capital Gain and bogus gifts etc. has been found bogus as a result of enquiries made by the Inv. Wing. On enquiries it has been found that the bank accounts from which money has been transferred to various beneficiaries have been operated by certain stock brokers who have been providing entries to the beneficiaries by showing them transaction made by them in purchase and sale of shares of certain companies, gifts from certain persons, which in fact never took place.
The assessee is also one of the beneficiaries figuring in the list supplied as stated above and an amount of Rs. 1,00,250/- has been remitted to the assessee from Lal Chand. The said amount is found credited in the account no.45 of Shreyash Gramin Bank, Ram Bagh, Agra of the assessee vide draft No.93782 dated 11-6-2000. Since the transaction of share trading found to be bogus and the entire amount of the same claimed to have been received by the assessee by bank draft is the assessee's income from undisclosed sources, which has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. Hence I have reason to believe that the above income of Rs.1,00,250/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961."
4. The assessee submitted in response to notice under section 148 that the return already filed is treated as return in compliance to notice under section 148 of the Act. The A.O. asked the assessee to furnish details. The assessee filed objection in issue of notice under section 148 which was rejected by the A.O. The assessee furnished copy of gift deed and an affidavit from Shri Sanjeev Goyal stating that he gifted a sum of Rs. 1,00,000/- to Shri Anil Kumar Singhal. The copy of Income Tax return of donor, Shri Sanjeev Goyal was also filed which shows income at Rs. 89,434/-. The A.O. issued summons under section 133(6) to Shri Sanjeev Goyal but no compliance of the same was made. The copy of Bank account of donor was not produced. The assessee stated on the relationship with donor that he has no blood relation with the donor. The AO noticed that there is no relation between the donor and donee exists in this case. As regards the contention of the assessee that the gifts have been received by banking channel, the AO noticed that it is worthwhile to mention that even if the depositor was produced, who had admitted the transaction, they were assessed to tax, the deposit can still be treated as unexplained in view of the decisions of various Hon'ble High Courts relied upon by the wherein it was held that mere payment by cheque/DD is not sacrosanct as it would not make a non-genuine transaction as genuine.
5. The A.O. relied upon judgment of the Hon'ble Apex Court in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 and came to the conclusion that human probabilities, surrounding circumstances, circumstantial evidences, etc. are to be considered while deciding the taxation matters. The Income-tax authorities can penetrate the veil and go behind the façade to ascertain the truth. They cannot put blinkers on their eyes while examining the genuineness of transaction. At the present conditions of the society when no person would part with even a small amount as gift without any reason, occasion and even relationship, how it can be accepted that a person in Delhi can give gift to the strangers having no relationship or consideration? The AO held that it is a clear cut example of a tax avoidance, which is not permissible as per the decisions of the Hon'ble Supreme Court mentioned above.
6. The A.O. made addition as under:-
"In view of the above Court decision and the facts of the case that the assessee has introduced his unaccounted money to the tune of Rs. 1,00,000/- under the garb of bogus gift entry and the same is, therefore, added under section 68 of the I.T. Act, 1961 under the head Income from Other Sources to the income of the assessee from undisclosed sources. Since it has been held that the assessee has taken gift entries, a commission @ 2% amounting to Rs. 2,000/- is also being added to the income of the assessee. Penalty proceedings u/s.271(1)(c) are also initiated for this act of the assessee separately."
7. Before the CIT(A) reopening was challenged by the assessee which was rejected by the CIT(A) as under :-
"On going through the assessment record, I find that the notice u/s 148 dated 26.03.2008 was issued after recording of reasons and obtaining necessary approval from the Addl. CIT Range-I Agra and this notice was sent by post on 27.03.2008 and also served personally to the assessee (appellant) personally on 28.03.2008. Notice sent by post was also not received back un-served. Therefore, the notice u/s. 148 has been found to be served in accordance with law and contention of the appellant raised in ground no.1 in this regard has not been found correct.
The next contention of the appellant that in absence and without considering the initial Return of Income of relevant Assessment Year filed on 28.11.2001, the proceedings u/s. 147 is wrong, illegal and bad in law has also not been found to be correct because no such evidence has been produced during the appeal proceeding showing that the AO has not considered the original return and from the record, I find that after receiving the report of the Addl. CIT, the AO had in his possession details of material provided by the Investigation wing about the entries of bogus capital gains and gift provided by certain brokers from certain bank accounts being operated by them. Therefore, on the basis of such information received by the AO, he validly formed his belief that the payment of amount of Rs. 1,00,250/- from such accounts operated by brokers in the name of the appellant was his undisclosed income received in the form of entry.
On examination of the copy of the return on record, I find that in this return, no such receipt of amount of Rs. 1,00,000/- or Rs. 1,00,250/- (in fact the actual amount paid to the assessee was Rs. 1,00,000/- trough draft because the amount of Rs.250/- is the payment made to the bank for making of draft) has been declared or any information about receipt of any gift was given. Therefore, I do not agree with the argument taken by the Ld. AR that the AO recorded the reasons without considering the material on record and without considering the original return filed by the appellant in which the alleged gift has not been shown. In this regard, I would like to rely on following decisions of the Hon'ble Supreme Court and jurisdictional High Court in which the reopening of assessment on the basis of report of the Investigation Wing and other officers of the Income Tax Department was held to be valid:-
| 1. | Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 450 (SC) | |
| 2. | ITO v. Purshottam Dass Bangur 224 ITR 362 (SC) | |
| 3. | Brij Mohan Agarwal v. ACIT [2004] 268 ITR 400 (All.) |
Here, it may also be noted that the initial return filed by the assessee (appellant) for the relevant assessment year was only processed u/s. 143(1)(a) and no scrutiny of this return was carried out by the department u/s. 143(3). Therefore, the genuineness of the gift Rs. 1,00,000/- claimed to have bean received by the assessee from Shri Sanjeev Goyal could not be examined before the receipt of the above information. It has already been held by the Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhavery Stock Brokers Pvt. Ltd. [2007] 161 Taxman 316 that the return processed u/s. 143(1)(a) is not an assessment order and therefore, there being no assessment u/s. 143(3), question of change of opinion about this receipt being valid gift or not does not arise. Therefore, I do not find any force in the contention of the appellant raised in Ground no.1 that the initiation of proceedings u/s. 147 is bad in law taking the view that the proceeding has been reopened without considering the initial return, which has not been found correct as discussed above. To support my view, I am producing the relevant portion of the decision of the Hon'ble Supreme Court in the case of ACIT v. Rajesh Jhaveri (supra) :-
"It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from 1.6.1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any "assessment" is done by them? The reply is an emphatic "no". The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise."
Therefore, in view of the above decision of the Hon'ble Supreme Court, just because of disclosure of the particulars of a gift in the return of income would not prevent the department from reopening of the case of the appellant u/s. 147 in case any information is received on the basis of any enquiry conducted by the investigation wing of the department that such payments are being made by certain brokers in form of entries of capital gains and gifts. However, the fact of this case is that the assessee in this case has not even disclosed the receipt of the amount of Rs. 1,00,000/- as gift in his initial return of income filed by him on 28.11.2007 and hence, the AO is very much justified in initiating proceeding u/s 147 after receiving the information of the nature as discussed in the assessment order and also discussed in para no.3 of this order keeping in view the decision of the Hon'ble Supreme Court in case of CIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (supra).
Now, the next question to be examined with regard to validity of proceeding u/s.147 is that whether the AO was justified in reopening the proceeding after receiving information from Addl. CIT, Range-1 and whether the contention raised by the appellant in this regard that the reasons recorded are on untrue facts is correct or not. In this regard also, I rely on the judgment of the Hon'ble Supreme Court in case of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) in which the Hon'ble Supreme Court has analyzed the scope of newly substituted section 147 in the Income Tax Act, 1961 w.e.f. 01.04.89. The relevant portion of this decision is reproduced as under :-
"The scope and effect of section 147 as substituted with effect from 1.4.89, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso."
In view of the above decision, it is clear that the Supreme Court has held clearly that under the substituted section 147 applicable w.e.f. 01.04.1989, existence of only the first condition suffices to reopen the assessment, which is further explained by the Hon'ble Supreme Court that in other words, if the AO for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment, if the assessment is being reopened under the main provisions of section 147 and not in proviso for which both conditions are required to be satisfied. In the present case also, the assessment was reopened under the main provisions of the section 147 because no assessment order u/s. 143(3) was passed earlier on the basis of the return of income filed by the appellant and hence, only first condition is required to be satisfied. In the case of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), the case was reopened on the basis of revenue audit objection. The audit department is outside the income tax department, even then the Hon'ble Supreme Court in the above cited case held that reopening of the case u/s. 147 was valid because the audit objection gave a cause or justification for reopening of the case. In the present case, the AO is on more strong footing because in this case, there was no objection from any authority outside the department on the income disclosed by the appellant but proper information was gathered by the Income Tax Department on the basis of investigation carried out by its investigation wing that certain brokers were found involved in giving entries of bogus capital gain and bogus gift and the name of the assessee (appellant) was also found from their records as beneficiaries of such entry. Therefore, the principle laid down by the Hon'ble Supreme Court for reopening of the assessment u/s. 147 in case ofACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) is found to be more appropriate in the present case because the Supreme Court has held in this decision that if the AO for whatever reason (here the reason with the AO is that he got information from the Investigation Wing through his Range Addl. CIT that this assessee has received an entry showing payment of Rs.1,00,250/- from the bank account maintained by such brokers who were found involved in giving entry of bogus capital gain and bogus gift) has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment.
In the above cited case of the ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), the Hon'ble Supreme Court has also analyzed the term "reason to believe" and the relevant portion of this decision is reproduced as under:-
"Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers."
In view of the above decision of the Hon'ble Supreme Court, I find that in the present case, the AO has "cause" for reopening the case. The "cause" is provided by the information received by him from the Investigation Wing of the department and such information was not verifiable from the return filed by the assessee for the relevant assessment year because no such receipt of money was disclosed in the return of income and this return was processed by the department u/s. 143(1)(a) only and no scrutiny u/s. 143(3) was carried out. As it has been held by the Hon'ble Supreme Court that processing u/s.143(1)(a) is not assessment, such information also provided "justification" to the AO to record the reason to believe that income to the extent of Rs. 1,00,250/- has escaped assessment. It is true that the correct amount received by the assessee is Rs. 1,00,000/- but the amount of Rs. 1,00,250/- in fact represented the amount of Rs.1,00,000/- which was received by the assessee because this amount was debited in the bank account being operated by brokers (which was examined by the Investigation Wing) along with draft making charges of Rs.250/- paid to the bank out of which, a demand draft dated 11.06.2000 of Rs.1,00,000/- was prepared and given to the assessee which was later deposited in his bank account by clearing on 17.06.2000 and subsequently, during the proceeding u/s.147, this amount was claimed to have been received by the assessee as gift but genuineness of such gift could not be substantiated by him because of his failure to produce the donor as well as to explain his relationship with the donor and occasion of receiving the gift and found to be just entry as per the information of the Investigation Wing. Therefore, such information on the basis of which this case was reopened cannot be said to be untrue at least in substance, though there may be slight mistake in recording the name of the person in whose name the alleged bank account existed from where the alleged money was paid claimed to be gift by the assessee (appellant). At the time of recording the reasons, the AO was not required to make all the enquiries and the information given in the report of the Investigation Wing was sufficient for him to draw such conclusion that the amount shown to have been received by the assessee as not declared in the return of income, was in form of entry of gift received from such brokers engaged in providing such entries because the information provided by the Investigation Wing was based on the enquiries conducted by the officers of the Income-tax Department and it was a sufficient prima facie material for him to reopen a case u/s. 147, more particularly because the initial return was only processed u/s.143(1)(a). It has also been held by the Hon'ble Supreme Court in case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) that "at the time of reopening of a case u/s.147, it has to be seen that there was prima facie some material on the basis of which, the Department could reopen the case and the sufficiency or correctness of the material was not a thing to be considered at this stage."
In view of the above legal position and facts of the case, none of the contentions raised by the assessee (appellant) has been found to be valid and justified and he has not even tried to substantiate them during the appeal proceeding despite his authorized representative appeared before me from time to time just to seek adjournment but never filed any written submissions in this respect. Therefore, Ground No.1, challenging the validity of proceeding u/s.147 and subsequent order passed u/s. 147/143(3), is dismissed."
8. On merit, the CIT(A) held as under :- (Para nos.6.10 to 6.12)
"6.10 In view of the facts and circumstances and various case laws so far discussed from para nos.6.1 to 6.9 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 (appellant) for examination, nor it is presently traceable at the given address by the AO 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 (appellant) during the assessment proceeding, creditworthiness of donor as well as the genuineness of the gift is not established and relying on the decision of Hon'ble Supreme Court in the case of CIT v. P. Mohankala (supra), and other decisions of Delhi High Court and Delhi Bench of Hon'ble ITAT in cases of Sajjan Das & Sons v. CIT reported in 264 ITR 435, CIT v. Anil Kumar [2001] 292 ITR 552 (Del), Sandeep Kumar (HUF) v. CIT [2007] 293 ITR 294 (Del), Rajeev Tandon v. ACIT 294 ITR 488 (Del), &ITO v. Naveen Kumar Agarwal [2008] 25 SOT 253 (Delhi) and the decision of Punjab & Haryana High Court in the case of Tirath Ram Guptav. CIT 304 ITR 145 and the decision of Hon'ble ITAT, Agra in the case of Smt. Satyawati Singhal v. ITO, Agra vide ITA No.04/Agr/2006 dated 27.04.2007, I am of the considered opinion that the gifts of Rs. 1,00,000/- shown by the appellant is not genuine gift and hence, they are receipt of money of an income nature as held by the Hon'ble Supreme Court in the case of CIT v. P. Mohankafa (supra) and hence, this amount is correctly added by the AO in the income of the assessee (appellant) holding it his unaccounted money under the garb of bogus gift entry and therefore, I confirm the addition of Rs.1,00,000/- made in the assessment order.
6.11 As regards to addition of Rs.2,000/- on account of commission paid for obtaining the entry of gift challenged in Ground No.2 is concerned, I have confirmed the decision of the AO holding receipt of Rs. 1,00,000/- in the hand of the appellant as unexplained gift being his unaccounted money, I find that the AO has made this addition because he found that the gift of Rs. 1,00,000/- shown by the appellant was not a real gift but a receipt of money in form of income and such entries are given by the entry giver only after charging of some commission. Though there is no direct evidence against the appellant that she has paid commission for obtaining this entry but on the facts and circumstances of this case, it is conclusively proved that the amount of Rs. 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. Under such circumstances, section 114 of the Evidence Act can be invoked. The relevant provision of this section is reproduced as under:-
"the court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conducts and public and private business in their relation to the facts of particular case."
Such presumption can be made under certain circumstances as provided in this section from (a) to (i) out of which it is provided in sl. no.(g) that this presumption can be applied in cases where the evidence which could be and is not produced would, if produced be un-favourable to the person who withhold it. In the present case also, the appellant has failed to give evidence as to if the receipt of Rs.1,00,000/- was not a real gift, then for what purposes this amount was received by him. Had he given such details, it would have not been favourable to him and therefore, he concealed the fact about the real nature of the amount of Rs. 1,00,000/- and also did not appear when he was called by the AO during the remand stage to explain the nature of receipt of this amount. Even during the appeal proceeding, no details were filed in support of this ground in which this addition was challenged. In view of these facts and circumstances, by invoking section 114 of Evidence Act, 1872, it can be presumed that the appellant has paid a commission of certain amount taking into account the human conduct and public and private business practice. Since the details of real affairs relating to receipt of Rs. 1,00,000/- was not provided by the appellant, such presumption is justified in view of section 114 of the Evidence Act, 1872. Therefore, I also confirm the decision of the AO to estimate this amount at 2% which comes to Rs.2000/-. The addition of this amount of commission of Rs. 2000/- is confirmed by me as the addition of the gift being unexplained money is confirmed by me.
6.12 As both the addition of Rs.1,00,000/- and Rs.2,000/- as challenged in Ground No.2 has been confirmed by me as discussed above, the Ground No.2 is dismissed."
9. The ld. Authorised Representative submitted that the assessee was not dealing in shares. The details given in reasons recorded and finally addition made is different. The ld. Authorised Representative submitted that wrong/incorrect reasons have been recorded. The ld. Authorised Representative submitted that reasons cannot be supplemented. The ld. Authorised Representative submitted that there is no reason to believe, therefore, reopening itself is bad in law. The ld. Authorised Representative in support of his contention relied upon following decisions:-
| (1) | NDT Systems v. ITO [W.P No. 2710 of 2012, dated 4-12-2012] | |
| (2) | Jay Bharat Maruti Ltd. v. CIT [2009] 180 Taxman 192 (Delhi) | |
| (3) | Arvind Poly Cot Ltd. v. Asstt. CIT [1996] 222 ITR 280/[1997] 92 Taxman 393 (Guj.) | |
| (4) | Tin Mfg. Co. of India v. CIT [1996] 222 ITR 323 (All.) | |
| (5) | CIT v. P.R. Ganapathy [2012] 210 Taxman 572/26 taxmann.com 354 (SC) | |
| (6) | CIT v. Arun Kumar Kothari [2013] 31 taxmann.com 258 (Raj.) |
10. On merit, the ld. Authorised Representative submitted that the A.O. did not examine the donor whereas the assessee has proved identity, creditworthiness and genuineness of the transaction. He relied upon the following decisions:
| (1) | CIT v. S.K. Jain [2013] 214 Taxman 10/31 taxmann.com 390 (All.) | |
| (2) | Kanchan Singh v. CIT [2008] 174 Taxman 383 (All.) | |
| (3) | CIT v. Ram Dev Kumar Chitlangia [2009] 315 ITR 435 (Raj.) |
11. The ld. Authorised Representative submitted that burden is on the Revenue which the Revenue has failed to discharge. In support of his contention, the ld. Authorised Representative relied upon the judgment of Hon'ble Allahabad High Court in the case of Tin Mfg. Co. of India (supra)
12. The ld. Departmental Representative, on the other hand, relied upon the order of CIT(A) and the following judgments:-
| (i) | ITO v. Purushottam Das Bangur [1997] 224 ITR 362/90 Taxman 541 (SC) | |
| (ii) | CIT v. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169 (SC) | |
| (iii) | Ram Lal Agarwal v. CIT [2006] 280 ITR 547/[2005] 149 Taxman 342 (All.) |
13. I have heard the ld. Representatives of the parties, record perused and gone through the decisions cited. In respect of ground no.1, reopening of completed assessment, I would like to refer following judgments:-
Brij Mohan Agarwal v. Asstt. CIT [2004] 268 ITR 400/140 Taxman 317 (All.)
The brief facts of this case are that the assessee in his return for assessment year 2001-02 showed sale of certain shares. The profits earned on sale of said shares were offered to tax as 'long-term capital gain'. On basis of information, his assessment was completed. Subsequently, a notice under section 148 was issued to him. The assessee by filing petition challenged the validity of said notice. In the counter-affidavit filed by the respondent, it was stated that Investigation Wing of the Department conducted search and seizure operations under section 132 against some share brokers. It was revealed in said operation that the assessee was involved in bogus transactions of shares with some share brokers, and sale of shares shown by him in his return of income was incorrect. It was thus alleged by the respondents that in such circumstances, they had a reasonable ground to believe that income of the assessee had escaped assessment for which proceedings under section 148 were to be initiated.3. The assessee was a HUF and Brij Mohan Agarwal is the karta of the family. The relevant assessment was year 2001-02. It was alleged in para 6 of the petition that the main source of income of the petitioner is from house property. The assessee enjoys income from the house property which is said to be commercial premises. It is alleged in para 7 of the petition that during financial year 1999 the petitioner purchased 8,400 shares of M/s. Charismatic Trade links Ltd. and the purchase of these shares was duly shown in the relevant income-tax return for that year. It is alleged in para 8 of the petition that during assessment year 2001-02, the aforesaid shares were sold to one M/s. Yadav & Co. In para 9 of the petition it is stated that this sale of shares was duly shown in the return of income. Subsequently, the assessee received a summons from the Addl. Director of IT (Investigation) Unit-I, New Delhi, vide summon dated 17th Jan., 2002 by means of which certain information was required from the assessee. Thereafter the assessee again received a summons dated 14th/15th Feb., 2002 by which certain more information was required. However, the assessee was surprised to receive the impugned notice under section 148 of the Act. On 14th Feb., 2003 the assessee received notice under section 142 of the Income-tax Act with certain queries. The assessee replied that the time period for issuing the notice under section 143(2) has expired hence the AO I was not authorized to initiate the proceedings. It is alleged that the AO did not point out any reason to believe under section 148. It was also not informed by the respondents that the receipts in respect of sale of shares was doubtful according to the respondents. In compliance to the notice under section 148 the assessee requested that the return already filed by him may be treated as compliance of the said notice. He also requested that copy of the reasons recorded for initiation of reassessment proceedings under section 148 may be supplied to him. On 24th Dec., 2003 the AO has supplied the reasons.
In that case on perusal of the reasons shows that information relating to bogus entries for long-term capital gains/loss, share dealings, etc., was received from the Director of IT (Inv.) Unit-I, New Delhi, vide letter dated 9th July, 2002 alongwith the investigation report prepared by the Addl. Director of IT (Inv.) Unit-I, New Delhi. Search and seizure operation under section 132 of the Income-tax Act was conducted in the cases of the brokers namely, M/s. Yadav & Co., Rakesh Nagar & Co., Sri Surendra Singh Mehta. During the course of investigation it was found that bogus entries of sale of shares amounting to Rs.5,98,800 has been issued to Brij Mohan Agarwal, HUF as per Sl. No.63 of the list of the investigation wing enclosed with the report. From a perusal of the record of the assessee it is revealed that the assessee in his return of income for the assessment year 2001-02 has claimed profit of Rs.7,62,282 for long-term capital gain on sale of 8,400 shares for Rs.7,89,180 and has claimed income-tax chargeable @ 10 per cent as special rate. From the finding of the investigation wing and as per the record the respondent had reason to believe that the assessee has diverted and has concealed his income of Rs.5,98,800 by disclosing it to be sale proceeds of shares which is not correct as no real transaction of dealing in shares had even taken place.
The assessee alleged in para 20 of the writ petition that the purchase of shares is not in dispute, the sale of these shares is also not in dispute. The aforesaid shares have not been transferred in favour of M/s. Yadav & Co. by the concerned company. Merely on the basis of the statement of a third person, reassessment proceedings cannot be initiated against the petitioner. It is alleged in para 22 of the writ petition that the sale value of shares have been disclosed and has been accepted and there is no dispute in respect of sale value of the shares. The complete sale value has been shown in the original return of income filed by the petitioner and hence it cannot be said to be a case of escaped assessment.
In para 8 of the counter-affidavit, it is stated that the assessee further indulged in bogus transactions in purchase also whereby he purchased shares on bogus transaction from M/s. J.R.D. Stock Broker (P.) Ltd. The director of M/s. J.R.D. Stock Broker (P.) Ltd. Mr. Ashok Gupta has admitted in his statement that he was engaged in providing bogus accommodation entries in exchange of cash/cheques for certain commission. The copies of the statement of Mr. Ashok Gupta are Annex CA-5, 7 and 8 to the counter-affidavit. In para 10 of the counter-affidavit it is stated that the petitioner is the recipient of several lakhs of rupees arising from the bogus transactions entered into through Yadav & Co. and through M/s. J.R.D. Stock Broker (P.) Ltd. The petitioner has concealed all these relevant materials. The earlier assessment was done under section 143(1) of the Income-tax Act, in which there was no scrutiny of the material.
In para 21 of the counter-affidavit it is stated that the petitioner has concealed income in his return. A sum of Rs.7,88,298 was taxable under the normal rate under the head 'Income from other sources' but it had been shown under the head 'Long-term capital gain' and was taxed at special rate of 10 per cent. Hence, the assessee has furnished inaccurate income and has also shown lesser income and has been assessed at a lower rate. The contention of the assessee that Department has accepted the sale of shares is misleading. There is no finding of the Assessing Officer that the sale of shares ever took place. Whatever, is shown are bogus entries. Under the facts and circumstances, the Court held as under:- (pages Nos. 404 & 405)
"From the facts stated in the counter-affidavit it is evident that the petitioner has been suppressing his correct income and has been indulging in bogus transactions as stated in the counter-affidavit. The contention of the learned counsel for the petitioner that it is a mere change of opinion cannot be accepted. Very important materials have come before the income-tax authorities to show that the petitioner was suppressing his income by indulging in bogus transactions.
16. It may be mentioned that at this stage we are not pronouncing a final verdict about the allegations in the counter-affidavit. All that the Court has to see at this stage as to whether it can be said that the authority concerned had reason to believe that the assessee had concealed his income or that the correct income of the assessee has escaped assessment. In view of the investigation made by the Investigation Wing of the Department, relevant and very material facts have come before the respondent No. 1 that the petitioner was concealing his income by indulging in bogus transactions. All that is required at the stage of issuing of notice under section 148 is that the belief of the ITO must be that of an honest and reasonable person based upon reasonable grounds and not on mere suspicion, gossip or rumours.
17. In the present case, we are of the opinion that the belief of the respondent No. 1 was an honest and reasonable belief on the material which he had received from the Investigation Wing of the Department. In Ranbir Engg. Mills Store v. ITO [1980] 126 ITR 512 (Punj. & Har.), consequent upon craids conducted by the Income-tax Department on certain brokers and examination of the books of a certain person, it was found that many of the transactions recorded in the books of the assessee as loans were accommodation entries in which no moneys had passed and the so-called lenders were name-lenders only. It was held that the proceedings under section 148 by the Assessing Officer had been validly initiated. Similar view has been taken in Frontier Trading Co. v. P.N. Chaudhry , ITO [1982] 136 ITR 503 (Punj. & Har.), Jash Bhai F. Patel v. CIT [1982] 136 ITR 799 (Punj. & Har.), Kripa Ram Ramji Dass v. ITO [1982] 135 ITR 68 (Punj. & Har.), M. Varadarajulu Naidu v. CIT [1978] 111 ITR 301 (Mad.) and Hazi Amir Mohd. Mir Ahmed v. CIT [1977] 110 ITR 630 (Punj. & Har.).
Thus there is no merit in this petition and it is dismissed."
Purushottam Das Bangur (supra)
The brief facts of this case are that during the accounting year relevant to the assessment year 1969-70 the assessee claimed that he had suffered long-term capital loss on sale of shares of MSUL during the period 5-3-1969 and 30-3-1969 at the price quoted in the Official Report and quotations of the Calcutta Stock Exchange Association. According to the assessee, he had incurred a loss of Rs. 1,57,792. The said claim of the assessee was accepted by the ITO 'C' Ward, Jodhpur while making the assessment and the same was affirmed in appeal by the AAC. Subsequently, the ITO received a letter dated 21-3-1974 from Deputy Director, Directorate of Inspector (Investigation), Special Cell, New Delhi, wherein it was stated that on information obtained from the Bombay Stock Exchange Directory the book value per equity share of MSUL rose from Rs.318.55 for the year ending 21-12-1965 to Rs.401 for the year ending 31-12-1970 and the earning per share rose from Rs.8.37 per share to Rs.44 per share during the abovementioned period and that the dividend percentage also rose from 2 per cent to 10 per cent for the same period, but the quotations of the shares in Calcutta Stock Exchange fell from Rs.168 to Rs.85 per share during this period. In the said letter it was stated that it was clear from these facts that the quotations appearing were as a result of certain manipulated transactions between the group and it could not be said to reflect the fair market value of the company. Along with the said letter he had annexed the information which was gathered by him on the basis of the Bombay Stock Exchange Directory and other information. The said letter was received by the ITO on 26-3-1974. On 27-3-1974, he issued a notice under section 147(b) whereby the assessee was informed that the ITO had the reason to believe that assessee's income chargeable to tax for the assessment year 1969-70 had escaped assessment and, therefore, the assessing authority proposed to reassess the income for the said assessment year and the assessee was required to deliver to him a return in the prescribed form of his income for the said year. Feeling aggrieved by the said notice, the assessee filed writ petition. The High Court had held that on the facts and in the circumstances of the case, it could not be said that the ITO had in his possession information in consequence of which he could have reason to believe that income chargeable to tax had escaped assessment for the relevant assessment years. The notices were, therefore, quashed. On appeal to Supreme Court held as under :-
"The High Court has proceeded on the basis that the said letter of Shri Bagai did not contain any information and that there was neither evidence of manipulation nor evidence of collusive transactions referred to in the letter and that no inquiries were made by the ITO after the receipt of the letter so as to constitute information. We are unable to agree with the said view of the High Court. The contents of paragraph 2 of the letter of Shri Bagai refer to the statement containing financial information regarding Maharaja Shree Umaid Mills Ltd. which was annexed to the letter of Shri Bagai. The said statement contained information derived from the Bombay Stock Exchange Directory about the financial condition of Maharaja Shree Umaid Mills Ltd. during the period 1965-70 which indicated that during this period, the company has prospered and that the book value per equity share had arisen from Rs. 318.55 for the year ending 31-12-1965 to Rs. 401 for the year ending 31-12-1970, the earning per share rose from Rs. 8.37 per share to Rs.44 per share and that dividend percentage had also risen from 2 per cent to 10 per cent for the same period.
On the basis of the information contained in the letter of Shri Bagai and the documents annexed to it, the ITO could have had reason to believe that the fair market value of the shares was far more than the sale price and the market quotations from Calcutta Stock Association shown by the assessee at the time of original assessment were manipulated ones and as a result income chargeable to tax had escaped assessment. It could not be said that the information that was contained in paragraph 2 of the letter of Shri Bagai was not definite information and it could not be acted upon by the ITO for taking action under section 147(b).
Ms. Gauri Rastogi, the learned counsel appearing for the respondents, has urged that the letter of Shri Bagai was received by the ITO on 26-3-1974 and on the very next day, that is, on 27-3-1974, he issued the impugned notice under section 147(b) and that he did not have conducted any inquiry or investigation into the information sent by Shri Bagai. Merely because the impugned notice was sent on the next day after receipt of the letter of Shri Bagai does not mean that the ITO did not apply his mind to the information contained in the said letter of Shri Bagai. On the basis of the said facts and information contained in the said letter, the ITO, without any further investigation, could have formed the opinion that there was reason to believe that the income of the assessee chargeable to tax had escaped assessment. The High Court, in our opinion, was in error in proceeding on the basis that it could not be said that the ITO had in his possession information on the basis of which he could have reasons to believe that income of the assessee chargeable to tax had escaped assessment for the relevant assessment years. For the reasons aforementioned, we are unable to uphold the impugned judgment of the High Court. The appeal is, therefore, allowed, the impugned judgment of the High Court is set aside and the Writ Petitions filed by the respondents are dismissed. No order as to costs."
14. In the light of the above discussions and judgments, if I consider the facts of the case under consideration, I do not see any substance in the submissions of the ld. Authorised Representative that the reasons recorded on account of sale of shares and addition made on different account of gift, is different because in the reasons recorded it is clearly stated about both types of transactions bogus entries of long term/short term capital gain and bogus gifts. It is also relevant to state that information received from Addl. Commissioner of Income, Tax Range-1, Agra and after applying mind the A.O. found that there is escapement of income. The information was received on 20th March 2008 and the A.O. issued notice under section 148 on 26.03.2008. Thus, there was sufficient time with the A.O. to apply his mind. The Hon'ble Apex Court in the case of Purushottam Das Bangur (supra) held that notice issued on next day after receipt of letter from Deputy Director, the notice issued under section 148 was a valid notice. Similarly the Hon'ble Allahabad High Court in the case of Brij Mohan Agarwal (supra) held that the A.O. has an honest and reasonable belief on the material which had received from the Investigation Wing. Therefore, notice issued under section 148 of the Act was a valid notice. The facts of the case under consideration are identical to the facts of the case of Brij Mohan Agarwal (supra). The judgment is of jurisdictional High Court and bound to follow the same. Accordingly I follow the same and find that the A.O. has rightly issued notice under section 148 of the Act. Since we followed the judgments of the Hon'ble Apex Court and the Hon'ble jurisdictional High Court and in view of that the judgments cited by the ld. Authorised Representative does not help to the assessee.
15. On merit I find that the CIT(A) has recorded a fact that the assessee did not disclose the receipt of amount of Rs.1,00,000/- gift in his initial return of income filed on 28.11.2007. Therefore, the A.O. has rightly taken action under section 148 of the Act.
16. Now I come to the merit of the case. The ordinary meaning of the gift is a transfer by one person to another of any existing movable or immovable property made voluntarily or without consideration of money or money worth. In legal effect, there cannot be a 'gift' without a giving and taking. The giving and taking are the two contemporaneous reciprocal acts which constitute a 'gift'. In order to make a valid gift, there must be perfect knowledge in the mind of the person making the gift of the extent of the beneficial interest intended to be conferred, and of which making it. Donor gives gift in money or money's worth and taking love and affection from donee. To examine the issue from point of view of the provisions of Income Tax Act we are to see the nature of the transaction. Gift, Its nature is credit in the hands of the donee because donee credited gift amount his/her capital account and being treated as own money/capital. Normally such credit entry in capital account can be made only of the transaction which has been processed through the provisions of the Income Tax Act. It appears from reading of section 68 of the Act that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee then, it is for the Income-tax Officer to be satisfied whether the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly the persons from whom money is alleged to have been received actually existed or not. Secondly depending upon the facts of each case, the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depositor is a mere name lender or not. Be that as it may, it is clear that the Income-tax Officer has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of gift. The use of the words 'any sum found credited in the books' in section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as gift. What is clear, however, is that section 68 clearly permits an Income-tax Officer to make enquiries with regard to the nature and source of any or all the sums credited in the books of account of the company irrespective of the nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the Income-tax Officer. There is no quarrel with the proposition that a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift and since the claim of a gift is made by the assessee the onus lies on him not only to establish the identity of the donor but his capacity to make such a gift. The assessee is required to prove three important conditions, namely, (i) the identity of the creditor, (ii) the capacity of the creditor to advance the money, and (iii) the genuineness of the transaction. What evidence would be sufficient to establish the said conditions or what material would be relevant in a particular case, would depend on the facts of each case. There cannot be one general guiding yardstick in the matter.
17. Generally the assessee is furnishing various types of material/evidence gift deed, confirmation and others, to appreciate those material/evidences we would like to refer one of the judgments of the Apex Court in the case of Durga Prasad More (supra) wherein the Court held that Science has not yet invented any instrument to test the reliability of the evidence placed before a court or Tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. It has been further held as under:-
"It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents."
18. I would also like to refer one more judgment of Hon'ble Apex Court in the case of P. Mohanakala (supra). In this case, following questions have been answered by the High Court in favour of the assessees and against the Revenue :-
| "(a) | Whether, in the facts and circumstances, the Income-tax Appellate Tribunal was correct in law to accept the principle of preponderance of probabilities in holding that the claim of the appellant that the sum of Rs. 15,62,500** received him by way of gifts through normal banking channels was not genuine and that it was liable to be assessed under section 68 of the Income-tax Act, 1961 ? | |
| (b) | Whether, in the light of the law established and based on the facts and in the circumstances of the case, the learned Income-tax Appellant Tribunal is legally justified in concluding that burden of proof cast on the appellant under section 68 of the Income-tax Act, 1961 has not been discharged and the ingredients for invoking section 68 of the Income-tax Act are present ? | |
| (c) | Whether in the facts and circumstances of the case, the conclusion of the Tribunal that the claim of gift is not genuine is reasonable and based on relevant material and not perverse ?" |
19. The dispute in all these appeals relates to the addition made by the Assessing Officer in respect of several foreign gifts stated to have been received by the assessees from one common donor namely Sampath Kumar. The gifts received were from one Ariavan Thotan and Suprotoman. Dring the enquiry by the Revenue it is asserted that they were the aliases of Sampathkumar. These gifts were made to A. Srinivasan and his wife, Smt. S. Kalavathy, his son, S. Balaji Manikandan and to one of his brothers, Rajendran and Smt. Mohanakala. In all the aggregate gifts received by the assessees is to the extent of Rs. 1,79,27,703. The Assessing Officer did not accept the explanation offered by the respective assessees that the amount of credit is a gift from NRI and proceeded to add it as the income of the assessees from undisclosed sources. The credit entries have been made during the period from July 8, 1992 to October 19, 1995. There is no dispute that the payments were made by instruments issued by a foreign bank and credited into the respective assessee's account by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on Citibank, N.A. Singapore. The Assessing Officer dealt with the controversy as regards the cash credit entries received from the foreign donor. He noticed that the gifts have been sent in the name of Ariavan Thottan and received by A. Srin ivasan and others who are all his family members. Each one of them is an individual assessee. All the assessees were summoned and their statements have been recorded by the Assessing Officer. Srinivasan who is the key person in his statement said that he knew Sampathkumar for the last 20 years and he had been helping Sampathkumar prior to 1985 by paying Rs. 100 to 200 every month as he had no source of income to get himself educated. Sampathkumar in his own statement stated that he was in Indonesia up to the year 1992 and employed as an engineer. Thereafter, he shifted to England and started consultancy profession there. Later in the end of the year 1994-95, he joined New Century Machinery Ltd., Cheshire, SK 16 4xS and became its director in 1996. It is in his statement that he is paying taxes in England from his income earned in England. As far as his Indian income is concerned, he stated that he filed the returns for the assessment years 1996-97 and 1997-98 before the Income-tax Officer, Ward 1(4), CBE only on October 23, 1997. His investment in Indian companies according to him will be around Rs. 5 crores and made out of his income earned in the foreign countries. He did not reveal the details of his bank account in India and stated that he would be submitting the details through his auditor which he did not. Except the self serving statement there is no material evidence as regards his financial status. He stated from 1972-73 he knew Srinivasan, Rajendran and their families. His father was a taxi driver, and was very poor. Srinivasan and his family members were supporting him when he was in India. To a pointed query as to whether there is any evidence to show that he was also known by any other name other than Sampathkumar, he stated that "no evidence. Only Mr. Srinivasan used to call me as Suprotoman."
20. The Assessing Officer in the circumstances came to the conclusion that the gifts though apparent are not real and accordingly treated all those amounts credited in the books of the assessees as the income of the assessees. On appeal the Commissioner of Income-tax concluded that the story set up by the assessees is unacceptable and hard to believe and the "preponderance of probabilities, the common course of human livings point to the contrary". The appeals were accordingly dismissed. The ITAT concurred with the findings and conclusions arrived at by the Assessing Officer and the Commissioner of Income-tax. The Tribunal noticed that the letters exchanged "by the person who had sent foreign exchange to the assessees only indicate that there is no love and affection between them and that he is clearly materialistic and his statement of accepting a reciprocation is also an indication to the fact that he is not doing anything free but clearly the compensation was a roundabout manner of showing of he having been compensated either in India or abroad." The Tribunal also took note of the various other attending circumstances and found it difficult to accept the explanation offered by the assessees. The High Court came to the conclusion that the reasons assigned by the Tribunal and other authorities "are in the realm of surmises, conjectures and suspicions. The authorities under the Act have failed to draw the only conclusion that is possible legally and logically.
21. The Apex Court held as under:-
"Explanation offered was not satisfactory. The 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. All the decisions cited and referred to hereinabove are required to be appreciated and understood in the light of the law declared by this court in Sumati Dayal [1995] Supp 2 SCC 453.
Whether the High Court was justified in interfering with the concurrent finding of fact arrived at by all the authorities including the Tribunal? The Assessing Officer found that all the so-called gifts came from Ariavan Thotan and Suprotoman. The assessees did not declare that they are the aliases of Sampathkumar. It is only an afterthought they have come forward with the said plea. The Assessing Officer also found that the gifts were not real in nature. Various surroundings circumstances have been relied upon by the Assessing Officer to reject the explanation offered by the assessees. The Commissioner of Appeals confirmed the findings and conclusion drawn by the Assessing Officer. The Tribunal speaking though its Senior Vice President concurred with the findings of fact. The findings in our considered opinion are based on the material available on record and not on any conjectures and surmises. They are not imaginary as sought to be contended.
Relying on the decisions of this court in Bejoy Gopal Mukherji v. Pratul Chandra Ghose, AIR 1953 SC 153 and Orient Distributors v. Bank of India Ltd. AIR 1979 SC 867, Shri Iyer, learned senior counsel contended that the issue relating to the propriety of the legal conclusion that could be drawn on the basis of proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the matter since the authorities below failed to draw a proper and logical inference from the proved facts. We are unable to persuade ourselves to accept the submission. The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence.
No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed an error in disturbing the concurrent findings of fact."
22. In the light of above judgments if I considered the contention of the ld. Authorised Representative that the A.O. did not examine donor, it is relevant to note that the 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 which is at page no.6 of assessee's Paper Book. 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 Rs. 1,00,000/- made in the assessment order. As regards to addition of Rs. 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 Rs. 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 Rs. 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 Rs.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. I did not find any error in the order of the CIT(A)
23. The judgments cited by the ld. Authorised Representative are distinguishable on facts. Those judgments have been decided by the Court considering facts of respective cases which are not similar to the facts of the case under consideration. In the case of S.K. Jain (supra), the creditworthiness was established by filing return of income of donor and his wife but in the case under consideration the relevant return for the year under consideration was not filed. The case of Kanchan Singh (supra) is also distinguishable on facts as in that case the amount was of four Resurgent Indian Bonds purchased by K, an NRI in October 1998 and gifted to the assessee on 10.07.1999. The Hon'ble Rajasthan High Court in the case of Ram Dev Kumar (supra), held that whether gift is genuine or not is essentially be a question of fact. In that case the A.O. made addition on presumption and assumption.
24. One more ground of the appeal is in respect of charging of the interest under section 234B and 234C of the Act which is consequential in nature. The A.O. is directed accordingly.
25. In the light of above discussions, I do not find any error in the order of CIT(A). The order of CIT(A) is confirmed.
ITA No.408/Agr/2012 - by the Assessee
26. The ld. Representatives submitted that facts of the case in Anil Kumar Singhal, HUF and Anil Kumar Singhal, Individual are identical and the grounds raised are also similar except for difference in amount. The amount of addition in this case is Rs.1,50,000/- from donor Shri Lal Chand and Rs 2000/- on account of commission. Since the facts of Anil Kumar Singhal, HUF are identical to the case of Anil Kumar Singhal, Individual, following the above discussions made in the case of Anil Kumar Singhal, Individual, order of the CIT(A) is confirmed in case of Anil Kumar Singhal, HUF also.
27. In the result, both the appeals of the assessee are dismissed.
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