Income Tax Appellate Tribunal - Agra
Brij Bhushan Agarwal vs Cit on 25 October, 2004
Equivalent citations: [2005]2SOT811(AGRA)
ORDER
In this appeal, the assessee has objected to the order of the Commissioner of Income Tax passed under section 263 of the Act on 18-3-2004 by way of following grounds:
"1 Because on the facts and the circumstances of the case, assessment order dated 28-3-2003 passed by the assessing officer cannot be held erroneous and prejudicial to the interest of revenue as the order was passed after due discussions and on the basis of evidences filed and available on records.
2. (a) Because, on the facts and in the circumstances of the case, the CIT-I, Agra erred in holding that the gifts of Rs. 22,04,000 were not liable to be accepted as the Donors were not produced during the course of assessment hearing.
(b) Because, on the facts and in the circumstances of the case, the CIT(A)-I, Agra erred in concluding that the gifts of Rs. 22,04,000 were accepted by the assessing officer without making proper and complete enquiries.
(c) Because, the finding of the assessing officer regarding genuineness of the gifts is based on material available on records and such a finding cannot be disturbed on unfounded presumptions and surmises.
3. (a) Because, on the facts and in the circumstances of the case, CIT-I, Agra erred in holding that unsecured loan of Rs. 17,40,784 was accepted by the assessing officer without making any sincere attempt, and without making any worthwhile enquiry.
(b) Because, the assessing officer had made definite enquiries in this regard during the course of assessment proceedings and the same was also complied with.
4. Because, order dated 18-3-2004 is bad in law and on facts."
2. I have heard the counsel for the assessee as well as the learned Departmental Representative
3. This appeal was partly heard on 15-10-1994 and since the assessee's counsel had pleaded that the assessee had discharged the onus put on it by the provisions of section 68 of the Act by having filed gift deeds, acknowledgement for having filed the returns of income, by the donors as well as the creditors, computation of their income, copies of their balance sheets and in almost all cases, copies of bank account, the learned Departmental Representative was directed to produce the assessment records to verify the submissions of the counsel for the assessee because the assessment order was silent with respect to these facts though the learned CIT has duly acknowledged these facts.
3.1 On 20-10-2004, the learned Departmental Representative produced assessment records, which were perused by the Tribunal and the appeal was heard.
4. The brief facts, as have been revealed from the records and stand admitted by both the parties are that the assessee had filed his return of income for the assessment year 2000-01 declaring a loss of Rs. 49,646 which was accompanied with audited accounts and report of audit under section 44AB of the Act. The assessing officer noticed that the assessee had claimed to have received the gifts from various persons from different places totalling to Rs. 22,04,000 and unsecured loans of Rs. 17,40,784. When the assessee was called upon to prove the genuineness of the gifts as well as loans, the assessee filed gift deeds, copies of acknowledgement for having filed the returns of income (by the donors) copies of their balance sheet, computation of their income, confirmations and in many cases, copies of bank accounts also.
5. Since the assessee had not filed evidence with respect to gift of Rs. 1,00,000 from one Shri Deepak Jain, Delhi, the assessee was required to produce documentary evidence in this respect and the assessee filed photo copy of return showing income of Rs. 60,260 Copies of balance sheet capital account etc. claimed to have been filed by Mr. Deepak Jain alongwith his return were not filed. In these circumstances, the assessing officer considered the gift of Rs. 1,00,000 from Shri Deepak Jain as not proved and consequently made an addition of Rs. 1,00,000 under section 68 of the Act.
6. While going through the assessment records, produced by the learned Departmental Representative it was noticed that it contained order sheet running in 15 pages and there were assessment proceedings details on various dates. It was further found that the original assessment order lying in assessment records contains three pages, whereas the assessment order supplied to the assessee, copy of which has been filed alongwith memorandum of appeal before the Tribunal, contains only two pages.
6.1. The third page of the assessment order lying in the assessment records of the assessee reads as under:
"Office Note - During the course of assessment proceedings the assessee has filed explanations of all the unsecured loans and gifts which were find satisfactory except an amount of Rs. 1 lakh received as gift on 15-3-2000 from Sh. Deepak Jain of Delhi. This amount has been added to the income of the assessee. After disallowing inadmissible the case has been completed on income of Rs. 1,01,290 as against returned loss of Rs. 49,646.
The first notice was issued with the approval of JCIT, Range-3, Mathura and the order has been passed after discussion with the JCIT, R-3, Mathura."
Sd/ Sd/-25-3-2003 (Sandeep Chauhan) (V.P. Lavania) Jt. CIT, Range-3, Mathura ITO 3(2), Mathura 6.2 There is another entry at page 3 of the assessment order, which reads as under:-
"22/X/03: Issue information letter to assessing officers of various donors as dictated for taking action at their end."
Sd/-
ITO
7. Later on, the C.I.T. initiated the proceedings under section 263 of the Act and ultimately passed order under section 263 on 18-3-2004, whereby he set aside the assessment and directed the assessing officer to make assessment de novo after carefully considering the relevant facts and the evidence and after given the reasonable opportunity to the assessee of being heard, because, in his opinion the assessment order passed by the assessing officer was erroneous and prejudicial to the interest of revenue for want of 'sincere efforts' to test the genuineness of the gifts totalling to Rs. 22,04,000 and 'worthwhile enquiries' before accepting the unsecured loans as genuine. The relevant part of the order of CIT, as contained in paras 5, 6 and 7 reads as under:
"5. With regard to unsecured loans of Rs. 17,40,784, it is claimed that persons from whom loans making a total of Rs. 15,69,784 were taken, were tax payers and these had been received by cheques. In the case of balance total amount of Rs. 1,7 1,000 of loan, the amount of individual loan was less than Rs. 20,000 and was received in cash. These were examined by the assessing officer and accepted. Hence, prima facie, there was no error in the assessing officer's order.
6. According to the assessee, if there was any prima facie error in the assessment order then merely in the interest of revenue, the proceedings under section 263 of the Income Tax Act cannot be invoked. It was, therefore, submitted that the proceedings initiated under section 263 of the Income Tax Act, 1961 in the case may be dropped.
7. The facts and circumstances relating to the case have been carefully considered. The fact that the alleged donors in eighteen cases were not produced before the assessing officer and the cheques through which these gifts were claimed to be given were issued only a day or two or same day alter equivalent amount was deposited in the accounts of the alleged donors and also the fact that there is no evidence to establish that the practice of receiving such gifts in assessee's family was common in the past, it cannot be prima jacie accepted that the gifts claimed were genuine merely on the basis of information filed by the assessee. There is no denying of the fact that the assessing officer in the case has not made 'sincere efforts' to test the genuineness of the eighteen gifts totalling Rs. 22,04,000. Similarly, there has been no 'worthwhile enquiries' made by the assessing officer before accepting the claim of alleged unsecured loans as genuine. In the aforesaid background of facts and circumstances, I am to conclude that the assessment order passed by the assessing officer was undoubtedly erroneous and prejudicial to the interest of revenue. I, therefore, proceed to invoke the powers vested under section 263 of the Income Tax Act, 1961 and setaside the assessment order of the assessing officer to be made de novo after carefully considering all the relevant facts and evidences and also giving a reasonable opportunity to the assessee for being heard."
8. It was in view of the above facts and circumstances of the case that the counsel for the assessee, first of all, after referring to the order under section 263, the learned Counsel submitted that after the reading of the order as a whole, it transpires that the CIT has considered the assessment order as erroneous and prejudicial to the interest of revenue mainly on the ground that (i) the assessee had not produced all the donors alongwith their original pass books, (ii) that no 'sincere efforts' were made to test the genuineness of the gifts, and (iii) that there has been no 'worthwhile enquiries' made by the assessing officer before accepting the claim of alleged unsecured loans is genuine, but none of these three allegations is correct or can be made basis for exercising the powers under section 263 of the Act. The learned Counsel further submitted that the assessee having discharged the onus put on it by the provisions of section 68 of the Act, the foot note at page 3 of the assessment order which clarifies beyond any doubt that the genuineness of gifts as well as unsecured loans had been verified by the Income Tax Officer as well as the Joint Commissioner of Income Tax, Range-3, Mathura after making due inquiries as per the provisions of law and on appreciation of factual evidence available on record, it cannot be said that the Income Tax Officer had not made so called 'sincere efforts' to test the genuineness of the gifts or had not made so called 'worthwhile enquiries' before accepting the loans to be genuine.
8.1 Commenting on the observations of the CIT that the assessee had not produced all the donors alongwith their original bank pass book, the learned Counsel submitted that the onus put on the assessee by provisions of section 68 i.e., the onus to prove genuineness of any credited amount, be it may by way of gift or loan or deposit, is to establish three ingredients i.e., identity of donors/ creditors, capacity of donor/creditor and the genuineness of the transaction and so far as the present case is concerned, the counsel submitted that the identity of the donors/ creditors and the genuineness of the transaction have not been objected to by the CIT. The only doubt raised by the CIT seems to be the capacity of the donors/ creditors, (though not in specific terms) but the assessee had established the capacity of donors/ creditors by filing the sufficient documentary evidence such as their balance sheet and copies of bank accounts as well as acknowledgements of having furnished the returns and therefore, the assessee had discharged the onus put on him. According to the learned Counsel, all the donors and the creditor being income-tax assessees and having confirm the factum of gifts or the loan, as the case was, nothing more was to be proved by the assessee.
8.2 According to the learned Counsel, the law does not require the assessee to produce the donors/creditors in person. The learned Counsel submitted that it was for the assessing officer in case he had any doubt regarding the genuineness of the evidence furnished by the assessee in respect of discharge of onus put on him, to call them in exercise of his powers under section 131 of the Act, but since the assessing officer as well as the Joint Commissioner, Income Tax, who was monitoring the assessment, were fully satisfied with respect to the sufficiency of the evidence furnished by the assessee, they might have not considered it necessary. He, therefore, submitted that non-production of donors by the assessee cannot be a ground for resorting to the provisions of section 263 of the Act.
8.3 Similarly, the learned Counsel submitted that he was never called upon to produce the original pass book of the donors and this observation of the CIT was also not relevant for invoking the provisions of section 263 of the Act.
8.4 Coming to para 7 of the order under section 263, the counsel for the assessee submitted that for exercise of jurisdiction under section 263, it is incumbent upon the CIT to give specific reason in this respect, but if we go through the effective part of the order, it reveals that he has passed the order simply on conjectures, surmises and suspicion, as is evident from the observation that the assessing officer in the case has not made 'sincere efforts' to test the genuineness of the gifts and to the effect that "there has been no worth while enquiries' made by the assessing officer".
8.5 Commenting on the use of terms 'sincere efforts' and 'worthwhile enquiries', the learned Counsel submitted that what is the degree of efforts, which could be said to be a 'sincere effort' and what is the nature of enquiry, which can be said to be worth while enquiry', has now where been specified either in the Act or in the order of the CIT and therefore, these terms indicate that the learned CIT was just roaming in the dark and was bent upon to set aside the assessment order, which had been passed after due enquiries and appreciation of factual evidence on record and the provisions of law. The learned Counsel further submitted that though the assessment order is a cryptic one, but that alone cannot be a ground for resorting to the provisions of section 263 of the Act. In support of the above submissions, the counsel for the assessee has relied upon the decision in the following cases :
(i) CIT v. Mehrotra Bros. (2004) 270 ITR 157 (MP)
(ii) CIT v. Mrs. Sunita Vachani (1990) 184 ITR 121 (Del)
(iii) CIT v. Shamshuddin Manzoor Raque (1988) 172 ITR 696 (All.)
(iv) Venkata Krishna Rice Co. v. CIT (I987) 163 ITR 129 (Mad.)
(v) CITv. Goyal Private Family Specific Trust (1988) 171 ITR 698 (All.)
(vi) CIT v. Gabrial India Ltd. (1993) 203 ITR 108 (Bom.)
(vii) CIT v. Dr. B.A. Rajakrishnan (1997) 226 ITR 323 (Ker.)
(viii) Diamond Jubilee Trust v. Director of Income Tax (Exemption) (2003) SOT 341 (Mum.)
(ix) Lalsons Enterprises v. Asstt. Commissioner (2004) 1 SOT 493 (Del)
(x) Hycron India v. Asstt. Commissioner (2004) 2 SOT 927 (Jodh.)
9. The learned Departmental Representative on the other hand, has supported the order of the CIT.
10. I have considered the rival submissions, facts and circumstances of the case and the order of the CIT and evidence available in the assessment records as well as the third page of the assessment order, copy of which was filed by the learned Departmental Representative on Tribunal's directions.
11. After careful consideration of the totality of facts and circumstances of the case, provisions of section 68 with respect to the requirements for discharging the onus put on the assessee and settled proposition of law in this respect, the foot note at page 3 of the assessment order, reproduced in para 6.1 above, the fact that this foot note has been signed by both the Income Tax Officer, V.P. Lawania and JCIT, Range-3, Mathura Shri Satish Chand and that there is another entry dated 28-10-2003, as per which Income Tax Officer had information letters to assessing officers of various donors for taking action at their ends, I am of the opinion that there remains no doubt with regard to the submissions of the counsel for the assessee that the assessee had discharged the onus put on him by the provisions of section 68 of the Act because the documentary evidence furnished by the assessee, which have been duly acknowledged by the CIT also, clubbed with the fact that all the donors and creditors were Income Tax payers, had filed their returns of income showing sufficient income, was sufficient to establish all the three ingredients i.e., identity, capacity and genuineness of the transactions both in case of donors as well as the creditors and therefore, I am of the opinion that the assessment order is neither erroneous nor prejudicial to the interest of revenue.
12. So far as the nature of assessment order is concerned, I am inclined to agree with the submissions of the counsel for the assessee that howsoever cryptic the assessment order may be, that alone cannot a ground for resorting to the provisions of section 263 of the Act. So far as the present case is concerned, though the assessment order contained at pages 1 and 2 is not so elaborate and may be termed as a cryptic order, but the office note and entry dated 22-10-2003 contained at page 3 of the assessment order (supra) proved beyond any doubt that the order in question cannot be termed, as cryptic also. Even otherwise, if we take the assessment order to be cryptic one, then also the CIT cannot said to be justified in exercising the powers vested under section 263 of the Act. This proposition of mine is fully supported by the decision of Jurisdictional High Court, Allahabad in the case of CIT v. Goyal Private Family Specific Trust (1988) 171 ITR 698 (All) wherein the Hon'ble High Court at page 701 of the report has held as under:
"The orders of the Income Tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to -the interest of the revenue".
13. Respectfully following the decision of Jurisdictional High Court, I am of the opinion that the assessment order, which has been the subject-matter of proceedings under section 263 of the Act, may be a cryptic one, but that itself does not render the assessment order to be erroneous and prejudicial to the interest of revenue.
14. So far as the other submissions of the learned Counsel for the assessee is concerned I am of the opinion that they are fully supported by the decisions relied upon by the counsel a few of which, I would like to discuss as under:
(1) CIT v. Mehrotra Brds. (2004) 270 ITR 157 (MP)
(a) In this case, the Hon'ble High Court dismissed the appeal of revenue by holding as under:
"That the Tribunal had found that when the assessee had furnished requisite information and the Income Tax Officer had considered the records before him and completed the assessment after considering the evidence filed and after his satisfaction about the genuineness of cash credits, the order of revision under section 263 of the Income Tax Act, 1961, on the vague ground that the assessing officer did not make proper enquiry was not valid. The Tribunal was justified in setting aside the order of revision. No substantial question of law arose from the order."
(b) So far as the assessee's case is concerned, the out come of assessee's appeal is wholly on the appreciation of facts on record, ie., evidence furnished by the assessce before the Income Tax Officer and acceptance of the same by the Income Tax Officer as well as JCIT. Consequently this decision supports the assessee's case that the assessing officer had made proper enquiries.
(2) CIT v. Mrs. Sunita Vachani (1990) 184 ITR 121 (Del)
(a) In this case the CIT had set aside the assessment order because he was of the view that the Income Tax Officer had not gone into the source of gift of large sum of money received by the assessee.
(a.i) On appeal, the Appellate Authority saw the balance sheet of the donors, which had been placed on record and came to the conclusion on merits that the decision of ITAT to treat the monies receipt of gifts was correct and there was no error committed by the officer as there was nothing more which he could investigate than what he cannot be done. The Hon'ble High Court on appeal of the revenue held that the findings of the Tribunal that the gifts were genuine was a pure question of fact and no question of law arose from the order of the Tribunal.
(b) So far as the present case is concerned, the assessment records and the foot note as well as entry dated 28-10-2003 on page 3 of the assessment order amply prove that the Income Tax Officer as well as JCIT could do nothing more than what they have done, ie., they could ask for the evidence and scrutinize the same and if after such exercise they came to the conclusion that the evidence furnished by the assessee was sufficient it cannot be said that there was no enquiry or effort made by them or that there was any infirmity in the assessment at least with regard to conducting of inquiries or making of efforts.
(3) Venkata Krishna Rice Co. v. CIT (1987) 163 ITR 129 (Mad.)
(a) In this case, the assessee, a partnership firm, had indulged in a joint venture in sugar in associatioa with certain other firms and disclosed its share income from the said joint venture in its return of income for the assessment year 1969-70, which was accepted and the assessment was made. The CIT subsequendy in suo motu proceedings initiated under section 263 of the Act, held that the Income Tax Officer's action in bringing to charge the assessee's share income from the joint venture was prejudicial to the interests of' the revenue because he should have considered assessing the joint venture income in the hands of the association of persons as a whole. He therefore directed the Income Tax Officer to first make an assessment on the Association of persons and then follow it uD with the assessment of the share income of the assessee as a member of that association. This order of the CIT was confirmed by the Tribunal on appeal by the assessee. The Hon'ble High Court held: as under :
"As in the instant case, the order of assessment of the Income Tax Officer was in accordance with law, it could not be held to be erroneous in law and consequently it could not be prejudicial to the interest of the revenue end hence, the action of the Commissioner was not justified. The Tribunal was, therefore, not right in upholding the order of the Commissioner.
The scope of interference under section 263 is not to set aside merely in favourable orders and bring to tax some more money to the treaties nor is the section meant to get at sheer escapement of revenue which is taken care of by other provisions in the Act. The prejudice that is contemplated under section 263 is prejudice to the income-tax administration as a whole. Section 263 is to be invoked not as a jurisdictional corrective or as a review of a subordinate's order in exercise of the supervisory power but it is to be invoked and employed only for the purpose of setting right distortions and prejudices to the revenue which is a unique conception which has to be understood in the context of and in the interest of revenue administration. Such a power cannot in any manner be equated to or regarded as approaching in any way the appellate jurisdiction or even the ordinary revisional jurisdiction conferred on the Commissioner under section 264."
(b) So far as the present case is concerned, it is not the CIT's case that the assessment order which has been passed by the Income Tax Officer under the supervision of JCIT, is not in accordance with law and therefore, so far as the assessment order remains as per the law, the same cannot be erroneous or prejudicial to the interest of revenue. The aforesaid decision fully supports the assessee's case.
(4) CIT v. Goyal Private Family Specific Trust (1988) 171 ITR 698 (All.)
(a) In this case, the assessee, Private trust, filed its returns and the Income Tax Officer assessed the beneficiaries of the trust holding that the trust was not assessable. The CIT, under section 263 of the Act set aside the order of assessment made on the beneficiaries by observing as under:
"Return filed declaring an income of Rs. 39,540. In response to a notice under section 143(2), Shri D.K. Agarwal, C.A. attended. Case discussed. This is a case of Private Family Specific Trust, in which shares of beneficiaries are specified. Therefore, income in the hands of the trust is exempt and taxable in the hands of beneficiaries. The trust has been created, vide trust deed dated 24-1-1973, a copy of which has been filed and placed on record, for the benefit of beneficiaries, Km. Mira Agarwal, Km. Usha Agarwal, Km. Rekha Agarwal and Master Kapil Agarwal. After discussion and scrutiny, income returned is accepted. Share of each beneficiary comes to Rs. 9,890. Assessed. Issue N.D. Thereafter, notices under section 263 were issued to the assessee by the Commissioner of Income Tax for both the years calling upon the assessee to show cause as to why assessment orders be not cancelled."
(a.i) The Tribunal found that the necessary account books had been produced. The Income Tax Officer had examined them and also discussed the case with the Representative of the assessee before passing the assessment. On the other hand, there was no finding by the CIT that the Income Tax Officer has reached an erroneous conclusion. The Tribunal, therefore, set aside the order of the CIT. On application by the revenue by way of direct reference to Hon'ble High Court, the Hon'ble High Court held as under:
"(i) That the finding that the books of account had been produced before the Income Tax Officer and that he passed the orders after having seen them is a finding of fact and no question of law arises there from.
(ii) That in his orders, the Income Tax Officer had clearly stated that he had discussed the case with the representative of the assessee and it was only after the discussion that the Income Tax Officer held that the assessee was a Private specific trust and the income thereof was exempt in the hands of the trust but that it was assessable in the hands of the beneficiaries. Having considered all these facts, the Tribunal observed in paragraph 4;
'The reasons given by the Commissioner of Income Tax for coming to the conclusion that the assessments had been made in a hurried way without any checking or scrutiny are superficial.' Such finding of the Tribunal is not without material and hence, no question of law arises.
(iii) That there is no finding by the Commissioner that the Income Tax Officer reached an erroneous conclusion and that, on the facts and circumstances of the case, the conclusion would have been different. The orders of the Income Tax Officer may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment orders as erroneous and prejudicial to the interest of the revenue. Writing an order in detail may be a legal requirement, but the order not fulfilling this requirement cannot be said to be erroneous and prejudicial to the interest of the revenue. It was for the Commissioner to point out as to what error was committed by the Income Tax Officer in having reached the conclusion that the income of the trust was exempt in his hands and was assessable only in the hands of the beneficiaries. The Commissioner having failed to point out any error, no error can be inferred from the orders of the Income Tax Officer for the simple reason that they are bereft of the details. If the order is not erroneous, then it cannot be prejudicial to the interest of the revenue. There is nothing to show in the order of the Commissioner that the Income Tax Officer would have reached a different conclusion had he passed a detailed order. So, the conclusions of the Commissioner that the orders of the Income Tax Officer are erroneous and prejudicial to the interest of the revenue are based merely on suspicion and surmises in the absence of any enquiry having been made by him."
(b) after careful consideration of the facts and circumstances of the present case and the aforesaid decision of Jurisdictional High Court, I am of the opinion that the assessee's case is fully covered by the proposition of law held by Hon'ble High Court (supra).
CIT v. Gabrial India Ltd. (1993) 203 ITR 108 (Bom.)
(a) In this case, the proposition of law held by the Hon'ble High Court is that the CIT cannot revise the order merely because disagrees with the conclusions arrived at by the assessing officer.
(b) So far as the present case is concerned, the CIT has not given any finding except a finding based on suspicion, conjectures and surmises, which leads one to believe that he has exercised the powers under section 263 of the Act because he seems to disagree with the conclusions arrived at by the assessing officer and therefore, his order cannot be sustained in law.
15. So far as the decision of Kerala High Court in the case of CIT v. Dr. B.A. Rajakrishnan (1997) 226 ITR 323 (Ker.), ITAT Mumbai Bench-B in the case of Diamond Jubilee Trusty. Director of Income Tax (Exemption)(2003) SOT 341 decision of ITAT, Delhi Bench in the case of Lalsons Enterprises v. Asstt. Commissioner (2004) 1 SOT 493 Delhi and the decision of ITAT, Jodhpur in the case of Hycron India v. Asstt. CIT (2004) 2 SOT 927 (Jod) are concerned, all of them support the assessee's submissions that the assessment order having been passed after detailed inquiries and appreciation of evidence placed on record, the same cannot be said to be erroneous and prejudicial to the interest of revenue.
16. In view of the aforesaid discussion and various decisions referred therein as well as the decision of ITAT, Agra Bench in case of Rishi Kumar Gupta v. CIT (2004) 90 TTJ (Agra) 645 (Addl. Volume), for the assessment year 1998-99, wherein, the CIT had set aside the assessment order in exercise of powers under section 263 of the Act on similar grounds, but the Hon'ble Tribunal set aside the order of the CIT, after holding that it is for the assessing officer and not for the CIT to decide as to upto what extent, the enquiry is to be made, I am of the opinion that the assessment order dated 28-3-2003, which has been passed by the Income Tax Officer after consultation with and under the supervision of JCIT, Range-3, Mathura and on appreciation of evidence furnished by the assessee, though may be cryptic one, but can't be said erroneous and prejudicial to the interest of revenue. Consequently, the CIT was not justified in invoking his powers vested by the provisions of section 263 of the Act. The order of the CIT is set aside.
17. In the result, the assessee's appeal is allowed.