Income Tax Appellate Tribunal - Rajkot
Assistant Commissioner Of Income-Tax vs Radhey Shyam Bansal on 17 February, 2000
ORDER
Behari Lal, A.M.
1. This appeal has been filed by the Department against the order of the CIT(A)-II, Rajkot, dt, 27th August, 1992 for the asst. yr. 1989-90. The various grounds of appeal taken up by the Department are as follows :
"The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 64,997 made on account of gift received by the assessee from a foreign party in US dollars."
"The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,60,875 made on account of unexplained investment in property holding that the AO does not have any authority under the IT Act to make a reference to the Valuation Officer for determining the cost of construction" and "The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 33,500 made under s. 65 of the IT Act on account of unexplained cash credits representing unexplained loan in the name of 3 persons."
2. The sources of income of the assessee, during the accounting period, were personal business in bentonite lumps, share of profit from different firms, interest income and dividend income. The first ground of appeal is regarding the addition of Rs. 64,997 made on account of gift received by the assessee from a foreign party in US dollars.
3. During the course of assessment proceedings, the assessee explained to the AO that the gift was sent by one Shri Ramesh Chawla through Shri Harishchandra Goyal, New York. The assessee also explained that Shri Ramesh Chawla has sent this gift to him in US $ 5000 because he had helped Shri R. Chawla in his earlier life in Gandhidham. Shri R. Chawla attained prosperity in his life because of the guidance of the assessee. It is stated that he also persuaded him to go abroad. It is because of the assessee that Shri R. Chawla is now settled in USA and he is now a nicely placed person. He also informed the AO that Shri R. Chawla regards him as his father and in view of such relationship he has set the gift to him. The gift was not only sent to him but also to his son Shri Nilesh Bansal. Therefore, the gift has been received by him but also to his son Shri Nilesh Bansal. Therefore, the gift has been received by him out of love and affection. He further stated that Shri R. Chawla also sent gift to Gandhidham, Gaushala Seva Samiti also on his persuasion. Shri R. Chawla also arranged certain gifts for Gaushala Seva Samiti, on his persuasion, from his other friends also. But the AO rejected his contention that the gift has been received out of love and affection. He concluded that the assessee is not related to Shri R. Chawla. Therefore, there is no consideration for receiving such gifts from him. Thus, the AO treated this gift amount as an investment of the assessee out of some undisclosed sources of income. He, accordingly, made addition of Rs. 64,997 to the total income of the assessee.
4. The learned CIT(A), after going through the various documents produced before him by the assessee, came to the conclusion that the blood relation between the donor and donee cannot by itself be the basis for doubting the genuineness of the gifts. The AO has not brought any other evidence on record to prove that the gift was not genuine. Therefore, the addition made by him of Rs. 64,997 was considered by the CIT(A) is not justified. He, accordingly, deleted the addition.
5. During the course of hearing, the learned Departmental Representative contended that Shri Harishchandra Goyal was not the real donor. The assessee received the gift through him and Shri Goyal received the gift from someone abroad on behalf of the assessee whose name has been given as Ramesh Chawla. Thus, according to the learned Departmental Representative, the gift received by the assessee cannot be considered as has been received through genuine sources. He further relied on the findings of the AO.
6. The learned counsel for the assessee, however, stated that the gift has been received by the assessee from Shri R. Chawla of USA through Shri Harishchandra Goyal, Shri R. Chawla is well known to the assessee and he has sent this gift through Harishchandra Goyal out of love and affection. Therefore, it cannot be said that the gift received is not genuine. The gift has also been received by a draft which was also deposited in the bank. The learned counsel contended that it is not necessary that the donor should be a blood relation of the donee for receiving the gift. Any person can give gift out of love and affection and it is not necessary that there should be blood relation between the donee and the donor.
7. We have heard the rival parties. During the course of hearing, the learned counsel produced before us copy of letter dt. 25th December, 1987, written by Shri R. Chawla of USA to the assessee wherein he has mentioned the draft number for US $ 5,000 and has also stated that the same is being sent to the assessee through Shri Harishchandra Goyal. Shri Goyal informed the assessee, vide letter dt. 27th December,1987, that he had received F.D.D. for US $ 5,000 issued by NBG International, Coral Cables (Miami) Florida bearing No. 003244 : 061000256 : 000001880, dt. 7th January, 1988, for and on behalf of the assessee. He has also stated that he is forwarding this draft to the assessee which is a gift from Shri R. Chawla. In view of the documents, the genuineness of the gift cannot be doubted. The identity of the donor is established. In view of the above documents, the transaction cannot be doubted. The capacity of Shri R. Chawla, who is settled in USA, to advance US $ 5,000 to the assessee cannot also be doubted. Keeping in view the fact that he has also made donations to Gandhidham. The donation was also received in the form of a draft and the same was also deposited in the bank. In his letter, dt. 20th March, 1992, written to the AO, the assessee explained that Shri R. Chawla also sent a gift to Gandhidham, Gaushala Seva Samiti, etc. on his request. The gift given to Gandhidham has not been doubted by the Department. In view of these facts, the capacity of the donor for making the gift to the assessee cannot be questioned.
8. During the course of hearing, the learned counsel also invited our attention to the decisions of the various Courts. In the case of CIT vs. Mrs. Sunita Vachani (1990) 184 ITR 121 (Del) the Hon'ble Delhi High Court held :
"Even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad, unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as representing the income of the assessee in India."
8. In the case of Ashwani Kumar Gard vs. AO (1998) 97 Taxman 271, decided by the Tribunal, Amritsar Bench, it was held that absence of relationship between the assessee and the donor was no ground to reject the assessee's claim.
9. In view of the facts discussed above and the Court cases relied upon by the learned counsel for the assessee, we are of the considered opinion that the addition made by the AO is not justified and the learned CIT(A) has rightly deleted the same on the merits of the case. The decision of the CIT(A) on this issue is, therefore, upheld.
10. The second ground of appeal is regarding the addition of Rs. 1,60,875 made on account of unexplained investment in property. The AO has made this addition on the basis of the valuation report of the Departmental valuer. During the course of search, it was found that the assessee had constructed a property and has declared the cost of construction at Rs. 1,95,626. The AO made a reference to the Asst. Valuation Officer, Rajkot for determination of the cost of construction of the property. As per the valuation report, the cost was determined at Rs. 4,12,300 as against the cost shown by the assessee of Rs. 1,95,626. After considering the objections raised by the assessee, the probable cost of construction was determined by the Valuation Officer at Rs. 3,56,500. Therefore, the AO made an addition of Rs. 1,60,875 being the difference of Rs. 3,56,500 and Rs. 1,95,626 under the provisions of s. 69 of the Act.
11. The learned CIT(A) deleted the addition made by the AO on the ground that the AO could not find out any defects in the books of account and, therefore, his referring the case to the Valuation Officer was not justified. This is a search case and the Department could not find out any evidence, during the course of the search, to support the view that the assessee has undervalued the cost of construction. The learned CIT(A) has also stated that the AO does not have any authority, under the IT Act, to make reference to the Valuation Officer for determining the cost of construction.
12. During the course of hearing, the learned Departmental Representative contended that the AO is fully empowered to make reference to the Valuation Officer in order to make a proper assessment. According to him, the AO, while making the assessment, can collect information through any source for determining the correct profits of the assessee. He also referred to the provisions of s. 69B. According to him, the books of account are not relevant while making the additions under the provisions of s. 69B. He further argued that the construction was for residential purposes and it was not the regular business of the assessee. Therefore, the maintenance of accounts regarding the cost of construction was not relevant in this case.
13. On the other hand, the learned counsel for the assessee supported the order of the learned CIT(A) and fully relied on the case of CIT vs. Pratapsingh Amrosingh Rajendra Singh (1993) 200 ITR 788 (Raj).
14. We have heard both the parties. The premises of the assessee were searched under s. 132 of the Act. During the course of search, the Department could not find out any evidence regarding undervaluation of the property. Therefore, the AO was not justified to refer the case to the Valuation Officer for determining the investment made in the cost of construction. It has also been held by various Courts that if the AO has not been able to find out any defects in the books of account or any other evidence to justify the plea that the cost of construction was understated, he is not entitled to refer the case to the Valuation Officer to determine the cost of construction. During the course of hearing, the learned counsel relied on decisions of various High Courts wherein the Hon'ble Courts have laid down that the AO is not entitled to refer the case to the Departmental Valuer without finding out any defects in the books of account maintained by the assessee. In the case of Pratapsingh Amrosingh Rajendra Singh (supra), the Rajasthan High Court held :
"that there was no dispute that the assessee maintained proper books of account and the same had been accepted in two parts and no defects were pointed out in the books. The expenses were fully supported by vouchers. Full details were also mentioned in respect of each item in the books, simply because the valuation report was of a higher amount, the books could not be said to be acceptable. The Tribunal was, therefore, justified in deleting the addition of Rs. 55,780."
15. Similarly, in the case of ITO vs. Sethna Ice & Cold Storage (1980) 9 TTJ (Ahd) 537, the Tribunal, Ahmedabad 'A' held that the addition made on the basis of the report of the Valuation Officer is not justified that regular books of accounts are maintained by the assessee and the AO has not been able to find out any defects in the books of accounts.
Similar view has been expressed by the Tribunal, Ahmedabad Bench 'A' in the case of ITO vs. Pravinchandra Girdharilal (1999) 63 TTJ (Ahd) 357.
16. In view of the above facts and the various case laws discussed above, we fully agree with the findings of the learned CIT(A) that the addition made by the AO is not justified. The order of the learned CIT(A), on this issue, does not require any interference from our side.
17. The third ground of appeal is regarding the addition of Rs. 33,500 made under the provisions of s. 68 of the Act on account of unexplained cash credits. The AO, in his order, has stated that there were deposits in the names of the following three persons in the balance sheet of the assessee :
Rs.
(i) Sonali Varma 15,000
(ii) Tapankumar Moulik 9,500
(iii) Chhotalalji 9,000
18. According to the AO, the assessee could not produce confirmatory letters from Tapankumar Moulik and Chhotalalji. Regarding Sonali Varma, the AO stated that she was not having any taxable income. Thus, he came to the conclusion that the three deposits were out of the undisclosed income of the assessee as the three persons mentioned above were not in a position to advance such amounts. He also supported his case by stating that all the amounts have been paid by cash without charging any interest.
19. The learned CIT(A) has stated in his order that the AO was present during the course of hearing before him and he confirmed that confirmation letters from all the three depositors were filed during the course of the assessment proceedings. Thus, the learned CIT(A) stated that the AO failed to take into account the evidence contained in the confirmatory letters. It was further stated by the learned CIT(A) that the AO rejected the evidence without any proper basis. The AO also did not summon any of the depositors for recording their statements or to make further investigation to prove the genuineness of the deposits. Therefore, according to him, the addition made under s. 68 is not justified.
20. During the course of hearing, the learned Departmental Representative fully relied on the order of the AO. On the other hand, the learned counsel for the assessee relied on the findings of the learned CIT(A).
21. We have heard the rival parties. The learned CIT(A) has clearly stated in his order that the confirmatory letters were filed by all the three depositors. The AO did not make any further investigation with the depositors to find out the genuineness of the deposits. When confirmation letters are filed and the identity of the creditors are known, it is the duty of the AO to summon the creditors and to record their statements. The onus is on the Department to prove that the deposits were not genuine. This onus has not been discharged by the AO. In the case of Jhaveribhai Beharilal & Co. vs. CIT (1985) 154 ITR 591 (Pat), the Patna High Court held :
"The law enjoins the issuance of summons in cases where the certificates purported to have been granted by creditors are produced before the assessing authority, but their signatures are not proved."
22. In view of the discussions above, we find that the addition has been made by the AO without making any proper enquiries. Therefore, the learned CIT(A) has rightly deleted the addition. The findings of the CIT(A) are, therefore, upheld.
23. In the result, the appeal is dismissed.