Income Tax Appellate Tribunal - Delhi
Income Tax Officer vs Sanjay Kumar Goel on 3 November, 2006
Equivalent citations: (2007)108TTJ(DELHI)823
ORDER
N.V. Vasudevan, J.M.
1. This is an appeal by the Revenue against the order dt. 10th Jan., 2003 of the learned CIT(A), Ghaziabad, relating to asst. yr. 1999-2000.
2. The assessee is an individual. He derives income under the head 'Salary' and is an employee of M/s Jagdambay Food Products. He also derives income from business of M/s Bhagwati Traders, dealing in wholesale of Aata, Maida, Suji etc. In the reassessment proceedings under Section 147 of the IT Act, 1961 (hereinafter referred to as the Act) for the asst. yr. 1999-2000, the assessee filed statement of affairs wherein he had credited a sum of Rs. 11,00,000 in his capital account as gifts received. The gifts were received from 10 different persons. The dates and names of the donors are as follows:
Name Date of gift Amount
1 2 3
1. Smt. Sneh Lata 18-11-1998 1,00,000
2. Sri Keshav Kumar Sharma 4-12-1998 1,00,000
3. Smt. Savita 4-12-1998 1,00,000
4. Smt. Gunjan 1-12-1998 1,00,000
5. Smt. Rashmi Rani Mittal 19-1-1999 1,00,000
Smt. Rashmi Rani Mittal 27-2-1999 1,00,000
6. Smt. Sunita 19-1-1999 1,00,000
7. Smt. Poonam 29-1-1999 1,00,000
8. Sri Harish Mohan Mittal 29-1-1999 1,00,000
9. Smt. Rajni 24-2-1999 1,00,000
10.Sri Sunil Kumar 24-2-1999 1,00,000
3. It is not in dispute that the assessee in the reassessment proceedings filed copies of gift deeds, acknowledgement of return of income and statement of bank accounts of the donors. The gifts had been received through accountpayee cheques and all the donors were assessed to income-tax. The assessee was asked to produce the donors for examination by the AO. The assessee failed to produce the donors. However, affidavits of the donors were received by post by the AO. From a perusal of these affidavits the AO noticed that some papers on which the affidavits were typed were purchased on 23rd March, 2002 and the affidavits had been made on the same day. The AO also noticed that the donors were residents of Delhi and there could not be any difficulty in producing them for examination. The AO, therefore, held that the assessee failed to discharge the onus of establishing the genuineness of the gifts. The AO held that the gifts were not genuine for the following reasons:
(1) All the gifts are made between the period 18th Nov., 1998 to 24th Feb., 1999 and there was no occasion to make gifts;
(2) The donors are not related to the assessee in such a manner which may arouse innate love and affection;
(3) All the donors could not have spontaneous love and affection for a particular period and make such a gift;
(4) The gifts have come to the assessee during the year when he has made investment in GDA for purchase of plots C-28 and C-43 and purchase of land at Dasna (as per statement of affairs);
(5) All the alleged donors are residents of Delhi and as per statement of income furnished, they have income in the range of Rs. 50,000 to Rs. 60,000 for the asst. yr. 1999-2000, which, in any case, might be insufficient to meet their basic and social needs at Delhi. Only one person has income around Rs. 1,00,000;
(6) The credits in the bank account of donors are made either only a few days before the gift, the same day or after the gifts and which have not been explained by the assessee. The sources of credits are also identical in some cases.
3.1 The AO made a reference to several judicial pronouncements with regard to genuineness of credits and finally held that the assessee failed to prove the nature and source of the credits of Rs. 11,00,000 and added the same as income of the assessee under Section 68 of the Act.
4. On appeal by the assessee, the CIT(A) deleted the addition made by the AO for the reasons given in para 4.3 of his order. The CIT(A) noticed that the' assessee was examined by the AO with reference to all the 10 gifts and in the statement so recorded the assessee had given the relationship of the donors with the assessee. The CIT(A) also found that the donors were assessed to tax and, therefore, no adverse inference can be drawn with regard to the creditworthiness of the donors. With regard to the genuineness of the gifts the CIT(A) held that the assessee had produced enough evidence to justify the gifts in question and that the AO had rejected the plea of the assessee without any material. The CIT(A), therefore, concluded that the gifts were explained by the assessee and there was no justification for making the addition by the AO. The Revenue is aggrieved by the order of the CIT(A) and has preferred the present appeal.
5. The learned Departmental Representative, firstly, submitted that the CIT(A) has not considered the various circumstances pointed out by the AO. The learned Departmental Representative relied on the following decisions:
(i) Roshan Di Haiti v. CIT ;
(ii) Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC);
(iii) Sumati Dayal v. CIT ;
(iv) CIT v. United Commercial & Industrial Co. (P) Ltd. .
5.1 He further drew our attention to the decision of the Delhi Bench of the Tribunal in the case of Asstt. CIT v. Rajeev Tandon in ITA No. 3495/Del/2004, wherein applying the test of human probabilities in the case of a gift from a NRI, the Tribunal had upheld the order of the AO treating the gift as not explained. The learned Departmental Representative' pointed out that several decisions of the various High Courts and the Tribunals had been discussed in this order. He submitted that in the facts and circumstances of the present case and taking into account the human probabilities and the various circumstances pointed out by the AO, the gifts in question had to be held as not genuine and the addition made by the AO has to be sustained.
6. The learned Counsel for the assessee, on the other hand, submitted that the AO had an inherent power to issue summons under Section 131 of the Act to examine the various donors and without doing so he was not entitled to draw any adverse inference regarding the purpose of the gift or the quid pro quo and occasion for making the gift. In this regard, reliance was placed on the decision of the Hon'ble Allahabad High Court in the case of Nathu Ram Premchand v. CIT (1963) 49 ITR 561 (All) wherein it has been held that it was the duty of the AO to enforce attendance. Further reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Orissa Corporation. (P) Ltd. for the proposition that without issuing summons and enforcing attendance of a creditor the AO cannot draw any adverse inference. Further reliance was placed on the decision of the Hon'ble Patna High Court in the case of Asstt. CIT v. Hanuman Agarwal wherein it has been held that where the assessee furnishes the income-tax particulars of the creditors and the confirmation from the creditors, the burden of proof on the assessee stands discharged. With regard to the observations of the AO about the variation of signatures in the gift deeds of the donors and the return of income, the learned Counsel submitted that the assessee was not firstly confronted with such variation nor the donors examined in this regard. The AO cannot give such a finding without the assistance of handwriting experts. In reply to the plea of the Departmental Representative that fresh opportunity to examine the donors should be given to the AO, the learned Counsel submitted that the Revenue cannot seek another opportunity having failed to do so in the first instance.
6.1 The learned Departmental Representative, in reply, submitted that the CIT(A) ought to have made the investigation with regard to the credits and without giving a finding on the genuineness of the gifts was not entitled to delete the addition. He relied on the decision of the Delhi Bench of the Tribunal in the case of Jt. CIT v. Swamp Vegetable Products Industries Ltd. (2005) 98 TTJ (Del) 420 : (2005) 96 ITD 468 (Del) for the proposition that the CIT(A) has to give a positive finding of fact and he cannot delete an addition merely by pointing out the deficiencies in the order of the AO. It was also submitted by the learned Departmental Representative that the donors were assessees' witnesses and it was incumbent on the part of the assessee to produce them for examination before the AO.
7. We have considered the rival submissions. The AO-while exercising his quasi-judicial functions has been entrusted with the powers to issue summons. Section 131 of the IT Act provides that the AO shall have the same powers as are vested in a Court under the Code of Civil Procedure under the 1908 Act while trying a suit for enforcing the attendance of a person and examining him on oath. These powers are conferred on the AO for the purpose of ascertaining the truth or otherwise of any assertion made by the assessee in the course of assessment proceedings. The AO while bringing to tax any credit in the books of an assessee in the absence of any satisfactory explanation about the nature and source of the credit, has to satisfy himself about the nature and source of a credit. In the present case, the assessee in discharge of his burden of proof under Section 68 of the Act had filed gift deeds of all the 10 donors. The assessee had also furnished the income-tax particulars of all the 10 donors. It is no doubt true that there are some peculiarities in these gifts, namely, they were all for a sum of Rs. 1,00,000 each. The gift deeds do not set out the occasion for making the gifts. The above circumstances certainly raise a suspicion about the nature and source of the gifts. But, this suspicion alone cannot form the basis for coming to a conclusion that the nature and source of the gifts remained unexplained.
8. In the present case, the assessee by a letter dt. 28th March, 2002 had clearly mentioned that enquiries can be made by deputing any person of the Department from the various donors. Apart from the above, the donors had filed affidavits in the present case duly notarized wherein they have explained that they are making the gifts out of love and affection, which they have towards the assessee. They have also explained their source of funds in their affidavits. The AO has conveniently ignored the same. Without examining the donors, it is not possible to come to a conclusion as to why the drafts were purchased on the same dates or as to why in the absence of any occasion or relationship with the donee, gifts were made by the donors. In other words, the conclusions drawn by the AO, in our view, are mere surmises and the same cannot be sustained in the absence of examination of the creditors in question. In the case of CIT v. Orissa Corporation (P) Ltd. (supra), the Hon'ble Supreme Court had dealt with an identical situation and it was held by the Hon'ble Supreme Court that where the assessee files confirmation letters and income-tax particulars of the creditors and where the AO does not pursue the summons issued under Section 131 of the Act to examine the source of income of the creditors, the assessee could not be found fault with.
9. Strong reliance was placed by the learned Departmental Representative on the decision of the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (supra). It was argued by the learned Departmental Representative that in the case of Sumati Dayal (supra) all the documents necessary for establishing a credit under Section 68 of the Act have been placed by the assessee and the Hon'ble Supreme Court applying the test of human probability held that the credit in question was not established. Such an inference has to be taken in the present case also.
9.1. We have perused the decision in the case of Sumati Dayal v. CIT (supra) and we find that there were several circumstances in the said case, which weighed with the Revenue authorities in treating the credits in question as unexplained. The assessee in the said case claimed to have won monies from jackpot events of horse racing. She did not have any knowledge of horse racing. The claim of winning several events on a single day was considered to be a very improbable event. The assessee was found not to have shown any drawings on race days or the preceding days for purchase of jackpot combination tickets. It was further found that this activity of horse racing was given up from 1st April, 1992 because winnings from races were brought to tax from 1st April, 1972. All these cumulative facts were taken into consideration in coming to the conclusion that the nature and source of the credit had not been explained by the assessee. The facts of the present case stand totally on a different footing. As already stated, without examining the donors any conclusion drawn by the AO would only be a surmise.
9.2. In the case of Roshan Di Hatti v. CIT (supra), general principle has been laid down with regard to burden that lies on the assessee in respect of credit entry appearing in the books of account. Section 68 of the Act now statutorily recognizes this burden. Therefore, the reliance on this decision by the learned Departmental Representative, in our view, does not help the case of the Revenue. Strong reliance was placed by the learned Departmental Representative on the decision of the Delhi Bench of the Tribunal in the case of Asstt. CIT v. Shri Rajeev Tandon (supra).
10. We have perused the said decision. In the said case the gifts in question were made by the donors, who are NRIs. The Tribunal found that there was no occasion to give the gifts and that there was no acquaintance between the donor and the donee nor any love and affection. The Tribunal in para 18 of its order had clearly mentioned that because the donors were NRIs, the AO was handicapped from examining them and this weighed with the Bench in deciding the above issue. The following were the observations in this regard:
We cannot ignore that in case of NRI donors the AO is handicapped in verifying the creditworthiness of the donor in comparison to an Indian donor because in the case of Indian donors after examining the donors and questioning them the AO can conveniently verify the creditworthiness, but in the case of foreign donors he cannot do so and has to simply depend upon the documents filed by the assessee.
10.1 It is, therefore, clear that where the donors could be examined by the AO any inference drawn by the AO without examining the donors would be only a surmise.
11. The decision in the case of Jt. CIT v. Swamp Vegetable Products Industries Ltd. (supra) is again of no assistance to the plea of the Revenue. Moreover, the gifts in question have been made during the previous year relevant to asst. yr. 1999-2000. Due to passage of time the assessee will be in a disadvantageous position to establish his case. In these circumstances, we do not find the objection raised by the Departmental Representative based on the decision in the case of Jt. CIT v. Swarup Vegetable Products Industries Ltd. (supra) is sustainable. In the facts and circumstances, in the present case, we are of the view that the CIT(A) was justified in deleting the addition made by the AO and the order of the CIT(A) does not call for any interference. The same is confirmed and this appeal by the Revenue is dismissed.
12. In the result, the appeal filed by the Revenue is dismissed.