Income Tax Appellate Tribunal - Ahmedabad
Ritieshbhai B. Mehta,, Ahmedabad vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " C "
Before Shri T.K.SHARMA, JUDICIAL MEMBER and
Shri D.C.AGRAWAL, ACCOUNTANT MEMBER
Date of hearing : 15/10/09 Drafted on: 29/10/09
Sl.Nos IT(SS)A Nos/ Block period Appeals/COs by
CO Nos.
Appellant Respondent
1. 288/Ahd/2004 1.4.1995 to The ACIT Shri
13.12.2001 Central Circle-1(3) Riteshbhai
Ahmedabad B.Mehta
Pragati
Bungalow,
Swastik
Society,
Navrangpura,
Ahmedabad
PAN ABWPM 1345
D
2. 248/Ahd/2004 -do- Shri Ritesh The ACIT
B.Mehta, Ahd Cir-1(3),
Ahmedabad
3. 259/Ahd/2005 -do- The ACIT Smt.Supriya
CC-1(3),Ahd A.Mehta,
Ahmedabad
4. CO. 8/Ahd/2006 -do- Smt.Supriya The ACIT
A.Mehta, Cir-1(3),Ahd
1, Ashwamegh
Part-III
Satellite Road
Ahmedabad
PAN ACLPM 533 M
5. 260/Ahd/2005 -do- The ACIT Cir-1(3), Shri Atul
Ahd. K.Mehta HUF
1,
Ashwamegh
Part-III
PAN AAEHM
0807 P
6. CO -do- Shri Atun K.Mehta The ACIT Cir-
No.9/Ahd/2006 HUF 1(3), Ahd.
7. 261/Ahd/2005 -do- ACIT CC-1(3), Ahd Mr.Nirav
B.Mehta, I-C,
Pragti
Bunglows,
Swastik Soc,
Navrangpura
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue &
Assessee)
And Nine others
-2-
Ahmedabad
PAN
AALPM 6981 B
8. CO -do- Mr.Nirav B.Mehta, ACIT CC-1(3)
10/Ahd/2006 Ahd Ahd
9. 262/Ahd/2005 -do- ACIT, CC-1(3), Ahd Shri Bakulesh
K.Mehta HUF
I-C Pragati
Bunglows, Ahd
PAN AACHB
5522 L
10. CO -do- Shri Bakulesh ACIT, CC-1(3),
11/Ahd/2006 Mehta, Ahd Ahd.
11. 263/Ahd/2005 -do- The ACIT CC- Smt.Bhartiben
1(3)Ahd. B.Mehta,
8, Alkapuri
Soc, Gulbhai
Tekra,Ahmed
abad
PAN AAOPM
7018 C
12. CO -do- Smt.Bhartiben ACIT CC-1(3),
12/Ahd/2006 B.Metha Ahd.
Assessee(s) by : Shri S.N.Soparkaar, AR
Revenue by: Shelley Jindal, CIT
ORDER
PER BENCH :-
All five Appeals by the Revenue (and one IT(ss)A No.248/Ahd/2004 - by Assessee Shri Ritesh B.Mehta) are directed against the orders of the Learned CIT(Appeals)-I, Ahmedabad. Cross Objections are filed by the assessee in response to Revenue's appeals. There are two common issues involved in these appeals and COs; one is about inclusion of foreign gifts in block assessment and other is about treatment given to undisclosed investment, cash out flows, and available cash for the block period.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -3-
2. Since common issues are involved in all these appeals and cross objections, we, for the sake of convenience, dispose of them by this consolidated/common order.
3. The common issue involved in appeals filed by the Revenue is that ld.CIT(A) has excluded foreign gifts alleged to have been received by the assessee, from the computation of income under block assessment.
4. First, we deal with the Revenue's appeal No.259/Ahd/2005 and Assessee's CO No.8/Ahd/2006 in the case of Smt.Supriya Atul Mehta.
5. The brief facts of the case are that a search and seizure operation was carried out at the premises of S/Shri Bakulesh Mehta and Atul Mehta , partners of Chitra Publicity Co. in which certain documents/papers were found indicating that their family members have received voluminous foreign gifts. Notice u/s.158BD of the I.T. Act, 1961 was issued in the case of assessee on 10/11/2003 and, accordingly, proceedings for block assessment were initiated. Return of undisclosed income was filed at Rs.NIL The ld. Assessing Officer noted that assessee has received gifts from NRI relatives total amounting to Rs.35,45,669/-. The details are given on page Nos.5 & 6 of the assessment order. For the sake of convenience, they are reproduced as under:-
"Cheque Cheque No. Draw Bank Donor name Amount Amoutn Date Rs. $ 11-08- 2786267 NEW JEARSY A.K.MEHTA 177601 5000 1996 NAITONAL BANK 16/10/2000 1059 FIRST A.K.MEHTA 325848 7000 UNION BANK 06-07- 70495604 -do- A.K.MEHTA 276099 5900 2001 17/07/2001 2120025-94 -do- -do- 233968 5000 IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -4- C 11537 CHARTERED ANURADHABEN 42179 1000 08/01/1999 BANK 17/01/1996 1008 BARNETT ATULBHAI 50504 1500 BANK SHAH 17/01/1996 1007 -do- -do- 50504 1500 20/01/1996 1010 -do- -do- 33670 1000 15/03/1997 4588470 THE DIME D.A. METHA 106261 3000 SAVING BANK 27/40/1995 2541039 NEW JEARSY M.A.CHUDGAR 306828 TM NATIONAL 980C BANK 20/02/1997 2905495 CORE STATE M.A.CHUDGAR 142463 400C BANK 04/02/1999 483254020 REGIONS MA CHUDGAR 336891 8000 BANK C22/1 2/1 388328274/4 SOUTH M.A.CHUDGAR 108179 2500 999 22 TRUST BANK 01/08/1999 11538 CHARTED MUKESHBHAI 34794 825 BANK 05-09- 1005 BERNETT P.A.SHAH 84225 2SC 1995 BANK 09-02- 6310393 BARNETT P.A.SHAH 105874 30c 1995 BANK 01-04- 1016 -do- -do- 40871 110 1997 18/02/1997 2869870 SUMMIT -do- 142463 400 BANK 29.12.95 2631891 NEW JERSY A.K.MEHTA 327681 9000 NATIONAL BANK 27.1.99 483253860 REGIONS M.A.CHUDGAR 379903 9000 BANK 7.2.2000 062001209- NATIONAL A.J. CHUDGAR 238243"
0268 BANK
6. The Assessing Officer noted that in the seized documents in Annexure A-1 page Nos.13, 18, 25, 36, 37, 42, 47, 52 & 59 were blank gift declaration forms but signed by notaries. The gifts were made in November-2001 or July-2001, but declaration is signed in 1999. According to the Assessing IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -5- Officer, prima-facie these documents are not genuine and reliable. Also, there were blank signed declaration forms of gifts at page Nos.66 to 76 of Annexure A-1. According to Assessing Officer, if a gift is made on 19/07/1999, how it was a notarized on 14/04/1999. Therefore, declaration made for claiming the foreign remittance as gifts were not contemporary. Such declarations were found in the case of other family members. Many of the declarations were prior to block period upto 1992. According to the Assessing Officer, all the family members have received gifts totallng to Rs.5.39 crores. The alleged donors are all from USA and claimed to be brothers and sisters and their family members. Total eight donors were noticed by the Assessing Officer as under:
i) Ashok K. Mehta
ii) Dutta Mehta
iii) Atulbhai Shah
iv) Meena A Chudgar
v) A.J. Chudgar
vi) Pragati A Shah
vii) Mukeshbhai Shah
viii) Anuradhaben
7. The Assessing Officer carried out enquires from US authorities. The information was received in the case of four donors. One Shri Anish Mehta was reported to have not sent any money. S/Shri Ashok & Datta Mehta reported that they have transferred to India approximately US $600,000 but not as gift. In respect of Amar Chudgar and meena Chudgar, the two donors, it was reported by the US authorities that they did not have any financial ability to give any gift whatsoever. In respect of Atual P.Shah & Pragati A.shah, it was reported that Shah(s) had financial capacity and they have made the gifts. In respect of Shri Shrirish Shah, Mukesh Shah, Anuradha Shah, it IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -6- was reported by the US authorities that they were having financial capacity and they have given the gifts. On the basis of these reports, Assessing Officer issued show-cause notice to the assessee. In response to which, it was submitted that all the gifts were duly disclosed in the regular return of income. Further, the gift-deeds, etc. found during the search were never used by the assessee by way of any evidence. The identity of donors are established and they have confirmed to have given gifts and transferred the money to India. Thus, on the basis of investigation carried out by the Assessing Officer in USA and on the basis of replies submitted by the assessee, he concluded as under:-
"6.2 General discussion on non genuine Gifts I When the main person of the group viz. Shri Bakulesh Mehta and Shri Atul Mehta were questioned regarding unilateral flow of foreign gifts from his family members, it was submitted that the donors are doing well in USA and have given the gifts out of their natural love and affection to the families of the two brothers. However, there are issues involved both in terms of evidence as also in terms of preponderance which suggest that the gifts are not given out of all that "natural" love and affection as has been made out to be. True, that banking channels have been utilised for their transmission but there are issues emanating from various statements and seized material which show that there is no circumstance which can . render the alleged remittance as gift. The following facts can prove this.
i) Most of the gifts have no relevance to any occasion and there is no reciprocation by the assessee which means that the gift is not customary.
ii) The gift is not supported by any documentary evidence. The only gift declaration seized from the residence was claimed by the assessee as not for any use. If those declarations are not considered, then there is nothing on record to treat the foreign remittance as gift.
iii) Gifts were received only by the assessee and his brother who are even otherwise well-to-do. If such gifts were need based, these could have been IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -7- given to the family of the deceased elder brother and other elder sister who are not financially sound and genuinely required support. If assessee's argument of natural love and affection is considered, then the other brother and sister and their families should not have been deprived of such generous gifts. The only conclusion can be that the assessee and his brother are financially capable to purchase the foreign remittances from their relatives abroad, which is not possible for the family of deceased brother and the other sister.
iv) In Hindu customs, world over, gifts are given to sisters and daughters and their families. Taking anything from sister or daughter is considered to be a sin in the Hindu religion. Till date, we have not come across any community or place where sisters or daughters are giving huge amount of money to their brother(s) or father. The assessee's submission in this regard is nothing but against the customs of the society, to prove the non-
existing circumstances of the gift as genuine. The assessee's claim that now it is even sisters, who are showing their love and affection, by giving huge money to brothers, is against the social realities.
There could be no conceivable reasons why the donors have extended such love and affection towards the assessee and his family members, through regular intervals, particularly when there is no reciprocation from the assessee. This is contrary to human behavior and probabilities.
(v) Even from the brother whose total wealth is admittedly not more than one million dollars (no evidence in support of such claim submitted), such huge gifts can not be possible. No one can gift 50% of his net wealth (which is in fact invested in real estate and other fixed investments) to the brothers staying in India with whom his association is very rare. The reason given by the Ashok Mehta that the money is paid by him to be a part of good will of the business run in India is very far-fetched. The person who is staying abroad since the last 30 years will be concerned about his family and social responsibilities in USA particularly when he knows that he is going to stay abroad. There is no question of parting with 50% of his wealth with his well to do brothers staying in India. Obviously, this can not be without consideration, which is not disclosed.
(vi) The remittances to a large extent have been admitted by Mina Chudgar and Ashok Chudgar as part of "Hawala" Transaction and from the above discussion it is clear that the remittance cannot be "Gift" or "Consideration for investment in business". In fact the entire remittance is IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -8- part of "Hawala" transaction which is being camouflaged by assessee and other members of Chitra group as foreign gifts. The identity of actual recipient and the mode of payment to the actual recipient in India is not disclosed by assessee and other members of Chitra Group and therefore the real creditor is hidden behind the donor of gift. This makes the credit on account of above mentioned gifts as not acceptable as genuine cash credit.
7. Case Laws :
(A) In the case of D.C. Rastogi V/s ACIT reported in 57 ITD 295 Delhi ITAT, B-Bench, it was held that it was necessary for the assessee to prove the financial position of the donor to make the gifts. Necessary evidence in the shape of income earned by the donor as also his financial status at the time of making the gift would be necessary and the assessee was required to give full cooperation to the A.O. in the process of the enquiry. It was also mentioned that the hawala business is in vogue in India and elsewhere and the bare fact that the money is received in India in foreign exchange from aboard will not be sufficient to absolve the assessee from the burden of establishing the identity, financial capacity of the donors and genuineness of the gift.
(B) Delhi High Court in the case of Sajandas & Sons ITA 264 ITR 435 has held that a mere identification of the donor and showing the movement of the gift amount through banking channels were not sufficient to prove the genuineness of the gift. Since the claim of gift was made by the assessee, the onus lay on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it had actually been received as a gift from the donor.
From the study of the above decisions by the Delhi ITAT and Delhi High Court, the following aspects are to be proved by the assessee:
i) Identity of the donor with his complete address.
ii) Sound financial capacity of the donor to make gifts out of his income and wealth.
iii) The circumstances leading to the gifts should be probable and reasonable.
iv) To prove that money received is gift and not other receipts.
If any of the above condition is not satisfied, the credit appearing in the assessee's books by way of gift is not explained u/s. 68 of the Act and the same is liable to be taxed as his undisclosed income. The onus to prove all the four above is on the assessee and not on the Department. If the assessee fails to prove any of the above, the gift is liable to be IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others -9- considered as unexplained credit u/s. 68. Applying the above yardstick in the assessee's case, it can be said that the assessee has to establish the identity of the donors who are his relatives and closely known to him.
(C) Sanjeev Batra. vs Assistant Commissioner Of Income-Tax (69 ITD 23) (ITAT-Delhi~A Bench) : The honourable Bench had decided in a similar case that- "Assessing Officer was fully justified in invoking section 68 for bringing to tax said amount of Rs.25 lakhs alleged to have been received by the assessee as gift one Mr. J.S. Kochar which has neither been proved to be genuine nor financial capacity of the donor has been established."
7.1. Accordingly, the Assessing Officer made an addition of Rs.35,45,669/- as undisclosed income of the assessee.
8. The Learned CIT(Appeals) following the decision of Hon'ble Gujarat High Court in the case of N.R. Paper Boards 248 ITR 526 (Guj.) and of ITAT Delhi Bench (Third Member) decision reported in Taxman Vo.145 page 16, dated January 12, 2005, deleted the addition by observing as under:-
"I have considered the appellant's contentions as reproduced above as also the AO's assessment order. It is noticed that the CIT(A)-I, Ahmedabad vide his order No.CIT(A)-1/CC.1(3)/50/03-04 dated 22nd July, 2004 in the case of Shri Bakulesh Mehta, Indl for the Block period 1/4/95 to 12/12/01 has made a detailed appellate order. The factgs in the present case and that of shri Bakulesh Mehta (Indl) are similar. This case also relates to the same group of cases in which the family members have made gifts to other group members. Even the assessment orders in these group of cases are similar only the amount of gifts received are different. The Department has not filed any caveat or represented the case before me. It is further noteworthy that the ITAT Delhi Bench 'A' (Third Member) vide its judgement reported in taxman Vol.145 page 16 (ITAT) dated January 12,2005 held as follows: (which support the appellant's contentions)-
"Since 158B r.w.s. 68 and 158BC of the Income-tax Act, 1961- Block Assessment in search cases-undisclosed income-Block period 1986-87 to 1/4/1995- Whether where an amount stands disclosed in regular return of income AO can go into IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 10 -
genuineness of said amount only in course of regular assessment and he cannot resort to block assessment proceedings to go into genuineness of said amount and subject it to higher rate of tax- field yeas"
This order of the Hon'ble ITAT is a Third Member decision and is dated January 12, 2005. The appellant has cited this decision before me to support its' submission that AO can go into genuineness of an amount which stands disclosed in the regular return of income, only while dealing with the Regular Assessment and not in the course of Block Assessment.
CIT(A)-I, Ahmedabad vide his order No.CIT(A)-I/CC.1(3)/50/03-04 dated 22/7/04 in the case of Shri Bakulesh Mehta (Indl) for the Block Period has held that -
(i) Gifts were through regular banking channels.
(ii) Donors were identified
(iii) Gifts were credited to the capital accounts of the donors, prior to the search.
(iv) Documents relied upon by the AO in Block Assessment existed already before the search and these documents were not used by the appellant.
(v) Having regard to the facts and circumstances of the case, the gifts received by the appellant and his family could not be added as unexplained income of the appellant.
(vi) Such an addition under section 68, if at all necessary, could be made in regular assessment and not in block assessment. Ld. CIT(A) relied on 248 ITR 526 of the jurisdictional Gujarat High Court in the case of N.R. Paper Boards, Reliance has also been placed by CIT(A) on M.P. High Court in the case of CIT Vs. Gum Ind. (257 ITR page 78) and Mumbai High Court in the case of CIT Vs. Shanlal b. Gurbani (294 ITR page 101).
In my opinion, considering all the above facts, I hold that it is the legal issue regarding applicability of section 68 to Block Assessment which needs to be decided first. If on the facts of the case, Section 68 is not applicable to Block Assessment, then prima facie the addition u/s.68 cannot be sustained. It is an undisputed fact that the gifts in question stood duly disclosed in the regular returns of income of the group members. This fact has already been highlighted by CIT(A)-I, IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 11 -
Ahmedabad in his appellate order dt. 22/7/04 in one of the group cases of Shir Bakulesh Mehta (Indl) for the Block Period. Hence, it is held that following the decision of the jurisdictional High Court of Gujarat in 248 ITR 526 in the case of N.R. Paper Boards and of the ITAT Delhi Bench (Third Member) reported in Taxman Vol 145, Page 16 that since gifts stood disclosed even earlier the gifts could be enquired into only in the case of Regular Assessment and not in Block Assessment. Judicial Propriety and the interests of legal consistency requires that such an appellate order as of the CIT(A)-I, Ahmedabad should be followed in the present group case also. In view of the case law cited unless the legal position has subsequently changed. The legal position has not subsequently changed. In fact, the Delhi Bench 'B' decision Taxman Vol.145 page 16 cited above, is the latest on the subject being dated January 12, 2005 it is a third Member decision. As already stated, no caveat has been filed by the department before me to state otherwise. Hence, the additions made by AO u/s.68 totalling Rs.35,45,669/- are deleted purely on legal issue adopting the reasoning of the abovfe appellate order of the Learned CIT(A)-I, Ahmedabad Ground No.2.1 is allowed."
9. The main ground on which addition deleted was that these gifts will fall for consideration in the regular assessment because no evidence was found in the search showing that these gifts are bogus.
10. Against this order, the Learned Departmental Representative submitted that blank-deeds and notarized declarations were found during the course of search and, thereafter investigation was carried out which indicated that many of the gifts are not genuine and, accordingly, they can be considered in block assessment. The material is found in the search and post search investigation indicated that gifts are not genuine and, therefore, Assessing Officer has jurisdiction in block assessment.
11. Against this, Learned Authorised Representative of the assessee submitted that whatever deeds are found are not used by the assessee or by the donors. There are the blank and they do not have any connection with the IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 12 -
gifts received by the assessee. All these gifts have been declared in the regular return and, therefore, they fall outside the purview of block assessment. Whether they are genuine or not can be examined by the Assessing Officer only during the course of regular assessment. The Learned Authorised Representative of the assessee drew our attention to paper-book containing copy of the returns and statement of income showing receipt of gifts from various donors in USA who where the family members and close-relatives of the assessee. He drew our attention a chart showing credit of the gifts in the capital account filed with the regular return and page numbers 5, 18, 34, 46, 67 and 68 of paper-book.
12. In support of his contention that gifts in question can be considered only in the block assessment, he relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Satish Kumar Chandna (2009)311 ITR 276(Delhi) and of CIT vs. Vishal Aggrawal (2006) 283 ITR 326 (Delhi).
13. The Bench required the Learned Departmental Representative to verify as to whether gifts have been declared in the regular returns or not. The Learned Departmental Representative submitted following charts showing details of the gifts received by Smt. Supriya A.Mehta declared in the regular return:-
As per the information received from the Assessing Officers', following gifts are mentioned in the original return of income SUPRIYA A MEHTA :
Sr.No. A.Y Name of the persons from whom gift Amount Total received
1. 1996-97 Meenaben Chudgar Rs.3,06,828/-
Pragatiben Atulbhai Rs. 84,225/-
Ashokbhai Kantilal Rs.3,27,681/-
Atulbhai Shah Rs.1,34,678/- Rs,853412
2. 1997-98 Pragatiben Atulbhai Rs. 1,05,874/-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 13 -
Ashokbhai K Mehta Rs.1,77,601/-
Pragatiben Atulbhai Shah Rs. 40,871/- Rs.324346
3. 1988-89 Pragatiben Atulbhai Shah Rs. 1, 42,463/-
Meenaben Amitbhai Chudgar Rs. 1, 42,463/-
Duttaben Ashokbhai Mehta
Rs. 1,06,26 1/- Rs.391187
4. 1999-2000 Meenaben Amitbhai Chudgar Rs.3,79,903/- Rs.379903
5. 2000-01 Meenaben Amitbhai Chudgar Rs.3,36,891/-
Kantilal Popatlal
Meenaben Chudgar Rs. 50,000/-
Amitbhai Chudgar Rs. 1,08,179/-
Mukeshbhai Rasiklal Rs.2,38,243/-
Anuradha Mukeshbhai Rs. 34,794/-
Received cheque as per WILL Rs. 42,179/-
Rs. 1,00,000/- Rs.910286
14. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. The undisputed facts are that the assessee has declared the gifts received from foreign relatives in the return of income filed by her during the course of regular assessments. It is also undisputed fact that during the course of search, no material has been found showing any of the gifts as not genuine. The evidence found was about blank gift deeds some of which seems to be notarized and anti-dated. But none of the blank deeds so found are connected to the transactions entered in the regular books of account. Thus, there is no nexus between the evidence found during the course of the search and the gift transactions shown by the assessee in the regular return of income. No doubt, some suspicion is created as to whether gifts received by the assessee earlier could be genuine or not but, in fact, there is no material found during the course of search relatable to the gift IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 14 -
transactions brought on record and declared by the assessee in the regular return of income as confirmed by the ld.DR. No doubt, the Assessing Officer has carried out enquiries in US and Investigating Wing of IRS (USA) has repled in the cases of same of the donors that either they have not given the gifts or they have transferred the money to India for some other purposes other than the gifts which cast doubt as to whether gifts are genuine or not. Of course, there are other donors, as revealed from the investigation carried out by investigating agencies in USA that donors have financial capacity and they have admitted to have been given the gifts. All the details are recorded by the Assessing Officer elaborately in the assessment order. However, the question is whether the post search investigation carried out alone by the Assessing Officer will confer jurisdiction on him to tax the amount of gifts as undisclosed income of the assessee in the block assessment.
15. In this regard, we may, for the sake of convenience, reproduce the section 158BB of the I.T. Act, 1961 as under:-
"Computation of undisclosed income of the block period."
158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, [in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence], as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined--"
16. This section clearly empower the Assessing Officer to include only those income as undisclosed income of the block period which can be computed:-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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(i) On the basis of evidence found as a result of search or requisition of books of account or other documents and
(ii) Such other material or information as are available with the Assessing Officer and relatable to such evidence.
16.1. Therefore, unless the evidence collected in post search investigation is relatable to the evidence found as a result of search, the material collected in post search investigation cannot be used for bringing the resulting undisclosed income in the block assessment. In other words, some Nucleus evidence should be found in the search indicating transactions of undisclosed nature or of non-genuine nature which can be snow-bowled into higher quantum of addition or to strengthen already discovered quantum by further evidence collected during the post search investigation. But where no nucleus evidence is found in the search and merely on the basis of suspicion, or incidentally Assessing Officer happened to collect evidence in respect of some undisclosed income in post-search investigation, then the same cannot form part of block assessment. In this regard, we may, for the sake of clarity, refer to the decision of ITAT Delhi Special Bench in the case of Mange Ram Mittal vs. ACIT (2007) 289 ITR (AT) 112 (SB) ITAT (Delhi). The relevant portion from that judgement is reproduced as under:-
"The provisions of Chapter XIV-B of the Income-tax Act, 1961, relate to assessment of undisclosed income. For that purpose the provisions of section 158BC lay down the procedure. The provisions of section 158B(b) define what is undisclosed income and the provisions of section 158BB lay down how undisclosed income has to be computed. The provisions of computation have two limbs, viz., (1) evidence found as a result of search, and (2) such other materials or information as are available with the Assessing Officer and relatable to evidence found as a result of search.
After the insertion of the Explanation to section 158BA(2) by the Finance (No. 2) Act, 1998 with retrospective effect from July 1, 1995, IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 16 -
there is no dispute that the block assessment under section 158BC is in addition to the regular assessment and not in substitution of the regular assessment and in the block assessment under section 158BC only the undisclosed income of the assessee has to be charged to tax at the special rate of tax provided in section 113.
The computation of undisclosed income of the block period in a block assessment must be related to evidence found as a result of search proceedings. The Finance Act, 2002, by the amendment to section 158BB with retrospective effect from July 1, 1995, added the words "and relatable to such evidence" : the undisclosed income has to be computed on the basis of evidence found as a result of search and/or other materials or information relatable to such evidence. At the same time it cannot be concluded that "undisclosed income" to be computed under the provisions of section 158BC should be confined to the evidence found during the course of the search. Even after the amendment by the Finance Act, 2002, with retrospective effect from July 1, 1995, there is scope to let in other materials or information gathered by the Assessing Officers during the course of post-search enquiry, but such other materials or information as now clearly mandated by the Legislature must be relatable to evidence found as a result of search.
The insertion of the words "relatable to such evidence" by the Finance Act, 2002, with retrospective effect from July 1, 1995, is intended to restrict the scope of material or information that may be relied upon by the Assessing Officer because it has to be relatable to evidence found as a result of search in the first instance. As long as there is an evidence of undisclosed income of the assessee, that would be sufficient to clothe the Assessing Officer with the powers to add to such evidence any further material or information that may be pertinent or necessary to reach a logical conclusion but there has to be a certain and specific nexus between the evidence found as a result of search and undisclosed income proposed to be assessed in the block assessment under section 158BC. At the same time it cannot be held that conclusive evidence of undisclosed income should be found during the course of search action itself and nothing further can be added or supplemented by way of subsequent enquiry.
Thus, an assessment under section 158BC is required to be made both on the basis of result of search as well as such post-search enquiry and IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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other proceedings that are in the nature of a logical consequence of the evidence found as a result of the search.
Whether a search is carried out at business or residential premises, the entire mass of what is physically found at the searched premises cannot be said to be evidence found as a result of search. Under section 158BB it is computation of undisclosed income of the block period and not the entire income of the block period. The provisions of section 158B(b) clearly define "undisclosed income" as including any "money, bullion, jewellery or other valuable articles or thing or any income which has not been or would not have been disclosed for the purposes of the Act".
Therefore, not every article or thing or every piece of information found during the course of search can be called "evidence found as a result of search". If any money, bullion, jewellery or other valuable article or thing or any income is required to be disclosed for the purposes of the Income-tax Act in any return of income but has not been disclosed, this would constitute basis for "undisclosed income". Where the returns of income have not been filed but the due date for filing the return of income has not expired or where the return of income itself has not fallen due, the question of what would not have been disclosed for the purposes of the Act would depend on the facts and circumstances of each case.
It is not every material or information available with the Assessing Officer that can form the basis of computation of undisclosed income of the block period but only the materials or information relatable to evidence found as a result of search. It is "evidence" that has to be found as a result of search in the first instance. Thereafter it is only "materials" or "information" available with the Assessing Officer. The expression "materials" is of much wider import than the expression "evidence". The phraseology employed in section 143(3) indicates that what an assessee is required to produce on his own or on requisition by the Assessing Officer is "evidence" ; whereas what the Assessing Officer has to gather is "materials". The same distinction has been maintained in the provisions of section 158BB(1). What constitutes admissible evidence, material or information for the purpose of section 143(3) equally constitutes admissible evidence, material or information for the purposes of computation of undisclosed income in block assessment proceedings under section 158BC.
There should be, in the first instance, "evidence" found as a result of search or requisition of books of account or other documents that may constitute the basis of computation of undisclosed income. That IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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"evidence" may not be conclusive to arrive at the finding of undisclosed income and the Assessing Officer may supplement it with "materials"
or "information" that he may gather or that may be otherwise available with him at the time of computation of undisclosed income of the block period. The expression "relatable" appearing in section 158BB(1) permits the Assessing Officer to bring material on record as may be required for computation of undisclosed income in relation to "evidence" found as a result of search. All materials or information gathered by the Assessing Officer or received by the Assessing Officer in the process of computation of undisclosed income on the basis of "evidence" would constitute materials or information "relatable to such evidence". For example, if during the course of the search an evidence is found to the effect that the assessee had income from a source not disclosed by the assessee, all further materials or information gathered by the Assessing Officer in regard to that source of income and for quantification of the assessee's income from that source would constitute materials or information relatable to such evidence. Similarly, if for example, during the course of search an evidence is found as to inflation of a particular item of expenditure, the materials or information subsequently gathered by the Assessing Officer in order to find out the other instances of inflation of expenditure would be materials or information relatable to such evidence. In other words, if during the course of search only a part or portion of the picture is seen, the material or information gathered by the Assessing Officer to reasonably reconstruct the whole picture would be materials or information relatable to such evidence. It, therefore, follows that while it is not open to the Assessing Officer to investigate new items of undisclosed income, he is entitled to collect further materials or information so as to bring to the logical conclusion evidence found as a result of search. The burden of proof, however, on the Assessing Officer may be greater in block assessment proceedings than in regular assessment proceedings, in view of the fact that while regular assessment is made of income, block assessment is made of undisclosed income."
16.2. It is quite clear from the above decision that without there being any nucleus evidence found in the search, the material collected in the post search investigation cannot become only basis for making addition in the block assessment. Similar view has been taken by various other Courts which support the above conclusion. For the sake of convenience, we reproduce IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 19 -
head-notes from some other decisions discussed by Learned Authorised Representative of the assessee also, as under:-
(1) CIT -vs- Shyamlal Balaram Gurbani 249 ITR 501 (Bombay H.C.) It was found that certain income from interest, salary and rent was reflected in the audited Balance sheet of the respective assessment year of the firm. Even though, regular return of income was not filed u/s. 139(1) but they were filed before the date of the search and such return reflected the income under these heads. The Tribunal concluded that undisclosed income is computed by the assessing officer u/s. 158BC from these items were not based on any material found in the search.. Hence, they will not form part of block assessment. The decision of the Tribunal was upheld by the High Court.
(2) CIT-Vs.- Ravi Kant Jain, 250 ITR 141 (Delhi).
In this case, after the search operation, the assessing officer referred the seized materials and regular books of accounts to the Special Audit. On the basis of the opinion of the Spl. Auditor, certain income was taxed as business income in Block assessment and not as Capital gains as already declared in the return of income. Hon'ble High Court held that it was merely a change of view and there is no addition, which is based on material found as a result of the search and hence, it will not fall under Chapter XIVB.
(3) Bhagbati Prasad Kedia -Vs- CIT 248 ITR 562 (Cal).
During the block assessment, assessee was called upon to explain the advances taken from the company. The assessee filed confirmation of loans and letter from the company including Income tax File No. of the creditor. The Income tax authority held that the said loan was a fictitious one and was to be considered as undisclosed income of the assessee during the block period under consideration. It was held that the assessing officer was not entitled to question, in block assessment, the loan, which was a subject matter of the regular assessment. The assessing officer was wrong in holding that the said sum would be taxed in the block assessment, when it has already featured in the regular books of accounts. Thus, item of transaction which is declared in regular books of accounts or return., even though found fictitious, and may give rise to income under Income Tax Act, but the same can not be taxed under Chapter XIVB. For taxing such items of regular return found fictitious later during the search, provisions of Chapter XIVB cannot be invoked.
(4) C.I.T. -vs-Vinod Danchand Ghodawat 247 ITR 448(Bombay) IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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Gold and Silver articles and jewellery found during the course of search were disclosed by the assessee in the Wealth Tax returns which were accepted by the department. No addition Under Chapter XIVB can be made on account of investment in gold. Similarly, silver articles disclosed in the W.T. Return even though not enquired u/s. 69C by the assessing officer couldn't be assessed as undisclosed income under Sec. 158BC. Further, during the course of search, it was found that assessee had constructed a Bungalow declaring a cost of Rs. 4.16 lacs. The Assessing officer referred the Bungalow to the departmental Valuation Officer to determine the cost of construction, who determined the cost at Rs. 6.66 Lakh. The difference was added as undisclosed income u/s. 158BC. The High Court held that no addition could be made under Chapter XIVB on the basis of departmental valuer 's report (it seems that property was declared because only difference in the cost was added. If the entire property was un-declared, perhaps addition of Rs. 6.66 lacs was called for and not the difference.) (5) A. Sadasivam -vs- ACIT 255 ITR-1 (AT) (Cal ITAT).
Assessee was a owner of house which had been leased to his wife who received rent. The facts were disclosed to the assessing officer. The house rent allowance could not be taxed in the hands of the assessee as entire property was declared one.
(6) Control Touch Electronic (P) Ltd. -Vs- ACIT 77 ITD 522 (Pune.) During the course of the search, certain purchase vouchers indicating bogus purchases were found. No purchases thereon were made. Enquiries however revealed that none of the purchase vouchers were entered in the regular books of accounts. Thus Tribunal found that there was no inflation of expenditure and hence, no addition can be made in the Block assessment. Whether such bogus purchase vouchers can be considered in the regular assessment was not decided by the Tribunal.
(7) Agrawal Motors -Vs.-ACIT 68 ITD 407 (Jabalpur).
Certain expenditure was debited in the regular books of accounts on account of Foreign Travel of Managing Director. The search revealed that such travel was possibly not for the business purposes. The assessing officer considered the expenditure as undisclosed income u/s. 158BC. The Tribunal held that any item of addition or disallowance considered in the regular assessment could not be said to be discovered by search liable to be added under Chapter XIVB. Such expenditure were not undisclosed. Whether such expenditure was for IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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business purpose or for non-business purpose, was a matter to be considered in regular assessment only.
(8) Microland -Vs- ACIT 67 ITD 446 ( Bangalore.) Where acquisition of assets are recorded in the regular books of accounts, claim of depreciation was also made and considered, interest payment on investment in purchase of these assets is also considered in the regular assessment, if search revealed that depreciation is not correctly claimed, the addition thereon cannot be made under Chapter XIVB.
17. Recently in two decisions, which have been referred by the Learned Authorised Representative of the assessee, the Hon'ble Delhi High Court has held that if an amount is declared in the regular return of income, the same cannot be brought tax in the block assessment. A summary of two decisions is given as under:-
(1) Commissioner of Income-tax Vs. Satish kumar Chandna [2009] 311 ITR 0276- [Delhi High Court] Block assessment--Income disclosed by assessee in return for assessment years--Not to be included in block assessment.
(ii) That the amount of Rs. 1,10,750 had been disclosed by the assessee in his return of income for the assessment years 1990-91 to 1992-93, Therefore, there was no error committed by the Tribunal in deleting this amount from the income of the assessee in the block assessment.
(2) Commissioner of Income-tax Vs. Vishal Aggarwal [2006] 283 ITR 0326- [Delhi High Court] Block assessment--Assessee disclosing gifts in return--Search in premises of assessee's father--No incriminating material against assessee found in course of search--Gifts not concealed income or undisclosed income of assessee--No substantial question of law arises--Income-tax Act, 1961, ss. 158BC, 260A.
In Chapter XIV-B of the Income-tax Act, 1961, special provisions for assessment in search cases have been given and if any amount of income has not been taxed and during the course of search, some undisclosed income is found on the basis of the material seized, that should be treated as undisclosed income.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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In 1997, a search and seizure operation was carried out under section 132 in the premises of the assessee's father but no incriminating material in so far as the assessee was concerned was discovered. The assessee had disclosed gifts for the assessment year 1993-94 and furnished necessary documents in support of the gifts. However, the Assessing Officer resorted to section 158BC and treated the gifts as concealed income and an attempt at money laundering. The Commissioner (Appeals) held that a post search inquiry conducted by the Assessing Officer during the block assessment proceedings could not form the basis for making an addition. The Tribunal held that there was nothing in the assessment order to show that any evidence was found during the search to suggest that the gifts were bogus. It also held that the gifts had been disclosed in the return. On appeal :
Held, that admittedly no incriminating material was found in the course of search and hence the Assessing Officer could not resort to the provisions of Chapter XIV-B to tax what was said to be the undisclosed or concealed income of the assessee. No substantial question of law arose.
18. The Learned Authorised Representative of the assessee further submitted that ITAT Ahmedabad Bench "B" in the case of Shri Bakulesh K.Mehta HUF in ITA No.4569/Ahd/2003 for the Assessment Year 1998-99, order dated 17/10/2006, noted that that assessee had received foreign gifts as under:-
Date Amount Details
4.4.97 2,82,252 Cheque No.003700 & 7900
From Meenaben A.Chudgar
22.4.91 2,85,265 Cheque No.2915834 $ 8000
From Ashokbhai K.Mehta
24.5.97 3,02,755 Cheque No.2915937 $ 8500
Ashokbhai K.Mehta.
These gifts were held genuine. In this regard, we refer to operative part of this judgment as under:-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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"4. We have carefully considered the rival submissions and perused the material on record as well as the orders of the tax authorities. This is an admitted fact that the A.O. in the remand report has accepted the identity of the donors as well as their creditworthiness. The A.O. did not accept the genuineness of the transaction. The only reason for not accepting the genuineness of the transaction given in the remand report as appearing in the order of the CIT(A) is that the matter is under investigation of the Department. But no evidence to the contrary was brought on record why the transaction is not genuine when the gifts were received from the sister and the brother through the banking channels. We have gone through the decision of the Gujarat High Court in the case Murlidhar Lahorimal vs. CIT cited supra, as relied on by the Ld. A.R. We find that this case is equally applicable to the facts of the case before us. The identity of the donors is proved. Even the sources of the amount gifted were also accepted by the A.O. The assessee has adduced evidence to prove the genuineness of the transaction that the gifts were received through the banking channels and the donors were closely related with the assessee being the sister and the brother of the assessee. The affidavits of the donors were also furnished which were not rejected by the Revenue. Copies of the affidavits are available at pages 49 to 51 & 54 to 56 of the Paper Book. The Revenue has not brought any material on record which may prove that the transactions are not genuine except the observation made by the A.O. that the matter is under investigation by the Department. The Ld. D.R. did not produce any cogent material or evidence disclosing what happened to the investigation carried out by the Department. In the absence of any cogent material or evidence, the natural inference is that the Revenue does not have any material or evidence which may prove that the gifts are riot genuine. Keeping in view the totality of the facts, we are of the view that the assessee has duly discharged his burden of proof and by adducing the evidence, the burden of proof gets shifted on the Revenue. No evidence to the contrary was brought on record. The gifts have been treated to be non-genuine merely on the basis of the imagination, surmises and conjectures. Section 68 lays down the rule of. evidence. The initial burden is on the assessee to prove the identity of the creditor, genuineness of the transaction and the creditworthiness of the creditor. Where the assessee has discharged his burden of proof, the burden gets shifted on the Revenue. Thus, the assessee, in our opinion, has established all the requirements of section 68. The rejection of the gifts, in our opinion, is due to arbitrary and unreasonable exercise of the power by the Revenue. We have also gone through the decision of the Madras High Court in the case of A.Rajendran & Others vs. ACIT (supra ). In this decision also we find that the Hon'ble High Court has held that once the assessee has established the identity of the donor and his solvency, the reasons to reject the explanation of the assessee in each case are in the realm of surmises, conjectures 'and suspicion and ultimately held that the addition u/s. 68 in IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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respect of the gifts from NRI was not sustainable. Therefore, in view of our aforesaid discussion, we do not find any infirmity or illegality in the order of the CIT(A) in deleting the addition of Rs.8,70,272/- made by the A.O. in respect of the gifts received by the assessee from the sister and the brother of the assessee."
18.1. The Learned Authorised Representative of the assessee submitted that if gifts are accepted as genuine from the same set of donors in regular assessment, then there is no reason to tax them in block assessment and, thus, there is no case of addition even on merits and, therefore, there is no reason to reopen the assessment. We, however, do not uphold this contention of Learned Authorised Representative of the assessee because after receiving fresh information as to whether the gifts are genuine or not, the Assessing Officer can always re-open the assessment even if an order was reached to the Tribunal stage on the same issue. In any case, all depends upon of the facts and circumstances of the case and reason recorded for reopening of an assessment.
19. The Learned Authorised Representative of the assessee also relied on one of the observations of the Tribunal in MA No.252/Ahd/2009 (arising out of ITA No.287/Ahd/2004 decided on 18/02/2009), wherein it has been held that the amount of gifts cannot be considered in block assessment. Eventhough it is apparently an obiter, it has relevance and is required to be seriously considered by the Co-ordinate Bench.
20. Thus, on the basis of above undisputed facts that no material was found in the search indicating that gifts from the donors, which were declared in the regular returns are bogus, these gifts cannot be considered for the purposes of addition in the block assessment even if post search enquiries indicated that gifts are not genuine. We, accordingly, confirm the order of the Learned IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 25 -
CIT(Appeals) on this issue. This ground of Revenue is, accordingly, dismissed.
21. As a result, the appeal of the Revenue, i.e. IT(ss) A No.259/Ahd/2005 is dismissed.
Assessee's CO No.8/Ahd/2006
22. The following ground were raised by the assessee in her cross objection:-
1. In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in holding that the order passed by the Assessing Officer u/s.158BD of the IT. Act with the previous approval of the Addl. CIT, Central Range-1, Ahmedabad is not bad in law when he ought to have held that the order passed by the Assessing Officer is bad in law and direct the cancellation thereof. In not doing so, he has failed to appreciate that the approval granted by the Addl. CIT was a statutory approval and not an administrative approval and, therefore, incumbent upon him to grant an opportunity to the respondent of being heard more particularly when the order approved is prejudicial to the interest of the respondent;
This Hon'ble Tribunal may, therefore, be pleased to hold that the order passed by the Assessing Officer u/s.158BD is bad in law and direct the cancellation thereof.
2. In law and in the facts as well as circumstances of the respondent's case, the learned CIT(A) while deleting addition of Rs.35,45,669/- representing credits for the foreign gifts in respondent's capital account by holding that as such gifts were received even prior to the (date of block period and the said gifts could be enquired into only in the case of the Regular assessment and not in block assessment, has grossly erred by not adjudicating the ground number 2 raised I before CIT(A) which is reproduces as under:
" In law and in the facts and circumstances of the appellant's case the Ld. Assessing officer has erred in making addition of Rs.35,45,669/- representing credits for the foreign gifts in the IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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assessee's capital account invoking provisions of section 68 of the Act, when no such addition is called for.
The CIT(A) has grossly erred by not adjudicating above referred ground that such gifts even otherwise cannot be taxed invoking the provisions of section 68 of the Act in the block assessment as respondent has discharged its onus by satisfactorily explaining the nature of gift, sources of gifts, identity of the donors, creditworthiness of the donors which were verified by the Assessing Officer by way of inquiries with Internal Revenue Services, USA and gifts were made through banking channels.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in invoking the provisions of section 68 of the Act even in the block assessment as respondent has discharged its obligation u/s. 68 of the Act.
3.In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in upholding the levy of surcharge though the search was prior to the introduction of the amendment for the levy of surcharge w.e.f. 1.6.2002 and, therefore, surcharge levied ought not to have been levied.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in upholding the levy of surcharge and direct the deletion thereof.
4. The Respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal.
23. Ground Nos.1 & 3 are not pressed by the Learned Authorised Representative of the assessee and, hence, they are rejected as such.
24. Ground No.2 relates to merits of addition and is in support order of the Learned CIT(Appeals). We have heard both the parties. As we have IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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confirmed the order of the Learned CIT(Appeals) in Department's appeal(supra), this ground of assessee's Cross Objection is, therefore, allowed.
25. As a result, assessee's Cross Objection No.8/Ahd/2006 is partly allowed.
26. Revenue's appeal, IT(SS)A No.288/Ahd/2004 and Assessee's appeal No.248/Ahd/2006 (in the name of Shri Ritesh B.Mehta) These are two cross appeals, one filed by the Revenue and other filed by the Assessee against the order of the Learned CIT(Appeals)-I, dated 27/07/2001. Following the grounds have been raised by the Revenue in its appeal:-
(a) Revenue's appeal, IT(SS) A No. 288/Ahd/2004
1. The CIT(A) has erred in law and on facts in directing to restrict the addition of Rs.19,73,873/- made on account of unexplained investment in deposits, gold and jewellery, etc. to Rs.11,85,284/-.
2. The CIT(A) has erred in law and on facts in directing to delete the addition of Rs.25,07,080/- made u/s.68 of the Act on account of alleged foreign gifts.
3. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer.
4. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the AO be restored to the above extent.
27. The effective issues involved in Revenue's appeal, is one which relates to addition on account of unexplained investment in deposits, gold and jewellery, etc. and other is about foreign gifts.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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28. The brief facts of the case are same as were in the case of Smt.Supriya A. Mehta (supra). The details of the gift shown to have been received by the assessee are as under:-
Total gifts received by Shri Riteshbhai B.Mehta from 1995-96 to 2000-01 AMOUNT DATE CHEQUE BANK DONOR DEPOSIT NO. NAME IN BANK 1995-96 295800.00 23/02/96 97129 Bank of Meena Dena Bank Baroda A.Chudgar 295800.00 1996-97 320566.00 28/02/97 2869877 Sumit Pragati Dena Bank Bank A.Shah 248890.00 11/03/97 2915795 Core State A.K.Mehta Dena Bank Bank 569456.00 1997-98 301136.00 24/04/97 2915941 Core State Pragati Dena Bank Bank A.Shah 354568.00 23/03/98 3319773 Sumit Datta Dena Bank Bank A.Mehta 655704.00 1998-99 380082.00 18/01/99 1415737 Collembia Pragati Dena Bank Bank A.Shah 380082.00 1999-2000 IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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229440.00 21/04/99 1515798 Collembia Pragati A Dena Bank
Bank Shah
229440.00
2000-2001
376598.00 11/08/00 1053 National A.K.Mehta Dena Bank
Bank
376598.00
29. The facts relating to these gifts are similar to the facts described in the case of Smt. Supriya A.Mehta(Supra). All these gifts were declared in the regular return of income. Those gifts were shown in the capital account. The assessee drew our attention to page numbers 4, 9, 14, 19, 26 and 32 of the paper-book showing credit of gifts in regular books.
30. The Learned Departmental Representative was required to verify whether the assessee's contentions are correct. The Learned Departmental Representative pointed out that returns for the Assessment Years 1999-2000 to 2001-02 showed gift amount as under:-
As per the information received from the Assessing Officers, following gifts are mentioned in the original return of income RITESH B MEHTA :
Sr.No. A.Y Name of the persons from whom gift received Amount
1. 1999-2000 $9000cheque No. 145737 Federal Bank, New York Dt. 18-01 -1999 3,80,082/-
2 2000-01 Dena Bank A/c. 64238 Ch.No.1415798 Colabia Foreign Gift $5400 2,29,440/-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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3. 2001-02 Dena Bank A/c. 64238 Ch.No. 1053 $8300 Foreign Gift from 3,76,598/-
National Bank ( Cheque deposit in Bank dt. 19-7-2000) -date 11-8- 2000
4. 2002-03 No gift
31. Regarding other three assessment years, the Learned Departmental Representative submitted that returned income was below taxable limit and, hence, returns were not filed. However, all the gifts were taken in the books of account. Further, no evidence was found in the search so as to show that gifts are not genuine. In fact, it was only post search investigation which created doubt that gifts are not genuine eventhough assessee had submitted documentary evidence discharging its onus. List of evidence produced by the assessee were as under:-
(i) The gifts so received are through banking channels and are credited to the capital account in the personal book maintained by him regularly.
(ii) The copies of such capital account are furnished by the assessee year after year alongwith the returns of income for the respective assessment years.
(iii) The amounts are collected through banking channels and are received by the assessee from USA.
(iv) He donors have accepted to have made the gifts.
(v) The identity of the donors have been established by the assessee and verified by the Assessing Officer by way of inquiries with IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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Internal Revenue Services, USA under the Income-tax Treaty of the said country and India.
(vi) The creditworthiness of the donors have been verified by the Assessing Officer through the said agency and it may be emphasized that none of the donors is established to be financially incapable of making the gifts.
32. In view of above and following our reasoning given in the case of Smt. Supriya A. Mehta(supra), we hold that addition in respect of these gifts cannot be made in the block assessment as no material evidence is found during the course of search that any of the above gifts are not genuine.
33. As a result, this ground of Revenue's appeal is dismissed.
34. The second issue raised in the Revenue's appeal is about addition of unexplained investments. The brief facts of the case are that during the course of search, gold ornaments and jewellery valued at Rs.21,83,731/- were found. The authorities seized jewellery worth Rs.10,25,996/-. It was claimed by Shri Ritesh Mehta (i.e. assessee) that jewellery valued at Rs.13,58,000/- belonged to his mother Devikaben and jewellery amounting to Rs.6,31,372/- belonged to his wife Ekta. It was claimed that these jewlleries were received by ladies at the time of marriage and a small fraction was acquired on subsequent occasions. In the return of Devikaben for Assessment Year 2001- 02, jewllery worth Rs.7,06,112/- was declared, whereas total jewellery was found Rs.13,58,000/-. Thus, jewellery worth Rs.6,51,558/- only remained unexplained. Similarly, in the case of Smt.Ekta, only jewellery valuing Rs.4,21,000/- remained in excess. The other part was declared in the return of income. When asked to explain, the assessee furnished certain explanation that some jewellery also belonged to Smt.Prabhaben (a NRI relation). Certain IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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explanation for purchases of jewellery was given which was partly accepted by the Assessing Officer. Finally, after considering various explanation, the Assessing Officer worked out that unexplained jewellery came to the tune of Rs.6,61,080/-, in respect of both the ladies. Subsequently, assessee furnished a cash flow statement which showing cash inflow and outflow. In outflow statement purchase of gold was shown at Rs.6,59,210/-. The Assessing Officer ignored the difference between 6,61,080 and 6,59,210 and focused on the cash outflow and cash inflow showing overall availability and outflow of cash in making various investments during block period as a whole. This cash inflow and outflow so prepared by the assessee was under:-
(1) Cash Outflow
Sr. Particulars Rs.
No.
1. Investments made out of cash (Supporting are 6,23,480
enclosed. as. at 1-A& 1-B)
2. Cash deposited in Bank Accounts (Supporting are 3,01,800
enclosed as at 2-A & 2-B)
3. Other withdrawals for personal expenditure (Supporting 1,82,200
are enclosed as at 3-A & 3-B)
4. Purchase of Gold (Supporting are enclosed as at 4-A & 6,59,210
4-B)
5. Marriage Expenses (Supporting are enclosed as at 5-A 4,47,663
& 5-B
Total Cash Outflow 22,14,353
(II) Cash Inflow
Sr. No. Particulars Total
6. Brought forward balance from earlier period -
7. Investments received back in cash on maturity or 2,40,480 pre matured withdrawals (Supporting are enclosed as at 7-A) IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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8. Cash withdrawn from bank accounts I 7,88,589 (Supporting are enclosed as at 8-A & 8-B)
9. Cash disclosure (peak of negative cash as on 13/01/2001) 4,12,171 (As per cash book prepared - Annexure - !)
10. Cash available as per the regular books of accounts of 7,73,113 Shri Bakuleshbhai & Bhartiben i.e. as on 01/04/2001 - Rs. 5,29,332/- plus cash withdrawn by Shri Bakuleshbhai from M/s. Chitra Publicity Company - Rs. 2,43,781/-
Total Cash Inflow 22,14,353 Balance (Difference between cash inflow and i cash outflow) Nil
35. The Assessing Officer examined the cash inflow and outflow statements and gave following finding:-
(i) In absence of regular cash book and other books of account, it cannot be said that the above statement represents the correct state of affairs.
(ii) Regarding cash availability at Rs.7,73,113/-, the ld.AO noticed that it cannot be said that Shri Bakuleshbhai did not use the above cash or that he had given such cash to the assessee.
Similarly, withdrawal of Rs.2,43,781/- by Shri Bakulesh Mehta and, thus, availability of cash balance was also not found supported by any evidence.
36. The Assessing Officer held that the cash disclosure of Rs.4,12,171/- was out of undisclosed income and the same was required to be added separately. Thus, out of total sum of Rs.22,14,353/- being cash inflow claimed, the Assessing Officer only accepted the investments received back in cash on maturity of investments at Rs.2,40,480/-. Others were not accepted and, thus, he proposed an addition of Rs.19,73,873/- (Rs.22,14,353 less Rs.2,40,480).
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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So far as the cash outflow was concerned, the ld.AO accepted the investment as shown by the assessee and no further investment was considered.
37. The Learned CIT(Appeals) deleted the addition of Rs.7,88,589/- out of Rs.19,73,873/- being cash withdrawal from the bank and available to the assessee as inflow. According to the Learned CIT(Appeals), assessee had furnished complete details of bank statements from where withdrawals were shown. Those withdrawals were available to meet the investments.
38. The Revenue is in appeal against this relief of Rs.7,88,589/-.
39. The Learned Departmental Representative submitted that firstly it is only a presumption that cash withdrawals made in the beginning of the block period would be available for investment at the middle of the block period or at the end of the block period. Such withdrawals could be used for some other purposes. Unless there is evidence to show that assessee had or his father had retained the money after withdrawing from the bank, it could not be available for explaining the outflow. Therefore, no benefit of Rs.7,88,589/- should be given. In this regard, the Learned Departmental Representative made the following submissions:-
"The Assessing Officer (AO), in his order, dated 31/12/2003 has discussed the matter from page no.2 to 12. He has discussed various evidences regarding unexplained investment found during the search from the premises of the assessee in the order. The discussion have been made regarding investment in jwellery, undisclosed marriage expenses of Shri Ritesh Mehta and other investments such as investment in FDRs and house hold expenses, etc. The AO on page no.9 in para 7.2 has made a cash flow statement indicating
a) the cash out flow on account of various investment / expenditures made during the block period.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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b) the cash in flow as claimed by the assessee to explain the various items of investment and expenditure during the block period.
The AO on page 11 from point (i) to (v) on page 12 has given his findings regarding the explanations given by the assessee and the reasons for making the additions on account of unaccounted investment / expenditure.
The CIT(A) in his order has partly allowed the appeal of the assessee on this ground and additions of Rs.2,10,0807- and Rs.7,88,5897- have been ordered to be deleted. He had discussed these issues in para 5.5 & 5.6 of his order.
The CIT(A) has upheld the additions made by the AO to the extent of Rs.7,73,113/- and Rs.4,12,171/-. He has discussed these two items in para 5.7 & 5.8 of his order.
The assessee before the AO, the CIT(A) and before the Hon'ble Bench has claimed that the investments have been made by him.
1) out of brought forward cash balances,
2) investment receipts back in cash on maturity and pre matured withdrawals.
3) cash withdrawn from Bank account
4) cash disclosure ( peak of negative cash in the hands of the firm )
5) cash available as per the regular books of accounts of father and mother of the assessee and cash withdrawal by father of the assessee.
The claim of the assessee was rightly not accepted by the AO. It is not acceptable because the assessee is trying to explain the investment out of various cash withdrawals in the hands of his father and mother and other withdrawal made by them from the books of accounts of the firm. The claim of utilization of cash withdrawn from bank account is also not acceptable as there is no direct or close nexus between the withdrawal and the utilization. The utilization should not be allowed after a long gap of time. Also, the evidences have been found on various expenses which show that only the major items have been noted at other miscellaneous expenses which might have been done by the assessee out of withdrawal from bank account and other sources.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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The claim of the assessee that cash in flow and out flow statement indicating the availability of cash out of various withdrawals / receipts from different sources by the assessee and the investment over the block period be made to find out unexplained investment, if any, should not be accepted as there has to be some evidence regarding the utilization of various withdrawals by the assessee in the block period. The assessee has to prove the nexus between the withdrawal and the utilization. The utilization cannot be allowed for after a long gap of time and there has to be a time limit of two to three months at the most beyond which the utilization cannot be allowed.
The claim of the assessee regarding the utilization of cash withdrawal made by his father and mother to explain the expenses / investment in his hand is also not justified as the withdrawals were not sufficient to meet day to day expenses of the family and Shri Bakuleshbhai Mehta, father of the assessee, has not used this cash balance to explain the investment in his hand also.
The claim of the assessee to explain to utilize the cash withdrawn from the firm is also not supported by any evidence, as there was always a cash shortage with the firm.
The cash disclosure of Rs.4,12,171/- which is in the hands of the firm, which has been sought to be used for explaining the investment is also not justified as it was an artificial item which has been created to explain the discrepancies in the hands of the4 assessee, and there is no evidence to show that any amount was withdrawn by the assessee from the year 1996 onwards."
40. Against this, Learned Authorised Representative of the assessee submitted that it is Assessing Officer who has taken the entire block period for estimating the cash inflow as well as cash outflow and entire period should be seen as a whole.
41. In a rejoinder, the Learned Departmental Representative submitted that a small period may be estimated for utilizing the cash availability withdrawal from the bank, as against of six years comprised in the block period. Therefore, after considering the rival submissions, we are of the view that it is not proper to treat the entire block period as one Unit for considering cash IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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inflow and cash out flow. In our considered view, it would be appropriate to consider a period of six months for which cash inflow and cash outflow should be prepared. If there is a negative cash outflow, then to that extent investment should be considered as undisclosed. In case, cash availability is more than cash outflow, then such availability of cash should be considered only for a period of six months from the date of withdrawal from the bank and, therefore, should be considered as available in the next six months for investment. If a period of more than six is expired after withdrawal from the bank, then such withdrawal should be ignored. The Assessing Officer will identify the dates of various inflow and outflow from the bank. The assessee will co-operate to wok out availability of cash on the basis of six months period. Thus, inflows and outflows would be prepared on six month basis and undisclosed investment or excess of outflow or inflow will be worked out.
42. As a result, we restore this issue to the file of the Assessing Officer for working out afresh after providing a reasonable opportunity of being heard to the assessee. This ground is, therefore, allowed for statistical purposes.
43. In the result, the appeal of the Revenue is treated as partly allowed for statistical purposes.
Assessee's appeal, IT(SS)A No.248/Ahd/2004 (Riteshbhai B.Mehta)
44. The following grounds have been raised by the assessee in his appeal:-
1. In law and in the facts as well as the circumstances of the appellant's case, the CIT(A) has grossly erred in dismissing the ground contending that the order passed by the Assessing Officer is bad in law which deserved to be cancelled when he ought to have held that the order is bad in law and ought to have cancelled the same. In not doing so, he has failed to appreciate the following amongst others :
(a) that the statutory notice issued is u/s.158BD of the IT. Act whereas the impugned provisions of section 158BD do not apply IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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to the facts of the appellant's case and therefore the order passed by the Assessing Officer in pursuance of such a notice is ab initio void;
(b) that the approval granted by the Addl. CIT was a statutory approval and not an administrative approval. Therefore, before passing such order of approval the appellant ought to have been heard as such approval granted was prejudicial to the appellant.
This Hon'ble Tribunal may, therefore, be pleased to hold that the order passed by the Assessing Officer deserves to be cancelled and direct the Assessing Officer accordingly.
2. In law and in the facts as well as the circumstances of the appellant's case, the CIT(A) has grossly erred in upholding the addition of Rs.11,85,284 (comprising of the amount of Rs.4,12,171 representing peak of the negative cash as on 13.1.2001 in the cash flow statement prepared by the appellant plus the amount of Rs.7,73,113 representing cash available as per regular books of account of Shri Bakulesh Mehta and Smt. Bharati Mehta, parents of the assessee & cash withdrawn from M/s. Chitra Publicity Co. by Shri Bakulesh Mehta as per cash-flow statement prepared by the assessee), out of the total addition of Rs.19,73,873 when he ought to have deleted the entire addition. In not doing so, he has failed to appreciate the following amongst others :
(A) As for upholding the addition of Rs.4,12,171 for the peak of negative cash balance he has failed to appreciate the following:
(i) that the impugned amount was utilized by the assessee in the cash outflow statement out of the income disclosed by the firm of M/s. Chitra Publicity Co.;
(ii) that the said M/s. Chitra Publicity Co. accepted this fact;
(iii) that the only source of income of the appellant is the amounts received from father whose only business income is share of profit from the said firm of M/s. Chitra Publicity Co. whose funds IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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were utilized by the assessee for the purpose of investment, marriage expenses etc.;
(iv) that there is no relevance to the huge cash balance and the cash available at the residence of the partner to the disclosed amount by the said firm;
(v) that no evidence is brought on record by the Assessing Officer during the course of assessment proceedings and/or during the appellate proceedings establishing that the impugned amount of Rs.4,12,171 utilized by the appellant for investment etc. was in fact so utilized by the firm M/s. Chitra Publicity Co. and therefore not available for such investment etc. by the appellant.
(B) As for upholding the addition of Rs.7,73,113 he has failed to appreciate the following amongst others :
(i) that the monthly receipt of Rs.25,000 from Shri Bakulesh Mehta by the appellant was for household expenses and not for any other major expenditure;
(ii) that the expenses and investment reflected in cash-flow statement was expenses on purchase of gold, clothes etc. was in connection with the marriage of the appellant as is evidenced by the documents found;
(iii) that though the documents seized were in the name of the appellant the funds were made available by the parents as it was their customary obligation;
(iv) that the amount of Rs.7,73,113 represented Rs.5,29,332 from the regular books of account of Shri Bakuleshbhai & Smt. Bharitben plus withdrawals by Shri Bakuleshbhai from M/s. Chitra Publicity Co. In the face of such clinching evidence being made available - without any evidence to the contrary - there is no justification for disallowing the same.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification for upholding the addition of Rs.4,12,171 in respect of the negative peak of the cash flow statement and the addition of Rs.7,73,113 being cash available as per regular books of account of Shri Bakulesh Mehta and Smt. Bharati Mehta and withdrawal from M/s.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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Chitra Publicity Co. by Bakulesh Mehta aggregating to Rs. 11,85,284 and direct the deletion of the entire addition of Rs.11,85,284.
3. In law and in the facts as well as the circumstances of the appellant's case, the CIT(A) has grossly erred in holding that the amount of Rs.4,12,171 being the disclosure made by the firm of M/s. Chitra Publicity Co. would cover the expenditure of Rs.4,12,171 for the reasons stated in ground No.2 hereinabove.
This Hon'ble Tribunal may, therefore, be pleased to so hold and direct the Assessing Officer accordingly.
4. In law and in the facts as well as the circumstances of the appellant's case, the C!T(A) has grossly erred in holding that the provisions introduced w.e.f. 1.6.2002 for the levy of surcharge are only clarificatory in nature and thereby upholding the levy of surcharge of Rs.53,771 when he ought to have deleted the surcharge so levied. In not doing so, he has failed to appreciate that the said provisions are substantive and are effective from 1.6.2002 and not clarificatory in nature, therefore, it would apply only for and from 1.6.2002. In the case of the appellant the search was on 13.12.2001.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification for levying surcharge and direct the deletion of Rs.53,771 being the surcharge levied.
5. In law and in the facts as well as the circumstances of the appellant's case, the CIT(A) has grossly erred in holding that the levy of interest u/s.158BFA(1) is consequential when he ought to have deleted the interest levied u/s.158BFA(1).
This Hon'bie Tribunal may, therefore, be pleased to hold that there is no justification in levying interest u/s.158BFA(1) and direct the deletion thereof.
45. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. Ground No.1 is not pressed and, hence, the same is rejected as such.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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46. Ground Nos.2, 3 & 4 relate to sustaining addition of Rs.4,12,171/- being cash disclosure of a peak negative and of Rs.7,73,113/- being cash available as per regular books of account, the addition in respect of which were confirmed by the Learned CIT(Appeals).
47. While discussing the ground relating to relief of Rs.7,88,589/- given by Learned CIT(Appeals) contested by the Revenue, we have held that a fresh cash outflow and inflow charts would be prepared on six monthly basis and not on block period basis as done presently. These two additions sustained by the Learned CIT(Appeals) are part of cash inflow prepared by the Assessing Officer and confirmed by the Learned CIT(Appeals). Assessee is in appeal against such confirmation by ld.CIT(A). But they are intricately connected with each other and, therefore, they should be considered afresh by the Assessing Officer in a fresh cash inflow and outflow. As a result these grounds of the assessee are restored to the file of Assessing Officer for considering afresh according to the fresh chart to be prepared. Therefore, these grounds of assessee's appeal are allowed for statistical purposes.
48. Last ground relates to charging of interest u/s.158BFA(1) of the I.T. Act, 1961. In our considered view, charging of interest is consequential and, therefore, no interference is required with the order of the Learned CIT(Appeals). Therefore, this ground is rejected.
49. As a result, appeal of the assessee is treated as partly allowed for statistical purposes.
Revenue's Appeal, IT(SS)A No.260/Ahd/2005 and Assessee's CO No.9/Ahd/2006 (Shri Atul K.Mehta HUF)
50. In Revenue's appeal the following grounds have been raised:-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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1. The CIT(A) has erred in law and on facts in directing to delete the addition of Rs.55,32,325/- made u/s.68 of the Act on account of alleged foreign gifts, ignoring adverse material on record.
2. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O.
3. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.
The Issue Of Gift and Donors
51. The only issue involved in Revenue's appeal is about gifts received by the assessee FOR Rs.53,32,323/-. The details of foreign gifts are as under:-
Ch. Date Ch NO. Drawn bank Donor name Amount Rs Amount S 30/11/1995 174-05168329 FIRST ALABAME BANK MA CHUDGAR I 356338 10000 21/08/1996 39092467617 FIRST ALABAME BANK MA CHUDGAR 176530 5000 22/08/1996 74166870 SOUTH TRUST BANK MA CHUDGAR 176530 5000 20/02/1997 2905492 CORE STATE BANK M A CHUDGAR 284946 8000 15/12/1997 554164445 SOUTH TRUST BANK M ACHUDGAR 76949 2000 O7/01/199S 483253861 CITI BANK NY M.A.CHUDGAR 379903 9000 27.01.99 r 24/02/1 999 48325401 CITI BANK NY MACHUDGAR 33689 800 (A21/12/1999 5016934596 NATIONAL BANK OF MACHUDGAR 259784 6000 COMMERCE | A
-09/0 1/2000 062001269 NATIONAL BANK OF MA CHUDGAR 238353 5500 0261 ; COMMERCE 29/12/1998 22000868 CITI BANK FEDERAL : S S SHAH 84383 200 SAVING BANK I 29/12/1998 028-2597431 CITI BANK FEDERAL S.S.SHAH 84383 200 IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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25 SAVING BANK 27.9.95 2541038 NEW JERSEY A.K.MEHTA 306838 NATIONAL BANK 10.11.95 356338 FIRST ALABAME BANK M A.CHUDGAR 356338 28.12.95 61-359950700 SUMMIT BANK A K MEHTA 309476 21.8.96 39092467617 ALABAME BANK M A CHUDGAR 176530 22.896 74166870 SOUTH TRUST BANK M A CHUDGAR 176530 20.2.97 2905492 STATE BANK MA CHUDGAR 284946 15.12.97 55416445 SOUTH TRUST BANK M A CHUDGAR 76949 29.12.98 22000868 CITIBANK FEDERAL S.S SHAH 84383 SAVING BANK 2912.98 28259743125 -DO- S.S SHAH 84383 27.1.99 483253861 I CITI BANK NEW JERSEY MA CHUDGAR 379903 24.2.99 48325401 : CITI BANK NEW JERSEY MA CHUDGAR 336891 20.5.99 3849314 SUMMIT BANK A K MEHTA 292933 21.12.99 5016934598 NATIONAL BANK OF M.A CHUDGAR 259784 COMMERCE 9.1.00 0620012090261 NATIONAL BANK OF MA CHUDGAR 238353 COMMERCE 7.2.00 268 NATIONAL BANK OF A J CHUDGAR 238243 COMMERCE 16.10.00 1058 FIRST UNION A K MEHTA 325848 IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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NATIONAL BANK 15.3.01 21200025 FIRST UNIONL A K MEHTA 702015 NATIONAL BANK 20.3.2001 212002592 FIRST UNION A K MEHTA 468002 NATIONAL BANK 17.7.01 FIRST UNION BANK A K MEHTA 233988
52. The facts are similar to the case of Shri Ritesh B.Mehta (Supra).
53. The Learned Departmental Representative submitted that case records in respect of Shri Atul K. Mehta are not available, but it has relied on the arguments made in the case of Smt. Supriya Mehta(supra) and sought to establish nexus of present gifts with the blank deeds found un the search. He submitted that case records in respect of this assessee are not available in the Department.
54. On the other hand, Learned Authorised Representative of the assessee submitted that all these gifts received are shown in the capital account in the regular return.
55. The Learned Authorised Representative of the assessee also relied on the submissions made in the case of Smt.Supriya Mehta(supra) that no nexus of the seized material with the foreign gifts received by the assessee are found indicating that they are not genuine. In fact, all these gifts have been declared in the regular return of income and, therefore, they will fall outside the ambit of block assessment.
56. After considering the rival submissions, we hold on the basis of reasoning given by us in the case of Smt. Supriya Mehta(supra) that these gifts IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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will not fall consideration for the block period as no material is found during the course of search showing that they are not genuine. On the other hand, all the documentary evidences indicated that they are prima-facie genuine. In any case, gifts are genuine or not will fall for consideration only in regular assessment. Accordingly, we confirm the order of the Learned CIT(Appeals) and dismiss the appeal filed by the Revenue.
Assessee's CO No.9/Ahd/2006 (Shri Atul K.Mehta HUF)
57. The assessee has raised following issued in its Cross Objection:-
1. In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in holding that the order passed by the Assessing Officer u/s.158BD of the IT. Act with the previous approval of the Addl. CIT, Central Range-1, Ahmedabad is not bad in law when he ought to have held that the order passed by the Assessing Officer is bad in law and direct the cancellation thereof. In not doing so, he has failed to appreciate that the approval granted by the Addl. CIT was a statutory approval and not an administrative approval and, therefore, incumbent upon him to grant an opportunity to the respondent of being heard more particularly when the order approved is prejudicial to the interest of the respondent;
This Hon'ble Tribunal may, therefore, be pleased to hold that the order passed by the Assessing Officer u/s.158BD is bad in law and direct the cancellation thereof.
2. In law and in the facts as well as circumstances of the respondent's case, the learned CIT(A) while deleting addition of Rs.55,32,325/- representing credits for the foreign gifts in respondent's capital account by holding that as such gifts were received even prior to the (date of block period and the said gifts could be enquired into only in the case of the Regular assessment and not in block assessment, has grossly erred by not adjudicating the ground number 2 raised I before CIT(A) which is reproduces as under:
" In law and in the facts and circumstances of the appellant's case the Ld. Assessing officer has erred in making addition of Rs.55,32,325/- representing credits for the foreign gifts in the IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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assessee's capital account invoking provisions of section 68 of the Act, when no such addition is called for.
The CIT(A) has grossly erred by not adjudicating above referred ground that such gifts even otherwise cannot be taxed invoking the provisions of section 68 of the Act in the block assessment as respondent has discharged its onus by satisfactorily explaining the nature of gift, sources of gifts, identity of the donors, creditworthiness of the donors which were verified by the Assessing Officer by way of inquiries with Internal Revenue Services, USA and gifts were made through banking channels.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in invoking the provisions of section 68 of the Act even in the block assessment as respondent has discharged its obligation u/s. 68 of the Act.
3.In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in upholding the levy of surcharge though the search was prior to the introduction of the amendment for the levy of surcharge w.e.f. 1.6.2002 and, therefore, surcharge levied ought not to have been levied.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in upholding the levy of surcharge and direct the deletion thereof.
4. The Respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal.
58. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record.
59. Ground Nos.1 & 3 are not pressed by the Learned Authorised Representative of the assessee and, hence, they are rejected as such. Ground No.2 relates to merit of the addition and in support of order of the Learned IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 47 -
CIT(Appeals). Since we have upheld the order of the Learned CIT(Appeals), this ground is allowed. In the result, assessee's Cross Objection is partly allowed.
Revenue's Appeal, IT(SS)A 261/Ahd/2005 & Assessee's CO No.10/Ahd/2006 (Mr.Nirav B.Mehta)
60. The following effective ground has been raised by the Revenue in its appeal:-
1. The CIT(A) has erred in law and on facts in directing to delete the addition of Rs.24,24,110/- made u/s.68 of the Act on account of alleged foreign gifts, ignoring adverse material on record.
61. The Learned Departmental Representative has submitted that they were able to verify only two gifts received by the assessee and declared in the regular return as under:-
In the case of Nirav B.Metha:
Sr.No. A.Y. Name of the Amount
persons from
whom gift
received
1. 2000-01 By cheque Rs.2,97,429/-
No.3645899 of
Summit Bank dt.
21/04/1999
2. 2001-02 By cheque Rs.3,76,598/-
No.1054 of $8300
received from
Ashokbhai Mehta
USA Union Bank
- dt. 19-07-2000
3. 2002-03 No gift Nil
62. In respect of others, it was submitted that the records are not traceable.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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63. On the other hand, Learned Authorised Representative of the assessee submitted that all these gifts are received and show in the capital account as per page Nos.4, 14 & 16 of the paper-book.
64. The Learned Authorised Representative of the assessee submitted that return for Assessment Years 1996-97 & 1997-98 are not filed because the income was below taxable limit. However, these gifts will not fall for consideration in the block assessment because no material was found in the search and assessee has submitted evidences to prove that gifts are genuine. He relied on the arguments raised by him in the case of Smt. Supriya Mehta(supra) and Shri Ritesh Mehta(supra).
65. After considering the rival submissions, we hold on the basis of reasoning given by us in the case of Smt. Supriya Mehta(supra) that these gifts will not fall consideration in the block period as no material is found during the course of search showing that they are not genuine. On the other hand, all the documentary evidences indicate that they are prima-facie genuine. In any case, gifts are genuine or not will fall for consideration only in regular assessment. Accordingly, we confirm the order of the Learned CIT(Appeals) and dismiss the appeal filed by the Revenue.
Assessee's CO No.10/Ahd/2006 (Shri Atul K.Mehta HUF)
66. The assessee has raised following issued in its Cross Objection:-
1. In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in holding that the order passed by the Assessing Officer u/s.158BD of the IT. Act with the previous approval of the Addl. CIT, Central Range-1, Ahmedabad is not bad in law when he ought to have held that the order passed by the Assessing Officer is bad in law and direct the cancellation thereof. In not doing so, he has failed to appreciate that the approval granted by the Addl. CIT was a statutory approval and not an administrative IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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approval and, therefore, incumbent upon him to grant an opportunity to the respondent of being heard more particularly when the order approved is prejudicial to the interest of the respondent;
This Hon'ble Tribunal may, therefore, be pleased to hold that the order passed by the Assessing Officer u/s.158BD is bad in law and direct the cancellation thereof.
2. In law and in the facts as well as circumstances of the respondent's case, the learned CIT(A) while deleting addition of Rs.24,24,110/- representing credits for the foreign gifts in respondent's capital account by holding that as such gifts were received even prior to the (date of block period and the said gifts could be enquired into only in the case of the Regular assessment and not in block assessment, has grossly erred by not adjudicating the ground number 2 raised I before CIT(A) which is reproduces as under:
" In law and in the facts and circumstances of the appellant's case the Ld. Assessing officer has erred in making addition of Rs.24,24,110/- representing credits for the foreign gifts in the assessee's capital account invoking provisions of section 68 of the Act, when no such addition is called for.
The CIT(A) has grossly erred by not adjudicating above referred ground that such gifts even otherwise cannot be taxed invoking the provisions of section 68 of the Act in the block assessment as respondent has discharged its onus by satisfactorily explaining the nature of gift, sources of gifts, identity of the donors, creditworthiness of the donors which were verified by the Assessing Officer by way of inquiries with Internal Revenue Services, USA and gifts were made through banking channels.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in invoking the provisions of section 68 of the Act even in the block assessment as respondent has discharged its obligation u/s. 68 of the Act.
3.In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in upholding the levy of surcharge though the search was prior to the introduction of the IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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amendment for the levy of surcharge w.e.f. 1.6.2002 and, therefore, surcharge levied ought not to have been levied.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in upholding the levy of surcharge and direct the deletion thereof.
4. The Respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal.
67. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record.
68. Ground Nos.1 & 3 are not pressed by the Learned Authorised Representative of the assessee and, hence, they are rejected as such. Ground No.2 relates to merit of the addition and in support of order of the Learned CIT(Appeals). Since we have upheld the order of the Learned CIT(Appeals), this ground is allowed. In the result, assessee's Cross Objection is partly allowed.
Revenue's Appeal, IT(SS)A No.263/Ahd/2005 and Assessee's CO No.12/Ahd/2006 (Smt. Bhartiben B.Mehta)
69. The following effective ground has been raised by the Revenue in its appeal:-
1. The CIT(A) has erred in law and on facts in directing to delete the addition of Rs.96,74,101/- made u/s.68 of the Act on account of alleged foreign gifts, ignoring adverse material on record.
70. The only issue involved in Revenue's appeal is about gifts received by the assessee. The details of foreign gifts of Rs.96,74,101/- received by the assessee and his minor son, are as under:-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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In the C.hoquo Date Cheque No. Drawn Bank Donor Name Amount Amount $
name of Rs.
SBM 09/05/1998 3320044 Summit Bank Anish A. Mehta 337451 6000
23/12/1998 3645323 Summit Bank Anish A. Mehta 378824 9000
SBM 12/07/2000 1055 First Union Bank Anish A. Mehta 376598 8300
20/02/1997 2905494 Core State Bank Anhok K Mehta 178159 5000
06/03/1997 2915797 Core State Bank Ashok K.Mehta 99615 2800
02/04/1997 2903455 Summit Bank Ashok K. Mehta 281120 7900
06/03/101)8 3319759 Summit Hank Ashok K Mehta 3515044 8000
12/07/2000 1056 National Bank Ashok K. Mehta 376598 8300
10/04/1997 2915939 Core State Bank Ashok K. Mehta 302472 8500
SBM 01/05/1996 97759 Bank of Baroda Ashok K.Mehta 273200 0
SBM 20/02/1997 3629 Collective Bank Ashok K.Mehta 103321 2900
06/03/1997 3699 Collective Bank Ashok K.Mehta 206383 5800
SBM
SBM 10/04/1997 3868 Collective Bank Ashok K Mt'hla 103173 2900
SBM 18/05/1998 3320073 Summit Bank Ashok K.Mehta 168708 4000
SBM 18/12/1998 3645330 Summit Bank lAshok K.Mehta 378624 9000
16/03/1999 1415797 Columbia Bank Ashok K.Mehta . 339313 8000
SBM 06/04/1999 1428022 Columbia Bank Datta A Mehta 182328 4300
23/02/1996 97125 Bank of Baroda Meena A 295800 0
Chudgar
01/05/1996 97757 Bank of Baroda Meena A Chudgar 273200 0
06/03/1997 2915794 Core Stale Bank Meena A 249089 7000
Chudgar
20/03/1997 2915835 Collective Bank Meena A Chudgar 284678 8000
02/04/1007 3825 Collective Bank MEENA A. CHUDGAR 104954 2050
r
04/04/1 997 2915916 Core State Bank Meena A Chudgar 354076 9950
18/04/1998 3453902 Summit Bank Meena A Chudgar 379676 9000
12/01/1999 3848758 1 Summit Bank Meena A Chudgar 252394 6000
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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09/12/1999 386338226 South Trust Bank Meena A Chudgar 389778 9000 SBM 20/11/1995 2631778 New Jersey Bank Meena A Chudgar 338578 9000 SBM 20/02/1997 3628 Collective Bank Meena A Chudgar 103321 2900 SBM 13/12/1999 388338241 South Trust Bank Meena A Chudgar 389778 9000 20/11/1995 357585421 Summit Bank Pragati A. Shah 338578 9800 18/02/1997 2869871 Summit Bank Pragati A. Shah 178159 5000 17/04/1997 2915975 Core State Bank Pragati A. Shah 284678 8000 03/12/1997 3721 Collective Bank Pragati A. Shah 88937 2500 SBM 23/02/1996 97128 Bank of Baroda Pragati A. Shah 246863 0 SBM 20/02/1997 3630 Collective Bank Pragati A. Shah 103321 2900 SBM 10/04/1997 2915940 Core State Bank Pragati A. Shah 302472 8500 SBM 12/03/1998 3453720 Summit Bank Pragati A. Shah 315044 8000 (SBM= Shaishv b Mehta (others = Bhartiben) Total gifts received from Anish A Mehta Rs.1092873 Total gifts received from Ashok K Mehta Rs.3125730 Total gifts received from Datta A Mehta Rs. 182328 Total gifts received from Meena A Chudgar Rs.3415319 Total gifts received from Pragati A. Shah Rs.1858052
--------------
Rs.9674302 =========
71. The facts are similar to the case of Shri Ritesh B.Mehta (Supra).
72. The Learned Departmental Representative submitted that case records in respect of Smt. Bharatiben B. Mehta are not available, but it has relied on the IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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arguments made in the case of Smt. Supriya Mehta(supra) and sought to establish nexus of gifts received with the blank deeds in the search.
73. On the other hand, Learned Authorised Representative of the assessee submitted that all these gifts are received and show in the capital account as per page Nos.4, 9, 15, 18, 21, 24 of the paper-book.
74. The Learned Authorised Representative of the assessee submitted that return for Assessment Years 1996-97 & 1997-98 are not filed because the income was below taxable limit. However, these gifts will not fall for consideration in the block assessment because no material was found in the search and assessee has submitted evidences to prove that gifts are genuine. He relied on the arguments raised by him in the case of Smt. Supriya Mehta(supra) and Shri Ritesh Mehta(supra).
75. After considering the rival submissions, we hold on the basis of reasoning given by us in the case of Smt. Supriya Mehta(supra) that these gifts will not fall consideration for the block period as no material is found during the course of search showing that they are not genuine. On the other hand, all the documentary evidences indicated that they are prima-facie genuine. In any case, gifts are genuine or not will fall for consideration only in regular assessment. Accordingly, we confirm the order of the Learned CIT(Appeals) and dismiss the appeal filed by the Revenue.
Assessee's CO No.12/Ahd/2006 (Smt. Bhartiben B.Mehta)
76. The assessee has raised following issued in its Cross Objection:-
1. In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in holding that the order passed by the Assessing Officer u/s.158BD of the IT. Act with IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 54 -
the previous approval of the Addl. CIT, Central Range-1, Ahmedabad is not bad in law when he ought to have held that the order passed by the Assessing Officer is bad in law and direct the cancellation thereof. In not doing so, he has failed to appreciate that the approval granted by the Addl. CIT was a statutory approval and not an administrative approval and, therefore, incumbent upon him to grant an opportunity to the respondent of being heard more particularly when the order approved is prejudicial to the interest of the respondent;
This Hon'ble Tribunal may, therefore, be pleased to hold that the order passed by the Assessing Officer u/s.158BD is bad in law and direct the cancellation thereof.
2. In law and in the facts as well as circumstances of the respondent's case, the learned CIT(A) while deleting addition of Rs.96,74,101/- representing credits for the foreign gifts in respondent's capital account by holding that as such gifts were received even prior to the (date of block period and the said gifts could be enquired into only in the case of the Regular assessment and not in block assessment, has grossly erred by not adjudicating the ground number 2 raised I before CIT(A) which is reproduces as under:
" In law and in the facts and circumstances of the appellant's case the Ld. Assessing officer has erred in making addition of Rs.96,74,101/- representing credits for the foreign gifts in the assessee's capital account invoking provisions of section 68 of the Act, when no such addition is called for.
The CIT(A) has grossly erred by not adjudicating above referred ground that such gifts even otherwise cannot be taxed invoking the provisions of section 68 of the Act in the block assessment as respondent has discharged its onus by satisfactorily explaining the nature of gift, sources of gifts, identity of the donors, creditworthiness of the donors which were verified by the Assessing Officer by way of inquiries with Internal Revenue Services, USA and gifts were made through banking channels.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in invoking the provisions of section 68 of the Act even IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 55 -
in the block assessment as respondent has discharged its obligation u/s. 68 of the Act.
3.In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in upholding the levy of surcharge though the search was prior to the introduction of the amendment for the levy of surcharge w.e.f. 1.6.2002 and, therefore, surcharge levied ought not to have been levied.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in upholding the levy of surcharge and direct the deletion thereof.
4. The Respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal.
77. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record.
78. Ground Nos.1 & 3 are not pressed by the Learned Authorised Representative of the assessee and, hence, they are rejected as such. Ground No.2 relates to merit of the addition and in support of order of the Learned CIT(Appeals). Since we have upheld the order of the Learned CIT(Appeals), this ground is allowed. In the result, assessee's Cross Objection is partly allowed.
79. Revenue's Appeal, IT(SS)A No.262/Ahd/2005 and Assessee's CO No.11/Ahd/2006 (Shri Bakulesh K.Mehta)
80. The following effective ground has been raised by the Revenue in its appeal:-
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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1. The CIT(A) has erred in law and on facts in directing to delete the addition of Rs50,30,909/- made u/s.68 of the Act on account of alleged foreign gifts, ignoring adverse material on record.
81. The only issue involved in Revenue's appeal is about gifts received by the assessee. The details of foreign gifts of rs.50,30,909/- are as under:-
Chequ e Cheque No. Drawn Bank Donor Name Amount Rs. Amount Date $ 28/04/ 4266573 Core State Bank Anish A. Mehta 395550 9500 1998 1995 21776 N.illon.il Dunk Ashok K. Mehta Anhok 234163 7500 UUUO 10/11/199 K.Muhlti 341319 5 28/1 21 2631890 National Bank Ashok K. Mehta 321285 9000 1995 19/02/ 3625 Collective Bank Ashok K. Mehta 303435 8500 1997 18/03/ 2915834 Core State Bank Ashok K. Mehta 285265 8000 1997 10/04/ 2915937 Core State Bank Ashok K. Mehta 302755 8500 1997 12/07/ 1051 First Union Bank Ashok K. Mehta 377989 8300 2000 23/02/ 97124 Bank of Baroda Meena A Chudgar 295800 0 1996 01 /05/ 97756 Bank of Baroda Meena A Chudgar 273200 0 1996 06/03/ 3700 Collective Bank Meena A Chudgar 282252 7900 1997 12/03/ 4218904 Core State Bank Meena A Chudgar 1026700 26000 1998 19/07/ 4832547 95 Regions Bank Meena A Chudgar 215976 5000 1999 IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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09/03/ 5401 Collective Bank Pragati A. Shah 375220 9500 1998
82. The facts are similar to the case of Shri Ritesh B.Mehta (Supra).
83. The Learned Departmental Representative submitted that part of case records in respect of Smt. Bharatiben B. Mehta are not available, but it has relied on the arguments made in the case of Smt. Supriya Mehta(supra) and sought to establish nexus with the bank deeds found and gifts received. Details available in regular assessment are as under:
In the case of Bakulesh K.Mehta (HUF) A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. A.Y. 1996- 1997- 1998-99 1999- 2000- 2001- 2002- 97 98 (Rs.) 2000 01 02 03 Gift N.A. N.A. 8,70,272/- 1797470 215976 377989 NIL shown in the original return
84. On the other hand, Learned Authorised Representative of the assessee submitted that all these gifts are received and show in the capital account as under:-
85. The Learned Authorised Representative of the assessee submitted that return for Assessment Years 1996-97 & 1997-98 are not filed because the income was below taxable limit. However, these gifts will not fall for consideration in the block assessment because no material was found in the search and assessee has submitted evidences to prove that gifts are genuine.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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He relied on the arguments raised by him in the case of Smt. Supriya Mehta(supra) and Shri Ritesh Mehta(supra).
86. After considering the rival submissions, we hold on the basis of reasoning given by us in the case of Smt. Supriya Mehta(supra) that these gifts will not fall consideration for the block period as no material is found during the course of search showing that they are not genuine. On the other hand, all the documentary evidences indicated that they are prima-facie genuine. In any case, gifts are genuine or not will fall for consideration only in regular assessment. Accordingly, we confirm the order of the Learned CIT(Appeals) and dismiss the appeal filed by the Revenue.
Assessee's CO No.11/Ahd/2006 (Shri Bakulesh K.Mehta HUF)
87. The assessee has raised following issued in its Cross Objection:-
1. In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in holding that the order passed by the Assessing Officer u/s.158BD of the IT. Act with the previous approval of the Addl. CIT, Central Range-1, Ahmedabad is not bad in law when he ought to have held that the order passed by the Assessing Officer is bad in law and direct the cancellation thereof. In not doing so, he has failed to appreciate that the approval granted by the Addl. CIT was a statutory approval and not an administrative approval and, therefore, incumbent upon him to grant an opportunity to the respondent of being heard more particularly when the order approved is prejudicial to the interest of the respondent;
This Hon'ble Tribunal may, therefore, be pleased to hold that the order passed by the Assessing Officer u/s.158BD is bad in law and direct the cancellation thereof.
2. In law and in the facts as well as circumstances of the respondent's case, the learned CIT(A) while deleting addition of Rs.50,30,909/- representing credits for the foreign gifts in respondent's capital account by holding that as such gifts were received even prior to the (date of block period and the said gifts could be enquired into only IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
- 59 -
in the case of the Regular assessment and not in block assessment, has grossly erred by not adjudicating the ground number 2 raised I before CIT(A) which is reproduces as under:
" In law and in the facts and circumstances of the appellant's case the Ld. Assessing officer has erred in making addition of Rs.50,30,909/- representing credits for the foreign gifts in the assessee's capital account invoking provisions of section 68 of the Act, when no such addition is called for.
The CIT(A) has grossly erred by not adjudicating above referred ground that such gifts even otherwise cannot be taxed invoking the provisions of section 68 of the Act in the block assessment as respondent has discharged its onus by satisfactorily explaining the nature of gift, sources of gifts, identity of the donors, creditworthiness of the donors which were verified by the Assessing Officer by way of inquiries with Internal Revenue Services, USA and gifts were made through banking channels.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in invoking the provisions of section 68 of the Act even in the block assessment as respondent has discharged its obligation u/s. 68 of the Act.
3.In law and in the facts as well as circumstances of the respondent's case the learned CIT(A) has grossly erred in upholding the levy of surcharge though the search was prior to the introduction of the amendment for the levy of surcharge w.e.f. 1.6.2002 and, therefore, surcharge levied ought not to have been levied.
This Hon'ble Tribunal may, therefore, be pleased to hold that there is no justification in upholding the levy of surcharge and direct the deletion thereof.
4. The Respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or at the time of hearing of the appeal.
IT(SS)A 288/Ahd/2004 & 248/Ahd/2006(Revenue & Assessee) And Nine others
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88. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record.
89. Ground Nos.1 & 3 are not pressed by the Learned Authorised Representative of the assessee and, hence, they are rejected as such. Ground No.2 relates to merit of the addition and in support of order of the Learned CIT(Appeals). Since we have upheld the order of the Learned CIT(Appeals), while disposing of Revenue's appeal, this ground of the assessee is allowed. In the result, assessee's Cross Objection is partly allowed.
93. We summarize the result as under:-
(i) Assessee's appeal No.248/Ahd/2004 is partly allowed. for statistical purposes.
(ii) Revenue's appeal No.288/Ahd/2004 is allowed for statistical purposes, whereas Revenue's other five appeals are dismissed.
(iii) All the five Cross Objections of the Assessee's are partly allowed.
Order signed, dated and pronounced in the Court on 13/11/2009.
Sd/- Sd/- ( T.K.SHARMA ) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 13/ 11 /2009 T.C. NAIR Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent 3. The CIT Concerned. 4. The ld. CIT(Appeals)-I, Ahmedabad
5. The DR, Ahmedabad Bench.6. The Guard File.
BY ORDER, स×याǒपत ूित //True Copy// (Dy./Asstt.Registrar), ITAT, Ahmedabad