Income Tax Appellate Tribunal - Pune
Bhavesh Madanlal Jain, , Dhule vs Department Of Income Tax on 19 June, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH " A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 693/PN/2012
(Asstt.Year : 2008-09)
ACIT, Circle-3(1),
Dhule .. Appellant
Vs.
Bhavesh Madanlal Jain,
1652, Tilak Road,
Nandurbar
PAN No. AFEPJ 0316D .. Respondent
Co.No.24/PN/2013
(Arising out of ITA No.693/PN/2012)
(Assessment Year 2008-09)
Bhavesh Madanlal Jain,
1652, Tilak Road,
Nandurbar
PAN No. AFEPJ 0316D .. Cross Objector
Vs.
ACIT, Circle-3(1),
Dhule .. Appellant in
The appeal
Assessee by : Shri Sunil Ganoo
Revenue by : Ms. Ann Kapthuama
Date of Hearing : 19-06-2013
Date of Pronouncement : -08-2013
ORDER
PER R.K. PANDA, AM :
This appeal filed by the Revenue and the CO filed by the assessee are directed against the order dated 16-01-2012 of the CIT(A)-I, Nashik relating to Assessment Year 2008-09. For the sake of convenience these were heard together and are being disposed of by this common order. 2 ITA No.693/PN/2012 (By Revenue) :
2. Ground of appeal No.1 by the Revenue reads as under :
"1. The Ld.CIT(A) has erred on facts and in law in considering the receipt of Rs.36,69,900/- to be taxed under the head Capital gains as against such receipts being taxed under the head Business income being adventure in nature of trade by the Assessing Officer."
2.1 Facts of the case, in brief, are that the assessee is an unmarried individual and filed his return of income declaring total income of Rs.9,41,637/- and agricultural income of Rs.2,06,058/-. During the course of assessment proceedings the Assessing Officer noted from the computation of income that the assessee has sold 25 Nos. of open plots admeasuring 3901.95 sq.mtrs in Survey Nos. 197 + 198/1 at Venugopal Nagar, Nandurbar. The total sale consideration received was shown at Rs.36,69,000/- . After deducting the cost of selling expenditure of Rs.3,38,390/- net consideration was shown at Rs.33,30,610/-. After considering indexation by treating the date of acquisition by the original holder, cost of improvement and deduction u/s.54F, the net long term capital gain was shown at Rs.8,96,505/-. However, during the course of assessment proceedings the assessee filed a revised calculation of this capital gain at Rs.9,76,896/-.
2.2 From the details furnished by the assessee the Assessing Officer noted that the assessee has received 80 Nos. of residential plots admeasuring 8300 sq.mtrs in Survey Nos. 197 + 198/1 at Nandurbar in succession of late Rohini bai W/o. Sharad Chandra Vadaklar who was residing at Gokul Road, Nandurbar. She expired on 12-03-2004 and before her death she had executed a will on 01-03-2004. This will was 3 duly registered with Sub-Registrar. It was submitted by the assessee that he had succeeded the above open plots from Rohini bai Vadalkar who was an agriculturist and treated the said plots as his fixed assets. It was accordingly argued that the same are fixed assets and the long term capital gain has been computed as per provisions of section 45 r.w.s. 49(1) of the Income Tax Act.
2.3 However, the Assessing Officer did not accept the contents of the will on the following grounds by reading the will between the lines :
a) The so-called Will was executed on 01.03.2004 and immediately after 11 days i.e. on 12.03.2004 she died.
b) The reasons for making Will as stated to be old age, ill health and unsound mind. Still the signature is so clear that only person who is with a sound health and sound mind can sign.
c) The Testator is having two qualified married sons to whom nominal movable assets have been given.
d) The assessee whose age is only 21 years and who is neither related to her nor even belongs to her community has been given 80 plots.
e) No reasons are mentioned in the so called Will for bestowing 80 plots to the assessee and for which act for the assessee it is his return.
f) In the Will the Testator mentions, "She was a lecturer"
whereas the assessee in his submission states that 'She was an Agriculturist."
2.4 In view of the above the AO questioned the authenticity of the Will and treated the Will as a fake Will on the above grounds and treated the transaction as that of Benami Transaction. The AO accordingly treated the cost of acquisition as NIL. The AO noted that the assessee and his father both are real estate dealers and the assessee has obtained the plots by way 4 of a fake will and now showing the surplus as capital gain by availing of benefits of indexation, deduction/s.54F etc. to evade taxes. 2.5 Relying on the decision of Hon'ble Supreme Court in the case of G. Venkat Swami Naidu & Co. Vs. CIT (1959) 35 ITR 594 (SC) and the decision of Hon'ble Bombay High Court in the case of Smt. Bhanumati Vs. CIT (1979) 119 ITR 69 (Bom.) the AO treated the transaction as "adventure in the nature of trade" and considered the Sale Consideration of Rs.36,69,000/- as business income. The AO also rejected the claim of selling expenditure of Rs.3,38,390/- in absence of any evidence filed before him.
3. Before the CIT(A) it was submitted that there is no hard and fast rule of health that the old age in every case shows shake of hand. Futher, the Assessing Officer admits that the Will is made in Sound mind and health. On the contrary the shaking signature is considered as suspicious by the Courts. It was submitted that the AO is presuming every aspect to the extreme extent and is bent upon not to accept the genuine transfer by the lady. The testator has given to her younger son land in Nandurbar Shivar - S.No. 50/2 - Area 2.26 hectares which means nearly 23,000 sq. mts. This cannot be said meagre. It was argued that the eldest son is also given entire lot of shares and joint account in banks. Therefore the AO's contention is not correct. It was argued that disposal of property under will does not require any relationship or of the same community. The non- mention of any reason for bestowing the legacy cannot lead to presume or infer that the Will is fake. The mention by the Testator as Lecturer and that by the assessee as Agriculturist cannot lead to conclude that the will is 5 fake. The testator in second para clearly mentioned that she was doing agriculture for 30 to 35 years. It was accordingly argued that the AO has tried to treat the will as fake on flimsy grounds and not on any cogent evidence.
3.1 The assessee submitted that the requirements of the Will as per Section 63 of the Indian Succession Act are duly fulfilled in respect of the Will under consideration. In addition while registering the deed, the witnesses, the Computer Operator and the son of the Testator have given statement confirming the execution of the Will. Consent of other legal heirs was also filed. It was accordingly argued that the will should be held as a valid Will properly executed and not as fake will and the legacy / plots received by the assessee be treated as valid.
3.2 As regards the observation of the AO treating the transaction as a benami transaction it was argued that there is nothing on records to substantiate the same except presumption. There is no evidence that the property in question was flown from the assessee to Smt. Rohinibai. On the contrary the said lady has come into possession of the land since 20-
11-1973 (when the assessee was not even borne) and was a valid purchase deed. Various decisions were also made to substantiate the case of the assessee
4. Based on the arguments advanced by the assessee the Ld.CIT(A) called for a remand report from the AO. After considering the same and on the basis of arguments advanced by the assessee the Ld.CIT(A) allowed the claim of the assessee treating the income as long term capital 6 gain and allowed deduction u/s.54F as claimed by the assessee by holding as under :
"6. I have carefully considered the facts and circumstances of the case and the rival submissions. I find from the record that AO has doubted the impugned will and that is only reasons for disallowing the claim of long term capital gain and tax the said profit as business income. In this context, it is noticed that the appellant has received the said impugned 80 plots by will executed by Smt. Rohinibai Sharadchandra Vadalkar on 01-03-2004, and thereafter she died on 12-03-2004. This document is duly registered on 31-07- 2004. The AO considered this will as "Fake and further considered it as "Benami transaction" and hence, rejected the claim of appellant of capital gain and taxed the said profit as business income.
6.1 The appellant has filed the Xerox copy of will as well as a translated copy in English. On perusal of the Will it is noticed that :
a) The testator, Smt Rohinibai Sharadchadra Vadalkar, aged 70 years old, residence of Ganpati Road Nandurbar, has executed will as on 1st March 2004, as she become aged and due to old age her health do not remain good.
b) As per the Will, the testator has given her movable and immovable properties, to her son Shri.Purushottam Vadalkar, Sou.Madhuri P.Vadalkar, Viral madanlal Jain, BhaveshMadanlal Jain (the; appellant).
The Will is witnessed by the two witnesses.
I find from the record that by virtue of the registered Will, the appellant got the possession and owner-ship of the said impugned plots, since the year 2004. The appellant continuously has been enjoying and holding the rights in the said plots, and selling it as per registered sale deeds. Out of these plots, the appellant has sold some plots during the year under consideration and profit earned thereon, is offered for taxation under the head of " Long term Capital-Gain", as it was held by him for the period more than 36 months. In earlier years also the appellant has sold some plots, received under this Will, and duly shown in the return of income.
I find from the record that the A.O has not made out any case to prove that the said impugned will is "fake". There is no evidence on record that either any family members of the testator Smt. Rohinibai Sharadchandra Vadalkar, i.e. her sons, husband or any other relative has challenged the validity of the Will in any court of law. On the contrary, they confirmed the facts of the will.
No other person has challenged the validity of the said Will any court of law. The state authorities, considering the will as genuine, recoded the name of the appellant as successor-owner on the basis of said documents. There is no 7 dispute in this regards, as the appellant has sold the various plots received under the Will.
I find from records that the A.O has not rebutted the various contentions of the appellant. He has not brought any supporting evidence to prove his contention that the will is fake. The various reasons given by the A.O are on presumption, assumption and surmises and are not sufficient to hold that the said impugned will is fake. Not a single fact of the Will has been disproved by the A.O., who merely, disbelieved but not disproved the contents of the Will and its validity.
I further find that the various reasons given by the A.O are not sufficient to prove that the said will is fake. Even though, the appellant belongs to the Jain Community and testator, is a Brahmin, and there" was a business relation with father of the appellant is also not sufficient to consider the said will as fake.
6.2 Why did the owner of the property execute a will in favour of the appellant, is a matter of her sweet will. One may by a Will deprive his close family members including his/her sons and daughters. He had right to do so. If a will is found to be valid, no further question as to why did he do so would completely out of the domain of the AO. A will may be executed even for the benefit of others including animals.
In view of the various factors, I find there is no sufficient reasons given by the A.O, to consider the said Will as fake Further, 1 do not find any substance in the A.O's reasoning mentioned in the assessment as well as in report, which do not prove beyond doubt, that the impugned will is a fake will. I find that A.O rejected claim of the appellant on mere doubt and suspicious. It was a settle law that suspicious, however so strong, cannot take place of a legal proof as held by Hon'ble Supreme Court in the case of Uma Charan Sing and Bor's 37 ITR 271. Thus, the learned A.O. is not justified to make the addition merely on surmises and conjectures. In view of the above, and considering the various facts, principles laid downs in the decisions cited supra relied upon by the appellant, I find there is no sufficient reasons to hold the said will as fake. Therefore, all the contentions of the A.O in respect of the Will fail. Under the circumstances, the appellant certainly deserves to claim the Long term Capital gain, considering the holding period and owner-ship of the said plots, which were received by him by virtue of the above cited will. For the purpose of determining the indexed cost of acquisition in respect of an asset acquired under a gift or will, the cost inflation index has to be worked out by taking the date of acquisition by the previous owner.
6.3 The issue involved in this appeal is squarely covered in favour of the assessee by the decision of Special Bench of the Tribunal in the case of DC1T Vs. Manjula Shah (318 ITR 417) wherein it has been held as under: 8
"When the cost of acquisition to the previous year as on the date of acquisition of the capital asset by him is to be adopted as the cost of acquisition to the assessee, even for the purpose of working out the indexed cost of acquisition as per the meaning given in Explanation to section 48, it is not logical to adopt the cost of inflation index for the year in which the capital asset became the property of the assessee and not, that for the year in which the asset was acquired by the previous owner. For the purpose of computing the long term capital gains arising from the transfer of a capital asset which had become property of the assessee under the gift, the first year in which the capital asset was held by the assessee has to be determined to work out the indexed cost of acquisition as envisaged in Explanation (iii) to section 48 after taking into account the period for which the said capital asset was held by the- previous owner. In that view of the matter, the indexed cost of acquisition of such capital asset has to be computed with reference to the year in which the previous owner first held the asset."
Further, Hon'ble jurisdictional Bombay High Court in the case of C1T Vs. Manjula J. Shah in Income-tax Appeal No. 3378 of 2010 held that the Tribunal was justified in holding that while computing the capital gains arising on transfer of a capital asset acquired by the assessee under a gift, the indexed cost of acquisition has to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset.
This view is followed and fortified by a recent decision of Jurisdictional ITAT Pune, dated 30/12/2011, in the case of ITO vs. Smt. Nima Greave Irani, Pune [I.T.A. No, 1322/PN/2010 : A.Y. 2004-05].
In view of the above and as the impugned will is not considered as fake, the profit/income on sale of said plots is required to be taxed under the head of "Long term capital Gain", as shown by the appellant. As such, further claim of deduction by the appellant under the provision of section 54F, as made in the return is also entitled and be allowed.
In view of the facts and for the reasons discussed as above, the grounds Nos. 3,4,5,6,7; 8; 15; 16 &17 are hereby allowed. The addition made by the A.O is, therefore, deleted, with a direction to the A.O to tax the said income as Long Term Capital Gain and allow deduction u/s.54F as claimed by the appellant."
4.1 Aggrieved with such order of the CIT(A) the Revenue is in appal before us.
9
5. The Ld. Departmental Representative heavily relied on the order of the AO. He submitted that on the basis of the details furnished by the assessee the Ld.CIT(A) called for a remand report from the AO who gave a detailed report dated 08-07-2011 doubting the genuineness of the will and pointing out that the transaction was a colourable device to evade tax. He submitted that the lady had earlier applied for demarcation of plots before the District authorities and Sri Madanlal Jain, father of the assessee, was the organizer/developer. Thus the business transaction was being given a colour of the will and the AO had requested the Ld.CIT(A) to obtain further clarification in this regard from the local authorities. However, the Ld.CIT(A) considering the various observations given by the AO held the will as genuine and not considered the issues raised by the AO in the assessment order/remand report. He accordingly submitted that the order of the Ld.CIT(A) be set-aside and the order of the AO be restored.
6. The Ld. Counsel for the assessee on the other hand heavily relied on the order of the CIT(A). Referring to the decision of the Hon'ble Supreme Court in the case of Rabindranath Mukherjee and Another Vs. Panchanan Banerjee (Dead) and Others reported in 1995 (082)-AIR-1684- SC (a copy of which was filed during the course of hearing) the Ld. Counsel for the assessee drew the attention of the Bench to the following :
"(1) Deprivation of the natural heirs by the testatrix.
(2) .......
(3) .......
(4) .......
10
(4) As to the first circumstance, we would observe that this should not
raise any suspicion, because the whole idea behind execution of will is to interfere with the normal line of succession. So natural heirs would be debarred in every case of will; of course, it may be that in some cases they are fully debarred and in others only partially. As in the present case, the two executors are sons of a half-blood brother of Saroj Bala, whereas the objectors descendants of a full blood sister, the disinheritance of latter could not have been taken as a suspicious circumstance, when some of her descendants are even beneficiaries under the will.
6.1 Referring to the decision of Hon'ble Delhi High Court in the case of Bhushan Kumar Dewan Vs. State and Others reported in 84 (2000) DLT 679 he drew the attention of the Bench to the following :
"8. The very nature and purpose of execution of the Will is to make known the intention of the testator regarding his property and the same has to be executed when the intention is to obstruct the natural normal line of succession, for the sons and daughters would naturally inherit according to the Hindu Succession Act on the death of the mother according to the line of succession. When a person desires to interfere with the said normal course of succession the necessity of execution of a Will arises and then such a Will is executed. It is thus natural that in the case of execution of the Will natural heirs are at times debarred and disinherited from inheriting the property left behind by the deceased. Therefore, the first circumstance, which is sought to be proved by the respondents for holding that the Will was executed under suspicious circumstances, therefore, has no merit at all. In this connection, reference may be made to the decision of the Supreme Court in Rabindra Nath Mukherjee v. Panchanan Banerjee, reported in AIR 1995 SCC 459 wherein it was held that the circumstance of deprivation should not raise any suspicion because the whole idea behind execution of the Will is to interfere with the normal line of succession. It was further held that natural heirs would be debarred in every case of Will when, it may be that in some cases they are fully debarred and in others only partially. It has come on evidence that the testatrix was staying with her son for a long period of time i.e. after one of her sons left the said premises and she was being looked after by the said son and her grandson. So in the natural course she was grateful to the family for looking after her at her old age and, therefore, thought it fit that her property, on her death would go to her grandson, who also happened to be only male child in the family. The said thought process is fairly natural and it cannot be viewed with any suspicion."
6.2 Referring to the commentary on the Indian Succession Act, 1925 by Sanjiva Row he drew the attention of the Bench to the following :
"Clause (b) contemplates wills made outside Calcutta, madras and Bombay, and wills made in respect of immovable property situated outside these cities. Therefore, wills executed outside these cities in respect of immovable properties situate outside these cities are not subject to the condition of obtaining probate before getting advantage of any such will".11
6.3 He submitted that when none of the family members of the testator has challenged the validity of the will in any court of law and when in turn they had confirmed the facts of the will the Assessing Officer was not justified in doubting the genuineness of the will. The various reasons given by the Assessing Officer doubting the genuineness of the will are based on surmises, presumptions and conjectures. Not a single fact of the will has been disproved by the Assessing Officer. Therefore, the validity of the will cannot be doubted. Referring to provisions of section 49(1)(ii) he submitted that the cost of acquisition of the assets shall be deemed to be the cost for which the previous owner of the property had acquired it as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee as the case may be. Since the assessee in the instant case has inherited the landed property as per the will, therefore, the provisions of section 49 (1)(ii) would apply and the assessee is entitled to get the deduction u/s.54F also. He accordingly submitted that the order of Ld.CIT(A) be upheld and the ground raised by the Revenue be dismissed.
7. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer doubted the will on the ground that the testator died within a period of 11 days after the execution of the will, the signature is very clear and therefore the reasons for making the will on the ground of old age and ill-health is doubtful, the testator had not given enough property to her 2 qualified married sons, the assessee is not related to her or belongs to her community and no reasons 12 have been mentioned for giving the plots through a will. Further, the assessee has mentioned that the testator was an agriculturist whereas as per the will she was a lecturer. We find from the various details furnished by the assessee before the Ld.CIT(A) that the testator as per the will had given her movable and immovable properties to her son, daughter and the assessee. The will is witnessed by 2 witnesses. The assessee got the possession and ownership of the plots in question since the year 2004 and was continuously enjoying and holding rights in the said plots. Nothing has been brought on record by the Assessing Officer to prove that the said will is fake other than doubting the same on presumption. None of the family members including her children and her husband has ever challenged the validity of the will in any court of law. On the contrary they have confirmed the facts of the will.
7.1 The Hon'ble Supreme Court in the case of Rabindranath Mukherjee and Another has held that the circumstances of deprivation should not raise any suspicion because the whole idea behind execution of a will is to interfere with the normal line of succession. It was further held that natural heirs would be deprived in every case of will when, it may be that in some cases they are dully deprived and in some places only partial. This view of Hon'ble Supreme Court has been followed by the Hon'ble Delhi High Court in the case of Bhushan Kumar Dewan (Supra). Since the Ld. Departmental Representative could not controvert the detailed reasonings given by the Ld.CIT(A) which are already reproduced at Para 4 of this order, therefore, in absence of any contrary material brought to our notice and following the decision of Hon'ble Supreme Court in the case of Rabindranath Mukherjee and Another and the decision of the Hon'ble 13 Delhi High Court in the case of Bhushan Kumar Dewan we find no infirmity in the order of the Ld.CIT(A) on this issue. We accordingly uphold the order of the CIT(A) on this issue. The ground raised by the Revenue is accordingly dismissed.
8. Ground of appeal No.2 by the Revenue reads as under :
"2. The Ld.CIT(A) has erred on facts and in law in deleting the addition of Rs.1,00,000/- made by the Assessing Officer as income from sand business".
8.1 Facts of the case, in brief, are that the assessee has shown loss of Rs.4,89,790/- from sand business. The Assessing Officer during the course of assessment proceedings noted that the District Collector vide its order dated 21-11-2006 has awarded contract of execution of sand from Tarade Tapinadi of 14000 brass of sand on payment of Royalty of Rs.16,05,000/-. This order was effective for the period from 18-10-2006 to 31-07-2007. From the details furnished by the assessee the Assessing Officer noted that the assessee has prepared sand trading account where an opening balance of 7696 brass of sand has been considered. As against Royalty of Rs.8,79,550/-, the assessee has shown sales of sand of 345 brass for Rs.3,39,760/- upto 31-07-2007and has arrived at loss of Rs.4,89,790/-. In absence of any documentary evidence to support that he has extracted sand from the river which is much less than the estimated figure and considering the fact that no prudent businessman after knowing the quantity and period shall act in the way the assessee has acted and further considering the fact that cost of construction material particularly sand is on a very high side the Assessing Officer rejected the trading account prepared by the assessee and estimated the income at Rs.1 lakh. 14 8.2 In appeal the Ld.CIT(A) deleted the addition on the ground that Assessing Officer has summarily rejected the loss and has not considered the submission of the assessee that the period from 01-04-2007 to 31-07- 2007 is monsoon period and the assessee had to encounter difficulties in extracting sand. Since excavation of sand is a seasonal activity the Assessing Officer was not justified in rejecting the sand trading account. However, since the assessee does not maintain proper records to establish that upto 31-07-2007 only 345 brass of sand valued at Rs.3,89,760/- was extracted the Ld.CIT(A) directed the Assessing Officer to estimate this value at Rs. 5 lakhs as against the sale of Rs.3,89,760/- which resulted in reducing the loss by Rs.1,10,240/-. He accordingly deleted the addition made by the Assessing Officer.
8.3 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
9. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. The Ld. Departmental Representative could not controvert the findings given by the Ld.CIT(A) that period from 01-04-2007 to 31-07-2007 is monsoon period and the assessee had to encounter difficulties in extracting the sand which is a seasonal activity. Considering the totality of the facts of the case and in view of the reasoned order passed by the Ld.CIT(A) on this issue, we do not find any infirmity in the order of the CIT(A) directing the Assessing Officer to estimate the value of Rs.5 lakhs as against the sale of 15 Rs.3,89,760/- in absence of maintenance of proper records. In our opinion, the order of the Ld.CIT(A) under the facts and circumstances is a reasoned one and requires no inference from our side. Accordingly, the same is upheld and the ground raised by the Revenue on this issue is dismissed
10. Ground of appeal No.3 by the Revenue reads as under :
"3. The Ld.CIT(A) has erred on facts and in law in deleting Rs.63,000/- out of addition of Rs.1,12,375/- made u/s.68 by the Assessing Officer".
10.1 Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings noted that the assessee has shown to have received cash gifts of Rs.1,12,375/- from 4 different parties the details of which are as under :
1. Sau. Gulabeen Madanlal (Mother) Rs.21,000/- in cash
2. Rekha Ravindra Jain (Elder Sister) Rs.21,000/- in cash
3. Viral Madanlal Jain (Elder Sister) Rs.21,000/- in cash
4. Small Gifts on birthday, various Persons Rs.49,375/- in cash
-------------------------
Rs.1,12,375/-
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10.2 According to the Assessing Officer the assessee has not filed any confirmation of any gift received except the computerised account extract of the donors signed by the assessee himself. No gift deed has been executed. Therefore, according to him it is not clear as to whether the gift is spontaneous and without consideration and the donor was competent to make the gift and duly accepted by the receipient. According to the Assessing Officer as per the provisions of section 68 the onus is on the assessee to prove the credit worthiness of the donor and the genuineness 16 of the transaction. In the instant case the assessee has not filed any gift deed and therefore mere statement that the assessee has received the above gift is untenable. Invoking the provisions of section 68 the Assessing Officer made addition of Rs.1,12,375/- u/s.68 of the I.T. Act. 10.3 In appeal the Ld.CIT(A) deleted the addition by observing as under:
"8.3 I have carefully considered the facts of the case and the rival submissions. The appellant has furnished the names, identity of his family members. Further, it is observed that during the course of assessment proceedings appellant has filed confirmation of cash gifts given by his mother and two elder sisters and brought to the notice of the A.O that they are assessed to tax and the gifts are customary gifts. However, A.O rejected the explanation of the appellant and taxed the said gifts as unexplained credits u/s.68. He has not examined to any donor, though they are assessed to tax. The bona fide explanation of the appellant cannot be lightly rejected. As the family donors are tax payers, it cannot be said that they do not have creditworthiness to make such amounts as gifts.
8.4 The appellant however has not filed any supporting evidences in respect of the amount of Rs.49,375/- claimed as received as gifts on birthday. Out of the total amount of gift amounting to Rs.1,12,375/-, gifts received from the relatives Smt. Gulabben madanlal Jain(mother) - Rs.21,000/-, Rekha Ravindra Jain (eider sister ) Rs.21,000/- and Viral Madanlal Jain (elder sister) Rs.21,000/- aggregating to Rs.63,000/- stands explained and The balance receipt of cash claimed as gifts received from various persons amounting to Rs.49,375/- is treated as unexplained. The impugned addition of Rs.1,12,375/- is, therefore, reduced to Rs.49,375/-. The AO is directed accordingly. This ground of appeal is partly allowed."
10.4 Aggrieved with such order of the Ld.CIT(A) the Revenue is in appeal before us.
11. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. From the various details furnished by the assessee we find the assessee has received the gift from his mother and 2 elder sisters who are assessed to tax. Considering the totality of the facts of the case and considering the smallness of the gifts received from 17 mother and sisters who are assed to tax we find no infirmity in the order of the CIT(A) in accepting the genuineness of the gift and the credit worthiness of the donors. Further, the Assessing Officer has not examined any of the donors who are income tax assessees. In view of the detailed reasoning given by the Ld.CIT(A) deleting the cash gifts received by the assessee from his mother and his 2 sisters who are income tax assessees we find no infirmity in his order on this issue. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed.
12. Ground of appeal No.4 by the Revenue reads as under :
"4. The Ld.CIT(A) has erred on facts and in law in deleting the addition of Rs.40,51,000/- made by the Assessing Officer u/s.68 of the I.T. Act."
12.1 Facts of the case, in brief are that on going through the balance sheet of the assessee the Assessing Officer noted that the assessee has introduced cash of Rs.40,51,000/- during the year in the name of certain persons as advance against sale of plots. The assessee has not completed the transaction of sale with these parties till the end of the accounting year. On going through the list of such persons the AO noted that the assessee has claimed to have executed only sale deed of 15 persons and in respect of remaining 14 parties, the sale deed has not been executed till the date of completion of the assessment. The assessee also did not furnish any copy of agreement for sale from these persons. Further, since the period between advance and registration of sale deed is very long, therefore, the AO was of the opinion that all the persons cannot wait for such a long period without any documentary evidence in support of payment of cash advance given to the assessee. During the course of hearing the assessee 18 has filed sale deed in respect of seven people only. On examination of copy of sale deed in respect of transaction with persons at serial no. 4,5,6 and 8 the AO observed that though the sale deed is typed, but date and amount of advance has been specifically in the assessee's handwriting and not typed. Some time there is overwriting. This itself according to the AO proves that the assessee has introduced his own unaccounted money in the name of these persons under the head "Advances against Plots/lands"
12.2 The AO further noted that burden is on the assessee to prove the genuineness of the credit by producing confirmation letters from the creditors with complete name and addresses of the parties who have advanced the plots. In the present case the assessee has not furnished the same and has merely given the names. The principles contained in section 68 are squarely applicable to such advances. The assessee has failed to prove that the amount represents advances against the purchases of plots.
He therefore was of the opinion that the amount is nothing but assessee's own money routed through the head advances received in cash for the purchase of plot. He accordingly added an amount of Rs.40,51,000/- to the total income of the assessee for the year under consideration.
12.3 Before the CIT(A) the assessee made elaborate submissions and filed the sale deeds executed, the letters of confirmation and the copies of Civil Suits filed by the purchasers of the plot as additional evidence which the Ld.CIT(A) forwarded to the Assessing Officer for his comments. After obtaining the remand report from the Assessing Officer and considering the submissions filed by the assessee before him and 19 considering the various case decisions the Ld.CIT(A) deleted the addition made by the Assessing Officer by holding as under :
"9.4 I have carefully considered the facts of the case, the assessment order, the report of the AO, the rival submissions and the position of law on the subject. In respect of this ground the appellant has submitted various copies of registered sale deed, which were not registered at the time of assessment proceeding. The total disallowance under the head is Rs.40,51,000/-. In the report dated 08/07/2011, the Id. AO after examining the additional evidence has accepted the advance of Rs.7,10,000/- as explained, leaving the balance of Rs.33,41,000/- to decide whether or the material available on record, it can be considered as explained or not. The account of Mukesh Beldar wherein the AO has pointed out a difference of Rs.1,80,000/- stand explained because the said amount was received before 01/04/2007 and is entered in the books of account. This account is, therefore, reconciled and no difference is found.
9.5 The appellant has shown outstanding liabilities of Rs.40,51,000/- on account of advances towards customers, as per Ann-A enclosed with the Assessment Order. During assessment proceedings, appellant has submitted the details thereof and explained the credits and also submitted the evidence in this regard. Appellant has produced the copies of sales deeds in respect of 15 persons, out of 31 persons, whose transaction were registered at the time of assessment. Subsequently, the by the appellant, and pointed out the reasons for non acceptance the credited amounts. On perusal of the reasons, it is noticed that most of the reasons are like :
i) "Deed filed but hand written dates and amount receipt not signed by payee. No Revenue stamp."
ii) No deed, only confirmation letter. No Pan .
iii) No deed. Only confirmation letter. No Pan. Receipt not signed by payee. No Revenue stamp.
iv) No detail payment in Deed .Receipt not signed by payee. No Revenue stamp,
v) No deed only confirmation letter Receipt not signed by payee. No Revenue stamp.
From the above remarks, it cannot be said that the said credited amounts are not explained, when particularly, the sales deeds were effected in respect of customers, whose amount have been received in advance against t h e sale of plots and copies of which are filed on records. Some sales are still to be registered, as remaining amount is yet to be received by the appellant. Thus, it is ample clear from the above narrated facts in respect of the said creditor that the appellant has submitted the information and documentary evidence of acceptance said credited amount, and proved beyond doubt the 20 identity, genuineness and credit worthiness of the creditor and discharged his onus.
It is further noticed that the opinion of the A.O regarding not accepting the explanation offered during the course of assessment proceeding, as not satisfactory must be based on proper appreciation of the facts and the material and other surrounding circumstances available on record. The opinion of the A.O must be formed objectively by appreciation material available on record. It is seen from record that appellant has discharged the burden to prove the credits cited supra by filing sufficient evidence which requires supporting the credits and proves the transactions. In view of the above and in the circumstances of the case, I am of the considered opinion that the appellant has duly discharged his burden of proof, which a person of ordinary prudence could have discharged. Thus, once the appellant has discharged his burden, the onus got shifted on the A.O to prove that the evidence filed by the appellant is not correct. The learned A.O. has not brought any evidence or cogent material on record which may prove that the A.O. had discharged his burden in this regard. Once the appellant has established the identity of the creditor and the burden got shifted to the A.O, assessee cannot be called upon to prove the worthiness of the creditors. This view is supported by the decision of jurisdictional Tribunal Of Pune in ITA.No.764/Pune/198 5 in the case of ITO vs. Suresh Kalmadi [32 TTJ] (Pune) 330(TM).
The Hon'ble Jurisdictional Bombay High Court has held in the case of Orient Trading Co. Ltd v CIT [ 1963] 49 ITR 723 (Bom) that: "When the entry stand in the name of third party and assessee establishes the identity of creditor and produce evidence showing that entry is not fictitious, initial burden lying on the assessee stands discharged; the burden shifts on revenue to show that the entry represented assessee's suppressed income -cash credits, in the facts and circumstances of the case, could not be treated as assessee's undisclosed income The Hon'ble Supreme Court has held in the case of CIT v K.S.Kannan Kunhi [1973] 87 ITR 395 (SC) that: Where explanation of the assessee was not absurd and it was capable of being examined, I T Authority acted arbitrarily in rejecting the explanation without making proper enquiry.
Further, I noted that A. O. merely disbelieved but not disproved the facts stated by the appellant in respect of the said creditor. It is not rejected by the A.O. Merely disbelieving the reasonable explanation of the appellant, is not sufficient for addition. Further, An explanation prima-facie reasonable cannot be rejected on arbitrary grounds, or on mere suspicious or on imaginary or irrelevant ground, as held in Lajwanti Sial v CIT [1956] 30 ITR 228 (Nag).
In view of the above and in the circumstances of case, appellant has filed bona fide explanation, with supporting documentary evidence and hence, that cannot be rejected on the grounds and reasons, as stated by the A.O. Therefore, the 21 addition made by the A.O cannot be sustained and hence, it is considered that the appellant had sufficiently proved the said credits. Therefore, the impugned addition of Rs.40,51,000/- is deleted. This ground of appeal is allowed." 12.4 Aggrieved with such order of the CIT(A) the Revenue is in appeal before us.
13. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find the Assessing Officer disallowed an amount of Rs.40,51,000/- on the ground that assessee has received advance from various parties for sale of plots and the assessee has not completed the transaction of sales before the end of the accounting year and therefore the transaction is doubtful. Further, the sale deeds are typed but the date and amount of advance has been hand-written by the assessee and at sometimes there is overwriting. Therefore, the Assessing Officer doubted the genuineness of the advance against plots/land and held that the assessee has introduced his own unaccounted money. We find the Ld.CIT(A) called for a remand report from the Assessing Officer on the basis of the additional evidence filed by the assessee before him and the Assessing Officer accepted the advance of Rs.7,10,000/- leaving the balance of Rs.33,41,000/- to be decided by the Ld.CIT(A). We find on the basis of various documents filed by the assessee the Ld.CIT(A) observed that the assessee has submitted the necessary information and documentary evidence of acceptance of the said credit amount and has proved beyond doubt the identity, genuineness and credit worthiness of the creditor and discharged his onus. He has also observed that the 22 Assessing Officer while rejecting the explanation given during the course of assessment proceedings has not based his reasoning on proper appreciation of facts and the material and other surrounding circumstances available on record. The Assessing Officer has not formed his opinion objectively by appreciating the material available on record. The Ld. Departmental Representative could not controvert the detailed reasoning given by the Ld.CIT(A) which in our opinion is a reasoned one. Under these facts and circumstances, we find no infirmity in the order of the Ld.CIT(A) deleting the addition on this issue. The ground raised by the Revenue is accordingly dismissed.
CO No.24/PN/2013 (By Assessee) :
14. The Ld. Counsel for the assessee at the time of hearing did not press the CO for which the Ld. Departmental Representative has no objection. Accordingly, the CO filed by the assessee is dismissed as "not pressed".
15. In the result, the appeal filed by the Revenue as well as the CO filed by the assessee are dismissed.
Pronounced in the Open court on this the 14th day of August 2013.
Sd/- Sd/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune, dated : 14th August 2013 satish 23 Copy of the order is forwarded to : 1. The assessee 2. The Department 3. The CIT(A)-I, Nashik 4. The CIT-I. Nashik 5. D.R. "A" Bench, Pune 6. Guard File By order // True Copy // Senior Private Secretary, Income Tax Appellate Tribunal, Pune 24