Income Tax Appellate Tribunal - Amritsar
Yogesh Kumar And Sons (Huf) vs The Assessing Officer on 24 July, 2007
Equivalent citations: (2008)115TTJ(ASR)696
ORDER
A.D. Jain, Judicial Member
1. This is assessee's appeal for the assessment year 2003-04 against the order dated 29-5-2006 passed by the learned CIT(A), Bhatinda. The following grounds of appeal have been raised:
1. That on the facts and in the circumstances of the case and in law the learned CIT(A) erred in upholding the reassessment framed Under Section 147/148 of the Income tax Act, 1961.
2. That the notice issued Under Section 148 of the Act has not been served according to the provisions of Section 282 of the Income tax Act, 1961 so the reassessment is liable to be quashed. So even if not raised at he first instance before the AO, it can be raised before the appellate authority at a later stage.
3. That the statement of Smt. Sukhdev Kaur Donor was recorded at the back of the assessee on 21-11-2005 so cannot be relied upon. So no adverse inference can be taken against the assessee.
4. That Sh. V.K. Mittal Advocate was not present on behalf of the donee at the time of recording of these statements of Smt. Sukhdev Kaur Donor as is clear from the oath taken by Smt. Sukhdev Kaur before the recording of the statements, so the finding of the CIT(A) is against facts and law.
5. That on the facts and in the circumstances of the case and in law the ld. CIT(A) erred in giving the findings that the reasonable opportunity was given to the assessee after the filing of the affidavit dated 2-12-2005 by Smt. Sukhdev Kaur Donor.
6. That on the facts and the circumstances of the case and in law, the ld. CIT(A) erred in giving the findings that the A.O. was justified in rejecting the affidavit of the donor dated 8-1-2003.
7. That on the facts and circumstances of the case and in law the ld. CIT(A) erred in giving the finding that Smt. Sukhdev Kaur Donor has not the capacity to give the gift in question and gift is also not genuine.
8. That in any case, the gift in question is not only genuine but also the donor has the capacity to give the gift in question.
2. The facts are that the assessee-HUF is a partner with the firm M/s. Yogesh Kumar, Contractor, Bhatinda. The assessee had, besides the share profit, received interest income of Rs. 1,37,650/- from the said firm during the year. However, no return of income had been filed. Accordingly, notice under Section 148 of the Act was issued on 26-7-2004. In response, the assessee filed return of income on 4-8-2004.
3. During the assessment proceedings, it was seen that the assessee had received a gift of Rs. 10 lacs from one Smt. Sukhdev Kaur W/o Shri Gamdoor Singh S/o Shri Chand Singh of Village Kanakwal Tehsil Talwandi Saboo. This amount of Rs. 10 lacs stood credited in the capital account of the assessee. The A.O. asked the assessee to file proof of annual income of the donor and of the assessee's relation with the donor, and to show the occasion of the gift. The assessee filed written submissions alongwith the photocopy of affidavit of Smt. Sukhdev Kaur, donor and a photocopy of the cheque by way of which the gift had been received. The A.O. asked the assessee to produce the donor for examination. Summons under Section 131 of the Income tax Act were issued to Smt. Sukhdev Kaur. As Smt. Sukhdev Kaur did not appear before the A.O., the A.O. asked the assessee to produce the donor, vide order sheet entry dated 18-9-2005. However, neither the assessee produced her before the A.O., nor did she herself appear for examination. From the investigation made by the A.O. directly from the bank and the assessee, the A.O. noted that the copy of the bank account of the assessee, as submitted by the bank, showed that the assessee had received a gift from a lady living Village Kanakwal, Tehsil Talwandi Saboo, having no blood relation with the assessee; that there was no occasion for making of such gift; that during the period from 1-3-2002 to 31-3-2004, the assessee had made only a single transaction of Rs. 2262/-; that the amount of Rs. 10 lacs was deposited in cash on the same date as of the gift and was transferred to the account of M/s. Yogesh Kumar, Contractor, in their account with the bank and an amount of Rs. 8 lacs was withdrawn on the same date by the firm. The A.O. again issued summons to the dono on 21-12-2005, who appeared before the A.O. alongwith herJiiishaiid-Shri Gamdoor Singh and Shri V.K. Mittal, Advocate, Counsel for the assessee. The statement of Smt. Sukhdev Kaur was recorded by the A.O. This statement forms Annexure 'A' to the assessment order. From the said statement of Smt. Sukhdev Kaur, the A.O. observed that she was not a person of means; that she lives a poor life; that she had not got issued any cheque book from her bank; that the cheque used for the alleged gift was a local cheque obtained from the bank, a loose leaf cheque; that she had stated that she had never deposited Rs. 10 lacs in her bank account on 8-1-2003; that she had stated that the Manger of the bank had taken her signature on some papers, stating that the same were required for her bank account; that she stated that being a un-educated lady, she was not aware of the contents of the affidavit and the blank cheque got signed by the Manager of the bank on 8-1-2003; and that she was prepared to state so even before either the A.O. or any authority.
4. Smt. Sukhdev Kaur also filed an affidavit before the A.O. in support of her statement that she had never given any cash to anybody even remotely connected with the assessee. This affidavit is at Annexure 'B' of the assessment order. The A.O. observed that the photocopy of the affidavit of Smt. Sukhdev Kaur, filed by the assessee, also suffered from an incorrect verification/identification, as she had never gone to Bhatinda, where the so-called affidavit appeared to have been signed by some advocate; that even the Notary did not affix his stamp on the affidavit and the affidavit did not seem to have been entered in the Notary Register; that the stamp papers had been purchased at Rama Mandi and had been got attested by the Notary at Bhatinda on the date of the alleged gift; that the cheque in question was neither a payees account cheque nor a crossed cheque; and that the cheque was not in the name of the assessee-HUF.
5. On the above discussion, the A.O. issued a show cause notice to the assessee. In response, the assessee submitted that Smt. Sukhdev Kaur and Smt. Parsin Kaur had received land compensation of Rs 4108434/- in total from the year 1998 to 1999, showing that the assessee had sufficient funds for giving the gift to the assessee.
6. The A.O., however, rejected the assessee's contention in view of his aforesaid observation. He held that the gift was unexplained cash credit, since the assessee had failed to prove any blood relation with the donor, the capacity of the donor and the occasion for the gift, besides the fact that the preponderance of human probabilities was entirely against the assessee; and that as such, the assessee had failed to discharge its onus regarding the genuineness of the gift. Accordingly, the amount of Rs. 10 lacs was added by the A.O.
7. The learned CIT(A), by virtue of the impugned order, upheld the addition and dismissed the appeal of the assessee. Aggrieved, the assessee is in further appeal before us.
8. Apropos the first issue, the learned Counsel for the assessee has submitted that the notice under Section 148 of the Act had not been served on the assessee in accordance with the provisions of Section 282 of the Act, rendering the reassessment proceedings liable to be quashed and that the learned CIT(A) erred in upholding the same. The learned Counsel for the assessee has submitted that the notice was issued at the Bhatinda address of the firm and not at Rama Mandi, where the assessee is residing for the last many years. It has been contended that the notice never reached the assessee. According to the learned Counsel for the assessee, in these facts, the reassessment is liable to be quashed. The learned Counsel for the assessee has placed reliance in this regard on the following case laws:
(1) I.T.O. v. Mukesh Kumar , (2) Kunj Behari v. ITO , (3) P.N. Sasikumar and Ors. v. CIT , (4) P.V. Doshi v. CIT , (5) Vijay Kumar Jain v. CIT , (6) 244 ITR 141.
9. The learned Counsel for the assessee has further contended that the cash credit was in the name of the firm and not in the assessee's name and so, addition, if any, was to be made in the hands of the firm and not in the assessee's hands.
10. Relying on the assessment order, on the other hand, the learned D.R. has argued that the reassessment is entitled to be maintained, since it was only in response to notice under Section 148 that the assessee filed the return of income and since it had also participated in the assessment proceedings.
11. We have heard the parties on the issue and have perused the material on record. In this regard, the contention of the assessee is that the requirement of Section 282 is that notice under the Act has to be served on the person named in the notice, but in the present case, this has not come about; that the notice under Section 148 was never served on the assessee and the factum of the return having been filed in response to the said notice and of the assessee having joined the assessment proceedings cannot render the non service of notice on the assessee to be a valid service.
12. It is seen from the impugned order that this very issue was raised by the assessee before the learned CIT(A) also. The learned CIT(A) observed that this issue had never been raised by the assessee in the assessment proceedings, rather it had been cooperating in the assessment proceedings, as stated by the A.O. in his remand report. The learned CIT(A) decided against the assessee for the reason that no objection with regard to the non-service of notice under Section 148 had ever been raised by the assessee before the A.O. and that the assessee had himself actively been participating in the assessment proceedings. It was also observed that a similar objection was raised by the assessee in his case in the status of individual, for the assessment year 2003-04 and that in that case also, the matter had been decided against the assessee.
13. We do not find any error with the order of the learned CIT(A). The stand of the assessee is that the conduct of the assessee in filing the return of income in response to the un served notice under Section 148 of the Act and that of joining the assessment proceedings cannot waive the statutory requirement of service of notice on the assessee.
13A. As per P.C. Puri v. CIT (1984) 18 Taxman 158 (Delhi), a waiver means abandonment of a right and it may be either express or implied from the conduct, but it is a basic requirement that it must be intentional and with knowledge.
13B. According to Dhirendra Nath v. Surinder Chand Ghosh , a waiver is an intentional relinquishment of a known right.
13C. In Basheshar Nath v. CIT 35 ITR 190 (SC), the Hon'ble Mr. Justice Bhagwati (as he then was), placing reliance on the dictum in 'Dawson's Bank Limited v. Nippon Menkwa Kabushiki Kaisha (1935) 5 Comp. Cas. 191, stated: "The generally accepted connotation is that to constitute waiver, there must be an intentional relinquishment of a known right or the voluntary relinquishment or abandonment of a known existing legal right, or conduct such as wan-ants an inference of the relinquishment or a known right or privilege".
14. In the present case, the assessee undisputedly filed its return of income in response to the notice under Section 148. It also actively participated in the assessment proceedings thereafter. It, therefore, by its conduct, abandoned the right to claim non service of the notice under Section 148, as envisaged under Section 282. The assessee intentionally and voluntarily relinquished and abandoned such right. Thereby, the assessee conceded to the jurisdiction of the A.O. to make assessment for the year under consideration. As such, the alleged non service of notice on the assessee was rendered merely a irregularity which got cured by the subsequent conduct of the assessee, as aforesaid. The consequences of such waiver, undoubtedly, are binding on the assessee. In CIT v. Swarannath Chettiar 15 ITR 430 (Mad.), after division in a joint family, notice was issued to the former karta thereof without describing him as Karta. The addressee, by the act of his making the return in response to such notice, was held to have waived all irregularities. No doubt, in that case, the notice was served on the addressee. Herein, though the factum of such service on the assessee is in dispute, obviously, the assessee filed the return in response to the said notice and also participated in the assessment proceedings. Hence, it cannot be disputed that the assessee was in the knowledge of such a notice having been issued and his subsequent conduct rendered non service of notice as a mere irregularity.
15. In CIT v. Bhanji Kanji's Shop 68 ITR 416 (Guj.), the notice of reassessment was served on the temporary servant of the assessee, in response to which the assessee filed the return of income. It was held that the validity of the notice could not be questioned in view of the fact that the return had been filed by the assessee in pursuance of the notice served on his temporary employee. The reassessment proceedings were held properly instituted.
16. In Dr. H.R. Rai v. CIT 145 ITR 809 M.P. the assessee filed a return in response to a notice under Section 148. The assessee also complied with the notices under Section 142(1) and 143(2) and participated in the assessment proceedings without raising any objection. It was only in the appeal that the assessee challenged the assessment as illegal for non service of notice of hearing personally, or on his authorised person. It was held that the procedural irregularity in the service of the notice would not invalidate the service.
17. In A.K.M. Govindaswamy Chettiar (Deed.) and Ors. v. ITO 144 ITR 559 (Mad.), the assessee filed returns in response to notice of reassessment served on a person acting as the assessee's agent, on whom notices under the Income tax Act had been served in the past. The assessee did not raise any objection regarding service of the notice before the A.O. It was held that the reassessment notice was validly served.
17A. The above case laws are applicable to the case at hand.
18. Reliance by the assessee in the case of ITO v. Mukesh Kumar 254 ITR 409 (Pb. & Har.) is entirely misplaced. That was a case dealing with the penal consequences of punishment under Section 276CC of the Income tax Act which is not the matter herein.
19. In Kunj Behari v. ITO 139 ITR 73 (Pb. & Har.) (supra), the Hon'ble High Court was dealing with the issue of conditions to be satisfied before substituted service by affixture. Again, this is not the case herein.
20. In P.N. Sasikumar and Ors. v. CIT 170 ITR 80 (Kerala) (supra), it was held that for reassessment, issuance of valid notice is a condition precedent. There is no denial to this settled legal position. In the present case, the position is not otherwise. Here also, a valid notice under Section 148 was issued to the assessee.
21. In P.V. Doshi v. CIT 113 ITR 22 (Guj.) (supra), it was held that in a reassessment, the conditions to be fulfilled are mandatory and cannot be waived, acquiseed in or estopped, and that consent cannot give jurisdiction. Again, there is no denial to the aforesaid legal proposition. However, the facts attending that case are entirely different from those present herein. There, the Tribunal remanded the matter to the ITO. The Hon'ble High Court held that the order of the Tribunal could not give jurisdiction where it did not exist. Evidently, such are not the facts before us. Here, the assessee, by his conduct, had filed the return in response to the notice under Section 148 and had also actively participated in the assessment proceedings, thereby intentionally, consciously and voluntarily waiving the right to claim that the notice under Section 148 was not received by the assessee. Accordingly, the facts clearly show that the assessee was in the knowledge of the reassessment notice having been issued and the assessee acted on such knowledge only.
22. In Vijay Kumar Jain v. CIT 99 ITR 349 (Pb. & Har.) (supra), it was held that when in respect of any year, a return has been submitted before assessment, the ITO cannot ignore the return and the notice of reassessment and consequent assessment ignoring the return are invalid. This decision, again, does not have facts pari materia with those of the present case. Here, the return was filed in response to notice under Section 148. Moreover, the A.O. did not ignore the return.
22A. The learned Counsel has also cited "244 ITR 141". However, it is seen that there is no such citation. Page 141 of volume 244 of the ITR is a continuation of a judgment of the Hon'ble Madras High Court, titled Sivaram Textiles v. CIT and Anr. which begins at page 136 of the report. This decision is with regard to the waiver of interest and penalty under Section 273A of the Income tax Act and is not applicable to the present case.
23. In view of the above, we do not find any error in the order of the learned CIT(A), on this issue. These findings are, therefore, hereby upheld.
24. Apropos the argument that since the cash credit was in the name of the firm and not in the name of the assessee-HUF, the addition, if any, ought to have been made in the firm's hands rather than in those of the assessee, no such plea, it is seen, was ever taken before either of the taxing authorities. The assessee merely seeks to rely on the solitary observation at page 6 of the assessment order that the donor had not mentioned that the amount of the alleged gift was for the assessee-HUF. The assessee cannot draw any support whatsoever from this observation of the A.O., since the A.O. has observed that the cheque in question was a bearer cheque and was endorsed to the firm. This argument of the assessee firm is, therefore, rejected,
25. As such, ground Nos. 1 and 2 taken by the assessee stand rejected.
26. Ground Nos. 3 and 4 are also inter-connected. They are against the recording of the statement of Smt. Sukhdev Kaur in the presence of Shri V.K. Mittal, Advocate, who allegedly was not representing the assessee at the time of recording of such statement.
27. In this regard, the learned Counsel for the assessee has submitted that the assessee was never associated at the time of recording of the statement of Smt. Sukhdev Kaur. It has also been stated that from the oath taken by Smt. Sukhdev Kaur before recording of the statement, it is amply clear that Shri V.K. Mittal, Advocate was not present on behalf of the assessee/donee at the time of recording of the statement.
28. The learned D.R., on the other hand, has refuted such claim of the assessee. Attention has been drawn to the answer to question No. 13 at page 5 of Annexure 'A' (supra) to the assessment order.
29. We have heard the rival submissions on this score. The grievance of the assessee is totally misconceived. Firstly, the assessment order shows that the assessee did not produce Smt. Sukhdev Kaur for examination before the A.O., despite having been repeatedly asked by the A.O. to do so. It was only thereafter that the A.O. summoned the donor by issuance of summons under Section 131 of the Income tax Act. The donor was examined at the time of assessment.
30. Further, the argument that the oath taken by the donor at the time of recording of the statement shows that Shri V.K. Mittal, Advocate, was not representing the assessee, does not have any legs to stand on. As pointed out by the learned D.R., the answer to this objection is to be found in the answer to question No.13 of the statement of the donor. It would be apt to reproduce the relevant portion thereof:
... My statement has been recorded in a cordial atmosphere and in the presence of my counsel Shri Vinod Kumar Mittal. I also confirm that the oath was administered to me before recording of the statement and I have been duly explained in detail the contents of the entire statement in Punjabi (my mother tongue) by Shri V.K. Mittal, Advocate, who is present during the entire statement and he has also been given opportunity to cross examine me on behalf of Shri Yogesh Kumar and he has also put queries and the Deponent has reconfirmed the above replies again....
31. The above deposition of the donor leaves no iota of doubt that:
(i) the statement of the donor was not recorded at the back of the assessee,
(ii) Shri V.K. Mittal, Advocate, during the recording of the statement of the donor, was representing the donee,
(iii) Shri V.K. Mittal, Advocate, was the counsel for the assessee,
(iv) Shri V.K. Mittal, Advocate, counsel for the assessee, had been duly granted opportunity to cross examine the donor on behalf of the assessee,
(v) Shri V.K. Mittal, Advocate, counsel for the assessee, did put queries to the donor, and
(vi) the donor duly responded to the queries raised to her by Shri V.K. Mittal, the counsel for the assessee, by reconfirming the replies given by her in the earlier part of her statement.
32. The fact at (iii) above is also clear from page 1 of the assessment order, wherein it has been, inter alia, mentioned that "Shri V.K. Mittal, Advocate for the assessee alongwith Shri Yogesh Kumar attended the assessment proceedings from time to time". On page 2 of the assessment order, it has been mentioned that "On 30-8-2005, the counsel for the assessee Shri V.K. Mittal, Advocate, attended and requested for adjournment" and that "On 14-9-2005, Shri Yogesh Kumar Gupta, Karta of the HUF alongwith Shri V.K. Mittal, Advocate attended." On page 3 of the assessment order, it finds mention that "On 19-9-2005, Shri Yogesh Kumar Gupta, the assessee alongwith Shri V.K. Mittal attended." It has further been mentioned that "...and the case was again adjourned for 26-9-2006 at the assessee's request. On 26-9- 2005, Shri V.K. Mittal attended and the case was adjourned to 10-10-2005."
33. In this regard, the learned CIT(A) has made, inter alia, the following observations:
...The AO in the remand report has mentioned that the statement of Smt. Sukhdev Kaur was recorded in the presence of Shri Vinod Mittal, counsel for the assessee and her husband Shri Gamdoor Singh. The statement was recorded in the presence of Sri Vinod Mittal, Advocate, duly authorised by the assessee. Shri Vinod Mittal, Advocate attended the assessment proceedings from time to time and at no time the assessee has with drawn his power of attorney.... The arguments of the counsel have no force since the counsel of the assessee Shri V.K. Mittal was present when the statement of the donor was recorded. Moreover, the A.O. supplied a copy of the statement of Smt. Sukhdev Kaur vide his letter dated 2-12-2005, which was served on the assessee on 7-12-2005 asking the assessee to file written submissions/objections. The appellant could have filed his objections or even could have requested for cross examination of Smt. Sukhdev Kaur. The counsel for the appellant cannot take a pica that the statement has been recorded at his back. This ground of appeal is also rejected.
34. In view of our preceding discussion, finding no error with the above observations of the learned CIT(A), we hereby uphold the same rejecting ground Nos.3 and 4 raised by the assessee.
35. Apropos ground No.5, it is contended that the learned CIT(A) erred in giving the finding that reasonable opportunity was given to the assessee after the filing of the affidavit dated 2-12-2005 by Smt. Sukhdev Kaur, donor.
36. In this regard, the learned CIT(A) has observed as follows:
The sixth ground of appeal is that reasonable opportunity to controvert the affidavit filed by the donor was not given. This was obtained by the department under pressure, threat and undue influence so cannot be relied upon. The AO on the other hand has mentioned in the remand report that the assessee has already been allowed reasonable opportunity to controvert the affidavit vide his office letter dated 2-12-2005 and the assessee has filed written submissions on 13-12-2005. I have carefully considered arguments of the counsel for the appellant and the assertions of the AO in the remand report. In view of the remand report of the AO the assertion of the counsel that reasonable opportunity was not given is not correct. This ground is rejected.
37. Before us, the learned Counsel for the assessee has not been able to dislodge the above findings of the learned CIT(A). Rather, it has been stated that a letter was, in fact, written by the A.O., but more time ought to have been given to the assessee.
38. We do not find any force in this argument of the assessee's counsel. The A.O., as mentioned in the remand report, as noticed by the learned CIT(A), allowed opportunity to the assessee to controvert the affidavit, vide this letter dated 12-12-2005. In response thereto, the assessee filed written submissions. In these facts, the assessee cannot plead that reasonable opportunity was not granted to it. Accordingly, ground No.5 stands rejected.
39. Ground No. 6 states that the learned CIT(A) erred in observing that the A.O. was justified in rejecting the affidavit dated 8-1-2003 of the donor.
40. In this regard, the A.O., in the assessment order, has elaborately discussed that Smt Sukhdev Kaur, in her statement recorded on 21-11-2005, categorically denied having filed any such affidavit and having gifted any money to the assessee. The donor also filed an affidavit to support her statement. It was in these facts that the A.O. rejected the affidavit dated 8-1-2003 put forth by the assessee as an affidavit of the donor. These facts have been duly considered by the learned CIT(A) while rejecting the assessee's ground in this regard.
41. As such, finding no error in the order of the learned CIT(A), the same is confirmed and ground No.6 stands rejected.
42. As per ground No. 7, the learned CIT(A) erred in observing that Smt. Sukhdev Kaur, donor did not have the capacity to give the gift in question and the gift was not genuine.
43. Apropos ground No. 7, the facts are that the A.O. made the addition of Rs. 10 lacs by treating the gift of such amount claimed to have been received by the assessee from Smt. Sukhdev Kaur as unexplained cash credit of the assessee under Section 68 of the Income tax Act. In this regard, the A.O. observed that according to the data given by the bank in the account of the assessee, the assessee had received the said gift from a lady living in a village, having no blood relation with the assessee. There was also no occasion for such gift. It was seen that during the period 1-3-2002 to 31-3-2004, the assessee had made A transaction of Rs. 2262/- only. The amount of Rs. 10 lacs was deposited in cash on the same date and was transferred to the account of M/s. Yogesh Kumar, Contractor, The firm in which the assessee is a partner, in their account, maintained with the Oriental Bank of Commerce, Raman Mandi and Rs. 8 lacs was withdrawn in cash on the same date by the firm. The donor, in her statement, deposed that she was not a person of means; that she was living a poor life. The A.O. observed that the donor had not even got issued a cheque book from the bank and that the cheque used for the alleged gift was a local cheque obtained from the bank, as A loose leave cheque. The donor stated that she had never deposited Rs. 10 lacs in her bank account on 8-1-2003; that the Manager of the bank had taken her signature on some papers, stating that they were required for her bank account; that she being an uneducated lady, was not aware of the contents of the affidavit or of the blank cheque got signed by the Manager of the bank. She also filed an affidavit in support of her statement. The A.O. also observed that the affidavit of the donor, as filed by the assessee, also suffered from incorrect verification/identification, since the donor had never gone to Bhatinda where the so-called affidavit seemed to have been signed by some advocate; that the Notary had not affixed the notarial stamp thereon and the said alleged affidavit also did not seem to have been entered in the Notary Register; and that the stamp paper had been purchased from Rama Mandi, but it was got attested by the Notary at Bhatinda. The A.O. also observed that the cheque was not a payee's account cheque and that it had also not been crossed. It was also not in the name of the assessee-HUF. The stand taken by the assessee was that Smt. Sukhdev Kaur, donor and Smt. Parsin Kaur, had received land compensation of Rs. 41,08,434/- in total from 1998 to 1999, meaning thereby that sufficient funds were available with the donor to give the gift in question. The said claim of the assessee was found by the A.O. to be wrong.
44. The A.O. thus made the addition holding that the assessee had failed to prove either any blood relation with the donor, or the capacity of the donor, or even the occasion on which the gift was made. It was also held that the preponderance of human probabilities and the circumstantial evidence was also not in favour of the assessee and that the gift was nothing but an unexplained cash credit of the assessee.
45. Before the learned CIT(A), the assessee pleaded that the land of Shri Gurdial Singh, father of the donor, had been acquired by the Govt. for a refinery in village Kanakwal (Raman); that the compensation in this regard was paid to the donor and her mother, Smt. Parsin Kaur; that Smt. Parsin Kaur - Rs. 15,93,007/- +Rs.4,61,210/-; that Smt. Sukhdev Kaur, donor received Rs. 15,93,007/- + Rs. 4,61,210/-; that the first compensation of Rs. 15,93,007/- each was received by the said ladies in March, 1998; that the second compensation was received in July, 1999; and that they both received compensation of Rs. 41,08,434/-. The assessee filed before the learned CIT(A) photocopies of the bank account of Smt.Sukhdev Kaur and cheques received in March, 1998 and the cheque issued by Smt. Sukhdev Kaur and the affidavit dated 8-1-2003, alleged to have been given by Smt. Sukhdev Kaur. The assessee averred that in view of these facts and documents which had also been filed before the A.O., the donor stood identified and it stood proved that she ad had the capacity to make the gift in question.
46. The learned CIT(A) rejected the ground taken by the assessee, holding as follows:
I have carefully considered the arguments of the counsel for the appellant and the remand report of the A.O. The donor Smt. Sukhdev Kaur in her statement recorded on 21-11-2003 categorically stated that she had not given any gift to the appellant and that she had not filed the affidavit dated 8-1-2003. She is also not a person of means and does not have the capacity to advance gift of Rs. 10 lacs. The appellant does not have any relationship with the donor and both are strangers to each other. There was no occasion on the date of the alleged gift i.e. 8-1-2003 for giving of gift by the donor, Smt. Sukhdev Kaur also categorically denied having deposited Rs. 10 lacs in her bank account on 8-1-2003 out of which cheque of Rs. 10 lacs has been issued to the appellant. She has clearly stated that the Manager of the bank got certain papers signed from her and being illiterate was not aware of the contents of the affidavit and blank cheque got signed from her. With regard to the money received on account of acquisition of land for refinery, Smt. Sukhdev Kaur stated that it was invested inn purchasing new land in Jodhpur Pakhar. The claim of the appellant that the donor had the capacity to pay is not correct. All these facts clearly show that the gift of Rs. 10 lacs claimed to have been received by the appellant is not genuine. The preponderance of probabilities also shows that this transaction can not be genuine. The tests laid down in the decision of the Punjab and Haryana High Court in the case of Lai Chand Kalra 22 CTR 135 are also not met with. The AO has rightly rejected the claim of the appellant of having received gift of Rs. 10 lacs from Smt. Sukhdev Kaur and treated the same as unexplained cash credit of the appellant and added the same Under Section 68 of the Income tax Act. This ground of appeal is also rejected.
47. The learned Counsel for the assessee before us has reiterated the stand taken by the assessee before the taxing authorities. The learned D.R., on the other hand, has placed heavy reliance in the impugned order.
48. In this regard, also, the assessee has not been able to make out any case to persuade us to differ from the categorical findings of fact recorded concurrently by both the taxing authorities.
49. Section 68 of the Income tax Act reads as follows:
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year.
50. Thus, if in the opinion of the A.O., the explanation of the assessee regarding any sum credited in the assessee's books, is not satisfactory, the A.O. may charge such sum as the income of the assessee. In the present case, the assessee claims to have received the cash credit of Rs. 10 lacs as gift from Smt. Sukhdev Kaur.
51. In CIT v. P. Mohanakala 291 ITR 278 (SC), it was observed as follows:
A bare reading of Section 68 of the Income tax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression 'the assessee offers no explanation' means the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books maintained by the assessee. The opinion of the assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion.
In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature.
The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited sin the books being treated as a receipt of income nature.
The assessee received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective account of the assessee by negotiation through a bank in India. Most of the cheques sent from abroad were drawn in the Citibank, N.A. Singapore. The evidence indicated that the donor was to receive suitable compensation from the assessee. On this material the Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the account books of the assessees as their income applying Section 68 of the Income tax Act, 1961. The assessees did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The Commissioner (Appeals) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the Assessing Officer and the Commissioner (Appeals). On appeal the High Court re-appreciated that evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion.
The Hon'ble Supreme Court held, reversing the decision of the High Court, that the findings of the AO, the CIT(A) and the Tribunal were based on the material on record and not on any conjectures and surmises; and that the fact that money came by way of bank cheques and was paid through the process of banking transactions was not by itself of any consequence.
52. "P. Mohanakala" (supra) governs the present case directly. In the present case, the opinion of the A.O. against the assessee has not been proved to be not formed objectively with reference to the material on record. While forming such opinion, the A.O. has duly applied his mind. The onus to prove his explanation satisfactorily to the A.O. was on the assessee. The assessee miserably failed to discharge such onus. The chief plank of the stand of the assessee before the A.O. was that besides the donor having been duly identified, she had undisputedly received compensation regarding acquisition of the land of her father by the Govt. and that due to such receipt, she had had the capacity to make over the gift in question. This plea has been categorically rejected. In her statement recorded before the A.O., the donor, in response to question No.8 submitted, inter alia, as under:
... My family is hand to mouth and the money received from the Gum Gobind Singh Refinery has been used partly at home and partly for purchase of the land at Jodhpur Pakhar....
53. This deposition of the assessee was duly considered against the assessee by the A.O. to hold that the claim of the assessee in this regard had been found to be wrong in view of the said statement.
54. The A.O. made enquiries from the bank of the assessee. From the bank account of the assessee, it was found that the assessee had received the gift from the donor, who was a lady living in a village having no blood relation with the assessee. There was no occasion too for making such gift. It was found that during the period 1-3-2002 to 31-3-2004, the assessee had made only a single transaction of Rs. 2262/-. The amount of Rs. 10 lacs was deposited in cash by Shri Yogesh Kumar, Karta of the assessee firm, on the date of the receipt of the gift itself and it was transferred to the account of the firm and Rs. 8 lacs was withdrawn on the same date by the firm. The A.O. disbelieved the affidavit dated 8-1-2003 produced by the assessee stating that it was given by the donor. This rejection was based on the statement of the donor recorded by the A.O., in the presence of her husband and the counsel representing the assessee. Moreover, it was seen that the cheque allegedly issued by the assessee was a bearer cheque and not a payee's account cheque or a crossed cheque, in the name of Karta of the assessee HUF. The A.O. held that the gift had been made to evade tax and that it was not a genuine gift at all.
55. In this manner, the assessee was totally unable to satisfactorily explain the gift claimed before the A.O. Therefore, there remains, in keeping with "P. Mohanakala" (supra), prima facie evidence against the assessee, i.e., the receipt of the money. The assessee has miserably failed to rebut this evidence. Thus, the said receipt of Rs. 10 lacs was rightly held by the A.O. to be the unexplained cash credit/income of the assessee.
56. The assessee has not been able to prove the ingredients of a valid gift. The alleged capacity of the donor to make over the gift in question, as discussed hereinabove, has been disproved by the statement of the donor herself. No occasion for making the gift was also proved by the assessee. Considering the facts in their totality, the preponderance of human probabilities and circumstantial evidence is also heavily against the assessee, as discussed hereinabove. It is unlikely, if not a impossible, for an alleged donor who is not related to the donee by blood, to make any such gift without any occasion. Once the donor is proved not to have had the capacity to make the gift of a huge amount of Rs. 10 lacs, her having made such gift is rendered but an impossibility. Then, the bank account of the assessee showed that it made only a single transaction of Rs. 2262/- from the period 1-3-2002 to 31-3-2004. Further, the conduct also gives rise to reasonable suspicion, when the amount of Rs. 10 lacs was deposited in cash by the assessee on the very date on which it was received.
It was transferred to the account of the firm in which the assessee-HUF is a partner. The firm, again, on the same date, withdrew Rs. 8 lacs in cash.
57. In Subhash Chander Sekhri v. Dy. C.I.T. 290 ITR 300 (Pb. & Har.), the Tribunal observed that the claim of the assessee that 'G' was his maternal aunt was found to be factually incorrect, as even in her affidavit, 'G' mentioned the assessee as a close family friend; that the same was the position in the affidavit of the assessee, where also, it was not mentioned that the gifts were received from his material aunt; that it was not borne out from the affidavit that the amount was being gifted on the occasion of the ensuing marriage of the assessee's daughter; and that the fact about the amount being gifted on the occasion of the ensuing marriage of the assessee's daughter was missing in both the affidavits. The Hon'ble High Court, dismissing the appeal, held that the findings of the Tribunal were in the nature of findings of fact giving rise to no question of law and that the view taken by the Tribunal in the given facts was a possible view.
58. In the present case also, as discussed above, the affidavit alleged to have been given by the donor stood out-right disproved by the statement of the donor herself, recorded by the A.O. The assessee totally failed to prove the case of gift set up by it.
59. It has been repeatedly held that it is for the assessee to prove that the donor had the means and the gift was genuine, for natural love and affection. This is supported by the following case laws:
(1) Lall Chand Kalra v. CIT 22 CTR 135 (P & H), (2) Sajan Dass and Sons v. CIT 264 ITR 435 (Delhi), (3) CIT v. Durga Prasad More 82 ITR 540, (4) Sumati Dayal v. CIT 214 ITR 801 (SC).
60. In "CIT v. Durga Prasad More" (supra) and "Sumati Dayal v. CIT" (supra) it has also been held that in any such matter, preponderance of human probabilities and circumstantial evidence have to be taken into consideration. As considered by us herein, these two facets are also wholly against the assessee in the present case. In view of the above, we hold that the order of the learned CIT(A) in this regard does not suffer from any infirmity whatsoever so as to require any intervention at our hands. Accordingly, the well reasoned findings of fact recorded by the learned CIT(A) are upheld. Ground No. 7 stands rejected.
61. Ground No.8 states that not only the gift in question is genuine, but also the donor had the capacity to give the gift in question. This ground stands covered by our above discussion concerning ground No 7. For the said discussion, ground No.8 is also rejected.
In the result, the appeal of the assessee stands dismissed.
Order pronounced in the Open Court on 19.07.2007