Income Tax Appellate Tribunal - Indore
Shri Mahendra Singh Tomar , Ratlam vs Ito-1, Ratlam, Ratlam on 11 November, 2020
अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA Nos.86 & 584/Ind/2018
Assessment Year:2012-13
Mahendra Singh Tomar ITO-1
243, Rajiv Nagar, बनाम/ Ratlam
Ratlam (M.P.)
Vs.
(Appellant) (Revenue )
P.A. No.AJMPT3321J
Appellant by Shri S.N. Agrawal, CA
Revenue by Smt. Vineeta Dube, Sr. DR
Date of Hearing: 15.09.2020
Date of Pronouncement: 11.11.2020
आदे श / O R D E R
PER KUL BHARAT, J.M:
These two appeals by the assessee are pertaining to Assessment year 2012-13 one in quantum proceedings and another qua penalty proceedings are directed against the different orders of Ld. Commissioner of Income Tax (Appeal)- (in short 'Ld. CIT(A)', Ujjain dated 12.12.2017 & 09.05.2018.
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 First we take the assessee appeal in quantum proceedings in ITANo.86/Ind/2018. The assessee has raised following grounds of appeal:
"1.1] That on the facts and in the circumstances of the case and in law the Ld CIT(A) erred in approving the action of the Ld Assessing officer in issuance of notice U / s 148 of the Act merely on the basis of presumption and on the basis of information received by him in the absence of any tangible material and live link of concealment of income.
1.2] That on the facts and in the circumstances of the case and in law Ld CIT[A] erred in approving the action of the Ld Assessing officer in issuance of the notice U / s 148 of the Act merely on the basis of information as received by him without properly appreciating the facts of the case and submission made before him and without independent applications of his mind prior to the issuance of the notice U / s 148 of the Act 2] That on the facts and in the circumstances of the case and in law the Ld CIT(A) erred in maintaining the addition of Rs 31,10,000/- to the total income of the appellant by invoking the provisions of section 68 of the Act merely for the reason that the same was offered by the appellant in the return as filed in response to the notice as issued U/s 148 of the Act without properly appreciating the facts of the case and submission made before him.
3] That on the facts and in the circumstances of the case and in law the Ld CIT(A) erred in maintaining the addition of Rs 1,00,000/- as made by the assessing officer to the total income of the appellant on account of low marriage expenses without properly appreciating the facts of the case and submission made before him.
4.1] That on the facts and in the circumstances of the case and in law the Ld CIT(A) erred in enhancing the income of the appellant by Rs 34,64,150/- on account of gifts received from various relatives even when the appellant has properly established the genuineness and creditworthiness of the donor without properly appreciating the facts of the case and submission made 2 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 before him.
4.2] That on the facts and in the circumstances of the case and in law the Ld CIT(A) grossly erred in enhancing the total income of the appellant even when the appellant had filed sufficient documents before the assessing officer and after being satisfied with the explanation of the appellant the same was accepted by him U / s 68 of the Act. Section 68 of the Act deals about the satisfaction of the assessing officer and not of the Ld CIT(A).
5] That on the facts and in the circumstances of the case and in law the Ld CIT(A) erred in enhancing the income of the appellant by an amount of Rs 8,43,150/ - on account of opening capital of the appellant without properly appreciating the facts of the case and submission made before him.
6. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) grossly erred in enhancing the income of the appellant in respect of gift and opening capital which was not in dispute before him and therefore enhancement as made by the Ld. CIT(A) was without his jurisdiction.
7. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) in maintaining the addition as made by the assessing officer and also enhanced the income of the appellant even when the appellant is not having any source of other income as to justify the huge additions in view of decision of the Hon'ble Apex Court in the case of Smt. P.K. Noorjahan as reported in 237 ITR 570 (SC)
8. That on the facts and in the circumstances of the case and in law the amount of interest as charged u/s 234B and 234C of the Act of Rs.3,61,774/- and Rs.32,141/- is either wrong or excessive and the same now requires to be deleted in full or reduced substantially.
9. The appellant reserve his right to add, alter, modify or delete any grounds of appeal on or before the date of final hearing."
2. The facts in brief are that the assessee is an individual and having salary income being employed as Chartered 3 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Accountant. He filed his return of income for the A.Y. 2012-13 by way of e-filing on 28.07.2012 declaring total income of Rs.2,02,437/-. Assessee had purchased an agricultural land at Gram Ahirkhedi Tehsil & Dist. Indore, on 19.10.2011 at sale consideration of Rs.60,00,000/-. On the basis of the information received from the office of the registrar assessment of the assessee was reopened u/s 147 of the Act, On the ground that the assessee had purchased an agricultural land thereby he made investment of Rs.64,66,000/-. In pursuance to the notice u/s 148 the assessee filed return of income declaring income at Rs.33,12,440/- however, during the course of assessment proceedings he stated that the return of income filed u/s 139 be treated as the income tax return filed in response to the notice u/s 148 of the Act. The Assessing Officer during the course of assessment proceedings called upon the assessee to explain source of investment. In response, thereto, the assessee submitted that the source of investment was gift received from his father who retired from the service of Railways who gave gift of Rs.17,00,000/-, Further he received gift from mother of Rs.5,26,000/-, grandmother of Rs.6,00,000/-, wife of Rs.4,15,000/- and other relatives and friend. Thus, he 4 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 received Rs.65,74,150/- as gift. This explanation of the assessee was not found acceptable by the assessing officer. He made addition of Rs.31,10,000/-, in this respect. Further, he made addition of Rs.1,00,000/- in respect of marriage ceremony expenses.
3. Aggrieved against this the assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions rejected the explanation made by the assessee and enhanced the addition made by the assessing officer. Thereby, he assessed income at Rs.65,74,150/-.
4. Now the assessee is in appeal before this Tribunal.
5. Ground Nos.1.1 & 1. 2 are against the legality of reopening. Ld. counsel for the assessee reiterated the submissions as made in the written synopsis. For the sake of clarity, submissions are reproduced as under:
A.1] The present appeal is filed by the assessee against the order of the Ld CIT (A), Ujjain dated 12-12-2017.
A.2] The appellant is an individual and his only source of income is salary income.
A.3] The basic details of the case are tabulated and summarized hereunder for your ready reference:
S. No Particulars Date/
Amount [in Rs.]
Date of filing of income-tax return under section 139 of the 1 27-07-2012 Act Total income declared in the income-tax return filed under 2 2,02,437 section 139 of the Act 3 Date of issue of notice under section 148 of the Act 03-06-2015 Date of filing of income-tax return in response to the notice 4 02-07-2015 issued under section 148 of the Act 5 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Total income declared in the income-tax return filed in 5 33,12,440 response to the notice issued under section 148 of the Act Date of passing of assessment order under section 143(3) 6 29-12-2016 r.w.s. 147 of the Act Total income assessed in the assessment order passed 7 34,12,437 under section 143(3) r.w.s. 147 of the Act Date of passing of order under section 250 of the Act by the 8 12-12-2017 Ld CIT(A), Ujjain Amount by which income of the appellant was enhanced by 9 43,07,300 the Ld CIT(A), Ujjain Total assessed income of the appellant after giving effect of 10 77,19,737 the order of Ld CIT(A), Ujjain A.4] The case of the appellant for the Assessment Year 2012-13 was reopened for verification of source of purchase of agricultural land by the appellant. The appellant categorically explained during the course of reassessment proceedings that source of purchase of the said land was out of gifts/ loan received from relatives/ friend. The appellant also filed ample documentary evidences in support of his contentions. However, the assessing officer did not accept the contentions put forth by the appellant and made the following additions to the total income of the appellant:
S. Particulars Amount [in
No Rs.]
1 Total income declared in the income-tax return filed under
2,02,437
section 139 of the Act
Add Additional income surrendered by assessee/ Addition on
account of gifts received from relatives and loan received 31,10,000
from friend
Add Addition on account of Marriage expenses 1,00,000
Total income assessed in the assessment order passed 34,12,437
under section 143(3) r.w.s. 147 of the Act
A.5] Party-wise details of addition of Rs. 31,10,000/- as maintained by the assessing officer is tabulated and summarized hereunder for your ready reference:
S. Name of the Relation Nature Gross Amount Amount not No Party with of amount accepted accepted as appellant Receipt [in Rs.] as genuine/ genuine Addition [in Rs.] maintained to the total income [in Rs.] 1 Shri Gopal Father Gift 17,00,000 6,00,000 11,00,000 6 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Singh Tomar 2 Smt Nilima Mother Gift 5,26,000 2,00,000 3,26,000 Tomar 3 Smt Jasoda Grandmother Gift 6,00,000 2,00,000 4,00,000 Bai Tomar 4 Smt Kirti Spouse Gift 4,15,000 1,21,000 2,94,000 Tomar 5 Smt Madhu Mother-in-
Gift 5,00,000 5,00,000 NIL
Bala Rajput law
6 Shri Virendra Father-in-
Gift 7,00,000 7,00,000 NIL
Singh Rajput law
7 Shri Awadesh Brother-in-
Gift 3,00,000 3,00,000 NIL
Singh Rajput law
8 Shri Ravi
Friend Loan 9,90,000 NIL 9,90,000
Gurjar
9 Opening
Opening
balance of - 8,43,150 8,43,150 NIL
Capital
capital
Total 65,74,150 34,64,150 31,10,000
A.6] The appellant during the course of reassessment proceedings specifically lodged a claim before the assessing officer to withdraw the amount of Rs. 31,10,000/- as offered for tax in the income-tax return as filed in response to the notice issued under section 148 of the Act.
However, the assessing officer did not accept the claim of the appellant to reduce the total income by an amount of Rs. 31,10,000/-. A.7] The appellant thereafter preferred an appeal before the Ld CIT(A), Ujjain and disputed the amount of additional income which was erroneously offered for tax in the income-tax return and maintained by the assessing officer in addition to amount of Rs. 1,00,000/- added on account of marriage expenses. However, the Ld CIT(A), Ujjain further enhanced the income of the appellant by an amount of Rs. 43,07,300/-. A summary of additions sustained and further enhanced by the Ld CIT(A), Ujjain is tabulated and summarized hereunder for your ready reference:
S. Name of the Nature Gross Amount Amount Amount in No Party of amount not accepted as dispute Receipt [in Rs.] accepted genuine by before the as genuine AO which Hon'ble by AO/ was Bench Addition enhanced [in Rs.] maintained by Ld CIT(A) by AO [in Rs.] [in Rs.] 1 Addition on account of gifts/ loan received from relatives/ friend 1.1 Shri Gopal Gift 17,00,000 11,00,000 6,00,000 17,00,000 7 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Singh Tomar 1.2 Smt Nilima Gift 5,26,000 3,26,000 2,00,000 5,26,000 Tomar 1.3 Smt Jasoda Gift 6,00,000 4,00,000 2,00,000 6,00,000 Bai Tomar 1.4 Smt Kirti Gift 4,15,000 2,94,000 1,21,000 4,15,000 Tomar 1.5 Smt Madhu Gift 5,00,000 NIL 5,00,000 5,00,000 Bala Rajput 1.6 Shri Virendra Gift 7,00,000 NIL 7,00,000 7,00,000 Singh Rajput 1.7 Shri Awadesh Gift 3,00,000 NIL 3,00,000 3,00,000 Singh Rajput 1.8 Shri Ravi Loan 9,90,000 9,90,000 NIL 9,90,000 Gurjar 1.9 Opening Opening balance of 8,43,150 NIL 8,43,150 8,43,150 Capital capital Sub-Total [A] 65,74,150 31,10,000 34,64,150 65,74,150 2 Opening balance of capital Opening 8,43,150 8,43,150 added twice Capital [Double Addition] Sub-Total [B] 65,74,150 31,10,000 43,07,300 74,17,300 3 Addition on account of marriage 1,00,000 NIL 1,00,000 expenses Sub-Total [C] Grand Total 75,17,300 1] GROUND NO. 1.1 & 1.2 - CHALLENGING THE REOPENING OF THE CASE IN ABSENCE OF ANY TANGIBLE MATERIAL AND LIVE LINK OF CONCEALMENT OF INCOME AND MERELY FOR VERIFICATION OF SOURCE OF PURCHASE OF ASSET 1.1] The appellant in these grounds of appeal has challenged the reopening of the case in absence of any tangible material and live link of concealment of income and merely for the purpose of verification of source of purchase of asset.8
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 1.2] The appellant purchased an agricultural land situated at Gram Ahirkhedi, Indore on 19-10-2011 for a basic consideration of Rs. 60,00,000/-, stamp duty of Rs. 3,75,000/- and registration charges of Rs. 91,000/- thereby totaling to Rs. 64,66,000/-. 1.3.1] The appellant thereafter received notices regarding Query on Financial Transaction which were duly responded to by the appellant and requisite supporting documentary evidences were also filed. The notices issued regarding Query on Financial Transaction and corresponding submissions of the appellant are enclosed herewith for your ready reference:
S. No Particulars Page No. of
Compilation
1 Notice dated 06-02-2015 regarding Query of Financial
187
Transaction issued from the office of the ITO, Ujjain 2 Submission filed on 23-02-2015 in response to the notice 188 issued from the office of the ITO, Ujjain 3 Notice dated 28-04-2015 regarding Query of Financial 189 Transaction issued from the office of the ITO-1, Ratlam 4 Submission filed in response to the notice issued from the 190-191 office of the ITO-1, Ratlam 1.3.2] On perusal of the above table, it is quite clear that notices issued from time-to-time were properly responded and supporting documentary evidences were also filed. However, the assessing officer proceeded to reopen the case of the appellant for the Assessment Year 2012-13 in the most casual and high-handed manner merely for verification of source of purchase of land which is not permissible in law. 1.4.1] It is a settled position of law that reopening cannot be resorted to for verification of source of purchase of asset since the investment need not necessarily come from income of an assessee chargeable to tax. It may be out of income exempted from tax, past savings, loans, gifts, liquidation of investment or sale of another property etc. It is only if there is any definite information that the assessee has some additional income, which is not disclosed by him and is invested in purchase of property, then alone the notice under Section 148 of the Act can be issued, and that too, only after recording the basis on which the Assessing Officer has formed his opinion that he has 'reason to believe' that any such income has escaped assessment.
1.4.2] In the facts of the present case, appellant provided details regarding the source of purchase of land to the assessing officer wherein it was categorically mentioned that the land was purchased out of gifts received from relative, loan received from friend and out of past savings of the appellant. However, the assessing officer did not consider the submission made by the appellant and reopened his case for the Assessment Year 9 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 2012-13 merely for verification of source of purchase of asset which is not permissible within the garb of reopening under section 147 of the Act. 1.4.3] The reason recorded by the assessing officer prior to reopening of the case of the appellant for the Assessment Year 2012-13 is scanned and reproduced hereunder for your ready reference:
1.4.4] On perusal of the above reasons as recorded by the assessing officer, it clearly transpires that there was absolutely no application of mind on the part of the assessing officer prior to reopening the case of the appellant for the Assessment Year 2012-13. This fact is duly evident from the reasons itself wherein the assessing officer merely recorded a belief that income chargeable to tax of Rs. 63,75,000/- i.e. equivalent to the amount of purchase consideration of the agricultural land, had escaped assessment within the meaning of section 147 of the Act. The reasons recorded by the assessing officer cannot by any stretch of imagination be 10 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 treated as reason to believe but it merely tantamounts to reopening for making fishing and roving inquiries which is not permissible in law.
1.4.5] It has been held in a catena of judicial precedents that reopening cannot be done for verification of source of purchase of asset. Relevant extracts from few of the landmark judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference:
1.5.1] The Hon'ble Karnataka High Court in the case of Sri C.M. Mahadeva Vs. CIT [ITA No. 795/2009] has held that:
"16. The facts of the aforesaid case are quite similar to the one on hand. In the present case also the reason for reopening is for further investigation to find out the source of investment for the purchase of the property, which is not permissible in law.
18. In the present case, what we find is that there is no nexus or live link between the material which had come to the notice of the Assessing Officer, and the formation of his belief that there was escapement of income by the assessee which may be assessable to tax. Merely by mentioning the income of the assessee in the assessment year, and the investment made by him for the purchase of residential property, it cannot be concluded that the difference would automatically be the income which had escaped assessment.
20. The submission of Sri E.I.Sanmathi, learned counsel for the respondent-Revenue is that the difference between the investment made by the assessee and his income during the year in question, would be the income which had escaped assessment from tax, is also not worthy of acceptance. Investment is not necessarily to be made from the income derived during one particular year in question. An investment to purchase a residential house or a capital asset, can always be made from the savings in the past years, as well as the savings from the year in question.
It could also be from gifts or loans taken from friends and relatives. It was only if there was any definite information that the assessee had some additional income, which was not disclosed by him and was invested in purchase of property, then alone the notice under Section 148 of the Act could have been issued, and that also after recording the basis on which the Assessing Officer had formed his opinion that he had 'reason to believe' that any such income had escaped assessment. The same is totally lacking in the present case.
24. In the present case, there is no allegation of the assessee not having made full and final disclosure in his return of income for the relevant 11 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 assessment year. Much emphasis has been laid on the fact that disclosure of the purchase of the property was not made in his return of income for the relevant assessment year. On being asked, Sri E.I.Sanmathi, learned counsel for the respondent-Revenue, could not place before the Court any provision of law which required the assessee, in the assessment year 2004-05, to disclose about the fact of having made the actual investment in his return of income. In the absence of any legal obligation on the assessee to disclose about the purchase of property in his return of income, it cannot be said that the assessee had concealed any income, even though when there is no dispute about the fact that he had disclosed his agricultural as well as non-agricultural income during the assessment year in question, and there is no finding as to income from which other source had been concealed by the assessee..................
26. In view of the aforesaid, we are of the opinion that the issuance of notice under Section 148 for assessment or re-assessment under Section 147 of the Act, was not be valid in the facts of the present case."
[Emphasis Supplied] 1.5.2] The Hon'ble Bombay High Court in the case of CIT v. Smt. Maniben Valji Shah as reported in [2006] 283 ITR 453 (Bombay) has categorically held that:
"Having heard Shri Desai, learned senior counsel for the appellant, as well as Shri Bhujale, learned counsel for the respondent, it is an admitted position that the assessee had invested a sum of Rs. 2,50,000 for the purpose of purchasing the flat and what was sought to be investigated was the source of income. A bare perusal of the aforesaid notice dated October 10, 1991, clearly indicates that the officer was wanting to know the details with regard to the source of funds with regard to purchase of the said flat for a sum of Rs. 2,50,000. Obviously in the above, there is no question of the Assessing Officer having any basis to reasonably entertain the belief that any part of the income of the assessee had escaped assessment and that such escapement was by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts.
Under the aforesaid facts and circumstances, we find no merit in the above appeal, hence the same stands dismissed, however, no order as to costs."
[Emphasis Supplied] 1.5.3] The Hon'ble ITAT Agra Bench in the case of Shri Raj Singh Vs. ITO- 3(3), Mathura [ITA No. 408/Agra/2018] has held that:
"28. Thus, the judicial opinion and mandate of law is clear and loud that proceedings under section 148 cannot be initiated for verification of the 12 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 sources of investment. Such an action of the AO in respect of the case on hand cannot be approved in law and is therefore, quashed.
29. The text of the reasons recorded do proves that virtually there has been no application of mind by the learned Assessing officer so as to form requisite satisfaction that investment in property is income of current year and which has escaped assessment; that the reasons recorded in the case in hand are no reasons in the eye of law, being completely barren and bald in nature as it is not mentioned that in what material terms the reply is lacking in nature; that the reasons do not show any mental exercise having been done by him before arriving at the satisfaction for escapement of income and thus, the AO made his conclusions, leaving the reader to guess for the material on basis of which of belief of escapement is founded. The so called reasons instead of being reasons to believe are reasons to suspect and sought to extend the scope of enquiry from the stage where it was left vide enquiry letter. The investment need not necessarily come from the income. It may be out of income exempted from tax, past savings, loans, gifts, liquidation of investment or sale of another property etc., notice under section 148 cannot be issued for verification of information, but here the jurisdictional satisfaction is the essential requirement has to be shown that there has been reason to believe that there was income chargeable to tax. The reasons recorded by the Assessing officer should speak his mind and the basis for coming to conclusion that investment had been sourced from income, which should have been disclosed and had not been shown therefore, there was escapement of income. There must be direct nexus between the material and belief of escapement. This mental exercise must be self-evident from the reasons recorded. Reasons must be self-speaking and self-defending as held by the Hon'ble Delhi High Court in the case of CIT Vs Indo Arab Air Services 283 CTR 0092 (Del) that:
"There is a long distance to travel between a suspicion that income had escaped assessment and forming reasons to believe that income had escaped assessment. The purported reasons do not show any such exercise by the learned Assessing officer and hence we have no hesitation in holding that the learned Assessing officer has exceed his authority in wrongly acquiring the jurisdiction in the matter."
30. In view of the above discussion, we are of the considered view that the reasons recorded by the learned Assessing officer, are no reasons in the eye of law for assuming jurisdiction in this case for issuing notice under section 148 of the Act.
31. We therefore, quash the assessment orders u/s 144 read with section 147 of the Act dated 30.03.2016 passed in consequence to notice dated 20.03.2015 for Assessment Year 2008-09 in the present appeal."
13Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 [Emphasis Supplied] 1.5.4] The Hon'ble ITAT Lucknow Bench 'B' in the case of Shri Chunnilal Prajapati v. ITO-II, Faizabad [ITA Nos. 290 to 293/LUC/2010] has held that:
"13. From the above, it is crystal clear that the Assessing Officer acted upon the information received from the Investigation Wing. In the said information, it was stated that the assessee invested a sum of $5,38,860/- in purchase of land situated in 150, Rafi Ahmad Kidwai Nagar Scheme (Eldeco Green), Gomti Nagar, Lucknow. However, it has not been stated that the said investment was out of undisclosed income of the assessee or out of income which escaped assessment. The Assessing Officer also had not mentioned in the aforesaid reasons that he was satisfied that the said sum of $5,38,860/- escaped Income-tax assessment. He simply relied on the information given by the ADIT(Investigation). It is well settled that in case of income escaping assessment, the Assessing Officer is required to issue notice u/s. 148 of the Act to assess the income u/s. 147 of the Act read with section 143(3) of the Act.
14. From the above provisions, it is clear that the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment. However, it cannot be said that if there is any investment it is sufficient to believe that the income to that extent escaped assessment because there may be so many sources for making investment and it is not necessary that only on the basis of investment it can be presumed that the income to that extent escaped assessment. There should be a concrete finding before coming to the conclusion that any income has escaped assessment and merely on the basis of the information provided by any another Wing of the Income-tax Department, the Assessing Officer cannot believe that there was income which has escaped assessment.
16. Considering the totality of the facts as discussed hereinabove, we decide the issue in favour of the assessee and hold that the Assessing Officer without referring to any material which could justify his conclusion that the income of the assessee escaped assessment, instantiated the proceedings u/s. 147 of the Act, the said action was not justified because the said action appears to be on suspicion and for making roving enquiries. In that view of the matter, assessments framed on the basis of notices dated 22.3.2006 issued u/s. 148 of the Act are set aside considering the same as illegal and bad in law, hence vitiated. Since we have decided the legal issue in favour of the assessee, therefore, no finding has been given on the other grounds contested by the assessee on merits."
[Emphasis Supplied] 14 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 1.6] In view of the above discussion and findings reiterated in the judicial precedents cited supra, it is humbly submitted that the case of the appellant as reopened merely for verification of source of purchase of asset did not tantamount to any valid reason to believe that income chargeable to tax has escaped from assessment thereby undermining the validity of entire reassessment proceedings. The reassessment proceedings initiated in the case of the appellant merely for verification of source of purchase of land was therefore grossly unjustifiable and wholly unwarranted and entire reassessment proceedings deserve to be quashed and set-aside on this count itself.
1.7.1] It has been held in various judicial precedents that the assessing officer should have reasons to believe and not reasons to suspect that income chargeable to tax has escaped assessment and reopening based on mere suspicion was held to be bad in law and without jurisdiction. It has been reiterated that suspicion against the assessee howsoever strong it may be without any basis and tangible material in possession of the assessing officer could not become reason to believe.
1.7.2] It has also been postulated that there must be a live link or direct nexus between tangible material in possession of the assessing officer and the formation of belief that income chargeable to tax has escaped assessment. It is also well settled that reopening cannot be done for making fishing and roving enquiries. It is also a settled position of law that the assessing officer cannot reopen the case of the assessee merely on the basis of borrowed opinion and he must independently apply his mind to the tangible material in his possession and reach to a conclusion that income chargeable to tax has escaped assessment. 1.7.3] In the facts of the present case, reasons as recorded by the assessing officer quite clearly prove that there was absolutely no application of mind by the assessing officer prior to reopening of the case of the appellant since the assessing officer mentioned that income equivalent to the amount invested in the purchase of land had escaped from assessment. Hence, it can be satisfactorily concluded that there was no tangible material in possession of the assessing officer so as to prove the live link of concealment of income and therefore, reopening of the case of the appellant is bad in law and deserves to be set-aside.
Relevant extracts from few of the landmark judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference:
1.8.1] The Hon'ble Supreme Court of India in the case of ITO Vs Lakhmani Mewal Das as reported in [1976] 103 ITR 437 (SC) has held that:
".............The reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the Court cannot go into sufficiency or adequacy of the 15 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. [Emphasis Supplied] 1.8.2] The Hon'ble Bombay High Court in the case of Pr CIT Vs Shodiman Investments (P) Ltd. as reported in [2018] 93 taxmann.com 153 (Bombay) has held that:
"12. The re-opening of an Assessment is an exercise of extra-ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before re-opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v. LakhmaniMerwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer.
13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment.
14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction."
[Emphasis Supplied] 1.8.3] The above-mentioned principles have also been reiterated in the following judicial precedents:
1. CIT, Delhi v. Kelvinator of India Ltd. - [2010] 320 ITR 561 (SC) 16 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
2. Pr. CIT-6 v. Meenakshi Overseas (P.) Ltd. - [2017] 395 ITR 677 (Delhi)
3. Pr. CIT v. RMG Polyvinyl (I) Ltd. - [2017] 396 ITR 5 (Delhi)
4. Chintan Jadavbhai Patel v. ITO - [2018] 404 ITR 76 (Gujarat)
5. Ajanta Pharma Ltd. v/s. ACIT - [(2004) 267 ITR 200 (Bom)]
6. CIT-V v. Orient Craft Ltd. - [2013] 354 ITR 536 (Delhi)
7. Pr. CIT v. Tupperware India (P.) Ltd. - [2016] 284 CTR 68 (Delhi)
8. Nu Power Renewables (P.) Ltd. v. DCIT, Circle 1(2)(a) - [2018] 94 taxmann.com 29 (Bombay) 1.9] In view of the above, it is humbly submitted that reasons recorded by the assessing officer that income chargeable to tax of Rs. 63,75,000/- had escaped from assessment was not based on any tangible material in possession of the assessing officer so as to prove the live link of concealment of income. Hence, case of the appellant as reopened merely for verification of source of purchase of asset tantamount to reopening for making fishing and roving inquiries which is not at all permissible in law."
7] GROUND NO. 8 - CHARGEABILITY OF INTEREST UNDER SECTION 234B AND SECTION 234C OF THE INCOME-TAX ACT, 1961 7.1] The appellant in this ground of appeal has challenged the chargeability of interest under section 234B and section 234C of the Act of Rs. 3,61,774/- and Rs. 32,141/- respectively.
7.2] The interest under these sections is consequential and mandatory in nature. Hence, it is humbly submitted that the assessing officer shall be directed to charge interest as per law on the amount of income that may be finally assessed.
6. On the contrary, Ld. Sr. DR opposed the submission made by the Ld. counsel for the assessee and submitted that admittedly the assessee had purchased immovable property and purchase of immovable property does not commensurate with the income disclosed by the assessee. Therefore, the assessing officer was justified on the opening assessment. She submitted that at this stage it is to be seen whether material was available before AO to form belief that income chargeable to tax has escaped assessment and the case laws relied by the Ld. counsel are distinguishable.
7. We have heard rival submissions and perused the material available on record and gone through the orders of the 17 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 authorities below. The contention of the assessee is that the assessing officer has not applied his mind before reopening of the assessment. We do not see any merit in this contention of the assessee as the material regarding purchase of property was not available before the assessing officer. The case laws as relied upon by the assessee do not support. The facts are distinguishable here is not merely verification of source of investment but also genuineness of such source of income. As the claim of the assessee was before the assessing officer was that he received gift from his family members and friend. Therefore, in the absence of material evidence supporting such claim the assessing officer was justified in reopening of assessment. Admittedly, in response to notice issued before re- opening of the assessment, it was stated that the source of investment was gift and loan from relatives and friend. But no evidence proving creditworthiness of persons was placed before assessing officer. It is noticed that grand-mother, mother, mother-in-law and wife of the assessee from whom he received gift are housewives. They do not have independent source of income except the gift received and savings made out of household expenses. The assessee did not place any evidence proving their independent source of income. Hence, no fault can be found in the action of assessing officer for reopening of assessment. These grounds of assess's appeal are dismissed.
18Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
8. Ground Nos.2, 4.1, 4.2, 6 & 7 are against sustaining the addition of Rs. 31,10,000/- and enhancement made by the Ld. CIT(A) invoking the provision of section 68 of the Act. The Ld. counsel for the assessee reiterated the submission as made in the written submissions. The submissions of the assessee are reproduced as under:
2] GROUND NO. 2, 4.1 AND 6 - CHALLENGING THE ADDITION MAINTAINED BY THE ASSESSING OFFICER AND FURTHER ENHANCEMENT MADE BY THE LD CIT(A) ON ACCOUNT OF GIFTS/ LOAN RECEIVED FROM RELATIVES/ FRIEND 2.1] The appellant in these grounds of appeal has challenged the addition of Rs. 31,10,000/- as maintained by the assessing officer and further enhancement of Rs. 34,64,150/- as made by the Ld CIT(A) on account of gifts/ loan received from relatives/ friend and opening balance of capital.
2.2.1] The income-tax return of the appellant under section 139 of the Income-Tax Act, 1961 was filed on 27-07-2012 wherein total income was declared at Rs. 2,02,437/-.
2.2.2] However, the income-tax return of the appellant in response to the notice issued under section 148 of the Income-Tax Act, 1961 was filed on 02-07-2015 wherein total income was declared at Rs. 33,12,440/-
including an amount of Rs. 31,10,000/- which was received as gift/ loan from relatives/ friend but was inadvertently offered for tax in the income- tax return of the wrong advice of the previous consultant.
2.3] It is pertinent to note that the appellant lodged his claim during the course of assessment proceedings itself to exclude the amount of Rs. 31,10,000/- from his total income. Copy of the submission dated 30-10- 2015 as filed before the assessing officer to exclude the amount of Rs. 31,10,000/- as offered for tax in the income-tax return from his total income, has been filed on Page No. 40-47 of the Compilation.
RIGHT OF THE ASSESSEE REGARDING EXCLUSION OF INCOME INADVERTENTLY OFFERED FOR TAX IN THE INCOME-TAX RETURN 2.4.1] At the outset, it is pertinent to mention that Article 265 of the Con7stitution of India lays down that no tax shall be levied except by 19 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 authority of law. Hence only legitimate tax can be recovered and even a concession by a tax-payer does not give authority to the tax collector to recover more than what is due from him under the law. Extract of Article 265 of Constitution of India is reproduced hereunder for your ready reference:
"265. Taxes not to be imposed save by authority of law No tax shall be levied or collected except by authority of law"
2.4.2] Further, there is an old Circular on assessee's rights as issued by the Hon'ble CBDT Circular No: 14 (XL-35) dated 11th April, 1955 which states as under:
"Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessee on whom it is imposed by law, officers should
(a) Draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) Freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs." [Emphasis Supplied] 2.4.3] The above circular has been judicially noted and approved in many judgments and has been relied upon in support of claim of the assessee. It is quite clear in light of Article 265 of the Constitution of India and Circular issued by the Hon'ble CBDT that only legitimate amount of tax due can be recovered and the Department cannot take advantage of ignorance of an assessee as to his rights.
Relevant extracts from few of the judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference:
2.5.1] The Hon'ble Calcutta High Court in the case of CIT v. Bhaskar Mitter as reported in [1994] 73 Taxman 437 (Calcutta) has held that:20
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 "8. The controversy raised in the second question is as to whether the annual letting value of the property determined by the Tribunal could be afigure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined uponcorrect application of the law should form the basis of assessment.
The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic). It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law. The Tribunal, therefore, in our view did not commit any error indirecting to fix the correct annual letting value of the premises in question, in accordance with the provisions of section 23 of the said Act withreference to the municipal valuation, although such sum was lower than the figure shown by the assessee in his returns of total income."
Emphasis Supplied] 2.5.2] The Hon'ble Calcutta High Court in the case of Maynak Poddar (HUF) v. Wealth-tax Officer as reported in [2003] 262 ITR 633 (Calcutta) has held that:
"10. Thus, unless the definition of 'net wealth' read with the definition of 'asset' as provided in section 2(m) and section 2(ea) respectively, include a building let out to a tenant used for commercial purposes,the same cannot be subjected to wealth-tax. Even if the assessee had included the same in his return, that will not preclude the assessee from claiming the benefit of law. There cannot be any estoppel against statute. A property, which is not otherwise taxable, cannot become taxable because of misunderstanding or wrong understanding of law by the assessee or because of his admission or on his misapprehension. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxabilityor the authority to impose tax is independent of admission. Neither there can be any waiver of the right 21 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 bythe assessee. The department cannot rely upon any such admission or misapprehension if it is not otherwise taxable."
[Emphasis Supplied] 2.5.3] The Hon'ble ITAT Kolkata Bench 'A' in the case of Sushil Kumar Das v. ITO as reported in [2011] 11 ITR(T) 17 (Kolkata)(URO) has held that:
"9. We have heard the rival submissions and perused the materials available on record. The moot question arising out of this appeal is whether the income determined by the Assessing Officer on the basis of the return filed by the assessee can be a figure lower than the income returned by the assessee. It is a well settled that the principle for determining the taxable income of the assessee under the Income-tax Act should be within the purview of the law in force. If the taxable income determined by the Assessing Officer is not in accordance with such principle it is open to the assessee to contend the same before the higher authorities to follow the correct application of law to determine the actual taxable income of the assessee. In our considered view, the lower authorities, are not expected, to say that merely because the assessee has returned income which is higher than the income determined in accordance with legal principles such returned income can be treated as lawfully assessed. An assessee is liable to pay tax only upon the taxable income. The law imposed by the Assessing Officer to assess the income according to law and determined the tax payable thereon. In doing so, the Assessing Officer cannot assess the income of the assessee an amount which is not taxable as per law though shown by the assessee in the return: It is always open to the assessee to take a plea that the taxable income though shown as income is not taxable under law before the higher authorities. The Commissioner of Income-tax (Appeals) without going into the merits of the case held that the Commissioner of Income-tax (Appeals) is not having any power to reduce the taxable income of the assessee at the appellate stage, which is not correct. In the case of Charanjit Jawa (supra) relied upon by learned counsel for the assessee supports the views that the interest received as a result of the order of the hon'ble High Court was not a statutory interest and was in the form of damage/compensation and the same was not liable to tax. In view of the above, after considering the totality of the facts and circumstances of the case and also on perusal of the case law relied upon by both the parties we hold that the interest of Rs. 2,53,730 received by the assessee as per the order of the hon'ble High Court was not taxable and the same is a capital receipt. We also take support from the circular issued by the Central Board of Direct Taxes vide Circular No. 14 (XL-35), dated April 11, 1955 which has directed the officers not to take advantage of the ignorance of the assessee. The appellate authorities have powers to admit points of law and admit claim for exemption based on materials on record as per the judgment of the 22 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. In view of the above, we direct the Assessing Officer to treat the aforesaid receipt of Rs. 2,53,730 as capital receipt which was received by him as per the order of the hon'ble High Court."
[Emphasis Supplied] 2.5.4] The Hon'ble Supreme Court of India in the case of CIT v. Shelly Products as reported in [2003] 261 ITR 367 (SC) has categorically held that:
"31. We cannot lose sight of the fact that the failure or inability of the revenue to frame a fresh assessment should not place the assessee in a more disadvantageous position than in what he would have been if a fresh assessment was made. In a case where an assessee chooses to deposit by way of abundant caution advance tax or self-assessment tax which is in excess of his liability on the basis of return furnished or there is any arithmetical error or inaccuracy, it is open to him to claim refund of the excess tax paid in the course of assessment proceeding. He can certainly make such a claim also before the concerned authority calculating the refund. Similarly, if he has by mistake or inadvertence or on account of ignorance, included in his income any amount which is exempted from payment of income-tax, or is not income within the contemplation of law, he may likewise bring this to the notice of the assessing authority, which if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the concerned authority in a case when refund is due and payable, and the authority concerned, on being satisfied, shall grant appropriate relief. In cases governed by section 240 of the Act, an obligation is cast upon the revenue to refund the amount to the assessee without his having to make any claim in that behalf. In appropriate cases therefore it is open to the assessee to bring facts to the notice of the concerned authority on the basis of the return furnished which may have a bearing on the quantum of the refund, such as those the assessee could have urged under section 237 of the Act. The concerned authority, for the limited purpose of calculating the amount to be refunded under section 240 of the Act, may take all such facts into consideration and calculate the amount to be refunded. So viewed an assessee will not be placed in a more disadvantages position than what he would have been, had an assessment been made in accordance with law."
[Emphasis Supplied] 2.6] In view of the findings reiterated in the judicial precedents cited supra, it is quite clear that assessee is liable to pay tax only on the amount of taxable income as per law. The assessee cannot be saddled with tax liability merely for the reason that he himself included an amount in his income-tax return which otherwise was not taxable under the Income-Tax Act, 1961. In the facts of the present case, the appellant categorically 23 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 lodged a claim before the assessing officer to exclude the amount of Rs. 31,10,000/- which was inadvertently offered for tax in the income-tax return as filed in response to the notice issued under section 148 of the Income-Tax Act, 1961. However, such claim was not allowed by the assessing officer and the assessing officer treated the amount of gifts/ loan received from relatives/ friend as non-genuine and maintained the addition to the extent of Rs. 31,10,000/- i.e. amount offered for tax by the appellant in his income-tax return. The action of the assessing officer in maintaining the addition of Rs. 31,10,000/- was neither legal nor proper since the amount of gifts/ loan received from relatives/ friend is not taxable as income of the appellant. Hence, the addition of Rs. 31,10,000/- as maintained by the assessing officer now requires to be excluded from the total income of the appellant.
ADDITION MAINTAINED BY THE ASSESSING OFFICER AND FURTHER ENHANCEMENT MADE BY THE LD CIT(A) IS NOT SUSTAINABLE EVEN ON MERITS OF THE CASE 2.7.1] The case of the appellant for the Assessment Year 2012-13 was reopened for verification of source of purchase agricultural land during the year under consideration.
2.7.2] The appellant purchased an agricultural land situated at Gram Ahirkhedi, Indore on 19-10-2011 for a consideration of Rs. 64,66,000/- which comprised of basic consideration of Rs. 60,00,000/-, stamp duty of Rs. 3,75,000/- and registration charges of Rs. 91,000/-.
2.8.1] The appellant categorically stated during the course of reassessment proceedings that amount invested in the purchase of agricultural land was out of gifts received from relatives, out of loan received from friend and out of his past savings represented in the form of capital.
2.8.2] Party-wise details of the source of investment made by the appellant which was also provided during the course of reassessment proceedings is as under:
S. Name of the Party Nature Relation PAN Amount No of with [in Rs.] Receipt appellant 1 Shri Gopal Singh Gift Father ACPPT6950P 17,00,000 Tomar 2 Smt Nilima Tomar Gift Mother AOXPT5375G 5,26,000 3 Smt Jasoda Bai Gift Grandmother N.A. 6,00,000 Tomar 4 Smt Kirti Tomar Gift Spouse AQLPT1730H 4,15,000 5 Smt Madhu Bala Gift Mother-in- N.A. 5,00,000 24 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Rajput law 6 Shri Virendra Singh Gift Father-in-
AWZPR3103Q 7,00,000
Rajput law
7 Shri Awadesh Singh Gift Brother-in-
BTAPS4374K 3,00,000
Rajput law
8 Shri Ravi Gurjar Loan Friend BLIPG9820L 9,90,000
9 Opening balance of Opening
- - 8,43,150
capital Capital
Total 65,74,150
2.9] The assessing officer while passing the assessment order accepted the gifts received from relatives to the tune of Rs. 34,64,150/- as genuine and maintained the additions to the extent of Rs. 31,10,000/-. The Ld CIT(A), Ujjain however enhanced the income of the appellant by the amount of gifts received from relatives and opening balance of capital of Rs. 34,64,150/- which were accepted as genuine by the assessing officer.
2.10] Detail of the amount of addition of Rs. 31,10,000/- as maintained by the assessing officer and further enhancement of Rs. 34,64,150/- as made by the Ld CIT(A) on account of gifts/ loan received from relatives/ friend and opening balance of capital is summarized hereunder for your ready reference:
S. Name of the Nature Gross Amount Amount Amount in No Party of amount not accepted as dispute Receipt [in Rs.] accepted as genuine by before the genuine by AO which Hon'ble AO/ was Bench Addition enhanced [in Rs.] maintained by Ld by AO CIT(A) [in Rs.] [in Rs.] 1 Shri Gopal Gift 17,00,000 11,00,000 6,00,000 17,00,000 Singh Tomar 2 Smt Nilima Gift 5,26,000 3,26,000 2,00,000 5,26,000 Tomar 3 Smt Jasoda Gift 6,00,000 4,00,000 2,00,000 6,00,000 Bai Tomar 4 Smt Kirti Gift 4,15,000 2,94,000 1,21,000 4,15,000 Tomar 5 Smt Madhu Gift 5,00,000 NIL 5,00,000 5,00,000 Bala Rajput 6 Shri Virendra Gift 7,00,000 NIL 7,00,000 7,00,000 Singh Rajput 7 Shri Awadesh Gift 3,00,000 NIL 3,00,000 3,00,000 Singh Rajput 25 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 8 Shri Ravi Loan 9,90,000 9,90,000 NIL 9,90,000 Gurjar 9 Opening Opening balance of 8,43,150 NIL 8,43,150 8,43,150 Capital capital Sub-Total [A] 65,74,150 31,10,000 34,64,150 65,74,150 2.11.1] The following documents were filed by the appellant before the assessing officer and Ld CIT(A) so as to justify the identity and creditworthiness of the donor/ lender and genuineness of the transaction:
S. Description of documents Page No. of
No Compilatio
n
Shri Gopal Singh Tomar, Father of the appellant - Gift of 1 Rs. 17,00,000/-1.1 Confirmation of Gift duly notarized 68
Details of pension received which was the source of making gift 1.2 69-71 to the appellant Bank Statement duly evidencing the fact that amount of 1.3 pension received in bank was withdrawn and gifted to the 72 appellant Smt Nilima Tomar, Mother of the appellant - Gift of Rs.2
5,26,000 2.1 Confirmation of Gift duly notarized 73 Smt Jasoda Bai Tomar, Grandmother of the appellant - Gift 3 of Rs. 6,00,000/-
3.1 Confirmation of Gift duly notarized 74Smt Kirti Tomar, Spouse of the appellant - Gift of Rs.
44,15,000 4.1 Confirmation of Gift duly notarized 75 Smt Madhu Bala Rajput, Mother-in-law of the appellant -
5Gift of Rs. 5,00,000/-
5.1 Confirmation of Gift duly notarized 76Sale deed of agricultural land which was the source of making 5.2 77-82 gift to the appellant Shri Virendra Singh Rajput, Father-in-law of appellant - Gift 6 of Rs. 7,00,000/-
6.1 Confirmation of Gift duly notarized 89Sale deed of agricultural land which was the source of making 6.2 90-94 gift to the appellant Shri Avdhesh Singh Rajput, Brother-in-law of appellant -
7Gift of Rs. 3,00,000/-
7.1 Confirmation of Gift duly notarized 83 26Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Sale deed of agricultural land which was the source of making 7.2 84-88 gift to the appellant Shri Ravi Gurjar, Friend of appellant - Loan of Rs.
89,90,000/-
8.1 Confirmation of accounts 952.11.2] In view of the ample documentary evidences as filed before the assessing officer and Ld CIT(A) and as listed hereinabove, it is clearly evident that the appellant satisfactorily discharged the primary onus cast upon him under section 68 of the Income-Tax Act, 1961 to establish the identity and creditworthiness of the donor/ lender and genuineness of the transaction as entered into with them. Hence, it is humbly submitted that addition of Rs. 31,10,000/- as maintained by the assessing officer and further enhancement of Rs. 34,64,150/- as made by the Ld CIT(A) on account of gifts/ loan received from relatives/ friend is neither legal nor proper and requires to be deleted in entirety.
2.12.1] The observations of the assessing officer while passing the assessment order along with corresponding explanations/ justifications of the appellant in respect of each such observation are summarized hereunder for reference of the Hon'ble Bench:
S. Name of PAN Amount Observations of Corresponding No the Party [in Rs.] the assessing explanations/ officer justifications of the appellant On perusal of the Confirmation of bank account of Gift duly Shri Gopal Singh notarized, details Tomar, it appears of pension received that an amount and bank of Rs. statement duly 12,62,479/- was evidencing the fact credited but that amount of Shri Gopal some of the pension received 1 Singh ACPPT6950P 17,00,000 amount was was withdrawn Tomar utilised by him from the bank for advancing for account was filed other purpose. before the Considering assessing officer.
retirement The PAN of donor
benefits and past was also provided.
saving gift of Rs. If the assessing
6,00,000/- was officer was not
accepted as satisified with the
27
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 genuine and source of gift made balance amount by donor, he could of Rs. have made 11,00,000/- is addition in the considered as nothands of the donor explained by the but not in the assessee hands of the appellant.
Considering the age of father of the appellant and his past savings, amount of gift of Rs. 17,00,000/-
requires to be accepted as genuine and reasonable Confirmation of Gift duly notarized was filed before the assessing officer. The PAN of donor was also provided. If the assessing officer In absence of was not satisified income-tax with the source of return, source of gift made by gift is not fully donor, he could acceptable but have made Smt Nilima considering the 2 AOXPT5375G 5,26,000 addition in the Tomar past saving, gift hands of the donor of Rs. 2,00,000/-
but not in the was accepted and hands of the Rs. 3,26,000/- is appellant.
treated as Considering the unexplained age of mother of the appellant and her past savings, amount of gift of Rs. 5,26,000/-
requires to be accepted as genuine and 28 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 reasonable Confirmation of Gift duly notarized In absence of was filed before income-tax the assessing return, source of officer.
gift is not fully Considering the
acceptable but age of
Smt
considering the grandmother of the
3 Jasoda Bai N.A. 6,00,000
past saving, gift appellant and her
Tomar
of Rs. 2,00,000/- past savings,
was accepted and amount of gift of
Rs. 4,00,000/- is Rs. 6,00,000/-
treated as requires to be
unexplained accepted as
genuine and
reasonable
Confirmation of
Gift duly notarized
was filed before
the assessing
officer. The PAN of
The assessee has donor was also
not properly provided. If the
explained the assessing officer
source of gift as was not satisified
given by her to with the source of
the assessee. gift made by
Considering the donor, he could
marriage gift and have made
Smt Kirti other saving, gift addition in the
4 AQLPT1730H 4,15,000
Tomar of Rs. 1,21,000/- hands of the donor
only was but not in the
accepted as hands of the
genuine and appellant.
balance amount Considering the
of gift of Rs. age of spouse of
2,94,000/- is the appellant her
considered as past savings and
unexplained the fact that
marriage took
place during the
year itself, amount
of gift of Rs.
4,15,000/-
29
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 requires to be accepted as genuine and reasonable Confirmation of Smt The assessee Gift duly notarized Madhu submitted copy 5 N.A. 5,00,000 of gift deed and and sale deed of Bala agriculural lands Rajput in respect of were filed before creditworthiness the assessing of the relatives, officer to justify Shri he submitted the the source of gift Virendra copy of sale deed 6 AWZPR3103Q 7,00,000 made by these Singh of agricultural relatives. PAN of Rajput land. Considering the donors were the documents also provided, as filed by the wherever available.
assessee, The assessing identity, officer duly genuineness and Shri accepted the capacity of the Awadesh contentions of the 7 BTAPS4374K 3,00,000 gift is accepted appellant and did Singh as genuine and Rajput not make any therefore no addition in respect addition is made of gift received in respect of from these these gifts relatives The assessee has Confirmation of not filed the accounts duly confirmation and signed was filed bank account. before the Ld The assessee has CIT(A). The also not provided complete address complete and PAN of the address. The lender was also Shri Ravi assessee has provided before the 8 BLIPG9820L 9,90,000 Gurjar failed to Ld CIT(A). If the Ld discharge the CIT(A) was not primary onus satisified with the lying on him to source of loan explain the given by lender, he source. Hence could have made same is treated addition in the as not properly hands of the explained lender but not in 30 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 the hands of the appellant The assessing officer duly accepted the contentions of the appellant.
The assessee is a However, the Ld
chartered CIT (A) grossly
accountant from erred in adding
January 2009 this amount to the
and filed the total income of the
Opening
return of income appellant under
9 balance of - 8,43,150
from A.Y. 2011- section 68 of the
capital
12. The Act even when
submission of such amount of
the assessee in capital was duly
this regard is justified looking at
considered the qualification of
the appellant and
also looking at the
fact that he was in
job for the last
three to four years
Total 65,74,150
2.12.2] The Ld CIT(A) during the course of appellate proceedings further enhanced the income of the appellant on account of gifts received from relatives by observing that section 68 of the Act embodies the expression "nature and source" which has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise can be inferred. The Ld CIT(A) further observed that the appellant failed to file the requisite documentary evidences in respect of gift and therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the donor.
2.12.3] With due respect, it is humbly submitted that the observations of the assessing officer and that of the Ld CIT(A) do not hold the field in respect of the following uncontroverted facts involved in the present case:
The identity of the donor/ lender was proved beyond doubt. The assessing officer himself accepted part of the gifts received from father, mother, 31 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 grandmother and spouse of the appellant as genuine. The assessing officer also accepted the gifts received from father-in-law, mother-in-law and brother-in-law as genuine in totality. There was no such finding that the appellant routed his own unaccounted/ undisclosed income in the names of any bogus parties.
The relationship of the donor with the appellant was duly established.
Confir mation of Gift duly notarized and signed by the donor was filed before the assessing officer and Ld CIT(A). Confirmation of accounts duly signed by the lender was also filed before the Ld CIT(A). These documents were not disproved by any of those authorities.
The complete address and PAN, wherever available were also provided to the assessing officer and Ld CIT(A). If there was any doubt regarding the source of gift made/ loan given to the appellant, necessary information could have been called directly from the parties. If the assessing officer and Ld CIT(A) would not have been satisfied with the explanation of the donor/ lender, necessary addition could have been made to the total income of the donor/ lender but not in the hands of the appellant.
Suppo rting documentary evidences so as to establish the source of gifts made by the relatives were also filed before the assessing officer and the Ld CIT(A) in respect of gifts received from few of the relatives thereby justifying the source of source of funds received by the appellant.
The lower authorities did not doubt the genuineness of the transaction of gift and also the identity of the donors/ lender. Hence, there was no rationale behind presuming that the appellant routed his unaccounted/ undisclosed income in the garb of gift/ unsecured loan.
The appellant qualified as a chartered accountant in the month of January, 2009. He was a salaried person and received nominal income during the year under consideration and in the subsequent years. The Department failed to bring on records any other source of income of the appellant apart from his salary income. Looking at the circumstantial evidences and applying the test of human probability which is heavily relied upon the Department of late, the onus was on the Department who was alleging that the apparent was not real, to prove that such exorbitant amount was 32 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 actually the unaccounted/ undisclosed income of the appellant which was routed back to him by means of gifts/ unsecured loan.
2.13] In view of the above discussion, addition of Rs. 31,10,000/- as maintained by the assessing officer and enhancement of Rs. 34,64,150/-
as made by the Ld CIT(A) seems to be merely based on surmises and conjectures which is grossly unjustifiable and wholly unwarranted more so when the appellant satisfactorily discharged the primary onus cast upon him under section 68 of the Act.
Relevant extracts from few of the judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference:
2.14.1] The Hon'ble Delhi High Court in the case of CIT v. Ramesh Suri as reported in [2015] 57 taxmann.com 84 (Delhi) has categorically held that:
"7. It was submitted that the modes for gifting amounts of properties cannot be really gone into by the revenue, so long as the identity or relationship is established, which has been done in the present instance. This Court considered the factual matrix. The revenue does not dispute the present relationship between the donor (through Mr. Waney) and Mr. Ashwani Suri. It also does not dispute that the letter in terms of which the initial donation was made to Mr. Ashwani Suri, directed the disbursement of amounts in a particular proportion, which he did. The assessee is also related to Mr. Ashwani Suri. In these circumstances, the underlined transaction whereby the donor directed amounts to be disbursed by Mr. Ashwani Suri to specified or named individuals cannot be treated as unnatural. Both the authorities - the CIT(Appeals) and the ITAT took note of these facts and further noticed that all the gifts were rooted to normal banking transactions. While Section 68 certainly enables the AO to bring to tax amounts which are suspect, in a transaction of the present kind, where the identity and the relationship of the donor are known, the AO in our opinion ought not to have concluded that the transaction - by which the assessee received the amount of Rs.1,84,860/- was in genuine.
9. As noticed earlier, the relationship between the donor, Mr. Ashwani Suri and Mr. Ramesh Suri i.e. the assessee is not disputed. In these circumstances, to require further proof, considering that the donor was an NRI at the given point of time in 1984, might have been asking for too much. In any event this Court is of the opinion that since a concurrent finding has been rendered largely based on facts no interference is called for. Reference is accordingly rejected." [Emphasis Supplied] 2.14.2] The Hon'ble Andhra Pradesh and Telangana High Court in the case of Pendurthi Chandrasekhar v. DCIT, Central Circle-11, Hyderabad 33 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 as reported in [2018] 407 ITR 179 (Andhra Pradesh and Telangana) has held that:
"21. The further observation of the AO that the assessee appeared to have opened the bank account only for the purpose of receiving cash in the guise of a gift, is also flimsy. When the donor herself has given a confirmation letter clearly stating therein that she has transferred the amount of Rs.73,00,000/- to the account of the assessee and further declaring that she gave the said gift out of her natural love and affection towards her nephew, the AO ought not to have entertained further doubts. If for facilitating receipt of a gift the assessee has opened an account, we do not find anything wrong in that. In our opinion, the whole approach of the AO is wholly perverse which cannot be sustained. Equally, the reasons assigned by the two appellate bodies confirming the order of the AO are also perverse.
22. The findings of the CIT(A) that gifts are traditional in nature, that they are given in functions like marriages etc., that there was no such occasion warranting receipt of gift from Nirmala to the assessee, and that it is very odd to note that the entire amount received from her daughter has been diverted to the assessee as a gift without any consideration, look to us to be empty sermons as the CIT (A) evidently judged the conduct of the parties from his personal perception, which is wholly impermissible.
23. When the Act itself does not envisage any occasion for a relative to give a gift, it is well-nigh impermissible for any authority and even for that matter for the Court to import the concept of occasion and develop a theory based on such concept. The donor being no other than the assessee's own maternal aunt, is a 'relative' as defined under the explanation to Section 56(2)(v) of the Act and in the light of the plea of the assessee that she was brought up by the assessee's parents, and her daughters having already been married off and in a well-to-do position, it cannot be said that such a gift falls beyond "human probability" test as quite often applied by the Courts. Hence, it is not permissible for the AO to judge the conduct of the donor sitting in his arm chair."
[Emphasis Supplied] 2.14.3] The Hon'ble Punjab and Haryana High Court in the case of CIT (Central), Ludhiana v. Jawahar Lal Oswal as reported in [2016] 382 ITR 453 (Punjab & Haryana) has held that:
"27. An arrangement between a donor and another is an arrangement between the donor and his source of money. The onus to probe and prove this aspect lies upon the revenue and not upon the assessee, particularly 34 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 where the income is being dealt with under a deeming provision. A person who receives a gift, is not required to prove the source of the money of his donor.
30. The Tribunal has held that there is no evidence or material to link Varinder Sharma to the assessee and that findings have been recorded on mere suspicion, conjectures and surmises. The Tribunal has also held that the assessee, who accepted the gift for and on behalf of his daughters, was not privy to any information regarding the source of funds with Mr. B.P. Bhardwaj. One cannot be oblivious to the fact that such a large gift received from a foreign country is bound to raise suspicion but can not disregard the fact that suspicion and doubt cannot replace proof or translate into reasons, much less reasons for invoking a deeming provision to hold that gifts represent the income of the assessee, particularly in the absence of relevant facts."
[Emphasis Supplied] 2.14.4] The Hon'ble Bombay High Court in the case of Mrs. Komal Wazir v. DCIT as reported in [2015] 281 CTR 506 (Bombay) has held that:
"14. We find that the explanation offered by the respondent-assessee to her possession of jewellery of Rs. 6.57 Lakhs was that the same was gifted to her on occasion of her marriage by her father and father-in-law. This explanation was not contested by the father and father-in-law. The authorities accepted the source of the jewellery in her possession. However, the Tribunal was not satisfied with the evidence produced by her father and father-in-law. This cannot be lead to be conclusion that the explanation offered by the respondent-assessee in respect of the jewellery in her possession is not satisfactory. In the normal course of human conduct, on occasions such as marriage the parents and parents-in-law of a bride do normally gift jewellery to the bride. On occasion such as this, it is not possible to expect the bride to ask for evidence of bills/invoices to support the purchase of the jewellery. One has to proceed on the basis that it is genuine. Thus her explanation that she received the jewellery as gifts from her father and father-in-law is sufficient explanation of the jewellery in her possession and the gifts are not denied by her father and father-in- law. We are of the view that invocation of Section 69 of the Act is these facts is completely unwarranted." [Emphasis Supplied] 2.14.5] The Hon'ble Andhra Pradesh High Court in the case of CIT v. Dr. Kodela Siva Prasada Rao as reported in [2013] 263 CTR 703 (Andhra Pradesh) has held that:
"12............Even though the assessee informed the department that the donor was available in India in December 2006 on account of the death of his mother-in-law and the contact details of the donor in India (address and mobile numbers), the department did not bother to contact him and 35 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 verify the above facts. In this view of the matter, we are of the view that the assessee had discharged the burden cast on him to prove the identity of the creditor, the creditworthiness of the creditor and the genuineness of the transaction. Therefore, the contention of the Revenue that the said sum ought to be added to the income of the assessee cannot be accepted. The finding recorded by the Tribunal is based on appreciation of the material on record and cannot be said to be perverse. In our view, no question of law, much less a substantive question of law arises for consideration in this appeal."
[Emphasis Supplied] 2.14.6] The Hon'ble ITAT Gauhati Bench (Third Member) in the case of Smt. Madhu Raitani v. ACIT, Circle-3 as reported in [2011] 10 ITR(T) 91 (Gauhati) (TM) has held that:
"20. The ld. A.M. further stated in his proposed order endorsing the observation of CIT(A) that the source of income of the donors does not permit them to make gifts to the assessee. The Hon'ble Supreme Court in the case of Daulat Ram Rawatmull (supra) has held that the onus of proving that the apparent is not real was on the party who claimed it to be so. The revenue could not bring any conclusive evidence to establish that donors from whom the gifts were received were bogus and the assessee's own undisclosed money came back to her en-route bogus gifts. The above position is also supported by the decision of the Hon'ble Gauhati High Court in the case of Nemi Chand Kothari (supra), wherein their Lordships of jurisdictional High Court while explaining the scope of section 68 of the Act has observed as under :--
"....The logical conclusion, therefore, has to be that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer to the transactions, which took place between the assessee and his creditor but the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is, under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited."
According to the said decision, therefore, creditor's creditworthiness has to be judged vis-à-vis transactions, which have taken place between the assessee and the creditor, and it is not the business of assessee to find out source of money of his creditor or genuineness of transactions which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors, for these aspects may not be within special knowledge of the assessee.....................In view of the above, in my considered opinion, the lower authorities were not justified in stating that the gifts were undisclosed income of the assessee, which was acceded to by ld. A.M. 36 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
22. Further, it is an established position that for arriving at the conclusion that the gift was not genuine and the same was undisclosed income of the assessee, the department ought to have brought on record evidence for such specific finding. Here in this case the department could not bring on record any evidence except alleging on presumption and suspicion that the gifts were bogus and represented assessee's undisclosed income. In these circumstances, this observation of the department, which was acceded to by the ld. A.M., without any conclusive material cannot lead to the inference that the amount was not gift but undisclosed income of the assessee. Reliance in this regard is placed on the decision of Hon'ble Supreme Court in the case of Bedi & Co. (P.) Ltd. (supra) and decision of Hon'ble Calcutta High Court in the case of Currency Investment Co. Ltd. (supra), wherein it has been held that when the assessee has disclosed the identity of the parties from whom it purchased shares and to whom it sold the shares, genuineness of the transaction cannot be denied merely because the assessee could not produce the brokers through whom the share were sold."
[Emphasis Supplied] 2.14.7] The Hon'ble ITAT Visakhapatnam Bench in the case of Dr. Vempala Bala Manohar v. ITO, Ward-1(3), Visakhapatnam as reported in 2016] 50 ITR(T) 567 (Visakhapatnam - Trib.) has held that:
"16. Considering the facts and circumstances of the case and also respectfully following the decision of Hon'ble High Court of Punjab & Haryana High Court and Hon'ble High Court of Delhi, we are of the view that in the absence of anything to show that the transaction was by way of money laundering, additions could not be made towards gifts when the assessee has discharged his burden by proving the identity, genuineness and capacity of the donor. We further opined that gifts are normally made by relatives through natural love and affection and do not necessarily require any particular occasion. In the present case on hand, the assessee has discharged his burden by furnishing necessary details before the A.O. The A.O. has summoned the donor and the donor has personally appeared before the A.O. and admitted that he had given gifts to his brother. Under these circumstances, we are of the view that the A.O. was not correct in coming to the conclusion that the assessee has not discharged genuineness of the transactions and capacity of the donor. Therefore, we direct the A.O. to delete the additions made towards alleged gifts of Rs.15 lakhs for the assessment year 2009-10, Rs.22,90,000/- for the assessment year 2010-11 and Rs.43,00,789/- for the assessment year 2011-12.............."
[Emphasis Supplied] 37 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 2.14.8] The Hon'ble ITAT Chandigarh Bench 'A' in the case of Kuldeep Singh v. ITO, Ward-1, Jagraon as reported in [2020] 113 taxmann.com 265 (Chandigarh - Trib.) has held that:
"8. We have heard the contentions of both the parties. We are not in agreement with the Ld.CIT(A) holding the explanation of the source of cash deposited in the bank of the assessee to the extent of Rs. 19, 17,000/- as unsatisfactory. The assessee had explained the source as being received as gift from his father which in turn had been explained as sourced from land sold by him in the preceding year and out of his own savings as under:
Out of land sold = Rs.9,45,000 + Rs.4,73,000 Savings = Rs.4,65,000/-
The assessee had filed evidence of sale of land in the preceding year for the said amount which the AO had examined and found and reported as correct in his remand report. Even the ld. CIT(A),we find, has not doubted the veracity of the said document but has not accepted the explanation for the reason that it was improbable that the father would have kept the money with him for a period of eight months before gifting it to his son. We do not find any merit or strength in this reasoning of the ld. CIT(A). There is nothing extraordinarily unusual or abnormal in the fact of retaining money for sometime before gifting it even if to the son, since there are various considerations which are involved in making a gift and it is up to the donor to decide when and to whom to make the gift. In the present case the period of retention of the amount for eight months, we find, is not unusually large so as to doubt the genuineness of the same. Considering the fact that the source of the amount with the donor has not been doubted, nor has the Revenue pointed out or brought on record any fact showing the usage of the said amount by the donor prior to gifting, we do not see any reason to hold the said explanation improbable and we find the same acceptable."
[Emphasis Supplied] 2.14.9] The Hon'ble ITAT Indore Bench in the case of Vinod Kumar Jain vs. ITO as reported in (2020) 58 CCH 0082 IndoreTrib vide order dated 28-01- 2020 has held that:
"15. As regards cash gift of Rs.2,50,00/- received from assessee's father it has been claimed that his father was deriving income from Kirana and Money Lending business. Since his income was below the taxable limit, return of income was not filed. He being a senior citizen it cannot be denied that he had accumulated savings from land in many years and thus his contribution of Rs.2,50,000/- as gift to his son for helping him to purchase a residential house cannot be doubted. Gift deed was duly notarized and signed by assessee's father is placed on record. It is also 38 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 submitted by Ld. counsel for the assessee, that assessee's father has also expired before some time.
16. We, therefore, in the given facts and circumstances of the case and looking to the peculiarity of the facts wherein in the donor has expired after signing an affidavit for the gift given to his son, find no justification in the action of the Ld. AO making the addition for unexplained investment u/s 69 of the Act, since the assessee has duly explained the source of Rs.2,50,000/- being receipt from his father. Accordingly addition u/s 69 of the Act is deleted. Thus, ground no. 2 & 3 stands allowed. [Emphasis Supplied] 2.14.10] The Hon'ble ITAT Indore Bench in the case of Shri Sunil Sojatia vs ACIT as reported in (2018) 54 CCH 0110 IndoreTrib has held that:
"10. Ground No.5 is against confirming the addition of Rs.3,70,000/- made u/s 68 of the Act. It is stated by the Ld. Counsel for the assessee that the amount was received from the minor children of Rs.3,70,000/-. He submitted that the assessing officer and CIT(A) both erred in not allowing the claim of the assessee and making addition. We find that in the remand proceedings, the A.O. has categorically stated that these advances were received from the minor children and these amounts pertain to the past savings of the children. The Ld. CIT(A) has not brought on record any adverse material rebutting the finding of the A.O. We therefore, direct the A.O. to delete this addition.
[Emphasis Supplied] 2.15] In view of the above discussion and findings reiterated in the judicial precedents cited supra, it is humbly submitted that there was no justification for maintaining addition of Rs. 31,10,000/- and enhancing the income by Rs. 34,64,150/- in light of the fact that there was no doubt regarding the identity of the donor and their relationship with the appellant, genuineness of the gift/ loan transactions and such parties duly owned up the amount gifted/ lent to the appellant. Hence, it is humbly submitted that the entire amount of Rs. 65,74,150/- on account of gifts/ loan received from relatives/ friend and opening balance of capital requires to be deleted in entirety from the total income of the appellant.
NO ADDITION IS JUSTIFIABLE TO TOTAL INCOME OF AN ASSESSES IF EXISTENCE OF DONOR/ LENDER WAS NOT IN DOUBT AND SUCH PERSON HAD ADMITTED TO HAVE MADE GIFT/ LOAN TO THE ASSESSEE 2.16.1] It is a well settled position of law that where existence of donor/ lender was not in doubt and he had admitted to have made gift/ loan to assessee, the mere fact that explanation furnished by him about his 39 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 source of such advancement had not been accepted by revenue authority could not lead to any presumption that source of such advance by donor/ lender emanated from the coffers of the assessee.
2.16.2] It is further well settled that the onus to prove that the apparent is not the real is on the party who claims it to be so.
Relevant extracts from few of the landmark judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference:
2.17.1] The Hon'ble Supreme Court of India in the case of CIT v. Daulat Ram Rawatmull as reported in [1973] 87 ITR 349 (SC) has held that:
"The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of B, the burden laid on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of B. A simple way of discharging the onus and resolving the controversy was to trace the source and origin of the amount and find out its ultimate destination. So far as the source was concerned, there was no material on the record to show that the amount came from the coffers of the respondent-firm or that it was tendered in B Calcutta branch of the Central Bank, on behalf of the respondent. As regards the destination of the amount, there was nothing to show that it went to the coffers of the respondent. On the contrary, there was positive evidence that the amount was received by B. It would thus follow that both as regards the source as well as the destination of the amount, the material on the record gave no support to the claim of the department."
[Emphasis Supplied] 2.17.2] The Hon'ble Rajasthan High Court in the case of Aravali Trading Co. v. ITO as reported in [2008] 220 CTR 622 (Rajasthan) has held that:
"19. This Court held by the parity of reasonings which prevailed in Daulat Ram Rawatmull's case (supra) that it can well be said that merely because the explanation furnished by Shri Bhopal Singh, Om Prakash Gupta and Shri Gauri Shanker Singhal, about the purpose for which the gold ornaments were delivered for making new ornaments and that the ornaments were belonging to their family was found to be not acceptable, could not have provided any nexus for drawing inference therefrom that the primary gold and gold ornaments belonged to the assessee.40
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
20. This principle is fully applicable to the present case. The fact that the explanation furnished by the aforementioned four creditors about the sources wherefrom they acquired the money was not acceptable by the revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source.
21. Accordingly the Tribunal, and the Assessing Officer had seriously erred and misdirected themselves in law by not correctly appreciating the legal principle about necessity of establishing such nexus once the assessee has discharged his onus by proving the existence of the depositors and the depositors having accepted their deposits with the assessee. Once this onus is discharged the presumption raised under section 68 stands rebutted and it becomes burden of revenue to prove that source of such deposits is traceable to assessee before the same can be treated as undisclosed income of the assessee concerned."
[Emphasis Supplied] 2.17.3] The Hon'ble Rajasthan High Court in the case of Kanhaialal Jangid v. ACIT as reported in [2008] 217 CTR 354 (Rajasthan) has held that:
"5. The question No. 1 relates to disallowance on account of cash credits found in the books of the assessees. Rs. 16,000 was alleged to have been borrowed to have been by Sri Devendra Sankhla and Rs. 16,000 was allegedly borrowed from one Ramulal. Assessee has produced the confirmation letters from both the creditors and has also produced Sri Devendra Sankhla before the AO. Sri Devendra Sankhla on being produced before the AO, affirmed that he had given in advance a sum of Rs. 16,000 to the assessee. However, the explanation of the assessee about the receipt of Rs. 16,000 from Devendra Sankhla was rejected on the ground that on inquiry from Devendra Sankhla the creditor could not satisfactorily explain source wherefrom whether he could have advanced Rs. 16,000, looking to his income and family expenditures. In other words, the cash credit in the name of Devendra Sankhla was rejected on the ground that the assessee has failed to prove source wherefrom deposit or advance by Sri Devendra Sankhla could be made. This finding has been consistently affirmed by CIT(A) as well as by Tribunal. We are of the opinion that in rejecting the explanation of the assessee on the undisputed facts is founded on erroneous application of law in the matter. While it was the assessee's burden to furnish explanation relating to such cash credits, the assessee's burden does not extend beyond proving the existence of the creditor and further proving that such creditor owns to have advanced the amount credited in the account of assessee to him. However, the burden does not go beyond to put the assessee under an obligation to further 41 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 prove that wherefrom the creditor has got or procured the money to be deposited or advanced to the assessee. The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee, is not relevant for the purposes of rejecting the explanation furnished by the assessee. and make additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 of the IT Act, unless it can be shown by the Department that the source of such money comes from the assessee himself or such source could be traced to the assessee itself. In the present case while existence of Sri Devendra Sankhla the creditor is not in doubt, and he has admitted to have advanced the loan to the assessee. The fact that the explanation furnished by Sri Devendra Sankhla about his source of such advancement has not been accepted by the Revenue authority cannot lead to any presumption that the source of such advancement by Sri Devendra Sankhla emanated from the assessee. Therefore, addition of Rs. 16,000 in the income of assessee as cash credit in the name of Sri Devendra Sankhla cannot be sustained. Such addition of income of assessee has to be deleted from the income of assessee."
[Emphasis Supplied] 2.18] Borrowing the ratio from the judicial precedents cited supra, it can be satisfactorily held that onus is on the Department who is alleging that the apparent is not real to prove that money received by the appellant in the form of gifts/ loan actually emanated from the coffers of the appellant and represents his unaccounted/ undisclosed income. If the Department is not able to discharge this onus, addition made to the total income of the appellant on account gifts/ loan has no legs to stand more so when the identity of the donor/ lender is proved beyond doubt and they have accepted to have advanced amount in the form of gifts/ loan to the appellant.
2.19] In view of the above, it is humbly submitted that addition of Rs. 31,10,000/- maintained by the assessing officer and enhancement of Rs. 34,64,150/- made by the Ld CIT(A) was neither legal nor proper and deserves to be deleted in entirety.
3] GROUND NO. 4.2 - CHALLENGING THE ENHANCEMENT MADE BY THE LD CIT(A) ON ACCOUNT OF GIFTS RECEIVED FROM RELATIVES AND OPENING BALANCE OF CAPITAL BY INVOKING THE PROVISIONS OF SECTION 68 OF THE INCOME-TAX ACT, 1961 MORE SO WHEN SECTION 68 OF THE ACT TALKS ABOUT SATISFACTION OF THE AO AND NOT OF THE CIT(A) 3.1] The appellant in this ground of appeal has challenged the enhancement of Rs. 34,64,150/- as made by the Ld CIT(A) on account of gifts received from relatives and opening balance of capital of the appellant 42 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 by invoking the provisions of section 68 of the Income-Tax Act, 1961 more so when section 68 of the Act talks about satisfaction of the AO and not of the CIT(A).
3.2.1] The relevant extract of the provision of section 68 and section 2(7A) of the Income-Tax Act, 1961 is reproduced hereunder for your ready reference:
"Cash credits.
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:"
Definitions.
2. In this Act, unless the context otherwise requires,-- .............
............
(7A) "Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant Director or Deputy Director or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Additional Commissioner or Additional Director or Joint Commissioner or Joint Director who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act"
[Emphasis Supplied]
3.2.2] On a conjoint reading of the provisions of section 68 and section 2(7A) of the Income-Tax Act, 1961, it becomes abundantly clear that provision of section 68 of the Act can be invoked only if the Assessing Officer is not satisfied with the explanation provided by the assessee regarding the sum credited in the books of accounts. Further, the definition of Assessing Officer as per section 2(7A) of the Act makes it quite clear that CIT(A) is not an Assessing Officer as per the provisions of section 2(7A) of the Act. Hence, it can be satisfactorily concluded that provisions of section 68 of the Act can be invoked only upon the satisfaction of the Assessing Officer and not upon the satisfaction of the Ld CIT(A).
3.3] In the facts of the present case, the Ld CIT(A) enhanced the total income of the appellant by an amount of Rs. 34,64,150/- by invoking the provisions of section 68 of the Income-Tax Act, 1961 which is totally illegal 43 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 and bad in law in view of the fact that CIT(A) is not an Assessing Officer whose satisfaction is mandatory prior to invoking the provisions of section 68 of the Act. Hence, enhancement of Rs. 34,64,150/- as made by the Ld CIT(A) by invoking the provisions of section 68 of the Act is grossly unjustifiable and wholly unwarranted and requires to be deleted in entirety on this count itself.
3.4] The aforesaid view is concurred by the Hon'ble ITAT Jaipur Bench in its landmark judgment in the case of M/s Motisons Entertainment (India) Pvt. Ltd. Vs. The ACIT, Central Circle-2, Jaipur [ITA No. 386 & 387/JP/2017] wherein it has been held that:
"12.4 We have heard the rival contentions and perused the materials available on record. It is pertinent to mention that the similar issue has been dealt with and decided by this Bench of ITAT in the case of Motisons Buildtech Pvt. Ltd vs ACIT, Central Circle-2,Jaipur vide its order dated 30- 10-2017 in ITA No.385/JP/2017 (Assessee's appeal) for the Assessment Year 2012-13 by observing as under:-
''8.4 We have heard the rival contentions and perused the materials available on record. In this ground, it is noted that the AO made the addition of Rs.3,68,27,500/- out of which the ld CIT(A) deleted the addition of Rs. 2,86,27,500/- and sustained the addition of Rs.82.00 lacs as mentioned at para 3.2.2. and 2.1.4.6 & 2.1.4.7 of the ld. CIT(A)'s order (supra). The question arises as to whether the ld CIT(A) can make the addition u/s 68 of the Act or not. For this purpose, the definition of Section 68 of the Act is as under:-
''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.' From the above definition, it is noted that Section 68 of the Act does not empower the ld. CIT(A) to make addition under this Act. Thus the addition u/s 68 can only be made by the Assessing Officer. The definition of the Assessing Officer has been provided in Section 2(7A) of the Act which reads as under:-
[(7A) "Assessing Officer" means the Assistant Commissioner [or Deputy Commissioner] [or Assistant Director] [or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the [Additional Commissioner or] [Additional Director or] [Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any 44 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;] Thus the ld. CIT(A) is not the Assessing Officer as per Income-Tax Act. Therefore, the ld. CIT(A) does not have any legal sanction to make the addition u/s 68 of the Act. Ld. CIT(A) in his order at para 2.1.4.6 had clearly held that the identity, creditworthiness and genuineness of transactions of these companies cannot be held doubtful and addition by applying the provision of sec 68 of the Act cannot be upheld. The ld. CIT(A) has sustained the addition of Rs. 82.00 lacs without specifying any provision of Income tax Act. No such addition can be sustained without invoking the relevant provisions of the Act. Moreover, the addition has been sustained in the hands of that assessee where cash /DD was deposited at 4th Channel. Hon'ble Rajasthan High Court and other Hon'ble Courts held that assessee cannot be asked to explain the source of the source..................."
It may be further noted that the issue raised by the assessee in Ground No.1 of the present appeal is same and the decision taken in the appeal of the assessee in ITA No. 385/JP/2017 for the Assessment Year 2012-13 in the case of Motisons Builtech vs ACIT, Central Circle-2, Jaipur (supra) shall apply mutatis mutandis in the present ground of appeal No. 1 of the assessee. Thus Ground No. 1 of the assessee's appeal in ITA No. 387/JP/2017 is allowed."
[Emphasis Supplied] 3.5] In view of the above discussion and finding reiterated in the judicial precedent cited supra, it is humbly submitted that enhancement of Rs.
34,64,150/- as made by the Ld CIT(A) on account of gifts received from relatives and opening balance of capital by invoking the provisions of section 68 of the Act is totally unjustifiable and uncalled for in view of the settled legal position that CIT(A) is not an Assessing Officer as per the provision of section 2(7A) of the Act and provision of section 68 of the Act talks about the satisfaction of the Assessing Officer and CIT(A) not being an Assessing Officer cannot resort to making enhancement by invoking the provisions of section 68 of the Act. The enhancement of Rs. 34,64,150/- as made by the Ld CIT(A) deserves to be quashed and set-aside on this count itself.
4] GROUND NO. 7 - CHALLENGING THE ADDITION MAINTAINED BY THE ASSESSING OFFICER AND ENHANCEMENT MADE BY THE LD CIT(A) ON ACCOUNT OF GIFTS/ LOAN RECEIVED FROM RELATIVES/ FRIEND IN LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SMT. P.K. NOORJAHAN 45 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 4.1] The appellant in this ground of appeal has challenged the addition of Rs. 31,10,000/- maintained by the assessing officer and enhancement of Rs. 34,64,150/- made by the Ld CIT(A) on account of gifts/ loan received from relatives/ friend in light of the decision of Hon'ble Supreme Court in the case of Smt. P.K. Noorjahan.
4.2] At the outset, it is pertinent to mention that the appellant is a Chartered Accountant in service who qualified as a Chartered Accountant in the month of January, 2009 only. The appellant received salary income to the tune of Rs. 2,02,437/- during the year under consideration.
4.3] Apart from the salary income shown by the appellant, the Department has not brought on record any other source of income of the appellant.
4.4] A summary showing the amount of total income declared by the appellant during the previous years' 2011-12 to 2013-14 relevant to the Assessment Years 2012-13 to 2014-15 is as under for your ready reference:
S. No Assessment Date of filing Total income declared in the income-
Year income-tax tax return
return [in Rs.]
1 2012-13 27-07-2012 2,02,437
2 2013-14 20-12-2013 2,12,630
3 2014-15 11-10-2014 2,11,840
4.5] The total income shown by the appellant in different years' and as summarized hereinabove substantiates the contentions of the appellant that he earned only nominal income being a Chartered Accountant in service. The onus is on the Department to prove the impossible as to how a man with such limited resources and with income ranging between Rs.
2,00,000/- to Rs. 5,00,000/- can have unaccounted/ undisclosed income to the tune of Rs. 65,74,150/- during the previous year 2011-12 relevant to the Assessment Year 2012-13 more so when the appellant had qualified as a Chartered Accountant only in the month of January, 2009.
4.6] The test of human probability and circumstantial evidence as relied upon by the Department in several cases of late should definitely come to the rescue of the appellant in the present case more so when the appellant had satisfactorily discharged the onus cast upon him to establish the identity of the donors/ lender and genuineness of the transaction entered into with them and there was no evidence with the Department that the amount received by the appellant by way of gifts/ loan actually represented his unaccounted/ undisclosed income.
46Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 4.7] It is also a well settled position of law that the provision of section 68 of the Act contains the word 'may' and not 'shall' which implies that even if the explanation offered by the assessee is not found to be satisfactory, even then the assessing officer is not obliged to treat such credit as income in every case.
4.8] The Hon'ble Supreme Court of India in the case of CIT v. Smt. P.K. Noorjahan as reported in [1999] 237 ITR 570 (SC) has categorically held that:
"2. The appeals relate to the assessment years 1968-69 and 1969-70. The assessee is a Muslim lady who was aged about 20 years during the previous year relevant for the assessment year 1968-69. On 15-11-1967 she had purchased 16 cents of land in Ernakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase was Rs. 34,628. On 27-11-1968, she purchased another 12 cents of land at Ernakulam and the total investment for this purchase was Rs. 25,902, the explanation of the assessee regarding the source of the purchase money for these investments was that the same were financed from out of the savings from the income of the properties which were left by her mother's first hasband. The said explanation offered by the assessee was rejected except to the extent of Rs. 2,000 by the ITO who made an addition of Rs. 32,628 as income from other sources in the assessment year 1968-69 and an addition of Rs. 25,902 in the assessment year 1969-70. The said orders were affirmed in appeal by the AAC. The Tribunal, however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case, it was not possible for the assessee to earn the amount invested in the properties and that by the stretch of imagination could the assessee be credited with having earned this income in the course of the assessment year or was even in a position to earn it for a decade or more. The Tribunal took the view that although the explanation of the assessee was liable to be rejected. Section 69 of the Income-tax Act, 1961 ('the Act') conferred only a discretion on the ITO to deal with the investment as income of the assessee and that it did not make it mandatory on his part to deal with the income as income of the assessee as soon as the latter's explanation happened to be rejected. On that view the Tribunal allowed the appeals of the assessee and cancelled the assessment made by the ITO. Thereafter the Tribunal at the instance of the revenue referred the question abovementioned to the High Court for its opinion. The High Court has agreed with the said view of the Tribunal and has held that in the instant case, it could not be said that the Tribunal was wrong in having differed from the ITO and the AAC in the matter of exercising judicial discretion as to whether even after rejecting the explanation of the assessee the value of the investments were to be treated as the income of the assessee. According to the High Court, the Tribunal 47 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 had not committed any error in taking into account the complete absence of resources of the assessee and also the fact that having regard to her age and the circumstances in which she was placed she could not be credited with having made any income of her own and in these circumstances, the Tribunal was right in refusing to make an addition of the value of the investments to the income of the assessee.
3. Shri Ranbir Chandra, the learned counsel appearing for the revenue, has urged that the Tribunal as well as the High Court were in error in their interpretation of section 69. The submission is that once the explanation offered by the assessee for the sources of the investments found to be non- acceptable the only course open to the ITO was to treat the value of the investments to be the income of the assessee. The submission is that the word 'may' in section 69 should be read as 'shall'. We are unable to agree. As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in the Parliament, the word 'shall' had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word 'may'. This clearly indicates that the intention of the Parliament in enacting section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case.
4. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. We also do not find any error in the said finding recorded by the Tribunal. There is, thus, no merit in these appeals and the same are, accordingly, dismissed. No order as to costs."
[Emphasis Supplied] 4.9] The decision rendered by the Hon'ble Supreme Court of India in the case of Smt. P.K. Noorjahan is squarely applicable to the facts of the present case. In the facts of the present case, appellant had qualified as a Chartered Accountant just recently in the month of January, 2009. It was not at all practical for a Chartered Accountant in service with income 48 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 around 2-2.50 lakhs during the previous year 2011-12 to suddenly have such exorbitant income of Rs. 65,74,150/- in one go and that too only in a particular year without there being any other source of income brought on record by the assessing officer or the Ld CIT(A). If it is considered for a moment that explanation offered by the appellant with regard to source of investment made in land was not found to be satisfactory, even in that case, it is worth noting that provision of section 68 of the Act contains the word 'may' and not 'shall' which in itself implies that the assessing officer is not duty bound to treat the sum so credited in the books of accounts of the appellant as his income more so when the appellant was not a man of means who could have earned income to the tune of Rs. 65,74,150/- in a single year. It is therefore quite evident that the discretion vested in the assessing officer was exercised arbitrarily in the facts of the present case keeping a closed eye towards the living standard of the appellant and his nominal and limited sources of income. Hence, the addition of Rs. 31,10,000/- maintained by the assessing officer and enhancement of Rs. 34,64,150/- made by the Ld CIT(A) on account of gifts/ loan received from relatives/ friend is grossly unreasonable and requires to be deleted on this count itself.
9. Ld. counsel for the assessee submitted that the authorities below were not justified in making the addition and sustaining the same. Further, the Ld. CIT(A) has grossly erred enhancing the income of the assessee had given sufficient documentary evidences in support of the gift received from the relatives. We find that the Ld. CIT(A) has decided this ground in his order by observing as under:
"Ground No.2:- Through this ground of appeal the appellant has challenged the addition of Rs.31,10,000/- u/s 68 of the I.T. Act. A notice u/s 148 was issued to the appellant on 03.06.2015. In response to the notice u/s 148 the appellant filed the return of income declaring total income of Rs.33,12,440/- on 02.07.2015. The AO assessed the income of the appellant at Rs.34,12,440/- after making an addition of Rs.1,00,000/- on account of marriage expenses. The AO has not made any addition of Rs.31,10,000/-. Therefore, the appeal on this ground is dismissed.49
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 4.4 Enhancement of income: A notice u/s 251(2) of the I.T. Act dated 30.08.2017 was given to the appellant stating that why the income of Rs.34,64,150/- (Rs.65,74,150/-- Rs.31,10,000/-) cannot be enhanced on account of income from undisclosed sources. In response to the above show cause, the appellant furnished the written submission dated 06.12.2017.
The appellant is in receipt of the gift from following persons:
4.4.1 (1) Gopal Singh Tomar -Gift of Rs.17,00,000/-
The appellant has allegedly received the gift of Rs.17,00,000/- from Shri Gopal Singh Tomar. The AO made the addition of Rs.11,00,000/- only. The appellant was requested to show cause why an enhancement of Rs.6,00,000/- cannot be made considering the remaining amount as income from undisclosed sources. The appellant was requested to furnish the documentary evidences in support of claim or the gift like bank statement of Shri Gopal Singh Tomar and corresponding entry in appellant's bank statement, Registered girt deed occasion of the gift, creditworthiness of the donor etc. and other documents on which appellant rely. The appellant was also requested to explain why part gift is considered as genuine and pan as non-genuine. As per law either gift is genuine or non genuine. There is no concept of part gift as genuine and part gift as non-genuine. The appellant has not furnished the above asked documents in respect of the gift. The appellant only furnished the notarized confirmation of gift only. The other documents asked hay not e n furnished. The appellant failed to establish the genuineness 0f the transaction and creditworthiness of the donor. The AO himself has considered the Rs.11,00,000/- as non genuine gift There is no reason to consider the gift of Rs.6,00,000/- as genuine. There is no concept of part genuine and part non-genuine gift.
Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source thereof or such explanation is unsatisfactory, such credits could be charged to tax as income of the appellant. The principle embodied in section 68 is only a statutory recognition of what was always understood to be the law based upon the rule that burden of proof is on the taxpayer to prove the genuineness of borrowings or other credits in his books, since the relevant facts are exclusively within his knowledge. The expression "nature and source" has to be understood together as £1 requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the appellant and if no explanation is given or the explanation given by the 50 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 appellant is not satisfactory. The Income Tax Authority can disbelieve the alleged transaction of gift. But the law is equally settled that if the initial burden is discharged by the appellant by producing sufficient materials in support of the gift the onus shifts upon the Income Tax Authority and after verification. The can' call for further explanation from the appellant and in the process, the onus may again shift from the Income 'Tax Authority to the appellant. Therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the donor.
(2) Smt.Kirti Singh Tomar Gift of Rs.4,15.000/- The appellant has allegedly received the gift of Rs.4,15,OOO/- from Smt. Kirti Singh Tomar. The AO made the addition of Rs.2,94,000/- only. The appellant was requested to show 'cause why an enhancement of Rs.1,21,000/- cannot be made considering the remaining amount as income from undisclosed sources. The appellant was requested to furnish the documentary evidences in support of the claim of the gift like bank statement of Smt. Kirti Singh Tomar and corresponding entry in appellant's bank statement, Registered gift deed. occasion of the gift, source of income of Smt. Kirti Singh Tomar and copy of income tax return filed by Smt, Kirti Singh Tomar, creditworthiness of the donor etc. and any other documents';" on which appellant rely. The appellant was also requested to explain why part gift is considered as genuine and part as non genuine. As per law either gift is genuine or non genuine. There is no concept of part gift as genuine and part gift as non-genuine. The appellant has not furnished the above asked documents in respect of the gift. The appellant only furnished the notarized confirmation of gift only. The other documents asked have not been furnished. The appellant failed to establish the genuineness of the transaction and creditworthy mess the donor. The AO himself has considered the Rs.2,94,OOOl- as non genuine gift. There is no reason to consider the gift of Rs.1,21,000/- IS genuine. There is no concept of part genuine and part non-genuine gift.
Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source thereof or such explanation is unsatisfactory such credits could he charged to tax as income of the appellant. The principle embodied in section 68 is only a statutory, recognition of what was always understood to be the law based upon the rule that roof is on the taxpayer to prove the genuineness of borrowing or other credits in his books, since the relevant facts are exclusively within his knowledge.
The expression "nature and source" bas to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the appellant and if no explanation is given or the explanation given by the appellant is not satisfactory. The income Tax 51 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Authority can disbelieve the alleged transaction of gilt But the law is equally settled that if the initial burden is discharged by the appellant by producing sufficient materials in support of the gift the onus shifts upon the Income Tax Authority and after verification, he can call for further explanation from the appellant and in the process, the onus may again shift from the Income Tax Authority to the appellant. Therefore, the appellant failed to discharge the burden 0f proof by not establishing the genuineness of transaction and credit worthiness of the donor. (3) Smt, Nilima Tomar Gift of Rs.5,26,OOO/-
The appellant has allegedly received the gift of Rs.5,26,OOO/- from Smt. Nilima Tomar. The AO made the addition of Rs.3,26,OOO/- only. The appellant was requested to show cause why an enhancement of Rs.2,OO,OOO/- cannot be made considering the remaining amount as income from undisclosed sources. The appellant's bank statement, Registered gift deed, 0cas'ion of the gift. source of income of Smt. Nilirna Tomar and c0py of income tax return filed by Smt.Nilima Tomar, creditworthiness of the donor etc. and any other documents on which appellant rely. The appellant was also requested to explain why part gift is considered as genuine and part as non genuine. As per law either gift is genuine or non genuine. There is no concept 0f part gift as genuine and part gift as non-genuine. The appellant has not furnished the above asked documents in respect of the gift. The appellant only furnished the notarized confirmation of gift only. The other documents asked have not been i furnished. The appellant failed to establish the genuineness transaction and creditworthiness of the donor. The AO himself has considered the Rs.3,26,OOO/- as non genuine gift. There is no reason to consider the gift of Rs.2,OO,OOO/- as genuine. There is no concept of part genuine and part non-genuine gift.
Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source hereof or such explanation is unsatisfactory, such credits could be charged to tax as income of the appellant. The principle embodied in section 68 is only a statutory recognition of what was always understood to be the law based upon the rule that burden of proof is on the taxpayer to prove the genuineness of borrowings or other credits in his books. Since the relevant facts are exclusively within his knowledge. The expression "nature and source" has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred.
It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the appellant and if no explanation is given or the explanation given by the appellant is not satisfactory, the Income Tax Authority can disbelieve the alleged transaction of gift. But the law is equally settled that if the initial burden is discharged by the appellant by 52 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 producing sufficient materials in support of the gilt the onus shifts upon the Income Tax Authority and after verification, he can call for further explanation from the appellant and in the process, the onus may again shift from the Income Tax Authority to the appellant. Therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the donor.
(4) Smt. Jasoda Bai Tomar - Gift of Rs.6,00,000/- The appellant has allegedly received the gift of Rs.6,00,000/- from Smt. Jasoda Bai Tomar. The AO made the addition of Rs.4,00,000/- only. The appellant was requested to show cause why an enhancement of Rs.2,00,000/- cannot be made considering the remaining amount as income from undisclosed sources. The appellant was requested to furnish the documentary evidences in support of the claim of the gift like bank statement of Smt. Jasoda Bai Tomar and corresponding entry in appellant's bank statement. Registered gift deed, occasion of the gift source of income of Smt Jasoda Bai Tomar and copy of income tax return filed by Smt. Jasoda Bai Tomar , creditworthiness of the donor etc. any other document on which appellant rely. The appellant has not furnished the above asked documents in respect of the gift. The appellant only There is no concept of pan gift as genuine and part gift as non-genuine. The appellant has not furnished the above asked documents in respect of the gin. The appellant only furnished the notarized confirmation of gift only. The other documents asked have not been furnished. The appellant failed to establish the genuineness of the transaction and creditworthiness or the donor. The AO himself has considered the Rs4,OO,OOO/- as non genuine gift. There is 110 reason to consider the gift of Rs.2.00,OOO/as genuine. There is no concept of part genuine and part non-genuine gift.
Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source thereof or such explanation is unsatisfactory, such credits could charge to tax as income of the appellant. The principle embodied in section 68 is only a statutory recognition of what was alw ays understood to be the law based upon the rule that burden of proof is on the taxpayer to prove the genuineness of borrowings or other credits in his books, since the relevant facts are exclusively within his knowledge.
The expression "nature and source' has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction initial onus is always upon the appellant and if no explanation is given or the explanation given by the appellant is no satisfactory. The Income Tax Authority can disbelieve the alleged ran action of gilt. But the law is equally settled that if the initial 53 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 burden is discharged by the appellant by producing sufficient materials in support of the gift, the onus shifts upon the Income Tax Authority and alter verification he can call for further explanation from the appellant and in the process, the onus may again shift from the Income Tax Authority to the appellant.
Therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the donor.
(5) Smt. Madhubala Rajput Gift of Rs.5,OO,OOO/- The appellant has allegedly received the gift of Rs.5,OO,OOOl- from ,Smt. Madhubala Rajput. The AO has not made any addition in this regard. The appellant was requested to show cause why an enhancement of Rs.5,OO,OOO/- cannot be made considering the amount as income from undisclosed sources. The appellant was requested to furnish the documentary evidences in support of the claim of the gift like bank statement of Smt. Madhubala Rajput and corresponding entry in appellant's bank statement, Registered gift deed, occasion of the gift, source of income of Smt Madhubala Rajput and copy of income tax return filed by Srnt. Madhubala Rajput, creditworthiness of the donor etc. and any other documents on which appellant rely. Whether the donor falling in the definition of relative as per Income Tax Act from who gift can be received. The appellant has not furnished the above documents in respect of the gift. The appellant only furnished the notarized confirmation of gift only. The other documents asked have not been furnished. The appellant failed to establish the genuineness of the transaction and creditworthiness of the donor. There is no reason to consider the gift of Rs.5,OO,OOOI- as genuine. Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source thereof or such explanation is unsatisfactory, such credits could be charged to tax as income of the appellant. The principle embodied in section 68 is only a statutory recognition of what was understood to be the law based upon the rule that burden of proof is on the taxpayer to prove the genuineness of borrowings or other credits in his books, since the relevant facts are exclusively within his knowledge.
The expression "nature and source" has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the appellant and if no explanation is given or the explanation given by the appellant is not satisfactory. The Income Tax Authority can disbelieve the alleged transaction of gift. But the law is equally settled that if initial burden is discharged by the appellant by producing sufficient materials in support of the gilt the onus shifts upon the Income Tax Authority and after verification, he can call for further explanation from the appellant and in the process, the onus may 54 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 again shift from the Income Tax Authority to the appellant. Therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the donor. (6) Shri Virendra Singh Rajput - Gift of Rs.7,00,000/- The appellant has allegedly received the gift of Rs.7,OO.OOO/- from Shri Virendra Singh Raj put. The AO has not made any addition in this regard. The appellant was requested to show cause why an enhancement of Rs.7,OO,OOO/- cannot be made considering the amount as income from undisclosed sources. The appellant was requested to furnish the documentary evidences in support of the claim or the gift like bank statement of Shri Virendra Singh Rajput and corresponding entry in your bank statement, Registered gift deed, Occasion of the gift, source of income of Shri Virendra Singh Rajput and copy of income tax return filed by Shri Virendra Singh Rajput, worthiness of the donor etc. and any other documents on which your rely .Whether the donor is failing in the definition of relative as per Income Tax Act from whom gift can be received. the appellant has not furnished the above asked documents in respect of the (1.. The appellant only furnished the notarized confirmation of gin only. The other documents asked have not been furnished. The appellant failed to establish the genuineness of the transaction and creditworthiness of the donor. There is no reason to consider the gift of Rs.7OOOOO/- as genuine.
Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source thereof or such explanation is unsatisfactory. Such credits could be charged to tax as income of the appellant. The principle embodied in section 68 is only a statutory recognition of what was always understood to be the law based upon the rule that burden of proof is on the taxpayer to prove the genuineness of borrowings or other credits in his books, since the relevant facts are exclusively within his knowledge.
The expression "nature and source" has to be understood together as a requirement of identification of the source and the nature of the source, So that the genuineness or otherwise could be inferred. It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the appellant and if no explanation given or the explanation given by the appellant is not satisfactory. The Income Tax Authority can disbelieve the alleged transaction of gift.
But the law is equally settled that if the initial burden is discharged by the appellant by producing sufficient materials in support of the 'It the onus shifts upon the Income Tax Authority and after verification, he can call for further explanation from the appellant and in the process, the onus may again shift from the Income Tax Authority of the appellant. Therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the 55 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 donor.
(7) Shri Awadesh Singh Rajput - Gift of Rs.3,OO,OOO/- The appellant has allegedly received the give of ",3,00,000/- from Shri Awadesh Singh Rajput, Th AO has made 'my addition in this regard. The appellant was requested to furnish cause whv an enhancement of Rs.3;OO,OOO/- cannot be made considering the amount as income from undisclosed sour e . The appellant was requested to furnish the documentary evidences in support of the claim of the gift like bank statement of Shri Awadesh Singh Rajput and corresponding entry in your bank statement, Registered gift deed. occasion of the gift. source of income of Shri Awadesh Singh Rajput and copy of income tax return filed by Sh Awadesh Singh Rajput. creditworthiness of the donor etc. and any other documents 011 which you rely. Whether the donor is falling in the definition of relative as per income Tax Act from whom gift can be received. The appellant has not furnished the above asked documents in respect of the gi n. The appellant only furnished the notarized confirmation of gift only. The other documents asked have not been furnished. The appellant failed to establish the genuineness of the transaction and creditworthiness of the donor. There is no reason to consider the gift of Rs.3,OO,OOO/- as genuine. Section 68 provides that any cash credit found in the books relating to which appellant offers no explanation about the nature and source thereof or such explanation is unsatisfactory, such credits could be charged to tax as income of the appellant The principle embodied in section 68 is only a statutory recognition of what was always understood to be the law based upon the rule that burden of proof is on the taxpayer to prove the genuineness of borrowings or other credits in his book', since the relevant facts are exclusively within his knowledge. The expression "nature and source" has to be understood together as a requirement of identification of the source and the nature of the source, 0f that the be inferred.
It is settled law that while considering the question whether the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the alleged gift taken by the appellant was a genuine transaction, the initial onus is always upon the appellant and if no explanation is given or the explanation given by the appellant is not satisfactory, the Income Tax Authority can disbelieve the alleged transaction of gift. But the law is equally settled that if the initial burden is discharged by the appellant by producing sufficient materials in support of the gift, the onus shifts upon the income Tax Authority and after verification, he can call for further explanation from the appellant and in the process, the onus may again shift from the Income Tax Authority to the appellant. Therefore, the appellant failed to discharge the burden of proof by not establishing the genuineness of transaction and credit worthiness of the donor. Therefore, the income of the appellant is enhanced by Rs.34,64,150/- (Rs.65,74,150/- - Rs.31,10,000/-). Penalty proceedings u/s 271(1)(c) are separately initiated on this enhancement.
56Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
10. On the contrary, Ld. Sr.-DR opposed the submission made by the Ld. counsel for the assessee, and supported the orders of authorities below. Further, Ld. Sr. DR contended that the assessee failed to prove genuineness of gift and creditworthiness of donors. She contended that under the facts and circumstances of the present case the authorities below were justified in making the impugned additions.
11. We have heard the rival submissions and perused the materials available on record. The contention of the assessee is that requisite material was placed on record before the lower authorities but the lower authorities did not consider the same. He submitted that in response to the notice u/s 148 of the Act the assessee had submitted that the source of investment was gift/loan received from family members and friends. The supporting evidences of the investment was placed before the Ld. CIT(A) and also the assessing officer. However, the Ld. CIT(A) sustained the addition and in addition to that enhanced the income of the assessee without considering material placed before him. Looking to the facts of the present case when the assessee is claiming that the source of investment was from the gifts 57 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 given by the family members and considering the facts that the assessing officer has verified the factum of gifts received by the assessee and partly granted the relief. There was no credible evidence before the Ld. CIT(A) to rebut the findings of assessing officer. The assessee placed documents related to sale of property by father-in-law and mother-in-law. Hence, the entire evidence could not be brushed aside without making proper verification. The Ld. CIT(A) was not justified enhancing the income. Therefore, we direct the assessing officer to delete the addition of Rs.34,64,150/- as made by the Ld. CIT(A).
Now coming to the issue about sustaining of the addition of Rs.31,10,000/- as declared by the assessee in the return of income. It is contended throughout by the assessee that the declaration made in the return was wrongly made. The assessee had placed on record all evidences regarding receipt of gifts etc. from the family members before this Tribunal also the assessee has placed a chart along with written synopsis mentioning the quantum of gift received from various persons as from the father of assessee had received Rs. 17,00,000/- from mother of assessee received gift of Rs.5,26,000/- from 58 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 grandmother of assessee received gift of Rs.6,00,000/- from wife he received gift of Rs.4,15,000/- and other relatives Smt. Madhu Bala Rajput, mother-in-law of the assessee gift of Rs.5,00,000/-, Shri Virendra Singh Rajput father-in-law of the assessee gift of Rs.7,00,000/-, Shri Awadesh Singh Rajput, brother-in-law of assessee gift of Rs. 3,00,000/- and friend Ravi Gurjar loan of Rs.9,90,000/-. Looking to the material placed before us, we find that the assessee has placed sufficient evidence to prove the receipt of gift received from his father amounting to Rs.17,00,000/-. Further, the finding of assessing officer regarding gift received from grand-mother and mother of the assessee respectively. We find that the assessing officer has partly accepted the gift of Rs.2,00,000/- each from mother and grandmother of the assessee. Looking to the family background and in the absence of specific evidences we modify the finding of assessing officer and allow the gift received from grandmother of Rs.3,00,000/- and mother of Rs. 2,50,000/-. Rest of the addition made on account of gifts received from mother and grandmother of the assessee are sustained. Thus, assessee gets relief of Rupees Twenty two lac fifty thousands (Rs.17,00,000/- + 3,00,000/- + 2,50,000/-) is gift received from parent and grandmother.
59Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 Now coming to the gift received from other persons. The assessee claimed to have received gift from his wife, father-in-law, mother-in-law, brother-in-law and his friend. These gifts need verification at the end of the assessing officer. The assessee is hereby directed to furnish the requisite evidences in support of the gift received from other relatives and friends more particularly mentioned in the assessment order. This ground of the assessee is partly allowed. Further, it was pointed out by the Sr. DR that the assessee himself had disclosed income of Rs.31,10,000/- in his return of income. However, during the course of assessment proceedings itself assessee had retracted from the income disclosed in the return of income. It is also seen that in response to the notice u/s 148 the assessee has taken stand that substantial source of investment was gift from different persons. If it is proved that the investment is made out of gifts received, admittedly no other source of income is unearthed by the revenue. It is settled law that only the receipt that partake character of income is required to be taxed. If receipt is in the nature of gift which does not partake character of income would certainly be not taxable. Therefore, looking to the peculiarity of the facts of the present case the issue related to gift/loan received 60 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 from wife, relatives and friend is restored to the file of the assessing officer for verification of veracity of the claim of the assessee. The AO is hereby directed to re-examine the issue of gift and loan of the aforesaid persons. If the claim of the assessee is found correct he would delete the remaining addition made in this respect. The grounds of the assessee are partly allowed in the terms indicated hereinabove.
12. Ground No.5 is against the disallowance of opening balance of capital.
Ld. counsel for the assessee reiterated the submissions as made in the written submissions. The submissions of the assessee are reproduced as under:
5] GROUND NO. 5 - CHALLENGING THE ENHANCEMENT OF RS. 8,43,150/- MADE BY THE LD CIT(A) ON ACCOUNT OF OPENING BALANCE OF CAPITAL OF THE APPELLANT 5.1] The appellant in this ground of appeal has challenged the enhancement of Rs. 8,43,150/- made by the Ld CIT(A) on account of opening balance of capital of the appellant.
5.2] A table summarizing the addition of Rs. 31,10,000/- made by the assessing officer and enhancement of Rs. 34,64,150/- made by the Ld CIT(A) is as under:
S. Name of the Nature Gross Amount not Amount
No Party of amount accepted as accepted as
Receipt [in Rs.] genuine by AO/ genuine by AO
Addition which was
maintained by AO enhanced by Ld
61
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 [in Rs.] CIT(A) [in Rs.] 1 Shri Gopal Gift 17,00,000 11,00,000 6,00,000 Singh Tomar 2 Smt Nilima Gift 5,26,000 3,26,000 2,00,000 Tomar 3 Smt Jasoda Gift 6,00,000 4,00,000 2,00,000 Bai Tomar 4 Smt Kirti Gift 4,15,000 2,94,000 1,21,000 Tomar 5 Smt Madhu Gift 5,00,000 NIL 5,00,000 Bala Rajput 6 Shri Virendra Gift 7,00,000 NIL 7,00,000 Singh Rajput 7 Shri Awadesh Gift 3,00,000 NIL 3,00,000 Singh Rajput 8 Shri Ravi Loan 9,90,000 9,90,000 NIL Gurjar 9 Opening Opening balance of 8,43,150 NIL 8,43,150 Capital capital Total 65,74,150 31,10,000 34,64,150 5.3] On perusal of the above table, it is quite clear that enhancement of Rs.
34,64,150/- made by the Ld CIT(A) included enhancement of Rs. 8,43,150/- on account of opening balance of capital of the appellant.
5.4] Hence, further enhancement of Rs. 8,43,150/- as made by the Ld CIT(A) on account of opening balance of capital led to double taxation of the same amount which is grossly unjustifiable and wholly unwarranted. Therefore, it is humbly submitted that further enhancement of Rs. 8,43,150/- made by the Ld. CIT(A) on account of opening balance of capital requires to be deleted in entirety.
13. On the contrary, Ld. Sr. DR opposed the submission made by the Ld. counsel for the assessee
14. We have heard the rival submissions and perused the materials available on record. It is contended on behalf of 62 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 the assessee that the ld. CIT(A) did not consider opening capital of Rs.8,43,150/-. This opening capital was out of gift from father and other family members. Ld. CIT(A) ought to have considered this. We find that the Ld. CIT(A) had decided this issue in para 4.8 of the impugned order as under:
"Opening Capital -Rs.8,43,150/-
The appellant had shown the opening balance of Rs.8,43,150/-. The appellant was requested to furnish the documentary evidences in support of his claim. The appellant submitted that he is earning from 2004 regularly a semi-qualified and from 2009 as qualified chartered accountant. The appellant has not furnished the documentary evidences like salary certificate and proof of filing of return of income in the earlier years. The appellant failed to establish that he was earning any income and paying taxes. In the absence of any evidences, therefore, the income of the appellant is enhanced by Rs.8,43,150/-. Penalty proceedings u/s 271(1)(c) are separately initiated on this enhancement.
From the above, it is clear that the opening balance was part of the enhancement made by the ld. CIT(A) as we have deleted the enhancement. Therefore, this ground of the assesseee's appeal is allowed.63
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
15. Ground No. 3 is against the addition of Rs.1,00,000/- made on account of Low marriage Expenses. The Ld. counsel for the assessee reiterated the submission as made in the written submission. The submissions of the assessee are reproduced as under:
6] GROUND NO. 3 - CHALLENGING THE ADDITION OF RS. 1,00,000/- MADE TO THE TOTAL INCOME ON ACCOUNT OF LOW MARRIAGE EXPENSES 6.1] The appellant in this ground of appeal has challenged the addition of Rs.
1,00,000/- made to the total income on account of low marriage expenses.
6.2] The appellant got married on 05-05-2011 i.e. during the previous year 2011-12 relevant to the Assessment Year 2012-13. The appellant categorically stated during the course of reassessment proceedings that marriage ceremony was conducted as per the rituals of Gayatri Pariwar from the native place of his spouse, Ganj Basoda, Vidisha. It was further stated that major expenses of marriage were borne by the in-laws of the appellant and therefore, amount of Rs. 1,75,000/- was incurred by the appellant on account of marriage related expenses.
6.3] However, the assessing officer did not accept the contentions put forth by the appellant and made lump sum addition of Rs. 1,00,000/- to the total income of the appellant on account of marriage expenses which is again very high-handed looking at the income of the appellant and his living standards.
6.4] It has been in various judicial precedents that lump sum addition made on account of marriage expenses merely on the basis of guess work without bringing on record any such evidence that actual expenditure was much more as shown by the assessee is not sustainable.
Relevant extracts from few of the judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for your ready reference:
6.5.1] The Hon'ble Madras High Court in the case of CIT Cent. II, Chennai v/s A.N. Dyaneswaran [Tax Case (Appeal) No.150 of 2004] has held that:
"The addition in respect of the estimated expenses towards marriage of the assessee's son Sri.Senthureswaran is of Rs.7,50,000/-. The assessee's mother had filed an affidavit in which it was stated that she incurred the 64 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 expenditure for the marriage of her grandson. Likewise, the assessee's son accepted that he had met the expenses incurred for the Singapore trip. In her Will which was probated, the assessee's mother had mentioned about this affidavit sworn in January 1996. It was also brought on record that the marriage expenditure in respect of booking the hall was made by Dharmambal Namasivayam Trust. These explanations were accepted by the Tribunal. The addition made by the Assessing Officer is purely a guess work and the Tribunal has rightly deleted the addition made by the Assessing Officer."
[Emphasis Supplied] 6.5.2] The Hon'ble ITAT Indore Bench in the case of Shri Rajat Maheshwari v. DCIT as reported in (2019) 34 ITJ 557 (Trib. - Indore) has held that:
"8. Ld. Counsel for the assessee contended that the addition is merely estimated because number of guests were much less and the list was a proposed list and not a final list of the invitees who attended the ceremony. On going through the submission made by Ld. Counsel for the assessee before the lower authorities as well as the loose papers impounded during the course of search we observe that at page 1 to57 of BS-4 and page 1 to 97 of BS-12 list of tentative invitees were 1589 persons but in the very same set of seized documents at item 15 of BS-1 there was invoice dated 18.2.2004 for printing of 1000invitation card. Further the proof of payment to the caterers were also part of seized records. The addition made by Ld. AO seems to be merely estimated because other than the list of invitees no other material evidence was unearthed by the search team which could prove that 1589 invitees attended the ceremony. Therefore in absence of no other evidence placed before us by Revenue authorities and in the given facts and circumstances of the case it will not be justified to sustain the estimated addition u/s 69C of the Act merely on the basis of list of invitees. In the result the addition of Rs. 12,19,550/- u/s. 69C of the Act stands deleted. Ground No. 2 of assessee's appeal is allowed."
[Emphasis Supplied] 6.5.3] The Hon'ble ITAT Chandigarh Bench in the case of Subhash Chander Goel v. ITO as reported in (2019) 1 ITJ Online 187 (Trib. - Chandigarh) has held that:
"19(ii) The Assessing Officer in the assessment order, considering the status of the assessee has presumed that assessee might have incurred so many expenditure on different occasions but nothing was brought on record whether assessee has performed any of such ceremonies which are large in number noted in the assessment order. Therefore, the order of the Assessing Officer was wholly based upon assumptions on certain facts which did not exist. In this case, at the time of hearing of the appeal, the assessment record was 65 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 available with Ld. DR but no tax evasion petition was containing. From the settlement arrived at between the husband and wife before Hon'ble High Court, as noted above, which contained the disposal of the income tax matter, would clearly reveal that from the side of in-laws of Ms. Megha Garg, daughter of the assessee, same information might have been provided to the Income Tax Department so as to initiate the above proceedings but the Assessing Officer did not record statement of any of the in-laws of Ms. Megha nor arrived at fair estimate of marriage expenses. It is, therefore, a clear case of additions made merely on assumptions and presumptions. Thus, there were no basis, what-so-ever to estimate higher marriage expenditure as against the explanation given by the assessee. May be there is some vague explanation given by assessee before Assessing Officer but it would not prove the case of the Assessing Officer to make higher estimate of marriage expenses.
20. Considering the totality of the facts and circumstances noted above, we do not sustain the additions made by the authorities below. We, accordingly, set aside the orders of authorities below and delete the addition of Rs. 8lacs on account of marriage expenses." [Emphasis Supplied] 6.6] In view of the above, it is humbly submitted that lump sum addition of Rs. 1,00,000/- made by the assessing officer on account marriage expenses was wholly based upon assumptions and guess work and therefore, it requires to be deleted in entirety
16. On the contrary, Ld. Sr. DR opposed the submission made by the Ld. counsel for the assessee
17. We have heard the rival submissions and perused the materials available on record. Looking to the facts of the case, we do not see any infirmity into the finding of the authorities below. The addition made on account of low marriage expenses is hereby sustained.
18. Ground No.8 of the assessee's appeal is against charging of interest is consequential, we hold accordingly.66
Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
19. Ground No.9 is general in nature which need no separate adjudication.
20. Now coming to the penalty appeal in ITANo.584/Ind/2018, the assessee has raised following grounds of appeal:
1.1 That on the facts and in the circumstances of the case and in law the Ld CIT[AJ erred in levied penalty on the amount of addition as made by him through enhancement in the appellate order even v hen no specific charge was framed by the assessing officer in the show cause notice as issued for penalty.
1.2J That on the facts and in the circumstances of the case and in law, the Ld CIT[AJ erred in levied penalty U/s 271[1][c) of the Act on both the charges and failed to framed any specific charges against the assessee which is contrary to the settled legal position.
2J That on the facts of the case and in law the Ld CIT[AJ erred in levied penalty U / s 271 [1)(c) of the Act of Rs 11,38,760/- on the amount of addition as made by the Ld CIT [A) in the appeal through enhancement even when the assessee had properly explained the source which was duly accepted by the Assessing officer.
3) That on the facts and in the circumstances of the case and in law the Ld CIT[A) erred in levied penalty on the amount of addition as made by him through enhancement without disproving the documents as filed by the assessee.
4) That on the facts and in the circumstances of the case and in law the Ld CIT[A) erred in levied penalty U/s 271[1][c] of the Act of Rs 13,30,955/- . The said penalty so levied is unsustainable, the same now
1. requires to be deleted in full.
67Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
21. The facts giving rise to the present appeal are that while framing the assessment, the assessing officer also initiated penalty proceedings u/s 271(1)(c) of the Act. Thereafter, the assessing officer issued a notice u/s 271(1)(c) on 29.12.2016. Subsequently, show cause notice was issued on 12.04.2017 and 16.05.2017. Thereafter, the assessing officer imposed penalty amounting to Rs.9,60,990/-.
22. Aggrieved against this the assessee preferred an appeal before the Ld. CIT(A) dismissed the appeal and also imposed penalty of Rs.13,30,955/- including the penalty on the enhanced income. Against this assessee preferred present appeal before this Tribunal.
23. Ld. counsel for the assessee submitted that the authorities below were not justified in imposing the penalty. Under the facts of the present case as such there is no concealment of filing of inaccurate particular of income. The assessment was reopened purely on the basis of verification of source of investment made in the immovable property. He submitted that the requirement of 68 Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018 law is not satisfied as the authorities below have not made specific charge whether the assessee was guilty of furnishing of inaccurate particulars of income or concealing of the particulars of income.
24. On the contrary, Ld. Sr. DR opposed the submission and supported the order of the authorities below. Ld. Sr. DR submitted that the authorities below were justified in initiating the penalty proceedings and imposing the penalty.
25. We have heard the rival submissions and perused the materials available on record and gone through the orders of the authorities below. In this case in quantum appeal (ITANo.86/Ind/2018) substantial addition made by the assessing officer has been deleted and rest of the additions made has been set aside for verification of the assessing officer. Under these facts, we hereby set aside the penalty order and direct the AO to delete penalty in respect of additions deleted and additions in respect of issues which have been set aside in ITANo.86/Ind/2018 to the file of Assessing officer for verification. Thus, grounds raised in this appeal are allowed in terms indicated above.
69Mahendra Singh Tomar /ITANo.86 & 584/Ind/2018
26. In result, both appeals filed by the assessee are partly allowed for statistical purposes.
Order was pronounced in the open court on 11.11.2020.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; दनांक Dated :11/11/2020 Patel/PS
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Assistant Registrar, Indore 70