Income Tax Appellate Tribunal - Mumbai
Praveen Kumar (Ihuf), Mumbai vs Department Of Income Tax on 7 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "C" MUMBAI
BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER
AND
SHRI RAJENDRA, ACCOUNTANT MEMBER
ITA No. 2796/M/09
Assessment Year 2000-01
ITA No. 2798/M/09
Assessment Year 2002-03
ITA No. 2800/M/09
Assessment Year 2004-05
ITA No. 2802/M/09
Assessment Year 2006-07
The Asst. Commissioner Praveen Kumar (HUF)
of Income Tax 20(2), C/002, Rishikesh Building,
612, Lokhandwala Complex,
Piramal Chambers, Vs. Andheri (W),
Lalbaug, Mumbai-400 058.
Mumbai - 400 012.
PAN: AACHP 2239 J
(Appellant ) (Respondent)
Revenue by : Shri A.C. Tejpal, DR
Assessee by : Shri Satish Modi
Date of hearing : 07-06-2012
Date of pronouncement : 27-06-2012
ORDER
PER BENCH Identical Eight Grounds of Appeal for three Assessment Years i.e. 2001-02, 2004-05,and 2006-07 were filed by the Assessing Officer (AO) against the order dt. 23-01-2009 of the CIT(A)-XX, Mumbai. Grounds of Appeal read as under :
"i. The learned CIT(A) has erred in facts and in law and in the circumstances of the case in directing to assess the income generated through sale of shares under the head 'Capital Gain' and allow the various deduction/exemption on the same as per 2 ITA No. 2796, 2798, 2800, 2802/M/09 Praveen Kumar (HUF) provisions of the Act as against the additions made by the AO as unexplained cash credits u/s.68 of the Act."
"ii. The learned CIT(A) has erred in directing to delete the addition in respect of household withdrawal."
"iii. The learned CIT(A) has erred in facts and in law and in circumstances of the case in not appreciating the facts that entire transaction giving rise to capital gain are merely an accommodation route, through which the unaccounted money of the assessee has converted into accounted money in the grab of long term capital gain arising on account of purchases and sale of shares."
"iv. The learned CIT(A) has erred in facts and in law and in circumstances of the case in not appreciating the Supreme Court decision in the following cases -
Macdowells and Company Ltd Vs CTO 154 ITR 148, CIT Vs. Sri Meenakshi Mills Ltd. 63 ITR 609, CIT Vs Durgaprasad More - 82 ITR 540 and Juggilal Kamapat Vs CIT 73 ITR 702 (SC) "v. The learned CIT(A) has erred in holding the details filed before the A.O. proved the genuineness of the transaction without verifying the details himself as there is no finding in his order that the details filed were duly verified by him and found to be correct".
"vi. The learned CIT(A) has erred in not appreciating the fact that after verification and from copy of invoices of expenditure found from the premises of the assessee, it is quite clear that the assessee is having a lavish life style and household drawing shown by the assessee were incredibly low".
"vii. The assessee prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the AO be restored".
"viii. The assessee craves leave to amend or alter any ground or to submit additional new ground which may be necessary".
2. Though there are eight grounds of appeal in the appeal memos, yet main ground are only two- first is about deletion of addition made by the AO u/s. 68 of the Income-tax Act,1961 (Act) and the second one is about low withdrawals for household expenses.
2.1. For the AY 2002-03 following grounds were filed by the AO challenging the above referred order of the First Appellate Authority(FAA).
3 ITA No. 2796, 2798, 2800, 2802/M/09Praveen Kumar (HUF) I. The learned CIT(A) has erred in directing to delete the addition in respect of household Withdrawal.
II. The learned CIT(A) has erred in not appreciating the fact that after verification and from Copy of invoices of expenditure found from the premises of assessee, it is quite clear that the assessee is having a lavish life style and household drawing shown by the assessee were incredibly low.
III. The learned CIT(A) has erred in not appreciating the facts of the case that the amount of Rs. 75,00,000!- received by the assessee was not able to satisfactorily explained the source of the cash received and hence the amount of Rs. 75,00,000!- was added to the total income of the assessee u/s.69A. The learned CIT(A) was not justified in holding the gift of Rs.75,00,000!- as genuine soly on the ground that similar gift from the donee to the another member of the family had been accepted by the department and placing reliance in the judgement of the H'ble Madras High Court in the case of CIT Vs Murthukarupan 290 ITR 154 whereas facts of the case are different.
IV. Whether the learned CIT(A) was justified in ignoring the principal of rejudicature in holding that even a mistake had been committed by some other A.O. in accepting a gift by the same donar as genuine then such mistake on part of the A.O. shall be binding on all other A.Os in respect of all other gifts given by the same donar to other donees.
V. The appellant prays that the order of the CIT(Appeals) on the above grounds be set aside and that of the AO be restored.
VI The appellant craves leave to amend or alter any ground or to submit additional new ground which may be necessary.
3. First we would like to deal with the orders for AYs. 2000-01, 2004-05 and 2006-07 (ITA Nos. 2796/M/09; 2800/M/09; 2802/M/09). As stated above, in these appeals, one of the grounds of appeal is about addition made by the AO u/s.68 of the Act on account of shown long term capital gain (LTCG).
3.1. As per brief facts of the case, a search and seizure action u/s. 132 (1) of the Act was carried out on 01-09-2005 in the group cases of Dilbagh Raj Arora based at Kanpur, Mumbai and Delhi. The assessee HUF is located at Mumbai. During the search proceedings it was found that the assessee group-consisting of Shri Dilbagh Rai Arora, his sons S/Shri Som Arora, Arunkumar Arora, Praveen Kumar Arora 4 ITA No. 2796, 2798, 2800, 2802/M/09 Praveen Kumar (HUF) Nirmal Arora, their family members and HUFs.-had shown long term capital gain (LTCG) in their respective returns on sale of shares of various listed companies that was set off against brought forward long term capital loss of earlier years. In the assessment orders passed u/s 153A of the Act, the AO held that share transactions mentioned above were sham/arranged transactions and that the entire sale proceeds recorded in books of accounts of the assessee group, including the assessee HUF, represented unexplained cash credits. Particulars of returned income and assessed income u/s 153A of the Act, in respect of the assessee HUF are as under :
AY Returned Income Assessed Income
2000-01 16.90 lakhs 2.88 Crores
2002-03 10.33 lakhs 86.93 lakhs
2004-05 86.80 lakhs 1.28Crores
2006-07 99.64 lakhs 1.25Crores
3.2. As mentioned, during the assessment proceedings AO made addition to the income of assessee on two accounts. The year-wise details of additions made by the AO are as under :
AY Addition on a/c. of Addition on Total
Unexplained account of low
investment withdrawals
2000-01 2.70 Crores 1.2 lakhs 2.71
Crores
2002-03 _ 1.6 lakhs _
2004-05 1.19 Crores 1.4 lakhs 1.20
Crores
2006-07 91.74 lakhs 2.4 lakhs 94.15 lakhs
3.3. As far as issue of long term capital gains is concerned, it is found that AO has made addition u/s. 68 of the Act as mentioned in the previous paragraph for the Assessment Years in question. As in the case of Smt. Pooja Arora and Sh.Praveen Kumar (Individual)AO held in the case of the assessee HUF that the transactions of LTCG on alleged sale of shares were fictitious and that entire sale proceeds received on sale of shares was to be taxed as the income of the assessee HUF from undisclosed sources. Assessee HUF preferred an appeal against the said order. First Appellate Authority (FAA) decided the issue in favour of the assessee following the orders of the CIT(A)-I, Kanpur and ITAT Lucknow. While deciding the appeal of, Smt. Pooja Arora (ITANo.2788/Mum/ 2009AY 2004-05 and ITA No.2790/Mum/2009 AY 2006-07) and Sh.Praveen Kumar (Individual) (ITANo.2788/Mum/ 2009AY 2004-05 and ITA No.2790/ Mum/2009 AY 2006-07) we have discussed the order of the FAA paragraphs of our said orders. After considering the arguments of the AO and the FAA and after perusing the orders of the 'A' Bench, Lucknow in the cases of Members of Arora group, we have held that order of the FAA in 5 ITA No. 2796, 2798, 2800, 2802/M/09 Praveen Kumar (HUF) deleting the addition made u/s. 68 needs no interference. We find that orders passed by the AO and FAA for the Assessment Years under consideration are same as in the case of Smt. Pooja Arora and Sh. Praveen Kumar (Individual)(supra). Only difference is the figures of additions made by the AO and AY in which said additions were made.
4. Before us, Departmental Representative (DR) and Authorised Representative (AR) made similar submission as in the case of Smt. Pooja Arora and Sh. Praveen Kumar (Individual) (supra). Following the said orders we uphold the order of the FAA.
Grounds of Appeal Nos. 1 and 3 to 5 of the AO for the Assessment Years 2000-01, 2004-05 and 2006-07 stand dismissed.
5. Next Grounds of Appeal for all the four assessment years are about low withdrawals by the assessee for his house-hold expenses (Ground of appeal Nos. 2and 6 for the AYs. 2000-01, 2004-05 and 2006-07 and Ground Nos.1 and 2 for AY.2002-03). As stated earlier the AO has made addition to the income of the assessee for the Assessment Years 2000-01, 2002-03, 2004-05 and 2006-07 as mentioned in the table at paragraph3.2. FAA while disposing the appeal filed by the assessee, in this regard, found that following was the withdrawal by the assessee HUF, Smt. Pooja Arora and and Sh.Praveen Kumar (Individual)for the Assessment Years concerned.
A.Y. Drawings by Drawings Drawings by Total
Praveen by Pooja Sh. Praveen
Kumar Arora Arora Kumar (Ind.)
(HUF.)
0120 2000-01 2.58 lakhs 2.4 lakhs 4.98lakhs
2002-03 1.70 lakhs -- 1.98 lakhs 3.68lakhs
2004-05 6.11 lakhs 3.6 lakhs 60,348/- 10.32 lakhs
2006-07 6.04 lakhs 3 lakhs 9.04lakhs
Total 28.02lakhs
5.1. After considering the Assessment Order and the submissions of the AR of the assessee, he held that the drawings shown by the assessee for the Assessment Year 2000-01 to 2002-03 were on lower side. He restricted the addition to Rs. 1,00,000/- each for the Assessment Years 2000-01 and 2002-03 as against Rs. 2.3 Lakhs and Rs. 4.6 Lakhs respectively. For the Assessment Year 2001-02, he upheld the entire addition of Rs. 44,183/-. Thus, the addition to the extent of Rs. 2.44 Lakhs was upheld by the FAA. He held that balance additions made in all the Assessment Years should be deleted as drawing shown by the assessee were adequate.
5.2. From the order of the FAA it is clear that he has taken a reasonable stand. We find that for three Assessment Years, he has 6 ITA No. 2796, 2798, 2800, 2802/M/09 Praveen Kumar (HUF) upheld the part/ full additions made by the AO. Considering the table at paragraph 3.2 and the findings of the FAA, we are of the opinion that his order does not suffer from any infirmity.
5.3. Upholding the order of the FAA, we dismiss the ground Nos. 2 and 6 for the AYs. 2000-01, 2004-05 and 2006-07 and Ground Nos.1 and 2 for the AY. 2002-03.
6. Next ground of appeal i.e., Ground No.3 is about the addition made on account of gift received by the assessee HUF. During the year under consideration AO found that the assessee HUF had received gift amounting to Rs.75 lakhs form Mrs. Noreen Jayantilal Manek. AO directed the assessee HUF to prove creditworthiness of the donor and the genuineness of the transaction. After considering the submissions of the assessee AO treated the entire amount of gift i.e. Rs.75 lakhs as unexplained cash credit u/s. 68 of the Act.
6.1. Assessee HUF preferred an appeal before the FAA. After taking in to consideration the assessment order and the arguments of the Authorised Representative (AR) of the assessee he held that the identity of the donor was not in dispute, that the source of the gift was fully explained by way of necessary documentary evidences i.e. the bank account no.154515 with Bank of Baroda in which the sale proceeds of sale of Apartment was deposited and the gift was given out of the said sale proceeds deposited in the said bank account, that the transactions being regular banking transaction from the known persons were fully explained, that the only allegation of the AO was with regard to the relation of the donor and the occasion of giving such a huge amount of gift, that the gift was made from the self- generated funds of the donor from sale of Apartment for which the appropriate authority of the Department has granted no objection certificate u/s 269UL(3) of the Act, that the same donor had made similar gifts to other group members of the appellant i.e. Rs.75 lakhs to Shri Dilbagh Rai Arora (HUF) and Rs.40 lakhs each to Shri Som Arora (HUF) and Shri Rajkumar Arora (HUF) of the same family, that AO had not brought on record any adverse material against the creditworthiness of the donor, that in the absence of any enquiry or any adverse material about the creditworthiness of the donor, the AO was not justified in holding that the donors creditworthiness was in doubt, that conduct of the donor or the donee or such circumstances which create doubt in the genuineness of the transaction of the gift had not been brought on record by the AO, that no enquiries in this direction were carried out by the AO, that the gift was made of huge amount, in the absence of any material to doubt the genuineness of the gift, would not be sufficient to treat the gift as non-genuine or bogus, that the donor has confirmed that she had voluntarily gifted the amount to the donee out of her natural love and affection, that section 123 of Transfer of Property Act, does not provide that the gifts should he made to a relative only, that that as per the law of the land, 7 ITA No. 2796, 2798, 2800, 2802/M/09 Praveen Kumar (HUF) no specific occasion is required for making gifts. Finally he held that in the absence of any cogent material to support his findings, the genuinity of the gift cannot he doubted.
6.2. He noted that CIT(A)-I, Kanpur, on the similar facts and circumstances in the matters of Dilbagh Rai Arora (HUF), Som Arora (HUF) and Rajkumar Arora (HUF) had accepted the gifts as genuine transaction and had deleted the addition made by the AO. He also noticed that ITAT Lucknow Bench had upheld the order of the CIT(A)- I, Kanpur.
6.3. On account of above referred discussion and specific orders of the ITAT Lucknow, we are of the opinion that the order of the FAA does not suffer from any infirmity. A Bench of Lucknow Bench vide order dtd. (ITA/656/Luc/08) has held as under :
"We have considered the submission of both the parties and carefully gone through the materials available on record. In the instant, it is not in dispute that the assessee along with three other family members, received gift from Mrs. Noreen Jayanti Manek. Her identity has not been doubted by the Assessing Officer. The source from which Mrs. Noreen Jayantilal Manek gave the gift was fully explained to the Assessing Officer. The only reason for doubting the genuineness of the gift was that the assessee could not produce the donor and did not explain the occasion of receiving the gift. It is well settled that for receiving the gift, the element of natural love and affection is essential and the gift should be without any consideration. In the instant case, it is not in dispute that the assessee received the gift from Mrs. Noreen Jayantilal Manek who had also given gifts to three more persons belonging to the same family to which the assessee belongs and in one of the cases of Raj Kumar Arora, H.U.F. for the assessment year 2002-2003 i.e. assessment year under consideration, the Assessing Officer, while framing the assessment under section 143(3) of the IT. Act had accepted genuineness of the gift. During the course of hearing, learned counsel assessee, stated at bar that no further action under section 263 was the said case so the assessment order attained the finality. The contention of the learned counsel for the assessee was not controverted by the Learned DR. The Hon'ble Madras High Court in the case of CIT vs. S. Muthukarupan [2007] 290 ITR 154 (Mad) has held as under:
".....that the finding recorded by the Tribunal that it would be a travesty of justice if the assessee, one of the co-owners, was solely picked out and an enhanced income was attributable in his hands for the same property, was based on a correct appreciation of evidence and therefore, no question of law arose from the order passed by it. The additions to rent were not justified"
In the instant case also the assessee received the gifts along with the three other family members from the same person. The source of the 8 ITA No. 2796, 2798, 2800, 2802/M/09 Praveen Kumar (HUF) donor for making the gifts was the same and the transaction was also through the similar banking channel, therefore, in view of the ratio laid down in the aforesaid referred to case, no different stand could have been taken in the case of assessee when the department had already accepted the genuineness of a similar gift vide assessment order dated 31/03/2006 passed under section 143(3) of the Act in the case of Raj Kumar Aora HUF belonging to the same group, to which the assessee belongs. In that view of the matter, we do not see any infirmity in the order of learned CIT(A).
In I.T.A.No. 661/Luc/08, the similar ground has been taken by the department except that the amount of gift involved is Rs.40 lacs in place of Rs.75 lacs involved in I.T A. No.656/Luc/08 (supra), since the facts are similar and even the rival contentions were also similar in this case as were in the case of Dilbangh Raj Arora (supra) therefore our findings given in the former part of this order shall apply mutatis mutandis for this appeal also."
7. In light of the above discussion we uphold the order of the FAA deleting the addition made by the AO u/s.68 of the Act.
Ground of appeal numbers 1 and 2 for the AY 2002-03 stand rejected.
As a result, appeals filed by the AO for all the four assessment years are dismissed.
Order pronounced in the open court on 27th June, 2012.
Sd/- Sd/-
(D.K. AGARWAL) (RAJENDRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai,
Date 27th June, 2012
TNMM
9 ITA No. 2796, 2798, 2800, 2802/M/09
Praveen Kumar (HUF)
Copy to:
1. Appellant
2. Respondent
3. The concerned CIT (A)
4. The concerned CIT
5. DR "C" Bench, ITAT, Mumbai
6. Guard File
(True copy)
By Order
Asst. Registrar,
Income Tax Appellate Tribunal,
Mumbai Benches, Mumbai.