Darshna H Shah Ahmedabad v. The Income Tax Officer Ward 7 3 Ahmedabad

1 In The Income Tax Appellate Tribunal C Bench Ahmedabad Before Shri T K Sharma Judicial Member And Shri A N Pahuja Accountant Member Ita No 3508 Ahd 2004 Assessment Year 2001 2002 Darshna H Shah 5 Orient Flats Opp Chaturbhais Hospital Usmanpura Ahmedabad I T O Ward 7 3 Ahmedabad Appellant Versus Respondent Pan Alrps 8966 P For The Appellant Shri S N Devitia For The Respondent Shri D S Chaudhary Sr D R Order Per T K Sharma Judicial Member This Appeal By The Assessee Is Against The Order Dated 16 09 2004 Passed By Ld Co Mmissioner Of Income Tax Appeals Xiii Ahmedabad For The Assess Ment Year 2001 2002 2 The Only Effective Grounds Raised In This Appeal Is That The Learned Commissioner Of Income Tax Appeals Erred In Confirming The Following Additions Disallowance A Loan From Shri Ashwin M Shah 50 000 B Loan From Shri Ramesh M Shah 1 40 000 C Gift From Shri Dharmendra Jain 1 00 000 D Salary To Jaisukhlal Shah 72 000 3 The Briefly The Facts Are That The Assessee Is An Individual Carrying On Business Of Trading In Share And Securi Ties Under The Name Of M S Mansi Investment For The Assessment Year U Nder Appeal He Filed Return Of Income Declaring Total Of Rs 1 61 439 The Assessing 2 Ita No 3508 Ahd 2004 Officer Framed The Assessment Under Section 143 3 Wherein He Made Additions Of Unexplained Cash Credit Of Rs 1 90 00 0 Consisting Of Rs 1 40 000 From Shri Ramesh M Shah And Rs 50 0 00 From Shri Ashwin M Shah The Depositor Shri Ashvin Shah Was Produced Before The Assessing Officer And His Statement On Oath Was Also Recorded On 17 01 2004 The Assessing Officer Observed That Pri Or To Issue Of Cheque To The Assessee On 17 01 2004 The Cash Of Rs 50 000 Has Been Deposited On 16 01 2001 The Assessing Officer Asked The Depositor To Explain The Source Of Cash Deposit Of Rs 50 000 The Depositor Explained That Rs 21 000 Was Received A S Loan From Pf Balance With Employer Reliance Industries And The B Alance Amount Of Rs 15 000 To 17 000 Was Received By Cash From E Mployees Credit Society Of Reliance The Assessing Officer Observed That Yearly Income Of The Depositor During The Financial Year 2000 01 Was Rs 56 155 Only The Assessing Officer Further Observed That Pf Loan Was Credited On 21 03 2001 And Not On 16 01 2001 I E After The Loa N Cheque Was Given To Assessee To Sum Up The Assessing Officer Obse Rved That Depositor Has Failed To Explain The Sources Of Rs 50 000 De Posited In Cash On 16 01 2001 Therefore The Depositor Has No Capacit Y To Give Loan Of Rs 50 000 He Accordingly Made The Addition On Appeal In The Impugned Order The Learned Commissioner Of Income Tax Appeals Confirmed The Same 4 In Respect Of Loan From Shri Ramesh Shah Of Rs 1 40 000 Also The Depositor Was Produced Before The Assessing Off Icer And His Statement On Oath Was Also Recorded The Assessing Officer Observed That There Was A Cash Deposit Of Rs 1 00 000 In H Is Bank Account On 11 04 2004 This Was Explained By The Depositor As Saving Of Last Three Months Before The Assessing Officer Depositor Als O Explained That An Amount Of Rs 40 000 Was Received From His 4 Relat Ives But Depositor Could Not Give The Name Of The Relatives On The Dat E Of The Statement 3 Ita No 3508 Ahd 2004 Recorded On Oath To Sum Up In Respect Of This Dep Ositor Also The Assessing Officer Observed That Creditworthiness Pr Oved Therefore He Treated Rs 1 40 000 As Unexplained Under Section 68 Of The Income Tax Act 1961 5 On Appeal Before The Learned Commissioner Of In Come Tax Appeals The Authorised Representative Of The Ass Essee Contended That It Is Not The Duty Of The Assessee To Explain Sources Of Source The Authorised Representative Also Relied On The Decisi On Of Rohini Builders Vs Dcit Reported In 76 Ttj 521 Ahd And Submitted That The Addition Is Not Sustainable Under Section 68 Of Income Tax A Ct 1961 As Interest Was Also Paid By The Assessee On Such Deposit This Was Allowed By Assessing Officer And Both The Depositors Has Shown The Interest In Their Return Of Income 6 The Learned Commissioner Of Income Tax Appeals Confirmed The Action Of The Assessing Officer For The Details Given In Para 2 2 Which Is Reads As Under 2 2 I Have Considered The Submission Of The Author Ised Representative Carefully And Have Gone Through The Details Submitted By The Authorised Representative It Is F Ound That Shri Ashwin Shah Was Having Income Of Rs 46 155 For Th E Assessment Year 2001 02 And Shri Ramesh M Shah Was Having Income Of Rs 40 984 For The A Y 2001 02 And Thro Ugh They Are Assessed To Income Tax And Their Permanent Account Numbers Have Been Furnished But It Only Proved Their Identi Ty As Regards The Creditworthiness Of The Depositors The Assessin G Officer Has Clearly Observed That There Were Cash Deposits Prio R To The Cheques Issued To The Appellant And The Deposits Co Uld Not Explain The Source Of Cash Deposits In Their Bank A Ccounts They Both Have Meagre Salary And They Do Not Have Suffic Ient Source For The Cash Deposit Of Rs 50 000 By Shri Ashwin Shah And Cash Deposit Of Rs 1 00 000 By Shir Ramesh Shah Prior To The Issue Of Cheques To The Appellant In View Of The Above F Acts I Agree With The Observations Of The Assessing Officer Tha T The Creditworthiness Of The Depositors Have Not Been Pr Oved Therefore I Confirm The Finding Of The Assessing O Fficer And Confirm The Addition Of Cash Credits 4 Ita No 3508 Ahd 2004 7 At The Time Of Hearing On Behalf Of The Assess Ee Shri S N Devetia Appeared And Contended That The Assesse E Has Proved The Identity Genuineness Of The Transaction Both The Learned Departmental Representative Of Authorities Below Treated The Cas H Credit As Unexplained On The Ground That The Creditworthiness Of Both The Depositors Is Not Proved By The Assessee Counsel O F The Assessee Explained That Subsequently An Amount Of Loan Is Refunded To Both The Creditors The Loan From Both The Depositors Was On Interest In The Assessment Order The Assessing Officer Has Allowed The Interest Paid In Case The Depositor Could Not Explained The Sourc Es Of Deposit To The Satisfaction Of Assessing Officer He Submitted Tha T It May Be A Good Ground For Making Addition Under Section 68 In Thei R Individual Assessment In Support Of This The Counsel Of The Assessee Relied On The Decision Of The Itat Ahmedabad Bench In The C Ase Of Rohini Builders Supra He Further Explained That View Ta Ken In The Case Of Rohini Builders Is Upheld By The Honble High Court Of Gujarat 8 On The Other Hand Shri D S Chaudhary Appeared F Or The Revenue Supported The Orders Of The Authorities Bel Ow The Learned Departmental Representative Pointed Out That The Cr Editworthiness Of Both The Depositors Are Not Proved Therefore The Addition Was Rightly Made By Invoking Provisions Contained In Section 68 Of Income Tax Act 1961 9 Having Heard Both The Sides We Have Carefully G One Through The Orders Of Authorities Below It Is Pertinent To Not E That The Assessee Has Discharged Initial Onus Which Lay On Her In Terms O F Section 68 Of Income Tax Act 1961 According To Both The Learned Depart Mental Authorities The Assessee Has Not Proved The Creditworthiness I N This Connection It Is Pertinent To Note That The Loan From Both The Pa Rties Was Received On Interest The Interest Paid Is Allowed By Assessing Officer The Amounts 5 Ita No 3508 Ahd 2004 Of Loans Were Received By Cheque And Also Subsequen Tly Returned By The Cheque Both The Depositors Have Shown Interest Income In Their Return Of Income In These Circumstances Addition Made Under Section 68 Is Not Sustainable As Held By Itat Ahmedabad Ben Ch In The Case Of Rohini Builders Vs Dcit Apart From This If At Al L Any Action Is Required To Be Taken That Should Have Been Taken In Hands Of Depositors In View Of This Addition Of Rs 1 90 000 Made In Respect Of Two Cash Credits Is Deleted 10 In The Assessment Order The Assessing Officer Also Made Addition Of Rs 1 00 000 In Respect Of Gift Receiv Ed From Shri Dharmendra Jain The Assessing Officer Observed Tha T Donor Shri Dhamendra Jain Is Not Relative Of The Assessee In The Statement Recorded The Donor Stated That He Received Rs 1 00 000 From Arihant Textile With Whom He Has Deposited An Amount On Var Ious Dates In The Past And His Annual Income Was Rs 60 000 Only Th E Assessing Officer Made An Inquiry From Social Cooperative Soc Iety Ahmedabad From Which Cheque Of Rs 1 00 000 Was Issued By Do Nor Shri Dharmendra Jain On 22 04 2000 The Assessing Office R Found That On The Same Date An Amount Of Rs 1 00 000 Was Depos Ited By Transfer Entry The Assessing Officer Accordingly Observed T Hat Cheque Of Rs 1 00 000 Credited To Dharmednra Jains Account Is Not Came From Rohit Textile As Claimed By The Donor But Has Came From Durga Trading Company And There Was A Cash Deposit Of Rs 2 00 000 On 22 04 2000 In Account Of Durga Trading Company I E The Date Of Issue Of Cheque By The Donor The Assessing Officer Accor Dingly Observed That The Donor Shri Dharmendra Jain Has No Capacity To Give Gift Of Rs 1 00 000 Looking To His Small Income And Furt Her It Is Stated That He Has Never Given In The Past Even A Small Gifts To H Is Real Relatives Considering These Facts The Assessing Officer Held That Gift Of Rs 1 00 000 Was Not Genuine And Added The Same As Unexplained 6 Ita No 3508 Ahd 2004 Cash Credit To The Total Income Of The Assessee On Appeal In The Impugned Order Learned Commissioner Of Income Tax Appeals Upheld The Action Of The Assessing Officer For The Details Given In Para 3 2 Reads As Under 3 2 I Have Considered The Submissions Of The Auth Orised Representative Carefully I Find That The Donor Is Not Related To The Appellant And The Donor Has Not Given Any Gift In T Hat Year Or In Earlier Years To Any Of His Relatives And There Is No Occasion In The Family Of The Appellant For Such Gift And Further T He Donor Has Not Creditworthiness As The Annual Income Of The Donor Was Only Rs 60 000 And It Is Quite Improbable For A Person Having Income Of Rs 60 000 To Give Gift Of Rs 1 00 000 Out Of His Small Income Which Cannot Be Sufficient For His Living And House Hold Expenses And Nobody Would Like To Utilize His Hard Earned Sa Vings For Making A Gift To An Outsider Unless There Is Any Mo Tive Of Financial Gain He Has Gifted Rs 1 00 000 To Unknown Person Who Is Not His Relative Without Any Occasion Further Before T He Cheque Of Rs 1 00 000 Has Been Issued To The Appellant Cas H Deposit Of Rs 2 00 000 Has Been Made In The Account Of Durga Trading Co On 22 04 2000 For Which The Donor Has No Explan Ation Considering All These Facts And Circumstances The Claim Of Gift Is Not Accepted And It Is Held That The Assessing Offi Cer Has Rightly Treated The Same As Unexplained Cash Credit In The Hands Of The Appellant And The Addition Made By The Assessing Of Ficer Is Confirmed 11 Before Us Counsel Of The Assessee Submitted Th At Mere Fact That Donor Could Not Explain The Source Of Deposit Is N O Ground To Make The Addition He Submitted That Amount Was Received By Cheque The Assessee Has Discharged The Onus Under Section 68 T Herefore Addition Made Be Deleted 12 On The Other Hand Departmental Representative Relying On The Decision Of Punjab And Haryana High Court In The Ca Se Of Tirth Ram Gupta Vs Cit 2008 304 Itr 145 P H Wherein It Was Contended That The Mere Identification And Showing Movement T Hrough Banking Channel Is Not Sufficient To Hold That Gift Was Gen Uine He Further Submitted That There Was No Occasion For The Allege D Donor To Have 7 Ita No 3508 Ahd 2004 Gifted Rs 1 00 000 When His Annual Income Is Only About Rs 60 000 Donor Is Also Not Related To The Assessee 13 Learned Departmental Representative Also Relied On The Decision Of The Punjab And Haryana High Court In The Case Of Jaspal Sinh Vs Cit 290 Itr 306 P H Wherein It Is Held That Asses See Is Also Required To Establish That The Donor Has A Means And The Gif T Was Genuine For Natural Love And Affection The Reliance Was Also P Laced On The Decision Of The Itat Delhi Bench In The Case Of Acit Vs Ra Jiv Tandan 2007 294 Itr At 219 Delhi Wherein It Was Held That Genuineness Of The Gift Transaction Cannot Be Determined Without Looki Ng Into Aspect Of Human Probabilities Relationship Of Donor And Done E Occasion For Making The Gift And Existence Of Reciprocacy If An Y In Case Assessee Failed To Establish Any One Of These The Gift Amou Nts Received By The Assessee Can Be Treated As The Assessees Income Fr Om Undisclosed Sources Representing The Assessees Own Money Intr Oduced In The Garb Of The Gift By The Assessee 14 Having Heard Both The Sides We Have Carefully Gone Through The Orders Of Authorities Below It Is Pertinent To N Ote That In This Case Assessee Has Failed To Establish The Genuineness Of Gift Transactions Keeping In View The Test Of Human Probabilities Re Lationship Of The Donor And Donee There Was No Occasion Of Making The Gift And Existence Of Reciprocacy If Any We Have Carefully Gone Through The Statement Of Donor Recorded On Oath After Carefully Going Throu Gh The Same We Are Convinced That Claim Of Gift Is Rightly Rejected By Both The Departmental Authorities Below Because Donor Has No Creditworth Iness His Annual Income Is Only Rs 60 000 And It Is Quite Improbab Le For The Person Having Income Of Rs 60 000 To Give Gift Of Rs 1 0 0 000 Out Of A Small Income Which Is Not Even Sufficient For His Living And Household Expenses Under Section 68 Of The Income Tax Act 1 961 The Onus Of 8 Ita No 3508 Ahd 2004 Establishing Genuineness Of The Gift Is Heavier As Compare To Establishing Genuineness Of Cash Credit The Reason S Are That In Case Of Cash Credit Creditor Always Has Right To Recover T He Money Given To The Assessee Whereas In Case Of Gift The Donor Loses T He Lien Over The Gifted Amount Forever We Therefore Inclined To U Pheld The Order Of The Learned Commissioner Of Income Tax Appeals Confi Rming The Addition Of Rs 1 00 000 15 In The Assessment Order Assessing Officer Disa Llowed The Salary Paid To Jaisukhlal Shah Amounting To Rs 72 000 By Invoking The Provisions Contained In Section 40 A 2 Of The I T A Ct 1961 Counsel Of The Assessee Submitted That The Salary Paid Is Neit Her Excessive Nor Unreasonable Because Last Year It Was Rs 7 000 Pe R Month This Year Assessee Paid Rs 10 000 Per Month On The Other H And Learned Departmental Representative Pointed Out That Salary Payment Made To Shri J H Shah Father Of The Assessee Is Not Commens Urate With The Legitimate Business Needs And Not Commiserate With The Services Rendered By Him Looking To Educational Qualificatio N Therefore The Salary Allowed By The Assessing Officer Rs 48 000 I E Rs 4 000 Per Month Is Reasonable 16 We Have Carefully Gone Through The Order Of The Authorities Below It Is True That Last Year Assessee Claimed S Alary Paid Rs 7 000 Per Month It Is Not Known Whether That Assessment Was Framed Under Section 143 3 Of It Act Be That It M Ay Be At The Relevant Paras Computer Trained Commerce Graduates Were Ava Ilable For Rs 3 000 Per Month The Father Of The Assessee Is Only Matriculate The Accounts Of The As Are Maintained On Computer There Is No Evidence That Shri J H Shah Is Computer Trained Th Ere Is One More Employee Who Was Paid Salary Of Rs 14 400 Per Ann Um Keeping In View The Provision Contained In Section 40 A 2 Of T He I T Act In Out 9 Ita No 3508 Ahd 2004 Opinion It Will Meet The Ends Of Justice If The Sa Lary Paid To The Extent Of Rs 6 000 Per Month Is Treated As Fair And Reasona Ble We Accordingly Direct The Assessing Officer To Allow The Salary To The Extent Of Rs 72 000 The Addition To The Extent Of Rs 48 00 0 Is Upheld 17 In The Result Appeal Of The Assessee Is Partly Allowed This Order Is Pronounced In Open Court On Dated 29 Th January 2010 Sd Sd A N Pahuja T K Sharma Accountant Member Jud Icial Member Ahmedabad Dated 29 01 2010 Paras Copy Of The Order Forwarded To 1 The Appellant 2 The Respondent 3 The Cit A Concerned 4 The Cit 5 The Dr Ahmedabad Bench 6 The Guard File By Order True Copy Asstt Registrar Deputy Registrar Itat Ahmedabad Benches Ahmedabad