Shri Sukhdev R.Acharya, Deesa v. The Income tax Officer,(OSD)Cent.Ward-2(1),, Ahmedabad

ITA 4014/AHD/2007 | 2004-2005
Pronouncement Date: 18-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 401420514 RSA 2007
Assessee PAN ACBPA3264B
Bench Ahmedabad
Appeal Number ITA 4014/AHD/2007
Duration Of Justice 3 year(s) 4 month(s) 15 day(s)
Appellant Shri Sukhdev R.Acharya, Deesa
Respondent The Income tax Officer,(OSD)Cent.Ward-2(1),, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 18-03-2011
Date Of Final Hearing 02-02-2011
Next Hearing Date 02-02-2011
Assessment Year 2004-2005
Appeal Filed On 02-11-2007
Judgment Text
ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH AH MEDABAD BEFORE SHRI G.D. AGARWA V.P. & SHRI MUKUL KR. SHRAWAT. I .T.A. NO. 4014 /AHD/2007 (ASSESSMENT YEARS: 2004-05) SHRI SUKHDEV R. ACHARYA SINDHI COLONY DEESA. (APPELLANT) VS. THE INCOME TAX OFFICER CENTRAL CIRCLE-2 (1) 3 RD FLOOR AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD. (RESPONDENT) I .T.A. NO. 1340 /AHD/2008 (ASSESSMENT YEAR: 2004-05) THE INCOME TAX OFFICER CENTRAL CIRCLE-2 (1) 3 RD FLOOR AAYAKAR BHAVAN ASHRAM ROAD AHMEDABAD. (APPELLANT) VS. SHRI SUKHDEV R. ACHARYA SINDHI COLONY DEESA. (RESPONDENT) PAN: ACBPA 3264 B BY ASSESSEE : SHRI S.N. SOPARKAR SR. ADV. BY REVENUE : DR. RAJA RAM SAH SR. D.R. ( (( ( )/ )/)/ )/ ORDER PER: SHRI MUKUL KUMAR SHRAWAT J.M. BOTH THESE APPEALS PERTAINED TO THE SAME ASSESSMEN T YEAR I.E. ASSESSMENT YEAR 2004-05 ONE IS AGAINST THE QUANTUM ADDITION AND THE OTHER IS IN RESPECT OF THE LEVY OF PENALTY UNDER SECTION 271(1)(C ). SINCE THE ISSUE INVOLVES ROUNDS THE COMMON FACTS THEREFORE THESE T WO APPEALS HAVE BEEN CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDE R. ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 2 (A) ITA NO.4014/AHD/2007 ( ASSESSEES APPEAL) . 2. GROUND NO.1 . IN THE FACTS OF THE CASE INTEREST OF RS.10 05 003/- PAID TO SHREERAM FINANCE IS ADMISSIBLE BUSINESS EXPENDITURE AND BE ALLOWED I N FULL. DISALLOWANCE OF PORTION RS.3 95 809/- TREATING AS F OR NON BUSINESS PURPOSE BE DELETED. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S. 143(3) DATED 27-12-2006 WERE THAT THE A SSESSEE IN INDIVIDUAL CAPACITY IS IN THE BUSINESS OF TRADING IN SHARES AN D ALSO TRADING CERTAIN OILS SUCH AS KEROSENE OIL AND MOTOR-OIL. ON VERIFICATION OF DETAILS IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED INTEREST OF RS.10 05 003/- PAID TO SHRI RAM FINANCE. IT WAS ALSO NOTICED BY THE ASSESSING OFFICER THAT A SUM OF RS.7 590/- WAS PAID TO SMT. GUNVATI P. THAKK AR. BOTH THESE PARTIES WERE STATED TO BE CONNECTED WITH THE ASSESSEE ONE BEING GROUP FINANCE COMPANY AND THE OTHER BEING A RELATIVE OF THE ASSESSEE. IT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT TOWARDS NON BUSINESS ASSETS SUBSTANTIAL INVESTMENT WAS MADE. IT HAS ALSO BEEN NOTICED BY THE ASSESSING OFF ICER THAT THE ASSESSEE HAD MADE INVESTMENT IN SHARES OF RS.1 39 29 108/- AND T HE INCOME EARNED FROM SHARES AND GOVERNMENT BONDS WAS AN EXEMPTED INCOME. THE ASSESSING OFFICER HAS SUMMARIZED THE POSITION OF THE FUNDS OF THE ASS ESSEE AND THEREAFTER ARRIVED AT THE CONCLUSION THAT THE ASSESSEE HAD UTILIZED BO RROWED FUNDS TOWARDS INVESTMENT IN NON BUSINESS ASSETS OR IN CERTAIN ASS ETS FROM WHICH THE EXEMPTED INCOME WAS EARNED. THE ASSESSING OFFICER THEREFORE ARRIVED AT THE CONCLUSION THAT ON THE TOTAL INTEREST BEARING FUNDS OF RS.2 31 54 404/- AN INTEREST OF RS.10 05 003/- WAS PAID. HOWEVER THE PROPORTIONATE INTEREST ON THE DIVERSION OF FUNDS WAS COMPUTED AT RS.3 95 809/- AFTER HOLDING T HAT FUNDS WERE DIVERTED TO THE TUNE OF RS.9 50 754/-. IN THE RESULT THE SAID ADDITION WAS MADE WHICH WAS CHALLENGED BEFORE THE LD. C.I.T. (APPEALS). AFTER C ONSIDERING THE NUMBER OF ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 3 DECISIONS LD. C.I.T. (A) HAS AFFIRMED THE FINDINGS OF THE ASSESSING OFFICER VIDE FOLLOWING PARAGRAPH :- 6. THE CONTENTIONS/DETAILS IN THIS REGARD FILED BY THE APPELLANT BY WAY OF A PAPER BOOK CONSISTING OF COPIES OF INCOME TAX RETURNS AND BALANCE SHEETS AS ALSO THE COPY OF ACCOUNT OF M/S. SHREE RAM FINANCE AND OF GODOWN CONSTRUCTION ACCOUNT ETC. W ERE CONSIDERED. THE APPELLANT HAS LABOURED TO SUPPORT HIS CONTENTIO N THAT HE WAS TRADING IN SHARES AND THEREFORE THE INVESTMENT MADE BY HIM IN THE AFOREMENTIONED SHARES WAS FOR BUSINESS PURPOSE AND THAT THE AMOUNT EXPENDED IN THE CONSTRUCTION OF THE STATED G ODOWN WAS ALSO FOR THE PURPOSE OF BUSINESS. HOWEVER ON BOTH COUNT S THE CONTENTIONS OF THE APPELLANT ARE NOT TENABLE. THE I NVESTMENT IN SHARES OF THE GROUP COMPANIES WAS NOT WITH A MOTIVE OF EARNING PROFITS AND NO EVIDENCE HAS BEEN PRODUCED TO ESTABL ISH THAT THE SHARES WERE BEING HELD AS STOCK-IN-TRADE. IN THE E VENT IT CANNOT BE SAID THAT THE INVESTMENT OF THE BORROWED FUNDS TO T HE EXTENT CLAIMED BY THE APPELLANT WAS FOR BUSINESS PURPOSE. THE GOD OWN CONSTRUCTION WAS UNDERTAKEN DURING THE PREVIOUS YEA R AND RS.70.22 LAKHS IS STATED TO HAVE BEEN EXPENDED A FACT THAT WAS CONSIDERED BY THE ASSESSING OFFICER WHILE COMPUTING THE PROPORTIO N OF THE DISALLOWANCE. NO INFIRMITY IS THEREFORE SEEN IN TH E ACTION OF THE ASSESSING OFFICER IN MAKING THE PROPORTIONATE DISAL LOWANCE OF RS.3 95 809/-. THE DISALLOWANCE IS THEREFORE CONFI RMED. 2.2. WITH THIS BRIEF BACKGROUND WE HAVE HEARD BOTH THE SIDES. THERE ARE FEW THINGS WHICH WERE BROUGHT TO OUR NOTICE BY THE LD. AUTHORIZED REPRESENTATIVE MR. S. N. SOPARKAR. THROUGH A BUSINESS CHART OF LAST F EW YEARS. HE HAS ARGUED THAT THE ASSETS WHICH WERE TREATED AS NON BUSINESS ASSET S WERE WRONG BECAUSE THE UTILITY OF INVESTMENT IN GODOWN WAS FOR THE PURPOSE TO EARN THE RENTAL INCOME. LIKEWISE THE INVESTMENT IN SHARES WAS NOT FULLY TO EARN THE EXEMPTED INCOME BUT THE BEING A TRADER IN SHARES THEREFORE EARNED TAXABLE INCOME AS WELL. IN SUPPORT OF THIS CONTENTION THE LD. AUTHOR IZED REPRESENTATIVE HAS RELIED UPON THE DECISIONS OF I.T.A.T. C BENCH BEARING I.T. A.NO.4012 4013/AHD/2007 & ITA NO. 2946/AHD/2008 ORDER DATED 15-10-2010 WHEREI N IT WAS HELD AS UNDER :- IN THE INSTANT CASE THE LD. C .I.T.(A) HAVE NOT C ARED TO TAKE NOTICE OF THE FACT SITUATION IN THE PRECEDING SO MA NY YEARS. THE INCOME EARNED ON TRADING IN SHARES FOR THE PREVIOUS SO MANY ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 4 ASSESSMENT YEARS WAS IN THE CONTEXT OF THE VERY SA ME FACTS AND CIRCUMSTANCES AS ARE RELEVANT FOR THE YEAR UNDER CO NSIDERATION HAS BEEN TREATED AS BUSINESS INCOME OF THE ASSESSEE AND THE REVENUE HAVE ACCEPTED THIS POSITION. IN THE ABSENCE OF MATE RIAL CHANGE IN FACTS OR ANY ADDITIONAL INPUT THERE WAS NO COMPELL ING REASON FOR TAKING A DIFFERENT VIEW. IN VIEW OF THE FOREGOING WE HAVE NO HESITATION IN REVERSING THE FINDINGS OF THE LD. C.I .T.(A) AND THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE INCOME FROM SHARING TRADING UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION. WITH THESE OBSERVATIONS GROUND NO.1 R AISED BY THE AFORESAID TWO ASSESSES IN THEIR APPEALS IS ALLOWED. 2.3. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRES ENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 2.4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE VIEW THAT THE ISSUE IN HAND NOW REQUIRES RE-CONSIDERATION BEC AUSE OF THE LATEST FEW DECISIONS AS PRONOUNCED IN THE CASE OF RELIANCE UTI LITY AND POWER LTD. 221 CTR-435 (MUMBAI) AND S.A. BUILDDERS 288 ITR-1 (S.C. ). CUMULATIVE EFFECT OF THESE DECISIONS IS THAT THE ASSESSEE HAS TO ESTABLI SH THE COMMERCIAL EXPEDIENCY TO CLAIM THE INTEREST ALLOWANCE. SECONDLY ASSESSE E IS REQUIRED TO DEMONSTRATE THE SUFFICIENCY OF INTEREST FREE FUNDS OF ITS OWN A ND IF SO DEMONSTRATED SUCCESSFULLY THEN A PRESUMPTION CAN BE LAID DOWN TH AT THE INVESTMENT WOULD HAVE BEEN OUT OF THOSE FUNDS. HOWEVER THE ASSESSEE HAS TO DISCHARGE THE FIRST ONUS TO DEMONSTRATE THAT THERE WAS SUFFICIENT INTER EST BEARING FUNDS WHICH WERE UTILISED TOWARDS NON INTEREST BEARING ADVANCES OR I NVESTMENT. THE LD. AUTHORIZED REPRESENTATIVE HAS ALSO MADE A STATEMENT THAT THE RESPECTED TRIBUNAL HAS HELD IN THE CASE OF THE ASSESSEES BRO THER VIZ. SHRI POONAMCHAND R. ACHARYA CITED SUPRA THAT THE INCOME FROM SHARE TRADING WAS TO BE TREATED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. THIS ASPECT HAS ALSO NOT BEEN CONSIDERED SO FAR IN ASSESSEES CASE. THEREFORE IN THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE WE ARE RESTORING THIS IS SUE BACK TO THE FILE OF THE LD. C.I.T.(A) TO BE DECIDED ACCORDINGLY AFRESH NEEDLE SS TO SAY AFTER PROVIDING THE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE. TH IS GROUND OF THE ASSESSEE IS THEREFORE ALLOWED ONLY FOR STATISTICAL PURPOSE. ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 5 3. GROUND NO.2 ADDITION OF GIFTS AGGREGATING TO RS.20 00 000/- ( TWENTY LACS) UNDER THE HEAD OTHER SOURCES WITHOUT DISPROVING THE EVIDE NCES FILED AND ON RECORD AND ON THE BASIS THAT DONORS ARE NOT IN RELA TIONS AND OUTSIDERS AND THUS THE GIFTS ARE INCOME U/S. 68 BE DELETED. THE A PPELLANT SUBMITS THAT NO INDEPENDENT ENQUIRIES MADE BY ASSESSING OFFICER AND NO OPPORTUNITY GRANTED. THE APPELLANT RELIES ON SUBMISSIONS VIDE L ETTER DATED 21-12-2006 FILED BEFORE A.O. AND CIT (A)-III AHMEDABAD. 3.1. IT WAS NOTED BY THE ASSESSING OFFICER THAT A S UM OF RS.20 LACS WAS INTRODUCED IN THE CAPITAL OF MINOR DAUGHTER MS. ART IBEN S. ACHARYA. THE DETAILS OF THE GIFTS RECEIVED AS RECORDED BY THE ASSESSING OFF ICER WERE AS FOLLOWS :- SR. NO. NAME OF DONOR AND ADDRESS. DATE OF GIFT AMOUNT OF GIFT DRAFT NO. NAME OF DONEE AND ADDRESS. (1) JAYABEN RATILAL SHAH 16 SHREE BUILDING 3 RD FLOOR L.G. CROSS ROAD NO.4 MALAD (W) MUMBAI-64. 16-02-2004 9 00 000/- BY DRAFT NO.238355 BANK OF INDIA MUMBAI 1 00 000/- BY DRAFT NO.238356 BANK OF INDIA MUMBAI. MINOR AARTI SUKHDEV ACHARYA (DAUGHTER OF ASSESSEE) (2) JAYABEN RATILAL SHAH 16 SHREE BLDG. 3 RD FLOOR L.G. CROSS ROAD NO.4 MALAD (W) MUMBAI-64. 14-02-2004 5 00 000/- BY DRAFT NO.238355 BANK OF INDIA MUMBAI. MINOR AARTI SUKHDEV ACHARYA (DAUGHTER OF ASSESSEE). (3) VISHWANATH RAM REKHA SHARMA. 20-02-2004 2 00 000/- BY DRAFT NO.576590 OF HDFC BANK. MINOR AARTI SUKHDEV ACHARYA (DAUGHTER OF ASSESSEE). (4) RAJNIKANT NAGINDAS 13-02-2004 3 00 000/-BY DRAFT NO.576590 OF MINOR AARTI SUKHDEV ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 6 BHAVSAR. HDFC BANK. ACHARYA (DAUGHTER OF ASSESSEE). 3.2. IN RESPECT OF THE GIFT MADE BY SMT. JAYABEN R.SHAH IT WAS NOTED BY THE A.O. THAT THE PAN NO. WHICH WAS INFORMED BELONGED T O SOME OTHER PERSON AND WRONG INFORMATION WAS SUPPLIED BY THE ASSESSEE. IT WAS ALSO NOTED BY THE A.O. THAT AS PER THE BALANCE SHEET OF SMT. JAYABEN R. SH AH THERE WAS BANK BALANCE OF RS.48 835/- ONLY. IT HAS ALSO BEEN NOTED THAT TH E ASSETS AS DISCLOSED BY HER WERE IN THE NATURE OF FLAT JEWELLERY RBI TAX FREE BONDS AND PPF ETC. IT HAS ALSO BEEN NOTED BY THE A.O. THAT THE ASSESSEE HAS N OT ESTABLISHED ANY RELATIONSHIP WITH THE SAID DONOR. THE GENUINENESS O F THE GIFT WAS DOUBTED AND TAXED IN THE HANDS OF THE ASSESSEE. 3.3. IN RESPECT OF THE GIFT OF RS.2 LACS BY SHRI VISHWANATH RAM REKHA SHARMA THE PRESUMPTION OF THE A.O. WAS THAT HIS ADDRESS W AS NOT GIVEN BY THE ASSESSEE. IT WAS NOTED BY THE A.O. THAT NO CONFIRMA TION WAS PLACED ON RECORD FROM THE SO-CALLED DONOR AND THE EVIDENCES WERE NOT LEGIBLE BECAUSE THE ADDRESS PAN NO. THE DETAILS OF THE I.T.O. ALL WE RE NOT LEGIBLE FROM THE RETURN OF INCOME FILED. MOREOVER IN THE ABSENCE OF ANY OCCAS ION OR FESTIVAL AND FURTHER THAT THE ASSESSEE HAS NOT FURNISHED ANY RELATIONSHI P WITH THE DONOR IT WAS HELD AS DIFFICULT TO ACCEPT THE EXPLANATION OF THE ASSESSEE . THEREFORE THE IMPUGNED AMOUNT WAS TAXED. 3.4. IN RESPECT OF THE GIFT RECEIVED FROM SHRI RAJNIKANT N. BHAVSAR FOR A VALUE OF RS.3 LACS IT WAS NOTED BY THE A.O. THAT THE ADDRESS AND THE PAN WERE NOT LEGIBLE. IT HAS ALSO NOT BEEN PROVED THAT THERE WAS ANY RELATIONSHIP BETWEEN THE DONOR AND THE DONEE. IN THE ABSENCE OF ANY DONO R AND DONEE RELATIONSHIP AS WELL AS IN THE ABSENCE OF ANY GIFT FOR THE OCCASION THE A.O. HAS TAXED THE SAME IN THE HANDS OF THE ASSESSEE. AT THE END IT WAS HE LD THAT THOUGH THE GIFTS WERE RECEIVED THROUGH DEMAND DRAFT BUT THOSE WERE NOT GE NUINE GIFTS AND TAXED ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 7 ACCORDINGLY BY INVOKING THE PROVISIONS OF SECTION 6 8 OF THE ACT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WHO HA S AFFIRMED THE ACTION OF THE ASSESSING OFFICER VIDE FOLLOWING PARAGRAPH :- 9. THE CONTENTIONS/DETAILS ON RECORD WERE CAREFULL Y CONSIDERED. THE ADDITIONAL EVIDENCE IN FORM OF A DECLARATION / COPY OF PAN CARD BY THE DONOR JAYABEN IS OF NO CONSEQUENCE IN FACE OF THE SUBSTANTIAL CORROBORATORY EVIDENCE TO THE CONTRARY AND THE LEGAL POSITION ON SIMILAR GIFTS. IT IS SEEN THAT THE APPE LLANT HAS NOT ANSWERED THE BASIC QUESTION RAISED BY THE A.O. AS T O THE RELATIONSHIP OF THE DONOR AND THE DONEE AND THE OCCASION WHICH P ROMPTED THESE GIFTS FROM THREE DIFFERENT PERSONS RESIDING AT DIFF ERENT PLACED WITHIN THE SPACE OF 6 DAYS. THE APPELLANT HAS NOT EXPLAINE D THE STRANGE MODUS OPERANDI OF MAKING THESE STATED GIFTS FOR EX AMPLE A DRAFT OF RS.9 LAKHS AND A DRAFT OF RS.1 LAKH HAS BEEN MADE O N THE SAME DATE FROM THE SAME BANK OF INDIA BRANCH IN MUMBAI AND BE AR THE SAME CONSECUTIVE NUMBERS I.E. D.D. NO. 238355 AND 238356 . ONE APPARENT EXPLANATION FOR THE STAGGERING OF THIS GIFT AMOUNT IS THAT THE SINGLE DEPOSIT OF RS.10 LAKHS AND ABOVE IN CASH TO PURCHA SE A DRAFT IS BEING INFORMED TO DIFFERENT REGULATORY AGENCIES AND SO TO OBVIATE THIS POSSIBILITY TWO DRAFTS WERE GOT MADE. THE OTH ER TWO DONORS HAVE ALSO PURCHASED DRAFTS APPARENTLY BY CASH. THE CAPI TAL ACCOUNT OF ONE OF THE STATED DONORS SHRI VISHWANATH FOR THE F. Y. 2003-04 REVEALS A TOTAL WITHDRAWAL OF RS.45 630/- ONLY AND THAT OF THE OTHER STATED DONOR NAGINDAS THE WITHDRAWAL IS OF RS.25 500/- IN THE A.Y. 2002-03. THE DETAILS IN RESPECT OF THESE THREE DONORS FOR TH E ASSESSMENT YEAR IN QUESTION I.E. 2004-05 HAVE NOT BEEN FURNISHED. T HE AUTHENTICITY OF THE STATED GIFTS; OF ITS QUANTUM AND ITS FACTUM AS ALSO THE CAPABILITY/ MOTIVE/CREDITWORTHINESS OF THE STATED DONORS IS NO T ESTABLISHED IN ANY MANNER. THE UTILIZATION OF THE AMOUNT SHOWN REC EIVED AS GIFT BY ITSELF AROUSES FURTHER SUSPICION. THE GIFT HAS BE EN DEPOSITED IN THE MINOR DONEES ACCOUNT AND DEPOSITED WITH M/S. SHREE RAM FINANCES A GROUP CONCERN WITH WHOM THE FATHER OF THE MINOR D ONEE I.E. THE APPELLANT USED TO OBTAIN LOANS. IN THE FACTS AND C IRCUMSTANCES I AGREE WITH THE CONCLUSIONS OF THE A.O. THAT THE FAC TUM OF THE GIFT REMAINS UNEXPLAINED / UNAUTHENTICATED. THE ACTION OF THE A.O. IN MAKING THE ADDITION IS THEREFORE UPHELD AND THE ADD ITION OF RS.20 LAKHS SO MADE IS CONFIRMED. 3.5. FROM THE SIDE OF THE APPELLANT SHRI S.N. SOPAR KAR APPEARED AND AGAIN REITERATED THAT IN RESPECT OF THE THREE DONORS NAME LY MS. JAYABEN R.SHAH SHRI VISHWANATH RAMREKHA SHARMA AND SHRI RAJNIKANT BHAVS AR ASSESSEE HAS ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 8 FURNISHED THE GIFT DEED CONFIRMATIONS DETAILS OF DEMAND DRAFTS AND THE RETURNS FILED. ONCE ALL THESE INFORMATIONS WERE PLACED BEFO RE THE REVENUE AUTHORITIES HENCE THERE WAS NO OCCASION TO DIS-BELIEVE THE EXPL ANATION OF THE ASSESSEE. THE LD. AUTHORIZED REPRESENTATIVE HAS REFERRED THE PAGE S OF COMPILATION CONTAINING COPY OF GIFT DEED COPY OF DEMAND DRAFT AND THE COP IES OF THE INCOME TAX RETURNS. 4. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE LD. DEPARTMENTAL REPRESENTATIVE DR RAJA RAM SAH SR. D.R. APPEARED AND VEHEMENTLY SUPPORTED THE VIEW TAKEN BY THE AUTHORITIES BELOW A ND ALSO CITED THE FOLLOWING DECISIONS :- 1. SAJJAN DASS AND SONS VS. C.I.T. 264 ITR-435 (DEL HI); 2. ITO VS. DR. JAGDISH J. KANSAGARA 66 ITD -381 (AH D) 3. C.I.T. VS. PRECISION FINANCE PVT. LTD. 208 ITR-4 65 (CAL.) 4. C.I.T. VS. P. MOHANAKALA & OTHERS. 291 ITR 278(S C). 4.1. HAVING HEARD SUBMISSIONS OF BOTH THE SIDES WE ARE OF THE VIEW THAT ONCE THE HONBLE HIGH COURT HAS HELD THAT SOME IDENTIFI CATION OF THE DONOR AND MERELY SHOWING THE MOVEMENT OF THE GIFT THROUGH BANKING CH ANNEL IS NOT SUFFICIENT TO ACCEPT A GIFT AS A GENUINE GIFT. RELEVANT PORTION I S REPRODUCED BELOW:- THE ASSESSEE CLAIMED RS.3 LAKHS AS A GIFT FOR THE ASSESSMENT YEAR 1993-94. DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSING OFFICER MADE ENQUIRIES WHICH REVEALED THA T IN THE AFFIDAVIT FILED IN SUPPORT OF THE SAID GIFT THE DATE OF ATTES TATION BY THE NOTARY AND THE DATE OF EXECUTION OF THE AFFIDAVIT BY THE D EPONENT DID NOT TALLY; THE NOTARY AFFIRMED THAT ON THE DATE ON WHIC H THE NOTARY NOTARIZED THE DOCUMENT THE DEPONENT WAS PRESENT BEF ORE HIM BUT THE PASSPORT OF THE DEPONENT SHOWED THAT HE WAS NOT IN INDIA ON THAT DATE; THE SIGNATURES OF THE DONOR ON THE GIFT DEED AND THE PASSPORT DID NOT TALLY. MOREOVER THE DONOR HIMSELF HAD CONTR ADICTED THE ASSERTIONS OF THE ASSESSEE AND HAD SENT A LETTER TO THE DIRECTORATE OF ENROCEMENT WHEREIN HE DENIED HAVING MADE ANY GIFT T O ANY PERSON AT ANY POINT OF TIME. THE ASSESSING OFFICER TREATED THE SAID AMOUNT AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME TO TH E TOTAL INCOME ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 9 OF THE ASSESSEE AS UNDISCLOSED INCOME. THE APPELLA TE AUTHORITIES CONFIRMED THE ORDER OF THE ASSESSING OFFICER. ON AP PEAL: HELD THAT A MERE IDENTIFICATION OF THE DONOR AND S HOWING THE MOVEMENT OF THE GIFT AMOUNT THROUGH BANKING CHANNEL S WAS NOT SUFFICIENT TO PROVE THE GENUINENESS OF THE GIFT. SI NCE THE CLAIM OF GIFT WAS MADE BY THE ASSESSEE THE ONUS LAY ON HIM NOT O NLY TO ESTABLISH THE IDENTITY OF THE PERSON MAKING THE GIFT BUT ALSO HIS CAPACITY TO MAKE A GIFT AND THAT IT HAD ACTUALLY BEEN RECEIVED AS A GIFT FROM THE DONOR. HAVING REGARD TO THE INQUIRIES CONDUCTED BY THE ASSESSING OFFICER FROM THE BANK WITH WHICH THE ASSESSEE WAS ADMITTEDLY CONFRONTED AND BEARING IN MIND THE FACT THAT ADMITT EDLY THE DONOR WAS NOT RELATED TO THE ASSESSEE THE FINDINGS RECOR DED BY THE TRIBUNAL WERE PURE FINDINGS OF FACT WARRANTING NO I NTERFERENCE. THE APPEAL WAS LIABLE TO BE DISMISSED. 4.2. NOW IT IS A SETTLED LEGAL POSITION AS DECIDED BY SEVERAL HONBLE COURTS THAT THE ASSESSEE IS UNDER STRICT OBLIGATION AND HEAVY B URDEN TO DEMONSTRATE THE GENUINENESS OF THE GIFT MEANING THEREBY THE OCCASI ON ON WHICH A GIFT HAS BEEN MADE AND THE RELATIONSHIP BETWEEN THE DONOR AND THE DONEE MUST ALSO BE ESTABLISHED./ EVEN THE HONBLE DELHI HIGH COURT IN THE ABOVE DECISION HAS DECIDED THE ISSUE IN FAVOUR OF THE REVENUE BY MAKIN G AN OBSERVATION THAT ADMITTEDLY THE DONOR WAS NOT RELATED TO THE ASSESS EE. APART FROM THIS LEGAL ASPECT IN THE CASE OF SMT. JAYABEN R. SHAH IT WAS N OT CLEAR THAT WHY THREE DRAFTS WERE MADE FROM BANK OF INDIA MUMBAI RESPECTIVELY O F RS.9 LAKHS RS.1 LAC AND RS.5 LACS INSTEAD OF GIFTING THE SAID SUM OF RS.15 LACS BY A SINGLE DRAFT. FURTHER IT HAS NOT BEEN ESTABLISHED THAT HOW A DONOR HAD MA NAGED TO MEET SUCH A HUGE AMOUNT OF GIFT WHEN THERE WAS OUTSTANDING BALANCE O F RS.2 000/ ONLY- IN THE BANK ACCOUNT. A SERIOUS DOUBT HAS ALSO BEEN RAISED IN R ESPECT OF THE PAN CARD NO AS INFORMED BY THE ASSESSEE WHICH WERE FOUND INCORRE CT. IN RESPECT OF OTHER DONOR VIZ. SHRI VISHWANATH R. SHARMA INCOMPLETE INFORMATION WAS FURNISHED DUE TO WHICH IT WAS NOT CONCLUSIVELY PROVED THAT TH E DONOR WAS HAVING SUFFICIENT FUNDS TO MAKE A GIFT TO THE ASSESSEE. THE AUTHORITI ES BELOW WANTED TO KNOW THE POSITION OF FUNDS BUT IN THE ABSENCE OF BALANCE SHE ET AND OTHER RELATED EVIDENCE IT COULD NOT BE ESTABLISHED. EVEN IT WAS NOTED BY THE A.O. THAT DUE TO ILLEGIBLE ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 10 AND INCOMPLETE DETAILS INVESTIGATION COULD NOT BE M ADE. IT HAS ALSO BEEN MENTIONED THAT A PERSON HAVING NOMINAL PROFIT AND I NSUFFICIENT CAPITAL MUST NOT BE IN A POSITION TO MAKE A GIFT OF SUBSTANTIAL AMOUNT OF RS.2 LACS TO THE ASSESSEE. LIKEWISE IN THE CASE OF THIRD DONOR VIZ. RAJNIKANT BHAVSAR THE A.O. WAS NOT ABLE TO MAKE THE INQUIRIES BECAUSE THE PAN CARD NO WAS NOT LEGIBLE AND THE INFORMATION ABOUT THE INCOME TAX OFFICER WAS ALSO F OUND TO BE INCORRECT. AS PER THE INFORMATION FURNISHED THE RETURN FOR A.Y . 2002 -03 WAS FILED IN WARD 9(1) AHMEDABAD BUT THAT RETURN WAS NOT TRACEABLE. FURTHE R IT HAS ALSO BEEN NOTED THAT SUPPORTING EVIDENCE SUCH AS PROFIT AND LOSS CAPITA L ACCOUNT AND BALANCE SHEET ETC. HAVE ALSO NOT BEEN FURNISHED TO ESTABLISH THE CAPACITY OF THE DONOR. AS FAR AS THE QUESTION OF THE OCCASION OF THE GIFT AND THE RELATIONSHIP BOTH WERE NOT ESTABLISHED AT ALL BY THE ASSESSEE. THE ASSESSEE HA S ALSO NOT FURNISHED OTHER CORROBORATIVE EVIDENCE OR INFORMATION TO DEMONSTRAT E GENUINENESS OF THE GIFT. 4.3. IN THE TOTALITY OF THE CIRCUMSTANCES OF THE CA SE AND IN THE LIGHT OF THE OBSERVATIONS MADE HEREINABOVE AS ALSO THE CASE LAWS CITED SUPRA WE ARE OF THE VIEW THAT THE REVENUE AUTHORITIES HAVE RIGHTLY ADDE D THE IMPUGNED GIFTS IN THE HANDS OF THE ASSESSEE. THEREFORE WE HEREBY CONFIRM THOSE FINDINGS AND DISMISS THIS GROUND. 5. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSE. (B) I.T.A. NO.1340/AHD/2008 . ( REVENUES APPEAL ) : 6. GROUND NO.1. THE LD. C.I.T. (A) ERRED IN LAW AND ON FACTS IN RE STRICTING THE PENALTY U/S.271(1)(C) OF THE ACT OF RS.6 51 000/- TO RS.17 000/- AND THUS ALLOWING RELIEF OF RS.6 34 000/- 7. THROUGH PENALTY ORDER PASSED UNDER SECTION 271(1 )(C ) DATED 29-3-2007 A PENALTY OF RS.6 51 000/- WAS IMPOSED IN RESPECT OF AN ADDITION OF RS.60 000/- ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 11 PERTAINING TO A DISALLOWANCE AGAINST SALARY INCOME AND AN ADDITION U/S. 68 IN RESPECT OF THE GIFTS RECEIVED OF RS.20 LACS. THE SA ID PENALTY WAS CHALLENGED BEFORE THE LD. C.I.T. (A) WHO HAS CONSIDERED BOTH T HE REASONS AND ARRIVED AT THE CONCLUSION THAT PENALTY COULD BE LEVIED ONLY IN RES PECT OF DISALLOWANCE OF RS.60 000/- HENCE IT WAS REDUCED TO RS.17 000/-. BE CAUSE PENALTY WAS SUBSTANTIALLY REDUCED THEREFORE NOW THE REVENUE I S IN APPEAL. 8. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED TH E ORDER OF THE AUTHORITIES BELOW. THE COMPILATION FILED HAS ALSO B EEN CONSIDERED. WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. C.I.T.(A). RELEVANT PORTION FOR READY REFERENCE IS AS FOLLOWS :- 5. THE CONTENTIONS/DETAILS ON RECORD/JUDICIAL DEC ISIONS WERE CAREFULLY CONSIDERED. IT IS SEEN THAT THE OBSERVATI ONS OF THE A.O. THAT THE PAN OF ONE OF THE DONORS WAS INCORRECT AND THAT THE OTHER DONOR COULD NOT BE SERVED SUMMONS WHILE THE THIRD DONOR R AJNIKANT HAVING DENIED . ARE EITHER NOT BORNE OUT FROM THE RECORD AND/OR CONSTITUTE MATERIAL COLLECTED BEHIND BACK OF THE APPELLANT WI THOUT PROVIDING HIM OPPORTUNITY TO EXPLAIN/CROSS EXAMINE AND THERE FORE LACK VALIDITY. IN ITS DECISION REPORTED IN 190 ITR 39 THE HONBLE HIGH COURT OF GUJARAT HELD THAT THE PENALTY AND ASSESSMENT PROCEE DINGS WERE SEPARATE AND SO THE ASSESSEE WAS ENTITLED TO ADDUCE ANY EVIDENCE OR TO TAKE UP NEW EVIDENCE WHICH HAD NOT BEEN DONE/TAK EN UP IN THE ASSESSMENT PROCEEDINGS. IT IS SEEN THAT THE EXPLANA TION I TO SECTION 271(1) (C ) RULES OUT THE CONCEPT OF MEANS-REA AND REPLACE IT WITH AN OBJECTIVE CRITERIA. THE APPELLANT HAD OFFERED AN EX PLANATION AND PLACED FACTS BEFORE THE A.O. IN RESPECT OF THE GIFT S. HOWEVER NO EXPLANATION HAD BEEN OFFERED AND NO DETAILS/FACTS I N RESPECT OF THE CLAIM OF ALLOWANCE WERE FURNISHED. THE FACT THAT EX PLANATION IS DISBELIEVED IN ASSESSMENT DOES NOT IPSO FACTO JUSTI FY PENALTY AS HELD BY THE HONBLE SUPREME COURT IN CIT VS. KHODAY ISWA RSA AND SONS 83 ITR 369. THE APPELLANT HAS POINTED OUT THAT IN T HE DECISION OF CIT VS. M.R. BHORSE 165 ITR 14 (SC) THE FACTS LEADING TO THE ADDITION HAD BEEN DISCLOSED AND IT WAS A CASE OF FAILURE OF THE APPELLANT TO ESTABLISH HIS CASE WHICH DID NOT MEAN THAT THE PEN ALTY BECOMES EXIGIBLE. IN THE CASE OF CIT VS. TRADERS & TRADERS 244 ITR 376 (MAD.) IT HAS HELD THAT WHEN THERE IS NO POSITIVE EVIDENCE THAT THE STATED GIFTS WERE ACTUALLY ASSESSEES INCOME PENALTY CANN OT BE JUSTIFIED AND THAT PENALTY IS NOT AUTOMATIC ON ADDITION BEING CONFIRMED AS HELD IN CIT VS.MATA PRASAD 278 ITR 354 (ALL). ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 12 5.1. THUS ON A HOLISTIC CONSIDERATION OF THE FACTS AND CIRCUMSTANCES AND THE APPLICABILITY OF AFOREMENTION ED JUDICIAL DECISIONS IT IS SEEN THAT IT IS ONLY IN RESPECT OF THE CLAIM OF ALLOWANCE OF RS.60 000/- THAT NO EXPLANATION WAS OF FERED. AS SUCH THE PENALTY WAS LEVIABLE IN RESPECT OF THE CLAIM OF RS.60 000/- WHICH COMES TO RS.17 000/- AS PER THE STANDARD (I.E. 100% ) ADOPTED BY THE A.O. THE PENALTY LEVIED IS THEREFORE RESTRICTED TO RS.17 000/- AND THE BALANCE IS DELETED. 9. THE QUESTION OF LEVY OF PENALTY IN RESPECT OF DI SALLOWANCE OF ALLEGED GIFTS HAS BEEN DEALT WITH BY THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF CIT VS. JALARAM OIL MILLS 253 ITR 192 WHEREIN IT WAS HELD THAT WHEN AN ADDITION IS NOT WARRANTED IN EACH AND EVERY CASE THEN THERE CA NNOT BE A SITUATION WHERE MERELY BECAUSE THE ADDITION HAS BEEN MADE BY INVOKI NG THE PROVISIONS OF SECTION 68 PENALTY U/S. 271(1) (C) WOULD FOLLOW AS A NAT URAL COROLLARY. AS PER THE HONBLE COURT THE SETTLED LEGAL POSITION IS THAT EX PLANATION TO SECTION 271(1) (C) PRESCRIBES A REBUTTABLE PRESUMPTION AND THE BURDEN WHICH IS CAST ON AN ASSESSEE IS AKIN TO A CIVIL BURDEN WHICH MAY BE DIS CHARGED ON A PREPONDERANCE OF PROBABILITIES. THE COURT HAS THUS SAID THAT KEE PING THIS LEGAL POSITION IN MIND IT IS NOT POSSIBLE TO STATE WITH CERTAINTY THAT THE ASSESSEE FAILED TO RETURN THE CORRECT INCOME DUE TO ANY FRAUD ON ITS PART. AN INC OME WAS ASSESSED BY VIRTUE OF THE PROVISIONS OF SECTION 68 BUT THE SAID INCOME HE LD AS DEEMED INCOME HOWEVER ALSO CONSIDERING THE LANGUAGE OF SAID SECT ION WHERE THE WORD MAY HAS BEEN USED IT WAS NOT POSSIBLE TO STATE WITH CE RTAINTY THAT THE SAID SUM WOULD BE CONCEALED INCOME OPINED THE HONBLE COURT. RESP ECTFULLY FOLLOWING THE ABOVE DECISION AND CONSIDERING THE TOTALITY OF THE CIRCUM STANCES OF THE CASE WE HEREBY AFFIRM THE FINDINGS OF THE LD. C.I.T. (A). GROUND R AISED BY THE REVENUE IS HEREBY DISMISSED. 10. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED THAT TOO FOR STATISTICAL PURPOSE AND THE REVENUES APPEAL IS DISMISSED. ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 13 ORDER PRONOUNCED IN OPEN COURT ON 18 3- 2011. SD/- SD/- ( G. D. AGARWAL) (MUKUL KUMAR SHRAWAT) VICE PRESIDENT JU DICIAL MEMBER. AHMEDABAD. DATED: 18 - 3 -2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) VALSAD. 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. ITA NO.4014/AHD/ 2007 ITA. NO.1340/AHD /2008 ASSESSMENT YEAR 2004-05. 14 1.DATE OF DICTATION 9-3-2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10-3- 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 10 -3-2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 11-3-2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 11 -3 -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 11 -3 -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..