Shri Rajesh Mukundlal Shah, Baroda v. The Income tax Officer, Ward-5(4),, Baroda

ITA 424/AHD/2006 | 2002-2003
Pronouncement Date: 08-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 42420514 RSA 2006
Bench Ahmedabad
Appeal Number ITA 424/AHD/2006
Duration Of Justice 3 year(s) 10 month(s) 17 day(s)
Appellant Shri Rajesh Mukundlal Shah, Baroda
Respondent The Income tax Officer, Ward-5(4),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 08-01-2010
Date Of Final Hearing 15-12-2009
Next Hearing Date 15-12-2009
Assessment Year 2002-2003
Appeal Filed On 20-02-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH JM AND A.N. PAHUJA AM SHRI RAJESH MUKUNDLAL SHAH. 50 PUSHPAK SOCIETY. OPP. MANJALPUR TOWNSHIP NO.2 NEAR DARBAR CHOKDI MANJALPUR BARODA- 390 011. V/S . INCOME-TAX OFFICER WARD- 5(4) BARODA. PAN :AHCPS7751F (APPELLANT) .. (RESPONDENT) AND INCOME-TAX OFFICER WARD- 5(4) BARODA. V/S . SHRI RAJESH MUKUNDLAL SHAH. 50 PUSHPAK SOCIETY. OPP. MANJALPUR TOWNSHIP NO.2 NEAR DARBAR CHOKDI MANJALPUR BARODA 390 011. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI TUSHAR HEMANI AR REVENUE BY:- SHRI C.K. MISHRA DR O R D E R A.N. PAHUJA :THESE CROSS APPEALS BY THE ASSESSEE AND THE REV ENUE FILED AGAINST AN ORDER DATED 06.01.2006 OF THE LD.CIT(A )-V BARODA RAISE THE FOLLOWING GROUNDS: ITA NO.424/AHD/2006[ASSESSEE] : 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF TH E ASSESSING OFFICER OF REJECTING THE BOOK RESULT OF YOUR APPELLANT AND FUR THER ERRED IN CONFIRMING THE ADDITION OF RS.44 228/- ON ACCOUNT O F NET PROFIT IN CONSTRUCTION BUSINESS. 2. IT IS PRAYED THAT THE ADDITION OF RS.44 228/- MA DE TO THE BOOK RESULT BE DELETED. 3. THE LD. CIT(A) ERRED IN HOLDING THAT THE CREDITO RS OF RS.26 02 684/- AS PER BALANCE SHEET ARE NOT GENUINE. ITA NO.424/AHD/2006 ASST. YEAR :2002-03 ITA NO.609/AHD/2006 ASST. YEAR :2002-03 ITA NO.424&609/AHD/2006 2 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE LIABILI TIES OF RS.26 02 684/- IN RESPECT OF THECREDITORS CEASED TO EXIST AND FURTHER ERRED IN CONFIRMING THE ADDITION OF RS.26 02 684/- MADE U/S 41(2) OF TH E ACT. 5. IT IS PRAYED THAT THE ADDITION OF RS.26 02 684/- BE DELETED. 6. THE LD. CIT(A) ERRED IN HOLDING THAT THE CREDITO R OF RS.2 32 705/- IN THE CAPITAL ACCOUNT OF YOUR APPELLANT IS UNEXPLAINED AN D FURTHER ERRED IN CONFIRMING THE ADDITION OF RS.2 32 705/- MADE ON TH IS ACCOUNT. 7. IT IS PRAYED THAT THE ADDITION OF RS.2 32 705/- BE DELETED. 8. YOUR APPELLANT CRAVES LEAVE TO ADD ALTER OR AME ND ANY OF THE GROUNDS MENTIONED ABOVE. ITA NO.609/AHD/2006[REVENUE] . 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AN D IN LAW THE CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 41(1 ) OF THE ACT TO THE EXTENT OF RS.19 53 951/- DISREGARDING THE FACT THA T THE RETURNS OF INCOME FURNISHED BY THE CONCERNED TWO CREDITORS DID NOT CONFIRM ANY OUTSTANDING DUES FROM THE ASSESSEE AND THE BANK ACC OUNT EXTRACTS OF THESE CREDITORS FURNISHED BY THE ASSESSEE DID NOT S HOW ANY TRANSACTION WITH THE ASSESSEE. 2. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT TH AT THE CREDIT BALANCES OF THE CONCERNED TWO CREDITORS WERE SHOWN AS OUTSTANDI NG IN THE BOOKS OF THE ASSESSEE AT THE SAME AMOUNT IN THE PRECEDING YE AR AS WELL AS IN THE SUCCEEDING YEAR AND IN VIEW OF THERE BEING NO CO-RELATION BETWEEN THESE CREDIT BALANCES AND THE RESPECTIVE RETURNS OF THE CREDITORS THE NATURE OF THESE CREDITS WAS MATERIALLY THE SAME AS THAT OF THE OTHER CREDITS WHICH WERE ACCEPTED BY HIM AS BOGUS AND HEN CE LIABLE TO TAX U/S 41(1). 2. ADVERTING FIRST TO GROUND NOS.1 & 2 IN THE APPE AL OF THE ASSESSEE FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT TH E RETURN DECLARING INCOME OF RS.2 96 570 FILED ON 30.10.2002 BY THE ASSESSEE EN GAGED IN THE BUSINESS OF CONSTRUCTION IN THE NAME AND STYLE OF AKTA BUILDERS BESIDES HAVING A PRINTING PRESS IN THE NAME AND STYLE OF AKTA PRINTING PRESS AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 1961[HEREINAFTER REFER RED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 23.10.2003.DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSING OFFICER[AO IN SHORT] ASKED THE ASSESSEE VIDE NOTICE U/S 142(1) DATED 30.8.2004 7.10.2004 24.12.2004 10.1.2005 & 24.1.200 5 TO FURNISH THE DETAILS OF DIESEL AND OIL EXPENSES MATERIAL TESTING CHARGE S JCB HIRING CHARGES REPAIRS AND MAINTENANCE EXPENSES JCB RUNNING AND M AINTENANCE EXPENSES ITA NO.424&609/AHD/2006 3 RELATING TO THE CONSTRUCTION BUSINESS AS ALSO PROD UCE THE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS OF THE AFORESAID EXPENSES FO R VERIFICATION. HOWEVER THE ASSESSEE NEITHER FURNISHED THE DETAILS NOR PROD UCED THE RELEVANT BOOKS OF ACCOUNTS. EVEN WHEN THE ASSESSEE APPEARED ON 4.2.20 05 AND WAS ASKED TO PRODUCE THE RELEVANT BOOKS OF ACCOUNTS AND DETAILS THESE WERE NOT PRODUCED ON 9.2.2005. THE SUBSEQUENT NOTICE DATED 18.2.2005 U/S 142(1) OF THE ACT ALSO WENT UNRESPONDED.IN THESE CIRCUMSTANCES THE ASSESSING OFFICER REJECTED THE BOOK RESULTS SHOWN BY THE ASSESSEE IN RESPECT OF CONSTRUCTION BUSINESS IN THE NAME OF AKTA BUILDERS AND ESTIMATE D THE NET PROFIT OF RS.3 51 577 @ 8% OF THE TURNOVER OF RS.43 94 715 . 3. ON APPEAL THE ASSESSEE CONTENDED THAT HE HAD PR ODUCED THE BOOKS OF ACCOUNT ON 4.2.2005 AND FURNISHED THE COMPLETE DET AILS OF VARIOUS EXPENSES ALONGWITH COPIES OF MAJOR BILLS BEFORE THE LD. CIT( A). THE ASSESSEE ARGUED THAT HE HAD BEEN MAINTAINING REGULAR BOOKS OF ACCOU NT DULY AUDITED U/S 44AB OF THE ACT AND THEREBEING NO MAJOR DEFECTS IN THE B OOKS THE ESTIMATION OF PROFIT BY THE ASSESSING OFFICER IS NOT JUSTIFIED. IN THE LIGHT OF THESE SUBMISSIONS THE LD. CIT(A) CONCLUDED AS UNDER :- 2.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER AND THE CONTENTIONS OF THE APPELLANT. A REPORT WAS CALLED F OR FROM THE ASSESSING OFFICER IN RESPECT OF THE ABOVE SUBMISSION MADE BY THE APPELLANTS REPRESENTATIVE. THE ITO WARD 5(4) BARODA VIDE HIS LETTER DATED 28.09.2005 HAS SUBMITTED HIS REPORT ON THIS ISSUE AS UNDER :- 3 THE CONTENTION OF THE LD. C.A. & A.R. OF THE ASS ESSEE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE H AD PRODUCED BOOKS OF ACCOUNT IS FAR FROM TRUTH AND MISLEADING WHICH IS SELF EVIDENT FROM THE ORDER SHEET ENTRY DATED 4.2.2005 DULY SIGN ED BY THE ASSESSEE HIMSELF AND THE LD.A.R. OF THE ASSESSEE AND ALSO NO TICE DATED 18.2.2005 (COPY ENCLOSED) DULY ACKNOWLEDGED BY THE ASSESSEE AND COPY OF THE SAME PRODUCED BY THE ASSESSEE HIMSELF I N THE PAPER BOOK. VIDE THE AFORESAID ORDER-SHEET ENTRY DATED 4.2.2005 (COPY ENCLOSED) THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNT AND HEARING WAS RE-FIXED ON 9.2.2005. HOWEVER THE ASSESSEE HAD NOT HONOURED HIS WORDS AND DID NOT TURN UP. VIDE NOTICE DATED 18/2/2 005 THE ASSESSEE WAS AGAIN ASKED TO PRODUCE BOOKS OF ACCOUNT (PARA 3 OF THE NOTICE) HOWEVER THE ASSESSEE DID NOT COMPLY WITH THE TERMS OF THE STATUTORY NOTICES AND FAILED TO PRODUCE BOOKS OF ACCOUNT BIL LS & VOUCHERS ETC. THEREFORE ASSESSEES CONTENTION THAT THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE A.O. IS TOTALLY MISLEADING AND FAR FROM TRUTH. AS THE ASSESSEE HAD FAILED TO PRODUCE BOOKS OF ACCOUNT BI LLS AND VOUCHERS ITA NO.424&609/AHD/2006 4 AND OTHER REQUIRED DETAILS AS PER THE TERMS OF STAT UTORY NOTICES ISSUED U/S 143(2) AND 142(1) OF THE ACT THE BOOK RESULT SHOWN BY THE ASSESSEE WAS REJECTED AND INCOME WAS ESTIMATED @ 8% OF THE TURNOVER WHICH IS QUITE REASONABLE IN THIS LINE OF BUSINESS. SUBMISSION OF COPY OF SOME BILLS AT THIS STAGE DOES NOT ALTER THE FACTS. EVEN AT THIS STAGE THE ASSESSEE DOES NOT COME FORWARD WITH THE B OOKS OF ACCOUNT BILLS AND VOUCHERS AND REQUIRED DETAILS AND DOCUMEN TS. IN VIEW OF THE ABOVE FACTS ASSESSEES APPEAL ON THE ISSUE OF REJE CTION OF BOOK RESULTS AND ESTIMATION OF NET PROFIT OUGHT TO BE REJECTED A ND ORDER OF THE A.O. MAY BE UPHELD. IN THIS CONNECTION THE APPELLANTS REPRESENTATIVE HAS AGAIN REITERATED THE SUBMISSION MADE BY IT EARLIER. IT HAS BEEN STATED T HAT FROM THE DETAILS NOW SUBMITTED IT IS CLEAR THAT THE EXPENSES HAVE BEEN I NCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHICH ARE S UPPORTED BY BILLS VOUCHERS ETC. AS MENTIONED BY THE ASSESSING OFFICER IN THE A SSESSMENT ORDER THE APPELLANT WAS REQUESTED SEVERAL TIMES TO FURNISH TH E DETAILS OF VARIOUS EXPENSES AS ALSO TO FURNISH THE BILLS AND VOUCHERS FOR THE EXPENSES AND TO PRODUCE THE BOOKS OF ACCOUNT FOR VERIFICATION. HOWE VER THE APPELLANT FAILED TO PRODUCE THE BOOKS OF ACCOUNT AND BILLS/VOUCHERS OF VARIOUS EXPENSES. DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT S REPRESENTATIVE HAS SUBMITTED COPIES OF SOME OF THE BILLS. HOWEVER AS MENTIONED BY THE ASSESSING OFFICER THESE DOCUMENTS WERE NOT PRODUCE D BEFORE THE ASSESSING OFFICER FOR VERIFICATION. CONSIDERING THE FACT THAT THE APPELLANT HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS OF EXPENSES BEFORE THE ASSESSING OFFICER HE WAS JUSTIFIED IN OBSERVING TH AT THE VARIOUS EXPENSES CLAIMED ARE NOT VERIFIABLE. CONSIDERING THE FACTS O F THE CASE THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE BOOK RESULTS SHOWN IN THE CASE OF AKTA BUILDERS AND IN ESTIMATING THE NET PROFIT @ 8% OF T HE TURNOVER OF RS.4294715 WHICH HAS BEEN WORKED OUT AT RS.351577/-. ACCORDING LY THE NET PROFIT ESTIMATED IN CONSTRUCTION BUSINESS AT RS.351577 IS CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAIN ST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSESSE E REITERATED THEIR CONTENTIONS BEFORE THE LD. CIT(A) WHILE THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. UNDISPUTEDLY DESPITE VARIOUS OPPORTUNITIES GIVEN BY THE AO BETWEEN 30.8.2004 TO 18.2.2005 THE ASSESSEE DID NOT FURNI SH EITHER THE DETAILS OF DIESEL AND OIL EXPENSES MATERIAL TESTING CHARGES JCB HIRING CHARGES REPAIRS AND MAINTENANCE EXPENSES JCB RUNNING AND MAINTENAN CE EXPENSES RELATING TO THE CONSTRUCTION BUSINESS NOR PRODUCED THE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS IN SUPPORT OF THESE EXPENSES. E VEN THOUGH BEFORE THE LD. ITA NO.424&609/AHD/2006 5 CIT(A) THE ASSESSEE FURNISHED DETAILS OF FEW EXPE NSES THE RELEVANT BOOKS OF ACCOUNTS AND BILLS WERE NOT PRODUCED EITHER BEFORE THE AO AS MENTIONED IN HIS REMAND REPORT OR EVEN BEFORE THE LD. CIT(A). I N THESE CIRCUMSTANCES WHEN THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT BEFORE THE AO EITHER IN ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEED INGS NOR IS IN A POSITION TO PRODUCE THE BOOKS OF ACCOUNTS EVEN AT T HIS STAGE THERE IS NO ALTERNATIVE LEFT BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A) IN HAVING RECOURSE TO PROVISIONS OF SEC.145 OF THE ACT. ONCE THE ASSES SEE FAILED TO FURNISH THE RELEVANT DETAILS AND SUBSTANTIATE THE TRADING RESU LTS FOR THE YEAR UNDER CONSIDERATION IT WAS OPEN TO THE AO AND THE LD. CI T(A) TO ESTIMATE THE GROSS PROFIT. THIS VIEW OF OURS IS FORTIFIED BY THE DECI SION OF HONBLE ORISSA HIGH COURT IN THE CASE OF RATANLAL OMPRAKASH VS. CIT 132 ITR 640(ORISSA) AND DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KY PILLIAH AND SONS 63 ITR 411(SC). NO DOUBT THE AO/CIT(A) SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDG MENT ASSESSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY BUT THERE IS NE CESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGMENT ASSESSMENT AND IT IS THE ASSESSEE HIMSELF WHO IS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS AND DETAILS. [ KACHWALA GEMS VS JCIT 288 ITR 10 (2007)(SC) ].AS ALREADY STATED SINCE THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS AND OTHER RELEVANT DETAILS BEFORE THE AO OR THE LD. CIT(A) IN SUPPORT OF THEIR TRADING RESULTS FOR THE YEAR UNDER CONSIDERATION THE LEARNED CIT(A) WHILE UPHOLDING REJECTION OF BOOK RESULTS SUSTAINED THE ESTIMATION OF NET PROFI T @8% IN RESPECT OF CONSTRUCTION BUSINESS CARRIED ON BY THE ASSESSEE. IT IS TRUE THAT ASSESSING OFFICER OR THE CIT(A) ARE NOT FETTERED BY TECHNICAL RULES OF EVIDENCE AND ARE ENTITLED TO ACT ON MATERIALS WHICH MAY NOT BE ACCEP TED AS EVIDENCE IN COURT OF LAW NEVERTHELESS THE ASSESSING OFFICER SHOULD ADO PT A METHOD WHICH MUST REFLECT THE PROFITS TRULY AND JUSTLY[ GEMINI PICURE S LTD. VS CIT (1958) 33 ITR 547 (MAD).] WE ARE OF THE OPINION THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS JUSTIFIED IN UPHOLDING THE APPLICATION OF NET PROFIT RATE OF 8% IN RESPECT OF CONSTRUCTION BUSINESS. SINCE THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT PLACE ANY MATERIAL BEFORE US FOR HAVING A DIFFERENT VIEW IN THE MATTER WE ARE NOT INCLINED TO INTERFERE WITH T HE FINDINGS OF THE LEARNED ITA NO.424&609/AHD/2006 6 CIT(A). THEREFORE GROUND NOS.1 & 2 IN THE APPEAL O F THE ASSESSEE ARE DISMISSED. 6. NEXT GROUND NOS. 3 TO 5 IN THE APPEAL OF THE AS SESSEE AND GROUND NOS. 1 & 2 IN THE APPEAL OF THE REVENUE RELATE TO ADDITI ON OF RS.45 56 635/- ON ACCOUNT OF CEASED LIABILITIES U/S 41(1) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT IN SCHEDU LE E OF THE BALANCE SHEET THE ASSESSEE HAS SHOWN CREDITORS OF RS.52 53 331/- WHICH INCLUDED A NUMBER OF CREDITORS BROUGHT FORWARD FROM THE EARLI ER YEARS AND WERE SHOWN AS OUTSTANDING EVEN IN THE LATEST RETURN FURNISHED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. TO A QUERY BY THE AO SEEK ING COMPLETE NAME/ ADDRESSES AND PAN OF THE SAID CREDITORS ALONG WITH THE DETAILS OF AMOUNT OUTSTANDING THE ASSESSEE FURNISHED A LIST OF CREDI TORS WITHOUT MENTIONING ANY ADDRESS AND PAN AND ALSO FAILED TO FURNISH THE COPI ES OF ACCOUNT CALLED FOR. AFTER SEEKING ADJOURNMENTS THE ASSESSEE ULTIMATELY FURNISHED FEW DETAILS ON 4.2.2005. A LIST OF VARIOUS CREDITORS IS GIVEN ON PAGE 4 OF THE ASSESSMENT ORDER.ON PERUSAL OF FEW DETAILS FURNISHED BY THE AS SSESSEE THE AO FOUND THAT DESPITE VARIOUS OPPORTUNITIES GIVEN COMPLETE ADDRESS PAN AND CONFIRMATIONS OF THE OUTSTANDING BALANCE WERE NOT F URNISHED IN RESPECT OF EKTA CEMENT SUPPLIERS SHRI KAMLESH PUNJABHAI THIDOR SHR EEJI ASSOCIATES UMA LUBRICANTS UMA VIJAY SAW MILLS SHRI PRATIK J SHAH S HRI RANCHODBHAI GAVAJIBHAI CHAREL & SHRI RASIKLAL M SHAH. ACCORDING LY THE AO CONCLUDED THAT THESE CREDITORS WERE NOT GENUINE. 6.1 AS REGARDS SHRI KAMLESH RASIKLAL SHAH & LAXMI T RADERS THE AO NOTICED THAT THE AMOUNT WAS BROUGHT FORWARD FROM T HE EARLIER YEARS AND THE ASSESSEE DID NOT FILE ANY CONFIRMATION WHILE THE RE TURNS OF THE SAID CREDITORS DID NOT REFLECT THE ASSESSEE AS A DEBTOR. 6.2 IN RESPECT OF CREDIT OF RS. 14 19 796/- IN THE NAME OF SHIR MINTEH R SHAH THE AO OBSERVED THAT THE SAID CREDITOR FURNI SHED RETURN DECLARING INCOME OF RS. 1 48 780/- U/S 44AD OF THE ACT WHILE AMOUNT OUTSTANDING WAS MORE THAN RECEIPTS. THE AMOUNT HAD BEEN BROUGHT FOR WARD FROM EARLIER YEARS AND WAS ALSO SHOWN OUTSTANDING IN THE SUBSEQUENT Y EAR. ITA NO.424&609/AHD/2006 7 6.3 IN RESPECT OF BARODA ROADWAYS THE ASSESSEE FAI LED TO FURNISH THEIR PAN AND CONFIRMATION WHILE A LETTER SENT TO THE SAI D CREDITOR WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS REFUSED. 6.4 REGARDING NASIM ROADWAYS VISHAL ROADLINES & RA HUL ROADWAYS THE AMOUNT WAS BROUGHT FORWARD FROM THE EARLIER YEA RS AND WAS SHOWN OUTSTANDING EVEN IN THE AY 2004-05. IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT THE SAID CREDITORS DID NOT CONFIRM THE OUTSTA NDING BALANCE NOR THE ASSESSEE FURNISHED THEIR PAN OR CONFIRMATION. 6.5 FOR SAHAJANAND SALES CORPORATION THE AMOUNT WA S BROUGHT FORWARD FROM THE EARLIER YEARS AND WAS SHOWN OUTSTANDING E VEN IN THE AY 2004-05. THE AO NOTICED THAT THE SIGNATURES OF THE SAID PART Y ON COPY OF ACCOUNT FURNISHED BY THE ASSESSEE AND THAT ON THE LETTER RE CEIVED IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT DIFFERED WHILE THE A SSESSEE FAILED TO FURNISH THEIR PAN AND COPY OF ACCOUNT IN THE BOOKS OF THE AFORESA ID PARTY 6.6 AS REGARDS SHRI SACHIN JAGDISH CHANDRA SHAH TH E AMOUNT OF RS. 5 34 155/- WAS BROUGHT FORWARD FROM THE AY 2000-01 WHILE THE SAID PARTY REFLECTED INCOME OF ONLY RS.20 074/- 6.7 IN THE LIGHT OF AFORESAID FACTS ESPECIALLY W HEN THE ASSESSEE FAILED TO RESPOND TO NOTICE DATED 18.2.2005 U/S 142(1) OF TH E ACT THE AO CONCLUDED THAT THE AFORESAID CREDITORS WERE NOT GENUINE AND ACCORDINGLY ADDED AN AMOUNT OF RS.45 56 635/- ON ACCOUNT OF CESSATION O F LIABILITIES U/S 41(1) OF THE ACT. 7. ON APPEAL THE ASSESSEE CONTENDED THAT THEY COU LD NOT FURNISH CONFIRMATION OF THE PARTIES THE ASSESSEE HAVING DI SCONTINUED BUSINESS TRANSACTIONS WITH THE AFORESAID PARTIES. SINCE THE ASSESSEE DID NOT OBTAIN ANY BENEFIT IN CASH OR OTHERWISE NOR HAD WRITTEN OFF TH E AFORESAID CREDITS RELYING UPON THE DECISIONS IN THE CASE OF NEW COMMERCIAL MI LLS CO. LTD. VS. DCIT 73 TTJ 893(AHD.) CIT VS. BHARAT IRON & STEEL INDUSTRIE S 199 ITR 67(GUJ) AND ITA NO.424&609/AHD/2006 8 CIT VS. SUGAULI SUGAR WORKS (P) LTD. 236 ITR 518(SC ) THE ASSESSEE PLEADED THAT PROVISIONS OF SEC. 41(1) OF THE ACT WE RE NOT APPLICABLE. AFTER HAVING A REPORT OF THE AO ON THE WRITTEN SUBMISSION S OF THE ASSESSEE THE LD. CIT(A) WHILE ACCEPTING THE CREDITS IN THE NAME OF SHRI MINTESH R SHAH & SHRI SACHIN JAGDISHCHANDRA SHAH AS GENUINE CONCLUDED AS UNDER :- 3.2.4 IN VIEW OF THE ABOVE FACTS IT IS CLEAR TH AT THE CREDIT BALANCE SHOWN BY THE APPELLANT IN THE NAMES OF 15 PARTIES OTHER THAN THE TWO PARTIES NAMELY SHRI MITESH R. SHAH AND SHRI SACHIN JAGDISHCHANDRA SHAH TOTALING RS.26 02 684/- ARE NOT GENUINE. THE APPELLANT HAS N OT MADE ANY PAYMENTS TO THESE PARTIES IN THE EARLIER YEAR DURING THE YEAR AND SUBSEQUENT YEARS. THESE PARTIES HAVE NOT CONFIRMED THE OUTSTANDING BALANCES AND MOST OF THEM ARE ALSO NOT ASSESSED TO TAX. FURTHER IN SOME CASES TH E APPELLANTS NAME ALSO DOES NOT APPEAR IN THE LIST OF DEBTORS OF THESE PAR TIES. THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDIT ION OF RS.26 02 684/- ON ACCOUNT OF CEASED LIABILITIES U/S 41(1) OF THE IT A CT 1961. ACCORDINGLY THE ADDITION MADE ON ACCOUNT OF CEASED LIABILITIES U/S 41(1) IS REDUCED FROM RS.45 56 635/- TO RS.26 02 684/- 8. THE ASSESSEE IS NOW IN APPEAL AGAINST THE AD DITION UPHELD TO THE EXTENT OF RS. 26 02 684/- WHILE THE REVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITION OF RS. 19 53 951/-. THE LD. AR ON BEHALF O F THE ASSESSEE WHILE RELYING UPON A DECISION DATED 3.7.2009 IN THE CASE OF P.I.C. [GUJARAT] LTD. VS. DCIT CIRCLE 7(5) IN ITA NO. 3871/AHD/2003 FOR THE A . Y.1997-98 CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION SINCE PROVISIONS OF SEC. 41(1) OF THE ACT WERE NOT ATTRACTED WHILE T HE LD. DR SUPPORTED THE ORDER OF THE AO. 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. THE PROVISIONS O F SEC. 41(1)(A) STIPULATE THAT WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN TH E ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS EXPENDITURE OR TRADING LIA BILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT O BTAINED OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFI TS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT ITA NO.424&609/AHD/2006 9 PREVIOUS YEAR WHETHER THE BUSINESS OR PROFESSION I N RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENC E IN THAT YEAR OR NOT. THE LD. CIT(A) WITHOUT EVEN ADVERTING TO THE DECISIONS CITED ON BEHALF OF THE ASSESSEE SUSTAINED THE ADDITION MADE BY THE AO U/S 41(1) OF THE ACT. UNDISPUTEDLY THE ASSESSEE DID NOT RECEIVE ANY BENE FIT NOR THE AMOUNT HAS BEEN TRANSFERRED TO PROFIT AND LOSS ACCOUNT AND THU S THE AMOUNT DID NOT BECOME THE ASSESSEE'S OWN MONEY. IN THESE CIRCUMSTA NCES AS CONCLUDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN BHARAT IRON AND STEEL INDUSTRIES(SUPRA) THE PROVISIONS OF SEC. 41(1)(A) ARE NOT ATTRACTED. 9.1 HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS. SILVER COTTON MILLS CO. LTD. 254 ITR 728(GUJ) HELD THAT SIMPL Y BECAUSE THE PERIOD OF LIMITATION HAD COME TO AN END FOR THE PURPOSE OF FI LING A SUIT FOR RECOVERY OF THE SAID AMOUNT OR FOR TAKING APPROPRIATE ACTION AGAINS T THE ASSESSEE IT CANNOT BE SAID THAT THERE WAS A CESSATION OF LIABILITY. TH E LIABILITY STILL REMAINS THOUGH IT MAY NOT BE ENFORCEABLE AT LAW ON ACCOUNT OF THE PROVISIONS OF THE LAW OF LIMITATION. RELYING UPON THE DECISION IN THE CASE OF SUGAULI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 .SC) HONBLE JURISDICTIONAL HIGH COURT FURTHER HEL D THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE I S A REMISSION OF LIABILITY BY THE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EV EN IF THE ENTRIES ARE MADE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTEN B ACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 9.2 HONBLE BOMBAY HIGH COURT IN ANOTHER CASE OF CIT VS. CHASE BRIGHT STEEL LTD. 177 ITR 128(BOMBAY) WHILE RELYING UPON T HEIR JUDGMENT IN J. K. CHEMICALS LTD. VS. CIT [1966] 62 ITR 34 HELD THAT T HE LIABILITY OF AN ASSESSEE DOES NOT CEASE MERELY BECAUSE THE LIABILITY HAS BEC OME BARRED BY LIMITATION. THE LIABILITY CEASES WHEN IT HAS BECOME BARRED BY L IMITATION AND THE ASSESSEE HAS UNEQUIVOCALLY EXPRESSED ITS INTENTION NOT TO HO NOUR THE LIABILITY EVEN WHEN DEMANDED. 9.3 HONBLE SUPREME COURT IN THE CASE OF BOMBAY DYEING & MANUFACTURING CO. LTD. V. STATE OF BOMBAY AIR 1958 SC 328 IN PA RA 23 OF THEIR DECISION OBSERVED AS FOLLOWS : ITA NO.424&609/AHD/2006 10 ' 23. IT HAS BEEN ALREADY MENTIONED THAT WHEN A DEB T BECOMES TIME BARRED IT DOES NOT BECOME EXTINGUISHED BUT ONLY UNENFORCEABLE IN A COURT OF LAW. ' 9.4 HONBLE SUPREME COURT IN THE CASE OF SUGAU LI SUGAR WORKS (P.) LTD. [1999] 236 ITR 518 HELD THAT UNLESS THERE IS A CESS ATION OF LIABILITY INCOME CANNOT BE ADDED AS PER THE PROVISIONS OF SECTION 41 (1) OF THE ACT. SIMILARLY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. C HETAN CHEMICALS PVT. LTD. 267 ITR 770 (GUJ) HELD THAT : ON A READING OF THE PROVISIONS IT IS APPARENT THA T BEFORE THE SECTION CAN BE INVOKED IT IS NECESSARY THAT AN ALLOWANCE O R A DEDUCTION HAS BEEN GRANTED DURING THE COURSE OF ASSESSMENT FOR AN Y YEAR IN RESPECT OF LOSS EXPENDITURE OR TRADING WHICH IS INCURRED B Y THE ASSESSEE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE OBTAINS WHETHER IN CASH OR IN ANY OTHER MANNER ANY AMOUNT IN RESPE CT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION OF SUCH LIABILITY. IN THAT CASE EITHER THE AMOUNT OBTAINED BY THE ASSESSEE OR THE V ALUE OF THE BENEFIT OCCURRING TO THE ASSESSEE CAN BE DEEMED TO THE PROF ITS AND GAINS OF BUSINESS OR PROFESSION AND CAN BE BROUGHT TO TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT OR BENEFIT IS OB TAINED. IN THE FACTS OF THE CASE ON HAND WITHOUT ENTERING INTO THE ASPE CT AS TO WHETHER THE LIABILITY TO REPAY THE LOANS WOULD BE A TRADING LIA BILITY OR NOT IT IS AN ADMITTED POSITION THAT THERE HAD BEEN NO ALLOWANCE OR DEDUCTION IN ANY OF THE PRECEDING YEARS AND HENCE THERE IS NO QUES TION OF APPLYING THE PROVISION AS SUCH. SECTION 28 OF THE ACT DEALS WITH PROFITS AND GAINS OF BUSINESS OR PROFESSION AND CLAUSE (IV) THEREOF SAYS THAT THE VA LUE OF ANY BENEFIT OR PERQUISITE WHETHER CONVERTIBLE INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION SHALL BE CHARGEABLE AS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON. IN THE FACTS OF THE PRESENT CASE IT CANNOT BE SAID THAT THE ASSESS EE-COMPANY WAS CARRYING ON BUSINESS OF OBTAINING LOANS AND THAT TH E REMISSION OF SUCH LOANS BY THE CREDITORS OF THE COMPANY WAS A BENEFIT ARISING FROM SUCH BUSINESS. 9.5 IN THE LIGHT OF VIEW TAKEN BY THE HONBLE SUPREM E COURT AND JURISDICTIONAL HIGH COURT IN THE AFORESAID DECISIO NS IT IS APPARENT THAT UNLESS THERE IS A CESSATION OF LIABILITY OR THERE IS A RE MISSION OF LIABILITY BY THE CREDITOR THE LIABILITY SUBSISTS AND THEREFORE EV EN IF THE ENTRIES ARE MADE TO WRITE BACK THE EXPENDITURE THE AMOUNT SO WRITTEN BACK CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT . IN THE INSTANT CASE THERE IS NOTHING TO SUGGEST TH AT THE ASSESSEE HAS OBTAINED ANY BENEFIT EITHER BY WAY OF REMISSION OR CESSATION OF ANY LIABILITY WHILE THE ITA NO.424&609/AHD/2006 11 AFORESAID LIABILITIES ARE CONTINUALLY ADMITTED BY T HE ASSESSEE IN THEIR BALALNCESHEET . IN THESE CIRCUMSTANCES WE HAVE NO ALTERNATIVE BUT TO VACATE THE FINDINGS OF THE LD. CIT(A) AND DELETE THE ADDITION SUSTAINED BY THE LD. CIT(A) . THEREFORE GROUND NOS. GROUND NOS. 3 T O 5 IN THE APPEAL OF THE ASSESSEE ARE ALLOWED WHILE GROUND NOS. 1 & 2 IN T HE APPEAL OF THE REVENUE ARE DISMISSED. 10. GROUND NOS. 6 & 7 IN THE APPEAL OF THE ASSESSE E RELATE TO CONFIRMATION OF ADDITION OF RS.2 32 705/- ON ACCOUNT OF UNEXPLAI NED GIFTS CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE. DURING THE YEAR UN DER CONSIDERATION THE AO NOTICED AN ADDITION OF RS.4 22 015/- IN THE CAPITAL ACCOUNT OF ASSESSEE. IT WAS CLAIMED BY ASSESSEE THAT HE HAD RECEIVED GIFTS OF R S.1 85 000/- AND RS.47 705/- FROM SHRI SUNIL PATEL. TO A QUERY BY TH E AO SEEKING CONFIRMATION COPY OF BANK ACCOUNT AND THE PROOF OF FURNISHING OF INCOME-TAX RETURN BY THE DONOR AS ALSO EXPLANATION OF SOURCE OF GIFTS AND RELATIONSHIP WITH THE DONOR BESIDES ASKING THE ASSESSEE TO ESTABLISH CAPACITY OF THE DONOR AND GENUINENESS OF THE TRANSACTION THE ASSESSEE SUBMIT TED A CONFIRMATION LETTER FROM SHRI SUNIL PATEL AND COPY OF THE BANK ACCOUNT OF THE DONOR FOR THE MONTH OF OCTOBER 2001. HOWEVER COMPLETE COPY OF BANK PA SS BOOK AND EVIDENCE OF FURNISHING OF INCOME-TAX RETURN ETC. BY THE DONO R WERE NOT FURNISHED NOR THE ASSESSEE ESTABLISHED CAPACITY OF THE DONOR AN D GENUINENESS OF THE TRANSACTION NOR EVEN STATED HIS RELATIONSHIP WITH T HE DONOR AND THE OCCASION ON WHICH THE SAID GIFTS WERE RECEIVED. IN THESE CI RCUMSTANCES THE AO TREATED THE GIFTS AMOUNTING TO RS.2 32 705/- AS UNEXPLAINED AND ADDED TO THE INCOME OF THE ASSESSEE RELYING INTER ALIA ON THE DECISIO N OF THE TRIBUNAL IN ITA NO.3609 TO 3611/AHD/2002 IN THE CASE OF NEELAMBEN G OPALDAS AGRAWAL MISS MAMTABEN G. AGRAWAL AND SMT. SHILPABEN D. AGRA WAL . 11. ON APPEAL THE ASSESSEE SUBMITTED THAT SHRI SUNIL PATEL A FRIEND OF THE ASSESSEE WAS RESIDING IN UNITED STATES AS EVID ENT FROM COPY OF HIS BANK ACCOUNT. BESIDES GIFT OF RS.1 85 000/- THE OTHER S UM OF RS.47 405 WAS RECEIVED DIRECTLY FROM SHRI SUNIL PATEL OUT OF NAT URAL LOVE AND AFFECTION FOR THE ASSESSEE. SINCE IDENTITY OF THE DONOR WAS ESTABLISH ED WHILE THE AMOUNT WAS RECEIVED BY CHEQUE THE INITIAL BURDEN OF PROVING T HE GIFT IS DISCHARGED. RELYING ITA NO.424&609/AHD/2006 12 UPON THE DECISIONS IN THE CAE OF DCIT VS. ROHINI BU ILDERS 256 ITR 360(GUJ) CIT VS. SUNITA VACHANI 184 ITR 121(DEL.) D C JAIN VS. ITO 32 TTJ 42(DEL.) & DCIT VS. ANIL KUMAR 58 TTJ 340(DEL.) TH E ASSESSEE ARGUED THAT THE AO WAS NOT CORRECT IN MAKING THE ADDITION OF RS .2 32 705/-. THE LD. CIT(A) AFTER HAVING A REPORT FROM THE AO CONCLUDED THAT THERE WAS NO OCCASION TO MAKE OR RECEIVE GIFTS WHILE THE DONOR I S NOT RELATED TO THE ASSESSEE. INTER ALIA SINCE THE ASSESSEE DID NOT ES TABLISH THE CREDITWORTHINESS OF THE DONOR NOR GENUINENESS OF THE GIFTS RELYING ON THE DECISION OF THE TRIBUNAL DELHI BENCH IN THE CASE OF SANJEEV BATRA VS. ACIT (1999) 69 ITD 23 THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE AO . 12. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LD. AR ON BEHALF OF THE ASSES SEE WHILE RELYING UPON THE DECISIONS IN THE CASE OF CIT VS. PRAGATI CO-OPERATI VE BANK LTD. 278 ITR 170(GUJ) AND MURLIDHAR LAHORIMAL VS. CIT 280 ITR 51 2(GUJ) CONTENDED THAT THE ASSESSEE IS NOT REQUIRED TO ESTABLISH SOURCE OF SOURCE. ALTER NATIVELY THE LD. AR PLEADED THAT THE SET OFF MAY BE ALLOWED AGA INST THE INTANGIBLE ADDITIONS. 13. ON THE OTHER HAND THE LD. DR SUPPORTED THE FIN DINGS OF THE LD. CIT(A) THE ASSESSEE HAVING FAILED TO ESTABLISH THE CREDIT WORTHINESS OF THE DONOR AND THE GENUINENESS OF THE GIFTS. 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH TH E FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON. IT IS WELL ESTABLISHED THAT ONCE THERE IS A CREDIT IN THE BOOKS MAINTAINED BY THE ASSESSEE T HE PRIMARY ONUS IS ON THE ASSESSEE NAMELY TO OFFER AN EXPLANATION AS TO THE NATURE AND SOURCE OF THE CREDIT. THE ASSESSEE HAS TO PROVE NOT ONLY THE IDEN TITY OF THE PERSON BUT TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND C REDITWORTHINESS OF THE PERSON WHO HAS GIVEN THE MONEY. IN THE CASE OF CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. (P) LTD. (1991) 187 ITR 596 (CAL) HONBLE CALCUTTA HIGH COURT MADE THE FOLLOWING OBSERVATIONS : 'IN OUR VIEW THE ASSESSEE FAILED TO DIS CHARGE THE PRIMARY ONUS WHICH LAY ON IT TO PROVE THE NATURE AND SOURCE OF THE CRE DITS. IT WAS NECESSARY FOR THE ITA NO.424&609/AHD/2006 13 ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF HIS C REDITORS THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUI NENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS THE ONUS SHIFTS ON TO THE DEPARTMENT. IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS. MERE PRODUCTION OF THE C ONFIRMATION LETTERS BEFORE THE ITO WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE B EEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THEY HAVE CREDITWORTHINESS.. .'. 14.1 IN THE INSTANT CASE THE AO NOTICED THAT T HE ASSESSEE HAD RECEIVED TWO GIFTS OF RS. 1 85 000/- AND RS. 47 705/- FROM SHRI SUNIL PATEL. AN AMOUNT OF RS. 1 85 000 IS STATED TO HAVE BEEN TRANSFERRED FRO M THE OPENING BALALNCE OF NRE ACCOUNT AS ON 1.10.2001. THE COMPLETE COPY OF T HE BANK ACCOUNT OR THE EVIDENCE OF CREDITWORTHINESS SAID DONOR ARE NOT AVA ILABLE ON RECORDS. OTHER AMOUNT OF RS. 47 705/- IS STATED TO HAVE BEEN RECEI VED THROUGH DD FROM ABROAD. THE RELEVANT DETAILS OF DD AND SOURCES OF PURCHASING DD WERE NOT PLACED BEFORE US NOR APPEAR TO HAVE BEEN SUBMITTED BEFORE THE AO OR THE LD. CIT(A) DESPITE SUFFICIENT OPPORTUNITY ALLOWED. WE A RE OF THE OPINION THAT UNLESS THE BANK STATEMENT IS SUPPORTED BY ANY OTHER CORROBORATIVE EVIDENCE TO ESTABLISH THE FINANCIAL CAPACITY OF THE DONOR TH E BANK STATEMENTS DO NOT PROVE THE CREDITWORTHINESS OF THE DONORS FOR SHOWIN G THAT THEY WERE FINANCIALLY SOUND FOR MAKING SUCH GIFTS; THE BANK STATEMENTS ME RELY INDICATE THE MOVEMENT OF THE FUNDS AND NOT THE CREDITWORTHINESS OF THE ACCOUNT HOLDER. MERE ISSUANCE OF A CHEQUE FROM A BANK ACCOUNT CANNO T ESTABLISH THE CREDITWORTHINESS OF A DONOR. IN THESE CIRCUMSTANCE S ESPECIALLY WHEN THE LD. AR HAS NOT PLACED BEFORE US ANY MATERIAL TO TAKE A DIFFERENT VIEW IN THE MATTER WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FI NDINGS OF THE LD. CIT (A) THAT THE ASSESSEE HAS FAILED IN ESTABLISHING THE CREDITW ORTHINESS OF THE DONOR. 14.2 AS REGARDS GENUINENESS OF THE AFORESAID TWO GIFTS EXCEPT THE CLAIM OF THE ASSESSEE THERE IS NO MATERIAL ON RECORD THAT T HE SAID DONOR WAS A FRIEND OF THE ASSESSEE OR THAT THERE WAS NATURAL LOVE AND AFFECTION. IN THIS CONNECTION IN THE CASE OF CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC) THEIR LORDSHIPS LAYING DOWN THE SIGNIFICANCE OF HUMAN PRO BABILITIES HELD AS UNDER : 'THAT THOUGH AN APPARENT STATEMENT MUST BE CONS IDERED REAL UNTIL IT WAS SHOWN THAT THERE WERE REASONS TO BELIEVE THAT THE A PPARENT WAS NOT THE REAL IN A CASE WHERE A PARTY RELIED ON SELF-SERVING RECI TALS IN DOCUMENTS IT WAS FOR ITA NO.424&609/AHD/2006 14 THAT PARTY TO ESTABLISH THE TRUTH OF THOSE RECITALS : THE TAXING AUTHORITIES WERE ENTITLED TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF SUCH RECITALS.' 14.3. IN THE PRESENT CASE NOT ONLY THAT THE ASS ESSEE FAILED TO PROVE THE CREDITWORTHINESS OF THE PERSON MAKING THE PAYMENT O F SUCH AMOUNT TO THE ASSESSEE THE AO AND THE LD. CIT(A) FOUND THAT THE GIFTS WERE NOT REAL IN NATURE. SINCE THE CLAIM OF GIFT IS MADE BY THE ASSE SSEE THE ONUS LIES ON HIM NOT ONLY TO ESTABLISH THE IDENTITY OF THE PERSON MA KING THE GIFT BUT ALSO HIS CAPACITY TO MAKE A GIFT AND THAT IT HAS ACTUALLY BE EN RECEIVED AS A GIFT FROM THE DONOR. THE GENUINENESS OF A GIFT TRANSACTION CANNOT BE DETERMINED WITHOUT LOOKING INTO THE ASPECT OF HUMAN PROBABILITIES REL ATIONSHIP OF DONOR AND DONEE OCCASION FOR MAKING THE GIFT AND EXISTENCE O F RECIPROCITY IF ANY. IT MEANS THAT WHILE CONSIDERING THE GENUINENESS OF THE GIFT TRANSACTION THE ABOVE-MENTIONED ASPECTS ARE OF NO LESS SIGNIFICANCE . FURTHER IN CASE THE ASSESSEE FAILS TO ESTABLISH ANYONE OF THESE INGREDI ENTS THE GIFT AMOUNTS RECEIVED BY THE ASSESSEE CAN BE TREATED AS ASSESSEE 'S INCOME FROM UNDISCLOSED INCOME REPRESENTING ASSESSEE'S OWN MONE Y WHICH WAS INTRODUCED IN THE GARB OF A GIFT BY THE ASSESSEE. T HUS KEEPING IN MIND THESE PRINCIPLES LAID DOWN FOR CONSIDERING THE GENUINENES S OF A GIFT TRANSACTION WE FIND THAT ADMITTEDLY SHRI SUNIL PATEL WAS NOT RELA TED TO THE ASSESSEE. THERE IS NO EVIDENCE ON RECORD REGARDING EITHER OCCASION OF THE GIFT OR THAT THE SAME WERE MADE ON ACCOUNT OF NATURAL LOVE AND AFFECTION. IT HAS NOT BEEN EXPLAINED BEFORE US AS TO WHY THE DONORS PARTED WITH SUCH HUG E AMOUNTS BY GIFTING THE SAME TO THE ASSESSEE WHEN NEITHER THERE WAS ANY OC CASION NOR THEY WERE RELATED TO THE ASSESSEE NOR THERE WAS ANY RECIPROCI TY BETWEEN THEM REGARDING EXCHANGE OF SUCH GIFTS. NOW THE SIMPLE QUESTION WH ICH ARISES IN MIND IS WHETHER IT IS HUMANLY PROBABLE THAT A PERSON MAY GI VE AWAY HIS HARD EARNED MONEY EARNED IN FOREIGN COUNTRY AS A GIFT TO AN I NDIAN ACQUAINTANCE MERELY OUT OF LOVE AND AFFECTION WHEN THAT INDIAN IS NOT R ELATED TO HIM AND THAT NRI DONOR HAS NO OCCASION FOR GIVING THE AMOUNT IN GIFT . IF WE PUT THIS QUESTION TO ANY HUMAN HAVING A NORMAL HUMAN BEHAVIOUR THE OBVI OUS ANSWER WOULD BE 'NO'. THEREFORE APPLYING THE TEST OF HUMAN PROBABI LITIES AS LAID DOWN BY THE APEX COURT IN THEIR VARIOUS DECISIONS THE ASSESSI NG OFFICER WAS FULLY JUSTIFIED ITA NO.424&609/AHD/2006 15 IN COMING TO A CONCLUSION THAT THESE WERE BOGUS GIF TS AND THEREBY ADDING THE SAME TO THE INCOME OF THE ASSESSEE. 14.4. IT IS ALSO WELL-SETTLED THAT MERE IDENTIFICAT ION OF DONOR AND SHOWING THE MOVEMENT OF GIFT AMOUNT THROUGH BANKING CHANNEL IS NOT ENOUGH TO PROVE GENUINENESS OF THE GIFT. THE ASSESSEE WAS REQUIRED TO ESTABLISH THAT THE DONOR HAD THE MEANS AND THE GIFT WAS GENUINE FOR N ATURAL LOVE AND AFFECTION AS HELD IN THE CASE OF LALL CHAND KALRA V. CIT [ 1981] 22 CTR 135 SAJAN DASS AND SONS V. CIT [2003] 264 ITR 435 (DEL.) CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC) AND SUMATI DAYAL V. CIT [1995] 214 ITR 801 (SC) AND RECENTLY IN THE CASE OF JASPAL SINGH VS. CIT (2006) 205 CTR (P&H) 624 : (2007) 290 ITR 306 (P&H). AND IN ACIT VS. RAJIV TANDON 294 ITRSP 219 (DELHI). IN VIEW OF THE FOREGOING WE ARE OF THE OP INION THA THE ASSESSEE FAILED TO DISCHARGE THE BURDEN WHICH LAY UPON HIM TO PROVE THE GENUINENESS OF THE GIFTS AND CAPACITY OF THE DONOR. 14.5 WE HAVE ALSO GONE THROUGH THE TWO DECISION S RELIED UPON ON BEHALF OF THE ASSESSEE. WITH DUE RESPECT WE ARE OF THE OPINI ON THAT FACTS IN THESE THESE DECISIONS ARE AT VARIANCE WITH THE FACTS OF THE CASE UNDER CONSIDERATION AND EVEN THE LD. AR DID NOT DEMONSTRATE BEFORE US AS TO HOW THESE DECISIONS ARE RELEVANT TO THE FACTS OF THE INSTANT CASE. 14.6. IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN THE LIGHT OF AFORESAID DECISIONS WE HAVE NO ALTERNATIVE BUT TO UPHOLD THE FININGS OF LD. CIT(A). THEREFORE. GROUND NOS 6 & 7 IN THE APPEAL A RE DISMISSED. AS REGARDS ALTERNATE PLEA REGARDING TELESCOPING THE ADDITION A GAINST INTANGIBLE TRADING ADDITION THERE IS NO MATERIAL BEFORE US NOR THE AS SESSEE ESTABLISHED NEXUS BETWEEN THE TWO ADDITIONS. UNLESS THERE WAS A CONNE CTION BETWEEN THE GIFTS AND THE TRADING ADDITION IT WOULD BE DIFFICULT TO ACCORD SET OFF OF THE TWO FIGURES AS HELD IN THE DECISIONS IN THE CASE OF CI T V. DEVI PRASAD VISWANATH PRASAD [1969] 72 ITR 194 (SC) AND CIT VS. JHAVERBHAI BIHARILAL & CO.160 ITR 634(PATNA). THEREFORE THIS PLEA OF THE ASSESSE E IS ALSO NOT TENABLE. ITA NO.424&609/AHD/2006 16 15. NO ADDITIONAL GROUND HAVING BEEN RAISED IN T ERMS OF THE RESIDUARY GROUND NO. 8 IN THE APPEAL OF THE ASSESSEE ACCORDI NGLY THE SAID GROUND IS ALSO DISMISSED. 16. IN THE RESULT APPEAL OF THE REVENUE IS DISMIS SED WHILE THAT OF THE ASSESSEE IS PARTLY ALLOWED.. SD/- SD/ - (MAHAVIR SINGH) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 8/1 /2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. INCOME-TAX OFFICER WARD- 5(4) BARODA 3. THE CIT(APPEALS)-V BARODA 4. THE CIT CONCERNED. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 8 /1 /2010