VENKATCHALAM R. CHETTIAR,,VADODARA vs. THE INCOME TAX OFFICER, WARD-5(4), NOW WARD-3(1)(5), BARODA

The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is reproduced as under:- “4. I have carefully considered the facts on records, submission of Ld. Authorized Representative and remand report of Assessing Officer. Ground No. 1 pertains to the completion of assessment u/s. 143(3) r.w.s. 147 after making addition of Rs.2,03,310/- and Rs.6,95,422/-. These additions have been challenged separately by Ground Nos. 2 & 3 and hence Ground No. 1 being general in nature is not adjudication separately. 4.1 Ground No. 2 pertains to the addition of Rs.2,03,310/- made u/s. 68 on account of unexplained gifts. The appellant has shown gifts from various persons in the year under consideration as well as in subsequent assessment years. The details of gifts are as under:- A.Y. 2000-01 Shri P. Kumar Rs.52,310/- 29.06.1999

This view finds support from the following decisions:- a) Laxmandas Sujandas Dalpat Vs. ITO (2015) 64 taxmann.com 180 (Guj.) In this case, it has been held that for genuine gifts, existence of love and affection and relationship are must. b) Abhay Devilal Rathod Vs. DCIT (2010) 40 SOT 354 (Ahd.) In this case, it has been held that identity and creditworthiness of the donor and genuineness of the gifts, all ingredients have to be proved by the assessee. Merely proving identity and creditworthiness of the donor,, gifts cannot be said to be genuine unless natural love and affection prompting gifts is established even if amount was received by cheque. c) Hanumandas Vs. CIT (2014) 221 Taxman 137 (P&H) In this case, it has been held that even if donor have means to make gifts, but there being neither any relationship nor any circumstances to show natural love and affection of the donor to the donee nor any occasion to make gifts to the assessee, addition u/s. 68 should be sustained. In view of the above discussion and legal position thus I hold that the Assessing Officer has rightly made the addition on account of unexplained gifts u/s. 68 as genuineness of the gifts remained improved. Thus Ground No. 2 is dismissed.”

During the course of appellate proceedings before us, the ld. counsel has contended that the reopening of the assessment by the assessing officer was not valid as the same was reopened only on the basis of information received from DDIT(Investigation). The ld. counsel has also submitted that gifts were received by account payee cheques supported by confirmation letter from the doner therefore the ld. CIT(A) is not justified in sustaining the addition made by the assessing officer. The ld. counsel has also made alternative submission that if the appeal of the assessee is not allowed then the addition should be restricted to the net profit and not to the whole amount based on the amount of gift receipt. On the other hand, ld. departmental representative has vehemently contended that after receiving information from the DDIT(Investigation) the assessing officer has applied his mind and reopened the assessment on the basis of his satisfaction and reason to believe that the receipt shown from the gift was not genuine. The ld. departmental representative has also submitted that assessee has received gifts from different persons who were not relatives of the assessee and such gifts were not supported with any gift deeds. The ld. departmental representative has also stated that assessee has failed to prove genuineness of gift received during the course of assessment and appellate proceedings before the Assessing Officer and ld. CIT(A).

We have heard both the sides and perused the material on record. The assessment u/s. 143(3) r.w.s. 147 of the act was finalized on 28th December, 2017. During the course of assessment, the assessing officer noticed that assessee has claimed gifts from different persons in all the assessment years as elaborated in this order. The assessing officer has added the amount of gift u/s. 68 of the act as unexplained income on the ground that genuineness of the gift was not proved. Regarding additional ground of appeal of the assessee that notice issued u/s. 148 was not valid, it is noticed that notice u/s. 148 of the act was issued on 19th March, 2007 and before issuing notice u/s. 148, the assessing officer has recorded reasons on 03-03-2007 and its copy was also provided to the assessee. The assessing officer has recorded his satisfaction after taking into consideration information received from the DDIT(Investigation) that the assessee has failed to prove the genuineness of the gift received gifts from different persons in different assessment years credited to the capital account not supported with relevant evidences. On perusal of the material on record, it is observed that information supplied by the Investigation Wing to the assessing officer formed a prima facie basis to enable the assessing officer to form a belief of income chargeable to tax having escaped assessment. Therefore, there is no substance in the additional ground of appeal of the assessee stating the assessing officer did not have reason to believe that income chargeable to tax had escaped assessment. The case laws relied upon by the assessee are distinguishable on facts and are of no help to the assessee in the present case. We uphold the reopening of assessment year under section 148 of the Act. Therefore, this additional ground of appeal of the assessee is dismissed.

Regarding confirming unexplained gift u/s. 68 of the act, it is noticed that assessee has shown gifts from various persons for the year under consideration as well as in subsequent assessment years as reported above in this order. On the basis of material on record, it is noticed that all the doners had absolutely no connection with the assessee. There was not any blood relation between the assessee and the different doners and the assessee had failed to explain as to why these different unknown persons would provide gift to the assessee in different assessment years. The assessee has not placed on record any gift deed to further establish the genuineness of the gift and mere payment by account payee cheque cannot be treated as genuine transaction without establishing the other ingredients i.e. occasion of the gift, relation of the doner with the donee gift deed etc. It is clear from the above facts that all the gifts in different assessment years have been claimed without any occasion and there was no other relation between the doners and the assessee. The doners appeared to be mere acquaintances. Therefore, it is not possible that they will voluntarily gift to the assessee frequently in different assessment years. Considering the above facts and circumstances, we do not find any infirmity in the decision of ld. CIT(A) holding that genuineness of gifts remained unproved. We could not find any substance in the alternative plea of the assessee to restrict the addition up to the net profit. Therefore, we do not find any reason to interfere in the finding of ld. CIT(A). Both the grounds of appeal of the assessee are dismissed. Accordingly, both the grounds of appeal of the assessee are dismissed.

In addition to the grounds of appeals on the basis of gifts as adjudicated above the assessee has filed ground no. vide against the decision of ld. CIT(A) in confirming the addition to the extent of Rs. 30,275/- being refund received in subsequent assessment year 2002-03. It is noticed that assessee has already brought to the notice of the lower authorities that impugned refund amount has already been shown as income in the year of receipt, therefore, we direct to the assessing officer to delete the addition of refund amount after verification of the claim of the assessee that same has already been shown as income in the year of receipt. In respect of professional tax penalty of Rs. 95,450/- disallowed by the assessing officer, the ld. CIT(A) has already considered the claim of the assessee at para 4.4, page no. 20 of the order of the ld. CIT(A) and restricted the disallowance to the extent of penalty amount of Rs. 50, 000/- after excluding the amount pertaining to the payment of professional taxes. Looking to the above facts, the assessee could not demonstrate the incorrectness in the decision of ld. CIT(A), therefore, we do not find any infirmity in the decision of ld. CIT(A). Accordingly, this ground of appeal of the assessee is partly allowed.

In the result, the appeals vide ITA 1718/Ahd/2016, 1720/Ahd/2016 and 1721/Ahd/2016 filed by the assessee are dismissed and appeal vide ITA 1719/Ahd/2016 is partly allowed.