SMT. O.G.SUNIL vs. THE DEPUTY COMMISSIONER OF INCOME TAX

We heard the counsel for the appellants and the Senior Standing Counsel for Revenue.

We shall first deal with the appeals filed by Smt.Asha Sunil. I.T.A.No.260 of 2014 pertains to the assessment year 2006-07. The first issue raised for consideration before the Tribunal was with respect to the addition of `10,43,815/-. The contention raised was that in the absence of search proceedings/search warrant in the case of the appellant, the assessment under Section 153A of the Income Tax Act was illegal. The Tribunal's order itself shows that after verifying the files of the department, the learned representative of the assessee very fairly conceded before it that he was satisfied that there was search in the case of appellant also and, therefore, he withdrew the said contention.

The second issue was with respect to the addition of `3,33,815/- as unexplained credit in the bank account. The contention raised on behalf of the appellant was that the said deposit was made out of the trading receipts from garment business. However, it has been specifically found that the net income returned by the assessee from her garment business was only `58,250/- and that even after availing of sufficient opportunities, the appellant could not explain the source of investment to the extent of `3,33,815/-. It was therefore that, in the absence of any material or explanation about the source and means, the Tribunal confirmed the addition made by the Assessing Officer treating the & 260, 261 and 262 of 2014 deposit in the bank as unexplained investment.

The next addition in the assessment order is with regard to the investment in property. According to the assessee's representative, the assessee had purchased the property to the extent of `6,30,000/- and the stamp duty and other expenses came to `7,10,000/-. Though the assessee had purchased the property and made investment as above, the assessee had no explanation about the source from which she got the funds for making the investment. It was in such factual circumstances that the entire amount was taken as income of the assessee. Insofar as the assessment year 2006-07 is concerned, these were the only issues that were raised and considered by the Tribunal.

Insofar as assessment year 2007-08, which is the subject matter of I.T.A.No.262 of 2014, is concerned, the issue raised before the Tribunal was with reference to addition of `38,39,969/- towards unexplained investment in the bank account and profit from sale of land. According to the assessee, the deposits were made in the bank from the sale proceeds of the land. However, the Assessing Officer found that the land itself was purchased only on 07.04.2006, ie., during the assessment year under consideration and the investment in the landed property was also not explained. The Assessing Officer has also treated the profit on & 260, 261 and 262 of 2014 sale of land to the extent of `5,93,100/- as business profit. However, despite the explanation that the deposits were made from sale proceeds of land, the details of the transactions and sale were not filed before the Assessing Officer. It was in the absence of such details or the explanation, that the Tribunal confirmed the order of the Commissioner of Income Tax (Appeals), upholding the addition.

In I.T.A.No.261 of 2014 the assessment order for the year 2008-09 is impugned. The sole ground of appeal was with regard to addition of `6,67,68,547/- on account of unexplained investments and this alone was the issue raised before us also. The contention raised before the Tribunal, which was reiterated before this Court also, was that the appellant's father Shri George Philip is an Air Craft Maintenance Engineer and that from his salary income, he gifted to his daughter, the aforesaid amount. Copy of the bank account statement produced by the assessee clearly showed that the money was transferred from Singapore to India by way of telegraphic transfer and within a day or two, the same was transferred to the assessee's account. However, the manner in which the money was transferred from Singapore to the assessee's father's account in India, could not be explained either before the Tribunal or this Court. Similarly, the role played by Tandon Investment Company, Singapore in this & 260, 261 and 262 of 2014 transaction is also a mystery and could not be explained even before us. In fact the evasive submission made was that the assessee's father “might have” transferred his salary from Singapore.

In substance, the contention raised before us was that if at all any addition could be made, it should be only in the hands of the assessee's father and not in the hands of the assessee. Before us, the learned counsel for the appellant also placed reliance on Section 56(2) of the Income Tax Act,1961 (in short,”the Act”), in as much as, the money was received from the father, a lineal ascendant of the assessee. However, the genuineness of the transaction was considered by the Tribunal and on facts, the Tribunal has concluded thus in paragraphs 19 and 20 of its order, which read as follows:

From this it is obvious that the funds were transferred to the assessee's father's account by T.T.transfer and again it was retransferred to assessee's account. Therefore, it is for the assessee to explain how the assessee's father got the funds. The assessing officer has taken pain in examining assessee's father. However, he could not give any satisfactory explanation except by saying that it was his savings and salary. In the absence of any material to show that the assessee's father has saved so much of money, this Tribunal is of the considered opinion that the claim of the assessee/her father that the transfer was from savings of her father cannot be accepted. To accept the gift, the assessee has to definitely establish the creditworthiness of her father. The contention of the ld. counsel for the assessee is that if the assessee could not explain the creditworthiness, the addition & 260, 261 and 262 of 2014 could be made only in the hands of the assessee's father. The case of the department as it appears from the assessment order clearly shows that Shri George Philip acted as an agent for transfer of funds from unknown person to Smt.Asha Sunil. The assessing officer has also found that the assessee's father's bank account is only a conduit for transfer of funds from unidentified person. In the absence of any material to suggest that the assessee's father has sufficient creditworthiness to credit such a huge money to the assessee, this Tribunal is of the considered opinion that the CIT(A) has rightly confirmed the addition. The onus is on the assessee to prove the creditworthiness of her father, genuineness of the transaction and identity of the parties. In this case, though the assessee claims that the funds were transferred from her father's account, the creditworthiness is not proved. Merely because the funds were transferred from banking channel, it will not prove the genuineness of the transaction as held by the Apex Court in the case of P.Mohanakala (supra). In view of the above, we do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed.” A reading of the order of the Tribunal shows that on the materials before it, the Tribunal was satisfied that the assessee had not discharged her burden & 260, 261 and 262 of 2014 by proving the creditworthiness of her father, the identity of the parties and the genuineness of the transaction and on facts, we fully endorse that conclusion. One is also at a loss to understand why, if her father was stationed in Bahrain as claimed by the appellant and if he wanted to gift his salary income earned in that country to his daughter living in India, he should transfer the amount to Singapore and then to India, instead of directly transferring the amount from Bahrain itself. It was in the aforesaid circumstances that the Tribunal confirmed the order of the Commissioner of Income Tax (Appeals), upholding the addition. The findings entered into by the Tribunal are entirely factual and on facts, once the theory of gift by father is rejected, the question of Section 56(2) of the Act does not arise at all.

Insofar as I.T.A.Nos.6 to 10, 12 and 24 of 2015 are concerned, those appeals pertain to the assessment years 2002-03 to 2008-09 and are filed by the assessee Shri O.G.Sunil, the husband of the appellant in the earlier three appeals. Insofar as assessment year 2002-03 is concerned, the challenge was against the addition of `36,67,010/-. According to the assessee, the Assessing Officer has taken `15,04,891/- as unexplained bank deposit. It was pointed out that the total deposit was `19,54,243/- and that the Assessing Officer has failed to take cheque & 260, 261 and 262 of 2014 deposit to the extent of `4,48,828/-. The Tribunal has recorded a finding that “the ld. representative very fairly submitted that the assessee could not explain the source for making these deposits”. Despite that, it is seen argued before the Tribunal that the income was from real estate business and, therefore, only the net amount should be taken and not the gross amount.

Insofar as the unexplained credits to the extent of `10,77,219/- is concerned, the evasive contention raised was that the unexplained credit “might have” been used for making deposit in the bank account and, therefore, it should not have been taken as income of the assessee. Similarly, with reference to the cash withdrawal from the bank to the extent of `2,91,600/-, the contention raised was that once the deposit was taken as income, withdrawal should not be taken as income once again. With reference to the foreign travel expenses, the Assessing Officer has made addition of `5,00,000/- and the contention raised was that this expense was incurred from the withdrawals made from the bank.

These factual contentions were considered by the Tribunal, and the Tribunal has made reference to the admitted fact that the assessee was not maintaining any books of account and that though the assessee had received huge amounts from various persons, details of such persons & 260, 261 and 262 of 2014 were not disclosed to the department. Insofar as the deposit of `19,54,243/-, which was admitted by the assessee is concerned, the Tribunal has noted that the Assessing Officer has taken only `15,04,893/- and that the cheque payment to the extent of `5,68,316/- was not considered by him. Insofar as the amount that has been taken by the Assessing Officer is concerned, the Tribunal has noted that in the absence of any details with regard to earning of income and the persons from whom the money was received, the Assessing Officer has rightly treated the entire amount as income. Insofar as the unexplained credit to the extent of `10,77,219/- is concerned, the Tribunal has taken note of the fact that the assessee has shown the same as loan from others in the cash flow statement. However, having regard to the fact that the assessee had not explained the identity of the persons from whom the loan was allegedly availed of, the creditworthiness of his creditors and the genuineness of the transaction, the Tribunal confirmed the order of the Assessing Officer, taking the aforesaid amount as income of the assessee.

The Tribunal has also confirmed the repayment made to the HDFC Bank, as income of the assessee, for the reason that even such payment could not be explained by the assessee before the lower authorities. Insofar as `2,91,600/- is concerned, the Tribunal agreed with & 260, 261 and 262 of 2014 the assessee that the same cannot be added to his income. With respect to `5,00,000/- incurred by the assessee towards foreign travel expenses is concerned, the Tribunal has held that the source of such expenditure was neither disclosed before the Assessing Officer nor disclosed in his cash flow statement. It was for that reason the Tribunal confirmed the addition to the extent of `5,00,000/-.

The only other common issue in respect of the assessment years 2003-04 to 2008-09 was with respect to addition on account of unexplained investment. The Tribunal has held that the said issue had already been contested in the appeal in relation to the assessment year 2002-03, where the Tribunal has ordered deletion of amounts withdrawn from the bank. Since facts were identical, similar view was taken with respect to these assessment years also and accordingly the Tribunal has ordered deletion of addition to the extent of amounts withdrawn from the bank. These issues were dealt with in paragraphs 30 and 31, which read as under: