MANJU LALCHAND CHHABRIYA,KOLHAPUR vs. THE DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE , KOLHAPUR

This appeal by the assessee against the order dated 14-10-2020 passed by the CIT(A), Pune – 11 for assessment year 2004-05.

The assessee raised ground Nos.1 and 2 questioning the action of CIT(A) in confirming the order of Assessing Officer (AO) in making addition of Rs.10,00,000/- on account of gift received in the facts and circumstances of the case.

Ld. AR Shri Pranjal Phadnis submits that the issue raised in the said two grounds were before this Tribunal in the case of Chhabriya family in and 1062/PUN/2012 and that this Tribunal remanded the issue to the file of AO in the above said Chhabriya family cases, by clearly holding that there is no material brought out by the Revenue to establish that the gifts received from Shri Jagdish Khatri have also been received as a device to account for the unaccounted incomes. Further, he drew our attention to the said order at page 13 of paper book and argued vehemently that this Tribunal clearly held that there was no such evidence in the present case as made by Shri Subhash Bhatija family where the donor confessed the dubious nature of gifts. Further, when the Tribunal also pointed to the examination during the course of search, nothing was brought on record by the Revenue to suggest that the present assessee accepted the gift from Shri Jagadish Khatri family as dubious. The ld. AR placed reliance on the order of CIT(A) in the case of Shri Lalchand P. Chhabriya (HUF) for A.Y. 2004-05 and argued that the findings rendered by this Tribunal in case of Chhabriya family in the first round of litigation which was relied upon by the CIT(A) in the second round of litigation is applicable to the facts of the present case as the CIT(A) therein considered evidences which are identical to the facts of the present case and drew our attention to para No.7 of the said order dated 28.04.2016.

The ld. DR relied on the order of CIT(A).

Heard both the parties and perused the material available on record. We note that the assessee is an individual derives income from rent and interest. The assessee declared total income of Rs.4,23,610/- for the year under consideration on 30.06.2004. As matter stood thus, a search and seizure action was conducted in the group of Chhabriya from 18.04.2007 to 20.04.2007 on the residential and business premises of the said group. According to the AO and CIT(A), an amount of Rs.1,71,00,000/- was disclosed u/s 132(4) and Rs.79,71,735/- was detected on account of additional undisclosed income. According to the AO, the assessee is one of the persons covered under the said search operation and it is evident from para No.2 of the assessment order, wherein we note that the name of assessee stands at serial No.6 of the said list. In pursuance of said search, the AO issued notice u/s 153A(a) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) to the assessee requesting her to file return of income, wherein we note that the assessee requested the AO to treat the return of income as was filed originally u/s 139(1). In the said proceedings, the AO held the gift of Rs.10,00,000/- said to have been received from Shri Jagadish KHatri on 25.09.2003 is the unaccounted income of the assessee introduced in the guise of gift through people operating in facilitating accommodation entries, which clearly shows the AO disbelieved the gift said to have been received by the assessee from one Mr. Jagadish Khatri, thereby the AO added said amount of Rs.10,00,000/- to the total income of assessee u/s 68 of the Act on account of unexplained credit.

Before the CIT(A), we find the assessee reiterated the submissions as made before the AO as well as this Tribunal which is evident from page No.3 of the impugned order. We note that the assessee brought to the notice of CIT(A) regarding passing of first appellate order in the case of Chhabriya family by the jurisdictional CIT(A). In the present case, the CIT(A) sought remand report from the AO in respect of examination of genuineness of the gift from Shri Jagadish Khatri. During the course of remand proceedings, it was contended by the assessee that the gifts from Khatri‟s family is genuine in view of the confirmation of gift deed by said Jagadish Khatri. It was also contended that the said Jagadish Khatri had direct remittances from Dubai, UEA to his NRE account and the said income was earned by the said Khatri outside India as NRI is exempt from income tax in India. The AO found the said explanation as not acceptable in the remand proceedings and reiterated his view in the assessment made u/s 143(3) r.w.s. 153A(a). The assessee vehemently contended when a similar issue on same identical facts was held to be genuine in the case of Chhabriya family, requested the CIT(A) to take the view in terms of decision rendered in Chhabriya family, and to delete the addition. The CIT(A) discussed the issue from para 6.1 of the impugned order, wherein it is noted the CIT(A) observed that the first and primary criteria is the capacity of the person making gift to be in possession of wealth proportionate to such a gift. According to CIT(A), when the source of source is the pay order/DD taken from Wall Street Exchange, LLC by Jagadish Khatri and the said Wall Street Exchange, LLC is one of the highest money remitters in the Middle East is known to facilitate money laundering without its sanction. By holding so, the CIT(A) confirmed the order of AO in holding there is no evidence that Shri Jagadish Khatri purchased the pay order / DD from Wall Street Exchange, LLC out of his own sources of income.

In view of the reasons recorded by the CIT(A) in respect of evidences filed by the assessee, the only thing arises for our consideration is as to whether the evidences furnished before us from page Nos.32 to 40 supports the claim of the assessee vis-a-vis the finding of CIT(A) in the case of Chhabriya and Lalchand Chhabriya (HUF) which are at page Nos. 7 to 19 of paper book. We find the notarized gift deed dated 11.10.2003 at page No.32 of paper book. On perusal of the same, it is noted that the said gift deed executed by Shri Khatri Jagdish Khemchand in the capacity of donor to assessee i.e. Manju Lalchand Chhabriya showing as donee, the said donor made his intention to gift out of natural love and affection a sum of Rs.10,00,000/- out of his own funds deriving from his account of State Bank of India. Further, it was conveyed that the said amount delivered to the assessee by way of a cheque bearing No.093787 dated 30.09.2003 and declared that the assessee is the absolute legal owner and he has no right, title or interest in any nature whatsoever in the said gift amount. Therefore, it is clear from the gift deed that the donor voluntarily made his intention to give gift in favour of the assessee and the said amount was transferred through banking channel deriving from his own account standing in State Bank of India, Pune. We find there is no contrary evidence brought on by the respondent-Revenue to show the said gift deed is arranged for the purpose of making assessee‟s unaccounted money introduced in the guise of said gift.

We find cheque dated 30.09.2003 at page 34 of paper book. It is observed that the cheque is of NRE account of State Bank of India. It was drawn by the said donor in the name of assessee by giving her account number of Shri Veershaiv Co-operative Bank Ltd., Kolhapur. In support of source of the said money in the NRE account belonging to the said donor, we find two pay orders by common date 30.09.2003 raised by the Wall Street Exchange, LLC in Dubai in favour of donor to his NRE account of State Bank of India, Pune branch, which clearly shows the source of money in the NRE account in India has been transferred from the account of donor by way of pay order in Dubai and we find no evidence contrary to the said transaction showing as dubious. The ld. DR did not bring on record any evidence showing the gift money was unaccounted money of the assessee. Further, we find the bank account, pass book of the assessee at page Nos.39 to 40 of paper book, wherein there is no dispute with regard to that encashment of said NRE cheque through the account of assessee in Shri Veershaiv Co-operative Bank Ltd., Kolhapur. It is clear from the said bank pass book, the assessee deposited cheque dated 30.09.2003 for Rs.10,00,000/- in her bank account. Further, we find the passport of donor at page Nos.36 to 38 of paper book and it shows that the donor is having a valid passport which supports the declaration made by him in the gift deed.

In view of the examination of above said evidences, we find that the gift amount was made by Shri Jagadish khatri from his NRE account of State Bank of India, Pune and pay order was taken by the said donor from Wall Street Exchange, LLC which was deposited in his NRE account in State Bank of India, Pune branch. It is also proved the said amount encashed by the assessee in her Shri Veershaiv Co-operative Bank Ltd. Therefore, we find the AO erred in ignoring the evidences filed in the form of NRE savings account, pay orders from Jagadish Khatri, which in our opinion, the gift of Rs.10,00,000/- to the assessee is voluntarily transferred from the account of donor to donee. We find the AO made addition u/s 68 which requires three ingredients to be proved. First is the identity of the donor is proved beyond doubt, which was already discussed by us is passport at page Nos.36 to 38 of paper book. Further, the source of gift amount is transferred through valid accounts from Dubai to NRE account in Pune. Therefore, the capacity of the donor is proved. Since the money transferred from valid account to NRE account in India, there is no doubt about the genuineness of the transaction. Since all the evidences with regard to three ingredients of section 68 are proved, the order of ld. CIT(A) is not justified. Therefore, the order of ld. CIT(A) is set aside and ground Nos.1 and 2 raised by the assessee are allowed.

The ground No.3 is consequential, which requires no adjudication.

In the result, appeal of assessee is allowed.