DAYA JAIN,NEW DELHI vs. ITO, WARD- 25(1), NEW DELHI

At the time of hearing, learned counsel for the assessee stated that the issues involved in these four appeals are similar and identical and the same can be disposed of by passing one order. For the sake of convenience, she argued the in the case of Smt. Meenu Jain Vs. Income Tax Officer, New Delhi. Therefore, I am first dealing with ITA No. 1738/Del/2018 (AY 2005-06) in the case of Meenu Jain vs. ITO and the result thereof will apply mutatis mutandis to other 03 appeals.

Smt. Meenu Jain, the assessee filed her return of income of Rs.1,32,156/- on 20.09.2005. The Assessing Officer processed the same u/s 143(1) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) at the returned income on 08.03.2007. Subsequently the case of the assessee was selected for scrutiny and Assessing Officer issued notice u/s 143(2) of the Act on 25.09.2006 which was served upon the assessee. In response to the same Authorized Representative (A/R) of the assessee filed requisite details.

The assessee declared income from other sources amounting to Rs.1,36,532/- comprising primarily of interest income. On examination of the balance sheet enclosed with the return filed by the assessee the Assessing Officer noticed that the assessee had received a sum of Rs.3,00,000/- by way of gifts from three persons Shri Naresh Jain, Shri Gopal Bansal and Shri Umesh Jain @ Rs.1,00,000/- each on 19.08.2004, 20.08.2004 and 20.08.2004 through cheques respectively. After examining the gift deed of the assessee, the Assessing Officer was of the view that all these persons chose to make a gift to the assessee, on the same day, without any occasion. The Assessing Officer also found that none of the family members have made any gifts to the assessee during the year. On examining the gift deed so furnished it was noticed that all the three donors had deposed that gifts have been made out of their natural love and affection for the assessee and the Assessing Officer was of the view that all the three donors are neither part of the family of the assessee or even a relative of the assessee. In light of this, the Authorized Representative of the assessee was asked by the Assessing Officer to furnish details about the gift transactions and also furnish evidence to establish creditworthiness of the donors. In response thereto, assessee furnished the copy of affidavit regarding gift deed, I.T. particulars and bank extract of the donors. On examination of the same the Assessing Officer noted that all the three donors had shown returned income which was slightly more than the maximum amount which is not taxable i.e. Shri Naresh Jain Rs.97,966/-, Shri Gopal Bansal Rs.1,02,000/- and Shri Umesh Jain Rs.1,12,000/-.

In response to the query raised by the Assessing Officer, the AR of the assessee expressed his inability to produce the donors. Keeping in view the facts and circumstances and the opportunity provided to the assessee for substantiating the claim of the assessee. The Assessing Officer finally held that assessee has not discharged his onus as required under Section 68 of the Act. AO observed that in view of above, it is against the human probabilities for such sums of money to be gifted to the strangers. The Assessing Officer after examining the documentary evidences filed by the assessee added Rs.3,00,000/- on account of gifts received by the assessee from the said three persons and completed the assessment on taxable income of Rs.4,32,160/- vide order dated 31.10.2010 passed under Section 143(3) of the Act. Against the assessment order, assessee filed appeal before the Learned First Appellate Authority who vide his impugned order dated 22.12.2007 has upheld the assessment order by dismissing the appeal filed by the assessee. Aggrieved with the impugned order dated 22.12.2017, assessee filed the present appeal before the Tribunal.

During the hearing, Mrs. Rano Jain, the learned A/R of the assessee argued on one legal ground as well as on merits also. She stated that the AO had made the addition of Rs.3,00,000/- in each case u/s 68 of the Act on account of gifts received by the assessee by holding that Rs.3,00,000/- does not represent gift and assessee is unable to prove this gift as bonafide gift. She stated that assessee is not maintaining books of accounts and filing the return of income on account of business income. She stated that assessee was not having business income / receipt / turnover in the relevant assessment year, then the question of maintaining the books of accounts of assessee does not arise. She stated that the finding of the AO as well as the Ld. First Appellate Authority on this issue is contrary to law and facts on the file because Section 68 is not applicable in the case of the assessee. The AO has failed to discharge its duty to make proper examination of return of income by going through the documents available on record as such as the assessee never maintained any books of accounts for the relevant assessment year. She also draw my attention to the provisions of Section 44AA of the Act and stated that this provision clearly established that the assessee was not under obligation to maintain any books of accounts. Therefore, the finding of the Revenue authorities that the amount of Rs.3,00,000/- was found credited in the books of accounts of the assessee and invoked the provision of Section 68 of the Act in the case of the assessee which is illegal and liable to be stuck down. In support of her contention she filed a paper book in which she has filed various orders of the Tribunal including the order passed in Vinesh Maheswari, Rima Maheswari Vs. Income Tax Officer, Ward 61(2)(3) New Delhi, dated 01.03.2019 in & 7211 (Del) of 2018 reported in (2019) 3 TMI 1118 – ITAT, Delhi and in Nitin Agarwal (HUF), Kailash Prasad Agarwal (HUF) and Manish Aggarwal (HUF) Vs. Income Tax Officer, Ward 30(1), New Delhi and Income Tax Officer, Ward 29(2) New Delhi reported in (2019) 1 TMI 651 – ITAT, Delhi, the under-signed is the author of this order dated 01.03.2009. Secondly, she has also cited order of the ITAT, Delhi reported in (2019) 4 TMI 1020 – ITAT, Delhi in Jitendra Kumar Yadav Vs. Assistant Commissioner of Income Tax, Circle 35(1), New Delhi. She has also filed various other case laws on the applicability of the provisions of Section 68 of the Act wherein the assessee is individual and not maintaining books of accounts and Section 68 of the Act is not applicable.

On this issue the learned Departmental Representative, relied upon the orders passed by the Revenue authorities. He has also filed a copy of the order dated 13.05.2019 passed by the ITAT, Delhi Bench ‘G’ New Delhi, in and 938 (Del) of 2012 – Assessment Years 2004- 05 and 2005-06 in the acse of Janak Goel Vs. Dy. Commissioner of Income Tax, Central Circle – 4, New Delhi. The learned DR has also filed one written submission on legal issue as well as on merits. He especially drew my attention towards paras 17 to 20 of the aforesaid Tribunal’s order dated 13.05.2019 and stated that the legal argument advanced by the learned counsel for the assessee has been adjudicated and answered in favour of the Revenue on the basis of the judgement of Hon’ble Bombay High Court in CIT Vs. Bhaichand N. Gandhi reported in (1983) 141 CTR 63 (Bom). Respectfully following the same the legal issue raised by the learned counsel for the assessee may be dismissed.

I have heard both the parties, perused the orders passed by the Revenue authorities on the legal issue by the learned counsel for the assessee especially the order passed by the ITAT, Delhi Bench ‘G’ New Delhi in and 938 (Del) of 2012 – Assessment Years 2004-05 and 2005-06 in the case of Shri Janak Goel, Gurgaon Vs. Dy. Commissioner of Income Tax, Central Circle – 4, New Delhi vide order dated 13.05.2019. I am of the considered view that the legal issue raised by the learned counsel for the assessee has already been adjudicated and decided in favour of the Revenue by the Division Bench of the Tribunal. The relevant para Nos. 17 to 20 are reproduced for the sake of convenience as under:-

The learned departmental representative vehemently supported the order of the learned assessing officer/CIT – capital and submitted that the amount has been deposited in the bank account of the assessee and therefore the addition is rightly been made under section 68 of the Income Tax Act. maintaining any books of accounts and therefore deposit made in the bank account of the assessee cannot be considered as an amount deposited in the books of accounts of the assessee and hence, the addition made u/s 68 of the income tax act stands vitiated and therefore it should be deleted. The first judicial precedent in this controversy is the decision of the honourable Bombay High Court in 141 ITR 67, wherein it has been held that that when monies are deposited in bank account, relationship that is constituted between the bank and the customer is of creditor and not the trustee and beneficiary. Therefore, it is not as if the bank passbook is maintained by the bank as an agent of the customer, nor can it be said that the passbook is maintained by the bank under the instructions of the customers. In view of this, the bank passbook supplied by the bank to the assessee cannot be regarded as a books maintained by the assessee under instructions. Accordingly, it was held that cash credit for the previous year shown in the assessee‟s bank passbook issued to him by the bank, but not shown in the cashbook maintained by him for that year, does not fall within the ambit of section 68 of the income tax act. The facts in that case are that assessee did maintain the books of accounts , certain sums were found in the bank account of the assessee but were not found in the regular cashbook submitted by the assessee. In the circumstances, the honourable High Court stated so. Further, the assessment year involved in that case is 1962 – 63. Admittedly on that date definition of the „books of accounts‟ as prescribed under section 2 (12A) was not there on statute, which is inserted by the finance act, 2001, with effect from 1/6/2001. Further, the honourable Bombay High Court in 85 taxmann.com 306, 250 taxman 362 and 399 ITR 256 (Bombay) in Arunkumar J Muchhala V CIT has considered an identical issue where the above decision of the honourable Bombay High Court in 141 ITR 67 was considered. The honourable Bombay High Court noted that in Sudhir Kumar Sharma (HUF) vs CIT, 46 taxmann.com 340, honourable High Court noted that when during the course of assessment proceedings, assessing officer noted that the assessee has deposited huge amount of cash in his bank account, the addition of the said amount in the income of the assessee, by invoking the provisions of section 68 of the income tax act is justified. It was further held that onus is on the assessee to explain the nature and source of the said cash deposits. Special leave petition was preferred challenging the above judgment before honourable Supreme court. However, the honourable Supreme Court has dismissed the same in 69 taxmann.com 219 [239 taxmann 264]. In view of this, even if the assessee does not maintain any books of accounts but the amount is deposited in the bank account of the assessee, which remains unexplained the addition could be correctly made u/s 68 of the act. Further looking at the definition of the „books or books of accounts‟ it is apparent that passbook is a daybook which is kept in the return form or as a printout of data stored in a floppy. Therefore, after the introduction of the definition of the books or books of account under section 2 (12A) of the act, the pass-book can also be considered as books or books of account. There is no distinction who writes it, but it is record of the transactions entered into by the assessee with the bank. The provisions of section 68 of the income tax act also does not make any distinction about who maintains the books of account, the only requirement is that the books should be of an assessee. There is no requirement that the books of account should be maintained by the assessee himself. In view of this, we do not find any infirmity in the order of the learned CIT – A, in confirming an addition of INR 512000/– on account of unexplained bank deposits under section 68 of the income tax act. Accordingly, the additional ground raised by the assessee for assessment year 2004 – 05 is also dismissed.

Accordingly, appeal of the assessee for assessment year 2004 – 05 is dismissed.’’ 10. I have thoroughly gone through the impugned orders along with order passed by the Tribunal dated 13.05.2019 reproduced above. I am of the considered view that the legal issue raised by the learned counsel for the assessee has already been adjudicated and decided against the assessee and in favour of the Revenue. By respectfully following the decision of Hon’ble Bombay High Court in CIT Vs. Bhaichand N. Gandhi (supra) by holding that the onus is on the assessee to explain the nature and source of deposits in the bank and under similar facts and circumstances of the case of the assessee Hon’ble High Court has also held that assessee has deposited huge amount of cash in his bank account and the addition of such amount in the income of the assessee by invoking provisions of Section 68 of the Act is justified. Special Leave Petition was preferred and challenged the order of the Hon’ble High Court before the Hon’ble Supreme Court of India which has already been dismissed. The same is reported in Shri Surinder Kumar Sanpal Vs. Income Tax Officer, New Delhi reported in 69 taxman.com 219 (239 Taxman 264) (SC).

I have gone through the order referred by the learned counsel for the assessee which is authored by the under-signed and I am of the view that at the time of argument in the appeals in which the under-signed passed the order where the assessee is not maintaining books of accounts and Section 68 of the Act is not applicable at the time of hearing of the said appeals. Learned Departmental Representative has not cited the decision of Hon’ble Bombay High Court in CIT Vs. Bhaichand N. Gandhi (supra) as well as the judgement of the Hon’ble Supreme Court of India dismissing the appeal filed against the judgement of the Hon’ble Bombay High Court in Shri Surinder Kumar Sanpal Vs. ITO (supra). Therefore, the benefit of said orders passed by the under-signed could not be given in future to any party.

Keeping in view the facts and circumstances explained above and the argument advanced by both the parties on the legal issue and on the basis of the judgement of the ITAT, Delhi Bench ‘G’ New Delhi reproduced above, I am of the considered view that the legal issue raised by the learned counsel for the assessee is decided in favour of the Revenue and against the assessee.

As regards to the merits of the case learned counsel for the assessee stated that the assessee has produced the gift deeds before the AO which was examined by him and made the addition in dispute by holding that the creditworthiness of the donor not especially verification of the donor was not arranged by the assessee, the amount denied to the assessee was found credited in the bank account of the donor through clearing cheque received on the same date when cheque was issued by him in respect of donation and love and affection between the donor and donee not found. She submitted that assessee has produced all the documentary evidence before the AO establishing creditworthiness of the donor but the AO failed to verify the same by using the power under Section 131 r.w.s. 133(6) of the Act. Therefore, the AO failed to discharge its duty so far as creditworthiness and sources of fund involved in the transaction of all the gifts are concerned. She further stated that no doubt the assessee could not produce the donor and has shown his inability to produce the donor and make a special request to issue summons under section 131 of the Act to the donor to merely failure of the assessee to produce the donor made a ground for the conclusion that the assessee failed to establish creditworthiness when number of adequate opportunities are vested by the statute with the AO for the same. She further argued that assessee placed copies of balance sheet, the IT proof, ITR and bank accounts of the donors which has not been examined by the AO and the Learned First Appellate Authority and accordingly, the addition was made and confirmed by them. As regards the absence of availability of love and affection between the donor and donee the learned counsel for the assessee stated that it is unwarranted and beyond imagination in the light of the Hindu culture for which the AO has no regards. She pointed out that at the relevant time donor and donee were close neighbours and their families were interacting with each other very closely, both were having enjoyed together for more than five years which transformed into good and healthy relation more than blood relation and the gifts in question result of it. Finally she argued that keeping in view the circumstances explained by the assessee, before the AO and the Learned First Appellate Authority as well as before the Tribunal the assessee has discharged her onus by producing various documentary evidence which the assessee has filed in the shape of paper book before the lower authorities as well as before the Tribunal and requested that the addition in dispute may be deleted in all the four appeals.

The learned Departmental Representative relied upon the order passed by the Learned First Appellate Authority. He has also filed two page written submissions to support the impugned order in which he has cited 8 judgements delivered by the Hon’ble High Courts. For the sake of convenience, the written submissions filed by the learned Departmental Representative dated 22.01.2020, is reproduced as under:- “Sub : Written Submission in the above case - reg.

Sarita Aggarwal Vs ITO Delhi High Court 2015 [2015] 56 taxmann.com 195 (Delhi)/[2015] 231 Taxman 600 (Delhi)/[2015] 373 ITR 586 (Delhi)/[2017] 294 CTR 71 (Delhi)

The learned Departmental Representative requested that assessee has received Rs.3,00,000/- from three different persons each of these three persons had gifted Rs.1,00,000/- to the assessee, which the assessee could not explain the source and genuineness of the gifts before the authorities below and requested that under the facts and circumstances of the case the appeals filed by the assessee may be dismissed.

I have heard both the parties on merits and perused the orders passed by the Revenue authorities and I am of the view that the Assessing Officer has examined the balance sheet annexed with the return of income filed by the assessee and found that the assessee has received Rs.3,00,000/- by way of gifts and asked the assessee to furnish details of donors from whom gifts of Rs.3,00,000/- were received. In response to the same the A/R of the assessee filed gift deeds along with the affidavits from the donors. After examining the same, the AO asked the assessee to explain the relationship between the assessee and donor which was replied by the assessee that these three donors are neither part of his family nor relatives of the assessee. I am of the view that when there is no relation between the assessee and donor the question of love and affection does not arise meaning thereby that the assessee could not establish the natural love and affection with the assessee by the donor which is very much essential for proving the genuineness of the gifts. Even otherwise, after examining the gift deeds, Income Tax particulars and bank accounts of the donors the Revenue authorities found that all the three donors had shown returned income which was very meagre and which the Assessing Officer has reproduced at page No. 2 of the assessment order. After examining the copies of the pass books of the donors, it was found that the funds were credited in the accounts of all the donors on the date when the gift deeds were made. In fact in the case of Shri Naresh Jain the cheque for the gift amount was dishonoured due to inadequate funds as is evident from the extract of the pass book.

As regards other 03 Appeals of different assesses are concerned, following the consistent view as taken in (AY 2005-06) in the case of Smt. Meenu Jain vs. ITO, as aforesaid, the ITA No. 1739/Del/2018 (AY 2005-06) in the case of Smt. Sushma Jain vs. ITO; (AY 2005-06) in the case of Smt. Daya Jain vs. ITO and ITA No. 1741/Del/2018 (AY 2005-06) in the case of Sh. Sudhir Jain (JUF) vs. ITO also stand dismissed.