KAMLESH PARWANI,MUMBAI vs. ITO 19(3)(2), MUMBAI

The captioned appeal by assessee for Assessment Year [AY] 2005-06 contest the order of Ld. Commissioner of Income-Tax (Appeals)-18 [CIT(A)], Mumbai, Appeal No.CIT(A)-18/T-62/ITO 19(3)(2)/10-11 dated 14/01/2013 qua confirmation of certain addition on account of cash credit u/s 68 for Rs.4 Lacs. The assessment for impugned AY was framed by Ld. Income-tax Officer 19(3)(2), Mumbai ITA.No.1737/Mum/2013 Kamlesh Parwani Assessment Year 2005-06 [AO] u/s 143(3) of the Income Tax Act,1961 on 28/12/2007. None has appeared for assessee and no adjournment application is on record. Left with no option, we proceed to dispose-off the same on the basis of material available on record and after hearing Ld. Departmental Representative [DR]. 2.1 Facts in brief are that the assessee being resident individual engaged in manufacturing and trading of chairs was assessed for impugned AY at Rs.14,27,570/- as against returned income of Rs.6,27,570/- filed by the assessee on 25/10/2005. The solitary issue involved in the appeal is addition u/s 68 for Rs. 4 Lacs. 2.2 During assessment proceedings, it was noted that the assessee received gifts aggregating to Rs.28 Lacs from four persons including Rs.2 Lacs each from Reena Dhankani & Harish Dhankani. It was observed that similar gifts were received by the assessee in the past in AY 2001-02, 2002-03 & 2004-05 in individual capacity as well as in the capacity of Karta of a HUF namely Kamlesh R.Parwani HUF. It was further noted that similar gifts were received by other family members of the assessee in the impugned AY as enumerated by Ld. AO on Page Numbers 2 & 3 of the quantum assessment order. In nutshell, Ld. AO observed that assessee and other family members regularly received substantial amount of gifts over the years from family members as well as from outsiders. The dispute under appeal before us is with respect to gifts received by the assessee from Reena Dhankani & Harish Dhankani for Rs. 2 Lacs each. The assessee, in support, filed copies of affidavit from each of these two donors but failed to file any other documentary evidences to prove the genuineness of the gifts. The Ld. AO, inter-alia, ITA.No.1737/Mum/2013 Kamlesh Parwani Assessment Year 2005-06 noted that the assessee failed to demonstrate his relationship with the donors and also could not prove the financial capacity of the donors to make such gifts. In other words, Ld. AO opined that the creditworthiness and genuineness of the transactions could not be established by the assessee. Finally, the aforesaid gifts were added as unexplained cash credit u/s 68 to the income of the assessee.

Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 14/01/2013 where the Ld. CIT(A) noted that both the donors resided at UAE and had no relationship with the assessee and after considering assessee’s submissions, confirmed the stand of Ld. AO by making following observations:- 3.3 I have considered the submissions of the appellant and facts of the case. It is noticed that the assessee has received gift of Rs.2 lakhs from Shri Harish Dhankani and Smt. Reena Dhankani. Both the donors are residing in UAE and has no relationship with the assessee. The AO has called for details in response to this the AR of the appellant has submitted copy of passport and Affidavit of both the persons and audit report of M/s. Dhankani Foodstuffs Trading Est. After examining these documents, the AO has held that the identity of the persons is proved but the creditworthiness and genuineness of the transactions is not proved because the assessee has failed to submit the bank statement and Balance Sheet of both the donors. The assessee has also failed to submit the relevant bank account in which these amounts were received. Therefore, the genuineness of this transaction is also not proved. Hence, he made the disallowance. On the other hand, the AR of the appellant has submitted that Affidavit of both the donors, photocopy of passport, copy of audited financial statement of Dhankani Foodstuffs Trading Est, copy of declaration from the Consulate General of India and declaration of gift was submitted before the AO to prove the genuineness of the transaction which was not accepted. The AR has also relied on the decision of Hon’ble Tribunal (Supra) to strengthen its view. 3.4 From the perusal of the submissions of the appellant and facts of the case it is clear that the assessee has received gift of Rs.4 lakhs from Mr. and Mrs. Dhankani i.e. Rs.2 lakhs each. It is undisputed that the assessee has no relation with the donors. Further it is also undisputed that there was no occasion of gift. As per the provisions of section 68 the onus is always on the assessee to prove the identity, creditworthiness and genuineness of the ITA.No.1737/Mum/2013 Kamlesh Parwani Assessment Year 2005-06 transaction. But in the present case the assessee has proved the identity of the donors but has failed to prove the creditworthiness and genuineness of transaction by submitting their bank accounts. To strengthen the views of the AO reliance is placed on the following decisions: DCIT vs. Phulwati Devi 314 ITR (AT) 1 (Delhi) The Hon’ble Tribunal has relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Durgaprasad P. More 82 ITR 540 and Smt. Sumati Dayal vs. CIT 214 ITR 801 has held that documentary evidence produced by the assessee prima facie supports claim – application of test of human probabilities and surrounding circumstances – documentary evidence cannot be accepted – addition justified. In the case of ITO vs. Alok Agarwal 52 SOT 127 (Agra) has held that in view of the decision of Hon’ble Supreme Court in the case of Mohan Kela 29 ITR 278, Durga Prasad More 82 ITR 540, Sajjandas & Sons vs. CIT 264 ITR 535 and Jaspal Goel v . CIT 310 ITR 715 (P&H) the gift received is not genuine and addition u/s.68 was confirmed. In case of Mangilal Jain v. ITO 315 ITR 105 the Hon’ble Madras High Court has held that mere proving of identity of the creditor or that the payment was made by cheque are not sufficient to prove the genuineness of the transaction. In view of these decisions and facts of the present case it is held that the assessee has failed to prove any relationship with the donor. There was no occasion of gift. The appellant has failed to submit the bank statement of the donor proving the creditworthiness and its own bank account where the gifts were recorded. Therefore, the concept of surrounding circumstances and human probability as decided by the Hon’ble Supreme Court is not proved in this case. Thus the addition made by the AO is upheld and ground of appeal is dismissed.

The Ld. DR submitted that the complete onus to prove the genuineness of gifts rested on assessee and he has miserably failed to prove the same and therefore, the stand of Ld. CIT(A) was quite justified.

We have carefully heard the contentions and perused relevant material on record. After considering the same, we concur with the stand of the revenue that the assessee miserably failed to prove the genuineness of the stated gifts. It is evident from the order of lower authorities that the assessee could only prove the identity of the donor but failed to establish the creditworthiness and genuineness of the gifts with cogent material. The donors had no relationship with the assessee ITA.No.1737/Mum/2013 Kamlesh Parwani Assessment Year 2005-06 and despite that huge gifts were received by the assessee as well as his other family members during impugned AY. Therefore we have no hesitation in confirming the stand of Ld. first appellate authority.

Resultantly, the assessee’s appeal stands dismissed.