SHRI SURESH PRASAD,BURDWAN vs. JCIT, RANGE-2, ASANSOL, BURDWAN

- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-Asansol dated 28.07.2014. Assessment was framed by JCIT, Range-2, Asansol u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 22.12.2011 for assessment year 2009-10. Grounds raised by assessee per its appeal as under:- “1. For that the Ld Commissioner of Appeals, Asansol has not been justified in confirming the addition of gift of Rs.25,00,000 instead of the fact that the Gift were genuine and identifiable and the credit worthiness of the gift donors were well established.

Inter-connected issue raised by assessee is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹25 lakh on account of bogus gifts.

Briefly stated facts are that assessee is an individual and engaged in business of scrap dealing, manufacturing and sale of iron ingot. The assessee in its balance dated 31.0.2009 has shown capital introduction of ₹ 23 lakh which he claimed to have received gifts of ₹ 25 lakh from the persons as detailed below:- Sl Name Relation with PAN & IT jurisdiction Amount of gift No. assessee received 1 Sri Krishna Prasad Father AAENPP2541N Wd-2(3)/Asl 5,00,000 2 Smt. Rukmina Debi Mother ADGPD2244J Wd-2(4)/Asl 5,00,000 3 Sri Dinesh Prasad Own brother AHTPP5212D Wd-2(3)/Asl 5,00,000 4 Smt. Sarita Prasad Sister-in-law ALYPP5293R Wd-2(3)/Asl 3,00,000 w/o Diniesh Prasad 5 Smt. Rani Prasad Sister-in-law ALYPP5265D Wd-2(3)/Asl 3,00,000 w/o Sri Suresh Prasad 6 Smt. Urmila Prasad Wife ARXPP3306N wd-2(3)/Asl 3,00,000 w/o Sri Suresh Prasad 7 Sri Rmesh Prasad Maternal AJIPP5141Q Wd-2(3)/Asl 50,000 s/o Madoji Prasad uncle’s son A.Y. 2009-10 Sh Suresh Prasad Vs. JCIT, Rg-2, Asl. Page 3 8 Smt. Usha Prasad Maternal ALYPP5264C Wd-2(3)/Asl 50,000 w/o Sri Ramesh uncle’s wife Prasad 25,00,000 During the course of assessment proceedings, AO issued notice u/s 131 of the Act to the donors of the gifts to verify and establish the identity, creditworthiness and genuineness of such gifts. However, none of the donor attended the office of the AO. On question by the AO about the non- compliance of notice issued u/s. 131 of the Act, assessee submitted that all the gifts are genuine and produced supporting documents in support of its claim as under:- 1) Confirmation of gift 6) copy of IT return 2) Mode of payment 7) statement of accounts 3) Date of payment 8) bank statement 4) Identify proof 9) cash flow statement 5) Source of money available in the hands of donor. However, assessee vide letter dated 15.12.2011 agreed to offer the amount of gifts received by him to tax due to non-appearance of his relatives (donors of gift) in response to the notices issued u/s. 131 of the Act to them. The relevant contents of the letter dated 15.12.2011 written by assessee reads as under:- “… … That further your have issued summons u/s.131 of the IT Act, in respect of personal attendance of all my family members (Donor) to attend in your office to give evidence in respect of such gift. That the personal attendance of my age old mother and father, wife and brothers’ wives and also other members is a very embarrassing for me as it was beyond the secrecy and dignity of our family. That although all he gifts are genuine in the eye of law but your goodself is not ready to accept such gifts without attendance of donors regarding transactions and genuineness of same. That in view of same I am not going against your view and I want to finish the litigation to avoid personal attendance of my family members by offering tax on such gifts by adding the such gifted amount to my total income for the year under assessment as I have no other alternative but to make offer for taxation on such gifts. That at present I am not in position to pay tax at a time as my bank Account has been declared as NPA Account but I am ready to pay the same by installments if your goodself permit such installments that I can bear the burden of tax liability in long run. A.Y. 2009-10 Sh Suresh Prasad Vs. JCIT, Rg-2, Asl. Page 4 That I hope your goodself will consider my offer taxation on such gifts as also grant the payments of taxes in installments and for this act of your kindness I shall remain grateful to you.” In view of the acceptance by the assessee to treat the amount of gifts as income, the AO added the amount of gifts for ₹ 25 lakhs as income from other source vide his order dated 22.12.2011 under section 143(3) of the Act.

Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee retracted from the acceptance given vide letter dated 15.12.2011 by way of filing an affidavit dated 24.06.2014 duly notarized on the ground that the acceptance letter was signed by him under coercion. The assessee further submitted that the order of AO is silent about the documentary evidence submitted during the assessment proceedings which are justifying that the gifts were genuine. However, Ld. CIT(A) disregarded the contention of AO and confirmed the order of AO by observing as under:- “12. The case boils down to whether there was threat or coercion and if so whether the retraction was made within reasonable time. Here notice under section 131 was issued to ‘donors’ by Assessing Officer and assessee comes up with an offer to own up the same as his income. Records does not bear any evidence that there was threat or coercion or even inducement. There is no misconception as assessee was aware of the consequence of acceptance of gift as is income in view of contents of penultimate paragraph of his letter dated 15.12.2011 to Assessing Officer which concerns tax payment as a result of the admission. The assessee was also not able to establish that there was threat on coercion resulting in improper procurement of admission. The judicial decision given in paragraph 11 are mainly of Supreme Court and High Court and hence I rely on the same as against decisions quoted by assessee.

Since there is no evidence of threat or coercion, I hold that the retraction me now has no validity. Accordingly I dismiss the grounds 1 to 9.” Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.

Before us Ld. AR for the assessee filed paper book which is running pages from 1 to 90 and assured that all the donors are ready to appear before the AO in response to the notice issued u/s 131 of the Act. He further submitted that the addition was sustained by Authorities Below only on the ground that the donors of the gifts failed to comply the notice issued u/s. 131 A.Y. 2009-10 Sh Suresh Prasad Vs. JCIT, Rg-2, Asl. Page 5 of the Act. Accordingly, Ld. AR requested the Bench to provide one more opportunity so that assessee can produce all the donors before AO in terms of provision of Section 131 of the Act. On the other hand, Ld. DR raised no objection if the matter is restored back to the file of AO for fresh adjudication in accordance with law.

We have heard the rival contentions of both the parties and perused the material available on record. In the instant case gifts of ₹25 lakh was received by assessee from his relative donors during the year which was shown as capital introduction in its balance-sheet as on 31.03.2009. The assessee also produced necessary documentary evidences in support of the impugned gifts which are placed on pages 53 to 90 of the paper book. But the amount of gifts was treated as income of assessee only on the ground that the donors failed to appear before AO in response to the notice issued to them u/s 131 of the Act as well as the assessee accepted to offer the same to tax. The view taken by the AO was subsequently confirmed by Ld. CIT(A). Now the limited issue before us arises so as to whether the impugned amount of gifts represents the undisclosed income of assessee. We find that the addition was made by the Authorities Below on account of two reasons as detailed under :