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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI I.C.SUDHIR & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is appeal filed by the revenue against the order of the ld CIT (A)-I, New Delhi dated 01.03.2011 for the Assessment Year 2001-02. 2. The revenue has raised the following grounds of appeal:- “1. The Ld. CIT (Appeals) is not correct in law and facts.
2. The Ld, CIT(A) has erred in both on facts and in law while accepting the Registration charges paid to the State Government for registration of plot and is showing the same under the head of loans and advances recoverable which is a wrong methods of accounting. Similarly, the Electrification Charges were also being recovered in the same manner and treated similarly in the books of account. Such registration of electrification charges can never be recoverable as debtors, loans and advances. These are not the Revenue expenditure and as such they cannot be adjusted against revenue receipts.
3. The Ld. CIT(A) erred in deleting additions made on account of ground rent which was retained by the assessee and had been utilized for the expenses of the firm.
4. Whether the Ld.CIT(A) was justified in deleting the addition made on charging on interest on late payment.
5. Whether the Ld. CIT(A) was justified in deleting addition made on account of cancellation charges out earnest money.
Page 2 of 10 6. Whether the Ld. CIT(A) was justified in deleting addition for which the assessee had not been able to produce details and evidence.
Whether the Ld. CIT(A) was correct in law and on facts of the case while deleting the additions made on account of gifts by the AO merely on identification of the donor and movement of gifts through the banking channels that too when the donor was not related to the assessee.”
The brief facts of the case are that the assessee is an individual. A search operation was carried on 16.03.2007. Pursuant to which return u/s 153A was filed on 08.10.2008 submitting the total income of Rs. 2287516/-. Against this the assessment was framed on total income of Rs. 6037817/. The matter was carried before the ld CIT (A) who in turn deleted some of the disallowance which are contested before us in this appeal.
The first ground of appeal
is general in nature and therefore dismissed.
5. The second ground of appeal is against registration of electrification charges of Rs. 912427/-. Before us the ld AR submitted that this issue is decided by ld CIT (A) by relying upon his own decision in appeal No. 336/09-10 for AY 2003-04 in case of Mr. K. K. Agarwal and same has been affirmed by the ld ITAT and which has been confirmed by Hon’ble Delhi High Court in case of CIT Vs. Manish Buildwell Ltd. dated 15.11.2011. Ld DR could not controvert this fact and also could not submit that how the facts are different in this year compared to the decision of coordinate bench in the case of the assessee and others on the same issue.
6. We have carefully perused the order of the coordinate bench dated 25.05.2012 wherein in para No. 3 of the appeal issue of addition towards and electrification charges was considered in case of the appellant for AY 2002-03 and in para No. 6 the addition has been deleted. The ld CIT (A) has followed the decision of the another assessee which has been confirmed by Hon’ble Delhi High Court. Further the identical issue in the case of the assessee himself has also been decided in AY 2003-04 and several other years by the order of ITAT dated 25.05.2012, hence, we do not find any infirmity in the order of the ld CIT(A) in deleting the above addition. In view of this ground No. 2 of the appeal is dismissed.
7. Ground No. 3 of the appeal is against deletion of addition on account of ground rent. Ld AR submitted that the disallowance of Rs. 6344/- is covered in favour of the assessee by ground No. 4 in appeal No. 2964/Del/2011 for AY 2003-04 in assessee’s own case. Ld DR could not controvert this fact and also could not submit that how the facts are different in this year compared to the decision of coordinate bench in the case of the assessee and others on the same issue.
Page 3 of 10 8. We have carefully considered ground No. 4 in para No. 16 of the appeal of the assessee for AY 2002-03; the coordinate bench has decided this issue deleting the addition of Rs. 25374/- for AY 2002-03. We do not find any change in the facts and circumstances of the case and therefore following the decision of the coordinate bench in the case of the assessee we delete the disallowance of Rs. 6344/- on account of ground rent. In the result ground No. 3 of the appeal is dismissed.
9. Ground No. 4 of the appeal is against deletion of addition on account of interest on late payments of Rs. 125000/-. The ld AR submitted that an identical issue has been dealt with Hon’ble ITAT in case of assessee himself in for AY 2002-03. Ld DR could not controvert this fact and also could not submit that how the facts are different in this year compared to the decision of coordinate bench in the case of the assessee and others on the same issue.
We have carefully considered the ground No. 4 of this appeal as well as ground No. 5 of that appeal and we are convinced that there is no change in the facts and circumstances of the case. The coordinate bench has set aside the issue to the file of AO as per para No. 20 to 22 of that appeal. Therefore, following the decision of the coordinate bench we set aside this issue also for this year back to the file of AO on similar directions. In the result the ground No. 4 of the appeal is dismissed.
The ground No. 5 is against deletion of addition on account of cancellation charges out of earnest money. The ld Assessing Officer has made an addition of Rs. 664625/- on account of 25% of the total value of advance received from the customer of Rs. 2658500/- on account of cancellation charges. The ld AR submitted that the issue is squarely covered in assessee’s own case by the order of coordinate bench for AY 2002-03 wherein in ground NO. 6 the addition of Rs. 764500/- is deleted for that year. Therefore, he submitted that the above decision may be followed. The ld DR also submitted that facts of that case the impugned case before us is identical.
We have carefully considered and also perused the page No. 12 wherein ground No. 4 in para No. 12 the identical issue has been decided by the coordinate bench confirming the deletion on account of cancellation charges. Therefore, following the order of the coordinate bench in absence of any change in the facts and circumstances we confirm the order of the ld CIT(A) in deleting the addition on account of cancellation charges amounting to Rs. 664625/- .
Ground No. 6 of the appeal is general in nature and therefore dismissed.
Page 4 of 10 14. The ground of No. 7 is against addition on account of gift received from Sh. Jagdish Mangala by treating it as bogus unexplained investment. This addition is deleted by the ld CIT (A). The brief facts of the gift noted by the Assessing Officer in para No. 5 of the assessment order is as under:- “5. Gifts As per the materials seized/impounded during the course of search and connected survey operations, the assessee has received gift during the year, the details whereof are as under:- SI. Annexure Name of the Relationship Date Amount No. details Donor with the (in Rs.) Donee 1. A-23, S-2, Sh. Jagdish No Relation 09.12.2000 20,00,0 Page No. Mangla 00 1 & 2 During the course of search operations, summons was issued to Sh. Mangla but it could not be served upon him as he had expired on 24.06.2002. Statement of his Bank Account was collected and examined. On the examination of bank statement [A/c. No. 988) it was revealed that Sh. Mangla was an entry operator. The entries in this statement were not related to any business dealings of Sh. Mangla as claimed by the assessee but are accommodation entries because whatever amounts are deposited in the account are withdrawn within two/three days leaving a meager balance in the account. Since there is no justification for the gifts made by a person who is not related to the assessee or any member of family, it can safely be concluded that the impugned gift represents the unaccounted money of the assessee routed through Sh. Mangla to benefit the assessee. The assertion of the assessee that the gift was given out of natural love & affection does not arise in this case for Sh. Mangla is no way related to the assessee and none of his family members is aware about Sh. Mangla in any way. By the questionnaire dated 08.09.2009, the assessee was asked to Show Cause as to why the impugned gifts amounting to Rs. 20(00,000/- from Sh. Mangla should not be added as unexplained income of the assessee based on the findings made in the course of assessment proceedings in the cases of M/s. K.K. Aggarwal & Sons(HUF) and M/s. Manish Aggarwal & Sons (HUF) in F.Y. 2008-09 wherein it was concluded by the AO that Sh. Mangla did not have the creditworthiness to make such gifts. Replying to the Show Cause, the assessee filed some documents purported to be copies of returns of Sh. Jagdish Mangla for the A.Y. 2001-02 and final accounts of the said assessee, which showed withdrawal of Rs. 3,07,29,6217- for the capital account from the assessee, thereby trying to meet the objections raised in the assessment proceedings of his HUF. However, a close examination of the documents revealed that there were reasons to believe that the same were not genuine, which are as under; a. Sh. Jagdish Mangla died on 24,06.2002. In the assessment proceedings for HUF which concluded on 29.12.2008, the assessee was unable to produce Page 5 of 10 documents relating to the current A.Y. It is not clear that how the assessee obtained such documents when the donor was dead. b. It is seen that the signatures of Sh. Jagdish Mangla in the return and final account of A.Y. 2001-02 appears to vary from his signatures on similar documents for A.Y. 2000-01 as also from the gift deeds signed by the donor. In A.Y, 2001-02 after signing Sh. Jagdish Mangia draws two lines with a break under his name. In A.Y.2000-01, after signing he draws one unbroken line and below that places two dots. c. Both returns are purported to be filed in Ward 19(2), New Delhi, but the stamp of the ITO in the return of A.Y. 2001-02 is different from the stamp in A.Y. 2000-01 and it does not contain the words "Ward 19(2)". d. There is no date or signature of the receiving officials in the return for the A.Y. 2001-02. There is a number and date return by hand and the same is circled. e. The stamp number is illegible in both A.Ys. 2000-01 & 2001-02. On account of these factors, there is reason to believe that the documents furnished by the assessee in support of his contention are not reliable and accordingly the same are rejected. It is also pertinent to mention that while framing assessment for the assessee HUF in the A.Y. 2001-02, the assessing officer had after conducting an analysis of the gifts received by the assessee and his family members recorded the following observations; (a.) Almost all this gifts have been given in the period between October,2000 and August, 2001. A few stray gifts have been given in the fast two or three months of F.Y. 2002-03. (b.) No gifts have been received before this date and very few gifts have been received after the period in question, (c.) None of the people, who have given gifts to the assessee, are related to the assessee in a manner that there could be said to be any natural love and affection between the donors and the donees, (d.) There is no record of the assessee's having given any gifts whatsoever, to the donors in return for their largesse, (e.) All this gifts have been made without there being any occasion or function in the assessee's family that could justify the receipt of these gifts. The bank account of most of these donors were examined, and it was found that these bank accounts appeared like the bank accounts of entry operators, in that, large amount of money were credited, to these bank accounts, only to be withdrawn the next date or immediately thereafter in the form of cheques to various parties among which were -the gifts to the assessee. Summons were also issued to most of the donors so that they could confirm the gifts made to the assessee however, none of the donors appeared in response to the said summons. Therefore, there were reasons to believe that most of the gifts were merely accommodation entries. In view of the observations recorded by my predecessor in the assessment of Manish Aggarwal & Sons (HUF) and in view of the fact that the documents since filed by the assessee have been seen to be unreliable, the gift from Sh. Jagdish Mangla is unexplained in the hands of the assessee and is therefore, added back to his income as his unexplained investment u/s 69 of IT Act, 1961.”
Page 6 of 10 15. On appeal before the ld CIT(A) by assessee the addition of the gift was deleted vide para No. 8 of the order wherein ld CIT(A) relying on his own order for AY 2001-02in case of Kamal Kishore Agarwal. He further stated in that appeal that it was concluded by him that all evidence produced by the assessee proved the identity and creditworthiness of Mr. Jagdish Mangala and further genuineness of the transaction of gift received from him. Therefore evidence produced in the case of some other person and on different transaction he held that the gift received by the assessee is genuine and identity and creditworthiness of the donor is proved. Aggrieved by the deletion of the above addition on account of gift of Rs 20 lakhs from late Mr. Jagdish Mangla revenue is in appeal before us.
The ld DR submitted that the Assessing Officer has made the addition after detailed enquiry such as examination of the returns of income of the donor as well as the bank account of the donor. He further relied on the decision of Hon’ble Delhi High Court in case of CIT Vs. Novadaya Castles Pvt. Ltd. 367 ITR 306. He further submitted that before the Assessing Officer the genuineness of the transaction was not proved and therefore the addition is rightly made. He further stated that ld Assessing Officer has in detail raised several contentions and none of them were dealt with by the ld CIT (A) and therefore the order of the ld CIT(A) may be reversed. Against this ld AR submitted that the issue is squarely covered by the order of coordinate bench in in case of Sh. KK Agarwal for AY 2001-02 wherein the addition is deleted on identical facts and therefore his argument was that the ld CIT (A) has correctly deleted the addition and the issue is covered in favour of the assessee.
We have carefully considered the rival submission. There was a search and survey operation conducted in the case of the assessee on 16.03.2007 which continued till 11.05.2007. During the course of search some material were seized and impounded wherein annexure A-23/S-2 page 1 and 2 was found which was dated 09.12.2000 wherein Sh. Jagdish Mangala has given a gift of Rs. 20 lacs to the assessee. During the course of search summons were issued to the donor but could not be served as he passed away on 24.06.2002. On examination of his bank statement the ld Assessing Officer noted that the donor is an accommodation entry provider. It was further noted by him that the amounts deposited in that account are withdrawn within 2 to 3 days leaving meager balance in his bank account. The donor is not at all related to the assessee and therefore ld AO doubted the genuineness of the gift as well as the creditworthiness of the donor. Further, as the donor was not acquainted or not known to the assessee, AO was also susceptible that gift was given out of natural love and Page 7 of 10 affection does not arise in this case. The ld CIT (A) has deleted the addition holding that in appeal No. 334/09-10 in case of Kamal Kishore Agarwal for AY 2001-02 wherein a gift of Rs. 21 lacs from Mr. Jagdish Mangala was deleted. The order of the ld CIT(A) in appeal No. 334/09-10 dated 28.02.2011 is also produced by the ld AR. However, on going through para No. 4 and 4.1 of the above order he deleted this addition because of his decision in ground No. 3 in appeal No. 97/08-09 in the case of Sh. Kamal Kishore Agarwal and sons (HUF) for AY 2001-02 wherein the said person i.e. Sh. Jagdish Mangala has given a gift of Rs. 10 lacs to the Sh. Kamal Kishore Agarwal and sons (HUF). Therefore, it is apparent that the ld CIT(A) has deleted the addition of gift of Rs. 51 lacs for the same AY in case of the same family by relying on the orders in other cases. This approach of the ld CIT(A) is erroneous. Because each cash credit require to be examined with respect to that particular transaction which ld CIT(A) has failed to do. Further, ld AR has placed before us the copy of the order of the coordinate bench in of Sh. KK Agarwal and has claimed that the issue is covered in the favour of the assessee. We have carefully perused the order which is placed at page No. 103 to 108 of the Paper Book. The above order has dealt with the gift of Rs. 21 lacs received by Sh. Kamal Kishore Agarwal. In that case the coordinate bench has deleted the addition holding that during the course of search no incriminating documents were found. In the present case the ld Assessing Officer has stated that incriminating documents as per annexure A-23 page No. 1 and 2 mentioned in para 5 of the assessment order were impounded. Therefore in the present case nothing is brought before us by the ld AR that incriminating documents were not found contrary to that ld Assessing Officer has clearly shown that incriminating document was found. In the present case assessment itself has been made on the incriminating documents found during the course of search. Therefore the ratio of that decision in ITA No. 2511/Del/2011 dated 30.09.2015 does not apply to the facts of the case. The ld DR has relied on the decision of Hon’ble Delhi High Court in case of CIT Vs. Nowadays Castes Pvt. Ltd. (supra) wherein, Hon’ble High Court has held that in those cases there was an evidence and material to show that the share holder company was only a paper company having no source of income but had made substantial and huge investment in the form of share application money and the Assessing Officer has referred to the bank statement and financial position of the recipient and beneficiary assessee and surrounding circumstances Then the three requirements of identification, creditworthiness and genuineness of the transaction have to be tested not superficially but in depth having regard to the human probabilities and normal course of human conduct. In background the above decision Page 8 of 10 of Hon’ble Delhi High Court in it apparent that during the year Sh. Jagdish Mangala has given a gift of Rs. 51 lacs at least collectively to the assessee, Mr. KK Agarwal and Mr. KK Agarwal HUF. Further the ld Assessing Officer has alleged that Shri Mangala is an accommodation entry provider and his bank account also shows that amount deposited is immediately withdrawn within 2 to 3 days leaving a meager balance in the bank account. the assessee before the Assessing Officer as well as before ld CIT(A) could not state even what business Mr. Jagdish Mangala is carrying on which justifies his creditworthiness of making a gift of Rs. 51 lacs during the single assessment year as stated above. Further, regarding the genuineness of the transaction has also not been proved by the assessee. Before the ld Assessing Officer assessee could not satisfactorily explained the doubts raised by the Assessing Officer about the genuineness of the transaction. As the assessee could not prove the creditworthiness of the Sh. Jagdish Mangala and genuineness of the transaction before the ld Assessing Officer and further the ld CIT(A) has deleted the addition without giving any reason and merely relying on some other orders and not examining the current impugned transaction of the gift. Further we also draw support from the decision of Honourable Delhi high court in Pawan Kumar Agarwal V CIT 373 ITR 0301 ( Del) where in identical circumstances where it is held that “7. The Tribunal in the impugned order has not specifically referred to section 68 of the Act but when we notice and read the order of the Assessing Officer, he has specifically recorded that the addition of Rs. 1 lakh was being made as the assessee had not been able to prove and establish the source of the income/deposit of the minor, Aushi Aggarwal, and, accordingly, the said amount should be treated as income from undisclosed source. On the said aspect, the Assessing Officer has referred to the scrutiny of the bank account in the name of Aushi Aggarwal in Canara Bank, which was opened on August 14, 1992, with deposit of Rs. 5,100 and, thereafter, a cheque of Rs. 1 lakh was deposited on August 18, 1992. On the same date itself, two cheques were issued in favour of Prayag Polymers (P.) Ltd. During the course of assessment proceedings, the assessee was asked to prove and establish the donor's capacity to make the gift, relationship between the assessee and Bhupinder Kumar and also to produce a copy of assessment order made by the tax authorities of the country in which Bhupinder Kumar was residing. These details were required to establish and show the genuineness of the transaction relating to the gift. The Assessing Officer has recorded that this information was not furnished. The Assessing Officer has further recorded that apparently there was no blood relationship between the donor and the assessee-donee and the donor had not been produced for examination. The capacity of the donor was also not proved and established. Accordingly, the Assessing Officer held that the medium of gift was a conduit for funnelling his own undisclosed money. The Commissioner of Income-tax (Appeals) has only relied upon section 5(1)(ii)(b) of the Gift-tax Act, 1958, to hold that the addition could not be sustained. He, however, accepted that the relationship between the donor and the donee had not been established. As far as production of assessment order in respect of the donor was concerned, it was observed that Bhupinder Kumar was not liable to be taxed in India and, therefore, production of assessment order was not relevant. He also observed Page 9 of 10 that onus of proof was discharged by the assessee by disclosing identity, capacity, source and confirmation from the donor.
Possibly, some of the information/confirmation may not have been possible for the appellant-assessee to procure but the close relationship, not necessarily the blood relationship, between the parties could have been asserted and fortified. Genuineness of the transaction has to be examined by not only taking into consideration the paper/documents, which were executed but the surrounding circumstances are also relevant. These aspects are of significance and importance, when the genuineness of a transaction is in issue. A gift is a voluntary act, by a person who out of love and affection transfers of money, movable or immovable asset to another person. Element of personal and close relationship between the two is the motivating factor as the donor parts with and transfers what belongs to him to someone, whom he/she loves and cares. This mandates and requires a close association between the donor and the donee, except where gifts are made for charity and philanthropic purposes. In the present case, the appellant merely relies upon the form of declaration by Bhupinder Kumar that the gift was made out of love and affection. However, it was accepted and admitted before the Tribunal that the donor and the donee- assessee were not known to each other. Thus, the statement in the declaration of gift regarding love and affection was apparently a mere formal proclamation. It was a wrong and incorrect assertion. The assessee does not plead past relationship and why and for what reason the said Bhupinder Kumar felt the urge and desire out of love and affection to make a gift to Aushi Aggarwal, the minor daughter of the appellant-assessee. The assessee could have explained and shown that the said Bhupinder Kumar was known to him but his contention was that he was not required to show and establish the relationship. Mere fact that the amount paid had emanated from the bank account of Bhupinder Kumar would not suffice in the facts of the present case.
It is not necessary for the Revenue to show and prove how the assessee in this case through a conduit had transferred and brought into books of account, undisclosed income under section 68 of the Act. In fact, this section casts a burden on the assessee to show the genuineness of the transaction by establishing the identity of the person from whom the payment was received, the source of payment, which necessarily need not be confined only to the details of the bank account from which payment was made but also corroborating and the surrounding circumstances. This has always been the legal position, even prior to the insertion of section 68 of the Act. It was a well-accepted principle that income/cash credits which are not satisfactorily explained might be assessed as income. Even long prior to the introduction of section 68 in the statute book, courts have held that where any amount was found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was in the opinion of the Assessing Officer not satisfactory, the sums so credited could be charged to be taxed as income of the assessee for the relevant previous year. Section 68 was inserted in the Act only to provide statutory recognition to a principle which had been clearly adumbrated in judicial decisions. The whole history of the introduction of sections 68 to 69D of the Act and the judicial decisions bearing thereupon clearly establish the proposition that these sections are only clarificatory and that even otherwise an addition can be made towards income from undisclosed sources (See CIT v. Orissa Corporation (P.) Ltd. [1986] 159 ITR 78 (SC), Yadu Hari Dalmia v. CIT [1980] 126 ITR 48 (Delhi), J. S. Parkar v. V. B. Palekar [1974] 94 ITR 616 (Bom), Nanak Chandra Laxman Das v. CIT [1983] 140 ITR 151 (All)). Likewise, creditworthiness of the donor would depend upon the income and earning of the donor and whether and did he have necessary funds. Rarely one finds a poor man giving gifts to a rich and powerful, out of natural love and affection.