N. PALANIVEL,BANGALORE vs. ASST.C.I.T., BANGALORE

The assessee has raised as any as six grounds but the only grievance is about addition made by the A.O. u/s 69 of Rs. 10,89,000/- being purchase cost of the site.

Learned AR of the assessee submitted that on page 18 of the paper book is the confirmation of the maternal grandfather of the assessee in respect of gift by him to the assessee and on page 40 of the paper book is his affidavit in this regard. He submitted that since affidavit is filed and no enquiry was made by the AO by calling the maternal grandfather of the assessee, addition cannot be made. He placed reliance on the judgment of Hon’ble Apex court rendered in the case of CIT vs. P. K. Noorjahan as reported in 237 ITR 570. Learned DR of the revenue supported the orders of the lower authorities.

I have considered the rival submissions. First of all, I take note of the directions of the tribunal in the first round. As per the same, the A.O. was directed by the tribunal to examine the claim of the assessee in detail after giving reasonable and adequate opportunity to the assessee of substantiating his claim. Hence, it is seen that the A.O. was required to provide reasonable and adequate opportunity to the assessee of substantiating his claim. This is not the case of the assessee that reasonable and adequate opportunity to the assessee of substantiating his claim was not provided by the A.O. As per page 3 of the assessment order, the A.O. asked the counsel of the assessee a pertinent question that how the agricultural land which fetched only Rs. 77,220/- as sale consideration in the years 2006, 2008 and 2009 can yield the income of Rs. 10 lacs or more in the year 1997 which helped Sri Vellaisamy to purchase the property in the name of his grandson. He has given a categorical finding that the assessee failed to produce any substantial proof which can prove the source of Rs. 10,89,000/- in the hands of the grandfather also. This categorical finding of the A.O. could not be controvertd by the learned AR of the assessee before CIT (A) or before me by bringing any cogent material on record. This is by now a settled position of law that for section 68, the assessee has to establish credit worthiness of the creditor also. If the property is purchased by the grandfather of the assessee in the name of the assessee, then whether it is a gift or loan by him, the assessee has to establish his credit worthiness and since the assessee has failed to do so, the addition cannot be deleted on the basis of only confirmation and affidavit of the grandfather of the assessee. Regarding this contention that since affidavit of the grandfather of the assessee was filed, he should have been called and examined before rejecting the affidavit, I find that the A.O. has not rejected the affidavit but since the assessee failed to prove his credit worthiness, relief was not allowed simply on the basis of affidavit and I find no infirmity in the orders of the authorities below on this aspect.

Now I examine the applicability of the judgment of Hon’ble Apex court rendered in the case of CIT vs. P. K. Noorjahan (Supra). The ratio of this judgment is this that the question whether the source of the investment would be treated as income or not u/s 69 has to be considered in the light of the facts of each case. Hence even as per this judgment, facts of each case has to be looked into and it cannot be said that by simply following this judgment, any addition made u/s 69 can be deleted. In that case, the explanation was that the purchase of property of Rs. 25,902/- was out of savings from the income of the properties which were left by her mother’s first husband. In the facts of that case, the tribunal held that although the explanation about the nature and source of the purchase money was not satisfactory but in the facts and circumstances of that case, it was not possible for the assessee to earn the amount of investment in that year or even in a decade. In the present case, the assessee himself has declared an income of Rs. 148,510/- in the present year. The A.O. has also noted that the opening balance in the P/L account shows that the assessee was running the business in the earlier year also and the claim of the assessee that he had no source to earn the alleged income is not acceptable. Under these facts, this judgment of Hon’ble apex court renders no help to the assessee in the present case.