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Assessee by : Shri K. Sampath, Adv. & Shri V. Raja Kumar, Adv.; Department by : Shri S. L. Anuragi, Sr. D. R.; Date of Hearing : 24.05.2018; Date of Pronouncement: O R D E R. PER PRASHANT MAHARISHI, A.M. :
This appeal is filed by the assessee for assessment year 2000-01 against the order of Commissioner of Income Tax ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 2 (Appeals), Meerut, dated 26.03.2008 wherein he has confirmed the reopening of the assessment as well as the addition because of gift received of Rs 16 lakhs from an accommodation entry provider.
2. The issue involved in this appeal is that the case of the assessee was re-opened under section 148 of the Income Tax Act and further the gift received by the assessee of Rs. 10 lakhs and her minor daughter for Rs 6 lakhs are found to be non-genuine and added to the income of the appellant under section 68 of the Act. 3. The assessment under section 143(3) read with section 148 of the Act was passed by the Assessing Officer on 20.12.2006 making an addition of Rs. 16 lakhs to the returned income of the assessee of Rs. 2,06,035/- determining the total income at Rs. 18,06,035/-.The assessee challenged the same before the learned CIT (Appeals) on the issue of re-opening as well as on the merits of the case. The learned CIT (Appeals) rejected the ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 3 appeal of the assessee on both the grounds and, therefore, assessee is in appeal before us. 4. The ground No. 1 of the appeal is in relation to addition under section 68 of the Act of Rs. 16 lakhs and ground No. 2 is in relation to the re-opening of the assessment. 5. First we take up the issue of re-opening and then go to the merits of addition in the case. 6. The brief facts shows that after assessee filed return of income on 21.07.2000 showing income of Rs. 2,06,035/-, information was received by the Assessing Officer from Addl. Director of Income Tax, Meerut, regarding the gifts scam by one Shri Sanjay Mohan Agarwal of Delhi. It was noted that total transactions of Rs. 34.78 crores were made in three financial years by that person from the bank account and deposited cash of Rs. 127.61 crores in various bank accounts. During the course of enquiry by the Addl. DIT, surrender of Rs. 8.10 crores as bogus gifts was made by beneficiaries whose names and addresses were also given. Those beneficiaries who ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 4 have not surrendered the sum, there cases were reopened. According to that assessee received a sum of Rs. 10 lakhs and a sum of Rs. 6 lakhs was received by her minor daughter, Miss Rachita Dhawan as gift from Shri Agarwal. In view of this, the learned Assessing Officer issued notice under section 148 on 21.03.2006. The assessee furnished the return of income and objected to the notice under section 148 of the Act. The assessee was provided the reasons for re-opening to which she filed her objections, which were settled by the Assessing Officer. Consequently, the assessee was asked to show the identity as well as the creditworthiness of the donor and genuineness of the gift. The Assessing Officer also obtained the bank account of the assessee with SBI vide account No. 36840 wherein the credit entry of Rs.10 lakhs on 21.04.1999 was received by draft No. 475 dated 17.04.1999 from Vijaya Bank. The Assessing Officer noted that this is an accommodation entry. Similar entry was also found by him in the bank account of the daughter ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 5 of the assessee. The Assessing Officer also asked the assessee to produce the donor before him. The assessee stated that he could not be produced as the he has expired. With respect to the creditworthiness and genuineness of the gift, the assessee submitted the Gift Deed and stated that the same fully explains the identity and creditworthiness of the donor. It was further stated that the Gift Deed also shows the genuineness of the same. The learned Assessing Officer directed the assessee to produce any of the legal heirs of the donor to show the genuineness of the gift. The assessee submitted that the donor was a close friend of the father of the assessee and there is no direct relationship, but the gifts are out of love and affection. The learned Assessing Officer, not convinced by the submission , therefore, held that the assessee has failed to prove the creditworthiness and genuineness of the transaction made an addition of Rs.16 lakhs.
ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 6
7. On appeal before the learned CIT (Appeals) the assessee challenged the re-opening as well as the merits of the addition. The learned CIT (Appeals) dealt with that issue vide para No. 4 as under :-
“ 4.I have considered all the facts and material pertinent to this case. 4.1.For deciding the genuineness or otherwise of any gift; various aspects arc to be considered :- a) Relationship between the donor and the donee; b) Occasion of the gift; c) Creditworthiness and general well being of the donor; d) Availability of gift deeds or gift letters along with copy of bank statement etc.; e) The source of particular fund which were used for making the gift; f) Past conduct i.e. precedence of gift or receiving the gift in the case of donor / donee; Any other specific consideration of facts and circumstances pertaining to gift under consideration. In my view, none of these factors can be solely important for indicating whether gift was genuine or not? One has to see the entire facts and circumstances i.e. all the factors mentioned above, in a comprehensive manner and then those have to be considered with the aspect of human probability (Sumati Dayal 214 ITR 801) i.e. general customs and conduct prevailing in the society. 4.2 If we deploy the above mentioned yardstick in ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 7 this particular case, what we observe is that there is no blood relation and no valid occasion for making such gift has been explained. On the other side of line of evidence, are the facts that affidavit regarding gift, gift deed, Identity Card, PAN card, bank statement, return of income etc. of Shri Sanjay Mohan Agarwal were all furnished, which do indicate that the donor was an identifiable person; was a person of high means and also that gift was made through banking channel. 4.3 It would have been difficult to adjudicate this case one way or the other, in such cases where both sides of line of evidence have some strength. But here comes an all important information or a vital evidence; which the undersigned could gather from chance perusal of various appellate files and subsequent gathering of information. This is mentioned as under. 4.4 It would be worth mentioning some of the vital facts regarding this particular donor, namely, Shri Sanjay Mohan Agarwal (now no more). Shri Sanjay Mohan Agarwal, R/o 4674, Shora Kothi, Paharganj, Delhi, was found to be embroiled in a serious gift racket. Deep inquiries carried out by the Addl.DIT (Inv.), Meerut, brought out that total gifts worth Rs.34.78 crores were made by this donor during F.Y. 1999-2000 to 2001-02 from the bank accounts relating to this donor and his associate conerns, utilising cash deposits to the tune of Rs.127.61 crores. All the debit and credit entries in these bank acounts were by clearing/transferring entries, intimately connected with a large number of other bank accounts. Quite often, the final transaction of gift was preceded by two or three entries in these related bank accounts. The statements of all connected bank accounts in first, second and remaining phases were collected ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 8 and it was found that cash to the tune of Rs. 127.61 crore had been deposited in several of these bank accounts, mostly belonging to companies managed and controlled by Shri Sanjay Mohan Agarwal. The funds used to finally reached the six individual accounts of Shri Sanjay Mohan Agarwal in Vijaya Bank, Ansari Road, New Delhi for giving the accommodation entries in the name of gifts/loans.
The Investigation Wing, Meerut identified as many as 551 beneficiaries spread all over India, involving, the bogus gifts / loans to the extent ofRs.41. 41 crores. TJie inquiries have already been referred to various Addl.DIT (Inv.) all over India. The bogus gifts / loans to the tune of Rs.8 crores was already surrendered, in cases of Meerut and also other stations like Mumbai, Jammu etc. Thus, the scam involved substantial cash deposits in several bank accounts controlled by Shri Sanjay Mohan Agarwal, rotation of funds from one bank account to other, and finally issuance of DDs by Shri Sanjay Mohan Agarwal of Delhi from his six O.D. and C.A. accounts with Vijaya Bank, Ansari Road, New Delhi, to large number of beneficiaries of all over India. The nexus of accommodation entries with the cash, has been clearly established in these cases. Further, the fact remains that such bogus gifts / loans were surrendered by not one or to; but umpteen number of beneficiaries; the total surrender reaching to the tune of Rs.8 crores. It is not out of place to mention that in almost all these cases, Shri Sanjay Mohan Agarwal was not related to the beneficiaries; nor there was any occasion which could justify giving such gifts to 100 of donees.
ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 9 The names and addresses of beneficiaries of Meerut, who had received such bogus gifts from Late Shri Sanjay Mohan Agarwal, was prepared, by the Addl. DIT (Inv.), Meerut and cases of beneficiaries, were reopened on the basis of this information. 4.5. After careful consideration of all the facts and evidence on record; I find that the evidence mentioned in para 4.4. is a fact / factor which cannot be brushed aside; and which tilts the scale of justice heavily in favour of the revenue. The ratio laid down by Hon‟ble Supreme Court in the case of Durga Prasad More, 82 ITR 540 and later in the case of Sumati Dayal, 214 ITR 801, is very relevant for such type of case. A particular transaction needs to be seen in the light of human probability and surrounding circumstances. Could one person, named, Sanjay Mohan Agarwal, have genuinely gifted to so many persons spread all over India, involving gift to the tune of Rs.40 crore or so? !!. Needless to say; such circumstance is humanly almost impossible. In this world, where it is difficult to find even closest of relatives and friends and family members giving substantial help to each other; it is unusual to the extent of impossibility that Shri Sanjay Mohan Agarwal had made genuine gifts to so many unrelated persons!! I am reminded of the words used by their lordship in the case of C. R. Ranganathan Chetty, 153 ITR 456 (Madras) “ … … look the way the gifts were made. Not only were they made to other people‟s children, bat some of them made to other people‟s wives. In any place, accepting in a tax court, gifts to other people's wives, even if they are wives of co-patners, would raise a host of questions and not a few eye brows, excepting when there is a understanding nod, “Ah, it is all for purposes of ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 10 Income-tax ”. The ITO saw the fads with a layman‟s eyes, which was the correct way to look at them. The Tribunal for their part, however, got involved in the convolutions of the Milakshara law of gift and brought to bear a dry and unreal legalistic approach ” Further, there are various recent courts‟ decisions which all disaprovc such concocted gifts; the conclusion arising out of variety combination of factors. Some of these emulative decisions are :- CIT vs. Anil Kumar, 292 ITR 552 (Del.); “In the case of gifts mere idcntitication of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Since the claim of gift is made by the asscsscc, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such : gift.” Sandeep Kumar HUF, 293 ITR 294 (Del.); “Genuineness of gift: Mere identification of the donor and showing movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Where the assessee failed to establish that gift was genuine, the Tribunal was justified in confirming additions.” K.L. Aggarwal vs. CIT, 190 ITR 303 (Del.); “Amount claimed by assessee to be a gift ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 11 Onus on assessee of proving validity of gift and producing donor tor examination summoning donor arises only when assessee not in a position to produce donor and informs assessing authority that summons has tu be issued Appellate 'tribunal rejected assessee‟s claim and treating amount as income. ” (iv) Deepak Kumar Agarwal, 110 Taxman, 233 (ITAT, Jabalpur). “ The assessee could not prove genuineness of gift and capacity of the donor. The AO was correct in treating gift as undisclosed income of assessee himself, ” 4.6. The scam angle in this case and all other cases where donee may be a beneficiary of gift racket being run in the name of / by Shri Sanjay Mohan Agarwal; takes this case and all such cases, miles away from the cases where gifts have been treated to be genuine by the courts. It has been held by various High Courts and also by the Apex Court as well that colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is lawful to avoid the payment of tax by resorting to dubious methods. Further, it is within the power of AO, rather it is his duty, to look beyond the outer walls of a particular transaction so as to know what is the „real‟ transaction; in other words, the AO is well empowered to lift the „veil‟ behind the transaction as they appear, so as to know the truth. Reliance is placed on umpteen number of judgements, inter alia - ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 12
( Durga Prasad More; 82 ITR 540 (SC); ( i Mcdowcll & Co., 165 IT R 227 (SC); i ) ( A. Raman & Co. 67 ITR 11 (SC); > i ( Play World Electronics Pvt. Ltd.; 184 ITR 308 ) i i ( S.B.I, 157 ITR 67 (SC); i v v ( Shri Meenakshi Mills Ltd., 63 ITR 609 (SC). ) ) ) v i ) All these pithy judgements underline the importance of dictum that it is the substance, and not form, of a transaction, which is important. In this case, the impugned gift has been part of a gift scandal; in the „substance‟, that cannot be ignored. So, even if gift has been given/taken in seemingly acceptable „form‟; it loses its genuineness when its substance; viz. a concoctcd / arrangcd transaction; is given due weightage. 4.7. Such assessees, including this particular assessee, refer to many courts cases in support of contention that gift is genuine. 4.7.1 Some of the recent case laws can be briefly analysed here, so as to observe that in those cases, preponderence of evidence was in favour of the assessee; for example, in case of R.S. Sibal, 269 ITR 429 (Del.), only ground on which the genuiness of the gift had been doubted by AO was alleged failure on the part of the assessee to establish his relationship with the donor; otherwise all particulars had been given in respect of genuineness of gift. In case of Nek Kumar, 274 ITR 575 (Rajasthan), donor had given affidavit and declaration and inspite of CIT(As‟) directions, the donor had not been examined by the AO, and there was no material evidence whatsoever to show that ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 13 the money was deposited by the assessee or by anyone else in the bank from where it came back to the assessee as a gift. In case of Murlidhar Lahorimal, 280 ITR 512 (Gujarat), the donor had appeared before AO and also produced evidence in support of the source of fund; revenue had not disputed any of these facts, and so, the High Court opined that nothing had been brought on record to show that the explanation of the assessee is not satisfactory. 4.7.2 Reliance by the assessee on such case laws, therefore, does not serve any purpose. This is because no authority can brush aside the all significant fact on record in present type of cases, viz. the gift scam being run by late Shri Sanjay Mohan Agarwal involving more than 500 beneficiaries and involving huge cash deposits to the tune ol'Rs.40 crorcs, which have travelled through various bank accounts to finally being given as a gift. This all important aspect takes this case, poles apart from other cases such as mentioned above, where AO treated gifts as bogus, but on preponderance of evidence, appellate authorities / courts opined otherwise holding gift as genuine. In present type of cases, the fact of murky transactions being used for tax avoidance purpose cannot be ignored. 4.8 I also find that in some of the cases involving this gift scam, addition on account of gift have already been confirmed by my predecessor C1T (Appeals). One of the cases, readily in my knowledge, is that of M/s. Madan Lai Anil Kumar (HUF), wherein, vide Appeal No. 323/05-06 dated 21.3.2006, the CIT (Appeals) confirmed the addition by mentioning as under :- “ The AO required the assessee to prove, 1. Identity of ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 14 the donor; 2. The capacity of the donor, 3. Genuineness of the gift. The appellant proved the identity of the donor and his capacity but could not prove the genuineness of the gift transaction because Shri Sanjay Mohan Agarwal, the donor, was not produced before the AO for examination, 'flic circumstantial evidence show that several persons who received gifts from Shri Sanjay Mohan Agarwal have surrendered the bogus gift amount. After having carefully gone through the written submission on behalf of the appellant and in the facts and circumstances of the case, I am of the view that the transaction of gift is not genuine and is merely a sham transaction of the bigger racket run by Shri Sanjay Mohan Agarwal. I, therefore, find no merit in the appeal of the appellant. The order passed by the Assessing Officer is hereby confirmed. In the result, the appeal is dismissed. ” Such other appellate orders, therefore, also support my conclusion in this case. 4.9 Regarding assessee‟s objection of proceeding u/s 147, 1 do not agree with the contention raised by the appellant. I find that, as mentioned in the assessment order and also this appellate order, department came into know of scam being run by / in the name of Shri Sanjay Mohan Agarwal; and one of the beneficiaries being the assessee. Thus, there was a pertinent information / material coming to the knowledge of the AO which led him to reasonable belief that real income of assessee had escaped assessment. The amount of escapement was also substantial being gifts shown to the extent of Rs.16 lakhs (Rs.10 lakhs + Rs.6 lakhs). Thus, in such circumstances, as per provisions of section 147 read with section 148, reasons were recorded and ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 15 approval of higher authorities was obtained. Thus, proper procedure has been followed, and I am convinced that Assessing Officer had enough reasons of belief for escapement of income. I have carefully gone through the entire submission made by the appellant‟s counsel on this aspect. 1 have also carefully read all the case laws cited on this aspect. 1 do not find it necessary to discuss all the case laws, as cited by the appellant. I would strongly hold that all these case laws, without any exception, support the case of the revenue, simply because the basic ingredients of section 147 are being fulfilled in the present case. The inference of the Assessing Officer was obviously based on the information / material regarding gift scam, as discussed above. There was a clear-cut nexus between material and belief. The belief that income had escaped assessment was, undoubtedly, reasonable as well as bonafide. Thus, proceedings under section 147 are held to be perfectly legal and valid. 4.10. I, therefore, have no hesitation in holding that the impugned gift is a paper transaction and is a bogus gift. This was assessee‟s own undisclosed fund routed through the bank account of late Shri Sanjay Mohan Agarwal. The addition made by the Assessing Officer is, therefore, upheld. ”
8. Therefore, assessee, aggrieved, is in appeal before us.
The learned authorized representative submitted a paper book containing 29 pages and submitted that the fact of the gift was duly corroborated with several documents filed ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 16 with the return of income and, therefore, same is real and genuine. He submitted a detailed note containing 6 pages, which is as under :-
“OBJECTIONS TO THE REOPENING OF THE CASE MAY PLEASE YOUR HONOURS: Permission is respectfully sought for placing the following Synopsis on the satisfaction recorded for re-opening the case.
1. In the subject case the factum of the gift was duly corroborated by several documents filed with the return of income. Apparently the gift was real and genuine.
No information or evidence was manifest which would show any falsity or fabrication with reference to the facts of the case.
The principle of law is that apparent is the real. The onus to prove contrary is on the Department. The authorities on this preposition are CIT vs. Daulat Ram Rawafmull (1973) 87 ITR 349 (SC), CIT vs. Biju Patnaik (1986) 160 ITR 674 (SC), CIT vs. Bedi and Company Pvt. Ltd. (1998) 230 ITR 580 (SC) and several others of the Hon’ble High Courts. Nothing has been brought on record by the Assessing Authority to show that the apparent is not real. Being so, the apparent shall prevail.
The support from the decisions of the apex court in CIT v. Durga Prasad More (1971) 82 ITR 540 and Sumati Dayal vs. CIT (1995) 214 ITR 801 could be drawn only in a situation of similarity of facts. In both ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 17 those cases the factual version as forwarded by the assessee to the Assessing Officers were found to be false. It is in the context of the falsity of the facts having been established in those assessments that the apex court was pleased to rule that human probabilities and surrounding circumstances were relevant factors in the evaluation of the evidence. There is no such factor present in the subject case so as to validate the applicability of the ratios of these two apex court decisions herein.
Gifts are not beyond the realm of human probability. The social customs support its repetitive incidence. Gifts have been a subject matter recognised by law itself as part of human conduct. Gifts were statutorily recognised and continue to be so even now. Gifts were subjected to tax at one time in terms of the Gift Tax Act, 1957. The government of that day abolished the gift tax only with the intention of saving expenditure on its administration. So it cannot be said with any conviction that gifts are beyond the realm of human probability are that surrounding circumstances negated. Thus the above two ratio are not at all relevant.
In the facts of the present case, as per material available on record, the entirety of the surrounding circumstances unmistakably point to the factum of a valid gift. The allegation of the Assessing Officer that the gift is another form of an accommodation entry is most conspicuous by the absence of even an iota of evidence to support that assertion by proving the intrinsic accommodation. An accommodation entry cannot be alleged without specifying and identifying the defrayment to the donor of the reciprocal consideration as involved in the accommodation by the assessee.
ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 18
The decision in the case of Lall Chand Kalra vs. CIT (1981) 6 Taxman 171 of the Punjab & Haryana High court is inapplicable to the subject case for the jurisdiction in the subject case is of the Allahabad High Court and in that jurisdiction there is direct authority on the point. The Allahabad High Court is absolutely clear on the point of the validity of gifts in cases where the Donor and Donee have accepted the gift and all the documents pertaining to the gift are on record. The court ruled that the factum of that gift was beyond denial or reproach. Please refer to the decision in CIT vs. Sham Shuddin Manzoor Haque (1988) 172 ITR 696. In terms of the applicable ratio of the jurisdictional High Court, the genuineness of the instant gift is unassailable and its validity cannot be clouded by the shadow of Kalara’s case.
None of the averments as made by the Assessing Officer are supported by any material or evidence. All of them are gratuitous and anomalous allegations. The allegations themselves are based on assumptions and presumptions without the flimsiest material backing. Assessee has adduced incontrovertible evidence including gift deed, bank details, affidavit etc. Contra arguments or persistence denials cannot be a substitute for proof. Presumptuous allegations without corroborative material do not constitute admissible evidence. Please refer Lai Chand Bhagat Amibika Prasad Vs. CIT (1959) 37 ITR 288 (SC), Mehta Parikh & Co. vs. CIT (1956) 30 ITR 181 (SC) in support of fhis dicfum. Also there is the direct decision on the point of the Delhi High Court in Ashok Kumar Sen vs. ITO (1981) 132 ITR 707. 9. The credit entries in the Appellant’s bank account on account of gift could not ipso facto be ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 19 construed as an accommodation entry without proof of exchange of cash between the donor and donee. There is no material to even flimsily demonstrate any cash exchange for cheque. The Donor has never asserted it. The Meerut Dl has simply alleged it. There is no statement recorded by anyone authority alleging any transfer of cash at any time by the assessee to the Donor.
10. The onus as perceived u/s 68 of the Act was totally absent in the case. In point of fact the assessee had not maintained any books of account and in the absence of any books of accounts, Section 68 of the Act has no application. Please see CIT vs. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom).
11. The message as conveyed to the Assessing Officer as to escapement of income of the assessee is not based on any material. The note referring to the communication of the Meerut investigation Wing has no relevant bearing with the formation of the belief as to escapement of income by the Assessee's Officer in this case. None has been established. The communication dismally fails to identify any material in that behalf. The fact is that the message is vague, indefinite, far-flung and remote. It has no relevance in the context of invocation on Section 147 of the Act qua the recording of a satisfaction. The authorities have by- passed the norms enunciated in the decisions of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 0437 and ITO vs. Madnani Engg Works Ltd. (1979) 118 ITR 1 (SC) the Meerut Dl's message is no information in the terminology of the section 147. That message is not supported by any material at all. Live nexus of reasons with the material on record was completely absent. Please refer CIT vs. Supreme Polypropolene P. Ltd. (2013) 35 Taxmann.com ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 20 215 (Del).
Any message which is vague and impertinent cannot be the basis for the formation by the Assessing Officer of the belief for escapement of income. The decision of the apex court in Chhugamal Rajpal vs. S.P. Chaliha (1971) 79 ITR 603 (SC) may be adverted to in this context to hold that a mere message without a foundational support cannot the pivot for the satisfaction to rest.
13. The Assessing Officer has treated the message as conveyed by the Addl. Director (Investigation) as the gospel truth without carrying out any verification at his end. No corroboration was sought from any source. That being the case the same was not utilizable as ‘information’ within the meaning of section 147 of the Act. After the setting up of that foundation there ought to have been plausible reasons for the belief. This is stated on the authority of the Delhi High Court in CIT vs. Atul Jain (2008) 299 ITR 383 and CIT vs. Paramjit Kaur (2009) 311 ITR 38 (P&H). Besides there was no adverse material in the possession of the Assessing Officer to support a conviction of the gift not being genuine. Absent such material the conclusion was impermissible. Kindly refer CIT vs. Anupak Kapoor (2008) 299 ITR 179 (P&H) 14. The digesting of the message from the Investigation Wing without verification and without application of mind being in the nature of a borrowed satisfaction has been held to be invalid in law. This is stated on the authority of Delhi High Court in SFIL Stock Broking Ltd. (2010) 325 ITR 285. Similar observations of the Gujarat High Court in the case of Pr. CIT vs. Varshaben Sanatbhai Patel vs. ITO (2015) 281 CTR 75, Pr. CIT vs. G & Pharma India ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 21 Ltd. of Delhi, CIT vs. Smt. Sulochana (2005) 272 ITR 529 (Mad) and CIT vs. Shree Rajasthan Syntex Ld. (2009) 313 ITR 231 (Raj) may be adverted to. Somebody else’s opinion cannot become the incumbent Assessing Officers opinion for initiating a reassessment. The Delhi High Court is violation this issue. Please see Signature Hotels P. Ltd. vs. ITO (2011) 338 ITR 51.
15. The relevant information as to the validity of the gift was already on record. The Assessing Officer changed his opinion as to the correctness of that information abruptly after receiving the communication from the AD (Inv) which admittedly was unverified, unsubstantiated and inadequate. That could not be considered as tangible material whose receipt could induce the formation of a belief as to escapement of income. The reopening was thus flawed and invalid. The decision of the apex court in CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) be referred to in this context.
16. The communication as received was in respect of a third party's doings. Without cross verification of that message with corroborative material and without providing an opportunity to the assessee for cross examining the third party, the message could not have been adopted as valid information in the subject case to reopen it to do a reassessment. Being done that way the proceedings are ab initio nugatory and no-est. This is submitted on the authority of the decision in the case of CIV vs. Pradeep Kumar Gupta (2008) 303 ITR 95 (Del). Further the statement of the Donor was never made available to the assessee. In this way the norms of natural justice stood contravened. The act of the Assessing Authority was thus a nullity. Kothari Metals vs. ITO (2015) 377 ITR 581 (Kar).
ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 22
The statement of tentative and unverified facts as conveyed by the Dl (Inv) Meerut has been substituted for wholesale for the very reasons to believe escapement of income of the assessee. That is impermissible in law in terms of the decision of the Delhi High Court in CIT vs. Vinita Jain (2007) 163 Taxman 325 (Delhi) which requires first hand verification as to the truth and authenticity of the information.
In the stark absence of any valid or proper reason to believe escapement of any income or any material to demonstrate that the gift was no gift but was actually an income the reopening is bad in law. This is submitted on the authority of the ratio of the Calcutta High Court in Peerless General Finance & Investment Co. Ltd. vs. DCIT (2005) 273 ITR 16. 19. The sanctioning authority has also accorded his approval in a mechanical manner without the least application of mind. He totally failed to notice the shortcomings or discrepancies or deficiencies in the Assessing Officer’s action. This is submitted on the authority of Madhya Pradesh High Court in CIT. Vs. S. Goyanka Lime & Chemicals Ltd. ((2015) 231 Taxman 73 which has been approved through a speaking order by the apex court in (2016) 237 Taxman 378. ”
His further argument was that the reasons are shown at page No. 17 of the paper book, which shows that information is received by the Assessing Officer and, therefore, the enquiry should have been done by the Assessing Officer, which has ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 23 not been done. He further submitted that there is no evidence and material on record to show that cash has been paid by the assessee for the purpose of the gift. In view of this, his main argument was that reopening is not valid.
The learned Departmental Representative vehemently supported the orders of the lower authorities and submitted that assessee has received gift in her name and her daughter‟s name in assessment year 2000-01 of Rs. 16 lakhs from an accommodation entry provider, who has already confirmed that gifts are bogus. He further submitted that the assessee could not prove the creditworthiness of the donor who is accommodation entry provider. Therefore, the genuineness of the gift is also not proved. He stated that primary onus is on the assessee to prove the identity, creditworthiness of the donor as well as the genuineness of the transaction. He further stated that the donor is not at all related to the assessee and there is no occasion to give such a huge gift to the assessee and her daughter. He, therefore, ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 24 submitted that re-opening has been correctly initiated and addition has rightly been made under section 68 of the Act. 12. We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also gone through the various case laws cited before us by the Ld. authorized representative and referred to by the lower authorities. In the present case, the assessee is an individual whose case was reopened by issuing notice under section 148 of the income tax act. The reasons for the reopening of the assessment proceedings are placed at page No. 17 of the paper book. The reasons succinctly shows that during the course of Inquiry in the case of Sri Sanjay Mohan Aggarwal the income tax Department found that he maintained OD account with Vijay bank New Delhi and further investigation revealed that total transactions carried out by that particular person was of Rs. 3 4.78 crores during the period November 99 to September 2001. On the debit and credit entries in the bank account were clearing transfers and this bank account was intimately connected with the larger number of other ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 25 bank accounts. The statement of all connected bank accounts were collected and it was found that the cash to the tune of Rs. 127.61 crore was deposited in the several bank accounts which was routed through the different bank accounts of the companies managed and controlled by that person who finally reach the 6 individual accounts and these accounts were used for giving the accommodation entries in the nature of gift or loans. In the course of the enquiry, it was found that a scam is run by that person and the beneficiaries surrendered Rs. 8.10 crores as bogus gifts and loans. It was further found that some of the beneficiaries of Meerut have not surrendered the bogus gifts and loans taken by them from the above person. The rest of the beneficiaries who not yet surrendered bogus gift was informed to the respective AOs. The investigation wing found that deposited into bank accounts of the assessee with Vijaya bank is nothing but accommodation entry in lieu of cash given to Sri Sanjay Mohan Aggarwal of Delhi. As per the information received, the deposit in the bank of the ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 26 assessee is Rs. 10 Lacs, The Ld. AO verified the return of income filed by the assessee for assessment year 2000 – 01 and found that assessee has not disclosed the above amount deposit in the bank account with Vijaya bank on 17/4/99 of Rs. 10 Lacs as income. According to the AO above deposit is unexplained. Based on these reasons the Ld. AO issued the notice under section 148 of the act of the assessee. According to the provisions of section 147 of the income tax act, if the Ld. assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section. Therefore, at the time of issue of notice under section 148 of the income tax act the Ld. assessing officer should have only prima facie reason to believe. It is not the requirement of the law that the Ld. assessing officer should reach at the definite conclusion that ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 27 there is an escapement of income. Based on the information received by the assessee from the investigation wing the Ld. AO verified the return of income of the assessee and found that assessee has not disclosed the above income, which was prima facie of the nature of an accommodation entry received from Mr Sanjay Mohan Agarwal. Several beneficiaries of the accommodation entries of that particular person has already surrendered sum of Rs. 8.10 crores as bogus gifts and loans. The donor has also confirmed before the Investigation wing that he is providing bogus gifts. Therefore remaining beneficiaries who have not surrendered the accommodation entries as their income their return were subjected to the reopening of the assessment. Assessee is one of them. The Ld. assessing officer on receipt of the information applied his mind to the same and found that in the return of income the above- unexplained deposit was not disclosed by the assessee as her income. Therefore, it is not the case that Ld. AO initiated reopening of the assessment merely based on the ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 28 information received from the investigation wing. In the present case, the impugned assessment year is AY 2000 – 01 and the notice under section 148 of the act was issued on 21/3/2006. Therefore, in the present case the assessment of the assessee was reopened beyond the period of 4 years but within 6 years from the end of the assessment year. Such assessment can only be opened if there is a failure on part of the assessee to disclose fully and truly the material facts necessary for assessment of the income of the assessee. The assessee has never disclosed the fact that it has received gift from Mr. Sanjay Mohan Aggarwal, who is an accommodation entry provider. Therefore it cannot be said that assessee has disclosed fully and truly the material facts of his income for the relevant year. Further the original return filed by the assessee on 21/07/2000 was also not assessed under section 143 (3) of the income tax act but was summarily accepted by the AO. The Ld. CIT (A) has further held that the inference of the Ld. assessing officer was obviously based on the information and material received ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 29 regarding the gift scam of Mr Sanjay Mohan Aggarwal and there was a clear-cut nexus between material received by the AO and belief formed. He further held that the belief formed by the Ld. AO about the escapement of income was undoubtedly reasonable and was bonafide. No infirmity can be found in the orders of the lower authorities so far as reopening of the assessment is concerned.
In para No. 11 of the written submission the Ld. authorized representative has stated that reason recorded by AO about escapement of the income of the assessee is not based on any material is also devoid of any merit. In the present case, the information received by the AO was very specific and was pointing out about gift scam run by Sanjay Aggarwal, where assessee is one of the beneficiary. The information was also very specific stating the bank account number and the cheque along with the date of the transaction. There is also live nexus between the reasons with the material on record for the reason that reopening has been made on the specific information that Mr Sanjay ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 30 Aggarwal was engaged in providing bogus loan and gifts and assessee is found to be one of the beneficiaries of the same. The AO has further verified the fact that return of the income of the assessee does not show any income offered on account of accommodation entry received from Mr Sanjay Mohan Aggarwal, therefore it cannot be said to be an uncorroborated information.
Another argument advanced by the Ld. authorized representative was that that communication received by the Ld. assessing officer was in respect of a 3rd partie‟s affairs and without cross verification of that message with the corroborative material and without providing an opportunity to the assessee for cross examining the 3rd party, the information could not have been adopted as valid information for reopening of the assessment. We have given a careful thought to the above arguments and found it to be not acceptable for the reason that transaction was between Mr Sanjay Mohan Aggarwal and assessee therefore it could not be said that it was an isolated ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 31 transaction or vague information or third party transactions. T was the transaction of assessee with the donor. The information was very specific that Mr Sanjoy Mohan Aggarwal has given several gifts and loans to several parties, which are only accommodation entries. Further the ld AR could not show us any request to the ld AO about the cross examination of the accommodation entry provider. Further as the donor has already passed away now this request made by the ld AR does not deserve any attention. Furthermore, when the assessee is so sure and claiming that there is close relationship with the donor of the assessee, in fact assessee should have produced donor before AO immediately. Assessee has constantly avoided production of Donor at all the times when he was alive.
The Ld. authorized representative further contended that sanctioning authority has also accorded his approval in and mechanical manner without least application of mind. He further stated that he totally failed to notice the shortcomings, discrepancies, or deficiency in the action of ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 32 the Ld. AO. The Ld. authorized representative vehemently relied on the decision of Hon‟ble MP High Court in CIT versus Goyanka Lime & Chemicals Limited 231 taxman 73. We have considered the above argument. The Ld. authorized representative did not produce any material to prove his argument but merely relied upon the judicial precedents. Therefore, this argument is rejected.
As per the reasons recorded by the Assessing Officer, there is every case for permitting assessment of the assessee for the said year. As per the reasons recorded, the assessee had received bogus gift money from acmodation entry provider who was indulging in providing bogus accommodation entries. There were series of transactions of this nature. As the reason stand therefore, reopening of the assessment would be ordinarily permissible In view of the above facts, we do not find any infirmity in the order of the Ld. assessing officer in reopening the assessment by issue of notice under section 148 of the income tax act for the impugned assessment year.
ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 33
17. Now we come to the merits of the addition of Rs. 16 Lacs in the hands of the assessee on account of gift received by assessee as well as her daughter. The receipt of the gift is covered under section 68 of the income tax act and therefore prima facie it is the onus of the assessee to prove the identity and creditworthiness of the depositor as well as the genuineness of the transaction. In the present case, the donor has already found to be an accommodation entry provider. However, it is the claim of the assessee that the statement of the donor was never made available to the assessee and therefore the principles of the natural Justice are contravened. For this proposition assessee has relied upon the decision of Hon‟ble Karnataka High Court in case of Kothari Metals V ITO 377 ITR 581. It was the case where the reasons recorded was not provided even after request. This is not the case before us. Further nothing is shown to us that assessee sought the statement of the donor or his cross examination. Several judicial precedents showsn does not apply to the facts of the case here as the assessee has ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 34 received gift from the accommodation entry provider who is not a near relative of the assessee and has gifted the amount without any occasion. Further with respect to relationship, we have seen the gift deeds placed in the paper book which does not mention any such reason for giving gift . Therefore, the statement of assessee that donor is known to the assessee or her family is unsubstantiated. On looking at return of income of Mr Sanjay Mohan Agarwal for AY 2000-01 placed at page no 25 of the paper book shows his income of Rs 129790/- only . he has also shown salary income of Rs 40,000/-. Further, his balance sheet placed at page no 26 of the paper books shows his capital of Rs 20.92 crores. This itself shows that balance sheet of the assessee and his return of income does not have any correlation. Further in his balance sheet huge sundry creditors and huge advances are shown . The profit and loss account shows turnover of 27 crores and meager profit of Rs 2.72 lakhs is shown. His capital account shows withdrawal of Rs 8.03 Crores. Apparently, such a huge withdrawal is used ITA. 2165 (Del) of 2008. Smt. Achla Dhawan, Meerut. 35 for providing bogus gifts. The pattern of the balance sheet, profit and loss account, and capital account shows that donor is not doing any genuine business activities. In view of this we do not find any infirmity in the orders of the lower authorities in confirming the addition of Rs 16 lakhs in the hands of the assessee u/s 68 of the act.
18. Accordingly, all the grounds of the appeal of the assessee are dismissed. The order is pronounced in the Open Court on :09/08/2018.