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Income Tax Appellate Tribunal, BANGALORE BENCH A, BANGALORE
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER (Assessment Year : 2004-05) Dr. M. B. Satish Kumar, Prop : Sri Satya Sai Hospital, No.NH 206, Kadur, Chikmagalur District 577548 .. Appellant PAN : BATPS8308D v. Income-tax Officer, Ward – 1, Chikmagalur .. Respondent Assessee by : Shri. R. Chandrashekar, Advocate Revenue by : Dr. P. K. Sreehari, Addl.CIT Heard on : 17.12.2015 Pronounced on :28 .12.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by assessee it has altogether taken nine grounds of which grounds 8 and 9 are on levy of interest u/ss.234A and 234B of the Income-tax Act, 1961 (‘the Act’ in short), which are consequential in nature.
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Vide its grounds 1 to 3 assessee assails reopening of the assessment done for the impugned assessment year.
Vide Grounds 4 to 6 assessee assails an addition of Rs.9 lakhs made by the AO u/s.68 of the Act which was confirmed by the CIT (A).
Assessee had filed its return for the impugned assessment year on 02.05.2011 in response to a notice issued u/s.148 of the Act. The germane reason for issue of notice u/s.148 of the Act, for the impugned assessment year arises from the observations of CIT (A) in his appellate order for A. Y. 2005-06. In the assessment done for A. Y. 2005-06, it was noted that the assessee had completed the construction of a nursing home called Sri Satya Sai Hospital in Chikmagalur district. A sum of Rs.9 lakhs out of the investment was explained by the assessee as a gift received from one Shri. P. Venkateshwaralu of Kadur on 12.08.2003. AO had observed that Shri. P. Venkateshwaralu was not related to the assessee in any manner and on days immediately preceding date of the gift. Shri. Venkateshwaralu had substantial cash deposits in his bank account.
CIT (A) on assessee’s appeal for A. Y. 2005-06 held that the gift was claimed as received on 12.08.2003 and the donor had mentioned the cheque ITA.702/Bang/2015 Page - 3 date as 12.08.2003 in his affidavit. Thus according to CIT (A) amount was received by the assessee during the financial year 2003-04 relevant to A. Y.
2004-05. Since gift was received in the earlier year CIT (A) deleted the addition disbelieving the gift for A. Y. 2005-06 inter alia making the following observations :
“The addition is deleted because the transaction of cash credit / unexplained gift does not pertain to this year. The AO is free to take any action as per law in the relevant asst year. The AO would also hear the assessee and consider all his objections in case he contemplates this addition in the relevant asst year. Therefore no comments are made at this state on the merits of the addition.”
In the proceedings for impugned assessment year also, assessee relied on the very same affidavit that he had produced in respect of Shri.
Venkateshwaralu for justifying the gift. AO examined the bank accounts of the donor with ING Vysya Bank. As per the AO immediately prior to the clearing of the cheque dated 12.08.2003, on 14.08.2003, there were following transactions in his bank account :
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AO made further verification and issued summons to Shri. Venkateshwaralu. He appeared before the AO and confirmed having made gift to the assessee. According to Shri. Venkateshwaralu credits in his bank accounts were on account of sale of agricultural produce. Shri. Venkateshwaralu was the proprietor of one M/s. Tirumala Estates. Source of the amount from which he had given the gift to the assessee was explained by him as under :
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AO issued summons to each of the above parties. It seems Shri. C. N. Shivappa, Shri. K. N. Prakash and Shri P. Rangaswamy appeared before the AO and stated that they had not purchased any arecanuts or coconuts to Shri. Venkateshwaralu. They also denied any payments to Shri. Venkateshwaralu. Other persons did not appear. AO disbelieved the claim of gift made by the assessee and made an addition of Rs.9 lakhs.
Aggrieved assessee moved in appeal before the CIT (A). One of the arguments taken by the assessee before the CIT (A) was that reopening was ITA.702/Bang/2015 Page - 6 based on the satisfaction of the CIT (A) and not the satisfaction of the AO. According to the assessee it was merely on a change of opinion. In so far as merits of the addition was concerned, argument of the assessee was that source of the source could not be questioned. CIT (A) however was of the opinion reopening was not based on any change of opinion, since AO held the very same opinion when he completed the assessment for A. Y. 2005- 06. Further according to him, assessee could only establish the identity of the donor but the genuineness of the gift was not proved. With these observations he dismissed the appeal of the assessee.
Now before us the Ld. AR submitted that the reasons emanated not from any satisfaction derived by the AO but were solely dependent on the observations of the CIT (A) in his order for A. Y. 2005-06. According to him, the reasons recorded by the AO did not show any rational connection with any escapement of income chargeable to tax. As per the Ld. AR, directions of CIT (A) were erroneously considered to be good enough for reopening the assessment. According to him, reopening based on change of opinion was bad in law. Reliance was placed on judgment of Hon’ble Apex Court in the case of CIT v. Kelvinator of India Ltd [ (2010) 320 ITR 561].
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On merits, Ld. AR submitted that assessee had proved the identity of the donor and the donor had appeared before the CIT (A) and confirmed the gift. Donor had mentioned in the affidavit the reason as to why he was giving the gift to the assessee. Assessee could not be asked to prove the source of the donor. As per the Ld. AR assessee had discharged his onus. If donor was not able to satisfactorily explain his source, Revenue should have proceeded against the donor and not against the assessee.
Per contra, Ld. DR submitted that this was not a reopening stricto- sensu. Assessee had not filed any return for the impugned assessment year. Further according to him elements of a gift were not satisfied. Donor was not related to the assessee. Bank pass-book of the donor showed cash credits in his bank account immediately before the gift. Revenue was not verifying the source of the source. Examination of the persons were done only to verify the genuineness of the transactions. As per the Ld. DR assessee failed to prove the genuineness. Thus according to him, lower authorities were justified in making the addition.
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We have perused the orders and heard the rival contentions. In so far as the issue of reopening is concerned, we find that assessee had never filed a return prior to issue of notice u/s.148 of the Act. Thus there was no question of any change of opinion. CIT (A) in his order for A. Y. 2005-06 had given a clear finding that the date on which the alleged gift was claimed fell within the previous year relevant to A. Y. 2004-05. In our opinion considering this, the reopening done was valid. Reason cited by the AO was relevant. Only relevancy of reason can be looked into and not its sufficiency. Even otherwise, Hon’ble Apex Court in the case of DCIT v. Zuari Estate Development & Investment Co. Ltd (C. A.6758 of 2004, dt.17.04.2014) has held that a reopening done, even in a case where an assessee had filed a return which was subject to a processing u/s.143(1) of the Act, would not come within the ambit of change of opinion. Assessee’s grounds 1 to 3 on reopening are dismissed.
Coming to the merits of the claim, what I find is that affidavit of Shri. Venkateshwaralu, iproduced by the assessee before the lower authorities read as under :
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It has been clearly stated that father of the assessee was a close friend of Shri. Venkateshwaralu and latter was giving the money for helping the assessee for constructing a hospital cum nursing home. Shri. Venkateshwaralu had appeared before the AO and confirmed the gift. No doubt, AO had found that the persons claimed by Shri. Venkateshwaralu to ITA.702/Bang/2015 Page - 10 have funded him for making the gift had denied the transactions with Shri. Venkateshwaralu. AO found that all these persons were only the employees of Shri. Venkateshwaralu or people having little means. In my opinion this would at the best show that Shri. Venkateshwaralu had income other than income from declared and explained sources. However the fact that he had given a gift through a bank cheque out of his bank account, in my opinion, stands substantiated by the assessee. Assessee had discharged the onus vested on him to prove the identity of the creditor, genuineness of the transaction and the credit worthiness of the creditor. In my opinion, lower authorities ought not have disbelieved the gift received by the assessee from Shri. Venkateshwaralu. I, therefore, delete the addition of Rs.9 lakhs made by the AO. Grounds 4 to 7 of the assessee are treated as allowed.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 28th day of December, 2015.