A.M.VENKATESAN,ERODE vs. ITO, ERODE

This appeal of the assessee is directed against the order of the Principal Commissioner of Income Tax-2, Coimbatore, dated 06.03.2015, passed under Section 263 of the Income-tax Act, 1961 (in short "the Act") and pertains to assessment year 2010-11.

Shri T. Vasudevan, the Ld. counsel for the assessee, submitted that the Principal Commissioner exceeding his power under Section 263 of the Act, found that there was a cash deposit in the bank account to the extent of `66,25,000/-. Referring to the assessment order, the Ld. counsel submitted that the cash deposit for the year under consideration was examined by the Assessing Officer after calling for explanation of the assessee. The assessee explained before the Assessing Officer that out of `66,25,000/- deposited in the bank account, a sum of `50,500/- was received by the assessee from his blood relatives and another sum of `7,50,000/- was received as hand loan. The assessee has also filed the details of the persons from whom the gifts were received and other information like PAN card, ration card and acknowledgement for filing of return of income, etc. The assessee has also deposited the amount in the bank. The Assessing Officer, after verifying the confirmation filed by the assessee, found that the gifts to the extent of `50,00,000/- were genuine. The Assessing Officer after enquiry found that the gift to the extent of `8,00,000/- was not genuine, accordingly, she added the same to the total income of the assessee. The Principal Commissioner, however, found that the Assessing Officer has not collected copy of ledger account of the companies in which the assessee was the Managing Director. The Assessing Officer also has not considered the provisions of Section 2(22)(e) of the Act. The Principal Commissioner has also found in para 3.2 of his order that the persons from whom the gifts were received by the assessee are relatives other than one Smt. S. Deivayanaki.

Referring to the observation made by the Principal Commissioner at para 3.5, the Ld. counsel for the assessee submitted that the Assessing Officer after making proper enquiry in respect of each and every gift received by the assessee and the loan received from the persons, allowed the claim of the assessee, except a sum of `8,00,000/-. Therefore, according to the Ld. counsel, the Principal Commissioner is not justified in saying that the Assessing Officer accepted the claim of the assessee without necessary enquiry. In fact, necessary enquiry was made which was reflected in the assessment order itself. In the absence of any material that the gift received by the assessee is bogus, according to the Ld. counsel, further investigation directed by the Principal Commissioner is beyond his jurisdiction. The Principal Commissioner in the guise of exercising his revisional power, cannot order for fresh enquiry. Since no material is available on record to suggest that the gifts received by the assessee were bogus, the Principal Commissioner cannot exercise his revisional power on the ground that the Assessing Officer has not made any necessary enquiry.

On the contrary, Shri Ajit Kumar Varma, the Ld. Departmental Representative, submitted that the assessee claimed before the Assessing Officer that he received `50,50,000/- as gift from blood relatives and `7,50,000/- as loan. The Assessing Officer in fact accepted the gift of `50,00,000/- from relatives, however, disallowed a sum of `8,00,000/-. The Assessing Officer, according to the Ld. D.R., has not made necessary enquiry to find out whether there was violation of Section 2(22)(e) of the Act. Referring to the order of the Assessing Officer, the Ld. D.R. pointed out that since all the cheques were received from the companies in which the assessee is the Managing Director, therefore, possibility of violation of Section 2(22)(e) of the cannot be ruled out. Since the cheques were received from the companies in which the assessee is the Managing Director, the Principal Commissioner found that whether the money received by the assessee is a dividend income within the provisions of Section 2(22)(e) of the Act is to be examined.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the assessee claims `50,50,000/- as gifts from various blood relatives.

In the result, the appeal of the assessee is allowed.