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Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,
Before: SHRI N.S SAINI
This is an appeal filed by the assessee against the order of CIT(A)-
Berhampur, dated 2.12.2013, for the assessment year 2009-2010.
The appeal is time barred by 202 days. The assessee has filed
condonation petition dated 17.10.2016 supported by affidavit for condoning
the delay in filing the appeal. After going through the condonation petition,
I find that the assessee had reasonable cause for not filing the appeal within
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the stipulated time. Ld D.R. did not have any objection for condoning the
delay. I, therefore, condone the delay of 202 days in filing the appeal before
the Tribunal and admit the appeal for hearing.
The first issue involved in this appeal is that the ld CIT(A) erred in
confirming the action of the Assessing Officer in making addition of
Rs.4,56,000/- u/s.68 of the Act on account of alleged gift.
I have heard the rival submissions and perused the orders of lower
authorities and materials available on record. The facts of the case are that
during the year under consideration, the assessee introduced fresh capital of
Rs.4,56,000/-. On being asked to furnish the capital introduced, the assessee
produced his father Shri L. Anand Rao for examination from whom he has
received cash gift of Rs.4,56,000/- on 10.12.2008. The assessee’s father Shri
L. Anand Rao in his statement recorded on 19.12.2011 stated that he has
made cash gift of Rs.4,56,000/- to his son during the financial year 2008-09
out of agricultural income. The Assessing Officer observed that Shri L. Anand
Rao was an agriculturist and is not assessed to income tax. Except a
memorandum of gift, no other evidence has been furnished. The assessee is
required to prove prima facie the capacity of such donor to make cash gift of
Rs.4,56,000/- on 10.12.2008 and genuineness of transaction. The assessee
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has submitted that his father Shri L. Anand Rao is looking after cultivation of
agricultural land of 26.65 acrres and yielding income from cultivation and have
sufficient savings from agriculture. The Assessing Officer observed that no
bank account is maintained by Shri L. Anand Rao, father of the assessee. The
assessee’s father in his statement stated that he has sold paddy to the
assessee who is proprietor of mill to the tune of Rs.52,250/-, which was
outstanding as on 31.3.2009. The Assessing Officer observed that after
meeting domestic expenses, the assessee’s father is not able to save money
to make such a huge cash gift of Rs.4,56,000/- out of agricultural income. He
has observed that merely filing of confirmatory letter does not discharge the
onus that lies with the assessee in proving the capacity and genuineness of
the cash gift so received. Hence, he held that cash gift made of Rs.4,56,000/-
on 10.12.2008 is not acceptable and added back the same to the income of
the assessee as unexplained income of the assessee.
On appeal before the ld CIT(A), the assessee submitted that the donor
has enough creditworthiness to donate the above amount of Rs.4,56,000/-.
He wanted an opportunity to produce necessary evidences in this regard.
Therefore, the ld CIT(A) referred the matter to the Assessing Officer for
verification and comments vide letter No.1459 dated 5.10.2012. Initially, the
Assessing Officer reported vide his letter No.438 dated 12.11.2012 that the
assessee could not produce the donor and other evidences. On being pointed
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out, the assessee requested one more opportunity to produce the donor, The
Assessing Officer, accordingly, gave one more opportunity to the assessee and
the assessee produced the donor and filed details before him. The Assessing
Officer in his report No.735 dated 18.3.2013, stated as under:
“Shri L Anand Rao had admitted of gifting Rs.4,56,000/- to his son Shri L.Srinivas Rao i.e. the assessee and the same was given in cash. In the statement given during scrutiny proceedings, Shri Rao had stated the source of income from the sale of agricultural produces. No certificate from the competent authority mentioning actual income from agriculture could be filed during assessment proceedings. Now in course of statement given, he filed a certificate from the Tehsildar, Padmapur vide certificate No.1799 dt.4.1.2012 wherein his income from agriculture has been mentioned at Rs.3,15,000/-. In the certificate it is not mentioned the agricultural income pertains to the F.Y. 2008-09 relevant to the assessment year 2009-2010 during which he gifted the amount of rs.4,56,000/- to the F.Y. 2011-12 relevant to the assessment year 2012-13 during which the agricultural income was only Rs.3,15,000/-. That means during the F.Y. 2008-09, i.e. three years back the income from agriculture is definitely very meager for which Sri Rao had no substantial amount to gift to the assessee. Vide Q.No.8, it was asked to file the certificate from the authority concerned mentioning the extent of agricultural income earned during the F.Y. 2008-09 relevant to assessment year under consideration in response to which shri Rao expressed his inability to file the same.
In the earlier statement, Shri Rao had also admitted of earning income by purchasing the paddy from the local cultivators and selling ti to different persons in addition to his own agricultural income. Vide Q. NBo.9, it was asked to furnish some of the cultivators alongwith confirmation letters with whom he had made transaction. Again Shri Rao expressed his inability to file the same. Similarly, in the statement given earlier Shri Rao had stated to derive agricultural income from 26.65 acres of land stood in the name of his father L Laxminarayana. However, on going through
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the land document filed, it is seen that the total extent of land is 44.37 acres which stood in the name of L. Laxminarayana and L. Ramulu. Vide Q. No.12, it was asked who is L. Ramulu and to produce the certificate from the competent authority mentioning the extent of land belonging to L. Ladminarayana. Shri Rao informed that L Ramulu is brother of his father and no documentary partition of the land has yet been made. There is only verbal partition of the land as per which 50% of land belongs to his father and balance 50% belongs to his uncle. If 50% of total land is taken into account then it comes to 22.18 acres being the share, whereas in the statement he has admitted of owning the land of 26.65 acres. Shri Rao does not maintain any bank account and entire income earned he kept in his residence. While questioned why is not keeping the cash in bank, it was answered no ban k is functioning in his village Derigaon. In support of his claim, he filed a letter form the derigaon Gram Panchayat mentioning the fact that no bank is being functioned in Derigaon. Vide Q. No.3, it was asked to explain the nearest ban k located near Derigaon in response to which Shri Rao explained the nearest bank is located in Gumuda which is 9 kms distance form his village and the bank is Utkal Gramya Bank. Against while questioned why the income earned was not kept in the bank for safety purpose, he explained for risky purpose for bringing the cash to Gumuda the same was kept in the house. Shri Rao does not maintain any account for his agricultural income as admitted by him vide Q. No.6. Similarly on a memorandum of gift was filed as was filed in course of scrutiny proceedings. But no gift deed normally prepared in stamp paper could be filed. The brief fact is that Shri Rao earned agricultural income wherefrom he had gifted the amount to his son which was given in cash. He neither maintains any bank account nor furnished the certificate from the competent authority regarding actual agricultural income earned during A.Y. 2009-10. No gift deed was also furnished by him but only he furnished a memorandum of gift wherein at para 2 it is mentioned that the done expressed his desire to receive the gift amount in cash only and the reason behind this is best known to the assessee because the assessee runs a rice mill and maintains the bank account with SBI, Gunupur, Dist Rayagada and nothing was prevented him to receive the gift amount either in cheque or draft from the donor so that the genuineness gift given could have been
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verified on verifying the bank account. The donor also could have kept the amount in the bank at Gumuda and by withdrawing the amount from the bank the gift could have been given to the assessee so that nobody can disbelieve for the transaction of gift. Here the assessee neither proved the source of income of the donor nor the transaction of gift amount given to him.”
In reply to the remand report, the assessee filed written submission
dated 26.11.2013 and stated as under:
“The humble explanation of the appellant most respectively show that during the course of appeal proceedings for the assessment year 2009-10, the LAO issued summons to the donor Shri Ladi Ananda Rao, father of the appellant in regard to genuineness of Rs.4,56,000/- being gifted to the appellant. The said donor has admitted the fact of the said gift before the AO and submitted the evidence of agricultural lands in the form of mutation certificate, RI letter in evidence of agricultural income and letter from Panchayat in e3vidence of non-existence of banks in the donor’s village. The appellant is submitting herewith Photostat copies of mutation certificate, RI letter and letter from Panchayat.”
Thereafter, the ld CIT(A) confirmed the addition made by the Assessing
Officer observing that as mentioned by the Assessing Officer, agricultural
certificate produced during remand does not specify the year to which such
agricultural income relate to. Ld CIT(A) presumed that the said agricultural
income of Rs.3,15,000/- relates to F .Y. 2011-12, as the certificate has been
issued on 4.1.2012, then the agricultural income in F.Y. 2008-09 i.e. three
years back will be much less. The assessee failed to produce any certificate
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regarding the agricultural income during the relevant financial year despite
the specific request by the Assessing officer. He observed that in fact the
assessee does not have adequate agricultural income is clearly buttressed by
the donor in his statement before the Assessing officer. He also stated that
the assessee buys paddy and sells to different persons. The donor could not
give any information regarding the persons from whom such paddy is procured
for trading. The entire amount was kept in cash, no gift deed was produced
before the Assessing Officer and strangely in the memorandum of gift, the
donee i.e. the assessee expressed his desire to receive the gift only in cash.
Before me, ld A.R. of the assessee submitted that the issue is squarely
covered by the decision of this Bench of the Tribunal in the case of Sridhar
Sahoo vs ITO, (2016) 182 TTJ (Cuttack) (UO) 41, wherein, the Tribunal held
that the assessee having filed the affidavits of all the creditors who also
appeared before the Assessing Officer in compliance of the summons issued
u/s.131 and evidence of their ownership of agricultural lands to prove their
creditworthiness, which has not been rebutted by the Assessing Officer by
bringing any material on record, the impugned addition under section 68
cannot be sustained.
On the other hand, ld D.R. relied on the orders of lower authorities.
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I find that in the instant case, the assessee claimed to have been
received Rs.4,56,000/- from his father Shri L. Anand Rao. His father appeared
before the Assessing Officer and in his statement recorded on 19.2.2011
u/s.131 of the Act admitted the fact of having giving cash gift of Rs.4,56,00/-
to his son (assessee) during the financial year 2008-09 out of his agricultural
income. In support of the same, he filed a certificate from the Tahasildar,
Padmapur vide certificate No.1799 dated 4.1.2012, wherein, it was stated that
he earned agricultural income of Rs.3,15,000/- and it has also been stated in
the said certificate that the agricultural income pertains to F.Y 2008-09
relevant to A.Y. 2009-2010 during which, he gifted Rs.4,56,000/- to the
assessee. Further, the father of the assessee Shri L Anand Rao also stated
that he derived agricultural income from 26.65 acres of land which stood in
the name of his father L. Laminarayana.
I find that after examining the father of the assessee Shri L.Anand Rao
u/s.131 of the Act, the Assessing Officer could not bring on record any material
to show that he has not actually given gift to the assessee or that he did not
have source enough out of which he could have given the impugned gift of
money in question. I find that the father of the assessee Sri L.Anand Rao duly
appeared before the Assessing Officer and affirmed of giving gift in question
to the assessee and also produced before the Assessing Officer evidence of
owning agricultural land by him wherefrom the agricultural income earned by
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him, out of which, the gift in question was given. In the above circumstances,
in my considered view, the initial onus which was upon the assessee under
the law was duly discharged. Thereafter, the Assessing Officer has brought
no material on record to show that the statement given by the father of the
assessee was incorrect or not possible. The Assessing officer has stated in
the assessment order that the father of the assessee did not have the capacity
to give gift to the assessee. I find that in support of the capacity to give the
gift to the assessee, he filed evidence of owning agricultural land and also a
certificate from the Tahasildar, Padmapur dated 4.1.2012, wherein, it was
stated that he earned agricultural income of Rs.3,15,000/- during the financial
year 2008-09 relevant to assessment year 2009-2010 when the gift was given
to the assessee. In the above circumstances, I fail to appreciate how the
Assessing Officer stated that Shri L. Anand Rao, father of the assessee did not
have the capacity to give gift of Rs.4,56,000/- to the assessee. After
examining the evidence produced by the father of the assessee, the Assessing
Officer could not bring any positive material on record to show that from
agricultural land possessed by the father of the assessee Shri L. Anand Rao,
he could not have earned so much of agricultural income out of which
Rs.4,56,00/- could not have been given as gift to the assessee.
The Assessing Officer has merely stated that the father of the assessee
had meagre income without bring on record any material in support of the
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issue. In my considered opinion, such a vague and unspecific and
unsubstantiated observation has no value in the eyes of law. Therefore,
considering the entirety of the facts and circumstances of the case I find that
the plausible explanation of the assessee was rejected by the Assessing
Officer merely on the basis of suspicion and doubt and without bringing even
an iota of material on record and even pointing out any inconsistency in the
statement of Shri L. Anand Rao, father of the assessee recorded u/s.131 of
the Act. My above view finds support from the decision of Hon’ble Supreme
Court in the case of Sreelekha Banerjee vs CIT (1963) 49 itr 112 (SC),
wherein, it was held that the department cannot by merely rejecting
unreasonably a good explanation convert good proof into no proof. Therefore,
in my considered opinion, the order of the Assessing Officer cannot be
sustained and the ld CIT(A) was not justified in confirming the same. I,
therefore, setaside the orders of lower authorities and delete the addition of
Rs.4,56,000/- in issue. Thus, the ground of appeal raised by the assessee is
allowed.
In second ground of appeal, the grievance of the assessee is that ld
CIT(A) erred in confirming the adhoc disallowance of Rs.47,180/-made by the
Assessing officer.
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Before me, ld A.R. did not make any serious arguments on this ground.
Therefore, the same is dismissed for want of prosecution.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 10 /01/2017 in the presence of parties.
(N.S Saini) ACCOUNTANT MEMBER
Cuttack; Dated 10 /01 /2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Ladi Srinivas Rao, Prop. Maa Baishno Devi Modern Rice Mill, At/PO: Gumuda, dist: Rayagada. 2. The Respondent. ITO, Rayagada Ward, Rayagada 3. The CIT(A)Berhampur 4. CIT,Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//
BY ORDER,
ASST.REGISTRAR, ITAT, Cuttack
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Date Initia l 1. Draft dictated on 10/01/17 Sr.PS 2. Draft placed before 10/01/11 (dictation Sr.PS author pad has been enclosed along with original file) 3. Draft proposed & placed AM before the second member 4. Draft AM discussed/approved by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS /PS 6. Kept for pronouncement Sr.PS on 7. File sent to the Bench Sr.PS Clerk 8. Date on which file goes to the H.C. 9. Date on which file goes to the AR 10. Date of dispatch of Order.