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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 23.11.2021, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 27.12.2019 for the assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal: “1) On the facts and in the circumstances of the case CIT(A) erred in rejecting submissions given on the ground of appeal "assessment order is bad-in-law, illegal and void ab-initio". 2) Without prejudice to ground no. 1, on the facts and in the circumstances of the case CIT(A) erred in confirming addition of Rs. 32,21,068/- made by the Assessing Officer by treating sources of increase in capital explained as gifts received from assessee's mother "Smt. Saroj Chandak" and father Rajkumar Chandak" to the extent of Rs. 32,21,068/- as unexplained cash credit u/s 68 and levying tax thereon as per provisions of section 115BBE(1) of the Act @ 60% by alleging that "assessee had failed to furnish authentic documents such as bank statements of donors or any other documents which can substantiate that there was sufficient cash in the hands of donors at the time of making said gifts" by rejecting written submissions and documents filed/produced by the assessee during the course of assessment proceeding to prove identity and creditworthiness of donors and genuineness of the transactions with them only on presumption and by ignoring that section 68 provides that assessee is required to prove source to source only in case of share capital raised by company and not in case of gifts from relatives. The assessee prays that the addition of Rs. 32,21,068/- made u/s 68 be deleted.
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3) Without prejudice to ground nos. 1 & 2, that CIT(A) erred in not adjudicating on the detailed submissions given by the assessee on charging income-tax as per provisions of section 115BBE (1) of the Act @ 60% on the transactions made in the F.Y. 2016/17 or on transactions made before 15.12.2016 during the F.Y. 2016/17 instead of @ 30%. The assessee prays that the income-tax be charged on such transactions @ 30%. 4) Without prejudice to ground no. 1, on the facts and in the circumstances of the case CIT(A) erred in confirming disallowance of Rs.29,487/- made by the Assessing Officer out of "Interest Paid" to "Toyota Finance Service Ltd." @ 30% for non-deduction of TDS by invoking provisions u/s. 40(a)(ia) by ignoring that said NBFC is reputed company, therefore, inference may be drawn at it might have incorporated interest received from the assessee and paid due tax thereon at the time of filing return, which ultimately results in no loss of revenue to the department. The assessee prays that the disallowance of Rs.29,487/- made by invoking provision of section 40(a)(ia) be deleted. 5) The appellant reserves the right to add, amend, or alter any ground or grounds of appeal at the time of hearing.”
Succinctly stated, the assessee who is running a wholesale medical shop had e-filed his return of income for A.Y.2017-18 on 03.11.2017, declaring an income of Rs.5,08,110/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s. 143(2) of the Act for the reason, viz. “large cash deposit during the demonetization period and abnormal increase in sales with decrease in profitability as compared to preceding previous year.”
During the course of assessment proceedings, it was observed by the A.O that the assessee had made cash deposits of Rs.12,12,500/- in specified bank notes (old currency notes) in his
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bank account. On being queried about the source of the aforesaid cash deposits, it was submitted by the assessee that the same were made out of available cash in hand on 08.11.2016. In support of his aforesaid contention the assessee submitted before the A.O his cash book a/w. details of month wise purchases/sales. During the course of the assessment proceedings, it was observed by the A.O that there were additions aggregating to Rs.32,21,068/- in the assessee’s capital account in his proprietary concern, viz. M/s. Laxmi Pharma. On being queried, it was the claim of the assessee that the same were sourced out of cash gifts which he had received from his parents, viz. (i) Smt. Saroj Chandak (mother of the assessee) : Rs.18.50 lac ; and (ii) Shri Raj kumar Chandak (father of the assessee) : Rs.13.75 lac, as under:
“Smt. Saroj Chandak Rs.6,25,000/- 9/12/2015 ----------do---------- Rs.6,75,000/- 17/02/2016 ----------do-------- Rs.5,50,000/- 22/07/2016 Shri Rajkumar Chandak Rs.4,50,000/- 9/12/2015 ----------do------------- Rs.4,57,000/- 17/02/2016 ---------do-------------- Rs.4,50,000/- 22.07.2016”
As the assessee failed to substantiate his aforesaid claim of having received genuine gifts from his parents by placing on record supporting documentary evidence and the bank statements of the respective donors, therefore, the A.O did not find any substance in the same. Also, it was observed by the A.O that the respective
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sources of income of the assessee’s parents was very nominal, which, by no means would support his claim of having received huge amount of cash gifts from them. Apart from that, it was noticed by the A.O that as the assessee had claimed to have raised unsecured loans from his parents, thus, his aforesaid claim of having received substantial amount of cash gifts from them was clearly proved to be a colourable device. Accordingly, the A.O not being persuaded to subscribe to the claim of the assessee of having received genuine cash gifts from his parents, held the entire amount of the addition in his capital account of Rs.32,21,068/- as an unexplained cash credit u/s.68 of the Act.
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before me.
At the very outset of the hearing of the appeal, it was submitted by the Ld. Authorized Representative (for short ‘AR’) for the assessee, that as instructed he does not seek to press the ground of appeal No.4. Accordingly, as per the concession of the Ld. AR the Ground of appeal No.4 raised by the assessee is dismissed as not pressed.
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Adverting to the solitary issue that survives for my adjudication i.e. sustainability of the addition of Rs.32.21 lac (approx.) made by the A.O u/s.68 of the Act, it was submitted by the Ld. AR that both the lower authorities had grossly erred in law and facts of the case in rejecting the explanation of the assessee, and had most arbitrarily in disregard of the documentary evidences that were placed on their record held the additions in his capital account which were sourced from the respective cash gifts so received by him from his parents as unexplained cash credits u/s.68 of the Act. It was, thus, the claim of the Ld. AR that the assessee had received genuine gifts from his parents which were prompted by love and affection on their part, and with an intent to financially support the assessee who at the relevant point of time was in a crisis. The Ld. AR rebutting the observation of the A.O that the respective donors had no financial means to make substantial amount of cash gifts took us through their respective returns of income, Page 14-41 of APB (although there is no document available at Page 17 to 19 of APB.). Be that as it may, it was the claim of the Ld. AR that as both the respective donors were regularly being assessed to tax, therefore, it was incorrect on the part of the A.O to observe that they had no financial means to make cash gifts to the assessee. My attention was specifically drawn by the Ld. AR to the return of income of the assessee’s mother, viz. Smt. Saroj Chandak
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for A.Y.2015-16, wherein she had disclosed income of Rs.2,40,291/-, Page 24 of APB. Relying on the judgment of the Hon’ble High Court of Chhattisgarh in the case of Pawan Kumar Agrawal Vs. ITO, Ward- 2(2), Bilaspur, Tax Case No.42 of 2011 dated 04.04.2017, it was averred by the Ld. AR that now when the assessee had discharged the primary onus that was cast upon him as regards explaining the source of the accretion in his capital account, therefore, in case the A.O had any doubt as regards the same, then, he was obligated to have taken recourse to verifications u/s.133(6) of the Act or u/s.131 of the Act as regards the respective donors. Also, the Ld. AR had drawn support from the order of the ITAT, Mumbai in the case of Kushal Virendra Tandon Vs. ACIT (2022) 215 TTJ 630 (Mum.). On the basis of his aforesaid contentions, it was submitted by the Ld. AR that now when the assessee had duly substantiated the source of gifts by placing on record supporting documentary evidence, therefore, the A.O could not have summarily discarded the same, and without placing on record any material proving to the contrary held the respective amount of gifts so received as unexplained cash credits u/s.68 of the Act. Also, the Ld. AR had taken us through the copies of the gift deeds of the aforesaid donors as were filed before the A.O, wherein they had admitted of having gifted the respective amounts to
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the assessee out of cash that was available with them, Page 17-19 & 46-47 of APB.
Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. It was submitted by the Ld. DR that as the assessee had failed to substantiate on the basis of irrefutable evidence the sources of the cash deposits as were reflected in his capital account during the under consideration, therefore, both the lower authorities had rightly made/sustained the addition of the said amount as unexplained cash credit u/s.68 of the Act. Adverting to the documentary evidences that were placed on record by the assessee to support his claim of having received genuine gifts from his parents i.e. the donors, it was submitted by the Ld. DR that the same was nothing but an eye wash, which, as observed by the A.O was nothing but a cooked up story of his to explain the unexplained cash deposits in his books of account.
I have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.
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As observed by me hereinabove, the assessee on being confronted by the A.O as regards the additions in his capital account of Rs.32.21 lac (comprising of cash addition of Rs.29.35 lac), had claimed that the same were sourced out of the cash gifts received by him from his parents, viz. (i) Smt. Saroj Chandak ( mother of the assessee) : Rs.18.50 lac ; (ii) Shri Raj kumar Chandak ( father of the assessee) : Rs.13.75 lac. On being called upon to substantiate the authenticity of the respective gifts transactions, I find that the assessee in his attempt to discharge the primary onus that was cast upon him had placed on record, viz. (i) copies of returns of income a/w. computation of income accompanied with the balance sheets and the capital accounts for F.Ys.2014-15, 2015-16 and 2016-17 ; (ii) copies of gift deeds, dated 09,12.2015, 17.02.2016 and 22.07.2016 of Smt. Saroj Chandak (mother) AND (i) copies of returns of income for the period i.e. A.Y.2007-08 to A.Y.2017-18 accompanied with capital accounts and balance sheets for the F.Y.2014-15, FY 2015-16 and FY 2016-17; and (ii) copies of gift deeds, dated 09.12.2015, 17.02.2016 and 22.07.2016 of Shri Raj Kumar Chandak (father).
On a perusal of the respective gift deeds of the aforesaid donors, viz. (i) Smt. Saroj Chandak (mother of the assessee);and (ii) Shri Raj kumar Chandak (father of the assessee), I find that both of them in a stereotype language had categorically confirmed of have
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given cash gifts aggregating to Rs.18.50 lac and Rs.13.75 lac, on three occasions each, to the assessee, which as mentioned in the respective deeds is stated to have been accepted by the assessee in the presence of witnesses. On a careful perusal of the respective gift deeds, I find that both the donors had stated that they were income tax payees and had provided their PAN. Also, both the donors had stated in their respective gift deeds that cash gifts were made by them out of their self-acquired funds of which they were absolute owners, and the said gift transactions were prompted by natural love and affection for their son i.e. the assessee. Although the assessee in order to fortify his claim of having received cash gifts had placed on record the returns of income for the period A.Y.2007-08 to A.Y.2017- 18 of his parents, however, we would mince no words in observing that the minuscule amount of income returned by both of them over the years does not inspire any confidence as regards their claim of having given cash gifts of substantial amounts of Rs.18.50 lac and Rs.13.75 lac to the assessee during the year. But at the same time, I cannot also remain oblivion of the fact that the A.O after rejecting the aforesaid claim of the assessee and disregarding the supporting documentary evidences which were placed by him on his record, viz. copies of the returns of income of the donors, copies of the gift deeds, copies of the balance sheets etc., had without conducting any enquiry
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as regards the genuineness of the claim of the respective donors by carrying out independent verifications, i.e., either by summoning the donors u/s.131 of the Act or calling for information from them in exercise of powers vested u/s.133(6) of the Act, had hushed through the matter and summarily held the gift transactions as bogus. As observed by the Hon’ble High Court of Chhattisgarh in the case of Pawan Kumar Agrawal Vs. ITO, Ward-2(2), Bilaspur, Tax Case No.42 of 2011 dated 04.04.2017, once the primary onus that was cast upon the assessee as regards explaining the nature and source of the cash credit in his books of accounts stood discharged, then the A.O was obligated to arrive at a conclusion as regards the maintainability of the claim of the assessee by taking recourse to Section 131 or Section 133(6) of the Act. Also, the Hon’ble Jurisdictional High Court in the case of CIT Vs. Abdul Aziz (2012) 251 CTR 58 (CG), had observed, that where an assessee establishes the creditworthiness of the creditors on the basis of affidavits, statements of the creditors disclosing their source of income, then the dissatisfaction arrived by the A.O without carrying out any independent enquiry is to be rejected. On the basis of the aforesaid settled position of law, I am of the considered view that as the A.O had neither carried out any independent enquiries nor taken recourse to proceedings u/s.131 or u/s.133(6) of the Act with respect to the aforesaid donors, i.e., either
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called for details from them and/or summoned them and recorded their statements as regards their depositions of having given cash gifts to the assessee, therefore, the view so taken by him is absolutely premature and cannot be endorsed on my part.
As regards the reliance placed by the Ld. AR on the order of the ITAT, Mumbai in the case of Kushal Virendra Tandon Vs. ACIT (2022) 215 TTJ 630 (Mum.), the same in my considered view is distinguishable on facts. I, say so, for the reason that while for in the said case the assessee had made a clear disclosure in his capital account of having received a cash gift from his father, but in the case of the present assessee before me the said claim was raised by the assessee only in the course of the assessment proceedings when he was queried about the additions in his capital account. Be that as it may, I am of the considered view that as the A.O had failed to carry out necessary enquiries as regards the authenticity of the claim of the assessee of having received genuine gifts from his parents, i.e. by taking recourse to Section 131 or Section 133(6) of the Act, and had summarily rejected his claim and the admissions of the said donors of having given cash gifts to the assessee, therefore, the matter in all fairness requires to be revisited by him for fresh adjudication. Accordingly, the order passed by the CIT(Appeals) is set-aside and the same is restored to the file of the A.O for fresh adjudication, who
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shall after duly considering the documents that were placed on his record by the assessee to substantiate his claim carry out necessary enquiries as observed hereinabove. Needless to say, the A.O in the course of set-aside proceeding shall afford a reasonable opportunity of being heard to the assessee who will remain at a liberty to support his aforesaid claim on the basis of fresh documentary evidence, if any. Thus, the Ground of appeal No.2 is allowed for statistical purposes in terms of the aforesaid observations.
As we have restored the core issue i.e. the claim of the assessee of having received genuine gifts from his parents, to the file of the A.O, therefore, the grievance of the assessee that both the lower authorities had erred in triggering the provisions of Section 115BBE(1) of the Act and saddling him with a tax liability @60% of the value of transaction, for the reason that the said statutory provision was made available on the statute only w.e.f.15.12.2016, being an issue the adjudication of which is inextricably interlinked or in fact interwoven with the aforesaid core issue, therefore, the same is restored to the file of the A.O. In case, the addition on the core issue or any part of the same is made by the A.O in the course of set- aside proceedings, then he shall re-adjudicate the said issue. Needless to say, the A.O shall before drawing any inferences on the aforesaid issue afford a reasonable opportunity of being heard to the
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assessee, who shall remain at a liberty to substantiate his claim on the basis of fresh material/evidences.
In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations.
Order pronounced under Rule 34(4) of the Appellate Tribunal Rules, 1963 by placing the details on the notice board. Sd/- (रवीश सूद /RAVISH SOOD) �या�यक सद�य/JUDICIAL MEMBER रायपुर / Raipur; �दनांक / Dated : 29th December, 2022 #####SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT-1, Raipur (C.G.) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक-सद�य” ब�च, रायपुर / DR, ITAT, “SMC” Bench, Raipur. गाड� फ़ाइल / Guard File. 6. आदेशानुसार / BY ORDER, // True Copy // �नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur.