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2016 DIGILAW 1044 (GUJ)

Anil Gajanan Sane v. Income Tax Officer

2016-06-07

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as the Tribunal) dated 17.02.2006 in ITA No. 3543/Ahd/2002, for the Assessment Year 1996-97, the assessee has preferred the present Tax Appeal for consideration of the following substantial question of law which were framed while admitting the matter on 23.07.2007. "(i) Whether on the facts and in circumstances of the case the Tribunal was right in law in upholding the addition of Rs. 2,20,000/- under Section 68 of the I.T. Act? (ii) Whether the Tribunal was right in law in requiring the appellant to prove the source of source to discharge the burden caste upon the appellant under Section 68 of the Act? (iii) Whether the Tribunal erred in not deleting the addition when the discretionary powers given in Section 68 were not exercised by the Assessing Officer when it was known to the Officer that the appellant was of 85 years of age and it would not be possible to hold this amount to be his income? (iv) Whether the Tribunal erred in ignoring the alternative plea of the appellant to work out peak credit instead of adding the entire amount of Rs. 2,20,000?" 2. Since the original appellant assessee has expired his legal heirs are brought on record. 3. The facts of the case are that the assessee was given Rs. 2,20,000/- advanced by Shri YN Rokade by cheques on various dates and the said amounts were collected from various devotees of the assessee. The Assessing Officer held that creditworthiness and genuineness of the transaction is not proved under section 68 and Rs. 2,20,000/- is added as unexplained cash credit. Being aggrieved and dissatisfied with the additions, the assessee filed an appeal before the learned Commissioner of Income Tax (Appeal) and the learned Commissioner of Income Tax (Appeal) upheld the addition. Being aggrieved by the order of the learned Commissioner of Income Tax (Appeal), the assessee carried the matter in further appeal before the Tribunal. The Tribunal, by the impugned order, confirmed the view of the revenue authorities. Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the assessee has preferred the present Tax appeal for consideration of aforesaid substantial question of law. 4. Mr. The Tribunal, by the impugned order, confirmed the view of the revenue authorities. Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the assessee has preferred the present Tax appeal for consideration of aforesaid substantial question of law. 4. Mr. Manish Shah, learned advocate appearing for the assessee submitted that the assessee has collected some amount of Rs. 5000/- from his followers and total amount came to Rs. 2,20,000/-. He further submitted that the assessee has produced on record the confirmation from each of person as well as from Mr. Y.N. Rokade who has given cheques of Bank of Baroda, Sufi Baug Branch, Surat where Shri Y.N. Rokade maintained savings bank account. The assessee has given further details and it was produced on record. In support of his submission he has relied upon the decision of this Court rendered in Tax Appeal No. 600 of 2005 to Tax Appeal No. 602 of 2005 vide judgment and order dated 19.11.2014 wherein it is held as under: "5. We have carefully considered the submissions made by learned advocates for both the sides. It is borne out from the records that a non-resident Indian Shri Chinubhai Gangadas Thakkar, permanently residing in Middlesex, U.K had given gift of Rs. 2 lakhs by way of a cheque from his Non Resident External Account to the assessees. The said gift is also evidenced by the Deed of Gift executed by said Chinubhai Thakkar. The cheque was credited in the bank account of the applicant on realisation. It is clear that the assessees had produced complete details of the identity of the donor. In this regard it shall be fruitful to refer to the decision of this Court in the case of Murlidhar Lahorimal (supra) which is reproduced hereunder: 11. As Section 68 of the Act denotes, once there is a credit in the books maintained by the assessee, the primary onus is on the assessee, namely, to offer an explanation as to nature and source of the credit. As Section 68 of the Act denotes, once there is a credit in the books maintained by the assessee, the primary onus is on the assessee, namely, to offer an explanation as to nature and source of the credit. What would be the degree of the onus and what should be the extent of explanation in such circumstances, is succinctly laid down by this Court in the decision in case of CIT v. Pragati Co-operative Bank Ltd., Suffice it to state that an assessee can be asked to prove the source of credit in books, but cannot be asked to prove the source of the source. 12. Unfortunately, as noted hereinbefore, the Tribunal has proceeded on an entirely fallacious premise, when it is observed, we have to decide the question about the genuineness of the gift on the balance of probabilities and, in our view, it is not probable that the assessee received Rs. 50,000/- or any part thereof as a gift from Ramji Nanji, the donor. Instead of addressing itself to the requirement of Section 68 of the Act, the Tribunal has adopted an approach which, to say the least, is unwarranted in law. The Tribunal states that motivation for making the gift is not established. This finding is neither here nor there. The assessee was called upon to explain the credit entry found in its capital account. The assessee pointed out that it had received a gift from Shri Ramji Nanji. Shri Ramji Nanji appears before the assessing officer and confirms the fact of having made the gift. He produces evidence in support of the source from which the funds for making the gift are available with him. The gift is given by way of a bank draft. The revenue does not dispute any of these facts. In fact, the revenue commences the present proceedings on the day it makes gift tax assessment qua this very gift in the hands of the donor. 13. Despite this factual position, the Tribunal singularly fails to note the fact that the identity of the donor is established, the donor having appeared in person before the assessing officer, the genuineness of the transaction is established, not only by the receipt of the bank draft, but also by the fact of transaction having borne gift tax once the assessment was framed. The primary onus which rested with the assessee, thus, stood discharged. The primary onus which rested with the assessee, thus, stood discharged. Thereafter, if the revenue was not satisfied with the source of the funds in the hands of the donor, it was upto the revenue to take appropriate action. The Tribunal fails to consider all these aspects. In fact, the donor having filed gift tax return and assessment having been framed on the donor, is not taken into consideration by the Tribunal at all. This was a very strong factor in support of the explanation tendered by the assessee. 14. The Tribunal, to the contrary, goes on to discuss and question as to why the donor should make a gift to the assessee; the size of the donor's family and availability or otherwise of the amount in hands of the donor; the area of the land held by the donor etc. At best, these could be factors for the donor to be called upon to explain the source of the funds in his hands, but that could not be a ground for disbelieving a gift which had admittedly been received by the assessee as a gift and being treated as undisclosed income of the assessee. 15. Having gone through the statements of the donor as well as the assessee, it is apparent that despite minor discrepancies, the factum of the gift having been made has been accepted by the donor and in the circumstances, it cannot be stated that the credit entry in the capital account of the assessee did not reflect the true picture. The assessee had shown the same as gift received. The assessee tendered an explanation and nothing has been brought on record to even hold for a moment that the said explanation is not satisfactory. Though the same is stated as a conclusion, the reasoning for stating so is as to disbelieving source of source. In these circumstances, the impugned order of Tribunal cannot be sustained. [Emphasis Supplied] 5.1 Similarly in the case of Heena Sharma (supra), this Court has observed as under: "Tribunal also relied on the decision of this Court rendered in case of Muralidhar Lahorimal v. Commissioner of Income-tax reported in (2006) 280 ITR 512(Guj.). In these circumstances, the impugned order of Tribunal cannot be sustained. [Emphasis Supplied] 5.1 Similarly in the case of Heena Sharma (supra), this Court has observed as under: "Tribunal also relied on the decision of this Court rendered in case of Muralidhar Lahorimal v. Commissioner of Income-tax reported in (2006) 280 ITR 512(Guj.). In the said decision also identity of the donor had been established beyond any semblance of doubt and genuineness of the transaction was also established not only by the receipt of bank draft but also by other contemporaneous record. The Revenue although in that case also was not satisfied with the source of fund in the hands of donor and yet, the Court held it was for the Revenue to take appropriate steps in that event, but, that would not lead to question genuineness of transaction. We find that the case of the assessee respondent in the matter on hand can be largely equated with the one decided by this Court in case of Muralidhar Lahorimal(supra). However, those decisions relied upon by the Revenue discussed hereinabove have materially and substantially different factual aspects. Again, we also are of the opinion that essentially this case is based on material that had been adduced by the assessee before the Revenue Authorities. Tribunal while upholding the say of the assessee and deleting the addition made by both the adjudicating authorities have given cogent and sufficiently acceptable reasons for arriving at positive conclusions that such gifts are genuine and the transactions are creditworthy. 5.2 As far as the decision of Harishbhai Raojibhai Patel (supra) is concerned, this Court observing that the gift amount was paid through cheque upheld the Tribunal's order deleting the addition of cash credit made by the Assessing Officer. 5.3 So far as the decision cited by Mr. Parikh is concerned, in the case of Shri Anil Kumar (supra), the Delhi High Court held that mere identification of the donor and establishing movement of gift through banking channels, would not be sufficient to establish their genuineness. Similar view has been taken by Punjab & Haryana High Court in the case of Tirath Ram Gupta (supra). 6. Parikh is concerned, in the case of Shri Anil Kumar (supra), the Delhi High Court held that mere identification of the donor and establishing movement of gift through banking channels, would not be sufficient to establish their genuineness. Similar view has been taken by Punjab & Haryana High Court in the case of Tirath Ram Gupta (supra). 6. Having gone through the decisions cited hereinabove coupled with the facts of the present case, we find that the facts in the present case are akin to the facts in the decision rendered by this Court in the case of Murlidhar Lahorimal (supra). We are bound by the decision of the co-ordinate Bench of this Court in the case of Murlidhar Lahorimal (supra) wherein it is held that the assessee cannot be asked to prove the source of source. Moreover, Gift Tax Act nowhere provides that a gift by somebody who is not creditworthy is not a gift. The Tribunal instead of addressing itself to the requirement of Section 68 of the Act, has adopted an approach which is unwarranted in law. The assessees pointed out that it had received a gift from Shri Chinubhai Thakkar produces the bank certificate and gift deed. The gift is given by way of a cheque. The revenue does not dispute any of these facts. We therefore are of the opinion that the question raised in the present appeals are required to be answered in favour of the assessees." 5. He therefore, contended that in view of the aforesaid decision, the conclusion reached by the tribunal as well as the CIT (Appeal) are required to be reversed. 6. Mr. Sudhir Mehta, learned advocate appearing for the revenue authority supported the orders passed by the CIT (Appeal) and Tribunal. He submitted that the Tribunal has considered the fact that neither genuineness nor creditworthiness of the creditor has been established and assessee has failed to prove the creditor and therefore, learned Tribunal has rightly upheld the action of assessing officer of making addition as unexplained cash credit. 7. We have heard learned advocates for the respective parties. Having gone through the decisions cited hereinabove coupled with the facts of the present case, we find that the facts in the present case are akin to the facts in the decision rendered by this Court in Tax Appeal No. 600 of 2005 to Tax Appeal No. 602 of 2005. 7. We have heard learned advocates for the respective parties. Having gone through the decisions cited hereinabove coupled with the facts of the present case, we find that the facts in the present case are akin to the facts in the decision rendered by this Court in Tax Appeal No. 600 of 2005 to Tax Appeal No. 602 of 2005. We are bound by the aforesaid decision in Tax Appeal No. 600 of 2005 to Tax Appeal No. 602 of 2005, wherein it is held that the assessee cannot be asked to prove the source of source. Moreover, Gift Tax Act nowhere provides that a gift by somebody who is not creditworthy is not a gift. The Tribunal instead of addressing itself to the requirement of Section 68 of the Act, has adopted an approach which is unwarranted in law. We therefore are of the opinion that the question raised in the present appeal is required to be answered in favour of the assessee." 8. Accordingly, we answer the question raised in the present set of appeal in the negative i.e. in favour of assessee and against the revenue. Appeal is allowed accordingly.