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TMI Blog1997 (6) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... nity of being heard to the assessee before charging interest under section 217. The third ground is disposed off accordingly. 3. The facts in relation to the first grievance are as under:-- The assessee maintains personal accounts and a sum of Rs.87,000 was found credited in such account, the explanation of which was that the assessee received gifts from the below given persons:-- 1. Smt. Sumitra Devi Rs. 10,000 2. Sri Kali Pd. Khowalla Rs. 10,000 3. Puranmal Agarwalla Rs. 10,000 4. Smt. Chhoti Devi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Bansal were returned unserved with the postal remark "not found". The assessee submitted that from this person also a gift was received but on account of lapse of time the present address of the said donor was not given. Smt. Chhoti Devi, another donor could not appear before the Assessing Officer as she was on pilgrimage but nonetheless a declaration of gift made by her confirming the factum of the gift of Rs.21,000 to the assessee on 17-7-1987 was filed. The said donor is also an income-tax assessee with the ITO, Ward-1, Dhanbad under GIR No. C-856. This lady also filed her gift-tax return and the gift-tax assessment was also completed. The assessee also filed a gift-tax assessment order, demand notice and challan of payment of gift-tax by Smt. Chhoti Devi in the paper book placed at pages 14 to 18. Though Shri Manoj Biyani, one of the donor did not appear before the Assessing Officer in reply to summons under section 131 of the Act; yet reply was filed from his authorised representative Shri B.P. Jhunjhunwala confirming the gift made to the assessee of Rs.15,000 on 22-3-1988 enclosing a copy of capital A/C of the donor for the assessment years 1987-88 and 1988-89. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer and confirmed the gift made to the assessee and also explained their sources for making such gifts. It was only Shri Suresh Kumar Bansal who could neither appear before the Assessing Officer nor could file any confirmation but the rest of the donors viz., Smt. Sumitra Devi, Shri Manoj Biyani and Chhoti Devi, though did not appear before the Assessing officer nonetheless confirmed the factum of gift through letters as well as by other related evidence. Thus, the assessee did whatever which was within his capacity to explain and convince the Assessing Officer that the sum of Rs.87,000 in aggregate credited in his capital account in his personal books was not his concealed income from any undisclosed sources but was gifts received from various persons. The assessee's counsel supporting the assessee's case further submitted that one of the donors, Smt. Chhoti Devi had also filed gift-tax return and was assessed accordingly and gift-tax paid. Arguing further the assessee's counsel submitted that apart from rejecting the explanation given by the donors no other material or evidence has been brought or placed on record by the Assessing Officer to hold that no gifts were made or that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee with the A/C that the Assessing Officer was right in making addition under section 68 of the Act. By simply saying in this manner, the assessee cannot be subjected to tax in respect of the gift amounts. Something more is required to ask the assessee to pay tax on the sum of Rs.87,000 and that something more is missing in this case. The Assessing officer has in our view miserably failed to establish that there has been no gift by those donors to the assessee particularly when copies of gift declarations have been executed and filed and formed part of the record accompanied by supporting documents and evidence, which cannot loose their weightage or credence merely on the ground that such an explanation is unbelievable. This is not the requirement of section 68 of the Act. We fully agree with the assessee's counsel that once a gift is made and in the case of movable property the possession of the subject-matter of gift, viz., cash in the instant case is handed over and delivered to the donor upon acceptance of the gift then the gift is complete and it is not open to the revenue to come forward and say that there has been no such gift particularly in the absence of any evidence or m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for household expenses and levy of interest under section 217 of the Act. Consequently, no separate order is being written by me in regard to these two matters. 3. Coming back to the addition of Rs.87,000, the first significant factor to be noticed is that the assessee had credited seven sums, totalling Rs.87,000, in his capital account. The source of the credits was explained to be gifts from the respective persons but the explanation was not accepted by the Assessing Officer. He accordingly made an addition of Rs.87,000 as concealed income of the assessee from other sources. He did not specifically mention section 68 of the Act. The addition was confirmed by the CIT(Appeals) in a brief order and he also did not mention section 68 of the Act. However, it is quite evident from a reading of the order that the addition was made under section 68 of the Act. In the course of argument, before us, also, the understanding was the same and, in fact, the ld. D.R. relied on the decision of the Patna High Court in Sarogi Credit Corpn. v. CIT [1976] 103 ITR 344 which is concerned with burden of proof in the case of cash credits added under section 68 of the Act. My ld. brother has rightly obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince section 68 was held to be not applicable. The decision is, therefore, distinguishable. 7. In the case of Kamlesh Kumar Sharma, the Assessee was an individual and received gifts of Rs.20,000 each from three donors, totalling to Rs.60,000. The Assessing Officer summoned the donors under section 131 and recorded their depositions and came to the conclusion that Shri Shiv Kumar Sharma did not have the capacity to make the gift of Rs.20,000 to the assessee. The Tribunal noticed that the assessee was having income of Rs.32,000 during the year without taking into account the addition on account of "Income from undisclosed sources". Shri Shiv Kumar Sharma was assessed on a total income of Rs.33,360 consisting of salary Rs.25,035, interest Rs.5,745 and share of profit Rs.2,380. It was observed that even if the amount was not explained inspite of affidavit given by Shri Shiv Kumar Sharma, it was to be considered in his hands the sense and in that view, it will be even be more beneficial to the revenue. This factor weighed heavily with the Tribunal in deleting the addition in the hands of the assessee. No such similar case has been made out in the matter before us and, therefore, the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax File number was available. Apart from issuing 131 notice the Assessing Officer failed to pursue the matter. The Tribunal, therefore, confirmed the decision of the first appellate authority in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80F. This decision is regarding addition under section 68 of the Act. However, the facts in the present case are different. The Assessing Officer did pursue the matter apart from issuing 131 notice to the assessee in most cases as we shall see. The case is, therefore, distinguishable on this count also. 11. The salient features of the facts of the present case will now be noted. The details are available in the assessment order. There were seven credits in the assessee's capital account, totalling Rs.87,000 as per list given in para 3 of my ld. brother's proposed order. 3 of the creditors were examined by the Assessing Officer and their statements were recorded. We will first refer to the statements. 12. Shri Kali Prasad Khowala stated that he made a gift of Rs.10,000 by cheque and produced his bank pass book in support thereof. It was found that Rs.20,000 was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e so called gift. The next day the cheques were issued of Rs.10,000 each in the names of the assessee and Shri Atul Kumar Loyalka. The source of deposit was stated to be savings from his income kept in the house in cash. The deponent was an accountant in the firm. M/s. Raghunath Prasad Agarwal and had salary income of Rs.1,250 per month only. He maintained a family of self, wife and three daughters. On these fact, the explanation was rejected and the amount was added. 16. The ld. D.R. relied on the decision of the Patna High Court in the case of Sarogi Credit Corpn. The question of burden of proof in the case of cash credits under section 68 was examined in this case. It was held that if the credit entry is in the names of third party and is accepted by the respective parties, the initial burden of proof on the assessee has been discharged. It may be noted that only the initial burden was discharged and it may well be that in certain circumstances the onus was again shifted to the assessee on account of the action taken by the department. It was further held that there was a difference when the parties are close relations of the assessee. It will be useful to reproduce the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same amount. Assessment proceedings are akin to civil proceedings, and we have to proceed on the basis of pre-ponderance of probabilities, which is against the explanation. The creditworthiness has not been satisfactorily, explained and established either, since the extent of income of the two parties was not adequate to save such amount either. Therefore, additions due to cash credits in the names of Shri Kali Prasad Khowala and Shri Puran Mal Agarwal are confirmed. 18. Shri Raj Kumar Agarwal is a third party and, therefore, the initial burden stood discharged when he confirmed the transactions. However, his statement has brought about a different picture. Here again, cash deposit was made at Dhanbad a day before the cheques were issued whereas he was an accountant in a firm at Jharia. This is once more against human probabilities. His salary was small and his family was large and it does not stand to reason that he could accumulate so much savings in cash in his house, only to be deposited in a bank account in a different town for the purpose of issuing cheques on the next day. Here also, I hold that the addition on account of cash credit should be confirmed. 19. We now com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was filed before him during the course of assessment proceedings. If that was filed, then the addition will stand deleted for the same reasons as in the case of Smt. Sumitra Devi. If that was not filed, then the, addition will stand confirmed. 23. In the case of Shri Manoj Biyani, summons under section 131 were issued and a reply was sent by Shri B.P. Jhunjhunwala, A.R. of the donor and it was stated that Shri Biyani was unable to go to Dhanbad. The gift of Rs.15,000 was confirmed. He was assessed at Calcutta and copies of his capital account for assessment years 1987-88 and 1988-89 were sent. Here again, there is nothing to show that Shri Manoj Biyani was a close relative and, therefore, he has to be treated like a third party. I hold that the addition of Rs.15,000 should be deleted for the same reasons as for Smt. Sumitra Devi. 24. In the case of Smt. Chhoti Devi, the assessee was asked to produce the donor but a petition was filed saying that she had gone on pilgrimage and as such she could not be produced. A declaration of gift was filed stating that she had made a gift of Rs.21,000 and she was assessed to Income Tax at Dhanbad. The Assessing Officer did not accept the expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Rs. 15,000 deleted. ------------------------------------------------------------------------------------- STATEMENT UNDER SECTION 255(4) OF I.T. ACT 1961 A difference of opinion, having emerged between the Judicial Member and the Accountant Member, who originally heard the appeal, we hereby state the points on which we differ and refer the matter to the Hon'ble President of the Income-tax Appellate Tribunal for further appropriate action: 1. Whether in the facts and circumstances of the case, the following additions to the assessee's income, as unexplained cash credits under section 68 of the Act, should be confirmed as held by the Accountant Member or deleted as held by the Judicial Member-- ------------------------------------------------------------------------------------- (i) Shri Kali Prasad Khowala Rs. 10,000 (ii) Shri Puran Mal Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Rs. 10,000 (ii) Shri Puran Mal Agarwal Rs. 10,000 (iii) Smt. Chhoti Devi Rs. 21,000 (iv) Shri Raj Kumar Agarwal Rs. 10,000 ------------------------------------------------------------------------------------- 2. Whether in the facts and circumstances of the case, the following addition to the assessee's income as unexplained credit under section 68 of the Act, should be deleted as held by the Judicial Member or set aside for further enquiries as held by the Accountant Member: (i) Shri Suresh Kumar Bansal Rs. 11,000" As the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Rs. 15,000 ---------------- Rs. 87,000 ---------------- ------------------------------------------------------------------------------------- Out of the above listed persons, Shri Kali Prasad Khowala, Shri Puranmal Agarwalla and Shri Raj Kumar Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee). 2. Rs.10,000 in the name of Shri Deepak Kumar Loyalka. The assessee is the wife's sister's son of Shri Kali Prasad Khowala. Shri Khowala was questioned about the source of his deposit of Rs.20,000. In reply, Shri Khowala stated that the amount was lying in his house in cash. He further stated that he derives income from commission from persons who purchase cars and trucks. He was an income-tax assessee in Dist. III(A), Ward-5,169, Acharya Jagdish Chandra Bose Road, Calcutta-20. He stated that previously he was residing at 26, Bartala Street, Calcutta, and was doing dalali in Calcutta and as such he happened to be assessed at Calcutta. The ITO scrutinized the capital account of Shri Khowala for assessment years 1987-88 and 1988-89. In 1987-88, his capital account showed an income of Rs.18,000 from salary and Rs.9,600 from interest. For assessment year 1988-89, he had an income of Rs.18,360 from commission and interest on loan. Whereas he stated that he used to derive commission from persons who purchase cars and trucks, his statement of account for assessment year 1987-88, however, showed that he had earned income from salary. He was a native of Deoghar. He is assessed to inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated again. Further, Shri Khowala has a son-in-law at Dhanbad and for this purpose he used to come often to Dhanbad. if that is so, the daughter of Khowala is ordinarily presumed to be at Dhanbad along with her husband. I came across subsequently that Shri Puranmal Agarwala is one of the sons of Khowala. In his deposition, he stated that Radheyshyam Khowala is his elder brother. Thus, as far as the present record goes, Kali Prasad Khowala was having two sons and one daughter. Thus, if there are two sons and a daughter, could it be natural that despite his advanced age of 75, Shri Khowala could gift away the whole of his earnings of Rs.20,000 to the assessee and his brother who are also the sons of the sister of his wife? Does he prefer the sons of his wife's sister for his own daughter and son-in-law and two sons for making a gift of Rs.20,000 which was the only substantial amount which he was able to save in his life. Further, there was no occasion for making the gift for the assessee and his brother. Thus, if I take into consideration the statement of Shri Khowala, his balance-sheet provided at page-9 shows that his capital account begins with a balance brought forward of Rs.1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s never the claim of Shri Khowala to have filed a gift-tax return or paid any gift-tax over the gifts made to the assessee and his brother. Thus, it would appear that if human probabilities are to be considered, then it is perfectly clear to me that the gift is unlikely to be made, and the very fact that a deposit was made on 24-4-1987 and it was taken away by issuing two cheques on 25-4-1987 and there were no further transactions from 27-4-1987 in the account, goes to show that there is a strong suspicion that in all probability the amount must have been deposited in the bank account not by some body in the name of Shri Khowala in order to make it appear that he had gifted the amount. This suspicion is more strengthened by the fact that no gift-tax return was filed by Shri Khowala having made Rs.20,000 worth gifts in that year. Therefore, I agree with the conclusions reached by the learned Accountant Member and I hold that it would be perfectly justifiable to consider the amount of Rs.10,000 in the hands of the assessee as unexplained income. 7. Now, let me take up the gift said to have been made by Shri Puranmal Agarwalla. Shri Puranmal Agarwalla is none other than the son of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent, he is staying at Gandhi Nagar, Dhanbad. He claims to be a broker in sale of scooters and he claims to be earning commission. He is assessed at Refund Circle, 169 Acharya Jagdish Chandra Bose Road, Calcutta. When asked as to why he happened to have income-tax assessment at Calcutta, he replied that his elder brother Shri Radheshyam Khowala and his uncle Shri Yugal Kishore Khowala stay at Calcutta and hence his file is at Calcutta. He says that he gifted Rs.10,000 to the assessee which was duly entered in his bank account No. 4101 with Punjab National Bank in which the gifted amount was debited on 12-5-1987. The assessee was stated to be the son of his aunt. The gift was not made on any particular occasion. The assessee is elder to him. He has got reverence to the elder brother and hence he has made the gift to the assessee. When asked as to what is the source for his earning Rs.20,000 which was deposited on 11 -5-1987 in his bank account, he stated that the money is out of his income. He admitted to have given another amount of Rs.10,000 on 12-5-1987 itself as gift to Atul Kumar Loyalka, who is the brother of the assessee. He denied the suggestion that Rs.20,000 represents t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies and, therefore, I agree with the learned Accountant Member and hold that the alleged gift by Shri Puranmal Agarwalla is nothing but fake and it represents nothing but the undisclosed income of the assessee and hence it is rightly added in his hands. 8. Now, let me take up the gift of Rs.21,000 allegedly given by Smt. Chhoti Devi. Despite the fact that the assessee was asked to produce her several times, time was taken by filing a series of petitions saying that she was not present and she went on pilgrimage and as such she could not be produced. Ultimately, she was never produced. An affidavit swom before a Notary, Dhanbad, was filed before the ITO. Photo copy of the affidavit was provided at page 14 of the paper compilation. It is noteworthy that it does not bear any date. That means, the document does not disclose on which date Smt. Chhoti Devi had sworn the affidavit before the Notary Public of Dhanbad. The affidavit discloses that she is the wife of Motilal Agarwal of Dhanbad, that out of natural love and affection she made a gift of Rs.21,000 on 17-7-1987 by cheque drawn on Central Bank of India, Dhanbad to the assessee, who is also resident of Dhanbad, and he accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 131. The mere filing of the affidavit before the ITO does not amount to proof of the transaction unless Smt. Chhoti Devi presents herself and confirms the affirmation in the affidavit before the ITO. Further, her income is very much dependent upon the gifts received by her from her relatives. Who are the relatives from whom she receives gifts every year are not known. Further, the amount of gifts also may be varying and would not be constant every year. Therefore, whether she has got sufficient sources from where she made gift of Rs.21,000 is itself doubtful. Further, what is her relationship with the assessee is not known. Unless the relationship is known between them, it is not easy to guage whether the gift of not an inconsiderable amount of Rs.21,000 is probable. For all the above deficiencies, I fully agree with the learned Accountant Member while holding that her source of income to make the gift is not proved, her gift to the assessee itself is not proved and, therefore, I concur with the learned Accountant Member and hold that the amount of Rs.21,000 is justly added in his hands and it is not liable to be cancelled. 9. Now, let me take up Shri Raj Kumar Agarwalla. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er were filed, the present balance-sheet itself does not make any sense. The balance-sheet also reveals that Shri Raj Kumar Agarwalla had kept only Rs.138.35 in Central Bank of India and Rs.114.30 with Canara Bank, Jharia, whereas he purported to have kept Rs.42,978.45 as cash on hand. Why he was keeping so much cash on hand is not known. Generally, if a person has got a bank account, be would keep the cash in the bank and does not keep it in his hands. Even though he has got two bank accounts, still he keeps a heavy amount of Rs.42,978 on hand only. At page-21, his income-tax assessment order for assessment year 1988-89 is produced. It only shows that he was-assessed on an income of Rs.1,314 and tax was Nil. This document does not advance the case of the assessee in the absence of the income-tax statement having been filed along with it, In Sarogi Credit Corpn.'s case, the Patna High Court held that if the credit entry in the books Of the assessee stands in the name of the assessee or the assessee's wife and children, or in the name of any other close relation or an employee of the assessee, the burden lies on the assessee to explain satisfactorily the nature and source of the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber: "22. Here also, there is nothing to show that Shri Suresh Kr. Bansal was a close relative and, therefore, the extent of burden of proof would be only that relatable to a third party. However, in the assessment order there is not even any description of any confirmation of gift by Shri Suresh Kumar Bansal. If that is so, then the assessee's burden of proof is not discharged. On the other hand, the paper book filed, before us, contained a copy of the Affidacit dated 6-5-1988 by Shri Suresh Kumar Bansal confirming the gift and giving his Income Tax Gile No. There is no certificate on the Index of the paper book whether this declaration was filed before the Assessing Officer. I, therefore, set aside the matter to the assessing Officer with a direction to verify whether the declaration was filed before him during the course of assessment proceedings. If that was filed, then the addition will stand deleted for the same reasons as in the case of Smt. Sumitra Devi. If that was not filed, then the addition will stand confirmed." Therefore, virtually, the matter was sent back to verify whether this confirmation was filed before the ITO or not. After getting it verified from his origi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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