TMI Blog2009 (1) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... uses the word 'may' and not 'shall'. The addition may, therefore, be deleted. 2. (a) The learned Commissioner of Income-tax (Appeals) erred in confirming income from Marine Chamber property at Rs. 5,67,000. The same may, therefore, be deleted. (b) The learned Commissioner of Income-tax (Appeals) failed to appreciate that annual letting value is estimated without any basis and without giving any opportunity to the appellant. The same may, therefore, be set aside. 3. The learned Commissioner of Income-tax (Appeals) erred in confirming income from Bhayander property at Rs. 21,642 instead of Rs. 1,714. The addition may, therefore, be deleted. 4. The learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of interest of Rs. 1,06,980. The same, may, therefore, be allowed. 5. The learned Commissioner of Income-tax (Appeals) erred in confirming levy of interest under sections 234B and 234C of the Income-tax Act, 1961." Ground No. 1 pertains to the confirmation of the addition of Rs.77,78,535 on account of gift received as unexplained cash credit under section 68. The Assessing Officer noticed that the assessee individual derives income from salary, inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The learned Commissioner of Income-tax (Appeals) also asked for certain details and since the assessee has not furnished the details fully, he did not accept the claim of gifts. His order in paragraph 3.4 is as under: "3.4 The appellant has failed to file any evidence to prove his closeness with the donors because of which they could give such heavy gifts. Despite specific requests, no photograph or video film has been filed by the appellant to show that the donors have ever attended any of the functions in the family of the appellant. It is normal in any family to preserve the photographs of functions like marriage or anniversaries. No evidence has been filed to show that the appellant or any of his family member was ever in correspondence with the donors although it is claimed that the donors had close relations with the father of the appellant since last 20-25 years. The photocopy of the passport of the appellant's father shows that during the period from 1997 to 2001, he has visited Germany on December 8, 1997 and Korea on July 3, 1997 and February 19, 1998. No evidence has been filed to show that any of the donors have ever visited India although the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven enough opportunity and the details which were asked for by the learned Commissioner of Income-tax (Appeals) were filed vide letter dated November 11, 2004. With reference to the genuineness of the gifts learned counsel submitted that confirmations from the foreign parties have been filed. The creditworthiness of the foreign parties was also enclosed with the confirmation letters by way of certificates from their auditors and so the gifts are to be considered as genuine gifts. It was submitted that all the donors were friends of the assessee's father and as they could not attend the marriage they sent the gifts on the occasion of marriage and so in the light of the facts the gifts are to be treated as genuine and the learned Commissioner of Income-tax (Appeals) to that extent has considered it wrongly as a nongenuine gift. He submitted that if another opportunity is given to the assessee further information can be provided to the authorities to prove the genuineness of the gift. The learned Departmental representative in reply submitted that there is preponderance of probability against the assessee as the gifts are not customary. There are no mutual gifts given by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter signed by the assessee is not addressed to any person but it indicates the visits by Vivek N. Jajodia and Shri N. P. Jajodia (father) for the period July 3, 1997 to April 14, 2002 without specifying each visit and respective places in the last five years. The visits from three foreigners were also given in the letter and only dates were mentioned whereas the learned Commissioner of Income-tax (Appeals) has asked for more details. The assessee was not even forthcoming in intimating when the gifts were received and the copies of the bank accounts in which the gifts are credited. Item Nos. 4 and 5 of the learned Commissioner of Income-tax (Appeals)'s request for information do include dates of gifts and copies of bank account also. Since the information was not furnished as required by the learned Commissioner of Income-tax (Appeals) and the letter dated November 11, 2004 does not establish any genuineness of the gifts, we are of the opinion that no purpose would be served in restoring the matter back to the lower authorities when the assessee is not forthcoming in giving any information which is in his possession in support of the gifts claimed. Consequently, the request for rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the pharma business and the three foreigners who are supposed to have gifted the amounts were also in the pharma business as can be seen from the letter-heads in which confirmations were furnished. So, it cannot be ruled out that there can be a business connection in remittance of funds by way of telegraphic transfer. It is also not understandable how the gifts were received by telegraphic transfer from all the three parties from different countries at the same time unless the so-called gifts are arranged amounts. The letter dated November 11, 2004 indicates that all the three foreigners have visited India during the relevant period but does not establish that they have gifted any amount when they came to India. Submissions made before indicate that the monies were received by way of telegraphic transfer and not received in India, hence, their visits to India do not establish any gift in India. The mode of remittance of amounts also indicates departure from the normal practice of receipt of genuine gifts. Be that as it may, neither before the Assessing Officer nor before the learned Commissioner of Income-tax (Appeals) could the assessee establish the identity and genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." According to section 3 of the Evidence Act, a fact is said to be proved when, after considering the matters before it, the court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the assessee that no opportunity was given. The learned Commissioner of Income-tax (Appeals), while confirming the action of invoking the provisions of section 22, also confirmed the valuation adopted by the Assessing Officer. It is the contention of learned counsel that he was not given opportunity to explain the valuation and the matter was decided unilaterally by the Assessing Officer and the learned Commissioner of Income-tax (Appeals). As seen from the orders there is no mention that the Assessing Officer had any basis for estimating the value at that level. It is already established by various legal principles that if properties are covered by the Rent Control Act the rent as fixed has to be accepted and if the property is not governed by the Rent Control Act the annual letting value is to be considered keeping in view various parameters established in various judicial cases. As seen from the order the Assessing Officer has adopted a monthly rent on estimation basis which cannot be accepted for the purpose of valuation. Considering the facts of the case and the objections raised by the assessee we are of the view that the matter of adopting annual letting value i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeals). We have considered the issue. As seen from the facts the assessee has taken a loan on the strength of the fixed deposits and advanced it to a company in which he is a director. It was explained before the Assessing Officer that the private limited company is the sister concern and hence did not charge any interest on loan given to them. To consider the issue in the light of the hon'ble Supreme Court decision in S. A. Builders Ltd. [2007] 288 ITR 1 (SC), the assessee has to establish that it was given for commercial expediency. The assessee is not in the business and the amount was not advanced in the course of business. The assessee had his own funds which are kept in fixed deposit. He took a loan, may be in personal capacity, and advanced the funds to the company in which he is a director. There can be an obligation to provide working capital requirements being a group concern and being a director in the said company but that does not establish any commercial expediency in advancing an interest-free loan. Further, the assessee has not advanced it in the course of any business, so deduction under section 36(1)(iii) does not arise. In fact, the assessee cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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