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Dr. H.C. Chen Dr. Chen’s Dental Clinic Rahem Castle Versus ITO-11 (2) (3) , Mumbai

2015 (6) TMI 519 - ITAT MUMBAI

Unexplained expenditure u/s.69C - the amounts remitted toward the father’s medical treatment - Held that:- There is no doubt in the present case as to the source; the assessee’s sister, Ms. Hapiping C. Chiang, who is working with Canadian Trust Company, having adequate income/ capital. It is the nature of the credit, however, that the assessee has not been able to satisfactorily prove, so that to that extent it becomes an unexplained credit. In fact, ‘gifts’ are considered as income, i.e., gener .....

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he same as income u/s. 68, that is, separate and distinct from that for being unable to prove or explain satisfactorily the source of the expenditure. - Decided against assessee.

In sum, the facts and circumstances lead to an unmistakable conclusion of the assessee’s father being critically ill, and the assessee’s sister, living far away, showing her concern and responsibility toward her father as well as appreciation for her brother in looking after him - her father, with whom he was .....

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inst the Order by the Commissioner of Income Tax (Appeals)-3, Mumbai ( CIT(A) for short) dated 08.11.2011, dismissing the assessee s appeal contesting its assessment u/s.143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2006-07 vide order dated 26.12.2008. 2. We have gone through the assessee s condonation petition dated 22/4/2013 as well as the accompanying affidavit, explaining the delay of 459 days in filing the appeal. It is clear there-from that the as .....

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gly advised for filing the instant appeal, which was so done on 23/4/2013 (and not 25/4/1013, as stated in the petition). The said decision is, firstly, not on condonation of delay. On merits, the said decision, in ratio, holds that a reasonable belief for escapement of income by the Assessing Officer (A.O.) could not be made in the absence of fresh tangible material, so that there was no basis for the issue of a notice u/s. 148 where the income had been assessed u/s. 143(3), whereat the same ma .....

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ink not. So however, the decisions on the condonation of delay as relied upon by the ld. counsel, as under, lean in favour of a liberal approach, so that an absence of mala fides should ordinarily lead to condonation of delay, i.e., even in a case of laches, though the other side should be adequately compensated for the cost of litigation and the inconvenience it is put to: a) N. Balakrishnan vs. M. Krishnamurthy [1998] 7 SCC 123; b) Ram Nath Sao Alias Ram Nath Sahu & Ors vs. Gobardhan Sao & .....

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xpenditure u/s.69C of the Act in the given facts and circumstances of the case. It would be relevant to recount the facts of the case. The assessee s balance-sheet as at the year-end (31.03.2006/copy on record) reflected a credit of ₹ 8,85,102/- to his capital account. Explaining the background facts, it was submitted during hearing that the assessee s sister, Mrs. Huaping Caroline Chiang, a Canadian national, settled thereat since 1979, was planning to visit India along with her family, a .....

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two other cheques of US $8000 and US $2000 vide letters dated 21.11.2005 and 19.11.2005 (copies on record) respectively. The assessee claimed the entire sum of US $ 20,000 (US Dollar twenty thousand) received from his sister during the year as a gift, and which explained its credit to his capital account. In view of the Assessing Officer (A.O.), the same was toward meeting the expenses by the assessee on his sister s visit to India, and which was deemed as his income u/s. 69C in-as-much as the .....

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ir father, remitted the sums out of love and affection by way of gift/s. Copies of passport of her two sons were also filed as an additional evidence, in support of the claim of their non-visit to India along with their mother (or even otherwise during the year), which was though not admitted by the ld. CIT(A) as there was no reason for not filing the same at the assessment stage, nor any useful purpose would be served in view of the admitted fact of Ms. Chiang visiting India alone in October, 2 .....

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as to their source, expenses on all the three counts. 4. We have heard the parties, and perused the material on record. Our first observation in the matter is that the expenditure on all the three areas, viz. for the unexplained source toward which, or to the extent of its inadequacy, addition u/s. 69C has been sustained in the present case, remains unspecified. True, the source of expenditure has to be explained by the assessee; rather, proving his claim as to source. However, unless the expend .....

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. CIT(A), which only represents expenditure incurred in cash), i.e., excluding the maintenance charges (Rs.20,004/-) and LIC premium (at ₹ 81,656/-) and, two, in keeping with that incurred in the past, stand disclosed at a lower sum, so as to infer the same being incurred out of undisclosed income. Similarly, there is again nothing to show that the assessee incurred any sum toward the visit of his sister for a few days in October, 2005, even as the assessee admits to have withdrawn an addi .....

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h not impact the withdrawal for personal purposes, which would thus stand reduced to an aggregate of ₹ 5.90 lacs, to any material extent. This leaves us only with the expenditure on the father s illness. In this regard, what was, to begin with, the fathers illness, i.e., its nature? For how long he had been ill, and what was its gravity inasmuch as it proved fatal - he finally expiring on 06.01.2006. What was the immediate cause of his death? Was he hospitalized during the relevant year an .....

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entail? Was he required to visit hospital regularly, etc. The assessee, despite this being the fulcrum of the matter, has been totally silent on the matter. Why? That apart, no expenditure has been stated to have been expended on medical treatment of his father. This is incomprehensible, when even in the normal course, the elderly - the assessee (his son) being himself aged 55 years at the relevant time, i.e., without being ill, much less seriously, require medication/physical attendance, if not .....

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nation of the remittance from his sister being a gift, and not toward any expenditure, the said explanation has several gaps and infirmities. The assessee s sister, as apparent from her affidavit/declaration, was not only aware of her father s illness, but in fact planned a visit to Mumbai along with her family to, as stated, see her ailing father, besides meeting the rest of the family. This, again, is indicative of the father being serious, so that she wished to see him as well as desired her .....

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penditure required, or anticipated to be incurred, for their visit. The travel tickets, which were undisputedly incurred by her or, in any case, not incurred by the assessee, i.e., on her visit in October, 2005, were not in contemplation. In fact, no arrangement could possibly be made as the dates of the visit were themselves not finalized, and the programme was at the planning stage, sans any details. The explanation, if one may call it so, of the remittance as being toward preparation for her .....

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etter dated 25.06.2005, i.e., after over a month. Further, the same states of the amount being remitted per cheque and, further, as a gift. Had the plan of the visit been dropped by then? If so, what explains the change in the purpose of the remittance from expenditure on the (proposed) visit to gift , except perhaps by way of contribution toward the father s medical treatment? The other two cheques, i.e., following her visit, again, though stated to be gifts (vide the forwarding letters dated 2 .....

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l in Mumbai. I further state that I sent a cheque dated 06.06.2005 of US $ 10,000 to my brother Mr. Hsin Chu Chen in the form of gift to him for whatever expenses he may have to meet on our visit. That ultimately I arrived in Mumbai alone on 01/10/2005 and was with my brother and father till I left India on 08/10/2005 and due to various reasons nobody else in the family accompanied me to India. That since my father was not keeping good health at the time, in order to spend time in his company, I .....

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cially planned a visit to see him and, two, to be able to, as his daughter (and being in a position to) contribute toward the cost of his medical treatment. She was not only aware of the nature of the father s illness; its gravity, but also the cost that his medical treatment entailed. The amounts were paid to her brother, with whom, and in whose care, the father was, incurring all the expenditure, and with no expectation for a return back, and which explains the use of the word gift by her, i.e .....

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e earlier part of the declaration, and the second, explanatory and corroborative. We will consider the latter aspect first. All it says is that the remittance has no relation to the actual sum expended by the brother. The same means only that. It is nobody s case or claim that the amount was by way of reimbursement to the brother of the expenses incurred by him, or that the two had agreed to share the same in some defined ratio, and which would in fact only be possible if detailed and meticulous .....

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ards the aspect which contradicts, in our clear view, the same being inconsistent with the conspectus of the case, is, to that extent, contradictory, and devoid of value. If no expenditure was to be incurred or planned to be, on the visit, where is the question of remitting the money toward the same? Further, how could it then be a gift, or have no relation, as stated, to the expenditure. Again, the actual amount spent by the assessee being admittedly a fraction of the expenditure, which a broth .....

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the actual amount spent by him for the purpose of my stay and travel in India and also on the medical expenses, if any, on the treatment of my father. In fact, even otherwise, a document where and to the extent internally inconsistent, is to be, to that extent, ignored, and a view, taking a view in harmony with the entirety of the facts and events, as actually transpired, taken or adopted. In our view, therefore, the amounts were clearly remitted toward the father s medical treatment. It could .....

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as in the decision by the hon ble courts, viz. C.K. Sudhakaran vs. ITO [2005] 279 ITR 533 (Ker), the proving of the existence of an investment, etc. (expenditure, in the present case), could also be on the basis of the inference drawn from proven facts. Inferential findings of fact are also (and as much) findings of fact. In the present case, the unmistakable inference is of the assessee s sister planning a visit to India to see, remitting sums toward the cost of medical treatment of, her ailing .....

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l explaining the expenditure to that extent. It is again not to be lost sight of that the remittance stated to be a gift, to the extent not so, is liable to be deemed as the assessee s income u/s. 68 of the Act. This is as a credit, to be not so deemed, is to be satisfactorily explained as to its nature and source. There is no doubt in the present case as to the source; the assessee s sister, Ms. Hapiping C. Chiang, who is working with Canadian Trust Company, having adequate income/ capital. It .....

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ourt upheld the principle of preponderance of human probabilities as a test for credibility of the assessee s explanation. Again, per decisions, as in the case of Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC); CIT vs. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC); CIT vs. Manick Sons [1979] 74 ITR 1(SC), it stands clarified, inter alia, by it that once there is an unexplained credit, it is open to the AO to hold it as the assessee s income and no further burden lies on the Revenue to sh .....

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