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TMI Blog2016 (3) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... ground of appeal, at any time before or at, the time of hearing, of the appeal, so as to enable to learned Commissioner (Appeals) to decide the appeals according to law. ." 3. The Brief facts of the case are that the assessee's case was selected for scrutiny under CASS. As per the AIR information, the assessee has purchased units of Deutsche Mutual Funds for Rs. 1,45,00,000/- on 15-05- 2009 and for Rs. 12,00,000/- on 20-05-2009. The assessee also purchased immovable property of Rs. 5,27,00,000/- on 30-12-2009. To examine the sources of investment in Mutual Fund and immovable property as reported in ITS under AIR , notice u/s 143(2) read with Section 142(1) of Income Tax Act,1961(Hereinafter called "the Act") was issued by the learned Assessing Officer (Hereinafter called "the AO"). During the course of the assessment proceedings u/s 143(3) of the Act read with Section 143(2) of the Act, the assessee submitted that it has invested Rs. 1.45 crores on 15-5-2009 and Rs. 12 lacs on 20-05-2009 in Deutsche Bank Mutual Fund, out of gift of Rs. 1,48,00,000/- received from his maternal uncle Shri Kumar Chimanlal Mehta vide Cheque No. 221429 dated 8-5-2009 and submitted affidavit dated 30-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anlal Mehta and a creditworthiness certificate issued by CA of Shri Kumar Chimanlal Mehta. However, the Pr. CIT held that the A.O. is duty bound to enquire about all the aspects of the gifts i.e. identity and capacity of the Donor and the genuineness of the gifts during the assessment proceedings which the A.O. has not verified during the assessment proceedings and has merely accepted the submissions of the assessee. As per 2nd proviso to section 56(2)(vii) of the Act, the value of any sum of money/immovable property/movable property received without consideration or for inadequate consideration is chargeable to income tax in the assessment of the recipient under the head "income from other sources" in case where an individual or a HUF receives, in any previous year, from any person or persons if it is otherwise not proved. In this case, the A.O. failed to verify the capacity of the donor whether he was capable of donating such huge amount or not and also failed to examine the genuineness of transaction of this gift. The Pr. CIT accordingly set aside the assessment order dated 08-03-2013 for examination of the gift of Rs. 1.48 crores and directed the A.O. vide orders u/s 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the A.O. to prove that Shri Kumar Chimanlal Mehta is the maternal uncle of the assessee and to establish the identity and creditworthiness of the donor and genuineness of the gift transaction. The ld. Counsel of the assessee submitted that an amount of US$ 299953.00 was received vide Inward Remittance (Purchase) which is placed at paper book page 7 & 8 of the assessee's paper book which showed that remittance has been received from UAE to the credit of the NRE bank account of uncle Mr. Kumar Chimanlal Mehta of the assessee with ING Vysya Bank which was further used for giving gift to the assessee. The ld. Counsel submitted that the remittance was received by ING Vysya Bank Ltd., TFU Mumbai from Mashreq Bank of Dubai from the account of assessee's maternal uncle Shri Kumar Chimanlal Mehta for further credit to the account with ING Vysya Bank, Opera House Branch, Mumbai and hence the contention of the Pr. CIT that the gifts are received not from NRE account is not correct rather it was received from ING Vysya Bank Ltd., TFU Mumbai for further credit to the NRE account of Shri Kumar Chimanlal Mehta which was further used for giving gift to the assessee. The ld. Counsel submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08) 296ITR 238(Pun. & Har. HC).On being asked by the Bench about the implication of Explanation 2 to Section 263 of the Act being now incorporated in the statute, the ld. Counsel submitted that it cannot be said that the assessment order is passed without making any enquiry which is clear from the assessment order. The Ld. Counsel submitted that the Pr. CIT cannot superimpose on the AO and the Pr. CIT should have looked into the 'record' as defined u/s 263 of the Act to come to conclusion whether the assessment is erroneous and prejudicial to the interest of Revenue 7. The ld. D.R., on the other hand, strongly supported the orders of Pr. CIT and contended that the A.O. has not made proper enquiry and verification regarding the gift of Rs. 1,48,00,000/- received by the assessee from his maternal uncle, Mr Kumar Chimanlal Mehta and the AO has merely accepted the documents filed by the assessee before finalizing the assessment orders dated 08-03-2013 passed u/s 143(3) of the Act and hence the Pr. CIT has rightly invoked provisions of Section 263 of the Act. 8. We have heard the rival contentions and perused the material available on record including the case laws relied upon. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 issued by ING Vysya Bank for inward remittance of US $ 299953 along with copy of Mashreq Bank of Dubai and the CA certificate of Shri Kumar C. Mehta. These replies are placed in paper book filed by the assessee before the Tribunal. The Pr. CIT has invoked the provisions of section 263 of the Act and issued four notices dated 14.01.2015, 12.02.2015, 26.02.2015 and 17.03.2015. The assessee duly submitted the details in response to proceedings u/s 263 of the Act initiated by the Pr. CIT , with respect to the gift , which are placed in paper book filed before the Tribunal , to establish the identity and creditworthiness of the donor and the genuineness of the gift transaction to establish that the gift is genuine such as bank statement of the donor, affidavit of the donor, CA Certificate of his maternal uncle Mr Kumar Chimanlal Mehta, the donor to establish his creditworthiness, passport of the donor, PAN of the donor, PAN and passport of mother of the assessee ( the donor is stated to be brother of assessee's mother). The Pr. CIT passed an order u/s 263 of the Act dated 25-03-2015 directing the A.O. to verify all the aspects of the gift of Rs. 1,48,00,000/- received on 08-05-2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by becoming an hindrance in the interpretation of the same. It is profitable at this stage to refer to the Memorandum to Finance Bill 2015 and notes to clauses to Finance Bill, 2015 which are as under: "Memorandum to Finance Bill 2015 Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue The existing provisions contained in sub-section (1) of section 263 of the Incometax Act provides that if the Principal Commissioner or Commissioner considers that any order passed by the assessing officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the assessing officer or cancelling the assessment and directing fresh assessment. The interpretation of expression "erroneous in so far as it is prejudicial to the interests of the revenue" has been a contentious one. In order to provide clarity on the issue it is proposed to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erted to provide clarity on the issue as to which orders passed by the AO shall constitute erroneous and prejudicial to the interest of Revenue whereby it is provided , interalia, that if the order is passed without making inquiries or verification by the AO which, should have been made or the order is passed allowing any relief without inquiring into the claim; the order shall be deemed to be erroneous and prejudicial to the interest of Revenue. The Hon'ble Supreme Court in the case of Malabar Industrial Company Limited v. CIT (2000)109 Taxman 66 (SC) held that if the AO has accepted the entry in the statement of account filed by the taxpayer without making enquiry , the said order of the AO shall be deemed to be erroneous and prejudicial to the interest of the Revenue. It is now established principle that with respect to cash credit appearing in the books of the assessee , the assessee has to establish three ingredients i.e. identity and creditworthiness of the creditor and the genuineness of the transaction as appearing in the books of account as per mandate of section 68 of the Act which is a primary onus caste by law on the assessee. 11. In this instant appeal , during the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 56 of the Act grants exemption for bringing into tax such income under the head income from other sources. But, however, section 68 of the Act contemplates that with respect to any credit in the books, it is an obligation cast upon the assessee to explain the credit as appearing in the books of the assessee to the satisfaction of the A.O. by establishing the identity and creditworthiness of the creditors and genuineness of the transaction. This initial and primary burden is cast upon the assessee u/s 68 of the Act to establish the identity and creditworthiness of the donor and to substantiate that the transaction is genuine. Thus, both the sections viz. Section 56 and 68 of the Act operate in different field whereas Section 56 of the Act deals with computation of the income of the tax payer under the head 'Income from other sources' which provides relief in case of receipts from close relatives as defined u/s 56 of the Act while Section 68 of the Act is placed under Chapter VI of the Act which deals with 'Aggregation of income and set off or carry forward of loss' and Section 68 of the Act cast primary onus on the assessee to explain nature and source of cash credit as appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apportionment was acceptable , observed that it was possible that there was an attempt to inflate expenses on trading activity and an attempt might have been made to reduce the actual expenses of the exempt unit. The use of the word 'possible' would indicate that there was no finding or adjudication by the CIT and his observation was based on mere suspicion and uncertain and yet a direction was issued to the AO to carry out fresh inquiries to do the exercise once again and decipher whether the actual expenses relatable to the manufacturing and trading activities were correctly separated. Thus, the CIT was unsure whether or not the bifurcation were right or wrong and hence it was held that it could not be said that the orders of the AO was erroneous. While in the instant case , there is no enquiry or verification conducted by the AO with respect to submissions made by the assessee with respect to gift of Rs. 1,48,00,000/- received by the assessee from his uncle Mr. Kumar Chimanlal Mehta and the AO merely accepted the submissions of the assessee. c) DIT v. Jyoti Foundation (2013) 357 ITR 388(Delhi)- It was held by Hon'ble Delhi High Court that orders which are passed without in ..... 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