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2017 (6) TMI 451 - ITAT DELHI

2017 (6) TMI 451 - ITAT DELHI - TMI - Addition u/s 68 - genuineness of gift - eligibility of donor - occasion for gifting - Held that:- Since, the donor is an NRI, it may be practically impossible for him to travel to India for the recording of a statement and the assessee cannot be made to suffer on that account. The donor has referred in his affidavit to the help extended to the donor’s family in his childhood by the father of the donee as a reason for the gift but the Ld. CIT (A) has confirme .....

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emonstrate with ample evidence as to why the contentions of the assessee were to be disbelieved. Therefore we set aside the order of the Ld. CIT (Appeals) on this issue and direct the AO to delete the addition. - Decided in favour of assessee - Disallowance of mould repairs and maintenance - Held that:- The assessee has produced copies of invoices/bills of the various amounts debited to the head ‘mould repair and maintenance’ and it is evident that most of the bills pertain to welding charge .....

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in these respective assessment years. Thus this addition also needs to be deleted as the assessee has been able to demonstrate that these expenses were essentially of revenue in nature and pertained to day to day repairs of the mould and not in the nature of capital expenditure as contended by the Department. - Decided in favour of assessee - ITA No. 2471/Del/2014 - Dated:- 8-6-2017 - SHRI N.K. SAINI, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For The Appellant : Shri G.S .....

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otal sales during the year amounted to ₹ 8,39,59,189/- yielding GP ratio of 10.5%. During the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed an amount of ₹ 1,39,297/- towards Mould Repairs & Maintenance. A perusal of the copies of the ledger account showed that moulds had been shaped into a final product and the Assessing Officer was of the opinion that this pertained to capital expenditure. The Assessing Officer observed that the e .....

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the gift related to the realization of SBI s India Millennium Deposits vide documents executed on 21.07.2004 which was received by the assessee from Shri Subhash Chand, an NRI. However, the Assessing Officer was of the opinion that although the India Millennium Deposit was transferable freely between an NRI and the Indian resident, the assessee had failed to substantiate his claim about the creditworthiness, identity of the owner and the genuineness of the transaction. The Assessing Officer obs .....

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s appeal and now, the assessee has approached the ITAT and has raised the following grounds of appeal:- 1 (i) That the learned CIT (Appeals) is riot justified both on facts and in law in confirming the addition as made by learned Assessing Officer of ₹ 62,91,279/- under s.68 of Income Tax Act 1961. (ii) That the learned CIT (Appeals) is not justified on facts and in law in treating the maturity proceeds of India Millennium Deposit amounting to ₹ 62,91,279/- as unexplained and confir .....

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the fact that the investment in India Millennium Deposit was not made in the relevant year. (vii) That the learned Assessing Officer never asked the Appellant to produce the person from whom the Appellant received the India Millennium Deposit. On this basis also, the addition is not justified. (viii) That the learned CIT (Appeals) has not considered the facts of the case and also explanations as submitted by the assessee. 2 (i) That the learned CIT (Appeals) is not justified both on facts and i .....

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ssessee had received gift of two certificates of India Millenium Deposit of 50,000/- US$ on 21.7.2004 which were received from a close family friend Shri Subhash Chand who was an NRI. It was further submitted that the India Millenium Deposits were issued in 2000 and that only the non-resident individuals of Indian nationality or origin were eligible to subscribe to the same. It was submitted that Shri Subhash Chand had subscribed to these deposits in the year 2000 and these certificates were iss .....

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nd the entire amount of ₹ 6,29,12,79/- was, in fact, the income of the assessee from undisclosed sources. It was further submitted that the explanation of the assessee was rejected by the Assessing Officer without any basis and reasoning. It was submitted that the identity of the donor was proved by providing copy of the passport of the donor along with affidavit. It was submitted that the creditworthiness of the donor was proved from the fact that the donor had acquired the certificates l .....

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ificate from bank - (page 45) 3.1 Ld. Authorised Representative submitted that in view of the evidences submitted before the lower authorities, the genuineness of the gift was amply proved. 3.2 On the second ground relating to disallowance of mould repairs and maintenance expenses, it was submitted that the bills pertained to repairs only. It was also submitted that mould repairs were allowed as an expense item in earlier and subsequent years by the department. Our attention was also drawn to pa .....

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creditworthiness of the donor as well as the assessee s relationship with the donor could not be proved and, therefore, the addition was rightly made. 4.1 It was further submitted that as per order of the Ld. CIT(A), it is not apparent from the ledger account whether the welding charges had been paid for repairs or for new moulds and, therefore, the disallowance on this count was also justified. 5. We have heard the rival submissions and have perused the relevant material on record. As far as t .....

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and the donee knew each other from before. The AO also observed that it has not been established that the bonds were received by the assessee in person or through some other source. The AO has also observed that it has not been established as to whether the assessee and the donor had any business connection. Further, the AO noted that there was no evidence to show that all formalities and banking regulations before making the gifts were followed in right spirit or not. These observations, in ou .....

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ip or circumstances in which the gift was made • was not the blood relative of the donor • failed to furnish a gift deed • failed to file confirmatory letter or correspondence confirming the gifts. 5.3 The Ld. CIT (Appeals) has noted that the assessee had filed an affidavit of Sh. Subash Chand and also a copy of his passport. The Ld. CIT (Appeals) in the impugned order accepted that the identity of the donor may be taken as established. However, he further noted that there was not .....

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the assessee was unable to produce the donor in spite of repeated opportunities provided by the AO. The Ld. CIT (Appeals) has further observed that the assessee was asked to produce the donor during the first appellate proceedings also but the assessee responded by suggesting that the statement could be recorded either through Skype or through videoconferencing which, as per the CIT (Appeals), did not have any evidentiary value and, therefore, was not resorted to. The Ld. CIT (Appeals) also obse .....

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16 of the impugned order that on the face of it the appellant has produced all the necessary documentary evidence, but on the other hand observes that it was beyond comprehension and human probability that a person would gift in amount of ₹ 62 lakhs to even a friend. Thus, the Ld. CIT (Appeals) apparently disbelieves the contention of the assessee on suspicion. 5.4 The ITAT Delhi bench in the case of DCIT versus Anil Kumar in ITA No. 4923/Del/1991 reported in 58 TTJ (DEL) 340 while examini .....

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r and affidavit. On assessee s instance the donor was examined under section 131. From his statement it is clear that he has confirmed making of gift in favour of assessee. In his statement he has also mentioned that he had regular source of income from preparing account books and from interest. The gifted amount was deposited in the S.B. account. All these evidence on record show that the burden which lay upon the assessee to prove the genuineness of the gift is discharged. Now the burden shift .....

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use there is suspicion about the source of income, the evidence cannot be discarded. In our view, we are of the opinion that the evidence provided by the assessee prove the genuineness of the gift and the burden which lay upon the assessee has been discharged…. 5.5 In CIT versus Ms. Mayawati reported in 243 CTR (Del) 9, the Hon ble High Court of Delhi held that since all the donors who had made gifts to the assessee had appeared before the Department and submitted affidavits on oath confi .....

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additions on account of the said gifts. 5.6 In CIT versus RS Sibal reported in 269 ITR 429, the Hon ble Delhi High Court dismissed the appeal of the Department by observing that no question of law much less a substantial question of law arose when the only ground on which the genuineness of the gifts had been doubted was the alleged failure on the part of the assessee to establish relationship between the donor and the donee. 5.7 Similarly in CIT versus Mrs Sunita Vachani reported in 184 ITR 121 .....

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t the genuineness of the gift by K to the assessee. The Hon ble High Court held that in any view of the matter, the assessee was able to establish the nature and source of the money. The nature and source of the money found deposited in the bank account of the assessee was the maturity amount of four bonds which were purchased by K on 01/10/1998. Therefore, so far as year under consideration was concerned, the nature and source were fully established. The Hon ble High Court held that there was n .....

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section 69 of the Act. 5.9 It is seen in the present case that the main thrust of the Department is on the fact that the assessee could not produce the donor, the alleged donor was not a family member of the assessee, the assessee had not given any similar gift to the donor, there was no special occasion to give the gift and that it was beyond comprehension and human probability that a person would gift an amount of ₹ 62 lakhs to even a friend. Thus, the entire case of the Department is a .....

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ssessee. It could not be understood as to how and why it was necessary for the donor and the assessee to prove the social interaction between them or for that matter to prove natural love and affection by donor towards donee - assessee. A person may have or develop love and affection for another person instantly and some persons may not even develop love and affection for years together but so far as the validity of a gift is concerned, these are not the considerations which are to be weighed. A .....

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nt Commissioner nor the assessing officer possessed. The donor had categorically stated more than once that he had gifted ₹ 1 lakh to the donee - assessee and had also transferred the money. The donee - assessee had also stated that she had accepted the gift and received the money. Such being the case, there was no reason for the Assistant Commissioner to come to the conclusion that the gift was invalid or not genuine. Apart from expressing his surprise and dissatisfaction over the amount .....

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at the addition made has been sustained. It is undisputed that the assessee has placed on record an affidavit dated 28/11/2007 of the donor which has been disbelieved by the Ld. CIT (A) only on the ground that there was an age gap of seven years between the donor and the donee and, thus, the averment of the donor that the donor and done were almost of the same age was incorrect. This, in our considered opinion, cannot be a valid ground for discarding the affidavit in its entirety. Further, there .....

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It is also undisputed that the India Millenium Deposits Bonds were in the name of the donor. The Ld. CIT (A) has also mentioned that the donor was not produced either before the AO or before him but he has also accepted the fact that the assessee had offered recording of statement through Skype/video conferencing which was refused by the Ld. CIT (A). In our considered opinion, since, the donor is an NRI, it may be practically impossible for him to travel to India for the recording of a statement .....

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not demonstrated with any cogent evidences as to how the contentions of the assessee were incorrect. Thus, it is our considered opinion, that on the facts of the case, the assessee had discharged his onus and the onus was on the department to demonstrate with ample evidence as to why the contentions of the assessee were to be disbelieved. Therefore, on an overall view of the circumstances surrounding the case, we are unable to agree with the findings of the lower authorities and respectfully fol .....

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