TMI Blog2009 (1) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... The brief facts relating to ground No. 1 are that the AO noted that the assessee has received gifts in cash totalling to ₹ 76,75,000 from 15 different persons. Accordingly, the show-cause notice was issued to the assessee. Summons under s. 131 were issued to the donors and subsequently 10 out of 15 donors appeared before the AO whose statements on oath were recorded. The finding in respect of each donor by AO is summarized in the following chart : Sl. Alleged donor Gift Gift Appeared Return Last Remarks 4. Sabbir Rafiq 5,50,000 No Yes 2004-05 Depariya 5. Sahin Safi 4,50,000 No Yes 2003-04, 2004-05 Dhorajiwala 6. Raees Rafiq 5,50,000 No Yes 2003-04, 2004-05 Depariya 7. Faruk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness carried out by them. The identity of each of the donors is proved as they have given the statements under s. 131. Even this is also confirmed from the copy of the acknowledgement of the return which was duly filed before the AO. The donors have also confirmed that they have given the gifts. Merely some of the donors have income below ₹ 60,000 and did not have their bank accounts will not make the donors to be incapable of making the gifts. Some of the donors have even pointed out the reasons that the assessee has provided earlier the financial assistance to them. The genuineness of the transactions is proved from the copy of the capital account of each of the donors. Reliance was placed on the following decisions : 1. Murlidhar Lahorimal vs. CIT (2006) 200 CTR (Guj) 109 : (2006) 280 ITR 512 (Guj); 2. Addl. CIT vs. Hanuman Agarwal (1984) 40 CTR (Pat) 15 : (1985) 151 ITR 150 (Pat); 3. CIT vs. Shree Gopal Co. (1994) 117 CTR (Gau) 357 : (1993) 204 ITR 285 (Gau); 4. Jalan Timbers vs. CIT (1997) 137 CTR (Gau) 649 : (1997) 223 ITR 11 (Gau); 5. Khandelwal Constructions vs. CIT (1998) 145 CTR (Gau) 65 : (1997) 227 ITR 900 (Gau); 6. Dy. CIT vs. Rohini Builders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries in the books of the assessee there was no other corroborative evidence. There is no evidence that the donors were having sufficient cash balance on the dates when the gifts were given to the assessee. The creditworthiness of the donors was also not established as all the alleged donors who appeared before the AO were persons of very small means. None of them has any established business and/or regular source of income. This is evident from the statements made by them on oath before the AO. The return for the first time for asst. yr. 2004-05 was filed by most of them, even though some of them had filed the first return of income for asst. yr. 2002-03 but those were also filed much after the close of the accounting year. The return filed for asst. yr. 2004-05 showed that all of them had declared the income below ₹ 60,000. In respect of case law relied on by the assessee it was pointed out that those cases are not applicable to the facts of the case before us. On question from the Bench whether any action has been taken in those cases, whether the donors have confirmed in the statements recorded under s. 131 that they have given the gifts, the learned Departmental Repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it himself on such reasons and grounds as seem good to him. Thus before the AO forms an opinion, he must consider the material before him. He has before him the material submitted by the assessee while giving an explanation, then he must collect his own material as an enquiry officer, weigh the two materials and as a quasi judicial authority form an opinion as to whether explanation furnished by the assessee is satisfactory or not. If the AO does not apply his mind in examining the documents furnished by the assessee and does not find any substantive error in them nor he collects any material by exercising powers under IT Act, then the claim of the assessee cannot be straightway rejected. If he does, it would be a violation of principles of natural justice and provisions of s. 68. The expression the assessee offers no explanation means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books of account maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory must be based on proper appreciation of the material and other surrounding circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation in that respect. The AO has to state as to how he has formed his opinion that the explanation is unsatisfactory. Sec. 68 has gained great importance over the years, the reason(s) for the same are that some unscrupulous assessee(s) use this method, i.e., of cash credit, as a device to channelise black money into white money. Over the years, the various Courts have drawn their receptive lines in the given facts of their respective cases. But, it would not be out of place to mention that there cannot be a straightjacket formula, which can fit into the facts of a given case and whereby it can be decided whether a credit is genuine one or not. It depends on the facts and circumstances of a given case and the Court(s) dealing with the same has to find out the true colour of the impugned transaction. The various Courts have given their verdicts with regard to the genuineness or ingenuity of the cash credits involved in the cases they were dealing with, in their own way. The gist of most of such decisions is that the onus to establish the identity and the creditworthiness of the creditor(s) and the genuity of the transaction(s) of a cash credit in question is cast upon the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween what is right and what is wrong. He has to follow the laws of the land before he can preach the taxpayer to abide by the law. The taxman has to conduct himself in a way which is friendly to the taxpayer by showing that he is not an enemy but a friend. This friendly manner, if adopted by the taxman should also be shown to be so overtly as well as covertly. All the precedents simply guide the decision-maker in given facts of a particular case and it is he who has to apply his judicial mind with all the prudence at his command to decide that case. More often than not the ratio of a decision is followed only by adopting its letters. The decision has to be followed both in its letter as well as in the spirit. The spirit of a decision is its soul. Yes, to follow the letter only is not that harmful, but the unfortunate part of it is, that the letters are torn out of context from a given judgment and the same are put where it does not fit. In this melee, the real meaning of a decision is lost. The most useful precedents are usually lost when only from an excerpt of a decision, entirely different meanings are drawn by different people. In the case before us this is an admitted fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addresses, GIR numbers/PAN as well as confirmation wherever available. SLP filed by Revenue against the said decision has also been rejected as reported at (2002) 254 ITR (St) 275. In the case of Murlidhar Lahorimal vs. CIT (supra) the facts were that the assessee filed the return of income along with the copy of capital account in the partnership firm in which he was a partner. The capital account showed ₹ 50,000 as gift received. The donor filed the return of gift of ₹ 50,000 and the assessment completed under s. 15(3) of the GT Act. Subsequently, notice under s. 148 was issued for the reason that ₹ 50,000 were assessable under s. 68. The Tribunal noted that the gift was given by way of bank draft. The donor appeared before the AO and confirmed the gift made. The evidences for the source of gift were available with him. The Tribunal however held that motivation for making gift was not established and the addition was upheld. When the matter went before the High Court, the Hon ble High Court held that the Tribunal failed to note the fact that the identity of the donor was established, donor having appeared in person before the AO, the genuineness of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry on any business. In October, 1947, he came to Delhi and secured premises for commencing business in February, 1948. Ultimately, he started jewellery business on 30th March, 1948. On that date, he carried the capital of ₹ 3,33,414 including gold ornaments, gold rawa, stones and cash in books. He explained the sources that he brought all those things when he migrated from Lahore in the sealed trunk from June, 1947 till 30th March, 1948. He did not have any other business or means of income from which the assets of ₹ 3,33,414 could be earned. The AO rejected the explanation of the assessee and treated ₹ 20,000 as explained and added ₹ 3,17,414. The Asstt. CIT treated further sum of ₹ 80,000 to be disclosed one. The Tribunal confirmed the order of the first appellate authority. The Hon ble High Court confirmed the order of the Tribunal and ₹ 2,33,414 was treated as undisclosed income of the assessee. When the matter went before the Supreme Court, the Hon ble Supreme Court held : Held, reversing the decision of the High Court, on the facts, that in reaching the conclusion that out of the capital of ₹ 3,33,414 credited in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT returns also. Copies of their capital accounts and the copies of acknowledgement of IT returns were also filed. In the capital accounts the gifts given to the assessee have duly been shown. But when we asked for the PAN, PAN was filed only in respect of 9 persons out of 10 donors. Five donors did not appear on the ground that they were the Pardanashin ladies. Even no confirmations on their behalf have been filed. In our opinion, once the donors are the income-tax assessees and the gifts given by the donors have duly been shown by them in their respective capital accounts, the AO should have taken action against the donors while making their assessments. A specific query was raised from the learned Departmental Representative but no action seems to have been taken in the cases of the donors. This is also a fact on record that the assessee has not commenced the business. The restaurant was under construction only. The assessee therefore could have not earned this much income from the business. The onus is on the assessee to prove the source of the amounts received by him. The assessee has produced some of the donors out of which nine are having PANs. Therefore, to the extent the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance sheet for that assessment year appearing at pp. 41 to 42 of the paper book. The learned Departmental Representative, on the other hand, relied on the order of the authorities below. We have carefully considered the rival submissions and perused the material on record. We find that the assessee has introduced the sum of ₹ 2,00,000 in September, 2003. The assessee was having opening cash in hand as on 1st April, 2003 amounting to ₹ 1,74,370. Since the assessee has not given any details of the income, etc. which the assessee had earned during that period, we, therefore, treat the sum of ₹ 1,50,000 as available with the assessee out of the opening balance for capital investment and accordingly the addition to the extent of ₹ 1,50,000 is deleted and for ₹ 50,000 the addition is confirmed. Thus, this ground stands partly allowed. Ground No. 3 relates to the addition of ₹ 52,000 due to low household withdrawal. The AO noted that there was withdrawal of ₹ 68,000 for the whole year. The AO has estimated the household expenses at ₹ 1,20,000 and therefore, made an addition of ₹ 52,000. When the matter went in appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new assets purchased. The flood is a natural phenomena and it is beyond the control of the assessee. The assessee has incurred the expenditure and the depreciation should be allowed. The learned Departmental Representative, on the other hand, relied on the order of the authorities below and contended that the AO asked the assessee to submit the complete addresses of Laxmidas Enterprise and Om Moulding Works from whom the assessee contended that he had bought the assets installed in the restaurant. The assessee could not adduce any evidence by way of addresses of these parties so that the AO could have directly verified the same. Even the assessee did not produce any proof by way of FIR and insurance. Had there been any damage the assessee would have made claim before the insurance authorities. Even the assessee could not obtain copy of the duplicate bills from the concerned parties. No direct evidence ancillary or the incidental has been filed by the assessee, therefore, the AO was correct in law in rejecting the claim of the assessee. We have carefully considered the rival submissions and perused the material on record along with the order of the tax authorities below. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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