High Court Of Rajasthan : Jaipur Bench
Nek Kumar vs. Assistant Commissioner Of Income Tax
Sections 4, 69
Asst. Year 1987-88
Y.R. Meena & Shashi Kant Sharma, JJ.
IT Appeal No. 93 of 2002
22nd July, 2004
Counsel Appeared
J.K. Ranka with Siddharth Ranka & Ganesh Joshi, for the Appellant : J.K. Singhi with Anuroop Singhi, for the Respondent
JUDGMENT
By the court :
This appeal is directed against the impugned order of Tribunal, dt. 20th Feb., 2002, whereby Tribunal has restored the addition of Rs. 1 lakh, gift received from Smt. Asha Devi Singhi.
2. The relevant asst. yr. is 1987-88. The assessee has filed the return for asst. yr. 1987-88 on 6th Oct., 1987 declaring the income of Rs. 38,460. That original assessment was completed under s. 143(1) accepting the income at Rs. 38,460. Thereafter the assessment has been reopened under s. 143(2)(b) of the IT Act, 1961. After reopening, the assessment has been completed under s. 143 (3) and Rs. 1 lakh has been added, which has been received by the assessee on account of gift from one Asha Devi Singhi. Smt. Asha Devi Singhi has given the gift of Rs. 1 lakh to the assessee on 16th Oct., 1986. She has also given the declaration to this effect by declaration dt. 18th Oct., 1986. On 18th Oct., 1986 she has also given the affidavit to this effect. The ITO of Sikkim has given the certificate that Smt. Asha Devi Singhi is assessee in the income-tax and sales-tax.
The assessee has challenged the assessment order of AO. CIT(A) vide order dt. 5th March, 1991 set aside the assessment order and remitted the matter back to the AO to make necessary enquiry giving opportunity to the assessee to confirm on the material collected against the assessee and also issue commission to examine Smt. Asha Devi Singhi in Sikkim. A fresh assessment was passed in compliance of the direction of CIT(A) and again the income was assessed at the same amount. Again assessee has preferred the appeal before the CIT(A), CIT (A) was of the view that direction of the CIT(A) in order dt. 5th March, 1991 has not been properly complied with. Neither proper enquiry has been made nor that lady has been examined by a commission, as directed in the earlier order of the CIT(A). Considering the material on record, CIT (A) has deleted the amount of Rs. 1 lakh, which has been added by the AO. Thereafter the Department has carried the matter before the Tribunal. Tribunal has passed the main order in case of Padam Prakash Khandaka and restored the addition.
6. Heard learned counsel for the parties.
7. Mr. Ranka, learned counsel for the assessee, submits that in para 7 of the CIT(A)’s order dt. 5th March, 1991 clear direction has been given how to examine the genuineness of the gift. That has not been complied with and by
detailed order in this second round, the CIT(A) has deleted the amount of Rs. 1 lakh added on account of gift. Tribunal has not given any justification to restore the addition.
8. Mr. Singhi, learned counsel for the Department, submits that the amount of gift has not been given from the account of Smt. Asha Devi Singhi, therefore, it is not genuine. Gift should be given by Smt. Asha Devi Singhi from her own money. He supported the order of Tribunal.
9. When, after reopening of the assessment, Rs. 1 lakh has been added in the income of the assessee, the assessee carried the matter before the CIT(A). CIT(A) vide order dt. 5th March, 1991 has set aside the assessment order and directed the AO to re-examine the genuineness of the gift. The directions have been given in para 7 of his order. The relevant para 7 reads as under : “After due consideration, it appears that the addition so made deserves to be set aside inasmuch as proper enquiries having a bearing on the issue with a view to decide the matter in a clinching manner have not been caused while deriving the adverse inference. It may be seen that the appellant has already filed an affidavit from the donor, a copy of the gift declaration, etc. and in view of this, if at all the contents of the affidavits, the contents of the gift declaration, etc. was to be disbelieved or suspected, the proper course would have been to issue commission to the concerned with a view to ascertain the factual position in respect of the genuineness of the gift so received by the appellant. The donor was living at a distance of more than 500 Kms, and hence, it was impracticable for the appellant to produce her for the purpose of examination and this was also not practicable for the purpose of issuing any summons under s. 131. This legal hurdle could have been overcome by issue of commission which otherwise appears to have been not done. Similarly, if any evidence was to be made use of on the basis of the enquiries got conducted through different banks at Calcutta or through the DDI Investigation as referred to in the impugned assessment order, propriety demands that the person affected is to be confronted beforehand so that one may not feel aggrieved of being unaware of certain evidence being utilised against it. This is what the principles of natural justice also postulate but unfortunately this was also overlooked and in view of the same, the use of the results of enquiry from these sources without confronting the appellant was not in good taste and also not in tune with the principles of natural justice. Furthermore, it may be that one of the persons buying the draft at Calcutta has signed as N.K. Jain but this aspect should have been preferred (probed) further by collecting the relevant information with a view to find out as to whether the initials stood for the appellant or for some one else and that too when the probability of having a similar name or similar initials as a fact comes across in the day-to-day life. In view of all this, it would be fair and reasonable if the addition in question is set aside with a direction that the possibility of issue of commission as stated supra may be considered, the appellant may be confronted with the results of enquiries being made use of and it may also be enquired into as to whether the person buying the draft at Calcutta was a different person or otherwise, so that the facts can be properly appreciated. Other enquiries having a bearing on the issue may also be caused and only after affording a reasonable opportunity to the appellant of being heard, the acceptability or otherwise of the gift so received may be decided afresh. Hence, the addition in question is set aside for fresh consideration.”
10. Thereafter, again the matter has been considered by the AO and AO has again added the same amount of gift treating the gift not genuine. In second round, he has not issued the commission to examine Smt. Asha Devi Singhi. He has issued commission to Asstt. CIT, Gangtok. The Asstt. CIT, Gangtok, also affirmed that Smt. Asha Devi Singhi is an income-tax assessee but he is not aware of the gift. Again, the matter came back to CIT(A). CIT(A) gave the detailed reasons and finally held that there is no justification to treat the gift not genuine. The relevant para of order of CIT(A) dt. 3rd Nov., 1993 in second round is 4.3, which reads as under : “After due consideration of the different facts involved grounds of appeal as also the report of the concerned authority as referred to earlier, it appears that the addition so made was without any proper basis and there is no iota of any evidence whatsoever to show that the source of gifts referred to earlier emanated from the appellant with a view to give it a colour of genuineness for the purpose of showing it as a gift from Smt. Asha Devi. It may be seen that while filing the return of income, the gift-deed, and affidavit was filed and there was a certificate from the ITO of the State of Sikkim wherein he has categorically affirmed of Smt. Asha Devi carrying on the business under the name and style of Narpat Singh, Gangtok, and also being an income-tax payer in the land of Sikkim State. It was also certified that she had made the gifts through the bank draft payable at Jaipur and it was out of her capital. The genuineness of the gift was also stated to have been verified by the ITO of the State of Sikkim, and this certificate was dt. 24th Oct., 1986 which was filed along with the return in October, 1987. Along with the said return, the copy of the affidavit was also filed and a declaration of gift from the donor was also filed. In spite of this, no attempt whatsoever was made at the relevant point of time to cause the different enquiries from the donor with a view to find out the factual position. The concerned authority has also not brought any evidence on record so as to show that the certificate given by the ITO, State of Sikkim as referred to earlier was a make-believe statement. In absence of the same, there was hardly any locus standi in coming to a conclusion that Smt. Asha Devi Singhi was not being assessed to income-tax and was also not doing any business and that too when the ITO of the State of Sikkim has categorically stated as per the certificate referred to earlier about the donor doing the business as also being assessed to income-tax. In view of this, the adverse inference so drawn by disbelieving the creditworthiness of the donor was not justified. It may also be stated that the amounts were withdrawn from the bank account of Shri Ramesh Singhi, the son of the donor and if certain deposits are made in the bank account of Shri Ramesh Singhi and the persons from whom such deposits have come are not traceable or found to be non-existent, adverse inference, if any, is to be drawn with reference to such deposits in the hands of Shri Ramesh Singhi and there was no basis at all in presuming that such deposits represented the black money of the appellant having been pondered (sic–laundered) back in the guise of gift through Smt. Asha Devi shown as donor. There is no iota of evidence to show that the amounts so deposited in the account of Shri Ramesh Singhi were from the appellant or from his brothers and this is more so when the appellant has never visited Calcutta as duly admitted by him in the statement recorded by the concerned authority. It may be that in one of the applications, the initials were N.K. Jain for the purpose of buying drafts but merely on this basis, it could not have been stated that the said application was signed by the appellant and particularly when the appellant has never visited Calcutta as contended for. Normally, as per the banking procedure, when the drafts are purchased by tendering cash at a place where no bank account is being operated by a person, the signatures in the application are given in the presence of the banking official and the appellant having no bank account at Calcutta and having never gone to Calcutta, there would not have been any possibility to move such an application. It is a day-to-day experience that the initials of different persons do tally but merely on this basis, it could not have been stated that the initial so given in the said application for buying the drafts at Calcutta represented the initials of the appellant. Apart from this, the appellant in the course of examination by the Departmental authority also denied of having moved such an application as also about the similarity in the signatures, it also requested for verification of the same with the signatures of the IT returns, etc. and also for taking the handwriting expert’s opinion, but, in spite of all this, no such attempt was made by obtaining the handwriting expert’s opinion and in absence of the same, there was no justification in treating the said initials as that of the appellant. The decision of the Sikkim High Court referred to earlier also makes a specific reference of the returns of the donor having been filed and assessed to tax. In view of all this, it cannot be said that the donor was not assessed to tax or was not doing any business in the State of Sikkim at the relevant point of time. It may be that the legal heir of the donor was not co-operating but merely on this basis, it cannot be said that the factum of gift was of dubious nature with a view to treat it as unexplained for the purpose of addition. There is no material evidence whatsoever to show that the money was deposited by the appellant or by a relative in the bank at Calcutta and thereafter got deposited in the account of Shri Ramesh Singhi which ultimately came back to the appellant under the guise of a gift. It may be that there was some racket for showing certain amounts by way of gift from the persons living in the State of Sikkim at the relevant point of time but in absence of any evidence, circumstantial, documentary or corroboration, it could not have been stated that the appellant was also involved in similar transactions vis-a-vis the factum of gift under consideration. In view of this, the report of the Departmental authority in regard to there being a racket was of general nature without giving any specific particulars so as to justify the adverse inference so drawn. It may be that the appellant was not in a position to give the details about the family particulars of the donor but this too could not have given a proper basis to justify the adverse inference. Taking into consideration all these facts such as the certificate given by the ITO of the State of Sikkim, the donor being assessed to tax as certified by him, lack of any evidence of the money having emanated from the appellant or his relatives by way of the deposits made in the account of Shri Ramesh Singhi and the appellant having never gone to Calcutta, etc. etc., it appears that there was no justification at all in holding the gift so received by the appellant as the undisclosed income. Hence, the addition in question, being unwarranted, is deleted.”
In appeal before the Tribunal, the Tribunal has passed the main order in case of Padam Prakash Khandaka, the other donee. He has not treated the gift genuine holding that Smt. Asha Devi Singhi did not make the gift from her own funds, therefore, gift is not genuine and CIT(A) has wrongly deleted the addition treating gift genuine. Considering the detailed reasons given by CIT(A), especially the fact that in spite of his direction, the donor has not been examined through commission by the AO, though Smt. Asha Devi Singhi has given the affidavit to this effect and also the declaration that she has given gift of Rs. 1 lakh to the assessee. The assessee has also been examined in second round by the AO wherein in answer to question No. 1, the assessee submits that “I know Smt. Asha Devi Singhi since long”. The donor was impressed by his grandmother, who was a “Sadhvi” in Jain Dharam and donor also visited so many times to Jaipur and stayed with his family and gift has been given. On these admitted facts and the reasons given in detail by the CIT(A), we see no reason to confirm the view taken by the Tribunal. Even merely on conjectures and surmises, such gifts cannot be treated not genuine. Therefore, we are of the view that the gift is genuine and Tribunal has committed error in restoring the addition of Rs. 1 lakh for no justification.
In the result, the appeal stands allowed.
[Citation : 274 ITR 575]
