Atul Mahindru, New Delhi vs Assessee

This is an appeal filed by the assessee directed against the order of CIT

(Appeals)- IV, New Delhi, dated 21.11.2009 for the Assessment Year 2002-03.

2. Facts in brief: The assessee is an individual and is a Manager M/s

Advance Finvest (P) Ltd. He filed his return of income on 30.07.2002 declaring

total income of Rs.3,56,820/-, after claiming exempt income of Rs.52,17,613/-.

The AO records during the assessment proceedings in the case of Shri Ashok

Mahindru and Sons, Gurgaon, for the A.Y. 2001-02 that it was noticed that the I.T.A. No. 279/Del/2010 2

assessee had received gifts of Rs.25,00,000/- from Mr. Pradeep Gupta S/o of

Shri Ramesh Chand Gupta, R/o 3,-C Court Lane, Civil Lines, Delhi. He also

observed that other family members of the assessee have received gifts and

these were held as non genuine. The assessment was opened u/s 147 of the

Income Tax Act by issuance of notice u/s 148 on 7.10.2005. The assessee

replied. Thereafter the assessment was completed u/s 147 r.w.s. 143(3) on

26.12.2006 determining the total income at Rs.99,91,133/- inter alia making

addition towards;

a) Gift received Rs.25,00,000/-.

b) Dividend income from M/s Apollo International Ltd. Rs.19,08,813/-.

c) Dividend income from M/s Advance Detergent Pvt. Ltd Rs.30,83,850/-

investment in shares of M/s Apollo International Ltd. Rs.17,16,000/-.

3. Aggrieved the assessee carried the matter in appeals. The first appellate

authority dismissed the appeal of the assessee. He upheld the finding of the

assessing officer.

4. Aggrieved the assessee carried the matter in appeal before the Tribunal

on the following grounds:

"1. The Learned CIT(A) has erred in upholding the action of Assessing Officer u/s 147/148 for reopening the case.

I.T.A. No. 279/Del/2010 3 2. The Learned CIT(A) has erred in disallowing the Gift of Rs.25,00,000/- received from Mr. Pradeep Gupta and in not considering the documents submitted for proving the genuity of the gift.

3. The Learned CIT(A) has erred in not treating sum of Rs.19,08,813/- received from Apollo International Limited as dividend.

4. The Learned CIT(A) has erred in ignoring evidence in respect of dividend received from Apollo International Limited.

5. The Learned CIT(A) has erred in ignoring the fact that Apollo International Limited has duly deposited Dividend Distribution Tax on dividend paid to assessee.

6. The Learned CIT(A) has made the addition merely on suspicion.

7. The Learned CIT(A) has erred in not treating sum of Rs.30,83,850/- received from Advance Detergent Limited as dividend income.

8. The Learned CIT(A) has erred in making an addition of Rs.2,24,950/- by not considering the evidences provided for other dividend income.

9. The Learned CIT(A) has erred in ignoring the evidences furnished while disallowing the claim of Dividend earned from Advance Detergents Limited.

10. The Learned CIT(A) has erred in disallowing the amount of Loan of Rs.1,00,700/- received from Sh. Vinod Govil after providing the evidences.

12. The Learned CIT(A) has erred in disallowing the amount of Rs.1,00,000/- on account low drawings. In view of the above submissions, the order dated 21.11.2009 of the CIT(A) confirming the additions made by Assessing Officer is unjust, improper and bad in law and hence the said order dated 21.11.2009 be set aside and Appellant's appeal be allowed. "

I.T.A. No. 279/Del/2010 4 5. The ld. counsel for the assessee Shri B.B. Bhagat submitted that the

reopening of the assessment of this case is bad in law. He filed a paper book

running into 192 pages and referred to page no. 1, where the reasons for

reopening are mentioned. He further submitted that the gift received from Mr.

Pradeep Gupta has been disclosed in the balance sheet. He argued that Shri

Ashok Mahindru and Sons, Gurgaon received gifts from non resident. He

submitted that if Atul Mahindru and Sons received non -genuine gifts, it does

not lead to a conclusion that the gift received by the assessee is non-genuine. He

pointed out that Mr. Pradeep Gupta is not a non-resident Indian. He relied on

the decision of the Hon'ble jurisdictional High Court of Delhi in the case of

Smt. Meera Kapoor Vs. CIT in ITA No.1295/2008 judgment dated 31st August,

2012 and submitted that the propositions laid down therein, if applied the facts

of the case, would lead to holding that the reopening is bad on law for the

reason that the entire reassessment proceedings were initiated and was

proceeded on vague suspicion. He further submitted that there is no tangible

material with the AO based on which re-opening was done and relied on the

decision of the Hon'ble Supreme Court in the case of Kelvenitor India. He also

relied on the decision of Hon'ble Supreme Court in the case of Associated Stone

Industries (Kotah) Ltd. v. CIT [1997] 224 ITR 560 (SC).

6. On merits, the ld. counsel for the assessee referred to page 3 of the

appellate Commissioner's order, Para 4 & 5 and submitted that Shri Pradeep I.T.A. No. 279/Del/2010 5

Gupta is a very close friend. He filed a note for admission of additional

evidence and submitted that the Tribunal may admit these evidences. He

submitted that not admitting the evidences has led to erroneous decision of the

ld. CIT(A). He contended that Mr. Ashok Mahindru and Sons has received gifts

of Rs.10,63,600/- from M/s Therese Morosini a non-resident and whereas in the

case of the assessee the donor was Indian citizen. He referred to

creditworthiness of Mr. Pradeep Gupta and submitted that he had financial

credibility.

7. He further submitted that the ld. CIT(A) had co-extensive powers as that

of the AO under those circumstances the fresh evidence has to be looked into

and proper adjudication be done.

8. On ground no. 3 to 9 he submitted that the assessee received dividend

income from M/s Apollo International Ltd. and evidence was filed before the

AO. He referred paper book page 146 which is a certificate from M/s Apollo

International Ltd. as well as pages 148 to 178 which are copies of the ITR of

Apollo International Ltd. showing payment of dividend distribution tax etc.

9. On dividend received from M/s Advance Detergent Ltd. he argued that

evidence was produced before the lower authorities but the same had not been

properly considered. He referred to the confirmations received from M/s

Advance Detergent Ltd. a copy of which is placed on page 192 of assessee's I.T.A. No. 279/Del/2010 6

paper book. He also drew the attention of the bench to the copy the balance

sheet of M/s Advance Detergent Ltd. for A.Y. 2001-02 and copy of the challan

showing payment of dividend distribution tax which are pages 177 to 191 of the

paper book. He pointed out that the Income Tax case record of M/s Advance

Detergent Ltd. and its assessment was with the same AO and that he has not

bothered to verify the claim of the assessee. He prayed that the addition should

be deleted.

10. Ground No. 10 is against the addition of Rs.17,16,000/- as unexplained

investment. He submitted that the addition is made only on assumption that the

assessee had made unexplained investment. He look this bench through the

confirmations given by R.K. Investment, at pages 37 to 44 of assessee's paper

book as well as confirmation from Chand Trading Company, S.K. Trading

Company and Jyoti Prasad Suresh Chand, to drive home the point that there is

no undisclosed investment made.

11. On ground No. 11 he submitted that the addition has been made though

the loan question from Sh. Vinod Goel, does not pertain to this assessment year.

12. On ground no. 12 he repeated the contention raised before the AO, as

well as the ld. CIT(A).

13. The ld. Sr. DR Ms. Y. Kakkar on the other hand strongly opposed the

contentions of the assessee. She submitted that definite information was I.T.A. No. 279/Del/2010 7

received by the AO, while doing assessment in the case of assessee group

concerns, that non genuine gifts have been received by various person of this

group and based on this information the assessments were properly reopened.

She first took up the merits of the case and referred to page 2 Para 5 of the

assessment order and page 4 para 12 and argued that on merit, the assessee

could not demonstrate the genuineness of the gift despite proper opportunity.

Referring to copy of gift deed on page 14, she submitted that the donee has not

signed the gift deed. Referring to page 15 & 16 of the paper book which is an

undertaking from Mr. Pradeep Gupta, she pointed out that this undertaking is

neither dated nor the place of execution is given. Similarly she pointed out that

in the case for undertaking from Mr. Atul Mahindru which is at page 17 & 18,

neither date nor place is mentioned. She submitted that Mr. Pradeep Gupta has

income from salary, interest, rent and dividend and that the income is meagre

compared to the amount of gift alleged to have been given. She pointed out that

in the balance sheet, the capital account of the current year was not filed.

Referring to the copies of the bank account, she submitted that cash was

deposited in the bank, prior to issue of cheques to the assessee and argued that

this is evidence that the gifts are not genuine. Referring to the dates she

submitted that gift was made prior to clearance of cheques.

14. On the issue of reopening, she submitted that sufficiency of the reasons is

not justiceable and for this propositions she relied on the following case laws I.T.A. No. 279/Del/2010 8

203 ITR 456 (SC); 236 ITR 54 (SC); 63 ITR 219 (SC) & 342 ITR 169 (Del).

She submitted that tangible material was available in the form of, a pattern of

gifts received by the group of assessee. On other grounds she relied on the

orders of the AO as well as the ld. CIT(A).

15. On additional evidence she supported the orders of the first appellate

authority and submitted that no application for admission of additional evidence

was made by the assessee.

16. In reply, the ld. counsel for the assessee referred to the letter dated 21st

October 2009 at pages 12 & 13of the paper book and submitted that an

application has been made for admission of additional evidence though the

same is not happily worded and the ld. CIT(A) has not adjudicated the same.

17. Rival contentions heard, on a careful consideration of the facts and

circumstances of the case, a perusal of the papers on record and the orders of the

authorities below as well as case laws cited we hold as follows;

18. We first taken up the issue of reopening. The reasons of reopening are

given at page 1 of the paper book. A perusal of this reasons demonstrate that

tangible material has come into the position of the AO, in the form of

assessment proceedings in the group case i.e. Shri Ashok Mahindru and Sons,

Gurgaon. Sufficiently the reasons, admittedly cannot be looked into by the

Tribunal. The contention of the assessee that the reasons are vague, that there is I.T.A. No. 279/Del/2010 9

no definite information etc. are not correct. The decision of the Hon'ble Delhi

High Court in the case of Smt. Meera Kapoor is factually distinguishable as in

that case the AO did not verify the correctness of information received by him.

It was a case where the ACIT had merely recorded the fact that some

information has been received from the ADIT(Inv) that the assessee has

received bogus gifts. In the case on hand the group concern of the assessee was

found to have received bogus gifts and was assessed a such and the assessee had

also shown that he has received gift of Rs.25,00,000/- from an unrelated party.

This cannot be said to be vague information. Thus this ground of the assessee is

dismissed and re-opening assessment is upheld.

19. Coming to merits of the issue of gifts, we find that the assessee has not

proved the genuineness of gift nor the creditworthiness of Mr. Pradeep Gupta.

The affidavits, undertakings etc. are self serving documents and deficiency in

these documents have been pointed out by the ld. DR. Amount has been

deposited in the bank account of Mr. Pradeep Gupta prior to issue of cheques to

the assessee. Mr. Pradeep Gupta does not have the financial capacity to make

such large gifts. This source of income and capital account balances do not

demonstrate that Mr. Pradeep Gupta is having the creditworthiness to make this

gift. Evidence produced does not demonstrate the genuineness of the gift. Under

these circumstances we uphold the findings of the first appellate authority and

dismiss this ground of the assessee.

I.T.A. No. 279/Del/2010 10

20. We now take up ground nos. 3 to 6 and 7 to 9 as well as ground no. 10.

We find that the assessee has moved an application for admissions of additional

evidence before the ld. CIT(A) in his letter dated 21st October 2009. The

assessee had pleaded that if the documents are treated as fresh evidence, they

may kindly be admitted as additional evidence as they go to the very root of the

matter. He pleaded for admission of the evidence under Rule 46A(4) of the

Income Tax Act before the ld. CIT(A). This was not done. No proper reason is

cited by the ld. CIT(A) for not addressing this plea of the assessee.

21. Before us of the confirmations from M/s Apollo International Ltd., M/s

Advance Detergent Ltd., R.K. Investments, Chand Trading Co. Jyoti Prasad

Suresh Chand etc., have been filed. These documents were also before the ld.

CIT(A). These documents should be considered for proper adjudication of the

issue. When the documents disclose that dividend is declared and dividend

distribution tax is paid, the evidence is crucial for coming to a conclusion as to

whether the amount received is dividend or not.

22. We are of the considered opinion that, under the facts and circumstances

of the case, these grounds have to be set aside to the file of the AO for fresh

adjudication in accordance with law. The AO shall consider these confirmations

copies of return of income etc. and other documents filed by the assessee and

pass appropriate order. In the result ground nos. 3, 4, 5, 6, 7, 8, 9, 10 are set

aside for statistical purposes.

I.T.A. No. 279/Del/2010 11

23. Ground no.11 is allowed for the reason that the loan in question from Shri

Vinod Govil has not been received in the current assessment year.

24. Ground no.12 is dismissed as not pressed.

25. In the result, the appeal of the assessee is allowed in part.

Order pronounced in the open Court on30 /06/2015.

Sd/- Sd/-

(DIVA SINGH ) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:30th /06/2015

*AK VERMA*

Copy forwarded to:

1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR