Prem Kumar Chowdhury, Kolkata vs Assessee

IN THE INCOME TAX APPELLATE TRIBUNAL "B " BENCH: KOLKATA

[Before Hon'ble Shri Mahavir Singh, JM & Hon'ble Shri B.P.Jain, AM ]

I.T.A No.1103/Kol/2012 Assessment Year: 2002-03

Prem Kumar Chowdhury . Vs. D.C.I.T., Circle-38, Kolkata Kolkata (Appellant) (Respondent) (PAN:ACTPC 3303 R)

For the Appellant : Shri S.M.Surana, Advocate For the Respondent : Shri S.S.Alam, Sr.DR

Date of hearing : 11.06.2015. Date of pronouncement: 16.06.2015. ORDER

Per Shri B.P.Jain, AM :

This appeal of the assessee arises from the order of ld.CIT(A)-XXIV, Kolkata dated 30.04.2012 for Assessment Year 2002-03.

2. The assessee has raised the following grounds of appeal :

"1. That on the facts and in the circumstances of the case Ld.CIT(Appeals) erred in confirming the addition of rs.20,00,000/-.

2. That on the facts and in the circumstances of the case Ld. CIT(Appeals( erred in not considering facts on records and requirement of Law, relied more on probabilities than specific requirements of the Act.

3. The appellant craves to add, alter/or amend ground or grounds of appeal on or before the date of hearing as may be allowed by appellate authority."

3. The brief facts of the case as emanating from the order of AO are reproduced for the sake of convenience as under :-

"The first issue that has been set aside to the file of the assessing officer pertains to four gifts for Rs.5 lakhs each received by the minor son and three minor daughters of the assessee and clubbed in the hands of the assessee. In the original assessment, all the four gifts for a total amount of Rs.20 lakhs was treated as ingenuine and added back as such. The CIT(A) examined the matter and ordered that the gifts be allowed as genuine. Hence the departmental appeal to the ITAT. The details of the gifts are as follows :

SNo. Name of the Donor Name of the Donee Gift Amnt (Rs) 1. Sanwarmal Agarwal Shiva Chowdhury 5,00,000 2. Puspa Gupta Radhika Chowdhury 5,00,000 ITA No.1103/Kol/2012 2 Prem Kumar Chowdhury A.Yr.2002-03

3. Dharma Jain Dipika Chowdhury 5,00,000 4. Madhu Jain Jagriti Chowdhury 5,00,000

In the original assessment the gifts was held as ingenuine and bogus for the following reasons :

1. The donors are not genuine donors.

2. Donors are not related in any way with the donees.

3. Donors were not produced for examination u/s 131 in presence of the assessee.

4. Worthiness of credit are not proved since the donors have no sufficient income to make such gift as revealed from the copies of the P/L account and the balance sheet.

5. Gift made out of refund of share application of donors just before the gift is made is a device to camouflage the gift transaction, and

6. All share application money were paid in cash and are below Rs.20,000/-.

The genuineness of the transactions is not established, since a cooked up transaction cannot be genuine. The creditworthiness of the donors is also not established, as is apparent from a simple analysis of the events leading to the gifts as discussed above. It is therefore concluded that the gifts are sham, and these had been used as an instrument of bringing money to the capital account of the assessee, without the necessary payment of tax. The amount of Rs.20 lakhs, representing four bogus gifts of Rs.5 lakhs each, is therefore will be added back in the computation of income form concealed sources under the head "other sources".

3.1. The ld.CIT(A) confirmed the action of AO and his findings are contained in paras 2.3 to 2.3.3 which for the sake of convenience are reproduced herein below :-

"2.3. I have considered the submissions of the Ld. A/R and also gone through the assessment order passed u/s 143(3)/254. In the instant case, the main issue relates to four gifts for Rs.5 lakhs each received by the minor son and three minor daughters of the appellant, which gifts for the total amount of rs.20 lakhs were treated as bogus and added in the hand of the appellant. The Ld. CIT(A) had held the gifts as genuine and deleted the said addition of rs.20 lakhs on account of gifts. Vide its order dated 12.10.2007 in ITA Nos. 577/Kol/2006 and 1233/Kol/2006 for A.Y. 2002-03, the Hon'ble ITAT, Kolkata has set aside the order of the Ld. CIT(A) on account of gift and restored the issue to the file of the AO to decide the same afresh and after providing reasonable opportunity of being heard to the appellant.

2.3.1. As per the direction of the Hon'ble ITAT, Kolkata the AO had examined two donors viz., (i) Shri Sanwarmal Agarwal and (ii) Shri Dharam Jain u/s 131. The AO had also issued summons u/s 131 to other two donors, viz., (i) Smt. Madhu Jain and (ii) Smt. Pushpa Gupta. Both of them chose to represent themselves before the AO through authorized representatives. On examination of the details of the donors, the AO has found that the nature of transactions in all the four cases is similar. All the four donors had just received back the share application money from Private Limited Companies like M/s. Stanly Vinimay Pvt. Ltd./ M/s Seema Trading & Fiscal Services Ltd / M/s Jayanti Fin & Trade Pvt. Ltd. All the donors made multiple investments in share application money in cash in small quantities not exceeding rs.20,000/- within a very short span of time just before making the gifts. Their annual income varied from rs.48,000/- to Rs.77,585/-. The gifts were made either on 11.09.2001 or 14.09.2001 in all the four case. There were hardly any transactions in the bank accounts of the donors other than the refunds of share application money which were paid as gifts to the son and three daughters of the appellant. The deposits of Rs.20 lakhs in cash towards share ITA No.1103/Kol/2012 3 Prem Kumar Chowdhury A.Yr.2002-03

application money in the four cases were not supported by their Returns of income and the source of such deposits were not explained.

2.3.2. It has been held by the Hon'ble Delhi High Court in the case of K.L.Agarwal vs CIT 190 ITR 303 (Del) that the onus of proving the validity of a gift made to assessee lies on him only. The Hon'ble Supreme Court in CIT v.P.Mohanakala [2007] 291 ITR 278 has held that the findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed error in disturbing the concurrent findings of facts."

2.3.3 The same principle is also applicable in this case. The surrounding circumstances and the human probabilities do not support the case of the appellant. In the circumstances of the case, the gifts are quite unusual and unnatural. Considering the fact of the case, I am of the opinion that the appellant has failed to prove the creditworthiness of the donors, human probabilities, the relationship between the donor and the donee, the occasion for making gift and the existence of reciprocity. In view of the above discussion, the addition of rs.20,00,000/- made by the A.O. is confirmed. These grounds of appeal are dismissed."

4. The ld. Counsel for the assessee Shri S.M.Surana, Advocate argued that in the first round the main objection of the AO and the ld.CIT(A) are that donors are not genuine donors, donors and donee are not related and the donors were not produced for examination u/s 131 of the Act. However, the donors had personally appeared before the AO and has submitted the source of gift made to the minor children. The copy of the income tax return for the impugned year and the preceding year, copy of the bank pass book and duly notarized gift deed duly accepted by the father and the guardian of the minor children in all the four cases were produced. No defect in the same has been pointed out. As regards the relation with the donors, law does not prohibit of making gift even with the person, who is not related in the impugned year. As regards the relation which had been stated that the donor is a close friend of the assessee of Shri Prem Kumar Chowdhury. As regards the donors were not produced for examination u/s 131 of the Act, the donors were produced before the AO in response to notice u/s 131 of the Act, who were examined and have confirmed of having given the gift to the said minors. In the circumstances and facts of the case the identity of the donors cannot be doubted which is backed by the gift deed and affidavit ITA No.1103/Kol/2012 4 Prem Kumar Chowdhury A.Yr.2002-03

of the donors who had made the gifts and direct confirmation by the donors to the AO confirming the gift had been explained the source of the gift. There is nothing on record that it is assessee's own money brought back by the assessee. The decision relied upon by the ld. CIT(A), therefore cannot be made applicable in the present facts and circumstances of the case. The ld. Counsel for the assessee relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs Ms.Mayavati 338 ITR 0563 in this regard where it has been held that AO had failed to appreciate that the gifts cannot be rejected merely on the ground that there was no occasion or relationship and the occasion for making the gift and relationship with the donor are not very relevant , rather relevant is the genuineness of the transaction together with the identity and capacity of the donor. Accordingly the ld. Counsel for the assesse Shri S.M.Surana, Advocate prayed to delete the additions so confirmed by the ld.CIT(A).

5. The ld. DR, on the other hand, relied on the orders of the authorities below.

6. We have heard the rival contentions and perused the facts of the case. The main thrust of the AO and the ld. CIT(A) in disallowing the gifts so received is that the donors are not genuine donors, not related with the donee. In this regard the donors have personally appeared before the AO, who were examined u/s 131 of the Act, who have also filed the direct confirmation to the AO and also the identity confirming the gift. The source of the gift as also stands explained. As far as relation is concerned, in the impugned year the blood relation is not necessary for the gift to be a genuine gift but in the impugned year their relationship also matters a lot and in the present case the donor is stated to be a friend of the assessee, who had submitted his explanation for the source of the gift, a copy of the bank account of the donor is on record along with the income tax return of the impugned year and of the preceding year. In all probability the gift is found to be genuine and the assessee has proved the identity, creditworthiness of the donor as well and therefore reliance of various courts by the ld.CIT(A) does not help the revenue, in the circumstances and facts of the present case. Accordingly we reverse the order of the ld. CIT(A) and direct the AO to delete the additions so made. Thus all the grounds of assessee are allowed.

ITA No.1103/Kol/2012 5 Prem Kumar Chowdhury A.Yr.2002-03

7. In the result the appeal of the assessee is allowed.

Order pronounced in the court on 16.06.2015.

Sd/- Sd/- [ Mahavir Singh ] [B.P.Jain] Judicial Member Accountant Member

Date: 16.06.2015.

R.G.(.P.S.)

Copy of the order forwarded to:

1. Prem Kumar Chowdhury, 308A, Rabindra Sarani, Kolkata-700006.

2 D.C.I.T., Circle-38, Kolkata.

3. CIT(A)-XXIV, Kolkata 4. CIT - Kolkata.

5. CIT-DR, Kolkata Benches, Kolkata

True Copy, By order,

Deputy /Asst. Registrar, ITAT, Kolkata Benches