Shri Gyarsi Lal Sharma, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 759/JP/2014 fu/kZkj.k o"kZ@Assessment Year : 2010-11

Shri Gyarsi Lal Sharma cuke The DCIT 40, Near Glass Factory, Vs. Central Circle- 1 Pratap Nagar , Tonk Road Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ASUPS 7114 F vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : S/Shri O.P. Agarwal, Manish Agarwal, C.A. & Javed Khan, Advocate

jktLo dh vksj ls@ Revenue by : Smt. Rolee Agarwal, CIT-DR

lquokbZ dh rkjh[k@ Date of Hearing : 21/04/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 5/06/2015

vkns'k@ ORDER

PER R.P. TOLANI, JM

This is assessee's appeal against the order of ld. CIT(A)- Central,

Jaipur dated 15-09-2014 for the assessment year 2010-11 raising one

issue by following grounds of appeal:

2 ITA No. 759/JP/2014

Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in sustaining the addition of Rs.29,09,667/- on account of unexplained expenditure towards education fees of his son on whims and fancies and without appreciating the evidences submitted by assessee in the shape of affidavit of the payee to prove the genuineness of the transaction, thus the additions made on such improper appreciation of the facts and evidences, deserves to be deleted in toto.

1.1 That the Ld. CIT(A) has further erred in treating the aforesaid amount of Rs. 29,09,667/- as the income u/s 56(2) of the Income Tax Act, 1961 being received from a non-relative person without appreciating the real nature thereof and without considering that no substantial enquiry was conducted by Ld. AO from the payee, thus the addition made deserves to be deleted.

1.2 That the Ld. CIT(A) has further erred in observing that the fact of payment of interest free loan to assessee was not borne out by the affidavit of the payee, while in fact the payee has categorically and in clear terms deposed in the affidavit that he has undertaken to bear all the expenditure for education of assessee's son and in furtherance of which he subsequently extended the interest free loan to assessee. Therefore, the addition of Rs. 29,09,667/- deserves to be deleted.

2.1 Briefly stated the facts are - Search operation u/s 132 of the Income

Tax Act, 1961 was carried out at assessee's residential premises on

08.06.2011. In response to notice u/s 153A, return of income was filed on

27.12.2012 declaring total income at Rs. 31,83,400/- which was revised

to Rs. 79,35,199/-. The assessment was completed u/s 143(3) r.w.s. 153A 3 ITA No. 759/JP/2014 Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

of the Income-Tax Act, 1961 at a total income of Rs. 1,09,99,870/-,

which included addition of Rs. 29,09,667/- held as income from

undisclosed sources in respect of sponsorship of his son's enrolment for

medical course by NRI friend Shri Rajesh Jain. During the course of

search, photocopy of receipt was found at assessee's residence reflecting

that Shri Rajesh Jain has sponsored the fee for medical education of the

assessee's son from NRI quota. No question during the course of survey

was asked in this behalf however during the course of assessment

proceedings AO raised queries in this behalf. Assessee gave detailed

explanation along with affidavit of Shri Jain and claimed it as an interest

free loan arrangement. Assessee vide his letter dated 18.03.2014

explained that Piyush Joshi, assessee's major son at the time (born on

21.02.1990) was enrolled for MBBS course in Jhalawar Hospital and

Medical College on NRI seat on the sponsorship of Sh. Rajesh Jain NRI.

He is assessee's close family friend, and on request agreed to pay the

requisite sponsorship fee of Rs. 29,09,667/- through 3 DDs of USD

20,000/- in the month of August, 2009 from his NRI A/c. Mr. Jain

fulfilled the relevant statutory requirements in this behalf including filing

of affidavit in desired proforma. It was agreed between assessee and Sh. 4 ITA No. 759/JP/2014

Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

Rajesh Jain that this amount was to be treated as an "interest free

unsecured loan". Assessee thus filed necessary evidence to establish the

genuineness of transaction, identity and creditworthiness along with the

affidavit of Shri Rajesh Jain confirming the fact that the sponsorship fee

was paid from his NRI a/c. Ld. AO however held that assessee must have

paid this amount by equivalent cash to NRI Shri Rajesh Jain from

undisclosed sources

2.2 In first appeal Ld. CIT(A) confirmed the order of AO and further

held in para 5(v) of his order that the interest free loan was taken to avoid

taxability of gift u/s 56(2).

2.3 Ld counsel contends that the entire edifice of the addition is based

on surmises, ifs and buts, same are countered by following contentions:-

A. The fact about Sh. Rajesh Jain being a close family friend is not in dispute the objection is on why he has undertaken the responsibility of medical education of assessee's son.

It is pleaded that relevant rules for medical admission in NRI quota permit any resident to be considered provided his admission is sponsored as a dependent by an NRI, this declaration should be supported by an affidavit in prescribed format. The word dependent finds mention in the affidavit because of this requirement for 5 ITA No. 759/JP/2014 Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

admission. Besides medical colleges allow NRI quota enrolment after due verification. Revenue has read too much into based on its surmises and assumptions which cannot be a basis for holding it as assessee's undisclosed income.

B. Both the parties i.e the person making payment as well as assessee have confirmed these facts, the burden of offering a reasonable explanation is duly discharged. Thereafter, in order to prove apparent is not correct, sole burden lies on revenue to prove otherwise which cannot be discharged by presumption or drawing conjectures.

C. For NRI quota enrolement medical council do not require dependent to be of blood relationonly. Since the medical college admission was necessary and assessee had no NRI relation abroad, a request was made to family friend Mr. Jain for help in this matter who willingly agreed and fulfilled necessary formalities including the prescribed affidavit acceptable to medical college. D. The affidavit is prescribed by medical college which binds the NRI for commitment of medical course fee in foreign exchange from NRI A/c. The amount in question was agreed to be an interest free loan by Shri Rajesh Jain to assessee. This normal course of action has been assumed by the department to be difficult to exist in human relations.

E. In the absence of any incriminating material to suggest cash payment of this amount to Mr. Rajesh Jain, the fact of payment cannot be assumed ignoring the facts and evidence on record. There is nothing to even remotely suggest that assessee paid this 6 ITA No. 759/JP/2014 Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

amount in cash or in kind at any time and particularly in the year in question. In the search operation no incriminating material was found to even remotely suggest any cash payment to Mr. Rajesh Jain.

F. As held by ld. CIT(A), this sponsorship is treated as a gift then the same being made to major son Piyush, it cannot be added in the hands of the assessee u/s 56(2).

It is vehemently contended that the allegations of undisclosed income or implied gift leveled by lower authorities are figment of imaginations and an attempt to willy nilly make the addition. It has no legs to stand, therefore, addition may be deleted.

2.4 Ld. CIT(DR) supported the orders of lower authorities.

2.5 We have heard the rival contentions and perused the material

available on record. As the facts emerge the transaction of sponsorship

has not been doubted, besides identity and creditworthiness of Shri

Rajesh Jain is not in question. To sum up adverse inferences drawn by

revenue and countered by assessee are as under:

(i) Why Shri Rajesh Jain has given the sponsorship

- Assessee counters by explanation that he is a close family friend, assessee had no NRI relative and requested his NRI friend to help in the matter who agreed to do so.

(ii)The affidavit refers Piyush as dependent of Mr. Jain, whereas he is not 7 ITA No. 759/JP/2014 Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

- There is prescribed format of affidavit issued by medical college, it requires the use of this word.

(iii)Assessee had sufficient income he should have paid Mr. Jain in Indian rupees

- Assessee was short of liquid funds at that time so they agreed for an interest free loan.

(iv)The amount is a gift u/s 56(2)

- If its gift than the recipient is Piyush and not assessee, therefore, it cannot be added in the income.

(v)The amount has been paid out of undisclosed income.

- Despite search operations not a scrap of evidence has been found about payment. There is neither any fact nor evidence on record to suggest that impugned amount was paid in any year and particularly in this year. Therefore, it cannot e held as payment out of assessee's undisclosed income.

2.6 In our considered view in the absence of any incriminating material

found during the course of search or inquiries thereafter, the addition

cannot be sustained as payment out of undisclosed income of this year.

2.7 Apropos the allegation of gift u/s 56(2), the done recipient being

the assessee's major son Piyush the addition on this count also cannot be

made in the hands of the assessee. Thus in the entirety of facts and

circumstances of the case mentioned above, the impugned addition is

deleted.

8 ITA No. 759/JP/2014

Gyarsi Lal Sharma vs. DCIT ,Central Circle- 1, Jaipur

3.0 In the result assessee's appeal is allowed.

Order pronounced in the open court on 5/06/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 5 /06/ 2015 *Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Gyarsi Lal Sharma, Jaipur

2. izR;FkhZ@ The Respondent- The DCIT, Central Circle- 1, Jaipur

3. vk;dj vk;qDr¼vihy ) @ CIT(A),

4. vk;dj vk;qDr@ CIT,

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No.759/JP/2014)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar