Subhash Chawla Prop. M/S. Chawla Forex ... vs Department Of Income Tax

Income-tax Officer, vs. Shri Subhash Chawla, Dasuya. Prop. M/s. Chawla Forex and M/s. New Chawla Jeans House, Gandhi Chowk, Urmarhiarpur (Appellant) (Respondent)

Appellant by : Smt. Ratinder Kaur, DR Respondent by : Shri Ravish Sood, Advocate

Date of hearing : 20.01.2015 Date of pronouncement : 27.01.2015

ORDER PER A.D. JAIN, J.M.

This is department's appeal for assessment year 2005-06 against

the order dated 21.10.2013 passed by learned CIT(A), Jalandhar,

challenging the action of the ld. CIT(A) in deleting the addition of

Rs.13,74,467/- as against total addition of Rs.16,56,176/- made by

the AO on account of unaccounted income of the assessee u/s. 68 of

the Income-tax Act, 1961.

2. The assessee is proprietor of M/s. Chawla Forex and New

Chawla Jean House. He filed his return of income for the year under 2 ITA No.08(Asr)/2014

consideration, declaring income of Rs.2,85,100/-. Vide assessment

order dated 31.12.2007, the income of the assessee was assessed at

Rs.19,83,470/-. While doing so, the AO, inter alia, made addition of

Rs.16,56,176/- u/s. 68 of the Act. While doing so, the AO observed

that in the capital account of the assessee, appearing in the books

of account of M/s. Chawla Forex, there were four credits totaling to

Rs.16,56,176/-;that on query,the assessee submitted that these

credits were on account of gifts made by his brother, who was

settled in Italy; that the assessee was asked to prove the identity

and creditworthiness of the donor; that the assessee produced a few

documents written in the Italian language; that these were claimed

to be bank statements of the donor; that the assessee was asked to

file the translated version of these documents; that a certificate

from Canara Bank, Tanda was filed, which document, while giving DD

number, certified that the said credits in assessee's bank account

were on account of foreign drafts; that the name and address of the

sender or even the country of origin was not specified; that the

assessee also filed photocopies of two bank drafts issued by the

foreign bank in the name of the assessee; that the translated

version of the bank account showed that the account was in the

name of one Shri Rohan Chawla, whereas the name of the assessee's

brother, as per copy of his passport, was Ram Chander Chawla; that 3 ITA No.08(Asr)/2014

to this, the assessee explained that his brother had changed his

name in 2003, for which, notice in the newspaper had been given;

that the photocopy of newspaper dated 16.03.2003 had been filed as

evidence in this regard; that there was no evidence with the

assessee regarding identity of the donor, his creditworthiness, or

the confirmation of the transaction, or the occasion on which the

alleged donation was given by the donor. It was on these facts, that

the AO made addition of the amount under consideration, i.e.,

Rs.16,56,176/-, to the income of the assessee.

3. By virtue of the impugned order, the ld. CIT(A) deleted the

addition of Rs.16,56,176/-, to the extent of Rs.13,72,467/-. While

doing so, the ld. CIT(A) observed as follows :

"6.8. I have considered the observations of the Assessing Officer as made in the assessment order as well as in various remand reports submitted from time to time. I have also considered the written submissions of the assessee as well as his counter comments on various reports of the Assessing Officer. I have further considered the other material brought on record. On careful consideration of the material brought on record, it has been noticed that the Assessing Officer has accepted during the course of assessment proceedings for the A.Y. 2009-10 that Shri Ram Chander Chawala alias Rohan Chawla is the real brother of the assessee who is stated to be a permanent resident of Italy. Not only this, the Assessing Officer has also accepted two gifts of Rs.66,575/- & Rs.5,26,862/- totaling to Rs.5,93,437/- from Shri Rohan Chawla to the assessee during A.Y. 2009- 10 as genuine gift. The evidences in the form of copy of 4 ITA No.08(Asr)/2014

passport and copy of bank statement which have been produced by the assessee to prove the identity and creditworthiness of Shri Ram Chander Chawla alias Shri Rohan Chawla, the real brother of assessee have been accepted in the A.Y. 2009-10 whereas the similar evidences are being objected to by the Assessing Officer for the A.Y. 2006-07 time and again. In my opinion, the Assessing Officer should adopt uniform approach in accepting or rejecting any evidence produced before him. Moreover, in my considered opinion, the assessee has proved beyond doubt the identity and creditworthiness of Shri Rohan Chawla who is a permanent resident of Italy with documentary evidences which has already been proved and admitted during assessment proceedings for the A.Y. 2009-10.

6.9. In these facts and in the circumstances of the case, I am of the opinion that the assessee has satisfactorily proved the identity of Shri Rohan Chawla as well as his creditworthiness. The transactions are also through banking channels which also cannot be doubted. I, therefore, treat the gift of Rs.13,72,467/- as a genuine gift which has been received by the assessee from his real brother Shri Ram Chander Chawla alias Rohan Chawla and delete the addition of Rs.13,72,467/- out of total addition of Rs.16,56,176/-. However, the assessee could not prove the source of balance gift of Rs.2,83,709/- as his brother has given gift of Rs.13,72,467/- only which has only been admitted. The stand of the assessee during assessment proceedings was that whole of the amount of Rs.16,56,176/- has been received as gift from his real brother Shri Rohan Chawla who is a resident of Italy whereas the confirmation from Rohan Chawla has been furnished only for an amount of Rs.13,74,467/-. I, therefore, treat the balance credit of Rs.2,83,176/- in the capital account of assessee as unexplained and confirm the addition made by the Assessing Officer to this extent. In the result, ground of appeal No. 2 taken by the assessee is, therefore, partly allowed.

4. Aggrieved, the department is in appeal before us.

5. Challenging the impugned order, the ld. DR contended that the 5 ITA No.08(Asr)/2014

ld. CIT(A) has erred in deleting the addition of Rs.13,74,467/- as

against total addition of Rs.16,56,176/-, correctly made by the AO to

the income of the assessee u/s. 68 of the Act. It has been contended

that while wrongly deleting the addition correctly made by the AO,

the ld. CIT(A) has failed to take into consideration the fact that the

credits in the assessee's capital account were on account of foreign

drafts, for which there was no evidence with the assessee regarding

the identity of the sender or his creditworthiness, confirmation of

transaction, or the occasion on which the alleged gifts were made by

the donor. It has been contended that the AO's observations in this

regard have not been appreciated by the ld. CIT(A).

6. On the other hand, the ld. Counsel for the assessee placed

strong reliance on the impugned order. It has been submitted that it

is patent on record that under similar facts and circumstances, in

the assessee's case for the assessment year 2009-10, the AO had

accepted that Shri Ram Chander Chawla alias Rohan Chawla was the

real brother of the assessee; that he was a permanent resident of

Italy; that the AO had himself, for assessment year 2009-10,

accepted as genuine, gifts of Rs.66,575/- and Rs.5,26,862/-, total

amounting to Rs.5,93,437/- from the said Shri Rahan Chawla,

brother of assessee, to the assessee; that complete documentary 6 ITA No.08(Asr)/2014

evidence in this regard was furnished before the AO; that this

documentary evidence comprised of passport and bank statement of

Rohan Chawla alias Ram Chander Chawla, as also confirmation from

Shri Rohan Chawla; that all these documentary evidences were not

taken into consideration by the AO; that the AO remained oblivious

to consider these documentary evidences brought on record by the

assessee; and that, on the other hand, the CIT(A) has duly taken into

consideration these documentary evidences and has rightly deleted

the addition wrongly made.

7. Having considered the rival submissions in the light of the

material placed on record, we do not find any error in the order of

the ld. CIT(A). We find that he has deleted the addition of

Rs.13,72,467/ out of total addition of Rs.16,56,176/-. While making

this deletion, the ld. CIT(A) has recorded categorical factual

findings, which the department has not been able to specifically

rebut before us. It has been duly taken into consideration that for

the assessment year 2009-10, in the case of assessee, under similar

facts and circumstances, the AO had himself accepted gifts

amounting to Rs.5,93,437/- from Shri Rohan Chawla alias Ram

Chander Chawla, the brother of the assessee, to the assessee as

genuine gifts. Moreover, the evidence in the shape of passport of 7 ITA No.08(Asr)/2014

Shri Ram Chander Chawla and copy of bank statement, as produced

by the assessee, having received them from Italy, have not found

any worthwhile rebuttal at the hands of the department. It is

pertinent to mention here that it was this very documentary

evidence, which prompted the AO to the accept aforesaid gifts

amounting to Rs.5,93,437/- as genuine gifts from assessee's brother

Shri Rohan Chawla in the assessee's case for the assessment year

2009-10 and no addition in this regard was made. Not only this, the

assessee also furnished confirmation from Shri Rohan Chawla. The

ld. CIT(A) also duly took this confirmation into consideration and it

was observed that this confirmation, rather than being for the

amount of the claimed gift for Rs.16,56,176/-, was for a gift of

Rs.13,72,467/-. It was as such, that the ld. CIT(A) observed that the

assessee could not prove the source of the balance gift of

Rs.2,83,709/-. The addition to this extent was maintained by the ld.

CIT(A), deleting the addition to the extent of Rs.13,72,467/-.We may

also bring on record that the said confirmation, copy whereof in

English translation, original in Italian language, has been filed

before us also, in the shape of affidavit, reads as follows :

"Affidavit

I, Ram Chander alias Rohan Chawla S/o Inderjit Chawla, aged about 31 years resident of Via Dorando Pietri No. 1 TNT 26, 41012 Carpi (MO), Italy declares 8 ITA No.08(Asr)/2014

solemnly affirm and declare as under :

1. I am a permanent resident of Italy for the last more than 12 years, and as on date is in "permanent occupation" and it creates income equivalent of R. 17 lakes (lac seventeen rupees approximately) of rupees annually.

2. That my real elder brother Sh. Subhash Chawla had always acted as a "father figure" to me in life and in it was when I was unemployed and unsettled in India, that he, despite his limited financial resources and family responsibilities and liabilities, including me helped me financially and morally to get settled down abroad.

3. What if the moral Financial and give to me by my brother can not be equated in monetary terms but I purely out of love and affection and by way of gratitude to my brother it most willingly to listening to my conscious therein gift an equivalent amount of rupees Rs.13,72,467/- during the period falling between 01/04/2004 to 31/03/2005, as the following:

S.No. Date Cheque/Draft No. Amount Amount (in (in rupees) euros)

1. 13.09.2004 No.52-02.041.950 01 9000 5,07,550- drawn 00

On 'Bank Popilare dell' Emilia Romagna, Carpi (MO)

2. 29.12.2004 No.51-51176567 04 5000 2,85,918- drawn on 'Bankpopilare 00 dell' Emilia Romagna, Carpi (MO)

3. 29.12.2004 No. 51-51340321-10 4000 5,78,999- drawn on 'Bankpopilare 00 dell' Emilia Romagna, Carpi (MO)

4. 02.03.2005 No. 52-02.74.386 02 6000 drawn on 'Bankpopilare dell' Emilia Romagna, Carpi (MO) Which amount of gifts was subsequently agreed to my 9 ITA No.08(Asr)/2014

brother Sh. Subhash Chawala.

4. The cheques at Sr. No. 1 and 3 to 5 were made by me out of my bank account, while the cheques made No. 2 were purchased by me from the bank.

Deponent Verification I, Ram Chander alias Rohan Chawla, the above named deponent do here to check if what is said above and correct to the best my knowledge and belief and nothing has been concealed in it.

Deponent Verified Date

8. For the above discussion, we hereby confirm the well reasoned

order passed by the ld. CIT(A), rejecting the grounds taken by the

department as shorn of merit.

9. In the result, the appeal filed by the department is dismissed.

Order pronounced in the open court on 27th January, 2015.

Sd/- Sd/-

(B.P. JAIN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 27th January, 2015 *aks/- Copy of the order forwarded to: 1. The Assessee : 2. Assessing Officer 3. The CIT(A), 4. The CIT, 5. The SR DR, I.T.A.T.,Amritsar

True copy By order