2009-VIL-348-ITAT-AHM

Income Tax Appellate Tribunal AHMEDABAD

ITA No. 3449/Ahd/2007

Date: 09.01.2009

MOHD. SOEB HAJI MOOSA TUMBI

Vs

INCOME TAX OFFICER

For the Appellant : R. B. Shah
For the Respondent : A. K. Mehta

BENCH

P. K. Bansal (Accountant Member) And Mahavir Singh (Judicial Member)

JUDGMENT

P. K. Bansal (Accountant Member)

This appeal has been filed by the assessee against the order of the CIT(A) dt. 19th July, 2007 for asst. yr. 2004-05 by taking the following effective grounds :

"1. On the facts and circumstances of the case as well as law on the subject the learned CIT(A) has erred in confirming the action of the AO in making the addition of gifts received of Rs. 76,75,000 as unexplained cash credit under s. 68 of the Act.

2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the AO in making the addition of Rs. 52,000 for low household withdrawal.

3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the AO in disallowing claim of depreciation loss of Rs. 3,38,442."

The brief facts relating to ground No. 1 are that the AO noted that the assessee has received gifts in cash totalling to Rs. 76,75,000 from 15 different persons. Accordingly, the show-cause notice was issued to the assessee. Summons under s. 131 were issued to the donors and subsequently 10 out of 15 donors appeared before the AO whose statements on oath were recorded. The finding in respect of each donor by AO is summarized in the following chart :

Sl.	Alleged donor	Gift	Gift	Appeared	Return Last	Remarks
4.	Sabbir Rafiq	5,50,000	No	Yes	2004-05	Depariya
5.	Sahin Safi	4,50,000	No	Yes	2003-04, 2004-05	Dhorajiwala
6.	Raees Rafiq	5,50,000	No	Yes	2003-04, 2004-05	Depariya
7.	Faruk	5,00,000	No	Yes	2004-05	Mohmad H. Ghaniwala
8.	Mohmed Saif	5,50,000	No	Yes	2002-03, 2004-05	Abdul Sattar Visavadarwala
9.	Anwar Gani	4,50,000	No	Yes	2004

balances not explained-says gift was given on demand from A. 54,267 Trades in plastics scrap-no business premises opening capitals balances not explained. 48,093Trades in grey clothes-no business premises-gift allegedly given at the instances of father 54,662 Deals in cut piece, lot shorts-no business premises-said gift was given on demand 6,054 Trades in grey cloth-no business premises-opening capital balance not explained. 58,146Trades in sarees opening capital balance not explained-said gift given in lieu of financial assistance from A. 48,012 Deals in cut The AO was of the view that the gifts were not genuine. There was no relationship or love and affection between the assessee and the donors and accordingly he treated the sum of Rs. 76,75,000 as bogus and unexplained and made the addition under s. 68 of the Act.

The assessee went in appeal before the CIT(A). The CIT(A) has dealt with the issue in great detail and confirmed the addition of Rs. 76,75,000 as unexplained cash credit under s. 68 of the Act as per observations given under paras 5 to 7 of his order.

The learned Authorised Representative before us vehemently contended that all the donors (except the ladies who were Pardanashin) have appeared before the AO and confirmed in their respective statements that they have given the gifts to the assessee and these are the persons whose names are appearing at serial Nos. 1 to 10 of the above Table. ‘Each of them has given the complete detail including their accounts and the acknowledgements of the returns filed. They are the regular assessees. Our attention was drawn in this regard towards pp. 10 to 39 of the paper book. It is evident from the perusal of the statements of various persons as reproduced in the assessment order that they have made the gifts to the assessee as the assessee was in need of the funds. Each of the donors has explained the source and the nature of business carried out by them. The identity of each of the donors is proved as they have given the statements under s. 131. Even this is also confirmed from the copy of the acknowledgement of the return which was duly filed before the AO. The donors have also confirmed that they have given the gifts. Merely some of the donors have income below Rs. 60,000 and did not have their bank accounts will not make the donors to be incapable of making the gifts. Some of the donors have even pointed out the reasons that the assessee has provided earlier the financial assistance to them. The genuineness of the transactions is proved from the copy of the capital account of each of the donors. Reliance was placed on the following decisions :

1. Murlidhar Lahorimal vs. CIT (2006) 200 CTR (Guj) 109 : (2006) 280 ITR 512 (Guj);

2. Addl. CIT vs. Hanuman Agarwal (1984) 40 CTR (Pat) 15 : (1985) 151 ITR 150 (Pat);

3. CIT vs. Shree Gopal & Co. (1994) 117 CTR (Gau) 357 : (1993) 204 ITR 285 (Gau);

4. Jalan Timbers vs. CIT (1997) 137 CTR (Gau) 649 : (1997) 223 ITR 11 (Gau);

5. Khandelwal Constructions vs. CIT (1998) 145 CTR (Gau) 65 : (1997) 227 ITR 900 (Gau);

6. Dy. CIT vs. Rohini Builders (2003) 182 CTR (Guj) 373 : (2002) 256 ITR 360 (Guj).

On the basis of the decision in the case of Rohini Builders (supra) it was contended that the assessee is not supposed to prove the source of source. He was fair enough to concede that five donors did not appear. It is only the ten donors who appeared before the AO out of which nine have PAN. The five donors being ladies who were Pardanashin and therefore, did not appear. He carried out to the assessment order and the statement made by each of the donors. It was vehemently contended that the assessee has complied with all the ingredients of s. 68. It was also contended that to the extent the donors had confirmed the gifts and they were the income-tax assessees, if any addition is to be made, that has to be made in the hands of the donors, not in the hands of assessee. The assessee is not supposed to prove the source of sources. It was also alternatively contended that the gift cannot be the income of the assessee, as the assessee was not having any source of income before the start of the restaurant business. The restaurant business was started only during the year. In the absence of any source of income, there cannot be any undisclosed income earned by the assessee. In this regard, reliance was placed on the following decisions :

(i) Mitesh Rolling Mills (P) Ltd. vs. CIT (2002) 177 CTR (Guj) 142 : (2002) 258 ITR 278 (Guj);

(ii) CIT vs. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509 : (1999) 237 ITR 570 (SC);

(iii) Roshan Di Hatti vs. CIT 1977 CTR (SC) 200 : (1977) 107 ITR 938 (SC);

(iv) CIT vs. Bharat Engineering & Construction Co. 1972 CTR (SC) 247 : (1972) 83 ITR 187 (SC).

The learned Departmental Representative, on the other hand, contended that the gifts were made in cash by 15 persons. Only 10 appeared. Even their identities were not proved. The submission of the assessee that the addition should be made in those cases itself proves that the assessee does not have any case. The gifts were not genuine. Five of the donors did not appear even though the assessee contended before the AO that those persons will appear subsequently. The persons who appeared did not have any means of identifying them. No ration card or PAN or any document was produced to prove the identity. Anybody could have turned up and gave the statement. The genuineness of the transactions was also not proved. Except the entries in the books of the assessee there was no other corroborative evidence. There is no evidence that the donors were having sufficient cash balance on the dates when the gifts were given to the assessee. The creditworthiness of the donors was also not established as all the alleged donors who appeared before the AO were persons of very small means. None of them has any established business and/or regular source of income. This is evident from the statements made by them on oath before the AO. The return for the first time for asst. yr. 2004-05 was filed by most of them, even though some of them had filed the first return of income for asst. yr. 2002-03 but those were also filed much after the close of the accounting year. The return filed for asst. yr. 2004-05 showed that all of them had declared the income below Rs. 60,000. In respect of case law relied on by the assessee it was pointed out that those cases are not applicable to the facts of the case before us. On question from the Bench whether any action has been taken in those cases, whether the donors have confirmed in the statements recorded under s. 131 that they have given the gifts, the learned Departmental Representative said no action has been taken in those cases so far as he is aware of but he vehemently contended that the onus is on the assessee to prove the identity, creditworthiness and genuineness of the transactions. The assessee in this case has failed to prove all the ingredients and the addition has rightly been made by the AO and sustained by the CIT(A).

We have carefully considered the rival submissions, and perused the material on record as well as the orders of the tax authorities. We have also gone through all the decisions relied upon before us by the both the parties. In order to appreciate the contentions urged before us, it would be appropriate to reproduce the provisions of s. 68 of the Act :

"68. Cash Credits-Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year."

From the reading of the aforesaid section, it is apparently clear that this section lays down rule of evidence that when any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of credit found in the books of the assessee, or the explanation offered by the assessee, in the opinion of the AO is not satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Before charging the credit as the income of the assessee, the AO has to form an opinion. This opinion is subjective, but it has to be judicious and based on material on record. An opinion is an inference of facts from observed facts. It is not an impression. It is a conviction based on appraisal of evidence on record. In V.L.S. Finance Ltd. vs. CIT (2000) 163 CTR (Del) 343 : (2000) 246 ITR 707 (Del), the Hon’ble Delhi High Court observed as under :

"‘Opinion’ means something more than more retailing of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question. It means : judgment or belief based on grounds short of proof. If a man is to form an opinion and his opinion is to govern, he must form it himself on such reasons and grounds as seem good to him."

Thus before the AO forms an opinion, he must consider the material before him. He has before him the material submitted by the assessee while giving an explanation, then he must collect his own material as an enquiry officer, weigh the two materials and as a quasi judicial authority form an opinion as to whether explanation furnished by the assessee is satisfactory or not. If the AO does not apply his mind in examining the documents furnished by the assessee and does not find any substantive error in them nor he collects any material by exercising powers under IT Act, then the claim of the assessee cannot be straightway rejected. If he does, it would be a violation of principles of natural justice and provisions of s. 68. The expression "the assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards the sum found credited in the books of account maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory must be based on proper appreciation of the material and other surrounding circumstances available on record. The opinion of the AO is to be based on appreciation of the material on record. The word "may" used in s. 68 provides discretion to the AO. In general the word "may" is an auxiliary verb clarifying the meaning of another verb of expressing an ability, contingency, possibility or probability. When used in a statute in its ordinary sense the word is permissive and not mandatory. But where certain conditions are provided in the statute and on the fulfilment thereof a duty is cast on the authority concerned to take an action, then on fulfilment of those conditions the word may take the character of "shall" and then it becomes mandatory. In s. 68, we find that there are no such conditions on the fulfilment of which the AO is duty-bound to make the addition. The word "may" denotes the discretion of the AO that he can make an addition or cannot make an addition. The Hon’ble Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan (supra) observed, as under :

"In the corresponding clause of the Bill which was introduced in Parliament, while inserting s. 69 in the IT Act, 1961, the word ‘shall’ had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word ‘may’. This clearly indicates that the intention of Parliament in enacting s. 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under s. 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under s. 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case."

Sec. 68 is a charging section and it applies when the assessee’s explanation with regard to cash credit is rejected as being unsatisfactory and also where the assessee does not tender any explanation in that respect. The AO has to state as to how he has formed his opinion that the explanation is unsatisfactory. Sec. 68 has gained great importance over the years, the reason(s) for the same are that some unscrupulous assessee(s) use this method, i.e., of cash credit, as a device to channelise black money into white money. Over the years, the various Courts have drawn their receptive ‘lines’ in the given facts of their respective cases. But, it would not be out of place to mention that there cannot be a straightjacket formula, which can fit into the facts of a given case and whereby it can be decided whether a credit is genuine one or not. It depends on the facts and circumstances of a given case and the Court(s) dealing with the same has to find out the true colour of the impugned transaction.

The various Courts have given their verdicts with regard to the genuineness or ingenuity of the cash credits involved in the cases they were dealing with, in their own way. The gist of most of such decisions is that the onus to establish the identity and the creditworthiness of the creditor(s) and the genuity of the transaction(s) of a cash credit in question is cast upon the assessee.

For a cash credit two parties are required. One is the assessee and the other is the cash creditor. No one can deposit his own money with himself in order to get benefit of s. 68. Another person should have deposited a sum of money with the assessee. This ‘another person’ cannot be a fictitious person but he should be a real person, who can be also a legal juristic person, which is permitted under the Act. The other person should have deposited his ‘own money’ and not the money of the assessee. Therefore, a maxim is created that if the real person deposits his own money with the assessee, the deposit is genuine and nothing else. In a sense all the three (sic) overall accepted generally, i.e., the identity, the creditworthiness and genuineness are different parts of only one ingredient, i.e., the genuineness of a cash credit. If the money is deposited by the self in the name of others, it cannot be said to be a cash credit at all. The money is stated to be deposited in the name of a person, who does not exist at all, it cannot be a cash credit. If no money is deposited but only entry is passed in the books of account, it is not a cash credit at all. Therefore, what is necessary to establish/prove a cash credit under s. 68 is that any other person than the assessee must have given or deposited money (s) with the assessee out of his own money. There cannot be any fixed rule or a straightjacket or a chemical formula, which can be said to be a sure shot test to Judge the genuineness of cash credit. An unscrupulous or dishonest assessee who has no respect for law can play any trick to evade payment of tax and can relate concocted stories which seem to be plausible and reasonable on the face of it. Therefore, it is for the taxman to discern the truth in the given facts and circumstances of a case. At the same time, the taxman has to act as an ordinary prudent instead of posing as a super human being and trying to prove as a numero uno. He has to strike a balance while conducting himself with the taxpayers, by remembering that the taxpayer is a respectable citizen and he contributes a lot towards the coffers of the Government, who in turn utilizes this fund for the benefit and the welfare of the people at large. Therefore, the task of a taxman is very important because he has to walk on an edge of a razor and at the same time he has to maintain a balance between what is right and what is wrong. He has to follow the laws of the land before he can preach the taxpayer to abide by the law. The taxman has to conduct himself in a way which is friendly to the taxpayer by showing that he is not an enemy but a friend. This friendly manner, if adopted by the taxman should also be shown to be so overtly as well as covertly. All the precedents simply guide the decision-maker in given facts of a particular case and it is he who has to apply his judicial mind with all the prudence at his command to decide that case. More often than not the ratio of a decision is followed only by adopting its letters. The decision has to be followed both in its letter as well as in the spirit. The spirit of a decision is its soul. Yes, to follow the letter only is not that harmful, but the unfortunate part of it is, that the letters are torn out of context from a given judgment and the same are put where it does not fit. In this melee, the real meaning of a decision is lost. The most useful precedents are usually lost when only from an excerpt of a decision, entirely different meanings are drawn by different people.

In the case before us this is an admitted fact that all the donors are income-tax assessees but it is only 13 persons who are having PAN. Shri Faruk Mohmad H. Ghaniwala and Smt. Irham Iqbal Tumbi did not have any PAN. Out of 15 donors only 10 donors appearing at serial Nos. 1 to 10 appeared before the AO, copies of their capital accounts and copies of acknowledgements of their IT returns were also filed. They accepted in the statements recorded under s. 131 that they have gifted the money to the assessee. We do not agree with the submission of the learned Departmental Representative that any person could have appeared before the AO and would have confirmed that they have given the gifts. Merely appearing before the AO does not prove the identity. If the AO was not satisfied about the identity of those persons, the AO should have not recorded the statements. Once the statement has been recorded and no material has been brought on record that the signatures on the statements recorded did not belong to the persons who have gifted the money or the signatures in the IT returns filed by these persons are different from the signatures, which have been made on the statements recorded under s. 131, it cannot be said that the identity is not proved. In our opinion, the identity is duly proved.

We have also gone through various case laws. In the case of Addl. CIT vs. Hanuman Agarwal (supra), the Hon’ble Patna High Court has held that if the assessee furnishes addresses of creditors, their confirmations and their income-tax numbers, the initial burden lying on assessee can be said to have been discharged. In the case of CIT vs. Shree Gopal & Co. (supra). the Hon’ble High Court has held that if the assessee produced prima facie evidence showing that the alleged borrowings were genuine, onus shifted to the Revenue to make out a case that the entries were not genuine. In the case of Jalan Timbers vs. CIT (supra) it was held that if assessee and creditors both have shown the impugned amount in their IT returns, no addition under s. 68 can be made if the returns of creditors have been accepted by AO. In the case of Khandelwal Constructions vs. CIT (supra) it was held for invocation of s. 68, proper enquiry is needed. In the case of Dy. CIT vs. Rohini Builders (supra), the Hon’ble High Court has held that no substantial question of law arises where assessee has established identity of creditors by giving their complete addresses, GIR numbers/PAN as well as confirmation wherever available. SLP filed by Revenue against the said decision has also been rejected as reported at (2002) 254 ITR (St) 275.

In the case of Murlidhar Lahorimal vs. CIT (supra) the facts were that the assessee filed the return of income along with the copy of capital account in the partnership firm in which he was a partner. The capital account showed Rs. 50,000 as gift received. The donor filed the return of gift of Rs. 50,000 and the assessment completed under s. 15(3) of the GT Act. Subsequently, notice under s. 148 was issued for the reason that Rs. 50,000 were assessable under s. 68. The Tribunal noted that the gift was given by way of bank draft. The donor appeared before the AO and confirmed the gift made. The evidences for the source of gift were available with him. The Tribunal however held that motivation for making gift was not established and the addition was upheld. When the matter went before the High Court, the Hon’ble High Court held that the Tribunal failed to note the fact that the identity of the donor was established, donor having appeared in person before the AO, the genuineness of the transaction was established, not only by the receipt of the bank draft but also by the fact of the transaction having borne the gift-tax. The primary onus which rested with the assessee thus stood discharged. If the Revenue was not satisfied with the source of the funds in the hands of the donor, it was upto the Revenue to take appropriate action. The addition of Rs. 50,000 was held to be not justified.

In the case of Mitesh Rolling Mills (P) Ltd. vs. CIT (supra) the facts were that the assessment under s. 144 was completed at total income of Rs. 2,50,127 while the return was filed at nil. While framing the assessment, the AO observed that the income under the head ‘Business’ is returned at nil, since the assessee does not seem to have commenced the production as yet. However, the balance sheet reveals that there has been introduction in the form of Rs. 90,000 for the shares and Rs. 1,60,127 in the form of unsecured loan. In the absence of the explanation, the sum of Rs. 2,50,127 was treated as income from undisclosed sources. When the matter went before the High Court, the Hon’ble High Court has held as under :

"Held that the Tribunal had not considered the submission of the assessee that even as per the finding of the ITO, the business of the assessee had not commenced. Similarly, the contention of the assessee that even if the explanation offered by the assessee for explaining the cash credit entries was not accepted, the entries in question should have been considered as capital receipts was also not considered. The matter was required to be remanded to the Tribunal for taking afresh decision in the matter in accordance with law after applying the test laid down by the Supreme Court in CIT vs. Smt. P.K. Noorjahan (1999) 155 CTR (SC) 509 : (1999) 237 ITR 570 (SC); Roshan Di Hatti vs. CIT 1977 CTR (SC) 200 : (1977) 107 ITR 938 (SC) and CIT vs. Bharat Engineering & Construction Co. 1972 CTR (SC) 247 : (1972) 83 ITR 187 (SC)"

The case of CIT vs. Smt. P.K. Noorjahan (supra) has already been discussed in the preceding para. In the case of Roshan Di Hatti vs. CIT (supra) the facts were that the assessee migrated from Lahore to Delhi during the partition days. He left Lahore with a sealed trunk containing gold ornaments, jewellery and cash which he deposited in the bank at Amritsar. He stayed in Mussoorie till October, 1947 and did not carry on any business. In October, 1947, he came to Delhi and secured premises for commencing business in February, 1948. Ultimately, he started jewellery business on 30th March, 1948. On that date, he carried the capital of Rs. 3,33,414 including gold ornaments, gold rawa, stones and cash in books. He explained the sources that he brought all those things when he migrated from Lahore in the sealed trunk from June, 1947 till 30th March, 1948. He did not have any other business or means of income from which the assets of Rs. 3,33,414 could be earned. The AO rejected the explanation of the assessee and treated Rs. 20,000 as explained and added Rs. 3,17,414. The Asstt. CIT treated further sum of Rs. 80,000 to be disclosed one. The Tribunal confirmed the order of the first appellate authority. The Hon’ble High Court confirmed the order of the Tribunal and Rs. 2,33,414 was treated as undisclosed income of the assessee. When the matter went before the Supreme Court, the Hon’ble Supreme Court held :

"Held, reversing the decision of the High Court, on the facts, that in reaching the conclusion that out of the capital of Rs. 3,33,414 credited in the books of the assessee on 30th March, 1948, assets of the value of Rs. 2,33,414 represented undisclosed income of the assessee, the Tribunal acted without any material or, in any event, the finding of fact reached by the Tribunal was unreasonable or such that no person acting judicially or properly instructed as to the relevant law could come to such a finding. The business carried on by the assessee at Lahore was a reasonably large business though its extent could not be verified by any reliable material produced by the assessee; there was no material on which it could be said that the ornaments, jewellery and cash brought by the assessee and kept in the sealed trunk were of the value of only Rs. 1,00,000 and no more; the fact that the assessee did not pay income-tax at Lahore could not have much value in view of the remittance of monies and the deposit of the sealed trunk in the bank; the answers given by Rule before the Tribunal to the informal questions put to him could not be relied upon for coming to any conclusion adverse to the assessee in view of the procedure prescribed by rr. 29, 30 and 31 of the Tribunal Rules, 1946, and they could not form part of the record; and no adverse inference could be drawn against the assessee from the fact of non-disclosure of the assets despite the press note of the Government of India. Further, the utter improbability amounting almost to impossibility of the assessee having earned such a large amount of Rs. 2,33,414 as profit within a few months in the disturbed conditions which then prevailed in India was a circumstance which ought to have been taken into account by the Tribunal and the Tribunal had failed to do so."

In the case of CIT vs. Bharat Engineering & Construction Co. (supra) the facts are that the assessee commenced its business in May, 1943. There were several cash credit entries in the first year amounting to Rs. 2,50,000. The Tribunal held that these cash credits could not represent the income as they were made very soon after the company commenced its activities. The Hon’ble Supreme Court held that the inference drawn from the facts proved was a question of fact and the Tribunal’s finding on that question was final. This is an admitted fact in the case of the assessee that 10 donors have appeared before the AO and confirmed that they have made the gifts to the assessee. They have filed their IT returns also. Copies of their capital accounts and the copies of acknowledgement of IT returns were also filed. In the capital accounts the gifts given to the assessee have duly been shown. But when we asked for the PAN, PAN was filed only in respect of 9 persons out of 10 donors. Five donors did not appear on the ground that they were the Pardanashin ladies. Even no confirmations on their behalf have been filed. In our opinion, once the donors are the income-tax assessees and the gifts given by the donors have duly been shown by them in their respective capital accounts, the AO should have taken action against the donors while making their assessments. A specific query was raised from the learned Departmental Representative but no action seems to have been taken in the cases of the donors. This is also a fact on record that the assessee has not commenced the business. The restaurant was under construction only. The assessee therefore could have not earned this much income from the business. The onus is on the assessee to prove the source of the amounts received by him. The assessee has produced some of the donors out of which nine are having PANs. Therefore, to the extent the five parties have not confirmed which are appearing at serial Nos. 11 to 15 amounting to Rs. 5,50,000, Rs. 5,75,000, Rs. 5,75,000, Rs. 4,50,000 and Rs. 4,75,000 totalling to Rs. 26,25,000, there is no evidence on record about the confirmations from the donor side that they have gifted the money to the assessee. We, therefore, confirm the addition to the extent of Rs. 26,25,000. Now coming to the gift received from Faruk Mohmad H. Ghaniwala amounting to Rs. 5,00,000, since the assessee could not place on record his PAN, therefore, we also treat this gift to be non-genuine and the addition in that regard is also confirmed.

In respect of the other gifts received by the assessee which relate to the nine parties who appeared and confirmed that they have gifted the amounts to the assessee, we are of the view that the assessee has discharged the onus and in our opinion the AO was bound to take action in their respective cases. We, therefore, delete the additions in view of the case laws as discussed above as in our opinion on the basis of these case laws the assessee has duly discharged his onus and the assessee is not supposed to prove the source of sources. Therefore, we delete the additions with the direction that the AO should taken action in the cases of those parties in the respective assessment years for examining the source of the gifts made by those parties to the assessee under the applicable provisions of the IT Act. Thus, this ground stands partly allowed.

Ground No. 2 relates to the addition of Rs. 2,00,000. The brief facts in relation to this ground are that the AO made an addition of Rs. 2,00,000 on the basis that the assessee has introduced Rs. 2,00,000 during the year under consideration as capital. When the matter went before the CIT(A), the CIT(A) confirmed the order of the AO rejecting the explanation of the assessee that the said capital was introduced out of past savings.

The learned Authorised Representative before us by referring to the copy of the capital account for the earlier year, i.e., 2002-03 pointed out that the assessee was having cash in hand as on 31st March, 2003 amounting to Rs. 1,74,370 and accordingly the sum of Rs. 2,00,000 was invested out of the past savings. For this our attention was drawn towards the acknowledgement of the return for asst. yr. 2003-04 and the balance sheet for that assessment year appearing at pp. 41 to 42 of the paper book. The learned Departmental Representative, on the other hand, relied on the order of the authorities below.

We have carefully considered the rival submissions and perused the material on record. We find that the assessee has introduced the sum of Rs. 2,00,000 in September, 2003. The assessee was having opening cash in hand as on 1st April, 2003 amounting to Rs. 1,74,370. Since the assessee has not given any details of the income, etc. which the assessee had earned during that period, we, therefore, treat the sum of Rs. 1,50,000 as available with the assessee out of the opening balance for capital investment and accordingly the addition to the extent of Rs. 1,50,000 is deleted and for Rs. 50,000 the addition is confirmed. Thus, this ground stands partly allowed.

Ground No. 3 relates to the addition of Rs. 52,000 due to low household withdrawal. The AO noted that there was withdrawal of Rs. 68,000 for the whole year. The AO has estimated the household expenses at Rs. 1,20,000 and therefore, made an addition of Rs. 52,000. When the matter went in appeal before the CIT(A), the CIT(A) confirmed the addition by observing as under :

"14. It has been contended by the Authorised Representative that the assessee resided in a joint family. The AO had not brought any material evidence on record to show that the withdrawals of Rs. 68,000 was on the lower side, nor did he substantiate his estimation of household expenses at Rs. 10,000 per month. The addition therefore, was made clearly on conjectures and surmises.

15. I have carefully considered both the positions. The assessee is an influential businessman who runs a restaurant called ‘Silver Nest’. He maintained two residential premises. He would thus have had to incur expenditure not only on the maintenance of the premises, but also on municipal taxes, servants, provisions for the family, medicines travelling as also on social and religious occasions. The withdrawals shown of Rs. 68,000 meant a monthly withdrawal of Rs. 5,666, which obviously would have been insufficient to meet all such expenses. Consequently, it could be concluded that the remaining expenses were met by the assessee out of his undisclosed income. The AO therefore, was fully justified in estimating the monthly expenses at Rs. 10,000 and the annual expenses at Rs. 1,20,000. The addition of the sum of Rs. 52,000 is therefore, confirmed."

We have carefully considered the rival submissions and perused the material on record along with the order of the tax authorities below. We find that there is a finding given by the AO that the assessee was maintaining two residential premises. The assessee is bound to incur expenditure on the property tax, servant’s salary, food, travelling, etc. Therefore, in our opinion, the estimate made by the AO is quite justified. We, therefore, do not find any illegality or infirmity in the order of the CIT(A) in confirming the addition to the extent of Rs. 50,000. Thus, this ground stands dismissed.

Ground No. 4 relates to the sustenance of the disallowance of depreciation of Rs. 3,38,442. The learned Authorised Representative before us contended that the assessee claimed the depreciation at Rs. 3,38,442. The assessee carried on restaurant business located in basement and due to the floods during the year under consideration the restaurant of the assessee got damaged due to which the assessee was unable to produce the bills for the new assets purchased. The flood is a natural phenomena and it is beyond the control of the assessee. The assessee has incurred the expenditure and the depreciation should be allowed.

The learned Departmental Representative, on the other hand, relied on the order of the authorities below and contended that the AO asked the assessee to submit the complete addresses of Laxmidas Enterprise and Om Moulding Works from whom the assessee contended that he had bought the assets installed in the restaurant. The assessee could not adduce any evidence by way of addresses of these parties so that the AO could have directly verified the same. Even the assessee did not produce any proof by way of FIR and insurance. Had there been any damage the assessee would have made claim before the insurance authorities. Even the assessee could not obtain copy of the duplicate bills from the concerned parties. No direct evidence ancillary or the incidental has been filed by the assessee, therefore, the AO was correct in law in rejecting the claim of the assessee.

We have carefully considered the rival submissions and perused the material on record along with the order of the tax authorities below. In our opinion, the onus is on the assessee to prove that the assessee has incurred the expenditure. No doubt, there had been flood during the year but that does not absolve the assessee from adducing the evidence. There is a finding that the assessee did not file even the copy of FIR, insurance claim if any made. Even the assessee could have taken duplicate bills from the respective parties. The assessee although told the names of the parties from whom the assessee bought the capital assets, but when the addresses were asked for, the assessee did not furnish the same. Even no such evidence brought to our knowledge. Under these facts, in our opinion, no interference is called for in the order of the CIT(A). We accordingly confirm the order of the CIT(A) on this ground. Thus, this ground stands dismissed.

In the results, the appeal of the assessee is partly allowed.

 

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