Ita/153/2013 Of E. Ummer Bava v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU FRIDAY, THE 20TH DAY OF MAY 2016/20TH VAISAKHA 1938 ITA.No. 153 of 2013 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 515/COCH/2011 of I.T.A.TRIBUNAL,COCHINBENCH DATED 08-02-2013 APPELLANT(S)/APPELLANT: ---------------------- E. UMMER BAVA CONTRACTOR, SAKEENA MANZIL, DOWN HILL, MALAPPURAM-676 519. BY ADVS.SRI.P.RAGHUNATH SRI.PREMJIT NAGENDRAN RESPONDENT(S)/RESPONDENT: ------------------------- THE COMMISSIONER OF INCOME TAX KOZHIKODE. BY SRI.P.K.R.MENON, SC, INCOME TAX R BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 20-05-2016,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPELLANT'S EXHIBITS: APPENDIX IN ITA.153/13 ANNEXURE A: PHOTOCOPY OF ASSESSMENT ORDER DT.10.12.2007. ANNEXURE B: PHOTOCOPY OF ORDER OF CIT(A) DT.31.3.2011 IN ITA NO.C-10/R3/CLT/CIT(A)-11/07.08.10/R3/CLT/CIT(A)-11/07.08. ANNEXURE C: CERTIFIED COPY OF ORDER OF ITAT DT.8.2.2013 IN ITANO.515/COCH/2011 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH.NO.515/COCH/2011 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH. /TRUE COPY/ PS TO JUDGE ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. -----------------------------------I.T.A.No.153 of 2013 ----------------------------------- Dated this the 20[th] day of May, 2016 JUDGMENT Antony Dominic, J. 1. This appeal is filed against the order passed by the Income Tax Appellate Tribunal, Cochin Bench inITA.515/11 pertaining to the assessment year 2005-06.The grievance of the assessee was confined toaddition of gift receipt of `35 lakhs from hisbrother Sri.E.Hamza Bava, an NRI, and addition of `2lakhs towards unverifiable nature of expenses. Thisaddition was confirmed by the first appellateauthority and by the Tribunal. It was in thesecircumstances, the assessee has come up in thisrevision filed under section 260A of the Income TaxAct, framing the following questions of law for theconsideration of this Court: “a) Whether, in the facts and circumstances of thecase, the authorities were right in invoking theprovisions of Sec.68 of the Act in respect of thegift received from the appellant's brother when (1)there is no dispute regarding the identity of the“donor” (2) the donor has proved his capacity tomake the gift by proving that he has received Dh.11 ITA.153/13 lakhs (Rs.110 lakhs) in connection with hisretirement and (3) payment was made throughInstruments issued by Foreign Banks and creditedto the account of the Appellant by negotiationthrough a Bank in India where he maintainsaccount? b) Whether the Appellate Authorities were right inupholding the same on the ground that theauthenticity of the Certificate issued by Ms.PalmGeneral Trading LLC has not been proved when theAssessing Authority had chosen to assess theamount under Sec.68 of the Act, on the groundthat the creditworthiness and capacity of thedonor have not been proved “beyond doubt”,especially when the Assessing Authority hadexpressed no reservations about the authenticityof the same in the Remand Report submitted byhim? c) Whether the Assessing Authority was notrequired to conduct enquiries regarding the claimof the Appellant that the amount was received asgift when his finding is that the appellant had notproved the credit worthiness and capacity of thedonor “beyond doubt”, which itself would indicatethat the Appellant had discharged the initialburden cast on him? d) Whether the authorities below were rightindicating that such receipts SHOULD HAVE BEENTHROUGH THE NRE ACCOUNT OF THE DONOR inorder to establish a link between the amounts c) Whether the Assessing Authority was notrequired to conduct enquiries regarding the claimof the Appellant that the amount was received asgift when his finding is that the appellant had notproved the credit worthiness and capacity of thedonor “beyond doubt”, which itself would indicatethat the Appellant had discharged the initialburden cast on him? d) Whether the authorities below were rightindicating that such receipts SHOULD HAVE BEENTHROUGH THE NRE ACCOUNT OF THE DONOR inorder to establish a link between the amounts received from the LLC and the gift when theAppellant had received the gifts in the form ofDemand Drafts - Instruments issued by ForeignBanks and credited to the respective account ofthe Appellant by negotiation through a Bank inIndia with whom the Appellant maintains account? e) Whether the Assessing Authority was right insuspecting the genuineness of the gift on theground that “there was no special occasion for thegift”, when the gift is NOT TO THIRD PARTIES,BUT TO OWN BROTHER? f) Whether, in view of the fact that (1) the donoris the brother of the appellant, (2) admittedly hehas received Rs.110 lakhs from his firm from whichretired (as certified by the firm), (3) the gift hasbeen properly confirmed through a duly NotarizedAffidavit by the “donor”, the authorities were rightin holding that “the genuineness of the transactionscannot be considered to have been established andthat creditworthiness of the donor has not beenestablished”? g) Whether the authorities erred in applying theprinciples laid down by the Hon'ble Supreme Courtin COMMISSIONER OF INCOMETAX VS.P.MOHANAKALA - [2007] 291 ITR 278 (SC) to thefacts of the case? h) Whether the addition of Rs.2 lakhs “to cover upthe deficiencies noticed in the books of accountsrelating to contract business” is sustainable?” ITA.153/13 4 2.Heard learned counsel for the assessee and thelearned senior counsel for the Revenue.learned senior counsel for the Revenue. 3.In so far as addition of gift receipt of `35 lakhs isconcerned, the order passed by the lower appellateauthority shows that it was mainly on account of thefailure of the assessee to prove the requirement ofsection 68 that the addition was upheld. Section 68of the IT Act requires an assessee to prove thecredits appearing in the books of accounts and thenature and source of such amounts so that, ifexplanation furnished is not satisfactory, theAssessing Authority can enter it as the assessee'sincome. The conditions which are required to beproved by the assessee are the identity of thecreditor, the capacity of the creditor to advance themoney and the genuineness of the transaction. In sofar as this case is concerned, the identity of thecreditor has been established by the assessee.However, in so far as the creditworthiness of thedonor is concerned, according to us, the Tribunal has,on facts, rightly held that the assessee has failed to ITA.153/13 discharge the burden. Similar is the case with thegenuineness of the transactions also. 4.In so far as the creditworthiness of the donor isconcerned, the Tribunal has found that the assesseehas not produced the balance sheet or financialstatement or cash flow statement of the donor.Similarly, there was also no material to show that thesums gifted were the sums received by the donor on hisrequirement from the firm of which he was a partner.That apart, it was also found that the donor hadreceived his retirement benefits from the firm in theprevious assessment year and in the previous yearalso, the assessee had received substantial sums fromthe donor. The authenticity of the certificate ofdisbursement of sums to the donor, issued by the firm,also was rightly declined to be accepted for nonproduction of supporting documents. Therefore, weconcur with the view of the Tribunal that thecreditworthiness of the donor was not established. 5.In so far as the genuineness of the transaction isconcerned, it could have been established by theconcerned, it could have been established by the assessee by producing materials to show that the moneygifted were from the own funds of the donor. On thisaspect also, there was total dearth of materials. Insuch circumstances, we are constrained to agree withthe Tribunal that the assessee failed to discharge theburden under section 68 of the Act and therefore, theaddition was rightly upheld. 6.The addition of `2 lakhs was sustained by the Tribunalfor absence of independent cross-verifiable vouchersand other documents. Here again, this factual findingcannot be said to be wrong in any manner. In suchcircumstances, we uphold the factual conclusion of theTribunal and according to us, the order of theTribunal does not give rise to any question of law forconsideration of this Court.for absence of independent cross-verifiable vouchersand other documents. Here again, this factual findingcannot be said to be wrong in any manner. In suchcircumstances, we uphold the factual conclusion of theTribunal and according to us, the order of theTribunal does not give rise to any question of law forconsideration of this Court. Appeal fails and is accordingly dismissed. Sd/- ANTONY DOMINIC, Judge. Sd/- DAMA SESHADRI NAIDU, Judge. kkb.