Itta/499/2012 Of Commissioner Of Income Tax v. Dr.kodela Siva Prasada Rao

HONOURABLE SRI JUSTICE GODA RAGHURAMANDHONOURABLE SRI JUSTICE M.S.RAMACHANDRARAO I.T.T.A.No.499 of 2012 JUDGMENT(per Hon’ble Sri Justice M.S.Ramachandra Rao): This appeal is filed under Section 260-A of theIncome Tax Act, 1961 (for short ‘the Act’) by the Revenuechallenging the order dated 29-06-2010 in I.T.A.No.677/Vizag/2008 of the Income TaxAppellate Tribunal, Visakhapatnam relating to theassessment year 2003-04. 2.The respondent/assessee, an ex-MLA andan Ex-Minister filed his return of income on 08-10-2003for the assessment year 2003-04 admitting a total incomeof Rs.3,34,500/- including income from other sources ofRs.60,000/- earned by him during the previous year. Healso admitted agricultural income of Rs.40,000/-. Thereturn was processed under Section 143 (1) on 19-01-2004. The assessing officer suspected that some incomechargeable to tax had escaped assessment and issued anotice under Section 148 on 11-10-2005 calling for returnof income for the assessment year 2003-04. In responseto this, the assessee’s authorized representative filed aletter dated 07-11-2005 stating that the return filed for the assessment year 2003-04 on 10-03-2002 may be treatedas return filed in response to notice under Section 148. Thereafter notice under Section 143 (2) was issued on 12-12-2005. Further notice under Section 142 (1) was issuedon 28-06-2006 calling for total salary particulars includingall allowances received by him in the capacity of Minsterduring the assessment year 2003-04. 3.The assessing officer reopened the earlierassessments and brought to tax the allowances receivedby the assessee after holding that no exemption wasavailable to the assessee on such allowances. 4.In this appeal, we are only concerned withthe issue relating to an amount of Rs.22,76,750/- in U.S.dollars received by the assessee from an NRI which wascredited to his capital account in the assessment year2003-04. 5.The assessing officer by notice underSection 142 (1) dated 12-09-2006 requested theassessee to furnish the complete details of receipt of theabove amount from the NRI such as nature of thetransaction, name and address of the person from whomthe amount was received and bank account particulars inwhich this amount was realized in Indian currency. Inresponse, the assessee’s authorized representative fileda letter dated 22-12-2006 stating that one N.Mohan, anNRI, a resident of USA had given the amounts to him and also gave a copy of the assessee’s bank account inS.B.H., Secretariat Branch, Hyderabad. On verification ofthis bank account, the assessing officer found that theassessee himself made a note of gifts received in thebank account statements furnished by the bank and asper the bank statement it was clear that an amount ofRs.7,76,750/- was received by the assessee. Theassessing officer vide letter dated 26-12-2006 requestedthe assessee to furnish proof regarding receipt of gift ofremaining amount of Rs.15.00 lakhs on or before 28-12-2006. The assessee filed a confirmation letter from theNRI, N.Mohan wherein he confirmed that he paidRs.15.00 lakhs to the assessee who was his relativeduring the financial year 2002-03 apart from the officialremittance in foreign currency to his account. Theassessee in a letter dated 27-12-2006 informed theassessing officer that the donor is available in town due tothe demise of his mother-in-law, furnished the completedetails of the addresses and mobile numbers of the donor to the Revenue for verification. But the Revenueauthorities did not contact the donor and verify the factsstated by him in the confirmation letter given by him. 6.The assessing officer was of the view thatthe NRI had not furnished any details as to the exact datewhen he paid Rs.15.00 lakhs, the sources for the sameand also the reasons for paying this amount to the 6.The assessing officer was of the view thatthe NRI had not furnished any details as to the exact datewhen he paid Rs.15.00 lakhs, the sources for the sameand also the reasons for paying this amount to the assessee. He also noted that the bank account of theassessee for the financial year 2002-03 did not disclosefrom which account the sum of Rs.7,76,750/- wasreceived by the assessee and the assessee had notfurnished any details regarding the bank account fromwhere these amounts were transferred to the assessee’saccount. He therefore held that the identity of the lenderor his creditworthiness or the genuineness of thetransaction could not be verified. He therefore opined thatthe explanation of the assessee was not satisfactory andby order dated 29-12-2006 determined that the amount of Rs.22,76,750/-is liable to be taxed as income of the assessee underSection 68 of the Act. 7.The assessee filedI.T.A.No.295/CIT(A)/GNT/ 2006-07 to the CIT (Appeals). Before the appellate authority, the assessee also filedcopies of the donor’s financial statements and contendedthat the donor is a resident of Boston in USA, that he is animmigrant to USA and is working there as a softwareexpert owning a software company and during the year hehad an yearly income of Rs.4.00 crores, in thesubsequent year he had an annual assessed income ofRs.2.00 crores and as on the date of filing of the appealhe owns a software company of worth U.S. $ 25 million(Rs.100 crores). The assessee filed another confirmationletter dated 10-07-2007 from the donor in the form of a certificate stating about his financial creditworthiness andtherein the donor also stated that his gifts to the assesseeare to help his extended family back home, that they aregenuine, that during the same period he had donatedmore than Rs.2.00 crores to rebuild a government school,constructed a guest house for Sree SitaramachandraSwami temple at Bhadrachalam and also gave money fora number of charitable causes. He enclosed the return ofincome filed in U.S. by him showing the status andfinancial position. The appellate authority, did notconsider the same and held that the assessee hadproved the identity of the donor, his creditworthiness butthe assessee had not proved the genuineness of thetransaction. He held that a bald confirmation letter from thedonor in USA is not sufficient to prove the genuineness ofthe transaction of gift, that the NRI’s bank accountevidencing transfer of amounts to the tune ofRs.7,76,750/- to the assessee’s bank account have notbeen filed and there is no evidence to show that theamount of Rs.15.00 lakhs was gifted to the assessee byhim as there is no evidence of withdrawal of funds by himto make these gifts. He therefore confirmed the additionof Rs.22,76,750/- to the income of the assessee underSection 68 of the Act by order dated 26-09-2008. 8.Aggrieved, the assessee filedI.T.A.No.677/Vizag/2008 to the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam. Afterconsidering the donor’s confirmation letter annexed to theassessee’s letter dated 27-12-2006 and the second confirmation letter 8.Aggrieved, the assessee filedI.T.A.No.677/Vizag/2008 to the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam. Afterconsidering the donor’s confirmation letter annexed to theassessee’s letter dated 27-12-2006 and the second confirmation letter dated 10-07-2007 of the donor, the bank statements ofthe assessee, the income tax returns of the donor filed inthe USA and noticing that the department made no effortto contact the donor even though he was in India inDecember 2006 on account of the demise of his mother-in-law and the assessee had furnished the mobile numberof the donor to the department, the Tribunal held that theassessee had proved the identity and thecreditworthiness of the donor and also the transaction ofgift given by him to the assessee as the assessee and hischildren were his relatives. The Tribunal thereforereversed the orders passed by the CIT (Appeals) and theassessing officer and held that the Revenue’s contentionthat the genuineness of the gifts by the donor to theassessee were not proved by the assessee is not correct,that on the basis of conjunctures and surmises theassessing officer had held that the gift was not genuinewithout taking any steps to examine the donor or makingany independent enquiry from the donor with regard to thegift. It also held that entries found in bank pass bookswhich are not regular books of accounts cannot beincluded under Section 68 of the Act and therefore theprovisions of Section 68 cannot be invoked. 9.Aggrieved thereby, the Revenue has filedthe present appeal before this Court. 10.Heard Sri B.Narasimha Sarma, learnedcounsel for the Revenue at the stage of admission. 11.Sri Sarma contended that the Tribunal’sfindings are contrary to law, material on record and vitiatedby irregularities in exercise of jurisdiction, that theassessing officer had rightly disbelieved the genuinenessof the gift and findings of the Tribunal are perverse andunsustainable. 12.From the above facts it is clear that theassessee had received a gift of Rs.22,76,750/- in U.S.dollars from an NRI, N.Mohan and the assessee had filedtwo confirmation letters, one in December 2006 andanother on 10-07-2007 given by the donor stating that hehad gifted the above amount to the assessee, that theassessee is his close relative, that he is a man of meansowning a software company of a net worth of US $ 25million, that he had gifted during the year 2002-03 Rs.2.00crores to rebuild a government school, and gotconstructed a guest house for Sri SitaramachandraSwami temple at Bhadrachalam. Copies of the incometax returns filed by the donor in USA were also filed by theassessee. Even though the assessee informed thedepartment that the donor was available in India inDecember 2006 on account of the death of his mother-in- law and the contact details of the donor in India (addressand mobile numbers), the department did not bother tocontact him and verify the above facts. In this view of thematter, we are of the view that the assessee haddischarged the burden cast on him to prove the identity ofthe creditor, the creditworthiness of the creditor and thegenuineness of the transaction. Therefore, the contentionof the Revenue that the said sum ought to be added to theincome of the assessee cannot be accepted. The findingrecorded by the Tribunal is based on appreciation of thematerial on record and cannot be said to be perverse. Inour view, no question of law, much less a substantivequestion of law arises for consideration in this appeal. 13.Therefore the appeal is without any merit andis dismissed. No costs. ____________________________ JUSTICE GODA RAGHURAM __________________________________ JUSTICE M.S.RAMACHANDRA RAODate:20-11-2012Kvr