Commissioner of Income Tax-III vs Mira S. Khurana

D.A. Mehta, J.—On 08.03.2010 the following order was made:

Heard learned Senior Standing Counsel for the Appellant Revenue.

Notice for final disposal returnable on 30.03.2010.

Heard learned Senior Standing Counsel for the appellant-revenue and learned advocate appearing for the respondent. ADMIT. The following substantial question of law arises from impugned order of Income Tax Appellate Tribunal (the Tribunal) dated 08.08.2008:

Whether on the facts and in the circumstances of the case the Tribunal was justified in law in restoring the matter to the file of the Assessing Officer without recording any findings as to how the order made by Commissioner (Appeals) was bad in law?

With the consent of the learned Counsel the appeal is taken up for final hearing and disposal today.

The grievance made by the appellant is that considering the findings recorded by the Assessing Officer and Commissioner (Appeals) the Tribunal has erred in law in shifting the onus on the revenue when it was respondent-assessee who had failed to establish the genuineness of the gift from the donors.

As against that on behalf of the respondent it was submitted that subsequent to the order made by the Tribunal the Assessing Officer had passed a fresh order and hence, this appeal was required to be dismissed. On merits it was submitted that the communication addressed by the assessee to the Assessing Officer was not considered by the Assessing Officer and hence, even for the said reason the matter was required to be sent back to the Assessing Officer. Therefore, also no error was committed by the Tribunal. It was submitted that out of various documents filed before Commissioner (Appeals) only one of the documents, namely, certificate by the Chartered Accountants had been considered by the Commissioner (Appeals) and for this reason also, impugned order made by the Tribunal was not required to be interfered with.

As can be seen from the facts on record the assessee received gift worth Rs. 15,00,000/- from one Non-resident Indian Shri Sajabhai Ajabhai Karia of Al Fahidi Street, Khor, Dubai. The Assessing Officer came to the conclusion that the assessee had failed to prove sound financial capacity of the said donor; had failed to establish the circumstances leading to gift; and had failed to establish that the money was received as gift only. The explanation tendered by the assessee was not found to be acceptable and the reasons recorded by the Assessing Officer have been summarized in Paragraph No. 2.4 of the assessment order. The same reads as under:

It can be seen from the above that the assessee has tried to legitimate the transfer of funds in the garb of gift.

There are no circumstances or a relationship as such which will legitimize such a claim.

There is no close relationship as claimed and the assessee has failed to establish that the gift is out of the wealth of the donor. The onus to produce at-least some financial data was on the assessee to prove the capability of the person to give the gift. The same has been done.

The assessee has not been able to prove the financial capacity of the donors nor any proof of the financial worth was submitted. Any details which would prove the financial soundness, like details of income and wealth with certified documents was not filed. As the assessee has not submitted the information to prove the financial capacity of the donor the only obvious conclusion which can be drawn is that the donors do not have financial worth to make such gift.

Commissioner (Appeals) has confirmed the aforesaid findings. While doing so Commissioner (Appeals) has recorded as under:

...Appellant is a resident of Ahmedabad while the alleged donor when he was in India was staying at Khambhalia in Jamnagar. The donor and donee belong to different communities. No link leading to friendship of natural love and affection could be shown by the appellant. The donor went to Dubai in the year 1998, and within a period of less than 2 years i.e. May, 2000, he made a gift of Rs. 15 lakhs to the appellant. There is no evidence to show that within such a short time he became so rich to gift this amount to a near stranger and unrelated person....

When one goes through the impugned order of the Tribunal it becomes apparent on reading Paragraph Nos. 9 and 10 of the order that the findings recorded in Paragraph No. 10 are not borne out from the orders of the subordinate authorities. The Tribunal has failed to appreciate that the Assessing Officer had granted opportunity to the assessee to prove the genuineness of the gift and creditworthiness of the donor but the assessee had failed to adduce any proof in this regard. The onus then could not have been shifted to the Assessing Officer without dealing with the findings recorded by the subordinate authorities. The position in law is well-settled and it is not necessary to refer to catena of decisions, suffice it to state that as recorded by this Court in the case of Rameshchandra M. Luthra Vs. Assistant Commissioner of Income Tax, the Tribunal is duty bound to consider the reasons given by the appellate authority for its decision before upsetting the order made by the appellate authority.

In the facts of the present case it is apparent that the Tribunal has failed to undertake the aforesaid exercise and the impugned order is thus vitiated in law.

In the circumstances, without expressing any opinion on merits of the controversy the impugned order dated 08.08.2008 made by Income Tax Appellate Tribunal, ''C'' Bench, Ahmedabad, in so far as it relates to respondent assessee, is quashed and set aside and Income Tax Appeal No. 2692/Ahd/2004 for Assessment Year 2001-2002 stands restored to file of Tribunal for being decided afresh in accordance with law after granting an opportunity of hearing to the parties.

The question is answered accordingly. The appeal is allowed in the aforesaid terms with no order as to costs.