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Section 68 in The Income- Tax Act, 1995
The Income- Tax Act, 1995
Section 24 in The Income- Tax Act, 1995
Cit vs D.P. Sandu Bros. Chembur (P) Ltd. on 31 January, 2005
New India Assurance Co., Shimla vs Kamla And Ors on 27 March, 2001

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Income Tax Appellate Tribunal - Delhi
Jatinder Machanda, New Delhi vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH 'D' : NEW DELHI)

SHRI U.B.S. BEDI, JUDICIAL MEMBER

and

BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER

ITA No.4060/Del./2011

(Assessment Year : 2006-07)

ACIT, Circle 27 (1), vs. Shri Jatinder Manchanda, New Delhi. 52 / 38, Ramjas Road, Karol Bagh,

New Delhi.

(PAN : AAQPM1665F)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : S/Shri Salil Aggarwal & Shailesh Gupta, CAs REVENUE BY : Ms. Y. Kakkar, DR

ORDER

PER B.C. MEENA, ACCOUNTANT MEMBER :

This appeal filed by the assessee emanates from the order of CIT (Appeals)-XXIV,

New Delhi dated 21.06.2011 for the Assessment Year 2006-07.

2. The assessee is an individual. Order u/s 143(3) of the Income-tax Act was made on

30.12.2008. An addition of Rs.10,88,000/- was made u/s 68 of the Income-tax Act, 1961.

CIT (A) deleted the addition by holding as under:-

"5.4 In view of the above discussion, I am of the opinion that the appellant has clearly discharged his onus by proving the identity of the donor, the genuineness of the gift and also the credit worthiness of the donor, who happens to be his own mother. If it was the case of the A.O. that the money gifted by Smt. Mohinder Wati to her son, the appellant, is not the same which she obtained by selling her jewellery declared under VDIS, 1997, then the onus was on him to establish such a nexus. Not only has he not been able to do so, he has not made any further investigations in 2 ITA No.4060/Del./2011

that direction. Further, the A.O. passed on the information regarding presumed bogus sale of jewellery to the A.O. of Smt. Mohinder Wati, who reopened her case u/s. 147 of the Act and passed an order with the following remarks :

"From details filed by the AR it is seen that the assessee has gifted this amount to her son out of amount received from sale of jewellery. After going through the details filed by the AR and on considering the submission made by the assessee is accepted and discussed the case."

3. The grounds of appeal taken by the revenue read as under :-

"On the facts and circumstances of the case and in law CIT (A) erred in :-

i) in deleting of Rs.10,80,000/- made on account of unexplained cash credit.

ii) In accepting the sweeping submission of the assessee which do not stand supported by evidence.

iii) In not allowing the opportunity to A.O. to examine the findings which were relied upon by the Ld. CIT (A).

iv) Immunity in VDIS cases is available only to the declarant and no third party can derive benefit from same.

2. The appellant craves the right to add, delete, alter or amend any ground of appeal."

4. While pleading on behalf of the revenue, the learned DR submitted as under :-

a) Following enquiries conducted by Assessing officer reflected that the jewelers from whom money was allegedly received as source of gifts to assessee Sh Jatinder Manchanda were non existent at the addresses provided on the alleged purchase memos/ bills submitted meticulously by assessee during assessment proceedings - Refer page 3, para 8.1 of assessment order read with para 12 , page 4 thereof :

S. Bill Dated Name of Particulars Amount PB Page Details of No. Party issuing of Jewels of Bill No.(earlier filed findings by ITI, purchase in Feb 2012 by postal authority, Memos Revenue) association

1. 13/11/2005 Rajinder & Old Gold 370260 11(ITI report), There is no lane Sons Ornaments 9- reply on number Jewelers, 547 One Gold 1(letter to asso. mentioned. The Gurdwara Tagari 490 & its reply), 31 address is non- Road, Karol GM @ 8415/- and reverse of existent/postal Bagh New 31(marks by authority stated Delhi-05 postal as incomplete authority) address/

3 ITA No.4060/Del./2011

association

stated that the

parties are not

member of

association and

where abouts are

not known as

names and

address are

incomplete

2. 25/11/2005 Dhananjay Old Gold 174720 14(ITI report), Gali Hamdard is Jewellry, Ornaments 7- reply on not in 1068 Gali 13 pcs bangle 5(letter to Malliwara. It is Hamdard 2nd 208 gms @ Malliwara asso. near Ajmeri Floor, 8400 & its reply), 33 Gate. The Malliwara, and reverse of address is non- Delhi-06 31(marks by existent. postal

authority as no

such firm in

this address)

3. 05/12/2005 Mohinder Old Gold 215040 13(ITI report), There is no such Gold Ornaments 9- reply on building in lane Jewellry, 16 pcs bangle 1(letter to asso. no.2. The 2126/2, Bank 256 gms @ & its reply), 32 address is non- Street, Karol 8400 and reverse of existent. Bagh, New 32(marks by Delhi-05 postal

authority as no

such firm in

this address)

4. 21/12/2005 Randhir Old Gold 147000 12(ITI report), There is no lane Jewels,718 Ornaments 9- reply on number Gurdwara One Gold Set 1(letter to asso. mentioned. The Road, (4pcs) 175 & its reply), 30 address is non- Beadonpur, gms @ 8400/- and reverse of existent. Karol Bagh 30(marks by New Delhi-05 postal

authority as

incomplete

address)

5. 24/12/2005 Dhananjay Old Gold 80544 14(ITI report), Gali Hamdard is Jewellry, Ornaments 6 7- reply on not in 1068 Gali pcs bangle 96 5(letter to Malliwara. It is Hamdard 2nd gms @ 8390 Malliwara asso. near Ajmeri Floor, & its reply), 33 Gate. The Malliwara, and reverse of address is non- Delhi-06 31(marks by existent. postal

authority as no

such firm in

this address)

6. 29/12/2005 Randhir Old Gold 104688 12(ITI report), There is no lane Jewels,718 Ornaments 9- reply on number Gurdwara One pair 1(letter to asso. mentioned. The Road, gold Kara 2 & its reply), 30 address is non- Beadonpur, Nos 125 gms and reverse of existent. Karol Bagh @ 8375/- 30(marks by New Delhi-05 postal

4 ITA No.4060/Del./2011

authority as

incomplete

address)

a.1) Doubting the transaction of gift per se -genuineness of transaction not established: Its difficult to imagine and against all human probabilities to assume that such shifting stand would inspire and establish genuineness of transactions and thus onus cast on assessee not discharged: No prudent person would give details of alleged sale in such fantastically detailed manner(to varied no of non existent dealers of jewellers of kaol bagh setting out Rs and jewels etc in (alleged ) bills evidencing such sums receipt generation) which on being found to be bogus by revenue (as INSPECTORS REPORT SHOWED NO EXISTANCE OF SUH PARTIES ON ENQUIRIES CONDUCTED AT ADDRESSES MENTIONED ON THE SALE BILLS FURNISHED BY ASSESSEE further corroborated BY RETURN OF STAMPED ENVELPOE BY POSTAL AUTHORITY OF LETTERS ADRESSES

TO SUCH ALLEGED PATIES WITH REMARKS"NOT EXISTANT"/"NOT AVAILABLE" ETC read with the fact that attempts of AO TO PROCURE DETAILS OF EXITANCE OF SUCH ALLEGED PATIES FROM WHO THE ASSESSE CLAIMED THAT HIS

MOTHER HAD SOLD JEWELS TO WERE REPLIED TO BY THE

KAROL BAGKH JEWELLERS ASSOCIATION ETC .AS STAING

THAT SUCH PARTIES ARE NOT EXISTANT . Infact all such stands raise a vital crucial question as to why such alleged sale of jewels to Ms Neeru Anand were not put forth directly to knowledge of assessing officer of Sh J.Manchanda (assesses case under consideration) at very first instance when (assuming that ) facts were known from the start.) and only conclusively prove that primary onus of discharge of burden cast under sec68 of the Act has not been discharged by assessee and still the onus of burden continues to rest on assessee by virtue of outcome of enquiries conducted by Revenue as regards fallacious explanations submitted by assessee as regards alleged sale of alleged jewels to such parties which is the source of gift received by assessee as reflected in his capital account evidenced by cash deposits in the bank statements of assessee.

b)Nature of entry : reflected in capital account of assessee and evidenced via bank account vide cash deposits on varied dates as mentioned in assessment order216ITR526(Del) in case of CIT Vs Sita Ram Vijay Kumar ; (286ITR548(PH) in case of Sethi Coton traders);255ITR573(Ker)ITO VsDiz Holdings:

b.1) 2011-TIOL-812-HC-P&H-IT(CIT Vs Jagtar Singh) :" The facts, in brief, necessary for adjudication and as narrated in the appeal, are that the assessee had deposited Rs. 22,80,000/- on 23.6.1999, in his account with the State Bank of India, and Rs. 19,00,000/- on 22.7.1999 and Rs. 17,00,00/- on 2.8.1999 with the Punjab and Sind Bank at Rupnagar. The assessing officer asked him to explain the source of these deposits. The assessee claimed that the said amounts were received by him on account 5 ITA No.4060/Del./2011

of sale of land and deposited in his accounts. The failure on the part of the assessee to explain the deposits amounting to Rs. 36,80,000/- satisfactorily led to considering his income from undisclosed sources and accordingly assessment was completed on the said amount as well, by the assessing officer vide order dated 26.3.2001. The assessee filed appeal. The Commissioner of Income Tax (Appeals) {in short "CIT(A)"} accepted the appeal by order dated 27.3.2002 and deleted the addition made by the assessing officer. The Department feeling not satisfied with the order of the CIT(A) preferred appeal before the Tribunal. The Tribunal concurred with the view of the CIT (A) and accordingly dismissed the appeal of the Department vide the order under appeal. The Revenue is in appeal assailing the orders of the CIT(A) and the Tribunal. We have heard learned counsel for the Revenue and have perused the record.

Learned counsel for the Revenue submitted that the CIT (A) and the Tribunal erred in placing initial onus upon the Revenue to establish that the deposits made by the assessee were the undisclosed income of the assessee. According to the learned counsel, the total deposits made by the assessee were of Rs. 60,80,000/-, out of which only Rs. 24,00,000/- on account of six registered sale deeds of Rs. 4,00,000/- each, had been satisfactorily explained. The balance amount of Rs. 36,80,000/- (i.e. Rs. 60,80,000/- less Rs. 24,00,000/-) was an undisclosed income as the assessee had failed to satisfactorily explain the source of the said amount. It was further argued that the assessee had failed to produce any documentary evidence in support of his claim that the amounts had been received on account of sale of land and the assessing officer was, thus, justified in assessing the same as unexplained income and the CIT(A) and the Tribunal had erred in reversing the said finding.

The point for consideration in this appeal is, whether cash deposits which were found in the bank accounts of the assessee had been duly explained by him, or not, and the CIT(A) and the Tribunal were justified in deleting the said addition? It is well settled that wherever a receipt is sought to be taxed as income, the Department is required to prove that the same falls within the taxing provision, and where the receipt is in the nature of an income, the burden lies on the assessee to show that it is not taxable as it falls within the purview of exemption provided by the Act. However, under Section 68 of the Act, where any amount is found credited in the accounts of the assessee relating to any previous year, the same can be charged to income tax as the income of the assessee of that year where the explanation offered by the assessee about the nature and its source is not satisfactory in the opinion of the assessing officer. In such a case, there is a prima facie evidence against the assessee, viz. the receipt of money and, if he fails to rebut the said evidence, it can be used against him by holding that it was the receipt of income nature. The assessing officer, after noticing that the initial onus which stood on the assessee was not discharged, made addition of Rs. 36,80,000/- under Section 68 of the Act. It was 6 ITA No.4060/Del./2011

noticed by the assessing officer that two receipts of Rs. 17,00,000/- each, on 21.7.1999 and 2.8.1999, had been the result of an after-thought inasmuch as the assessee could not offer any explanation to justify the said amounts, more particularly, when it was not the part of the sale consideration in the registered sale deeds. Reference was also made to the statement of Sh. Navraj, the vendee where he was asked to explain the facts relating to an amount of Rs.17,00,000/- handed over to the assessee on 21.7.1999, but he failed to give any satisfactory reply and details in that regard. Similarly, as regards receipt of Rs. 17,00,000/- on 2.8.1999, he had stated that he did not recognise his signature on the receipt in question as the same differed and he would confirm only after seeing the receipt taken from Shri Jagtar Singh, the assessee. He was unable to explain the source of this payment as well. Further, the sale deeds did not specify that there was something more than the land that was alienated and there was no mention of any other thing like crops, popular trees, tube-wells and buildings etc. Still further, it was recorded that the agricultural land, at the time of sale, was vacant and the agricultural produce was sold out in 1996-97 and 1997-98 and the agricultural income was shown in the return. The amount deposited on the basis of these alleged receipts, thus, could not be held to be substantiated by the assessee as relating to the sale of the land. However, the CIT(A) and the Tribunal wrongly placed the initial onus on the Revenue and had allowed the appeal of the assessee. The approach of the CIT(A) and the Tribunal cannot be accepted as the deposits which were credited in the accounts of the assessee had not been explained satisfactorily by the assessee, and, thus, it could not be held that the assessee had discharged the onus placed on him to show that it was his income from the sale of land. Once it is held that the onus was wrongly placed on the Department and the assessee had failed to produce any cogent and convincing material to establish that the deposits were on account of sale of land, the addition made by the assessing officer could not have been deleted and the finding as recorded by him could not be held to be perverse. The CIT(A) and the Tribunal were, thus, not justified in reversing the finding of the assessing officer and thereby deleting the addition. In view of the above, the substantial question of law is, therefore, answered in favour of the Revenue and against the assessee

b.2)Reliance on 109ITD288(Del) in case of Smt N.Rana:" 7. A question is when the assessee is not maintaining any books of account, whether addition can be made under section 68 of the Act? In the present case it is seen that the assessee has prepared his statement of affairs. A statement of affairs is nothing but a balance-sheet of a person as on a particular date. Such statement can be prepared only from the books of account. Thus firstly it is incorrect on the part of the assessee to contend that he is not maintaining any books of account. The statement of affairs prepared is testimony of the same. Such statement also includes the receipt of gift. Thus once it is found that the gifts are not genuine and such gifts explain assets held by the assessee, the amount has to be treated as undisclosed income of the 7 ITA No.4060/Del./2011

assessee and liable to be added as income. Thus the decision of the Tribunal relied upon by Shri Sapra is distinguishable on facts. In the said case it Was found that the assessee is not maintaining any books of account and hence no addition can be made under section 68 of the Act. However, in the present case, it is found that since the assessee has furnished his statement of affairs, which can be prepared only on the basis of books of account, the addition can be made under section 68 as well as under section 69 of the Act."

b.3)Facts of present case :in Instant case the assessee Jatinder Manchanda has submitted its capital account thus falling u/sec68 as the said amount of rs 10. Lacs has been shown in his capital account for Fy 05-06 as gift received from Mrs Mohinderwati

b.3.1) Without prejudice to same , if the amount is not assessable undersec68 , the Hon`ble ITAT is duty bound to tax it under the correct head as laid down in 131ITR (SC)451 Kapurchand Shrimals case. The assessee has submitted capital account as on 31/3/06....(pbk pg18-new pbk ) hence the entry of gifts depicted in capital account as stated therein evidenced also in bank pass book will come within the ambit of sec 68.

c)Fraud: The reliance on the assessee on varied bills and ultimately tendering the theory of sale of alleged jewels declared under VDIS by mother Smt Mohinderwati is fraught with misrepresentation and fraud as the lady aged around 88-86 years of age then was stated to have was under senile dementia--failure to understand , speak or walk-- as per doctors certificate on record produced dated 15/10/2008 (refer pbook -- )during the course of assessment proceedings of Sh Jatinder. Its difficult to accept that in such a state of health the assessee`s mother could have remembered such minutest details of first having sold it to (non existent ) jewellers (in lanes of karol bagh) , then turned around after being confronted by adverse findings by revenue to recollect that jewels were sold through one small dalal sh Deepak karmarkar , who claimed to have received that from an old lady during the year under consideration is fraught with serious falsity and against all human conduct and probabilities . Still intriguing is the complete turn around of dalal to say that he had given the old lady only certain token informations -who met the dalal, was it the old lady of 88-90 years , when did she meet as the statements tendered during assessment proceedings of dalal Deepak armarkar, Smt Neeru Annad are undated and are without any legal tenability as its difficult to imagine that an old lady would frantically run around with such vigour collecting information/ bills for Income Tax purposes as she lay ill (as per medical certificate). Further, the theory being tendered , one after another still baffles a rational logical thinking as to how an old medially ill person can tender with amazing accuracy such fantastic bald explanations to hoodwink revenue.

8 ITA No.4060/Del./2011

c.1)At the stage of mothers own assessment stage u/sec147 : As the doctors certificate had already been tendered dt 15/10/2008 in case of assessee Sh J.Manchanda , its natural to seek answer to following questions (a)Who authorized the counsel to represent Smt mohinderwati (since order sheet entries depict that the scrutiny proceedings gathered steam wef 10/8/2009 in case of mother Smt MOhinderwati (refer paper book pages181-183)as she was incapacitated mentally as on 15/1/0/2008 (b)Who gave the details to assessee Smt Mohinderwati`s counsel Sh Puri as regards sale of jewels through dalal, and later changing that to Smt Anand and earlier prior to this of sale through five jewellers as the submissions are tendered during 148 proceedings of mother Smt Mohinderwati(c) Can a senile dementia patient remember such minute details/ turns of events regarding sale of jewels etc (d) What is the legal sanctity of such submissions , summarily tendered without any backing in law of a medically invalid assessee -Can such order obtained through fraud (on account of misrepresentation of vital fact of the assessee Smt Mohinderwati being medically invalid and further suppression of other facts of bogus gifts ) said to attain finality of litigation under law and who authorized the counsel to appear on behalf of Smt Mohindewati(e) Is it probable for 88-90 yrs old lady to bother about temporal matters in such medical conditions , by any humane logical probability?(f) Why did the counsel of assessee Sh J.Manchanda or that of Smt Mohinderwati not produce the fact of his mother being under senile dementia sufferings --failure to understand , speak or walk-- as per doctors certificate on record produced dated 15/10/2008 to Assessing officer of Smt Mohinderwati via his counsel or directly to AO (of Smt Mohinderwati), or to CIT(A) of Sh Manchanda in all fairness as it had / has legal repercussions on the matters under evaluation per se. Can such a fraudulent order be relied upon to give benefit to Sh Manchanda (the assessee) as regards acceptance of a valid gift as has been done by the CIT(A) without appreciating the circumstantial evidences as set out in the written submissions.

d) VDIS immunity available to Smt Mohinawati qua jewels declared in VDIS letter and NOT as regards availability of alleged cash arising there from sale proceeds of alleged sale of jewels : The assessee has failed to appreciate the legal position that VDIS declaration does not ipso facto renders the availability of cash valid . VDIS declaration merely declared the of jewels . No further and no less. It did not and does-not certifies the existence of the said jewels as in FY 2005-06 at the threshold which is a fine nuance or the existence of the money brought about by alleged sale of alleged declared VDIS jewels in FY 2005-06 . These matters still await resolution and appreciation .e)As per 241ITR 216 (mp) in case of Smt Shanti Devi Vs CIT: "Section 64 of the Finance Act, 1997, simply provides that a person would be entitled to make voluntary disclosure of the income under the scheme. The effect is that the authorities are not entitled to make any investigation into the 9 ITA No.4060/Del./2011

source from where he has earned the income, but section 64 does nowhere provide that the declaration relating to the explained income would also be taken to be correct. If a true declaration pertaining to the investment is made then that would be the end of the matter but if it comes to the knowledge of the Department that a higher amount was invested than the amount disclosed, then the Department certainly would be entitled to take suitable proceedings under the Act....".

e(a)98ITR657(All) in case of Badri Prasad &Sons Vs CIT :" The Tribunal was also right in holding that the mere charge of tax on the amount declared under the voluntary disclosure scheme could not have the effect of converting the money into the income of the declarant if in fact it did not belong to her. The Finance (No. 2) Act of 1965 only permitted to bring forth for taxation of undisclosed income by persons to whom it belonged, and neither intended nor had the effect of converting the income belonging to the persons behind the screen into the income of the declarant. The disclosure made by the two ladies and the tax paid thereon was thus of no relevance in establishing either that the money belonged to them or that it did not belong to their respective husbands, who had brought it into the accounts of the assessee-firm. The circumstance was, therefore, not relevant for discharging the burden which lay on the assessee under section 68 of the Income-tax Act, 1961, of explaining the cash credits.

As the affidavits had been discarded and the circumstances of disclosure under the Finance (No. 2) Act, 1965, and the payment of tax on the amounts disclosed was not relevant to prove the ownership of money, we are of the opinion that the Tribunal was right in holding that the assessee had failed to discharge the onus which lay on him to explain the source of the deposits..."

e(b)151ITR751(Del) in case of CIT Vs Vishwanath o. & 247ITR819(SC) in case of CIT Vs United Trading Co:" It is now brought to our notice that this very question has since been decided by this court in ITO v. Rattan Lal [1984] 145 ITR 183. In the said decision it has been held that the immunity enjoyed by a declarant under section 24 of the Finance (No. 2) Act, 1965, under the Voluntary Disclosure Scheme is confined to the declarant alone and is not extended to the assessment of a third party assessee in relation to the income disclosed by the declarant. It was further held that there is nothing in section 24 of the Finance (No. 2) Act which prevents the Income-tax Officer, if he is not satisfied with the explanation of the assessee about the genuineness of sources of amounts found credited in his books to add them to the assessee's income amount in spite of these having already been made the subject-matter of the declaration made by the depositors/creditors. He is entitled to include them as income of the assessee from undisclosed sources."

10 ITA No.4060/Del./2011

e©As held in Delhi HC judgment in 258ITR121(del) in case of Sajjan Chaddha "The issue raised is no longer res integra. In Jamnaprasad Kanhaiyalal v. CIT [1981] 130 ITR 244, the Supreme Court, dealing with a similar question, has held that the legal fiction created by section 24(3) of the Finance (No. 2) Act of 1965, was limited in its scope and could not be invoked in assessment proceedings relating to any person other than the person making the declaration under that Act so as to rule out the applicability of section 68 of the Act. The court has further observed that there is nothing in section 24 of the said Act, which prevents the Income-tax Officer, if he was not satisfied with the explanation of an assessee about the genuineness or source of an amount found credited in his books, in spite of its having already been made the subject matter of a declaration by the creditor and taxed under the scheme, from investigating the true nature and source of the credits. It is pertinent to note that in view of the aforenoted decision, the decision of this court in Rattan Lal's case [1975] 98 ITR 681 has since been overruled by the apex court in (ITO v. Rattan Lal [1984] 145 ITR 183). As noted above the addition made by the Assessing Officer was deleted by the appellate authorities on the basis of the decision of this court in Rattan Lal's case [1975] 98 ITR 681. In the light of the aforenoted decision of the Supreme Court, the question referred has to be answered in the negative, i.e., in favour of the Revenue and against the assessee. "

e.d) 2005-TIOL-195-ITAT-MUM (M/s LILARAM P MULCHANDANI Vs INCOME TAX OFFICER )"23. It was next argued by the learned counsel that the assessee had declared the diamonds in question under the VDIS and hence his explanation that he had sold them to Shri Trivedi should be accepted. We are not impressed by the aforesaid argument. The declaration of diamonds by the assessee under the VDIS or the nature and source of the acquisition of the said diamonds is not in issue in the case before us. What is in issue before us is whether the diamonds claimed to have been sold were actually sold and, if so, what is the evidence to establish the genuineness of the sale transaction. Therefore nothing turns on the fact that the diamonds in question were declared under the VDIS. Mere declaration of diamonds under VDIS does not necessarily mean possession of diamonds or sale of diamonds also. The limited implication of declarations under the VDIS was that the Departmental authorities were precluded from examining the nature and source of the acquisitions declared under the VDIS. Declaration of diamonds under the 'Voluntary Disclosure of Income Scheme' and de facto possession of diamonds and their sale are altogether different from each other in law. Be whatever it may, mere declaration under the VDIS does not lead us to presume either directly or indirectly that they were subsequently sold to shri Trivedi when Shri Trivedi himself denies to have physically purchased any diamond from anyone. What is thus required to be proved is the fact in issue before us, i.e., genuineness of sale 11 ITA No.4060/Del./2011

transaction and not the fact or issue which is not before us, i.e., declaration of diamonds under the VDIS......"

Further it reads :" We given our serious consideration to all the facts and circumstances of the case in light of the materials and arguments placed before us. As observed by Lord Templeman in R.V. Inland Revenue Commissioners, 215 ITR 487 (HL), every tax avoidance scheme involves a trick and a pretence. It is the task of the Revenue to unravel the trick and the duty of the Court to ignore the pretence. In the case before us, the revenue has unraveled the trick that was played to accommodate the VDIS declarants through factious entries of purchase/sale of diamonds and hence it is our bounden duty to ignore the pretence, namely, the medium of cash credits for introducing unaccounted money in the books. It is not a case of mere rejection of the explanation given by the assessee but a case where the department has brought positive materials on record, which has not been rebutted by the assessee, to unravel the tick played to accommodate VDIS declarants. Taking into account the totality of all the facts and circumstances of the case, we hold that the learned CIT (A) has correctly exercised his discretion and jurisdiction in dismissing the assessee's appeal. We find no illegality, irregularity or irrationality in his order and hence we confirm the same ..."

f) Shifting stand of assessee does not inspires confidence about the explanations tendered and onus cast is not discharged by assessee about genuineness of transaction :296ITR249(Del) in case of Bharati Telecom Finance Ltd Vs CIT: "Having heard learned counsel for the assessee, we find that there are several versions that have been given to explain the amount of Rs. 80 lakhs in the hands of the assessee. The amount was initially said to be an advance received by the assessee from Ms. Devina Mehra for purchase of shares, then it was said to be a loan given by M/s. First Global Finance Pvt. Ltd., then it was said that Ms. Devina Mehra was authorized by M/s. First Global Finance Pvt. Ltd. to advance the amount to the assessee and finally, it appears that two of the three demand drafts were not even issued by M/s. First Global Finance Pvt. Ltd. or by Ms. Devina Mehra but by a third party, namely, M/s. Growell Capital Services Pvt. Ltd. In view of the shifting stands and the varying explanations given for the source of Rs. 80 lakhs in the account of the assessee, the authorities under the Act took the view (and were fully justified in doing so) in not accepting the nature of the transaction or the source of the funds or for that matter the genuineness of the transaction itself. The Tribunal has also noted that the assessee's case was that the amount was received from M/s. First Global Finance Pvt. Ltd. but that the accountant of the assessee had wrongly shown that the amount was received from Ms. Devina Mehra. The Tribunal noted that even this explanation is contradictory and unsubstantiated because subsequent repayment of the amount was not made to M/s. First Global Finance Pvt. Ltd. but to Ms. Devina Mehra who had herself stated that the amount was given to the assessee by M/s. 12 ITA No.4060/Del./2011

First Global Finance Pvt. Ltd. The explanations for the amount are riddled with serious doubts. All the authorities under the Act have found against the assessee in view of the discrepancies. ..."

f.1) Shifting stand coupled with assessee address found non existent: (a)earlier the assessee stated to have sold jewels to five parties(b)this theory was later changed to a small dalal "Deepak karmarkar" who stated to have sold the jewels of Smt mohinderwati to some other buyer in lieu of which he gave Mrs Mohinderwati rough credit notes on draft bills just stating the description of pieces of jewellery and rates thereof (which runs couner to bills submitted before assessing officer of 5 jewelers) (c) again this theory of giving rough credit notes was changed to state that the Smt Mohinderwatis jewels were purchased by Smt Neeru Anand, R/0 D-1, Model Town-I, Delhi .

(d) The fantastic twists in &shifts of theories propounded by assessee were rendered to hoodwink the revenue as soon as the Revenue completed the investigation of finding bogus jewellers/ purchasers of karol Bagh area, which when confronted to assessee , another theory of dalal Deepak karmarkar was presented, who too was confronted by Revenue . The dalal Deepak karmarkar stated in his statement that he had merely given a token of information regarding value and amount (in gms)of jewels sold and no further to Ms Mohinderwati . This too puts at naught the bills of 5 jewels purchasing shops of karol bagh submitted during assessment proceedings which were also enquired to by ITI, and local jewelers Association were said to be non existant . Since dalal`s version too was negated by Revenue, the assessee propounded yet another shift of dalal having sold the jewels to Smt Neeru Anand , R/0 D-1, Model Town-I, Delhi who claimed to have bought the jewels for a sum of Rs 10.80 lacs in cash from this small time dalal during FY 05-06 as yet another alleged alibi THUS making the assessee liable on stories which we running o"a"ultimate buyer Smt Anand ultimately sold to 286ITR357(Del) in case of Rakesh Kalia: 280ITR547(All) in case of Ram Lal Agarwal

g) No peak to be applied:294ITR610(All) in case of CIT Vs Vijay Agricultural Ind:"... This court in Income-tax Reference No. 226 of 1998, Bhaiyalal Shyam Behari v. CIT [2005] 276 ITR 38 decided on January 19, 2005, has held that the principle of peak credit is not applicable in case where the deposits remained unexplained under section 68 of the Act."

g.2)276ITR38(All) : "The contention is wholly misconceived. For adjudicating upon the plea of peak credit the factual foundation has to be laid by the assessee. He has to own all cash credit entries in the books of account and only thereafter the question of peak credit can be raised.

g.3)255ITR401(Del) in Dalmia case :"It cannot be an abstract proposition in law that the intangible additions of the previous year are to 13 ITA No.4060/Del./2011

be taken note of while considering the cash credit. On the facts of each case a specific plea and proof that there was any link between the intangible additions in the previous year and the cash credit has to be established, if that be a fact while tendering the explanation regarding the cash credit it must plainly be stated as a fact that the cash credit concerned did come out of the earlier intangible additions. Unless this is done, there is no requirement to make an enquiry regarding the reasonableness of the explanation. It is not open to the assessee to offer two different explanations by way of alternative pleas. A similar view was expressed by this court in CIT v. Kulwant Kaur [1980] 121 ITR 914. But if any unexplained cash credit can reasonably be related to the amount covered by the intangible addition made in the past, or in the very year, necessary set off is not impermissible. But as. observed by the Supreme Court in CIT v. Manick Sons [1969] 74 ITR 1, it is not permissible to give credit for intangible additions, without indication of the reasons as to why credit can be given. The question whether a particular cash credit can be covered by the intangible addition is essentially one of fact. It is within the domain of taxing authorities to consider whether a particular cash credit, or unexplained expenditure or investment can reasonably be attributed to intangible additions, if materials are placed in that regard. No material was placed before the authority to substantiate the plea

h.1) 2011-TIOL-182-ITAT-AHM: INCOME TAX OFFICER ,

AHMEDABAD Vs MURLIDHARAN G PILLAI :" 7. When we apply the above principles to the facts of the present case, we find that there is no admission by the assessee that money deposited in the bank account represented his unaccounted money. Secondly, there are no withdrawals in cash from the bank account. Thirdly, there is no evidence of any source of money claimed to have been paid back to the depositors on different dates during the accounting year as per confirmations. Such repayment was shown to have been made in cash and there is no source of money of such repayment. Fourthly, alleged confirmations from the depositors cannot be relied upon because identities of the depositors are not verifiable, they are not available at the given addresses as in several cases, summons could not be served, onus is always on the assessee to produce the depositors to prove his case unless all the necessary ingredients of cash credit as per section 68 are primarily satisfied by the assessee which in this case has not been done. Assessee has to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the assessee, identity of the depositors/creditors is beyond shed of doubt and money has also been repaid or interest has been repaid during the year and also subsequent year and also gone back to the bank account of the depositor/creditors. If assessee is able to give in the first instance to the AO then it can be said that assessee had discharged the onus and thereafter it is for the AO to enforce attendance of the depositors/creditors and if they fail to appeal then adverse inference against the assessee cannot be drawn. But where 14 ITA No.4060/Del./2011

such prima facie case is not made out by the assessee in its favour then onus cannot be put on the department for enforcing the attendance of the depositors. Therefore, where assessee has not discharged the primary onus lying on him it cannot be accepted that money could have come from the depositors. To us confirmations are apparently self-serving documents without they are being any proof of their truthfulness. They can safely be rejected as not being the credible evidences.

8. In view of the above, neither the deposits are proved by the assessee nor the claim of peak is established by him. In fact assessee has also failed to show real destination of the money through bank draft so purchased by him out of the cash deposited in the bank account thereby suppressing material facts in understanding the nature of cash inflow and its destination. Entire transaction of deposits in the bank account remained under crowd of secrecy and, therefore, the explanation furnished by the assessee remained unsatisfactory. Even the benefit of withdrawal through ATM mentioned as above cannot be given importance because they are apparently for household purposes and cannot be said to be available for redeposit in absence of any other evidence of meeting out household expenditure by the assessee. We apparently uphold the contentions of Revenue that entire sum of Rs.17,48,500/- deserves to be confirmed. As a result, we uphold the order of AO setting aside the order of ld. CIT(A). Appeal filed by the Revenue is allowed whereas the Cross Objection filed by the assessee is dismissed.9. In the result, appeal filed by the Revenue is allowed whereas the Cross Objection filed by the assessee is dismissed.

i) Bogus gift: reliance on294ITR488(Del) in case of Rajiv Tandon : "Having heard learned counsel for the assessee, we find that the Tribunal considered the entire case law on the subject including several decisions of the Supreme Court and this court. Reference has been made to CIT v. Durga Prasad More [1971] 82 ITR 540, wherein the Supreme Court observed that the taxing authorities were entitled to look into the surrounding circumstances to find out the real and factual position. Similarly, this court in Sajan Dass and Sons v. CIT [2003] 264 ITR 435 took the view that not only must the assessee establish the identity of the donor and his capacity to make the gift, but he must also establish that the amount received by him was in fact a gift."(117ITD220-(Del) )

i(ii)292ITR552(Del) in case of Anil Kumar: "Similarly in Sajan Dass and Sons [2003] 264 ITR 435 (Delhi), it has been laid down that: "A mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift. Since the claim of gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it has actually been received as a gift from the donor. Having regard to the 15 ITA No.4060/Del./2011

inquiries conducted by the Assessing Officer from the bank, with which the assessee was admittedly confronted and bearing in mind the fact that admittedly said Subhash Sethi was not related to the assessee, we are of the view that the findings recorded by the Tribunal are pure findings of fact warranting no interference. We find it difficult to hold that on the facts of the instant case proper opportunity had not been granted to the assessee to prove the gift." So, from the aforesaid judgments, the position which emerges is as under: (i) Mere identification of donor and showing the movement of gift amount through banking channels is not sufficient. to prove the genuineness of the gift. (ii) Since the claim of the gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift. Here in the present case, there is nothing on record to show as to what was the financial capacity of the donors; what was the credit-worthiness of the donors; what kind of relationship the donors had with the assessee; what are the sources of funds gifted to the assessee and whether they had the capacity of giving large amount of gift to the assessee. Further, the assessee was asked to appear in person before the Assessing Officer, however, he never appeared. Since, the assessee did not prove the genuineness of the transaction nor he established the identity of the donor, nor the capacity of donor to make gift, as such the Income-tax Appellate Tribunal was wrong in deleting the addition of Rs. 20 lakhs on account of gift alleged to have been received by the assessee."

i(iii) 311ITR239(PH) S.C.Vema Vs CIT: ".....The bank account filed at this stage does not establish the financial credentials of the donor. The bank statement placed on record reveals that the said account was opened on 10th July, 1995 with the deposit of Rs. 1,00,300. A sum of Rs. 8,42,250 has been deposited on 9th Nov., 1996 by draft. Two cheques of Rs. 2 lakhs each have been issued on 13th Dec., 1996. The said bank account does not establish the financial status of the alleged donor. Since the assessee had failed to discharge the onus in regard to the financial capacity and status of the donor as also the occasion for making the gift to establish the genuineness of the gift, the CIT(A) was wrong in deleting the addition. The decisions of the Tribunal. referred to by the CIT(A), are on their own facts. The principles of law in regard to cash credits and gifts are well-established and the appellate authority is bound to apply the principle of law to the peculiar facts of each case""..."Even otherwise it is well settled that mere identification of donor or receipt of amount through banking channel is not sufficient to satisfy the requirement of a genuine gift. In that regard, we may place reliance on a Division Bench judgment of this Court in the case of Jaspal Singh vs. CIT (2006) 205 CTR (P&H) 624 : (2007) 290 ITR 306 (P&H)."

i(iv) Burden in case of receipts from close relatives304ITR239(all)Banarsi Prasad Vs CIT: "The Tribunal has held, on the facts and circumstances narrated above, that for making the explanation "satisfactory", the assessee was required to furnish in the 16 ITA No.4060/Del./2011

explanation the additional information as to from where the assessee's wife and minor son, having no source of income, obtained the money which was given to the assessee by them. The phrase "burden of proof" in the referred question is slightly misleading. The real issue is whether the explanation furnished in the facts and circumstances of the case was or was not satisfactory. We are of the opinion that, in view of the facts mentioned above, if the assessee failed to furnish the information about the source from which his wife and minor son obtained money for investing with the assessee, the mere explanation regarding the source of the receipt or credits in the account books of the assessee, viz., that he received the money from his wife and minor son, is far from "satisfactory".

Learned counsel for the assessee has relied upon the following decisions:(1) CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC); (2) CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC); (3) Deputy CIT v. Rohini Builders [2002] 256 ITR 360 (Guj);(4) Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati); (5) CIT v. Jauharimal Goel [2008] 296 ITR 263 (All); [2005] 147 Taxman 448. Each of these cases turned on their own facts. As already stated, what explanation would be "satisfactory" would depend upon the facts and circumstances of each case. It is well-settled that under section 68 the assessee has to prove three conditions, viz., (1) the identity of the creditor, (2) the "capacity" of such creditor to advance the amount, and (3) the genuineness of the transaction. The second condition, referring to the "capacity" of the creditor, cannot be said to have been established on the facts and circumstances of the present case, in the absence of the details referred to above, viz., the source from which the non-earning wife and minor son got the money to invest with the assessee. Thus, generally but not always, depending upon the facts and circumstances, when the credits have been received by an assessee from such close relatives, the explanation to be furnished under section 68 would require to disclose the facts necessary to establish the "capacity" of the creditor as above. In the circumstances, the question referred is answered as above by holding that on the facts and circumstances of the present case, when the credits were received by the assessee from close relatives like his non- earning wife and minor son, the explanation to be furnished under section 68 in order to qualify as "satisfactory" would require to disclose the source of the depositor for establishing the "capacity" of the creditor as above. The reference is answered, as above.

i(v) 305ITR202(Del) in case of Indus Valley Promoters : "...M/s. Indwheels firm was not located at the given address as is evident from the Inspector's report dated July 13, 2001. Only copy of account of M/s. Indwheels is not sufficient to explain the source and creditworthiness of Sh. Sanjay Gupta. The main plank of the assessee's arguments is that the source of the source cannot be examined. In the present case, the Revenue has seen through the ploy of the assessee whereby substantial amount have been deposited in cash purportedly in the 17 ITA No.4060/Del./2011

books of M/s. Indwheels stated to be a partnership firm and from where the amounts have been withdrawn and credited to the account of Sh. Sanjay Gupta in the books of the assessee-company. It is the case of the Revenue that the same cash deposits could have been made in the books of the assessee-company and the method of choosing the circuitous path is only an attempt to circumvent the provisions of section 68 of the Act. The amount was deposited in cash and in spite of enquiry, the source of the deposit was not explained. The creditworthiness of the said payment is not clear from the income shown by them. Therefore, the addition should be confirmed. Since the assessee was a director in the assessee-company having a regular account, what was the reasoning to first deposit the cash in M/s Indwheels and thereafter transfer the funds to the assessee-company, when the initial deposit could have been made in the books of the assessee-company itself. Thus, we do not find any infirmity in the reasoning given by the Tribunal in upholding the action of the tax authorities in bringing to tax the sum of Rs. 11,82,000."

j) Examination of Source of gift : The examination by assessing officer of jewellers is merely the examination of source of gifts and not of source of source . The source of gift is er Smt Mohinderwati has gifted the sale proceeds of jewels .The source of source of the matter is the examination of the person to whom the jewellers has actually disposed off the jewels of Smt Mohinderwati. In instant case, the assessing officer has merely corroborated the matter with existence of so called jewellers and no further . It's the assessee who has been turning around trying to prolong the link by bringing new purchasers of jewellery.

Reliance on 242ITR 719(Mad) in case of Commissioner of Income- tax v. K. Palaniappan for proposition that earlier VDIS declaration does not explains the existence of jewellery in FY involved or explains the source of credit entries as gift to assessee J.Manchanda : "...., but for the inducement offered by the Govern- ment and, therefore, it is impermissible to rely upon the statement made in the voluntary disclosure scheme. Even assuming that the statement made therein is regarded as a piece of evidence the assessee must be able to prove the statement made by him in the disclosure scheme corrobo- rated by some independent materials as the assessee has come under the regular assessment channel and it is for him to satisfy the authorities that the onus placed on him under section 68 of the Act is discharged.

The second reasoning given by the Appellate Tribunal is also based on the probabilities of the case. The view of the Appellate Tribunal that the assessee could not have earned Rs. 50,000 in one year is not based on any material and further, the reasoning of the Appellate Tribunal is against the teeth of the provisions of section 68 of the Act. 18 ITA No.4060/Del./2011

The third reasoning given by the Appellate Tribunal is also farfetched. The Tribunal perused the assessment records of the earlier assessment years 1964-65 to 1975-76 and recorded a finding that the earlier assessment records gave the Tribunal an impression that there may be possibility of some income escaping assessment in those earlier assessment years. The finding of the Appellate Tribunal clearly shows that the Tribunal has arrived at the conclusion on the basis of certain probabilities and without any material on record. The Appellate Tribunal has not even discussed the nature of the business and the volume of business and how it came to the conclusion that there could have been some escaped income in the earlier years. The observation made by the Appellate Tribunal that there may be possibility of some income escaping assessment clearly shows that the Tribunal has acted on the basis of probabilities and has allowed its imag- ination to run the field. The Appellate Tribunal is a final fact finding authority, but if it renders a finding on the basis of its conjectures and sur- mises, such a finding cannot be regarded as binding on the courts. That apart, the courts have taken a view that where certain intangible additions were made in the earlier years, that would constitute the source for the credit entry in the subsequent year, but, however, we are of the opinion that a concealed income which was neither disclosed in the assessment proceedings nor in any other ancillary proceeding for any earlier year can hardly constitute a source for a subsequent credit entry and if the expla- nation of the assessee that the source of the credit entry is the undisclosed income of the earlier years is accepted, it will open the doors to tax eva- sion and the purpose behind the enactment of section 68 will be easily defeated as it will be open to any one to point out that the credit entry came from some undisclosed and unassessed income of a prior year. When Parliament has placed the onus on the assessee to explain satisfac- torily the nature and source of the credit entry, it is for the assessee to prove the source of the credit entry and the courts have held that if the additions were made in the earlier years, that would constitute the source for the subsequent credit entry, and then it is for the Department to prove that the earlier additions were spent away during intervening period. It is not clear from the order of the Appellate Tribunal how the Tribunal came to the conclusion on a perusal of the earlier assessment records that the assessee might have earned the sum which was not disclosed in the earlier assessment proceedings. In our view, the conclusion of the Appellate Tribunal is arrived at only on the basis of its own surmises and conjectures and there is a complete dearth of materials for its conclusion and, in our opinion, it has by cosmeticising it, given an illusion that it has arrived at findings of fact, on the basis of materials, and the ultimate inference drawn on the basis of the above reasonings, in our view, is not sustainable on the facts of the case. The Income-tax Officer as well as the Commissioner of Income-tax (Appeals) has clearly found that the assessee has not explained the source of the credit entry and the assessee had not let in any new 19 ITA No.4060/Del./2011

evidence before the Appellate Tribunal and only on the basis of the plea raised before the Appellate Tribunal that the said amount could have been the undisclosed income of the earlier years and it would not represent the income of the previous year and also on the basis of the belated disclosure made by the assessee under the Voluntary Disclosure Act, the Appellate Tribunal has come to the conclusion that the assessee had explained the source of the credit entry. We are of the view that the finding of the Appellate Tribunal is not based on any material on record and, therefore, we are not able to sustain the finding of the Appellate Tribunal that the assessee had explained the nature and source of the credit entry. Mr. Janakiraman, learned counsel for assessee, pleaded that at least the matter may be remitted to the Appellate Tribunal to consider the matter afresh. However, we are of the view, the assessment year involved is 1976- 77 and two decades have passed since then, and we are not able to entertain the request of learned counsel for the assessee that the matter should be remitted to the Appellate Tribunal to consider the matter afresh. In this view of the matter, we answer the questions of law referred to us in the negative and in favour of the Revenue. However, in the circumstances of the case, there will be no order as to costs. "

k) Against human probabilities: All circumstantial circumstances ought to be examined by the assessing officer as laid down in 214ITR801 Sumati Dayal case (SC) read with 82ITR 54o(SC) Durga Prasad More.. The burden cast on assessee in case of more onerous in case of Income- tax Officer v. Smt. Usha Aggarwal 1ITR (Trib) 593(Del) ("In arriving at conclusion regarding genuineness of the gift, attendant circumstances as past conduct of the donors of having received or given gifts to others, including gifts received from the present donee, relationship, occasion etc. have to be considered and an opinion has to be formed as to whether it could be said that the behaviour of the donor was that of a normal human being. We are also of the view that the burden in respect of a gift is somewhat heavier than the burden in case of a loan as the former is a gratis payment and involves consideration of human conduct.

k.1) Credits not proved Earlier order of AO in mother Smt Mohanawatai not valid in law as the assessee`s mother Smt Mohanawatai was under senile dementia--failure to understand , speak or walk-- doctors certificate on record produced dated 15/10/2008 during course of assessment proceeding of assessee son Sh Manchanda , thus in case of mother Mohinawati`s assessment case , the shifting stand / theory propounded that jewels were sold to Ms Anand etc after the fact that Revenue had already discovered the on existence of the alleged parties to whom jewels were sold as set out in the assessment order of Sh J.Manchanda is a mere subterfuge to hoodwink Revenue with yet another theory. This even otherwise does not inspire confidence as Smt. Mohindrawati , when her case was reopened under sec147 and proceedings commenced in right earnest was "was under senile dementia--failure to understand , speak or walk" and hence too this new 20 ITA No.4060/Del./2011

stand given by assesses mother in her own case does-not stand judicial scrutiny and is an order obtained through fraud/ misrepresentation as medical certificate states. Its against all human probabilities to rationally accept a situation wherein a assessee medically incapicaitated can recollect the facts of sale of jewels to Ms Anand or the fact of contacting the dalal to procure details etc Burden of proof on assessee not discharged:

k.2)Reliance by CIT(A) on Smt. Moinawati`s order erroneous: (a)Refusal of the assesses counsel to place the fact of assessee Smt. Mohinawati being under Senile dementia (regretfully) to knowledge of AO of Smt. Mohinawati during finalization of assessment proceeding results in obtainment of an order through fraud or misrepresentation which has no finality as such and liable for cancellation by this Hon`ble Tribunal ---(a)How a person under senile dementia can authorize forwarding of a new theory /stand of sale of jewels to Ms Anand (b) Can the submissions made during the proceedings of finalization of Smt. Moinawati valid in law in view of medical certificate(c) Whether the doctrine of finality of litigation can rescue the assessee (Counsel of Smt Mohinawati or Assessee Sh Mancanda ) from misrepresentation conducted in obtaining the order of Smt Mohinawati u/sec147 dated ....

k.2(i) Reliance in this case is placed on the SC decision of :

27. Similarly, in New India Assurance Co, Shimla v. Kamla, AIR 2001 SC 1419, the Apex Court held that an order which is null and void remains inexecutable and unenforceable forever as it cannot acquire legal validity by any process of sanctification whatsoever for the reason that forgery is anti-thesis to legality and law cannot afford to validate a forgery.

k.2(ii) S.P Chengalvaraya Naidu vs Jagannath on 27 October, 1993: Equivalent citations: 1994 AIR 853, 1994 SCC (1) 1

"5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that "there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence". The principle of "finality of litigation" cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court- process a convenient lever to retain the illegal-gains indefinitely. We 21 ITA No.4060/Del./2011

have no hesitation to say that a person, who's case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation.

6. The facts of the present case leave no manner of doubt that Jagannath obtained the preliminary decree by playing fraud on the court. A fraud is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. Jagannath was working as a clerk with Chunilal Sowcar. He purchased the property in the court auction on behalf of Chunilal Sowcar. He had, on his own volition, executed the registered release deed (Ex. B-15) in favour of Chunilal Sowcar regarding the property in dispute. He knew that the appellants had paid the total decretal amount to his master Chunilal Sowcar. Without disclosing all these facts, he filed the suit for the partition of the property on the ground that he had purchased the property on his own behalf and not on behalf of Chunilal Sowcar. Non-production and even non-mentioning of the release deed at the trial is tantamount to playing fraud on the court...."

k.2(iii) United India Insurance Co. Ltd vs Rajendra Singh & Ors, on 14 March, 2000

"...Fraud and justice never dwell together.(Frans et jus nunquam cohabitant) is a pristine maxim which has never lost its temper over all these centuries. Lord Denning observed in a language without equivocation that no judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud, for, fraud unravels everything( (Lazarus Estate Ltd. Vs. Beasley 1956(1) QB

702.)

For a High Court in India to say that it has no power even to consider the contention that the awards secured are the byproducts of stark fraud played on a Tribunal, the plenary power conferred on the High Court by the Constitution may become a mirage and peoples faith in the efficacy of the High Courts would corrode. We would have appreciated if the Tribunal or at least the High Court had considered the plea and found them unsustainable on merits,if they are meritless. But when the Courts pre- empted the Insurance Company by slamming the doors against them, this Court has to step in and salvage the situation......

..... What is the legal remedy when a party to a judgment or order of court later discovered that it was obtained by fraud?

In S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagnnath (dead) by Lrs. & ors. {1994 (1) SCC 1} the two Judges Bench of this Court held:

22 ITA No.4060/Del./2011

Fraud avoids all judicial acts, ecclesiastical or temporal- observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment/decree- by the first court or by the highest court-has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings

In Indian Bank Vs. Satyam fibres (India) Pvt. Ltd. {1996 (5) SCC 550} another two Judges bench, after making reference to a number of earlier decisions rendered by different High Courts in India, stated the legal position thus:

Since fraud affects the solemnity, regularity and orderliness of the proceedings of the Court and also amounts to an abuse of the process of Court, the Courts have been held to have inherent power to set aside an order obtained by fraud practised upon that Court. Similarly, where the Court is misled by a party or the Court itself commits a mistake which prejudices a party, the Court has the inherent power to recall its order............... Therefore, we have no doubt that the remedy to move for recalling the order on the basis of the newly discovered facts amounting to fraud of high degree, cannot be foreclosed in such a situation. No court or tribunal can be regarded as powerless to recall its own order if it is convinced that the order was wangled through fraud or misrepresentation of such a dimension as would affect the very basis of the claim."

k.2(iv) New India Assurance Co., Shimla vs Kamla And Ors on 27 March, 2001 Appeal (civil) 2387 of 2001,Appeal (civil) 2388 of 2001,Appeal (civil) 2389 of 2001) "........ The observation of the Division Bench of the Punjab and Haryana High Court in National Insurance Co. Ltd. vs. Sucha Singh (supra) that renewal of a document which purports to be a driving licence, will robe even a forged document with validity on account of Section 15 of the Act, propounds a very dangerous proposition. If that proposition is allowed to stand as a legal principle, it may, no doubt, thrill counterfeiters the world over as they would be encouraged to manufacture fake documents in a legion. What was originally a forgery would remain null and void for ever and it would not acquire legal validity at any time by whatever process of sanctification subsequently done on it. Forgery is antithesis to legality and law cannot afford to validate a forgery...."

k.2(v) Hamza Haji vs State Of Kerala & Anr on 18 August, 2006: Appeal (civil) 3535 of 2006

".....The High Court found that the appellant had secured an order from the Forest Tribunal by playing a fraud on it and since fraud vitiates the entire proceedings it was a fit case where the High Court should exercise 23 ITA No.4060/Del./2011

its jurisdiction invoking Article 215 of the Constitution of India and set at naught, the order of the Forest Tribunal found to be vitiated by fraud. Thus, the High Court allowed the claim of the State and that of the writ petitioners and setting aside the order of the Forest Tribunal in OA No.247 of 1979, dismissed that application filed by the appellant before the Forest Tribunal. The High Court also directed the State to take back the 20 acres of land said to have been put in the possession of the appellant during the pendency of the contempt of court case. This decision of the High Court is challenged by the appellant, the applicant before the Forest Tribunal, in these appeals.

9. It is contended on behalf of the appellant that the High Court had far exceeded its jurisdiction and has acted illegally in setting aside the order of the Forest Tribunal which had become final long back and which had been given effect to, that too, by the intervention of the High Court. It is submitted that the High Court had no jurisdiction or authority to set at naught the two earlier orders of Division Benches of co-equal strength and that too at this belated stage and thus the order suffered from patent illegality. On facts it was contended that the finding that the order was procured by the appellant by playing a fraud on the Tribunal was not justified and no occasion arose for the High Court to exercise its jurisdiction under Article 215 of the Constitution of India, assuming it had such a jurisdiction to interfere with the earlier orders. On behalf of the State it is contended by learned senior counsel that fraud vitiates everything, that if an order is vitiated by fraud, it does not attain finality and it can be set at naught by a proper proceeding and on the facts and in the circumstances of the case, the High Court was fully justified in setting aside the order of the Forest Tribunal. It is submitted that the High Court has only followed the ratio of the decisions of this Court and there is nothing illegal in the decision rendered by the High Court. On facts, fraud was writ large and this was a case where the High Court ought to have interfered and the interference made was fully justified. Counsel further submitted that since the appellant had come with unclean hands and had obtained a relief by playing a fraud on the court, this was a fit case where this Court should decline to exercise its discretionary jurisdiction under Article 136 of the Constitution of India, sought to be invoked by the appellant. It was submitted that the appeals deserve to be dismissed.

10. It is true, as observed by De Grey, C.J., in Rex Vs. Duchess of Kingston [ 2 Smith L.C. 687] that: "'Fraud' is an intrinsic, collateral act, which vitiates the most solemn proceedings of courts of justice. Lord Coke says it avoids all judicial acts ecclesiastical and temporal".

In Kerr on Fraud and Mistake, it is stated that: "in applying this rule, it matters not whether the judgment impugned has been pronounced by an inferior or by the highest Court of judicature in the realm, but in all cases alike it is competent for every Court, whether superior or inferior, to treat as a nullity any judgment which can be clearly shown to have been obtained by manifest fraud."

24 ITA No.4060/Del./2011

It is also clear as indicated in Kinch Vs. Walcott [1929 APPEAL CASES 482] that it would be in the power of a party to a decree vitiated by fraud to apply directly to the Court which pronounced it to vacate it. According to Kerr, "In order to sustain an action to impeach a judgment, actual fraud must be shown; mere constructive fraud is not, at all events after long delay, sufficient but such a judgment will not be set aside upon mere proof that the judgment was obtained by perjury."

(See the Seventh Edition, Pages 416-417)

11. In Corpus Juris Secundum, Volume 49, paragraph 265, it is acknowledged that, "Courts of record or of general jurisdiction have inherent power to vacate or set aside their own judgements".

In paragraph 269, it is further stated, "Fraud or collusion in obtaining judgment is a sufficient ground for opening or vacating it, even after the term at which it was rendered, provided the fraud was extrinsic and collateral to the matter tried and not a matter actually or potentially in issue in the action.

It is also stated:

"Fraud practiced on the court is always ground for vacating the judgment, as where the court is deceived or misled as to material circumstances, or its process is abused, resulting in the rendition of a judgment which would not have been given if the whole conduct of the case had been fair".

12. In American Jurisprudence, 2nd Edition, Volume 46, paragraph 825, it is stated,

"Indeed, the connection of fraud with a judgment constitutes one of the chief causes for interference by a court of equity with the operation of a judgment. The power of courts of equity in granting such relief is inherent, and frequent applications for equitable relief against judgments on this ground were made in equity before the practice of awarding new trials was introduced into the courts of common law.

Where fraud is involved, it has been held, in some cases, that a remedy at law by appeal, error, or certiorari does not preclude relief in equity from the judgment. Nor, it has been said, is there any reason why a judgment obtained by fraud cannot be the subject of a direct attack by an action in equity even though the judgment has been satisfied."

13. The law in India is not different. Section 44 of the Evidence Act enables a party otherwise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a Court to consider and decide the question whether a prior adjudication is 25 ITA No.4060/Del./2011

vitiated by fraud. In Paranjpe Vs. Kanade [ILR 6 BOMBAY 148], it was held that it is always competent to any Court to vacate any judgment or order, if it be proved that such judgment or order was obtained by manifest fraud. In Lakshmi Charan Saha Vs. Nur Ali [ ILR 38 Calcutta 936], it was held that the jurisdiction of the Court in trying a suit questioning the earlier decision as being vitiated by fraud, was not limited to an investigation merely as to whether the plaintiff was prevented from placing his case properly at the prior trial by the fraud of the defendant. The Court could and must rip up the whole matter for determining whether there had been fraud in the procurement of the decree. ..."

Further it states :..... In Ram Preeti Yadav Vs. U.P. Board of High School and Intermediate Education & Others [(2003) Supp. 3 SCR 352], this Court after quoting the relevant passage from Lazarus Estates Ltd. Vs. Beasley [(1956) 1 All ER 341] and after referring to S.P. Chengalvaraya Naidu (Dead) by LRs. Vs. Jagannath (Dead) by LRs & Ors. (supra) reiterated that fraud avoids all judicial acts. In State of A.P. & Anr. Vs. T. Suryachandra Rao [(2005) 6 SCC 149], this Court after referring to the earlier decisions held that suppression of a material document could also amount to a fraud on the Court. It also quoted the observations of Lord Denning in Lazarus Estates Ltd. Vs. Beasley (supra) that,

"No judgment of a Court, no order of a minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything." "........Therefore, the appellant played a fraud on the Court by holding out that he was the title holder of the application schedule property and he intended to cultivate the same, while procuring the order for exclusion of the application schedule lands. It was not a case of mere perjured evidence. It was suppression of the most vital fact and the founding of a claim on a non-existent fact. It was done knowingly and deliberately, with the intention to deceive. Therefore, the finding of the High Court in the judgment under appeal that the appellant had procured the earlier order from the Forest Tribunal by playing a fraud on it, stands clearly established. It was not a case of the appellant merely putting forward a false claim or obtaining a judgment based on perjured evidence. This was a case where on a fundamental fact of entitlement to relief, he had deliberately misled the Court by suppressing vital information and putting forward a false claim, false to his knowledge, and a claim which he knew had no basis either in fact or on law. It is therefore clear that the order of the Forest Tribunal was procured by the appellant by playing a fraud and the said order is vitiated by fraud. The fact that the High Court on the earlier occasion declined to interfere either on the ground of delay in approaching it or on the ground that a Second Review was not maintainable, cannot deter a Court moved in that behalf from declaring the earlier order as vitiated by fraud...."

26 ITA No.4060/Del./2011

"20......... Thus, we find no merit in the argument that the High Court had exceeded its jurisdiction in setting aside the order of the Forest Tribunal at this distance of time."

k.2(vi) Ram Chandra Singh vs Savitri Devi And Ors. on 9 October, 2003: Equivalent citations: 2004 (2) ALT 15 SC, I (2004) BC 187 SC: " 18. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad.

"......19. In Derry v. Peek, (1889) 14 AC 337, if was held: In an 'action of deceit the plaintiff must prove actual fraud. Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false.

A false statement, made through carelessness and without reasonable ground for believing it to be true, may be evidence of fraud but does not necessarily amount to fraud. Such a statement, if made in the honest belief that it is true, is not fraudulent and does not render the person make it liable to an action of deceit.

20. In Kerr on Fraud and Mistake at page 23, it is stated:

"The true and only sound principle to be derived from the cases represented by Slim v. Croucher is this that a representation is fraudulent not only when the person making it knows it to be false, but also when, as Jessel, M.R., pointed out, he ought to have known, or must be taken to have known, that it was false. This is a sound and intelligible principle, and is, moreover, not inconsistent with Derry v. Peek, A false statement which a person ought to have known was false, and which he must therefore be taken to have known was false, cannot be said to be honestly believed in. "A consideration of the grounds of belief", said Lord Herschell, "is no doubt an important aid in ascertaining whether the belief was really entertained. A man's mere assertion that he believed the statement he made to be true is not accepted as conclusive proof that he did so."

21. In Bigelow on Fraudulent Conveyances at page 1, it is stated :

"If on the facts the average man would have intended wrong, that is enough."

22. It was further opined:

"This conception of fraud (and since it is not the writer's, he may speak of it without diffidence), steadily kept in view, will render the 27 ITA No.4060/Del./2011

administration of the law less difficult, or rather will make its administration more effective. Further, not to enlarge upon the last matter, it will do away with much of he prevalent confusion in regard to 'moral' fraud, a confusion which, in addition to other things, often causes lawyers to take refuge behind such convenient and indeed useful but often obscure language as 'fraud upon the law'. What is fraud upon the law? Fraud can be committed only against a being capable of rights, and 'fraud, upon the law' darkens counsel. What is really aimed at in most cases by this obscure contrast between moral fraud and fraud upon the law, is a contrast between fraud in the individual's intention to commit the wrong and fraud as seen in the obvious tendency of the act in question."

23. Recently this Court by an order dated 3^rd September, 2003 in Ram Preeti Yadav v. U.P. Board of High School & Intermediate Education and Ors. reported in JT 2003 (Supp. 1) SC 25 held:

"Fraud is a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by words or letter. Although negligence is not fraud but it can be evidence on fraud. (See Derry v. Peek (1889) 14 AC 337)

In Lazarus Estate v. Berly [(1956) 1 All ER 341] the Court of Appeal stated the law thus:

"I cannot accede to this argument for a moment "no Court in this land will allow a person to keep an advantage which he has obtained by fraud. No judgment of a Court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything". The Court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever."

".....30. It was further held:

"The judiciary in India also possesses inherent power, specially under Section 151 CPC, to recall its judgment or order if it is obtained by fraud" on Court, In the case of fraud on a party to the suit or proceedings, the Court may direct the affected party to file a separate suit for setting aside the decree obtained by fraud. Inherent powers are powers, which are resident in all Courts, especially of superior jurisdiction. These powers spring not from legislation but from the nature and the constitution of the tribunals or Courts themselves so as to enable them to maintain their dignity, secure obedience to its process and rules, protect its officers from indignity and wrong and to punish unseemly behavior. This power is necessary for the orderly administration of the Court's business."

28 ITA No.4060/Del./2011

31. In Chittaranjan Das v. Durgapore Project Limited and Ors. , It has been held:

"Suppression of a material document which affects the condition of service of the petitioner, would amount to fraud in such matters. Even the principles of natural justice are not required to be complied within such a situation.

It is now well known that a fraud vitiates all solemn acts. Thus, even if the date of birth of the petitioner had been recorded in the service returns on the basis of the certificate produced by the petitioner, the same is not sacrosanct nor the respondent company would be bound thereby."

l(i) "Section 68 is only an enabling provision and would apply where a credit entry is made in the books of account maintained by the assessee. The position where no such entry is made, but the amount is undisputedly received by the assessee, is governed by general principles and the question whether in such a case the receipt is taxable as income would largely depend on the facts and evidence. We, therefore, reject the preliminary point raised on behalf of the assessee." The making of entries in the books of account maintained by the assessee is not a condition precedent for taxing them as the assessee's income :Deputy Commissioner of Income-tax v. Smt. Phoolwati Devi(314ITR(AT)1(Del):" Taking all the aforesaid surrounding circumstances into consideration and putting them to test on the anvil of normal course of human conduct and probabilities, we are of the opinion that despite the superficial documentation in support of the credits, they cannot be considered to be genuine loans taken by the assessee. In CIT v. Durga Prasad More [1971] 82 ITR 540, the Supreme Court observed that the Tribunal would be justified in disbelieving a story which is prima facie fantastic and does not accord with the human probabilities and that the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. In Sumati Dayal v. CIT [1995] 214 ITR 801, the Supreme Court again held that in such cases, a superficial approach to the problem should be eschewed and the matter has to be considered in the light of human probabilities and further that any transaction about which direct evidence is rarely available should be inferred on the basis of the circumstances available on the record. In that case, the majority opinion of the Settlement Commission was approved as it was taken after considering the surround- ing circumstances and applying the test of human probabilities. These principles apply to the present case where the documentary evidence prima facie supports the assessee's case but a closer look at the same in the light of the surrounding circumstances and applying the test of human probabilities reveal that the documentary evidence cannot be accepted. The learned Commissioner of Income-tax (Appeals), with respect, did not approach the case from this angle and seems to have been guided merely by the documentary evidence. In this, he fell into an error. He ought to have given a wholesome treatment to the case taking 29 ITA No.4060/Del./2011

into account the principles laid down by the Supreme Court in the judgments cited above. We are unable to agree with him that the Assessing Officer was wrong in adding the loans aggregating to Rs. 10 lakhs as the assessee's income.

The learned representative for the assessee strongly relied on the judgment of the Bombay High Court in CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67 to contend that section 68 is not applicable since the assessee is not maintaining books of account and no addition can be made on the basis of the bank passbook of the creditors since the bank statements cannot be considered to be books of account of the assessee. No doubt, section 68 refers to amounts credited in the books of account of the assessee but section 68 is not exhaustive of the additions that can be made by the Assess- ing Officer. Where it is seen that the assessee is in receipt of monies, then notwithstanding that he does not maintain books of account in which such monies are recorded, it is his burden, when called upon, to point out the nature and source of the money and if his explanation in this behalf is not found satisfactory it is open to the Assessing Officer to add the same as his income. For this purpose, it is not necessary for the Assessing Officer to rely on section 68 of the Act. This aspect of the matter has been considered by the Delhi Bench of the Tribunal in the case of ITO v. Ramesh Chand Garg (ITA No. 4622/Del/2003, dated April 13, 2007), to which one of us (the Vice- President) was party, in the following words :

"That apart, section 68, in our humble opinion, is not exhaustive of the additions to be made by the Assessing Officer of amounts received by the assessee. If that were to be so, any assessee by simply not maintaining books of account can seek to escape taxation of monies received by him for which he has no explanation regarding the nature and source. In A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), a similar situation arose. The assessee had contributed monies to the firm in which he was a partner and they appeared in the account books of the firm as credits from him. The assessee was asked to give an explanation as to how he came to possess the amounts. He explained that a part of the amount came from his aunt being given to her by his father and the other part was earned as share income from another firm. Both the explanations were rejected by the Income-tax authorities whose decision was con- firmed by the Tribunal and the High Court. On further appeal by the assessee to the Supreme Court, it was held that there was ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of assessable nature. Whether a receipt is to be treated as income or not must depend very largely on the facts and circumstances of each case. The making of entries in the books of account maintained by the assessee is not a condition precedent for taxing them as the assessee's income. It is the receipt of the monies 30 ITA No.4060/Del./2011

which entitles the Income-tax authorities to examine their taxability. In Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 (SC), the assessee had disclosed in a statement that she had received certain amounts from the Maharani of Baroda 'out of natural love and affection'. A part of the gifts was received in the form of jewellery. Cheques had also been received by the assessee which were credited in her account. The Supreme Court did not hold that the Income-tax authorities were debarred from assessing the amounts as income but on facts held that since there was evidence to show that the cheques, cash and jewellery were received as gifts they were not assessable as income, particularly when there was no dispute about the truth of the assessee's version. We do not think that there is any prohibition in the Income-tax Act, to assess, if the evidence justifies the same, any amount received by the assessee as his income notwithstanding that the amount received was not entered or credited in the books of account maintained by him. Section 68 is only an enabling provision and would apply where a credit entry is made in the books of account maintained by the assessee. The position where no such entry is made, but the amount is undisputedly received by the assessee, is governed by general principles and the question whether in such a case the receipt is taxable as income would largely depend on the facts and evidence. We, therefore, reject the preliminary point raised on behalf of the assessee." In the light of the aforesaid legal position, it is not possible to accept the submission of the learned representative for the assessee that section 68 has no application to the case. Even without reference to the section, the amount can be added if the explanation of the assessee with regard to the nature and source of the receipt is not satisfactory. We, therefore, uphold the addition. The order of the Commissioner of Income-tax (Appeals) is reversed and the addition is restored. The appeal of the Department is allowed with no order as to costs. The order pronounced in the open court on January 4, 2008. (emphasis supplied)

L(ii) alternatively too , the bogus gifts are taxable :Reliance on Vinod Behari Jain v. Income-tax Officer,Smt. Sarika Jain v. Income-tax Officer,Sanjog Jain v. Income-tax Officer reported in 306ITR (AT)392 (Del) for "....Now reverting to the facts of the instant case of the assessees, we find that the amounts in question were alleged to have been received as gifts from the respective donors. The amounts were deposited by the donee assessees in their bank accounts which means that the assessees have not denied the ownership of such amounts found credited in their bank accounts in the financial year relevant to the assessment year under consideration. Regarding the genuineness of the acquisition of the amounts, explained to be gifts, have already been turned down by the Tribunal by holding the transactions to be in genuine. Section 69A provides that such money may be deemed to be the income of the assessee for such financial year. This is a deeming provision under which when the explanation given by the assessees offered regarding acquisitions of the same is rejected then under this deeming provision the same can be added to the income of the assessee. 31 ITA No.4060/Del./2011

We are further of the opinion that addition made by the tax authorities below merely under a wrong provision of the Income-tax Act, 1961 cannot absolve the assessees from being taxed under the correct provisions of the Income-tax Act, 1961 because the tax authorities below are duty bound to tax the undisclosed income of the assessees under the provisions of the Income-tax Act, 1961.

For the reasons stated above, the order of the Commissioner of Income tax (Appeals) in treating the impugned gift amounts as non-genuine gift transactions and consequently treating the same as undisclosed income of the assessees is upheld, however, we add that the impugned additions are to be made under section 69A of the Income-tax Act, 1961 and not under section 68 as held by the Commissioner of Income-tax (Appeals). The order of the Commissioner of Income-tax is modified to this extent only. In the result, the instant appeals filed by the respective assessees are dismissed. The order pronounced in the open court on December 20, 2007. "

Mi )Untenable Reliance on Smt. Mohinawati`s order: The order passed in case of mothers case has no sanctity on the peculiar facts of this peculiar case and no leverage can be drawn from assessee Smt Mohinderwati having paid capital gain tax in view of findings recorded by assessing officer in case of donee (assessee under consideration Sh J.Manchanda ) in case of J.Manchanda only proves that assessee Smt Mohinderwati has evaded tax at normal rate u/head Income from other sources by adopting the device of alleged sale of VDIS declared jewels after a lapse of good years (since VDIS).

Reliance on for proposition that when source of funds in hands of donor is not explained then addition under sec68 tenable : Mukesh Shaw Vs ITO :

"5. We consider the submission of the learned counsel for the appellant and perused the impugned order. It is a question of fact whether a person is creditworthy or not? and after considering the facts of the case we are of considered opinion that the Tribunal has not committed even error fact or error of law. The Assessing Officer has carefully examined the evidence produced by the assessee as well as his father-in-law, who appeared in response to the summoning of the Assessing Officer and who also submitted the documentary evidence as well the affidavit. After submission of the documentary evidence and affidavit, the Assessing Officer was supposed to decide the case according to the evidence available on record to find out the genuineness in the claim of the assessee, whether it is a gift or not as well was required to find out whether there is creditworthiness of the donor or not? Much has been stressed that the donor has admitted that he has gifted the amount to the assessee and that should have been accepted. We are unable to agree with this proposition because of the fact that we do not hold that in a case where the assessee claims that he received certain money from 32 ITA No.4060/Del./2011

someone in cash and the other party admits the same had been given by him and the material on record clearly disclosed that the donor had no creditworthiness so as to give the amount, then in that situation the admission contrary to the trustworthy evidence cannot be accepted as binding upon the Assessing Officer. Furthermore, in a case where one claims that he received certain amounts from ex- person and ex-person admits the availability of funds in the bank and it's withdrawal from bank, produces the such bank document in respect of his creditworthiness and from such documentary evidence itself, it is proved, as a matter of fact, that the transaction could not have happened than the admission of the donor is required to be rejected. If the plea as raised by learned counsel for the assessee is accepted than that means admission of such person (donor in this case) is binding upon the Assessing Officer even if such admission (which is also only an evidence and may be evidence of an interested person) has such high evidentiary value which can reject even trustworthy documentary and other evidence produced by the assessee himself or such donor himself. If so is held as argued by the learned counsel than it will ultimately lead to holding that after admission of the such person (donor in this case) no inquiry with respect to creditworthiness of the donor could have been conducted by the Assessing Officer. In a case where there is reasonable reason even of prima facie nature that there is possibility that the donor or the creditor had creditworthiness and he has given certain amount to the assessee, then, in that situation the burden of the assessee stands discharged. In that situation the assessee cannot be asked to explain or prove the source of the creditor from where and how he got the money. Enquiry about creditworthiness of a person and creditors source for such credit are entirely different matters. Once credit in the hands of creditor is proved, it's source cannot be enquired by the Assessing Officer in the assessing proceedings of (debtor) assessee. Argument of learned counsel for the appellant that once identity of a creditor is disclosed, the burden of the assessee to explain the money in his hand stand discharged cannot be accepted if the Assessing Officer is satisfied that creditor has no creditworthiness. Here there should not be confusion in knowing the difference between creditworthiness of the creditor and his source for the such credit. If such creditor says that he had paid certain amount to the assessee and produces evidence of availability of fund with him than further enquiry about the fact that from where he got the money is not permissible in the assessment proceedings of the assessee. In proper cases, where money in the hands of such creditor at relevant time is proved even a separate proceeding can be initiated against such person, who admits that he has paid or given money to the assessee. It is settled law, as settled by number of cases reference of which is not necessary as now it is well established by those pronouncements, that in the case of any assessee for any credit entry, it is explained by the assessee by disclosing identity of person than thereafter, he need not required to prove the source of the credit of the creditor. But this proposition can apply only when it is proved that the such creditor has creditworthiness, that in fact he has money to give it to 33 ITA No.4060/Del./2011

the assessee. Suppose if one creditor admits that he has given money to the assessee from his bank account and also submits statement of his bank account wherein there was no money, than whether in that situation the admission of such creditor given on even oath is binding upon the Assessing Officer? The answer would be no. The admission binds the author of admission and operate as estoppel against him but is not binding upon any other persons or authority.

6. Here, in this case the facts clearly indicates that the assessee was the son-in-law of the alleged donor and the donor was in employment and was getting salary and claimed that on different times of donation he was having cash, in total to the tune of Rs. 8.00 lakhs. His contention has been recorded by the Tribunal in para 9 that he gave this gift from the money received on his retirement and from provident fund and gratuity amount. The donor's contention further is that he kept all those money in his bank account and in support of his contention he produced the passbook of his two bank accounts, one of S.B.I, Asansol and another S.B.I. Nirsa. Asansol bank account was opened in the month of December, 2001 and from this account total withdrawal was Rs. 24,95,880/-, out of which Rs. 21,93,380/ is either transferred entries or Demand draft entry and only Rs. 3,02,500/- was withdrawn in cash. In another account of the S.B.I. the total amount found withdrawn in cash to be, Rs. 4,48,400/-, resulting into the total cash withdrawal from 1998 to 2004, which comes to Rs. 7,50,900/- as cash withdrawal in about six years. It was not the case of the assessee or his father-in-law, who got opportunity to adduce evidence that donor gave this amount from any other sources, other than the retirement benefits and gratuity amount. Therefore, the Tribunal and A.O rightly observe that in a case where total cash withdrawal is only Rs.7, 50,900/- since 1998-2004 from two bank accounts than it cannot be believed that he had kept the said amount with him, so as to give it to his daughter and son in law in the year 2004. Learned counsel vehemently submitted that A. O. and the Tribunal proceeded on presumption and observed that, if all cash withdrawals were gifted by the donor than how he met his household expenses? The assessee and the donor were not asked to explain this position and also this could not have been subject inquiry in the assessee's proceedings. The argument may look attractive but having no substance. Since the case of the donor himself was that he paid this amount out of retirement benefit which he deposited in the bank and he produced the evidence in support of the said account and took his own specific stand is that he paid the amount out of funds of the gratuity, than even if the donor had other source of income and met with his household and other expenses from that other income than also that plea cannot help the assessee as fact in issue is that whether it can be believed that the donor went on withdrawing the cash from bank and kept the money with him for assessee for five years. From the facts, his donation to assessee from his retirement benefit and gratuity is not proved rather say, contradicted by his bank account itself.

34 ITA No.4060/Del./2011

7. Much stress has been given that in a number of judgments, it has been held that once identity of a donor or a creditor is disclosed by the assessee, then the Income Tax Officer can only proceed to register proceedings against such creditor and can give proper notice to such creditor to explain his income or the source from which he has given money to the assessee. Such plea do not applies in the facts of the case where from trustworthy evidence the Assessing Officer reaches to conclusion that the transaction itself is not genuine so as to have any doubt that the payment has been made by third person to assessee then issuing notice to a third party after taking stand that third party has not given the amount to the assessee will be nothing, but futile and unnecessary exercise.8. In view of the above reasons, this appeal is dismissed.

Mii) There is no corroboration on record on files of Smt. Mohinderwati during asstt proceedings (from assessee Smt Mohinderwati) to prove beyond doubt or say with reasonable human probability of the fact that there was (a) any sale of jewels at threshold in view of findings of AO in case of J.Manchanda (b) that alleged jewels allegedly sold are same as that declared under VDIS , more so in backdrop of shifting stance etc(c) the number of years that has lapsed in intregunnum as its not uncommon for ladies to sell jewels in old age -infact they are given as family heirlooms to grand children , daughter-in-law etc as per human probability (d)the revenues finding of assessing officer in case of J.Manchanda of this being a bogus case of alleged sale of jewels being presented as source of (bogus ) gift to assess Sh J.Manchanda has not been adverted to, examined on judicial principles by assessing officer of Smt Mohinderwati and hence too a judicial authority (read CIT(A) of Sh J.Manchanda ) reliance on such order is unacceptable in law read with decisions of SC as regards doctrine of "finality of litigation" - New India Assurance Co, Shimla v. Kamla, AIR 2001 SC 1419; Hamza Haji vs State Of Kerala & Anr on 18 August, 2006; S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagnnath (dead) by Lrs. & ors. {1994 (1) SCC 1}; Ram Chandra Singh vs Savitri Devi And Ors. on 9 October, 2003: Equivalent citations: 2004 (2) ALT 15 SC, I (2004) BC 187 SC etc (supra)

Miii)The books are being maintained by assessee since (capital account has been made ) & the assessee is a proprietor of Bharat In. works of which he is offering income for taxation .

Miv)Reliance on AOs order in totality and since the varied decisions cited by Assessee & CIT(A) are inapplicable to matter . Hence relying on varied decisions / factual matrix quoted supra, the matter may please be decided in favour of Revenue. .

5. The learned AR submitted as under :-

35 ITA No.4060/Del./2011

That solitary issue involved in the instant appeal filed by the revenue is regarding deletion of addition of Rs.10.80 lacs representing gift received from mother Smt. Mohinder Wati and, brought to tax as alleged unexplained cash credit u/s 68 of the Act. The factual matrix, relating to the aforesaid addition, are that assessee deposited a sum of Rs.10,66,276/- in cash during the financial year 2005-06 with Bank of India, Maya Puri, Delhi on various dates between 16.11.2005 to 31.01.2006. The assessee's case was selected for scrutiny vide issue of notice u/s 143(2) and, assessee was directed to show cause as to why the said amount of Rs.10,66,236/- should not be treated as unexplained cash credit under section 68 of the Act and, therefore be added to his income. The assessee stated that sum of Rs.10,66,236/- was deposited by assessee in his above mentioned savings bank account out of the gifts received by him from his mother Smt. Mohinder Wati, who was assessed to tax in Income Tax Officer Ward 24(4), New Delhi, having PAN: AANPW7638R. She declared her sources of income in the return of income filed by her and also declared the fact that she had gifted a sum of Rs.10,80,000/- to her son Sh. Jatinder Manchanda. A copy of declaration of gift was filed in support of the claim. Further, it was also explained to the learned Assessing Officer that, source of gift given by Smt. Mohinder Wati was sale of part of jewellery which she had declared under VDIS 1997. A copy of such certificate under section 68(2) of the VDIS, 1997 issued by Commissioner of Income Tax - VII, New Delhi was also filed before the learned AO during the assessment proceedings. Further the assessee supplied the copies of bills of jewellery sold by Smt. Mohinder Wati and Gift Deed to the learned Assessing Officer and further vide letter dated 01.12.2008 reiterated the fact that the donor had sold jewellery which she declared in VDIS, 1997 and from such money, she gave a cash gift of Rs.10,80,000/- to assessee. Thus, the source gets proved and there was no requirement in law to prove the source of source of the donor as, she had sufficient funds with her to give gift of Rs.10,80,000/-. The learned Assessing Officer vide order dated made an addition of Rs.10,80,000/- on account of unexplained cash credits under section 68. In doing so, he gave following findings:

i) Sale of jewellery is false and assessee has not produced any statement to say that in absence of sale of jewellery Smt. Mohinder Wati will have sufficient funds of Rs.10,80,000/-. In coming to this conclusion, he overlooked the fact that, she had declared such jewellery in VDIS, 1997 and during the impugned financial year there was no stock of such jewellery left with the mother, hence, this finding of AO was merely based on suspicion, conjectures and surmises.

ii) Income Tax Return is not enough to show the credit worthiness of the donor and more so, the entire transaction of gift is a sham, in garb of which assessee's own unaccounted money has been converted into accounted money (in giving this finding, he factually erred in ignoring the fact that donor was mother of assessee and she had sufficient funds 36 ITA No.4060/Del./2011

with her which she duly disclosed in her Return of Income as well, so genuineness and creditworthiness, stands explained).

During the course of appellate proceedings the assessee brought to the notice of CIT (A), that the assessee's assessing officer passed on the information of gift to the assessing officer of Smt. Mohinder Wati, who in turn reopened the assessment of Smt. Mohinder Wati under section 147 for the impugned Assessment Year 2006-07, where in, on considering the entire facts, the learned assessing officer in the case of donor, through a speaking order dated 07.12.2009 accepted the fact that the lady has given gift to her son out of the amount received from sale of jewellery. The learned assessing officer of the donor accepted the returned capital gains on sale of jewellery, accepted the validity of gift made by her to her son namely the assessee and thereby, accepted the entire returned income without making any additions. Hence source of funds stood proved in the hands of the donor in view of the speaking order passed by the assessing officer in donor's hands. Hence, the said sum once being assessed in the hands of Smt. Mohinder Wati and thereby the same sum being so gifted to her son, namely the assessee could not again be deemed to be taxable as assessee's undisclosed income. The learned Commissioner of Income Tax (Appeals) held that:

"In Para 5.4. I am of the opinion that the assessee has clearly discharged his onus by proving the identity of the donor, the genuineness of the gift and also the creditworthiness of his mother, who happens to be his own mother. If it was the case of the AO that the money gifted by Smt. Mohinder Wati to her son, the assessee, is not the same which she obtained by selling her jewellery declared under VDIS, 1997, then the onus was on him to establish such nexus. Not only has he not been able to do so, he has not made any further investigation in that direction. Further, the AO passed on the information regarding presumed bogus sale of jewellery to the AO of Smt. Mohinder Wati , who reopened her case u/s 147 of the Act and passed an order with following remarks:

"From details filed by the AR it is seen that the assessee has gifted this amount received from sale of jewellery. After going through the details filed by the AR and on considering the submission made by assessee is accepted and discussed the case."

In Para 5.5. In view of the above discussion, the addition made by the AO for an amount of Rs. 10, 80, 000/- u/s 68 of the Act is hereby deleted."

Aggrieved against the aforesaid order of the learned Commissioner of Income Tax (Appeals) revenue has preferred this appeal before Your Honour's against deletion of the said unexplained cash credit u/s 68 amounting to Rs.10,80,000/- . It is also submitted that, the learned DR during the course of hearing before Hon'ble Bench has made following submissions:

37 ITA No.4060/Del./2011

(i) That there has been a shifting stand by assessee and his mother during her reassessment proceedings;

(ii) That none of the buyers to whom jewellery were said to be sold by the mother existed at the addresses given;

(iii) That the order obtained in the case of mother Smt. Mohinder Wati has been obtained by fraud, as she has shifted her stand during the reassessment proceedings; and,

(iv) A lot of emphasis was placed on the age of the lady and her mental state and how can a lady of 90 years old suffering from mental dementia, give such amount of gift.

At the outset, it is submitted that, assessee is an individual not maintaining any books of accounts in individual capacity. However4 it clarified is that, assessee is also a sole proprietor of M/s Bharat Industries Works for which books of accounts are maintained by assessee. The addition of Rs.10,80,000/- made under section 68 is highly arbitrary, as no books of accounts have been maintained by assessee and thus, there is no question of any credit appearing in the books of the assessee nor any amount is appearing as credited in books of accounts of proprietorship concern of assessee. Further, assessee submits that sums appearing on the deposit side of bank account cannot be regarded as books of accounts, as has been held in the following judgments :

i) 113 TTJ 178 (Del) Mayawati vs DCIT Affirmed by High Court of Delhi in the case of CIT vs. Mayawati reported in 338 ITR 563.

"As regards applicability of Section 68, I am of the opinion that the Gift could not have been dated u/s 68 because the Gifted amount has been directly deposited into the bank account of the assessee. In such facts, the law on the point has been laid down in CIT vs. Bhai Chand. Gandhi 141 ITR 67, 69 Bombay - that Statement of Affairs is not Books of Accounts, hence addition u/s 68 cannot be made.

I am also of the opinion that as the Gifts cannot be charged u/s 68, the A.o. has tried to take shelter u/s 56 of LT. Act by stating in the Assessment Order that the Gifts are charged u/s 68/69 r.w.s. 56(1). While doing so he has forgotten that Section 68 and 69 are deeming provisions and not charging Section. So they cannot be read together and this is not a case where Section 56 would apply as the assessee is not having any Income from Other Sources.

ii) 171 ITR 532 (P&H) Smt. Shanta Devi vs CIT . iii) 141 ITR 67 (Bombay) CIT Poona vs Bhaichand H. Gandhi." iv) 291 ITR 232 (Chennai) CIT vs Taj Borewells. 38 ITA No.4060/Del./2011

Thus, it is evident from the above judgments that gift received and directly deposited in bank account cannot be added under section 68, as bank account is not books of accounts of the assessee and thus, no addition could be made under section 68 of the Act

That further, the assessee proved the source of the gift i.e. from mother Smt. Mohinder Wati and thus, when identity, creditworthiness and genuineness of a transaction has been proved by an assessee, then the assessing authority is not justified in going to the question of 'source of source'. As, the sale of jewellery and giving of gift has been accepted by department in assessment made on Smt. Mohinder Wati. Thus, doubting the source of source in assessee's case is highly improper and based on mere suspicion. For, this proposition assessee seeks to place its reliance on following judgments:

i) 177 Taxman 331 (Del) CIT vs Diamond Products Ltd .

Para 5. We have heard the learned counsel for the assessee and have examined the findings returned by the Tribunal as well as those returned by the Commissioner of Income-tax (Appeals) and find ourselves to be in agreement with the conclusions arrived at by the Tribunal. The Assessing Officer is not permitted to examine the source of the source once the assessee has been able to establish that the transaction with his creditors is genuine and that the creditors' identities and creditworthiness have been established. In this case, this had been done, therefore, it was not open to the Assessing Officer to make the addition of Rs.23,00,000 after entering upon an examination of the source of the source. Consequently, we feel that no interference is called for on this conclusion in the impugned order passed by the Tribunal. The Tribunal has correctly applied the law on the facts determined by it. No substantial question of law arises on this aspect of the matter.

ii) 330 ITR 298 (Del) CIT vs. Dwarkadhish Investment (P) Ltd.

Para 8. In any matter, the onus of proof is not a static one. Though in Section 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke Section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the 'source of source'."

That further, the allegation of Assessing Officer that the assessee has brought her unaccounted money through gift and has made it accounted, 39 ITA No.4060/Del./2011

is totally baseless and merely based on suspicion and surmises, as nothing has been brought on record by the learned Assessing Officer that the money emanated from the coffers of assessee, on the contrary the reassessment done in the case of Smt. Mohinder Wati establishes the point that, she actually gifted the amount to assessee. To strengthen this argument, reliance is placed on the following judgment:

(i) 307 ITR 334(Del) CIT vs Value Capital Services (P) Ltd.

" ... the additional burden on the revenue. It must show that even if the applicant does not have the means to make the Investment, the Investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee this has not been done insofar as the present case is concerned and that has been noted by the Tribunal also."

(ii) 306 ITR 35 (Del) CIT vs. Real Time Marketing P. Ltd

That the assessee is the only son of Smt. Mohinder Wati and as such the amount of gift received from a mother needs no particular occasion, as natural love and affection is enough in such cases. For this proposition, assessee would seek to place its reliance on following judgments :

(i) 324 ITR 231 (Del) CIT vs Suresh Kumar Kakkar

"Para 3. Insofar as the identity is concerned, that is an admitted position that the gifts were made by the mother to the son. With regard to the creditworthiness, the assessee has been able to discharge the onus cast upon him by furnishing the bank statement of his mother (donor) as also the confirmation certificate from the mother confirming the said gifts. Once the assessee has discharged the primary onus, which was cast upon the assessee, it was incumbent upon the Assessing Officer to prove on the basis of a cogent evidence that the transaction was not genuine. There is no such evidence forthcoming. We find that the conclusions of the Assessing Officer and the Commissioner of Income-tax (Appeals) with regard to the genuineness of the transactions are merely conjectural and are based on surmises and assumptions. Such conjectures and assumptions cannot take the place of proof, once the assessee has discharged the primary burden which had been cast upon him.

Para 4. The Tribunal has correctly concluded that the authorities below had ignored the fact that there was a blood relationship (mother-son) between the donor and the donee; that the gifts are normally made by parents to children through love and affection and do not necessarily require any particular occasion; that the gifts in the present case were all made by cheques and through banking channels. The Tribunal held that when the identity and the capacity are proved beyond doubt and the source of the gifts was the mother, there was no question of making the addition under Section 68 of the said Act.

40 ITA No.4060/Del./2011

Para 5. In the foregoing circumstances, the findings recorded by the Tribunal do not suffer from any perversity. Consequently, no substantial question of law arises for our consideration."

ii) 291 ITR 475 (Raj) Huma Hussain vs CIT

iii) 102 TTJ 665 (Del) Suraj Bhan Bajaj vs ITO

iv) 200 Taxation 219 (Del) CIT vs Raghbir Singh v) 338 ITR 563 (Del) CIT vs. Mayawati

REBUTTAL OF THE CONTENTIONS OF THE LD. DR : That first and foremost the assessee would submits that, there has been no shifting of stand by the assessee or by the donor, as the entire nature of transaction has been explained by Smt. Mohinder Wati in her reassessment proceedings and which has also found favour with her assessing officer, who has accepted the genuineness of sale of jewellery and gift given to assessee. However, again to rebut the department's false allegations, assessee would like to bring the facts about the sale of jewellery clearly as below:

(i) Smt. Mohinder Wati had sold the jewellery through a small "dalal" (commission agent! broker) Mr. Deepak Karmakar and as is customary in the jewellery business, these were sold in cash through him. At the same time, no credit note was obtained as it was not a commercial transaction and the assessee was not aware that any bill etc was to be obtained;

(ii) However, when assessment of assessee i.e. Jitender Manchanda was opened, the donor asked for specific evidence for sale of jewellery and for which dalal was contacted, who informed that the jewellery was of gold and was sold at the then prevailing rate and it was not customary to obtain any credit note in cases of personal transactions. However, on being insisted, the dalal gave credit notes in form of bills stating the exact quantity and rate at which jewellery was sold. These were provided to the learned Assessing Officer in the assessee's case. However, as it is apparent that these were just bills given merely for rate purposes, the purchasers/ jewelers were non existent as has been observed by the assessing officer;

(iii) Further, the dalal was again contacted during the reassessment proceedings of Smt. Mohinder Wati and it was specifically requested by her that not only the purchase vouchers but also the exact names and addresses of the buyer is required for income tax purposes. To this, dalal informed that the jewellery were sold to Mrs. Neeru Anand, resident of D - 1, Model Town - 1, New Delhi - 09, PAN: AALPAI276B, who had purchased these in case by withdrawal of cash from her regularly maintained bank account;

41 ITA No.4060/Del./2011

(iv) More so ever, during the course of proceedings of Smt. Mohinder Wati, statements of dalal Sh. Deepak Karmakar and the buyer of Jewellery Smt. Neeru Anand were also taken on record. Smt. Neeru Anand had stated that she was regularly assessed to tax vide PAN: AALPA1276B in New Delhi and that she had purchased pieces of gold jewellery during the financial year 2005-06 and that this jewellery had been purchased by her through Mr. Deepak Karmakar and that this jewellery had been purchased by her in cash and that, cash was drawn by her from regularly maintained bank account no. 0109000761000 in State Bank of Hyderabad, K.G. Marg, Delhi. Copy of her bank statement showing cash withdrawals was produced along with for verification;

(v) Shri Deepak Karmakar had stated that he was a small dalal commission agent working in jewellery market, Dariba, Chandni Cowk, engaged in assisting individual buyers and sellers of jewellery. During financial year 2005-06 he had facilitated sale of certain pieces of jewellery of Smt. Mohinder Wati who was known to him for long time. The jewellery was sold to Smt. Neeru Anand. The sale consideration was in cash, since this was an individual to individual dealing, hence no credit note/debit note was required. Generally, in personal dealings, he does not reveals the identity of buyer and sellers. Later Mrs Mohinder Wati had asked him for credit notes of these transactions. He had informed her that it was not possible and hence had given though credit notes on draft bills just stating the description of pieces of jewellery and rates thereof. He had categorically stated in his statement that he had no idea that these credit notes were required by Smt. Mohinder Wati for official purposes. He had just given these as token of information that such and such pieces have been sold at such and such price. He had just done it as in their trade they generally did not reveal the identity of buyers and sellers. Later, Mrs. Mohinder Wati told him that the bills for sale of jewellery were required for official purposes, he revealed her the actual fact that these had been purchased by Mrs. Neeru Anand; and,

(vi) So, it would be evident from above that, there is no shifting of stand on part of assessee, as the entire factual matrix explained above would make it abundantly clear that the jewellery was actually sold by Smt. Mohinder Wati and as such she had sufficient funds to give gift to her son Sh. Jitender Manchanda. In fact as far as assessee is concerned, there can be no allegation of shifting of stand. It is submitted that, assessee has always contended consistently that, sums received represents gift from mother and there is no change in such a contention and hence the submission is misconceived. It is no doubt true that earlier it was explained that mother had received the sum by sale of jewellery to certain jewellers though later, it was clarified that, such sale was not made to jewellers, but to Mrs. Neeru Anand. It is submitted that, this fact does not in any manner establish that there is a shifting of stand by the assessee. The stand of the assessee continues to be that, gift was received by the assessee from mother who had received the sum from sale of jewellery. It is submitted that, sale of jewellery was to jewellers or Mrs. Anand does 42 ITA No.4060/Del./2011

not lead to an assumption that, there is a shifting of stand and in any case, such alleged shifting of stand, if there is any is that, of the mother and, not of the assessee. However, once the sale has been accepted in the hands of the mother by the learned Assessing Officer, the same too is of no consequence. Reliance here is placed on the judgment of Apex Court in the case of Mcorp Global Pvt. Ltd. vs. CIT reported in 309 ITR 434 wherein the Apex Court has held that Hon'ble Tribunal cannot take away the benefit granted by the department and also the judgment of Apex Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT reported in 293 ITR 226 wherein it is has been held that once the said order attained finality, the same could not be disturbed. The assessee also seeks to here refer to the judgment of Allahabad High Court in the case of Sheo Narain Duli Chand vs. CIT reported in 72 ITR 766 wherein it has been held as under:

"There is no presumption that witnesses appearing for an assessee come forward to give false evidence to oblige the assessee."

In light of the aforesaid it is evident that the arguments are in vein contrary to facts and law. It is well settled position of law that once a transactions stands accepted in the hands of the seller, the same too also has to be accepted in the hands of the buyer. Reliance is placed on the case of Mani Kakkar. (Copy enclosed). Infact, even in the case of co- owners, this position has been accepted in the following judgments:

(i) 107 ITR 477 (P&H) Jaswant Rai vs Commissioner of Wealth Tax, Patiala I

ii) 292 ITR 624 (Mad) CIT vs Kumararani Smt. Meenakshi Achi

As regards, judgments relied upon by learned DR, the submission of the assessee is as under:

Sr.No. Judgments Rebuttal of the assessee

i) 258 ITR 121 Not Applicable to the (Del) facts of the present

CIT vs Sujjan case, as the issue

Singh involved is not of

Chaddha gift in this cited

judgment,

furthermore, nothing

has been credited in

the books of

impugned assessee,

so section 68 has no

applicability at all.

ii) 304 ITR 259 (Ker) Not at all applicable to the CIT vs Co-op Sugars facts of the present case, as

Ltd. in this cited judgment the

43 ITA No.4060/Del./2011

issue involved was of

allowability of expenditure

u/s 37(1) and no issue is

there of gift or of section 68.

iii) 82 ITR 540 (SC) Rather this judgment CIT West Bengal II supports the case of the

vs Durga Prasad assessee, the court in this

More case held that, "It is true that an apparent must be

considered real until it is

shown that there are reasons

to believe that the apparent is

not the real." However, the

assessing officer has

nowhere in assessee's case

has been able to prove that

the gift is not real and more

so, the reassessment of donor

and acceptance of sale of

jewellery and giving of gift

by her assessing officer,

establishes the fact that, the

gift was real.

iv) 241 ITR 801 (SC) The proposition laid down in Sumati Dayal vs CIT this judgment was that, if

surrounding circumstances

create doubt then

explanation of assess should

not be accepted. However, in

assessee's case, this ratio

cannot be applied, as test of

surrounding circumstance is

favour of assessee, as the

fact that jewellery was sold

and gift was given has been

established by assessment

carried on by assessing

officer on Smt. Mohinder

Wati's case.

(v) 294 ITR 488 (Del) Not applicable to the facts of Rajeev Tandon vs the impugned case, as this

ACIT cited judgment is with regard to gifts from strangers,

whereas in impugned matter,

the gift directly came from

mother, thus there was no

need to prove the occasion

for giving the gifts.

vi) 296 ITR 249 (Del) Not applicable to the facts of 44 ITA No.4060/Del./2011

Bharti Telecom the case, as this case deals

Finance Ltd. vs ACIT with the shifting of stand by assessee and giving different

explanations at different

stages, whereas in the

assessee's case, if we look at

the factual matrix in the

impugned matter, the

assessee has been able to

explain the gifts received and

from what source the donor

gave gifts, this fact was even

accepted by the assessing

officer in the case of the

donor, so the proposition of

shifting of stand, is not at all

applicable in the present

case.

vii) 2009 TIOL 400 In this cited judgment, the (P&H) donor denied giving gifts,

whereas, in the impugned

matter the assessee's mother

has accepted the giving of

gift. So, the cited judgment

is not at all applicable to the

facts of the case.

In view of the aforesaid submissions, it is submitted that gift received by assessee amounting to Rs.10,80,000/- is genuine, as the department has accepted the said sale of jewellery and giving of gift in the reassessment proceedings of Smt. Mohinder Wati. Further, the assessee has sufficiently explained the identity, genuineness and creditworthiness of the donor and furthermore, the gift has been given by mother to her only son, as such this issue is covered by the judgment of Hon'ble Delhi High Court in the case of CIT vs Suresh Kumar Kakar reported in 324 ITR 231.

Before concluding the assessee also seeks to refer to the judgment of Apex Court in the case of CIT vs. Daulat Ram Rawatmull reported in 87 ITR 349, wherein at page 359 the Hon'ble Court has held as under:

" .... This explanation was found to be false in view of the admitted position that the amount of Rs.5,00,000 in fixed deposit in the name of Biswanath in Jamnagar bank had been tendered at Burrabazar Calcutta branch of the Central Bank on November 15, 1944, and thereafter was transferred through Bombay head office of the bank to Jamnagar. There were also other circumstances which pointed to the falsity of the above explanation. The falsity of the above explanation of Biwanath, in the 45 ITA No.4060/Del./2011

opinion of the High Court, did not warrant the conclusion that the amount of Rs.5,00,000 belonged to the assessee. We can find no flaw or infirmity in the above reasoning of the High Court. The question which arose for determination in this case was not whether the amount of Rs.5,00,000 belonged to Biswanath, but whether it belonged to the respondent-firm. The fact that Biswanath has not been able to give a satisfactory explanation regarding the source of Rs. 5,00,000 would not be decisive even of the matter as to whether Biswanath was or was not the owner of that amount. A person can still be held to be the owner of a sum of money even though the explanation furnished by him regarding the source of that money is found to be not correct. From the simple fact that the explanation regarding the source of money furnished by A, in whose name the money is lying in deposit, has been found to be false, it would be a remote and far-fetched conclusion to hold that the money belongs to B. There would be in such a case no direct nexus between the facts found and the conclusion drawn therefrom." (Emphasis supplied)

Reliance is also placed on the following judicial pronouncements to submit that inability of the assessee to explain source of source or origin of origin cannot be basis to invoke section 68 of the Act: (i) 103 ITR 344 (Patna) Saraogi Credit Corporation CIT (ii) 59 ITR 632 (Assam) Tola Ram Daga v CIT

(iii) 49 ITR 273 (Mad) S. Hastimal v CIT

(iv) 151 ITR 150 (Pat) Additional CIT, Bihar v Hanuman Aggarwal (v) 154 ITR 244 (Pat) Addl CIT v Bahri Bros. (P) Ltd.

It can never be within the exclusive knowledge of the debtor to know the sources of income of the creditor. Once he is supplied the credit that he wants, he is satisfied. Once he has furnished the true identity, the correct address, the correct G.I.R. number of the creditor, he fulfils his obligation under the Act. The question then still remains with regard to the genuineness of the transaction and the capacity of the creditor to furnish the loan concerned.

(vi) 177 Taxman 331 (Del) CIT vs. Diamond Products Ltd.

At this juncture, the assessee also seek to place on the judgment of Apex Court in the case of CIT vs. K. Chinnathamban reported in 29 TR 682, where it has been held by their Lordships of the Apex Court "where a transaction stands confirmed by the third party of an investment no addition could possibly be made u/s 68 of the Act, in the hands of the assessee in whose, books of accounts credits appears.

6. We have heard both the sides in detail. The assessee has received the gift of

Rs.10,80,000/- from his mother, Smt. Mohinder Wati. Smt. Mohinder Wati who was

assessed to tax with ITO, Ward 24 (4), New Delhi and was having PAN 46 ITA No.4060/Del./2011

No.AANPW7638R. She has declared the fact that the gift has been made by her to only

son, Shri Jatinder Manchanda (assessee). Smt. Mohinder Wati has declared the jewellery

under the VDIS, 1997 and also having the certificate under section 68 (2) of the VDIS,

1997 issued by Commissioner of Income-tax - VII, New Delhi. The source of date was

shown as sale of the jewellery which was earlier declared by the assessee under the VDIS

Scheme. The assessment of Smt. Mohinder Wati was reopened and while making the

assessment the Assessing Officer has accepted the fact that Smt. Mohinder Wati has given

a gift to her only son, Shri Jatinder Manchanda out of the sale proceedings of her jewellery.

Assessee is not shifting the stand but it is his mother's stand which is changed with regard

to the sale of jewellery. Existence of jewellery with mother is not doubted. Only the

person to whom it is sold is changed. The capital gain of the jewellery has been assessed

in her hand. The assessee was the son of the donor, Smt. Mohinder Wati. She was

assessed to tax. She has explained the source which has been ascertained by the assessing

authority. She was the mother of the assessee. The revenue has failed to brought on

record anything which could show that it was assessee's own money which has been

deposited in the bank. The immediate source of the gift received is explained. Thus,

considering totality of the facts and circumstances including the income-tax assessments of

the donor, we find no merits in the revenue's appeal and we dismiss the same.

7. In the result, the appeal of the revenue is dismissed.

Order pronounced in open court on this 18th day of May, 2012.

Sd/- sd/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : the 18th day of May, 2012

TS

47 ITA No.4060/Del./2011

Copy forwarded to:

1.Appellant

2.Respondent

3.CIT

4.CIT(A)-XXIV, New Delhi.

5.CIT(ITAT), New Delhi.

AR, ITAT

NEW DELHI.