reported/published in http://elegalix.allahabadhighcourt.in/elegalix/WebShowJudgment.do
HIGH COURT OF JUDICATURE AT ALLAHABAD
Reserved
Income Tax Appeal No. 71 of 2002
M/s. Zafa Ahmad & Company
Versus
The Commissioner of Income Tax, Varanasi
***********************
Hon'ble R.K. Agrawal, J.
Hon'ble B. Amit Sthalekar, J.
(Delivered by R.K. Agrawal, J.)
The present appeal has been filed under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) against the order of Income Tax Appellate Tribunal, Allahabad dated 31.03.2002. The appeal has been admitted vide order dated 14.08.2002 on the following two substantial questions of law.
"1. Whether on the facts and in the circumstances of the case, burden as contemplated under section 68 of the Act to explain about the nature and source of the deposits has been explained by the appellant?
2. Whether the genuineness of the gift is relevant for coming to the conclusion that the burden about the nature and source of the deposit has not been discharged?"
Briefly stated, the facts giving rise to the present appeal are as follows:
The appeal relates to the Assessment Year 1992-93.
The appellant is a partnership firm in which Mohd. Khalid and Zafar Ahmad were the partners.
During the previous year relevant to the Assessment Year in question, Mohd. Khalid deposited a sum of Rs. 1,24,000/- whereas Zafar Ahmad deposited a sum of Rs. 1,04,000/- in their capital account in the firm.
During the course of the assessment proceedings, the Assessing Authority asked the appellant to explain the source of the aforesaid deposits
The appellant filed explanation along with various evidences to show that the amounts were deposited by the two aforementioned partners of the firm in their capital account.
It was further explained that Mohd. Khalid had received the amount by way of gift from six persons and all the six persons have filed their Income Tax Returns and also Gift Tax Returns.
Zafar Ahmad has received the said amount by way of gift from five persons and these five persons have also filed their Income Tax Returns and the Gift Tax Returns.
The two partners are assessed to income separately.
The Assessing Authority did not accept the plea of the appellant and made an addition of Rs. 1,24,000/- and Rs. 1.04,000/- towards unexplained deposit under section 68 of the Act.
Feeling aggrieved, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals) Allahabad, who vide order dated 09.03.1995 allowed the appeal and accepted the deposits made by the two partners.
He had held that the appellant has been able to discharge its burden to prove the nature of the deposit and its source.
The Revenue feeling aggrieved preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal by the impugned order had allowed the appeal and reversed the order of the Commissioner of Income Tax (Appeals).
We have heard the learned counsel for the parties.
Learned counsel for the appellant submitted that the appellant had discharged the burden which lay upon it under section 68 of the Act.
The two partners, who have deposited the amount of Rs. 1,24,000/- and Rs. 1,04,000/- in their capital account have admitted the deposit made by them.
They have further explained the source of the receipt of the said amount from various persons.
The donors have also been produced before the Assessing Officer, who are income tax payee and they have filed their Income Tax Returns as also the Gift Tax Returns.
They admitted of having given the amount by way of gift.
Thus, the nature, source and credit-worthiness of the depositors have been proved beyond doubt and the Tribunal was not justified in holding that the credit-worthiness of the donors have not been established.
He further submitted that merely because all the donors have filed their Income Tax Returns on a single day and the Gift Tax Returns were filed just before the expiry of the due date would not make any difference.
He has relied upon a Division Bench decision of this Court in the case of Anil Rice Mills Versus Commissioner of Income Tax, (2006) 282 ITR 0236 for the proposition that only the credit-worthiness of the depositor has to be established and not the source of the source of the depositor has to be explained.
Learned standing counsel for the Revenue further submitted that the partners who have received the amount of gift from various persons have not been able to establish the credit-worthiness of the donor and, therefore, the Tribunal had rightly held it to be added under section 68 of the Act as unexplained deposits.
We have given our thoughtful consideration to the various pleas raised by the learned counsel for the parties.
We find that it is not in dispute that the aforesaid two amounts have been deposited by the two partners in their capital account.
The partners are income tax payee.
They have explained the source as having received gift from various persons, who have also filed their Income Tax Returns and have been assessed accordingly.
Merely because, the donors are weavers and they own only one loom would not make any difference.
They have filed their Income Tax Returns and have also filed the return under the Gift Tax Act.
They have paid the gift tax also.
Assessment under the Gift Tax Act has also been made, though the assessments made were summary in nature.
In the case of Anil Rice Mills (supra), this Court has held that the assessee can not be asked to prove the source of source or the origin of origin.
Taking the various facts enumerated above,
we are of the considered opinion that the Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as the credit-worthiness of the donors had not been established.
The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date.
The appellant has explained the nature and source of the deposit and has discharged its burden. The order of the Tribunal on this ground therefore can not be sustained and is liable to be set-aside. The appeal succeeds and is allowed.
Dated 10th January 2013
HIGH COURT OF JUDICATURE AT ALLAHABAD
Reserved
Income Tax Appeal No. 71 of 2002
M/s. Zafa Ahmad & Company
Versus
The Commissioner of Income Tax, Varanasi
***********************
Hon'ble R.K. Agrawal, J.
Hon'ble B. Amit Sthalekar, J.
(Delivered by R.K. Agrawal, J.)
The present appeal has been filed under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act) against the order of Income Tax Appellate Tribunal, Allahabad dated 31.03.2002. The appeal has been admitted vide order dated 14.08.2002 on the following two substantial questions of law.
"1. Whether on the facts and in the circumstances of the case, burden as contemplated under section 68 of the Act to explain about the nature and source of the deposits has been explained by the appellant?
2. Whether the genuineness of the gift is relevant for coming to the conclusion that the burden about the nature and source of the deposit has not been discharged?"
Briefly stated, the facts giving rise to the present appeal are as follows:
The appeal relates to the Assessment Year 1992-93.
The appellant is a partnership firm in which Mohd. Khalid and Zafar Ahmad were the partners.
During the previous year relevant to the Assessment Year in question, Mohd. Khalid deposited a sum of Rs. 1,24,000/- whereas Zafar Ahmad deposited a sum of Rs. 1,04,000/- in their capital account in the firm.
During the course of the assessment proceedings, the Assessing Authority asked the appellant to explain the source of the aforesaid deposits
The appellant filed explanation along with various evidences to show that the amounts were deposited by the two aforementioned partners of the firm in their capital account.
It was further explained that Mohd. Khalid had received the amount by way of gift from six persons and all the six persons have filed their Income Tax Returns and also Gift Tax Returns.
Zafar Ahmad has received the said amount by way of gift from five persons and these five persons have also filed their Income Tax Returns and the Gift Tax Returns.
The two partners are assessed to income separately.
The Assessing Authority did not accept the plea of the appellant and made an addition of Rs. 1,24,000/- and Rs. 1.04,000/- towards unexplained deposit under section 68 of the Act.
Feeling aggrieved, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals) Allahabad, who vide order dated 09.03.1995 allowed the appeal and accepted the deposits made by the two partners.
He had held that the appellant has been able to discharge its burden to prove the nature of the deposit and its source.
The Revenue feeling aggrieved preferred an appeal before the Income Tax Appellate Tribunal. The Tribunal by the impugned order had allowed the appeal and reversed the order of the Commissioner of Income Tax (Appeals).
We have heard the learned counsel for the parties.
Learned counsel for the appellant submitted that the appellant had discharged the burden which lay upon it under section 68 of the Act.
The two partners, who have deposited the amount of Rs. 1,24,000/- and Rs. 1,04,000/- in their capital account have admitted the deposit made by them.
They have further explained the source of the receipt of the said amount from various persons.
The donors have also been produced before the Assessing Officer, who are income tax payee and they have filed their Income Tax Returns as also the Gift Tax Returns.
They admitted of having given the amount by way of gift.
Thus, the nature, source and credit-worthiness of the depositors have been proved beyond doubt and the Tribunal was not justified in holding that the credit-worthiness of the donors have not been established.
He further submitted that merely because all the donors have filed their Income Tax Returns on a single day and the Gift Tax Returns were filed just before the expiry of the due date would not make any difference.
He has relied upon a Division Bench decision of this Court in the case of Anil Rice Mills Versus Commissioner of Income Tax, (2006) 282 ITR 0236 for the proposition that only the credit-worthiness of the depositor has to be established and not the source of the source of the depositor has to be explained.
Learned standing counsel for the Revenue further submitted that the partners who have received the amount of gift from various persons have not been able to establish the credit-worthiness of the donor and, therefore, the Tribunal had rightly held it to be added under section 68 of the Act as unexplained deposits.
We have given our thoughtful consideration to the various pleas raised by the learned counsel for the parties.
We find that it is not in dispute that the aforesaid two amounts have been deposited by the two partners in their capital account.
The partners are income tax payee.
They have explained the source as having received gift from various persons, who have also filed their Income Tax Returns and have been assessed accordingly.
Merely because, the donors are weavers and they own only one loom would not make any difference.
They have filed their Income Tax Returns and have also filed the return under the Gift Tax Act.
They have paid the gift tax also.
Assessment under the Gift Tax Act has also been made, though the assessments made were summary in nature.
In the case of Anil Rice Mills (supra), this Court has held that the assessee can not be asked to prove the source of source or the origin of origin.
Taking the various facts enumerated above,
we are of the considered opinion that the Tribunal had erred in holding that the amount deposited by the two partners is liable to be added under section 68 of the Act on the ground that the gifts received by the respective partners from the various persons could not be explained as the credit-worthiness of the donors had not been established.
The Tribunal had wrongly drawn an adverse inference upon the fact that the donors had filed their Income Tax Return for the Assessment Years 1988-89 to 1991-92 on a single day and further the return for the Gift Tax was filed on 25.08.1992, which was well within the due date.
The appellant has explained the nature and source of the deposit and has discharged its burden. The order of the Tribunal on this ground therefore can not be sustained and is liable to be set-aside. The appeal succeeds and is allowed.
Dated 10th January 2013
