ITAT CHENNAI BENCH 'A'

IT Appeal No. 1275 (Mds.) of 2011
[ASSESSMENT YEAR 2006-07]

ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND VIKAS AWASTHY, JUDICIAL MEMBER

Shaji P. Jacob for the Appellant.
G. Baskar for the Respondent.

Vikas Awasthy, Judicial Member - The appeal has been filed by the Revenue impugning the order of the CIT(A)-V, Chennai dated 11.04.2011.

2. The brief facts of the case are that the assessee filed his return of income for the assessment year 2006-07 on 4.3.2008 declaring total income of Rs. 2,58,961/-. The assessee is alleged to be a Director of M/s. Models Bright Future Personality Development P. Ltd. The case of the assessee was selected for scrutiny and notice under section 143(2) was issued to the assessee on 11.9.2008. During the course of assessment, the Assessing Officer made additions in the income returned by the assessee on account of gifts amounting to Rs. 4,80,920/- received from mother's sister's son, loan from Mr. Iliaz amounting to Rs. 8,80,072/- and from Mr. Sakthvel to the tune of Rs. 5,04,000/- and cash deposits amounting to Rs. 13,00,000/-.

3. The Assessing Officer held that mother's sister's son does not fall within the definition of 'relative' as provided under Explanation to section 56(2)(v), therefore, the gift received from him is disallowed. As regards loans, identity of the persons who have given loans have not been proved. The Assessing Officer rejected confirmations received by the assessee through e-mail and made additions of the said alleged loans in the income returned by the assessee. As regards cash deposits, the Assessing Officer held that the assessee has failed to give clear source of deposits in the bank. The Assessing Officer vide his assessment order dated 30.12.2008 rejected the explanation furnished by the assessee and proceeded on to make addition of the said amount.

Aggrieved against the assessment order dated 30.12.2008, the assessee preferred an appeal before the CIT(A). The CIT(A) vide impugned order accepted the contentions of the assessee and allowed the appeal in full. Now, the Revenue has come in second appeal before the Tribunal assailing the order of the CIT(A).

4. Shri Shaji P. Jacob appearing on behalf of the Revenue submitted that the CIT(A) has erred in deleting the addition of Rs. 4,80,920/-, which the assessee has alleged to have received as gift from his mother's sister's son. As per the definition of relative given in Explanation to section 56(2)(v), mother's sister's son do not fall within the meaning of the term relative used in the section. The DR submitted that with regard to the alleged loans received from Mr. Iliaz and Mr. Sakthivel, the CIT(A) without affording any opportunity of hearing to the Assessing Officer has accepted the appeal of the assessee. In respect of cash deposits amounting to Rs. 13,00,000/-, the DR contended that the assessee has failed to produce any documentary evidence to substantiate his claim that the amount has been received as a loan. The identity of the lenders was neither established before the Assessing Officer or before the CIT(A). The DR submitted that except for the bald statement of the assessee, the assessee could not substantiate his claim with regard to cash deposits. The CIT(A) has drawn adverse inference from the order of the Assessing Officer wherein the Assessing Officer has made reference to what the assessee has stated before him.

5. On the other hand, the counsel for the assessee submitted that the order of the CIT(A) is a well-reasoned and detailed order. The amount of Rs. 4,80,920/- has been received by the assessee from his cousin. The CIT(A) has allowed the same after considering the fact that the gift has been received from lineal ascendant or lineal descendant which means 'relative'. With regard to the loan amounts received from Mr. Iliaz and Mr. Sakthivel, the counsel submitted that confirmations received through e-mail from the aforesaid persons were submitted before the Assessing Officer. The Assessing Officer in an arbitrary and unjustified manner refused to consider the same and went on to make addition of the said amount. The counsel further contended that an amount of Rs. 13,00,000/- was not a single transaction. The said amount was deposited over a period of one year. He contended that all the statements were produced before the Assessing Officer as well as CIT(A). The Assessing Officer without considering the documentary evidence produced by the assessee made addition of Rs. 13,00,000/- in the income returned by the assessee.

6. We have heard the submissions of both the sides and have perused the orders of the authorities below. The CIT(A) has allowed gift of Rs. 4,80,920/- received from mother's sister's son on the ground that the amount has been received from the lineal ascendant or lineal descendant which means relative. The term relative has been defined in Explanation to section 56(2)(v) which is reproduced herein below:-

"56(2)(v):-……
Explanation.—For the purposes of this clause, "relative" means—

The term used in proviso to section 56(2)(v) is "relative" which has been further elaborated in the Explanation to clause (v) of Section 56(2). The CIT(A) has erred in equating the term "lineal ascendant or lineal descendant" to relative to include mother's sister's son. When the meaning of the term relative is defined in the Act itself, to derive meaning of the word relative from term "lineal ascendant or lineal descendant" and bring the relationship with the purview of the section to grant benefit is unjustified and bad in law. When the definition has been provided in the Act itself, it is not appropriate to import dictionary meaning of the term. A perusal of the term "relative" used in the section clearly shows that mother's sister's son does not fall within the definition of 'relative'. Therefore, the amount received by the assessee from mother's sister's son does not qualify for the benefit. Therefore, we reverse the finding of the CIT(A) on this issue and allow the ground of appeal of the Revenue.

7. In respect of other two additions, the DR has contended that the assessee has failed to substantiate his claim with documentary evidence either during the assessment proceedings or appellate proceedings with respect to identity and genuineness of the lenders of the loan. The DR has contended that before deleting the addition made by the Assessing Officer the CIT(A) has not afforded any opportunity to the Assessing Officer to defend the assessment order. The documents which were produced before the CIT(A) were never submitted by the assessee before the Assessing Officer, which is in violation of Rule 46A of the Income Tax Act.

8. In respect of these two additions deleted by CIT(A), we deem it appropriate to remit the matter back to the Assessing Officer to decide the issues afresh after taking into consideration the evidence submitted by the assessee with regard to genuineness of the lenders of the loan and the evidence furnished by the assessee explaining cash deposits of Rs. 13,00,000/-. Thus, these two grounds of appeal assailing the order of the CIT(A) are allowed for statistical purposes.