IN INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JM AND SHRI RAJESH KUMAR, AM I.T.A. No.4981/Mum/2014 ( Assessment Year : 2006-07) Ramesh Jhaveri (HUF), Income Tax Officer, SMRUTI Building, Range - 21(3)(3), Bandra, Mumbai 4th Floor, Plot No.16, Road No.5, Vs. JVPD Scheme, Vile Parle (W), Mumbai 400 056 PAN :AAAHR4425E Assessee by Shri Anuj Kishnadwala Revenue by Shri B S Bist Date of Hearing : 06.09.2016 Date of Pronouncement : 22.09.2016 O R D E R PER RAJESH KUMAR, AM This appeal has been filed by assessee against order of Commissioner of Income-Tax (Appeals)-32, Mumbai, dated 04.07.2014 for A.Y. 2006-07 on following grounds: 1. learned CIT (A) has erred in law and in facts in confirming addition of income of Rs.82,39,653/- being gift of India Millennium Deposit received as unexplained credit under section 68 of I. T. Act, 1961. 2 ITA No.4981/Mum/2014 2. It is respectfully submitted that proceeds of India Millennium Deposit cash not be brought to tax in hands of appellant by invoking provisions of Section 56(2)(v) of I.T. Act, 1961. 2. issue raised in this appeal is against confirming addition of Rs.82,39,653/- by ld. CIT(A) by upholding action of AO of treating gift of Indian Millennium Deposit (hereinafter called as IMD ) bond as unexplained credit u/s 68 of Income Tax Act, 1961 and Ground No.2 is with regard to raising issue of India Millennium Deposit cash not be brought to tax in hands of appellant by invoking provisions of Section 56(2)(v) of Act. 3. facts of case are that assessee has filed his return of income on 31.10.2006 declaring total income of Rs.22,168/-. Thereafter case of assessee was selected for scrutiny and statutory notices u/s 143(2) and 142(1) were issued and served upon assessee. assessee firm derived income from share of profit from registered firm, short term capital gains and interest. During course of assessment proceedings, AO found that assessee has claimed IMD bonds of Rs.82,39,653/- in bank account as gift and claimed same as exempt under provisions of Section 10(15)(iid)(c) of Act. assessee submitted before Assessing Officer that gift from three persons aggregating to Rs.120 US$ = Rs.52.81 lakhs in terms of Indian currency was received by assessee. said gifts were transferred by 3 ITA No.4981/Mum/2014 donors in favour of assessee vide letter dated 30.9.2005 and these deposits bonds were encashed on 29.12.2005 and maturity proceeds of Rs.82,39,653/- including interest of Rs.28,38,452/- were received i.e. assessee also submitted before AO that said gifts were not taxable under provisions of section 56(2)(v) of Act as language used in said section is any sum of money' and IMD bonds received by assessee did not fall within ambit of any sum of money'. As regards taxability of interest on IMD Bonds assessee submitted that same was exempt u/s 10(15)(iid)(c) of Act. assessee also specifically asked by AO that as to how gift received in month of September, 2005 was exempt from tax as provisions of section 56(2)(v) have undergone changes after September, 2004 i.e. any gift received from non relative is liable to be taxed in hands of donee exceeding Rs.25000/- which is received after September, 2004. AO finally not convinced with submissions of assessee as made from time to time during course of assessment proceedings added Rs.82,39,653/- to total income of assessee as unexplained cash credit u/s 68 of Act by framing assessment u/s 143(3) of Act vide order dated 24.10.2008 by assessing income at Rs.82,61,821/-. 4. ld. AR vehemently argued that case of assessee stands covered in its favour by decision of Co-ordinate Bench of Tribunal 4 ITA No.4981/Mum/2014 in case of Nilesh Jhaveri (HUF) V/s ITO in ITA. No. 4980/Mum/2014(AY:2006-07) dated 04.08.2016 and be allowed accodingly. 5. On other hands, ld. DR while strongly opposing arguments of ld.AR submitted that provisions of section 56(2)(v) of Act were amended retrospectively and therefore any gift received from non relative is taxable under said section. ld. DR heavily relied on orders of authorities below. 6. We have carefully considered rival contentions and perused materials placed before us including orders of authorities below. We find that assessee has received gifts from following three persons : S.No. Name of donor IMD Worth Date of transfer of Date of receipt in USD IMD to donor of gift of IMD to assessee 1 Sunil Gandhi US$90,000 11.8.2004 13.9.2005 2 Mitesh Shah US$10,000 8.9.2001 27.9.2005 US$5,000 8.8.2001 27.9.2005 3 Jagdish H Karia US$5,000 10.7.2001 27.9.2005 We find that identical issue has been decided by Co-ordinate Bench of Tribunal in case of Nilesh Jhaveri (HUF) (supra) in another family HUF family of assessee on identical facts, where Tribunal has decided issue as under: 2.2 Matter was carried before First Appellate Authority, wherein various contentions were mainly raised with regard to IMDs are not any sum of money and further, regarding genuineness of creditor. Assessee 5 ITA No.4981/Mum/2014 raised various submissions and considering same, CIT(A) confirmed order of Assessing Officer. 2.3 Same has been opposed before us on behalf of assessee inter alia submitting that: i. Assessee has received IMD as gift of IMD of US$ 1,00,000/- on 31.08.2004 from Shri Sunil Kumar Khimchand Gandhi and not on 26.09.2005 as alleged by Assessing Officer. ii. It was submitted that these IMDs were repaid / matured on 29.12.2005 and assessee received total amount of Rs.68,66,378/- on maturity of IMDs comprising of principal amount of Rs. 45,00,911/- and interest amount of Rs. 23,65,467/- and that said amount was claimed as non taxable by assessee. iii. It was further submitted that IMD certificate is not "any sum of money" and therefore it would not fall within ambit of Section 56(2)(v) r.w.s. 2(24)(xiii) of Act. iv. It was further contended that gifts are genuine as identity of donor i.e. Shri Sunil Kumar Khimchand Gandhi was proved through his Indian Passport. It was further submitted that although he resides at Dubai his capacity of giving of US$1,00,000/- is proved. v. It was further contended that close relationship between donors' family and donee's family was proved by photographs on different family occasions. vi. It was contended that interest amount of Rs. 23,65,467/- is exempt u/s.10(15)(i) of Act. vii. It was further submitted that copies of IMDs certificate clearly reveal that donor was previous holder of IMDs before passing them to assessee by way of gift. viii. It was also submitted that donor Shri Sunil Kumar K Gandhi was having annual income of US$ 15,00,000/- and therefore gift of US$ 1,00,000/- to close family friend was not unusual. ix. creditworthiness of donor got proved as donor was holding IMDs for substantial period. Assessee ultimately contended that genuineness of these gifts of IMD from close family friends need not be doubted. x. To prove creditworthiness, assessee had submitted net worth certificate of Shri Sunil Kumar Khimchand Gandhi and affidavit confirming above facts. 2.4 In this background, assessee requested to delete addition made by Assessing Officer. To strengthen its contention, ld. Authorized 6 ITA No.4981/Mum/2014 Representative also relied on decision of ITAT, Agra Bench (Third Member) in case of Avnish Kumar Singh vs. ITO [2010] 126 ITD 145 (Agra)(TM), wherein third Member observed that in instant case, following facts were not in dispute: (a) identity of donor was not in doubt; (b) gift was given by declaration deed; (c) donor had given affidavit affirming making of gift; (d) there was confirmation through post of gift per demand draft; (e) affirmation of assessee in examination on oath recorded by Assessing Officer; (f) affirmation of donor in examination on oath recorded; (g) direct reply of donor to Assessing Officer confirming gift; (h) donor was stated to be friend of assessee s father; (i) donor was doing some finance business; and (j) source of gift was receipt through cheque of Rs.2,46,000 received by donor from B Ltd. and cash amount of Rs.3,500. 2.5 All these facts establish fact that gift was received by assessee and sources thereof are satisfactorily explainable and proved putting its genuineness beyond doubt. adverse facts as pointed out by Accountant Member: (i) that assessee or his father never made any gift of any amount to anybody; (ii) that gift was not on any occasion or function; (iii) that donor visited his house one or two times though never beyond drawing room; (iv) that donor was person of low financial status having monthly income of less than Rs.5,000/- and has shown withdrawals from his capital account less than Rs.3,000/- per month; (v) that donor has no house, no telephone number, no fixed deposit and not any other immovable assets; or that original deposit by donor of Rs.1,25,000/- with B Ltd. was not proved, were not so material to hold gift was not genuine one or sources thereof unsatisfactory so long as immediate source of gift was admittedly established to be from third party. donor had appeared in person before Assessing Officer and confirmed making of gift and reasons which persuaded him to make gift, he being friend of assessee s father who helped him in past. 7 ITA No.4981/Mum/2014 Sec. 68 provides for charging sum credited in assessee s books of account as income of assessee if assessee offers no explanation about nature and sources of sum so credited or if explanation offered by assessee thereof was not satisfactory. On facts and circumstances as narrated above, in my opinion, are such as satisfactorily explains nature and sources of credit by way of gift. Therefore, gift could not be said to be credit, sources of which were not explained satisfactorily. It was genuine gift and assessee has proved its sources satisfactory. Therefore, impugned gift was held genuine and consequently no addition thereof can be made to income of assessee as income from other sources u/s.68 of Act held by Third Member. 2.6 In this background, assessee claimed that they had received gifts totaling to USD1,00,000/- equivalent to approximate Rs.68,66,378/- from one person, namely, Shri Sunil kumar K Gandhi on 31.08.2004 and said IMDs were encashed by assessee on 29.12.2005 including interest totaling to Rs.68,66,378/-. In regard to issue of taxability of gifts assessee's main stand has been that section 56(2)(v) of Act mentions word "any sum of money" and according to assessee gift of IMDs did not fall within purview "any sum of money". Assessee also claimed that in instant case gift was received before 01.09.2004, which was much prior to insertion of section 56(2)(v) of Act inserted by Finance Act w.e.f 01.04.2005. Assessee also filed copies of certificates of IMDs bearing numbers C151871 to C151875 and C161772 to 161776. In view of this, we hold that gift in question does not fall within purview of any sum as envisaged in Section 56(2)(v) of Act. 2.7 Further, ld. Authorized Representative relied on relevant portion of ITAT in Avinash Kumar Singh (supra) held as under: 7. When there are two possible views one in favour of assessee and other in favour of Revenue, which view should be accepted is million dollar question before us. view in favour of assessee is fortified with numerous evidences which forms complete chain of events, as has been discussed above. occasion of having made this gift has been explained by donor himself that he was obliged by father of donee in year 1994 during his visit to deity Vaishno Devi when father of assessee helped him and his family members. Thus, occasion and reason for making gift are also given by donor, albeit, as 8 ITA No.4981/Mum/2014 of now these are no longer requirements of valid gift in view of recent decision of Tribunal in Miss Mayawati s case, including one of this very Bench. source of gift has also been explained with help of possible and feasible evidences which are available on record. Against that are pitted inferences of learned AO that this is not proved that is not proved and other whys and wherefores. In these circumstances, it would be too harsh and too illogical to decide against assessee who has produced entire evidences desired, required and insisted on by learned AO and that would result in illegality and injustice. We have to go by evidences available on record. possibilities and realities of life come only thereafter, and when adverse possibilities are also found to be explained there should be end of these "possible realities", otherwise no gift would be or can be treated as genuine, as reality of life, in this era is that even father would not give gift to his son. Thus, we are bound by positive evidences which are available on record and form complete chain of events. Here, we accept this gift as genuine because identity and creditworthiness of donor have been established on record. reason for making this gift is also stated and its genuinity stands proved. Entire evidences, which have been referred to above like declaration of gift, affidavit of donor, direct letter sent to AO, statement on oath both of donor and donee, proof of source of draft of Rs. 2,50,000 with further evidence, inter alia, go to prove claim of assessee. Therefore, we delete impugned addition and allow this appeal. 2.8 Nothing contrary was brought to our knowledge. Facts being similar, so, following same reasoning, this issue is decided in favour of assessee. 2.9 Regarding interest, assessee relied on notification u/s.10(15)(i) of Act which reads as under: Section 10(15)(i) of Income-tax Act, 1961 Exemptions Income by way of interest, etc., on bonds, securities Specification of bonds, securities, etc. issued by Central government. NOTIFICATION NO. 188/2005 [F.NO. 178/43/2005-IT(A-I)] S.O. 1114(E), DATED 10-8-2005 9 ITA No.4981/Mum/2014 In exercise of powers conferred by sub-clause (i) of clause (15) of section 10 of Income-tax Act, 1961 (4 of 1961), central government hereby specifies India Millennium Deposits, being bank instruments representing foreign currency denominated deposits in form of Promissory Notes, issued by State Bank of India, bank constituted under section 3 of State Bank of India Act, 1955 (23 of 1955), as deposits/for purposes of said sub-clause. 2.10 In view of above, interest in question is exempt. Summing up gift in question does not fall within ambit of Section 56(2)(v) of Act and same is exempt as discussed above. 3. In result, appeal filed by assessee is allowed as indicated above. 7. We find from order of co-ordinate Bench, issue and facts mentioned therein and issue in hand are identical. Therefore, we are of considered opinion that case of assessee is fully covered by above said decision. We, respectfully following same, set aside order of ld.CIT(A) and direct AO to delete addition. 8. In result, appeal filed by assessee is allowed. Order pronounced in open court on 22.9.2016. Sd sd (MAHAVIR SINGH ) (RAJESH KUMAR) Judicial Member Accountant Member Mumbai; Dated : 22.9.2016 Sr.PS:SRL: 10 ITA No.4981/Mum/2014 Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, True copy (Dy./Asstt. Registrar) ITAT, Mumbai Ramesh Jhaveri (HUF) v. Income Tax Officer, Range - 21(3)(3), Mumbai