TaxTMI 
TaxTMI 
2009 (1) TMI 531
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....ated/ignored the following facts :-- ( i)That the donors were related to the appellant and the gifts were made out of love and affection by them towards the appellant. (ii )That the donors had gifted the amounts in question through account payee cheques drawn their respective bank accounts; (iii )That all the donors maintained regular books of account and were income-tax assessees having substantial income as also shown the gifts in their books of account and returns. (iv )That all the donors had made declarations of gifts and were duly examined by the ITO, Basti and had duly confirmed those gifts. (v )That copies obtained by banks which of the gift those gifts of bank accounts of the donors were the ld. ITO directly from the supported the fact and genuineness and the capacity of donors to make to the appellant. (4) The appellant had thus fully discharged her onus in terms of section 68 of Income-tax Act, 1961 by proving the identity of the donors, their creditworthiness and capacity to make the gifts and genuineness of the transactions. The ld. Assessing Officer did not bring out any evidence on record to prove anything otherwise. (5) The ld. CIT(A) in the circumstances oug....
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....o inform him their relationship with the donee, quantum of gifts, details of assessment and bank accounts from where gifts have flown. As the donors did not comply with the notices sent, the Assessing Officer required the assessee to prove the genuineness of the gifts. Several hearings were given by the Assessing Officer, the details thereof are mentioned in the assessment order. He noted that several such notices and letters remained uncomplied with. Finally, he issued commissions to Assessing Officers who were assessing the donors to record their statement. The statements of the donors were then recorded. The details of all these gifts are described by the Assessing Officer in his order. For the sake of convenience, they are summarized as under :-- 6. Smt. Asha Agarwal : On enquiry from the bank, Urban Cooperative Bank, Basti, where Smt. Asha Agarwal has account, it was noted by the Assessing Officer that a cheque number 17295 was issued to the assessee for Rs. 6,01,000 and was encashed but immediately before encashment of the cheque, amount of Rs. 2,40,000, Rs. 1,50,000, Rs. 1,60,000 and Rs. 1,00,000 were deposited in cash in her account. The Assessing Officer noted that deposi....
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....0 was made on 24-6-2003 and Rs. 1,40,000 on 25-6-2003 and Rs. 2,00,000 on 26-7-2003. Gross total income declared by the assessee amounted to Rs. 1,16,024 and Rs. 1,38,060 for the assessment years 2002-03 and 2003-04 respectively. 11. Shri Sunil Kumar Agarwal : This donor has given cheque No. 50684 on 22-7-2003 which was encashed on 25-7-2003. A cash deposit of Rs. 2,10,000 was made on 23-7-2003 and Rs. 1,40,000 and Rs. 2 lakhs on 25-6-2003. Shri Sunil Kumar is claimed to be assessed to tax and for assessment years 2002-03 and 2003-04 for which return of income was filed, he has declared income at Rs. 81,460 and Rs. 74,595 respectively. 12. On the basis of statement recorded and the facts so collected by the Assessing Officer, he drew following inferences :-- 1.All the donors are not 'persons of means' i.e., their annual income is around Rs. 80,000 to Rs. 1,50,000 per annum. For instance, Shri Nand Lal Agarwal an Advocate and his wife Asha Agarwal, a forwarding agent, have supposedly gifted Rs. 10 lacs to the assessee but they do not have even a four-wheeler and are maintaining only a scooter. There is only one house property in the name of his wife. 2.Their household withdrawal....
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....um of Rs. 26,55,000 as assessee's income from undisclosed sources. The Assessing Officer relied on the following judgments :-- Sumati Dayal v. CIT [1995] 214 ITR 801 (SC); Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC); CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465 (SC); CIT v. Biju Patnaik [1986] 160 ITR 674(SC); McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC). 14. Before the ld. CIT(A), it was submitted as under :-- "(1) All the gifts were made by cheque through bank and details regarding bank accounts of the donors were made available to the Assessing Officer. (2) All the donors are regularly assessed to income-tax; and proof regarding filing of their returns was produced before the Assessing Officer. The gifts were disclosed in the balance sheets annexed with the returns of income filed by the donors. (3) Copies of gift deeds, bank accounts, computation of income statements, balance sheets, capital accounts etc., were well before the Assessing Officer. (4) It was clarified to the Assessing Officer that the accountant had in-advertently committed mistake in writing the names and amounts of gifts in the capital a/c. (5) All the donors were appeared before ....
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....ly, confirmed the addition. 17. Against this, the ld. AR submitted that information about the donors and gift money as given in the return was a clerical mistake and no weightage is required to be given to such mistakes. Secondly, the donors are identifiable. They have appeared before the income-tax authorities. They have given statement and have accepted to have been given gifts. Money has flown from their respective bank accounts. It is not for the assessee to enquire from where the donors have brought the money and deposits in their bank account. In fact, the Assessing Officer has not put any question to the assessee or to the donors as to from where donors have brought cash for depositing the same in the bank account. In absence of any such query, it is presumed that Assessing Officer had accepted the case of the assessee and he had no doubt about source of cash deposited by the donors. Further, the Department is required to take action in the case of donors in case he is not satisfied about the source of such cash. So far as the assessee is concerned, he cannot ask the donors from where they have brought the cash. The ld. AR further submitted that Assessing Officer cannot enq....
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....old that the inference of the Assessing Officer about the income of Rs. 80,000 to Rs. 1,80,000 shown by these donors in their return of income is not adequate to hold that they are man of means is not acceptable. They are persons of reasonable means though not earning income in higher category, say Rs. 5 lakhs or Rs. 10 lakhs or more. They have owned the bank a/c from which alleged gift was given and also owned the money deposited in their bank account. During the course of assessment proceedings or appeal proceedings, no question was asked from the donors as to from where they have got cash for depositing in their bank account. Even the assessment of the donors was not reopened for the alleged owning of cash for depositing in bank account for giving gift to the assessee. So far as genuineness of the gifts is concerned, we notice that the Assessing Officer has not brought out in the statement recorded of the donors that there was no semblance of natural love and affection. On the other hand, some of them had claimed that they are close relatives of the assessee and because of their personal bondages, they had given gift to the assessee. All these donors had filed affidavits, the co....
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....t convincing. In the instant case, the Assessing Officer had issued commission to another officer, who himself summoned the creditors and recorded their statements, who admitted to have advanced the money to the assessee by borrowing loans from the market. The Assessing Officer had initiated proceedings under section 148 against the creditors. In those proceedings, necessary evidences of loan raised by the creditors were filed. But the Assessing Officer did not issue any summon or collect any material on his own from the creditors of the creditors so as to show that the claim of the loan made by the two lady creditors was false or not satisfactory. An outright rejection of an explanation was not a quasi-judicial act. There was no material with the Assessing Officer to come to the conclusion that the creditors had not raised the loans from the market or that story put forward by them was fake. On the other hand, the assessee was a 24 years old lady, who had just entered into the business. It was not expected that she would have unaccounted money, which would go to creditors and siphoned back to the assessee in the form of loan. The word 'may' used in section 68 provides discretion ....
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....less the authorities give a finding that the donors could not have cash at their own and could not have deposited the same out of their own sources and further that the theory of love and affection is only a smoke screen for arranging the gifts. Once the donors are related to the assessee and there is a day-to-day acquaintance with the assessee, as in the present case, unless it is shown that it is only a pretence and not a natural phenomenon, the existence of ingredients of love and affection cannot be ruled out. Love and affection can be reflected by frequent acquaintance, mutual exchanges of gifts, mutual help to each other standing for each other in hours of need, and other similar factors. Once the assessee has shown that the donors are related to him and they are closed family friends, then the onus shifted on the Assessing Officer to show that what is pretended to be a case of natural love and affection is not borne out from facts. Such facts are required to be extracted by the Assessing Officer either by enquiries or by recording statements of donors/donee/other witness or by whatever means lawful, he considers necessary. Rejecting the claim of natural love and affection wh....
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.... ITR 121 (Delhi). 12. Assessee also relied on the following decisions for the proposition that suspicion however so grave cannot be the basis of additions : 1. Dhirajlal Girdhari Lal v. CIT 26 ITR 736 (SC). 2. Dhakeshwari Cotton Mills Ltd. v. CIT 26 ITR 775 (SC). 3. Lalchand Bhagat Ambica Ram v. CIT 37 ITR 288 (SC). 4. Umacharan Shaw & Bros v. CIT 37 ITR 271 (SC). 5. Omar Salay Mohamed Sait v. CIT 37 ITR 151 (SC). 13. In the absence of any link between gifts and assessee's income from unexplained sources, in the premises of the facts narrated above, we are of the view that appeal by the assessee is liable to be allowed." 27. The Hon'ble Delhi High Court on similar facts in the case of CIT v. R.S. Sibal [2004] 269 ITR 429, held as under : "During the course of assessment proceedings for the assessment year 1994-95, the Assessing Officer noticed two deposits of Rs. 7 lakhs and Rs. 2.25 lakhs on 8-7-1993 and 12-8-1993, respectively, in the assessee's bank account. The assessee was required to explain the sources of the two amounts. It was stated by the assessee that these amounts were received by way of gifts from two NRIs, S and M. In support, copies of the gift deeds, affid....
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....he source of credit in the books, but cannot be asked to prove the source of the source. The assessee, an individual, filed a return of income accompanied by a copy of his capital account in the partnership firm where he was a partner. The capital account contained a credit entry showing a sum of Rs. 50,000 as gift received. The donor had filed a return of gift in respect of the gift of Rs. 50,000 and the assessment came to be completed under section 15(3) of the Gift-tax Act, 1958. Assessment was made accepting the gift but notice was subsequently issued under section 148 on the ground that the gift was not genuine and the amount of Rs. 50,000 was assessable under section 68. The Tribunal found that the gift was given by way of bank draft; the donor appeared before the Assessing Officer and confirmed the fact of having made the gift. He produced evidence in support of the source from which the funds for making the gift were available with him. The Tribunal however held that the motivation for making the gift was not established. It upheld the addition. On a reference : Held, that the Tribunal failed to note the fact that the identity of the donor was established, the donor havi....