TaxTMI 
TaxTMI 
2007 (3) TMI 659
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given by Smt. Sharda Devi to the assessee on March 19, 2001, through cheque No. 051262 of Central Bank of India, Deoria. The Assessing Officer recorded the statement of Smt. Sharda Devi wherein she had admitted that gift was given by her. She had received money after the death of her husband, who was an employee of Sales Tax Department. He died in December, 2000. The Assessing Officer noted that on the same date, i.e., March 19, 2001, a sum of Rs. 80,000 was deposited in cash in the account of Smt. Sharda Devi. This made the cash balance at Rs. 2,01,088 and out of this a cheque of Rs. 2 lakhs was issued as a gift to the assessee. The Assessing Officer noted that money had come back to the assessee. The sum of Rs. 80,000 deposited in cash belonged to the assessee and since it is unexplained, it was added under section 69. 4. In the case of Sri Deonath Mishra, who is an employee of U. P. Police and had worked on the post of constable, the Assessing Officer noted that a sum of Rs. 50,000 was deposited in cash on March 19, 2001, out of which a cheque No. 965728 was issued to the assessee as gift on the same date. The Assessing Officer held that the gift of Rs. 50,000 was not found ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that Rs. 50,000 is past savings. The learned Commissioner of Income-tax (Appeals) also did not believe that how a Government employee being a constable could deposit cash of Rs. 50,000 and thereafter give a gift. There was neither any occasion nor any family relationship. The explanation that Sri Deonath Mishra had balance of Rs. 1,03,148 prior to the issue of cheque was not believed by the learned Commissioner of Income-tax (Appeals) on the ground that photo copy of the passbook submitted before him was completely illegible. He, thus, confirmed the addition of Rs. 50,000. 9. In respect of Sri Janardan Prasad Chaurasia, the learned Commissioner of Income-tax (Appeals) noted that he is a retired havildar and drawing pension from August 1, 2000, of Rs. 3,750. His family consists of self, wife, one married daughter and two school going sons. He claimed to have owned six acres of land in the name of his father and self. He also claimed that he received retirement and pensionary benefits out of which he gave a gift of Rs. 2,50,000. The Assessing Officer noted that a sum of Rs. 2,50,000 was deposited in cash on March 20, 2001 and on the same day a draft was purchased. Sri Chaurasia c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the date of gift. He has agricultural holding in the family. The Assessing Officer has doubted the creditworthiness but not the genuineness as well as capacity of the donor. In case of Janardan Prasad Chaurasia, the learned Authorised representative submitted that genuineness of the transaction has not been doubted. He had agricultural holdings of 6 acres in the family. He gets pension of Rs. 3,750 per month. He had received Rs. 63,376 and Rs. 1,23,086 in July, 2000, which was deposited in his bank account. His statement was recorded on oath and he has accepted the fact of giving gift to the assessee. Similarly, a sum of Rs. 18,500 was accepted to have been given by Sri Ramesh Kumar Mishra to the assessee. 13. On legal front, the learned Authorised representative submitted that the Assessing Officer made the addition under section 69, which legally wrong. The assessee is maintaining books of account and therefore, provision of section 69 would not be applicable. The Assessing Officer has not invoked section 68, therefore, the additions cannot be considered under section 68. Once section 69 fails, then no question of any addition arises. Even otherwise on merits as submitted abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e occasion for making gifts or relationship of the donor with the donee is not relevant. It was held in that case that once a particular explanation is furnished by the assessee and evidence is adduced, then onus is shifted to the Department to falsify such material. The learned Authorised representative then referred to the decision of the Income-tax Appellate Tribunal, Allahabad Bench in ITO v. Uttam Kumar Agrawal [2004] 4 MTC 117 in I. T. A. No. 754 (Alld.) of 1998 decided on October 16, 2003, for the proposition that in case of gifts received from close relatives and friends, if prima facie evidence is filed, then initial onus of the assessee is discharged. The Assessing Officer was not justified in rejecting the gifts without further enquiries. The learned Authorised representative then referred to the decision of the Income-tax Appellate Tribunal, Allahabad Bench in the case of ITO v. Matadin Snehlata (HUF) [2004] 90 ITD 203 for the proposition that where in respect of gifts received by the assessee, the assessee not only produced some donors as required by the Assessing Officer but also filed affidavits of confirmations and other supporting documents in all cases, then by tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the cases cash was deposited on the same day in their account and cheque/draft was issued for transferring the money as gift to the assessee. One has to go by human probabilities to find out whether the gifts are genuine or not. The learned Departmental representative also submitted that even though the Assessing Officer has not made the addition under section 68 and he has only invoked section 69 but the Commissioner of Income-tax (Appeals) has conterminous power with the Assessing Officer and he has in fact, considered the identity, creditworthiness and genuineness of gifts and therefore, addition under section 68 was elaborately considered by him. The error, if any, can be covered by section 292B. The Assessing Officer intended to make addition under section 68. Even otherwise, if addition can be sustainable under any other provision of the Act, then the Commissioner of Income-tax (Appeals) is duty bound to consider that addition under different provision which he has rightly considered. In addition to this, there is no occasion for giving gift ; there is no relationship between the donor and donee ; there is no evidence to show that there was any love and affection between don....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-tax (Appeals) by express words, he exercises the same powers as does the original court or authority. In fact, entire assessment is thrown open before him. He can travel outside the record i.e, the return made by the assessee and assessment order passed by the Assessing Officer. If the first appellate authority cannot confine itself only to the material on record at the time of assessment, then there is no reason as to why he cannot consider the addition made by the Assessing Officer under different section. It is also the duty of the first appellate authority to correct all the errors which have crept in the order of the Assessing Officer. It is also the duty of the first appellate authority to consider the matter placed before him in its all aspects. This is all the more required when the Assessing Officer has failed to consider a matter in detail or in a proper manner. He is competent to conduct a detailed examination of any aspect dealt with summarily or briefly by the Assessing Officer. 16. In CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, the hon'ble Supreme Court had held as under (page 229) : "The Appellate Assistant Commissioner has therefore plenary powers i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the audited accounts and past assessment records and determined the income at nil in a best judgment assessment, the Commissioner of Income-tax (Appeals) has power to compute the loss on the basis of the audited accounts and past assessment records. It was so held by the hon'ble Calcutta High Court in CIT v. Ranicherra Tea Co. Ltd. [1994] 207 ITR 979 (headnote) : "In disposing of an appeal from an assessment under section 144 of the Income-tax Act, 1961, the first appellate authority need not confine itself only to the materials on record at the time of assessment. It may make such enquiries as it thinks fit. The first appellate authority has all the powers which the original authority may have. In the absence of any statutory provision to the contrary, the appellate authority is vested with all the plenary powers which the subordinate authority has in the matter." 19. In CIT v. T. T. Krishnamachari and Co. [1997] 223 ITR 224, the hon'ble Madras High Court held that the Appellate Assistant Commissioner can consider the addition on different basis and different ground. The hon'ble Madras High Court held in this regard as under (headnote) : "The Appellate Ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der the addition of alleged gifts under section 68 even though the Assessing Officer had only invoked section 69. Therefore, this part of the argument of the learned Authorised representative of the assessee fails. 22. After having held that impugned additions can also be considered under section 68, we proceed to examine whether all the attributes of that section are gathered by the authorities below. So far as the identity of the donors is concerned, it seems that there is no dispute. These persons were produced before the Assessing Officer, who had recorded their statements and the learned Commissioner of Income-tax (Appeals) had also accepted the identity of the alleged donors. The learned Departmental representative has also not challenged this aspect as there is no material contrary to the finding of the learned Commissioner of Income-tax (Appeals) on this aspect. 23. Now we proceed to examine whether there is enough material to come to the conclusion that alleged donors have creditworthiness for giving these gifts. Regarding the first donor, i.e., Smt. Sharda Devi, we notice that a sum of Rs. 1,20,563 was credited in her bank account on February 27, 2001, and thereafte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sued. The alleged donor could not show the source of such money and what as the hurry in issuing the cheque on the same day when cash was given. Though the paper work is complete in this case also but in our considered view, the donor did not have any creditworthiness and it is not explained from where he received the money. There is also no evidence as to whether alleged transaction was reported by him to his employer, i.e., State Government alongwith necessary evidence as to the source of money of Rs. 50,000 which is required to be furnished when a transaction above certain limit is entered into by an employee. Thus, neither the creditworthiness of the donor nor the genuineness of the transaction is believable. 25. In respect of the third donor, i.e., Sri Janardan Prasad Chaurasia, it is noted that he is a pensioner receiving pension of Rs. 3,750 since August 1, 2000 and claims that he is presently doing agriculture. He has large family to support as shown by the learned Commissioner of Income-tax (Appeals). He claims that he has 7 acres of agricultural land. His statement was recorded wherein he has confirmed having given the gift. He has filed a gift deed and also confirmato....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rson who is already very rich as compared to the donors. Thus, we cull out the following relevant factors in the case of the three gifts : "(1) There is no relationship between the donors and donee. The donors are strangers to the assessee. No evidence is filed as to how they are known to each other. Only in one case, the assessee is stated to be maternal aunt of the donor and a distant relation. (2) There is no occasion for making gifts. (3) There is no evidence that there was any love and affection or friendship between the donors and donee so that it could motivate the person to gift practically his entire capital, like precious money received as retirement benefit of the husband. (4) There is no evidence that there was any business transaction between the donors and the assessee as it is not believable that a stranger would part away his lifetime savings by giving gifts to unknown person sacrificing his chances of improving his living conditions with that money. (5) Most of the donors had given gifts of their entire capital. (6) All the persons had meagre withdrawals to support their large family. They had very nominal incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orders. In the present case, the donors are mean of humble means. They are not assessed to tax. The capacity of the donors could not be proved. These facts are different. (ii) Nek Kumar v. Asst. CIT [2005] 274 ITR 575 ; [2004] 191 CTR 207 (Raj) In that case, there was no material on record to hold that gift was not genuine. However, it is not true in the present case. There is enough material on record, to show the gift of money by three persons was not probable as they were persons of humble means. (iii) Asst. CIT v. Manoj Kumar Sekhri [2005] 142 Taxman 15 (Amritsar) (Mag). In that case there was no material on record to hold that money was not genuine. However, it is not true in the present case. There is not enough material on record to show that gift of money by three persons was not provable as they were persons of humble means. (iv) ITO v. Uttam Kumar Agrawal [2004] 4 MTC 117 (Tribunal) In this case gift was rejected without carrying out necessary enquiries. It is not so in the present case. The Assessing Officer had carried out enquiries, recorded statements of donors and found that they are not in a capacity to make gift....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owing decisions are relevant on the point at issue : (1) ITO v. Diza Holdings P. Ltd. [2002] 255 ITR 573 (Ker) ; (2) Raunaq Ram Nand Lal v. CIT [2002] 254 ITR 617 (P & H) ; (3) Smt. Iva Gogoi v. CIT [2002] 254 ITR 576 (Gauhati) ; (4) CIT v. Precision Finance Pvt. Ltd. [1994] 208 ITR 465 (Cal) ; (5) Rajshree Synthetics Pvt. Ltd. v. CIT [2002] 256 ITR 331 (Raj) ; (6) R. B. Mittal v. CIT [2000] 246 ITR 283 (AP) ; (7) CIT v. United Commercial and Industrial Co. P. Ltd. [1991] 187 ITR 596 (Cal) ; (8) M. A. Unneeri Kutty v. CIT [1992] 198 ITR 147 (Ker) ; (9) Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gauhati) ; and (10) Hindusthan Tea Trading Co. Ltd. v. CIT [2003] 263 ITR 289 (Cal). 30. From the above decisions, it is clear that tax authorities are entitled to penetrate into the veil to ascertain the truth. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in the documents. It is the duty of the court to go behind the smoke-screen and discover the true state of affairs. The court is not to be satisfied with the form but with the substanc....