TaxTMI 
TaxTMI 
2009 (7) TMI 857
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....this gift as genuine and the learned CIT(A) has echoed the finding of learned AO. 3. We have heard the rival submissions and perused the material available on record. The capital account of the assessee filed along with the return of income showed receipt of a gift of Rs. 2,50,000. The assessee had also enclosed a copy of declaration of gift dt. 21st April, 2002 executed by the donor Shri Rajesh Walia, his affidavit confirming this gift with his complete address, a copy of his PAN card and proof that he is an old income-tax assessee, a photocopy of his ration card, a copy of accounts of the donor in the books of Balaji Trading Corporation, Delhi and his balance sheet as on 31st March, 2001. It was shown that Shri Walia had received a cheque for Rs. 2,46,000 on 20th April, 2001 from the Balaji Trading Corporation, Delhi, and a cash amount of Rs. 3,500 was deposited on 21st April, 2001, thereafter a draft of Rs. 2,50,000 was got prepared in the favour of the assessee. The AO was satisfied with the identity of the donor but his capacity and the genuinity of the gift was still in doubt. So, he asked the assessee to be present for recording his statement. On 18th Oct., 2004, the stat....
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....both parties. The source of the gift is also explained with a complete sequence of events. Now, there are two possibilities before us-one, that in the light of the above-mentioned overwhelming evidences, where the identity and creditworthiness of the donor, and the factum of deposit by way of gift stands proved on record, and-second, in view of the other part of the statement of the donor wherefrom it is noticed that he does not own any valuable assets and lives in the house of his Buwaji and was doing business of commission (Dalali) as grain merchant, there being no direct relation between the donor and the donee, the capacity of the donor as well as the genuinity of this gift can be doubted. Why one would make a gift when he is not possessing enough assets and deposits and whose earning is not much and that too to a person who knows him through assessee's father only. 7. When there are two possible views one in favour of the assessee and the other in favour of the Revenue, which view should be accepted is a million dollar question before us. The view in favour of the assessee is fortified with numerous evidences which forms a complete chain of events, as has been discussed....
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....with, I respectfully proceed to write my separate order, as under. The facts 2.1 The facts of the case would bear mention; the matter being entirely factual, as it is only on the basis of the factual findings by the authorities below, including inferential, that the gift of Rs. 2.50 lacs received by the assessee in the instant case stands impugned by the Revenue, and it is again only on the basis of their validity or otherwise in law, and which would require an appellate authority, as the Tribunal, reviewing its case, to examine if these are cogent and tenable, and which would decide their maintainability or otherwise in law. 2.2 The assessee was, during the verification proceedings under s. 143 of the IT Act, 1961 ('the Act' hereinafter), vide order sheet entry dt. 20th Sept., 2004, required to attend personally in the matter on 27th Sept., 2004. After seeking a couple of adjournments, the assessee attended (along with his counsel) and was examined on oath by the AO on 18th Oct., 2004, and whereat his deposition revealed the following: (a) Confirmation of the receipt of gift per demand draft, received through post; (b) the gift was confirmed to be not receiv....
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....atement in the deponent's name in the first affidavit as on account of a typing error. 2.5 The deposition of the donor dt. 31st Jan., 2005 (Annex. "B" to the assessment order) revealed that he lived in the house belonging to his Buwaji, and also that he did not have any plot of land and/or residential house of his own; his main source of income, even as confirmed from the IT returns, was from Dalali in food grains, yielding him an annual income of Rs. 50,000 to Rs. 60,000. Further, he did not own any telephone, cell phone, fridge or four-wheeler nor had any investment in the form of bank FDR, NSC, etc. either in his name or in the name of his family members. He confirmed the gift to the assessee, even as it was admitted that the draft was got prepared/purchased by giving cheque to somebody, though he did not remember to whom he had so directed. The source of money was stated to be the receipt back of Rs. 1.25 lacs from one M/s Balaji Trading ,Company, to whom money was advanced by him (on interest) on 25th April, 1995. However, he could not state the source of the said amount of Rs. 1.25 lacs advanced to M/s Balaji Trading Company (the correct name, however, is M/s Sri Balaj....
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....at pp. 14 to 18 of his order, some of which, being by the apex Court, would be incumbent to mention: - CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC); - Workmen, Associated Rubber Industry Ltd. vs. Associated Rubber Industry Ltd. (1985) 48 CTR (SC) 355 : (1986) 157 ITR 77 (SC); - McDowell & Co. Ltd. vs. CTO (1985) 47 CTR (SC) 126 : (1985) 154 ITR 148 (SC); - Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC); - Sunil Siddharthbhai vs. CIT (1985) 49 CTR (SC) 172 : (1985) 156 ITR 509 (SC); - CIT vs. Kundan Investment Ltd. (2003) 182 CTR (Cal) 608 : (2003) 263 ITR 626 (Cal). The arguments 3.1 Before us, like contentions stood raised by either side. With reference to the evidences filed by the assessee, through which the learned Authorised Representative took us during the course of hearing, it was observed by the Bench that as per the copy of account of Shri Rakesh Walia in the books of M/s Sri Balaji Trading Corporation, the balance in his account as at 31st March, 2002 is at Rs. 1 lac, so that the said concern owes Rs. 1 lac to Shri Rakesh Walia as on 31st March, 2002, while there is no such balance in the balance she....
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.....e., the assessee and its creditor, which are even otherwise of relevance, being the authors and the executants of the transaction(s), assume prime significance. Their examination reveals that while the assessee-donee states of the donor residing at his own residence, the donor himself states of him living with his relative (Buaji), with even his name appearing as a part of the family of one Shri Anil Kumar, as apparent from the copy of the ration card, at serial No. 7 thereof, as also admitted by the donor. The assessee could not even tell about the members of the donor's family, leave alone knowing them personally, and which would be natural and in consequence to the intimacy shared, as stated, between the two families since the year 1994, even though the assessee resides at Firozabad while the donor and his family is based at Delhi. In fact, the assessee has himself admitted of having visited the donor's house only on one or two occasions, and not gone beyond the drawing room, so that the relations, if any, were admittedly formal, and that the donor was rather a friend of his father and his acquaintance with him was only thus in the capacity of being his father's son....
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.... investment in LIP/NSC/bank FDR, etc. in his name, and even does not own any consumer durables which can be considered as an integral part of modern day life. In fact if at all any savings could be ascribed to his income, the same, assuming a normal prudent behaviour, would flow to these avenues, represent as they do the necessities of daily life, or investments, provide as they do financial security with a concomitant and reasonable return on risk-free basis. No build-up of capital or balance in his savings bank account has also been exhibited, with his bank account as, submitted, even as observed by the learned CIT(A), being for two days, i.e., 20th April, 2001 to 21st April, 2001. The said date(s) neither represent the end of the month nor of the year, and neither do the said entries appear at the end of the page. The assessee or the donor has, thus, while taking a xerox copy of the said bank account statement, blocked the entries appearing on the page subsequent to the cheque per which the assessee's draft stood purchased (cheque No. 954006, dt. 21st April, 2001). This is again highly inexplicable, if not deplorable, and perhaps on purpose as the same was not furnished duri....
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....sfaction or non-satisfaction in the matter, as the case may be, and that the powers of the AO in the matter of assessment are plenary, he was duty bound to make proper inquiry in the matter in the factual matrix of the case to ascertain the veracity of the evidences furnished by the assessee (being also directed by the first appellate authority), and the Revenue in doing so, has neither overreached nor exceeded its powers or jurisdiction. Continuing further, though the address of the said concern as mentioned on its letter-head is the same as that stated by the donor, the Postal Department has informed the Revenue of the said concern as having left the place without leaving any forwarding address. Clearly, both the assessee and the donor are either not aware of the present whereabouts of the said concern or chose not to reveal the same. In fact, it is the latter that appears to be the case, with the assessee furnishing the donor's account statement in the books of the said concern, and which would only be through the donor, while it is clear that the said concern had closed shop at the stated address, and the same did not represent its current address. Given this non-availab....
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....(disclosed) sources. 4.5 It may also not be out of context to state the assessee's conduct which has been throughout recalcitrant, with it questioning the AO's right for the production of the donor in the first place. Similarly, though it was stated by the assessee of it being not in a position to produce the donor, as required, due to the latter's unavailability, on the AO's proposing to visit Delhi for his examination, the assessee produced the donor before the proposed date of visit (1st Feb., 2005). And which, apart from being in discharge of the onus cast on him by the law, is only understandable in view of the close relations he ostensibly enjoys with the donor, and who only could possibly reveal the source of the funds with him, so that the AO was fully justified in requiring his presence, particularly in view of the scanty and non-satisfactory nature of the evidence furnished vis-a-vis the capacity and the genuineness aspect of the transaction. In this regard it is observed that the entire material brought on record was only on the basis of the continuing and unremitting efforts by the Revenue authorities. Affidavit 4.6 As regards the furnishing of ....
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....n a number of decisions, so that the law in the matter is settled, and the case law legion, to some of which reference may profitably be made, i.e., other than to which the authorities below have adverted to, and is at para 6. An affidavit, it needs to be appreciated, is normally given only at the instance of a Court and generally demanded or tendered in establishing a negative, i.e., where positive evidence is not forthcoming, as where the facts are only in the personal knowledge of the deponent. Satisfaction under s. 68 of the Act, on the other hand, is to be arrived at on the basis of objective materials and in spite of the entries to that effect in the assessee's books, or even the creditor's book for that matter, so that the assessee has to furnish explanation and lead evidence to establish the truth of the credit on the parameters of the identity, capacity and genuineness. It is only on the basis of some objective material or evidence led by the assessee, that the satisfaction by the AO, which has necessarily to be arrived at, can follow, and also judicially reviewed. This aspect of the matter stands abundantly clarified by the apex Court in the case of CIT vs. Dur....
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....r, yet, would not satisfy the mandate of the law for which the condition precedent as prescribed thereunder, being the proving of the credit on three parameters aforereferred, has to be met [Satya Pal Verma vs. ITO (1977) 106 ITR 540 (All)]." Another decision that comes readily to mind in this context is that of CIT vs. Sardar Store (1986) 53 CTR (P&H) 352 : (1986) 161 ITR 53 (P&H). Though the said case is with reference to the penalty levied under s. 271(1)(c), the ratio of the said decision would well be applicable; rather more so, with the penalty being saved by the furnishing of a plausible explanation by the assessee. The Hon'ble Court clearly held that a mere furnishing of a statement of the creditor, or an affidavit therefrom, the issue involved in the said case being, again, the proving of the credit under s. 68 of the Act, in view of the material on record exhibiting that he was not in a position to pay, the burden of the Expln. 1 to the section, though rebuttable, stands not met or discharged by the assessee. 4.7 Lastly, I may take up the assessee's claim of the transaction being duly reflected in the capital account of the donor for the relevant year. In th....
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....e ascribed thereto, it was clarified by the apex Court that there is nothing in law to hold such preclusion and, that the immunity in law from the matter being examined or required to be proved before the Revenue extended only to the declarant-creditor and not to the assessee-debtor. Reference in this context is drawn to the decision in the case of CIT vs. Biju Patnaik (1986) 58 CTR (SC) 65 : (1986) 160 ITR 674 (SC). Case law 5.1 The assessee has before us placed reliance on some case law, without either disputing the factual findings by the Revenue or by showing as to how the case law relied upon by it qua the application of s. 68 in the facts and circumstances of the case is not correct. As such, the matter being entirely factual, the province of appellate authority as the Tribunal being to see whether the Revenue's non-satisfaction in the matter is reasonable, i.e., with reference to the explanations offered by the assessee as to the nature and source of the credit, it is not necessary to encumber this order by going through the said case law, each of which does not, in any manner state a law, or possibly so, different from that as laid down by the apex Court, or even ....
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....tablish or prove the said credit could be faulted with, being based on cogent findings based on the material on record. Not only has the assessee completely failed to satisfy, on the touchstone of reasonableness, which is the only guiding criterion in the matter, on the parameters of the capacity and the genuineness of the impugned credit transaction, so as to consider it as proved, but the Revenue, on the basis of the materials and information, which as afore stated it has painstakingly gathered, clearly exhibited it to be otherwise, with the assessee being unable to answer or meet the same or rebut the inferences flowing therefrom. As explained by the apex Court in the case of CIT vs. P. Mohanakala & Ors. (2007) 210 CTR (SC) 20 : (2007) 291 ITR 278 (SC), the expression 'offers no explanation' as occurring in the section (s. 68) means no proper, reasonable and acceptable explanation as regards the sums found credited in his books of account maintained by him. This reiterates the settled law in the matter and at once delineates the duty cast on the assessee, as well as, correspondingly, that on the Revenue, for it is thus incumbent on it to show that the assessee's expl....
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....ived a cheque for Rs. 2,46,000 on 20th April, 2001 from the Balaji Trading Corporation, Delhi, and a cash amount of Rs. 3,500 was deposited on 21st April, 2001, thereafter a draft of Rs. 2,50,000 was got prepared in the favour of the assessee. The AO was satisfied with the identity of the donor. It was explained that the donor was friend of his father. 4. In order to verify his capacity and the genuineness of the gift, the AO required the assessee to produce Shri Walia before him for examination. He even sent a letter to him. The donor replied directly to the AO vide his letter dt. 10th Dec., 2004 accepting the fact of making the gift. Shri Rajesh Walia also appeared before AO on 31st Jan., 2005, and he again accepted that he had made a gift of Rs. 2.5 lakhs to the assessee and explained the source of the gift. 5. Dissatisfied with the genuineness of the gift, the AO made the addition primarily with reference to human conduct and the system prevalent in the society, practicability of life etc. He relied on certain decisions and held that the donor is a person of low financial status having income of less than Rs. 5,000 per month and has shown withdrawals from his capital acco....
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....d by the donor himself that he was obliged by the father of the donee in the year 1994 during his visit to deity Vaishno Devi when the father of the assessee helped him and his family members. 8. The AM on the other hand doubted the closeness and natural love and affection of the donor and the donee, the capacity and creditworthiness of the donor apart from genuineness of the transaction, in view of the fact that his annual income being bare minimum to maintain oneself, so that no savings, much less of any sizeable amount, is feasible with reference thereto. No build-up of capital or balance in his savings bank account has also been exhibited, with his bank account as submitted being for two days, i.e., 20th April, 2001 to 21st April, 2001. The said account shows an opening balance (as on 20th April, 2001) at Rs. 476 and a closing balance of Rs. 726 (as on 21st April, 2001), with the draft amount being funded by the receipt of Rs. 2.46 lacs received from M/s Sri Balaji Trading Corporation and the balance by cash. Observing as to how and why this amount, ostensibly sourced from M/s Sri Balaji Trading Corporation, stands received from it after several years, has not been clarified....
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....t finding some noting therein, as to the purchaser and it being only in the nature of confirmation having no evidentiary value. Lastly, on the transaction being duly reflected in the capital account of the donor for the relevant year, he observed that the same is not reliable as demonstrated with reference to the unexplained difference obtaining in the account of his creditor (M/s Sri Balaji Trading Corporation), i.e., from whom the amount under reference is stated to have been retrieved, and secondly, and equally importantly, the fact of the impugned credit flowing from the donor's account, though relevant, cannot be considered as conclusive of the matter. He referred to the cases relied upon by the assessee and found them of no help to the assessee. 9. Parties are heard and their rival submissions considered. The following facts are not in dispute: (a) the identity of the donor is not in doubt; (b) gift is by a declaration deed; (c) donor has given an affidavit affirming the making of the gift; (d) there is a confirmation through post of gift per demand draft; (e) affirmation of the assessee in examination on oath recorded by AO; (f) affirmation of the do....