TaxTMI 
TaxTMI 
2010 (6) TMI 556
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....uch amount, the source of funds with the assessee is explained to be out of gifts received from the following twelve parties: 1. Rajdas Bakshmal Roopwani, Hospital Line, Madhav Nagar, Katni. Rs. 1,00,000 2. Gopichand Chairmal Madhwani, Keren Line, Madhav Nagar, Katni. Rs. 1,00,000 3. Gopichand Bakshamal Roopwani, Hospital Line, Madhav Nagar, Katni. Rs. 1,00,000 4. Nanakram Gopichand, Keren Line, Madhavnagar, Katni. Rs. 1,00,000 5. Shrichand Thakurdas Manwani, Khaiber Line, Madhavnagar, Katni. Rs. 1,00,000 6. Harish Kumar Gurmukhdas Mooljani, Hospital Line, Madhavngar, Katni. Rs. 1,00,000 7. Raj Kumar Tikamdas Wadhwani SudharNis. Cin. Madhavnagar, Katni. Rs. 1,00,000 8. Hemandas Narayandas Sewlani, Khaiber Line, Mahavnagar, Katni. Rs. 1,00,000 9. Ghanshyam Karamchand Paraswani, Khaiber Line, Madhavnagar, Katni. Rs. 1,00,000 10. Ramesh Kumar Karodimal Bhatiya, Keren Line, Mahdavnagar, Katni. Rs. 1,00,000 11. Thakurdas Gopichand Madhwani, Kere Line, Madhavnagar, Katni. Rs. 1,00,000 12. Sundardas Hremandas Pahaljani, Hospital Line, Madhavnagar, Katni. Rs. 1,00,000 2.1 From each one of the above 12 persons, the assessee is stated to have individually....
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....the assessee. The AO observed that on examining the details furnished in respect of donors, such donors were found to be persons having marginal taxable income i.e. to say that each donor pays Income-tax to the tune of Rs. 50 to Rs. 100 per annum. These donors have prepared capital account on estimate basis. The AO also observed that the so called donors have deposited money in their bank account on the day or one day prior to the so called making of gifts. He further observed that the personal withdrawals by the so called donors for their household expenses and other expenses are so petty to support the status of such donors to give a gift of Rs. 1 lac or so. According to the AO, there is trend at Katni to give such arranged gifts by charging 3% to 4% of the gift amount and a number of Accountants are involved in this activity. The AO found that in the assessee's case none of the donors are relatives of the assessee. None of the donors are maintaining any regular books of account. In none of the bank accounts maintained by the so called donors, the money was deposited in an earlier period than one day or two prior to making of gifts. According to the AO, these donors also gave aff....
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.... a deep and emotional relationship with that person. In this case, there is none. He also held that in this case all these donors are financially very tight and are short of money. In fact, it can be seen that these persons with great difficulty are managing their daily needs. The ld. CIT(A) also held that some of the donors have been found to be barely managing to satisfy the basic needs of life. According to him, such a person would rather look for ways and means to enhance his income so as to make his life alive and thus such a person could not every think of making gift. 4. The assessee challenged the order of the ld. CIT(A) before the Tribunal. The ld. A.M. has confirmed the findings of the ld. CIT(A). However, the ld. Vice President (J.M.) deleted the addition 5. On account of difference of opinion between the ld. V.P. (J.M.) and ld. A.M., this mater has been referred to me under section 255(4) of the Act. 6. Shri G.N. Purohit, ld. Counsel for the assessee relied upon the proposed order of the Hon'ble V.P. He further submitted that the ld. A.M. has not considered the decision of Hon'ble Madhya Pradesh High Court in the case of CIT v. Mehrotra Brothers [2004] 270 ITR 157(M.....
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....ove gifts were found to be doubtful. The AO required the assessee to prove the source of funds in the hands of donors and also to prove the identity of the said donors. The assessee has claimed that he had received the gifts from 12 persons. The onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such gift. In such type of cases, the assessee; has to prove that the money has actually been received as a gift from donor. The assessee is also required to demonstrate what kind of relationship or what kind of love and affection the donor has for the assessee and to explain circumstances in which gifts were made. The explanation of the assessee should be proper, reasonable and acceptable; otherwise the AO is free to draw a conclusion that the assessee has not offered any explanation. The Hon'ble Supreme Court in the case of Mohankala (supra) held that the 'expression the assessee offered no explanation' means where the assessee offered no proper, reasonable and acceptable explanation as regards the sums found credited in the books of account maintained by the assessee. The Hon'ble Supreme further held that the opinion of the AO ....
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....bank. His family is comprised of himself, wife and a son aged about 1½ year. Except for this, he has never received nor has given any gift to anyone. (iv) Shri Gopichand He claims to be earning about Rs. 50,000/- p.a. as commission on sale of bidi, cigarettes to various shopkeepers. It is claimed that his saving is about Rs. 2,500 p.m. but is not depositing in any bank account. His family is comprised of himself, wife and three sons and two daughters. All of them are married but are living together. Except for this, he has never received nor has given any gift to anyone. (v) Shri Ramesh Kumar According to his statement he is engaged in the sale and purchase of pan-masala and earning about Rs 50,000/- p.a. His family is comprised of himself and wife only. He claims to be saving about Rs. 2,000/- p.m. but is not depositing in any bank account. Except for this, he has never received nor has given any gift to anyone. (vi) Shri Shrichand Manwani He claims to be running a general provisions shop taken on rent near Traffic police post and is earning about Rs. 50,000/- p.a. His family is comprised of himself, wife and two school going children aged about 10 to 15 year. The fam....
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....r the true state of affairs. The court is not to be satisfied with the form and leave alone the substance of the transactions." The Hon'ble Supreme Court in the case of Durga Prasad More (supra) also observed that the Income-tax authorities are entitled to look into not only the documents produced but also the surrounding circumstances. The relevant observations of the Hon'ble Supreme Court read as under : "It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced bef....
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....d the donee. In my opinion, this decision is also not applicable to the facts of the present case because the facts are distinguishable. In the above case, the Department failed to show that the transaction was by way of money laundering. In the instant case, issue relates to financial capacity of donors and also the genuineness of transaction. Therefore, the decision of Hon'ble Rajasthan High Court (supra) is of no help to the assessee's case. 16. The decision of the ITAT Jabalpur Bench rendered in the case of Pramod Kumar Agrawal, Bilaspur (supra) is also not applicable to the facts of the present case. In the said case, the department could not controvert the explanation of the assessee by bringing any cogent evidence on record and the transactions were doubted on flimsy grounds. In the instant case, sufficient material has been brought on record by the Department to controvert the explanation of the assessee. In that view of the matter, the decision rendered in the case of Pramod Kumar Agrawal (supra) is distinguishable on facts. 17. In the case of Supreme Tyres (supra), the ITAT, Amritsar SMC Bench held that all the creditors having confirmed the credits in their statements ....
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....e onus which lay on him with regard to genuineness of gifts received by him from NRIs. The Hon'ble High Court held that the findings are factual in nature and hence no substantial question of law is involved. In the said case, the Hon'ble High Court held that there was a categorical finding by both the appellate authorities in favour of the assessee and therefore, the Hon'ble High Court declined to interfere in the matter. The facts are clearly distinguishable from the facts of the present case and therefore, the decision is not applicable to the facts of the present case. 21. The decision of the Hon'ble Gujarat High Court in the case of Murlidhar Lahorimal (supra) is also not applicable to the facts of the present case. In the said case, the gift of Rs. 50,000 was received by the assessee. The donor confirmed the gift and explained the source thereof and gift-tax proceedings having been completed against the donor, the Hon'ble High Court held that the onus which lay upon the assessee under section 68 was discharged and therefore, genuineness of the gift could not be disbelieved and the amount could not be treated as undisclosed income of the assessee. This decision is also not ap....
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.... to the assessee were unusual and against all human probabilities. There was no explanation of the immediate source of money for gift. There was no explanation from where the cash had come. Even though money had flown through bank account, that is not sacrosanct unless the donors were men of worth. In all the three cases, money was deposited in cash in the donors' bank account on the same day when the cheques/drafts were issued. All the gifts were taken on the same day as if there was some programme or function on the date of the gift at the premises of the assessee. All the three persons were of humble means. The following factors in the case of the three gifts were relevant: (1) There was no relationship between the donors and donee who were strangers to the assessee. (2) There was no occasion for making the gifts. (3) There was no evidence that there was any love and affection or friendship between the donors and donee. (4) There was no evidence of any business transaction between the donors and the assessee. (5) Most of the donors had given gifts of their entire capital. (6) All the persons had meagre withdrawals to support their large family and fad nominal income. None of the....
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....ssee to lead evidence to prove the identity, creditworthiness and financial capacity of the donors as well as the genuineness of the gift transaction, (ii) mere identification of the donor and movements of the amounts through banking channels are not sufficient to prove the genuineness of the gift, (iii) it is also necessary for the assessee to prove the creditworthiness of the donors for showing that gift was genuine; (iv) the genuineness of a gift transaction cannot be without looking into the aspect of the financial donor to give such amount in gift; (v) the genuineness of a gift transaction cannot be determined without looking into aspect of human probabilities, surrounding circumstances, such as relationship of the donor and donee, the donee or making such gift, etc. ; (vi) in case the gift received by the assessee from the donor are not genuine then the amount to the income of the assessee as being the assessee's income from undisclosed sources received as gifts is to be treated as concealed income of the assessee and can be added to the income of the assessee as being the assessee's income from undisclosed sources." 29. After considering the entire facts and circumstances o....