TaxTMI 
TaxTMI 
2012 (7) TMI 129
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....s expired his Son who was summoned u/s 131 and whose statement was recorded by the Ld. A.O. has duly confirmed the said Gift, capacity of the Donor, reason for giving the Gift and that even after thorough examination the Ld. A.O. could not find anything adverse. 3. That the Ld. Authorities below have erred in Law and on facts in disbelieving the Gifts which are supported by documentary evidence and by the statement recorded by the Ld. A.O. 4. That the Ld. Authorities below have been highly unjust and arbitrary in disbelieving the evidence of Gifts without bringing on record any contrary evidence in support of his presumptions. 5. That the appellant craves to leave add, alter, amends or withdraw any ground of appeal." 2. The brief facts of the case are that the appeal was heard on 13.01.2009. The order was pronounced on 30.01.2009. The said order of I.T.A.T. is reproduced as under: - "Order in ITA No.192/Agr/2007, Asstt. Year: 2000-2001, Manak Chand Garg vs. ITO -- This appeal of the assessee is directed against the order of ld. CIT(A) dated 18.10.2006 and pertains to A.Y. 2000-01. 2. Briefly stated, the facts of the case are that the assessee is a partner in the firm, M/s. M....
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....Lohar Gali, Agra is also managed and controlled by Shri D. K. Agarwal, CA has given gift of Rs.1,00,000/- on 25.08.1999 to the above named assessee. In view of the above, it is clear that Shri D. K. Agarwal has been creating bogus trusts which are involved in giving entry of gifts. As per information received these gifts have been found to be unaccounted money of the beneficiaries themselves. I have therefore, reasons to believe that income to the tune of Rs.1,00,000/- has escaped assessment in the case of Shri Manik Chand Garg S/o. Shri Laxmi Narain Garg, B-12, Natrajpuram, Kamla Nagar, Agra for AY 2000-01 to issue notice u/s. 148." 3. In reassessment proceedings, the AO sought explanation with regard to two gifts and ultimately found that these are in-genuine gifts being made by unidentified persons without their creditworthiness having been proved. The ld. CIT(A) has also confirmed the impugned additions. Now the assessee is aggrieved and has raised the following grounds :- "1. That the Ld. CIT(A) has erred in Law and on facts in sustaining the addition of Rs.1,00,000/- representing Gift received from Smt. Neelam Kumari without properly appreciating that the assessee ....
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....he case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC), these are admitted as ground Nos.6, 7 and 8. 6. On merits, the two gifts - one of Rs.1,00,000/- representing the gift received from Smt. Neelam Kumar and second of Rs.2,00,000/- received from Shri Ratan Singh are the subject matter of challenge. 7. In so far as gift of Rs.1 lakh received from Smt. Neelam Kumari is concerned, the relevant facts are that the assessee has declared this gift received through cheque No.864439 dated 25.08.1999. A copy of gift deed signed by Smt. Neelam Kumari was filed before the AO on 16.11.2005. In the gift deed as well as in the information dated 25.08.1999, a gift of Rs.l lakh made on 25.08.99 to Shri Manak Chand Garg S/o. Shri Laxmi Narain Garg, B-12, Natrajpuram, Kamla Nagar, Agra were also enclosed and in the balance sheet as on 31.03.1998 a cash/bank balance of Rs.18,485/- was shown. Alongwith this reply, the assessee also filed copies of two informations dated 12.09.1999 and 26.09.1999 from which Shri Ratan Singh has informed two gifts amounting to Rs.l,00,000/- each having been made by him through cheque Nos.597902 and 597904 respectively to Shri Manak Chand Garg. Sm....
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.... the I.T. Act, 1961 was issued on the same day to Shri D.K. Agarwal, CA on the given address requiring him to attend my office personally on 5.6.2006 and to produce complete books of account in case of Smt. Neelam Kumari Prop. M/s. Brij Mohan Lal & Sons, 51-Madhav Kunj Pratap Nagar, Agra, Managing Trustee of M/s. Narmada Benefit Trust 31/67, Lohar Gali, Agra for the A.Y. 2000-01, bank statement for the period 1.4.98 to 31.3.2001 and explanation regarding sources of funds through which amount of Rs.1 lac was gifted by Smt. Neelam Kumari to Shri Manak Chand Garg with amount and date of making gift. Any how, on 5.6.2006, Shri D.K. Agarwal, CA could not appear before me therefore, on verbal request of the assessee another summon u/s.131 dated 7.6.2006 was sent by Speed Post to Shri D.K. Agarwal, CA requiring him to produce personally on 12.6.2006 the same documents which were required by the summon dated 29.5.2006. Shri D.K. Agarwal, CA attended on 12.6.2006 in response to summon u/s. 131 dated 7.6.2006 and has filed a bunch of 95 copies of papers which were submitted by him before the ACIT-2(l), Agra on 31.3.1999. Statement on oath of Shri D.K. Agarwal, CA has been recorded by me whi....
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....prop. of M/s. Brij Mohan Lal & Sons was also a managing trustee of M/s. Narmada Benefit Trust, the AO put certain other questions to Shri D.K. Agarwal in response to which Shri D.K. Agarwal filed bunch of 95 papers including bank a/c. before the Ld. A.O. The Ld. A.O. in his remand report has partly discussed about the bunch of 95 papers which shows that the AO was satisfied about this gift of Rs.1 lac also. The assessee has thus proved both the gifts which have been received by him through a/c. payee cheques, legal heir of both the donors has duly confirmed about the facts of gift." 9. After considering these evidences, finally, the ld. CIT(A) has come to the conclusion that the gift was arranged by the assessee to introduce his unaccounted money in regular books of accounts and, therefore, he confirmed this addition. Now the assessee is further aggrieved. 10. It was vehemently argued by the ld. A.R. 8hri J.L. Verma that with regard to 8mt. Neelam Kumari, the entire evidence were produced to confirm this gift and copies of those evidences are again enclosed at pages 30, 34, 35 & 36 of his paper book. On the other hand, the ld. D.R. has vehemently argued that neither the identit....
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....e Shri Vijay Singh resident of Village Panwai, Tehsil Kirawali, Agra as legal heir of the donor Shri Ratan Singh. In evidence of his identity Shri Vijay Singh has filed copy of Khatoni and a certificate dated 15.5.2006 issued by Chaudhri Vijay Singh the Pradhan of Gram Panchayat, Panwari Vikas Khand Ahhnera, Agra. The Pradhan has certified that Shri Ratan Singh S/o. Shri K Mwasi Singh has been expired on 16.6.2001. He has three sons but he used to reside with his some Shri Vijay Singh. Shri Ratan Singh was running a brick kilm at Deori Road, Deori under the name and style of M/s. Rama Brick Field. Later on he did dalali of bricks. An statement on oath of Shri Viay Singh S/o Shri Rattan Singh aged about 48 years R/o. Village Panwari Tehsil Kirawali, Agra has been recorded by me on 29.5.2006 which is self explanatory and is submitted with case record of Shri Manak Chand Garg for your kind perusal. In this statement on oath, in replies to question No.4 to question No.7, Shri Vijay Singh has categorically stated as under :- - Before his death my father told me that he had given gift of Rs.2 lac to Shri Manak Chand Garg (Ans. To quen. 4) - Shri Manak Chand Garg is our family friend. H....
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....ement and books of accounts of Shri Rattan Singh for verification of genuineness of the gift and to explain the source of funds out of which the gift was given therefore, after examining Shri Vijay Singh, it appears to me that a self cooked story has been put by the assessee in the mouth of Shri Vijay Singh. The donor Shri Rattan Singh was having no relationship with the donee Shri Manak Chand Garg and there was no love and affection in between them out of which the said gift was made and there is no specific occasion on which the gift of Rs.2 lac was made by Shri Rattan Singh to Shri Manak Chand Garg. In fact, Shri Manak Chand Garg has introduced his own unaccounted money in the garb of gift through an artificial donor. In view of the above fact it is humbly submitted that the assessee does not deserve for any relief from the addition of Rs.2 lac made u/s. 68 as undisclosed income of the assessee in the assessment order passed for the AY 2000-01." 12. Again the reply in rejoinder to the remand report tendered by the assessee is being extracted below:- "Gift from Shri Ratan Singh Since the donor Shri Ratan Singh has already expired on 16.6.2001 his son Shri Vijay Singh appeared....
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....essee's case throws a shroud of disbelief and absence of documentary proof takes out this gift from the kitty of genuineness. The evidences filed in the form of acknowledgement of ROI again disprove the case of the assessee. The donor has disclosed meager incomes in both these years. Thus the creditworthiness of the donor is also not proved. From the remand report as well as assessee's reply, the creditworthiness of the donor is not at all established. Therefore, we do not accept this gift also 14. Now coming to legal ground taken by the assessee as additional ground, ground No.1 of additional ground which has been treated as ground No. 6 challenges the assumption of jurisdiction u/s. 148 of the Act on the ground that the reasons recorded with regard to escapement of income are not specific, but are general in nature. After perusing the reasons recorded by the AO which have been extracted in above part of this order, it becomes clear that the reasons with regard to escapement of income qua alleged gift of Rs.l,00,000/-, given by Smt. Neelam Kumari through cheque No.864439 drawn on a particular bank is definitely a specific and not a general information. Therefore, this ground is....
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....refore, it was submitted that the Tribunal has rejected the appeal of the assessee under misconception. Therefore, it should be recalled. Reliance is placed on various case laws mentioned in the written submission filed by the assessee. 4. On the other hand, the D/R stated that miscellaneous application of the assessee may be disposed off on merit. 5. After considering the submissions and perusing the order of Tribunal, we find that a mistake has been crept in the order of the Tribunal. Whether the addition is liable to be deleted or not is another aspect, but the fact is that the assessee has filed supporting evidence in its case. Copy of ownership of agricultural land is placed on record as mentioned in the order of the Tribunal at pages 16 & 17. Therefore, it is a mistake on the part of the Tribunal in mentioning that no documentary evidence was produced in support of ownership of agricultural land, as stated by Shri Vijay Singh legal heir of donor Shri Ratan Singh. Since supporting evidence produced, copy of which is placed on record in the original file, therefore, we hold that the order of the Tribunal is liable to be recalled. In view of above facts and circumstances, we ....
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....rmada Benefit Trust who has expired on 22.12.2002. The A.O. noticed that gift of Rs.1,00,000/- made to the assessee by Smt. Neelam Kumari has also been routed through M/s. Narmada Benefit Trust which has also been also managed and controlled by Shri D.K. Agarwal, C.A. It has also been noted by the A.O. that certain facts as noted by the A.O. in paragraph no.4 of his order from which it is clear that the assessee has initially misguided the department by giving false name and address the Gift Deed. The A.O. held that the assessee introduced his own unaccounted money in the garb of gift through artificial donors. The A.O. found that the assessee has failed to establish the creditworthiness of both the creditors Shri Rattan Singh and Smt. Neelam Kumari. The CIT(A) confirmed the addition. It was submitted before the CIT(A) that the Donor Shri Rattan Singh has also expired on 16.06.2001. Therefore, it was not possible to produce him before the A.O. The CIT(A)provided fresh opportunity to the assessee to produce the Legal Heir of the donor for examination before the A.O. The A.O. submitted the remand report dated 15.06.2006 which is reproduced in the original I.T.A.T. order. The CIT(A) ....
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.... of assessment proceedings, Shri D K Agarwal has claimed that the fund of Narmada Benefit Trust was utilized for aforesaid gift of Rs.1 lakh. It is also seen that besides giving gift to appellant the aforesaid trust has distributed gift of more than Rs.25 lacs to various beneficiaries. The facts of the case clearly indicate that Narmada Benefit Trust was created with the sole intention of defrauding the revenue by providing fictitious entries in respect of gift etc. There are unexplained cash deposits in the bank account of aforesaid trust, in such circumstances gift advanced by Smt. Neelam Kumari cannot be held as genuine gift. 3.5 Similarly, in the case of Ratan Singh though his L/h has confirmed the facts regarding gift of Rs.2 lacs, however, copy of bank accounts was not produced. During the concerned year, the total income of Ratan Singh was only Rs.1,49,750/-. From the copy of his capital account produced by L/h it appears that Late Shri Ratan Singh has given gift of Rs.5,10,000/-. Appellant failed to produce bank statement or books of account of late Shri Ratan Singh, in such circumstances creditworthiness of Ratan Singh remained unproved. A person having measure income of ....
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.... out of such avoidance has necessarily to be the same." 3.6 In the case of Sumati Dayal 214 ITR 801 the Supreme Court has held that surrounding circumstances and human probabilities are to be kept in view in taxation matter. In such matter a superficial approach has to be avoided. 3.7 The Calcutta High Court in the case of CIT vs. L.N. Dalmia in 207 ITR 89 has held that for determining whether the transaction sham or a device or a route, Income-tax Authorities are entitled to enter the factual cover and ascertain the truth. 3.8 In the case of Sunil Sidharth vs. CIT 156 ITR 507 the Supreme Court has held that it was open to the Income-tax Authorities to go behind the transaction and examine whether the transaction was genuine or not. 3.9 Similarly the Hon'ble Supreme Court in the famous case of McDowell has held that avoidance of tax through colorable device was not permissible. The aforesaid decision has been followed by the Kerala High Court in the case of CIT vs. S. Ami in 210 ITR 585 and the Kerala High Court has held that even after the decision in the case of CWT vs. Arvind Narrotam 173 ITR 479 the decision of the Apex court in the case of McDowell still hold the flit. If ....
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.... Neelam Kumari, it was stated that she is assessed to tax and PAN was also given. The gift was given through cheque. In respect of gift from Rattan Singh, it was stated that the assessee has discharged the onus as he has proved the identity of the donor who has been assessed to tax. The gift was given through account payee cheque. The gift deed of Smt. Neelam Kumari and its acceptance, confirmation of gift, reply given by the D K Agarwal was also field as evidence before the A.O. In respect of gift from Shri Rattan Singh, confirmation of two gifts, two gift deeds and its acceptance copy of return were filed. Statement of Shri Vijay Singh, son of L.H. of late Shri Rattan Singh recorded under section 131 of the Act on 29.05.2006. In the said statement it was stated by the Shri Vijay Singh that Rattan Singh has expired on 16.06.2001. A death certificate issued by Gram Panchayat Panvari dated 15.06.2006 was also filed. In respect to question no.4 it was stated that before the death late Shri Rattan Singh has told to Shri Vijay Singh that he has given gift of Rs.2,00,000/- to the assessee. In question no. nil the purpose of the gift was asked wherein Vijay Singh replied that the assesse....
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....king channel. The donors are assessed to tax and have confirmed the facts of gift. The case of the A.O. is that the assessee has introduced his own unaccounted money in the garb of gift through artificial donor. Therefore, the addition is warranted under section 68 of the Act. The view of the A.O. has been confirmed by the CIT(A). In other words, the case of the Revenue is that the gifts were not genuine. Before coming to the facts of the case, we would like to discuss the issue what is genuine gift. To examine the issue let us see what is meaning of the gift. The ordinary meaning of the gift is a transfer by one person to another of any existing movable or immovable property made voluntarily or without consideration of money or money worth. In legal effect, there cannot be a 'gift' without a giving and taking. The giving and taking are the two contemporaneous reciprocal acts which constitute a 'gift'. In order to make a valid gift, there must be perfect knowledge in the mind of the person making the gift of the extent of the beneficial interest intended to be conferred, and of which making it. Donor gives gift in money or money's worth and taking love and affection from donee. To....
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....ks of account can be gone into by the Income Tax Officer. There is no quarrel with the proposition that a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift and since the claim of a gift is made by the assessee the onus lies on him not only to establish the identity of the donor but his capacity to make such a gift and genuineness of the gift. The assessee is required to prove three important conditions, namely, (i) the identity of the creditor, (ii) the capacity of the creditor to advance the money, and (iii) the genuineness of the transaction. What evidence would be sufficient to establish the said conditions or what material would be relevant in a particular case, would depend on the facts of each case. There cannot be one general guiding yardstick in the matter. However, in this regard, an important clue can be taken from some judgments of the courts. 8. Accordingly, we would like to refer one of the judgments of the Apex Court in the case of CIT vs. Durga Prasad More, 82 ITR 540 (SC) wherein the Court held that Science has not yet invented any instrument to test the re....
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.... 9.1 The brief facts of the case which was before the Apex Court were that the dispute in all those appeals relates to the addition made by the Assessing Officer in respect of several foreign gifts stated to have been received by the assessees from one common donor namely Sampath Kumar. The gifts received were from one Ariavan Thotan and Suprotoman. It is during the enquiry by the Revenue it is asserted that they were the aliases of Sampathkumar. These gifts were made to A. Srinivasan and his wife, Smt. S. Kalavathy, his son, S. Balaji Manikandan and to one of his brothers, Rajendran and Smt. Mohanakala.In all the aggregate gifts received by the assessees is to the extent of Rs.1,79,27,703. The Assessing Officer did not accept the explanation offered by the respective assessees that the amount of credit is a gift from NRI and proceeded to add it as the income of the assessees from undisclosed sources. The credit entries have been made during the period from July 8, 1992 to October 19, 1995. There is no dispute that the payments were made by instruments issued by a foreign bank and credited into the respective assessee's account by negotiation through a bank in India. Most of the c....
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....tory set up by the assessee is unacceptable and hard to believe and the "preponderance of probabilities, the common course of human livings point to the contrary". The appeals were accordingly dismissed. The I.T.A.T. concurred with the findings and conclusions arrived at by the Assessing Officer and the Commissioner of Income-tax. The Tribunal noticed that the letters exchanged "by the person who had sent foreign exchange to the assessee only indicate that there is no love and affection between them and that he is clearly materialistic and his statement of accepting a reciprocation is also an indication to the fact that he is not doing anything free but clearly the compensation was a roundabout manner of showing of he having been compensated either in India or abroad." The Tribunal also took note of the various other attending circumstances and found it difficult to accept the explanation offered by the assessee. The High Court came to the conclusion that the reasons assigned by the Tribunal and other authorities "are in the realm of surmises, conjectures and suspicions . . . the authorities under the Act have failed to draw the only conclusion that is possible legally and logicall....
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....ich the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence." No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed an error in disturbing the concurrent findings of fact." 10. Delhi High Court in the case of Rajeev Tandon vs. ACIT, 294 ITR 488 (Delhi) held as under:- "Having heard learned counsel for the assessee, we find that the Tribunal considered the entire case law on the subject including several decisions of the Supreme Court and this court. Reference has been made to CIT v. Durga Prasad More [1971] 82 ITR 540, wherein the Supreme Court observed that the taxing authorities were entitled to look into the surrounding circumstances to find out the real and factual position. Similarly, this court in Sajan Dass and Sons v. CIT [2003] 264 ITR 435 took the view that not only must the asses....
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.... and creditworthiness of the donor are not sufficient. The important thing in addition to identity and creditworthiness of donor in such case which it requires to prove by the assessee is genuineness of the gift. On perusal of the records including the documents pointed out in the order of Miscellaneous Application by the I.T.A.T., we find that no documents support to the fact that there was genuine gifts. Merely filing of holdings of agricultural land of donor does not amount that the gift was genuine. Filing of gift deed and copies of bank account also does not serve the purpose to hold that there was a genuine gift. These documents referred by the assessee are required to be considered in the light of law laid down by the Apex Court in the case of CIT v Durga Prasad More 82 ITR 540 (SC) where in it has been held that Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. It has been further held that it is true that an apparent must be considered real until it is shown that there are reasons to be....
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....een filed of which copy is filed at page no.29 of the Paper Book. For the purpose of ready reference, the same is reproduced as under :- (translated in English) "Balance Sheet as on 31.3.97 515024.00 Ratan Singh, Prop. of firm 50000.00 Soil A/c. 467763.00 old balance 16500.00 Bhatta Golta A/c. 47261.00 Net profit 600.00 PNB Bank A/c. ----------------- 447924.00 Closing Balance ------------- ------------- 515024.00 515024.00 ------------- -------------" 14. In the said balance sheet, closing balance of Rs.4,47,924/- has been shown with pointing out whether it was cash or bank or other balance. In practice such capital account and source of income is not believable. These are the facts which support what we have stated above that such return are being filed to create the capital to accommodate unaccounted money. Therefore, in spite of the fact that the assessee filed returns and the same have been processed cannot be said to be good and sufficient evidence in support of the fact that the donor having real capacity to give the gift and the gift was genuine. To curtail such wrong practice going on, it is very much necessary to hold that in such type of cases the gift cannot ....
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....he hands of trust actually belongs in trustee vide his appellate order dated 8/9.7.2004. All these trusts are actually managed and controlled by Shri D.K. Agarwal, CA. It has also been informed that Annexure-II of seized material during the survey shows that one of the trust Narmada Benefit Trust, 31/67, Lohar Gali, Agra is also managed and controlled by Shri D. K. Agarwal, CA has given gift of Rs.1,00,000/- on 25.08.1999 to the above named assessee. In view of the above, it is clear that Shri D. K. Agarwal has been creating bogus trusts which are involved in giving entry of gifts. As per information received these gifts have been found to be unaccounted money of the beneficiaries themselves. I have therefore, reasons to believe that income to the tune of Rs.1,00,000/- has escaped assessment in the case of Shri Manik Chand Garg S/o. Shri Laxmi Narain Garg, B-12, Natrajpuram, Kamla Nagar, Agra for AY 2000-01 to issue notice u/s. 148." (Letters Bold and under lined by us) 16. Even otherwise also, we find that the assessee has failed to prove the occasion as well as the relation that how the assessee has passed the consideration in the form of love and affection to the donors again....