TaxTMI 
TaxTMI 
2015 (12) TMI 1129
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....the relevant accounting period is the year ended on 31.03.2002. The assessee, who is engaged in the business of developers/housing projects, filed return of income in the capacity of an individual on 31.03.2003 declaring total income of Rs. 1,05,044/-. The assessee has shown his income from partnership firm - M/s Krishna Developers at Rs. 31,441/- and income from M/s Rachit Land Developers, a proprietary concern of the assessee at Rs. 86,103/-. Interest income on NSC and bank was also shown at Rs. 9,565/-. The return was initially processed under section 143(1) of the Act, thereafter the same was taken up for scrutiny. During the course of assessment proceedings, upon verification of the capital account, it was noticed that an amount of Rs. 7,02,000/- had been credited as fresh capital introduced during the year. The source of the same was shown as gifts received from the following persons: [1] Ramesh Kheshani Rs.2,00,000/- [2] Vinod Manghnani Rs.1,00,000/- [3] Niranjan Chhotala Rs.1,00,000/- [4] Rupchand Ramlal Prajapati Rs. 50,000/- [5] Piraram Chelaram Rabari Rs. 50,000/- [6] Mahavir Prasad Prajapati Rs. 50,000/- [7] Vinod Jugraj Dungar Rs. 51,00....
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.... I find that the appellant has given the confirmation letters, Pan numbers and the copies of returns and bank statements of Indian donors and as regards two donors from Dubai i.e. Shri Ramesh Kheshkani and Shri Vinodkumar Manghnani, the appellant has filed copy of confirmation letter and copy of passport and details regarding the period of stay of the donors in Dubai. The donor Ramesh Keshkani has been staying at Dubai since last 24 years and Vinod Manghnani has been staying since last 13 years. Most of these donors have given gift from their cash in hand or from capital account. So the adequacy of current year's income to give the gift is not to be considered as from the accumulated income they have given the gifts. The decision of ACIT v. Hansa Chhaganlal cited by the Authorized Representative is fully applicable in the case of the appellant as the appellant has furnished the address of the donor and the financial capacity of the donor. Two of the donors have admitted before the Assessing Officer and confirmed the fact that they have given the gift to the appellant. Shri Piraram Rabari has stated in reply to question No.9 that he has made cash deposits in his bank account and has....
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....ibunal has gone on to discuss and question as to why the donor should make a gift to the assessee; the size of the donor's family and availability or otherwise of the amount in the hands of the donor; the area of the land held by the donor; etc. The court observed that at best, these could be factors for the donor to be called upon to explain the source of the funds in his hands, but that could not be a ground for disbelieving a gift which had admittedly been received by the assessee as a gift and being treated as undisclosed income of the assessee. Reliance was also placed upon the decision of this court in the case of Commissioner of Income Tax v. Pragati Co-operative Bank Ltd., [2005] 278 ITR 170 (Guj), for the proposition that once the assessee had given the names and addresses of the alleged creditors and it was in the knowledge of the revenue that the said creditors were income-tax assessees, if the revenue did not make any effort to pursue the so-called alleged creditors, the assessee could not do anything further and the assessee had discharged the burden that lay on it. It was for the revenue to examine the source of income of the alleged creditors to find out their credit....
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....rt in the case of Murlidhar Lahorimal v. Commissioner of Income Tax (supra) and held that the assessee cannot be asked to prove the source of source. It was submitted that in the present case, two of the donors had appeared before the Assessing Officer and confirmed the gifts and accordingly, the requirements of proving the genuineness of the gifts are duly satisfied. Insofar as two foreign donors are concerned, it was submitted that for the first time, it was the Tribunal which has raised the issue with regard to the original passbooks not being produced and therefore, it was not justified in not granting an opportunity to the assessee to produce the original passbooks, more so, when the lower authorities did not doubt the copies produced by the assessee. Referring to the findings recorded by the Tribunal that it was for the assessee to produce the parties as the same was necessary to establish identity and to enable the Assessing Officer for examination and further investigation regarding genuineness of persons and creditworthiness, it was submitted that all relevant details with regard to the said persons had been furnished to the Assessing Officer and hence, the Assessing Offic....
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....no relations with them and therefore, the gifts have not been made in the natural course of love and affection. It was submitted that the reason given for the gifts, namely, on account of the earthquake, the said persons had made the gifts, is by way of an afterthought. Referring to the facts of the case, it was pointed out that insofar as Shri Rupchand Ramlal Prajapati, who is alleged to have given a gift of Rs. 50,000/- is concerned, his salary income is only Rs. 49,200/-. In the return of income, his salary income is not reflected. That though it has been recorded that most of the donors have been bringing customers for the assessee, they did not get any commission for bringing such customers and on the contrary, though they are persons of meagre means, they have given relatively huge gifts to the assessee. It was submitted that both the Assessing Officer as well as the Tribunal have made a detailed analysis of each donor and have come to the conclusion that the genuineness of the gifts as well as creditworthiness of the said persons have not been established. Moreover, except for the two persons who were produced before the Assessing Officer, even the identity of the other dono....
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.... assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence, the same can be used against the assessees by holding that it was a receipt of an income nature. It was submitted that in the facts of the present case, it is not the contention of the assessee that any finding of the Tribunal is not borne out from the record. 7.2 Reliance was also placed upon the decision of the Supreme Court in the case of Commissioner of Income Tax v. P. R. Ganapathy, [2012] 210 Taxman 572 (SC), wherein the court in a case where the Department had invoked section 68 of the Act, observed that the burden is on the assessees to show that the amount received by purported gifts from the two donors was a "gift" in the legal sense. The court observed that the assessees had not led evidence to show whether the alleged donors had adequate funds in their respective accounts to make these purported gifts in Singapore Dollars which was almost running into more than five lakhs. Mr. Mehta submitted that therefore, the financial capacity of the donor has to be established by the assessee and merely submitting tax returns is not sufficient and that the passbooks of the bank accounts s....
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....Tribunal has given cogent and sufficient reasons for arriving at the conclusion that the gifts are not genuine. 7.4 In conclusion, it was submitted that thus, firstly the burden of establishing the source of the donor lies on the assessee, which the assessee has failed to prove; secondly the assessee has failed to prove the relationship of natural love and affection between the donor and donee, and thirdly, the gift far exceeds the returned income, under the circumstances, the Tribunal was wholly justified in reversing the order passed by the Assessing Officer. It was, accordingly, urged that no question of law is involved in the facts of the present case and that the entire matter is in the realm of facts. 8. In rejoinder, Mr. Divatia, learned counsel for the appellant referred to the facts of the case to point out that Shri Niranjan Chhotalal Kshatriya, had in the statement recorded under section 131 of the Act, stated that he had deposited the cash and given the gift and that such amount is duly deposited in the capital account. Referring to the return of income filed by the said assessee, it was submitted that the return of income of the said assessee was duly submitted. As r....
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....the court had struck down the order of the Tribunal as it had remanded the matter to the Assessing Officer without dealing with the findings recorded by the subordinate authorities. Reverting to the facts of the present case it was submitted the question regarding non production of the original passports of the NRIs is not borne out from the findings of the subordinate authorities and hence, the matter is required to be restored to the file of the Tribunal to decide the same after affording an opportunity to the assessee to produce the same. As regards the decision of the Supreme Court in the case of Commissioner of Income Tax v. P. R. Ganapathy (supra), it was pointed out that in the facts of the said case, the court had restored the matter to the Tribunal and directed the Tribunal to examine the question in the light of what was stated in the said decision and does not in any manner come to the aid of the respondent. 8.1 Mr. Divatia further submitted that the decisions of the Delhi High Court as well as the Punjab and Haryana High Court, on which reliance has been placed by the learned counsel for the revenue for the purpose of contending that the gift should be made out of natu....
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....fts from the accumulated income. However, this finding of the Commissioner (Appeals) is not based on any supporting material. On the contrary, the evidence on record shows that the Indian donors have very meagre income and no reasonable person could ever come to the conclusion that they have the capacity to make such gifts. Considering the income of these persons, it is not possible for them to accumulate such income. The Commissioner (Appeals) has further found that the decision in the case of ACIT v. Hansa Chhaganlal is fully applicable to the present case as the assessee has furnished the address of the donor and the financial capacity of the donor. This finding is again de hors the record, inasmuch as, no material has been placed on record by the assessee to establish that the donors had the financial capacity to make such gifts. The Commissioner (Appeals) has also observed that Shri Piraram Chelaram Rabari has stated that he had deposited cash in his bank account and had given the gift from his salary. In this regard, the statement of Shri Piraram Chelaram Rabari recorded under section 131 of the Act reveals that he was working as a watchman (chowkidar) and two years prior the....
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....abari : This person appeared before AO and it has not been disputed that he is working as watchman and is cleaning the shops. He has contended that neither he had deposited any amount and earned any interest, although, he was showing interest income in the return. On further questioning, he did not remember from whom interest has been earned. He did not disclose any source of income except watchman salary, besides, answer to question No.8, he stated that he has no relationship with the assessee and has only met on number of times. Whereas in answer to question No.35, assessee contended that I have business relationship with Piraram Chelaram Rabari. Answer of the assessee itself make statement of Rabari unbelievable, who did not state that there was any business relationship. We have to appreciate that AO has looked into the facts of the case as to whether a watchman has given substantial amount of gift to builder? Facts clearly raise question of proper inquiry. In the absence of clear facts to substantiate, burden on the assessee is of higher degree, inasmuch as, he has to establish as to how a watchman can have financial capacity to gift substantial amount to assessee who is mu....
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....ity of any knowledge about members of the family of Shri Ramesh Keshkani and said that he met him through one Shri Mahadev Keshkani and he did not know full names and complete local address of the donor. He had not contacted him by mail or telephone since last six to seven years. Further, neither original passport nor affidavit sworn before any diplomatic authority from Shri Ramesh Keshkani was produced except only simple confirmation. Confirmations could not be relied on, unless signatory is proved and entire facts of the case is verified. In case of Shri Vinod Meghani also, no original passport was produced and he is not a relative. Assessee has no knowledge about the family members. He did not remember names and his family members and local addresses of Shri Vinod Meghani at Ahmedabad, he had not contacted him by mail or telephone since last six to seven years. In view of these glaring deficiency and proper establishment of identity of the donors in the form of original passport and their proper existence, relationship as alleged by the assessee, we are unable to treat this gift as genuine gift as identity and creditworthiness could not be proved by assessee in terms of section ....
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....rom the record, there is nothing to reveal that the relationship between the assessee and the donors was the one involving natural love and affection. In the opinion of this court, having regard to the financial capacity of the donors as emerging from the record, considering the facts of the case from the point of view of a reasonable man taking a reasonable view, it is not possible to believe that the gifts in question are genuine. 13. The Supreme Court in Commissioner of Income Tax v. P. Mohanakala (supra) has held that a bare reading of section 68 of the Act suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income tax as the income of the assessees of that previous year. The expression "the assessees offer no explanation" means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found c....
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....on would be squarely applicable to the facts of the present case, inasmuch as, the explanation given by the assessee has not been found to be acceptable. 14. The learned counsel for the appellant has placed strong reliance on the decision of this court in the case of Murlidhar Lahorimal v. Commissioner of Income Tax (supra); however, in the opinion of this court, the said decision would not come to the aid of the appellant herein, inasmuch as, in the facts of the said case, the identity of the donor was established as the donor had appeared in person before the Assessing Officer, the genuineness of the transaction was established, not only by the receipt of the bank draft, but also by the fact of the transaction having borne gift tax once the assessment was framed. The primary onus which rested on the assessee, thus, stood discharged. The court, on facts, found that the donor had produced evidence in support of the source from which the funds for making the gift were available with him and the revenue had not disputed any of these facts. Placing reliance upon its earlier decision in the case of CIT v. Pragati Co-operative Bank Ltd., (supra) the court held that the assessee can be ....