TaxTMI 
TaxTMI 
2007 (4) TMI 59
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....e Act was conducted. at the residence of the karta of the assessee-Hindu undivided family, Shri Sandeep Kumar. Certain documents/ his loose papers were seized during the course of search. Proceedings under section 158BD were initiated against the assessee on January 7, 1998, and the assessee filed a return declaring "nil" undisclosed income on February 17, 1998. During the course of search, a set of cheque books and pass books of NRE accounts of the donors of the alleged gifts to this group were recovered from the business premises of the karta of the assessee-Hindu undivided family. From the perusal of the seized documents it was noticed by the Assessing Officer that the assessee has received a sum of Rs. 3,37,000 and Rs. 36,000 as gifts b....
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....r, after considering the submissions of the assessee and perusing the documents, the Assessing Officer was of the opinion that the assessee has not been able to discharge its onus of proving the identity, capacity and the creditworthiness of the donors as well as the genuineness of the gifts due to the reason that the copies of affidavits merely confirm the fact that the money has been transferred from NRE account to the assessee but it does not give any information regarding the source of funds as well as the source from where funds are alleged to have been given as gifts, came into the NRE account.; that the confirmation of the donor regarding the income declared and tax paid along with copy of individual income-tax return without any bal....
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.... is able to establish the identity of the donor but has not been able to establish the financial capacity of the donor and genuineness of the gifts. So by invoking section 68 of the Act a sum of Rs. 3,73,000 received by the assessee as gift was treated as income of the assessee from undisclosed source and added to the income of the assessee. 4 Being dissatisfied with the assessment order, the appellant filed an appeal before the Tribunal and vide impugned order the Tribunal dismissed the appeal filed by the appellant. 5 It has been contended by learned counsel for the appellant that on identical facts in the case of Shri Sandeep Gambhir, individual who is the karta of the assessee-Hindu undivided family, a similar addition in the block as....
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....nd the genuineness of the same could not possibly be easily verified by the Assessing Officer. In the instant case the return of the NRI donor filed by the assessee, having not been accompanied by the balance-sheet, is simply a copy not bearing any authentication from the Revenue Department of that country and not even properly notarized by an authorized person of that country, so, it is not possible for us to look into such unauthenticated evidence filed by the assessee to support and corroborate the financial status of the donor for coming to a conclusion; that in fact the donor was in a capacity to give such huge amounts as gifts to persons unrelated to him out of love and affection as claimed by the donors in their affidavits in the cas....
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.... to whether the identity of the donor has been established, and whether the donor had the capacity to make such a gift or not. In a decision of this court in CIT v. R. S. Sibal [2004] 269 ITR 429, it has been laid down (page. 432) "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. But, in the instant case, we find that though the assessee had admittedly produced the bank statements, the Assessing Officer did not raise any query w....
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....s is not sufficient to prove the genuineness of the gift. (ii) Since the claim of the gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift. 10 Here in the present case, there is nothing on record to show as to what was the financial capacity of the donor; what was the creditworthiness of the donor; what kind of relationship the donors had with the assessee; what are the sources of funds gifted to the assessee and whether they had the capacity of giving large amount of gift to the assessee. 11 Accordingly, the gifts received in this case by the assessee from NRI donor cannot be held to be genuine gifts and the tax authorities below wer....