AI Drafter 
TaxTMI 
TaxTMI 
2010 (6) TMI 785
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....w the appeal by the assessee. 3. In the result, appeal by the assessee is allowed. ORDER B. R. Kaushik (Accountant Member) 1. I have perused the order of the ld. Vice-President in allowing the appeal of the assessee. With due respect, I do not agree with his order in allowing the appeal of the assessee against confirmation of addition of Rs. 10,00,000 made by the Assessing Officer on account of the gifts not considered genuine. 2. It is seen that the assessee had claimed that he has received 10 gifts of Rs. 1,00,000 during the relevant accounting period. The Assessing Officer for the reasons discussed in the Assessment Order 6-5-2003 held that "the assessee had introduced his own money under the guise of gifts through persons of inadequate means. In the above circumstances, the sum of Rs. 10,000 is treated as assessee's own money. It is treated as income from undisclosed sources and taxed in the hands of the assessee on the basis of date of its introduction in the hands of the assessee." 3. The ld. CIT(A) confirmed the order of Assessing Officer as per detailed discussion in paras 2 to 8 of his impugned order dated 15-3-2007. In short, the ld. CIT(A) observed ....
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....ed by him for the detailed reasons discussed in his order in that appeal. Since I have respectfully differed from the ld. V.P. on this issue in the case of Shri Sushil Kumar Mohnani (supra) I respectfully, do not agree with the decision of the ld. V.P. on this issue. 3C. The relevant portion of my dissenting order in the case of Sushil Kumar Mohnani (supra) is reproduced below for ready reference: 4. I respectfully differ from the Learned Vice President. In my considered opinion, the gifts have been rightly held as not genuine by the ld. CIT(A) for the reasons discussed here-in-after. In the case of CIT v. P. Mohankala (2007) 291 ITR 2781 (SC) the Hon'ble Supreme Court has held as under: "In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz. the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature." 5. It is also seen that the Hon'ble Vice-President has distinguished the case of P. Mohankala....
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....ature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut it, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature." It is clear from the decision of the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 80 Taxman 89 that direct evidence about secret transaction would be rarely available and the inference had to be drawn on the basis of circumstances available on the record and that the genuineness of claim had to be considered in view of the surrounding circumstances and applying the test of human probabilities. 6. It has also been held by the Hon'ble Punjab and Haryana High Court in the cases of (i) Subhash Chand Verma v. CIT (2009) 311 ITR 2392 (Punj. and Har.) (ii) Jai Kumar Jain v. Asstt. CIT (2009) 311 ITR 3393 (Punj. and Har.) (iii) Subhash Chander Sekhri v. Dy. CIT (2007) 290 ITR 3004 (Punj. and Har.) (iv) Jaspal Singh v. CIT (2007) 290 ITR 3065 (Punj. and Har.) and (v) Yash Pal Goel v. CIT (20....
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....ed itself constitutes a prima facie evidence against the assessee relating to the receipt of money, and if the assessee fails to rebut the evidence it can be used against the assessee by holding that it was a receipt of an income nature. A simple 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. Since the claim of 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 a gift and that it has actually been received as a gift from the donor. [Emphasis supplied] The Hon'ble High Court further Held, dismissing the appeal, that the financial position of M suggested that he neither had the capacity to make the gift nor the source from where the gift was made. No reason whatsoever had been assigned for gifting such a huge amount by M to the assessee. M never visited the home of the assessee and hence there was no love and affection. It was nothing but a subterfuge to avoid income-tax. The transactions were not genuine ones." [Emphasis supplied] At page 81 of the aforestated order, th....
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.... for establishing the "capacity" of the creditor. Mere explanation regarding the source of the receipt or credits in the account book of the assessee that he received the money from his wife any minor son who are not earning was far from "satisfactory"." 13. The ITAT as per its decision dated 28-6-1995 in the case of D.C. Rastogi (HUF) v. Asstt. CIT (1996) 57 ITD 295 (Delhi) has also held that "in case of cash credits and gifts, the onus lies on assessee to establish identity and capacity of creditor and genuineness of transaction." 14. It is also seen that no direct decision of Hon'ble M.P. High Court on this issue was brought to our notice by the learned counsel for the assessee. The reliance of the learned counsel for the assessee on the decision in the case of CIT v. Metachem Industries (2000) 245 ITR 16010 (MP), with due respect is of no help to the assessee because in that case the issue before the Hon'ble High Court was whether the capital introduced by the partner of the firm was liable to be considered for income-tax in the case of the partner who has confirmed the introduction of capital in the case of the assessee firm. The decision, with due respect, canno....
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....dered opinion that the decision of the learned CIT(A) in confirming the addition made by the Assessing Officer deserves to be upheld and the appeal of the assessee is liable to be dismissed on this issue. First two grounds of appeal are accordingly dismissed. 18. Following my aforestated order on similar facts in the case of Sushil Kumar Mohnani (supra) brother of the assessee, I hold that the decision of the ld. CIT(A) on this issue deserves to be confirmed. The first two grounds of appeal are accordingly dismissed. 19. Regarding 3rd ground of appeal against confirmation of addition of Rs. 7,520 for house hold expenses. I agree with the decision of ld. V.P. in allowing the appeal of the assessee on this point, the 3rd ground of appeal is allowed. 20. The appeal of the assessee is partly allowed. We, the Members of Income-tax Appellate Tribunal, Jabalpur Bench, differed in the matter in the Appeal No. 115/Jab./2007 by the assessee, in the matter of Shri Arvind Kumar Mohnani, for the assessment year 2001-02. Hence, we are of the opinion that the matter be placed before the Hon'ble President under section 255(4) of the Income-tax Act, 1961, for appropriate orders. The....
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....of the said donors. According to the Assessing Officer, the assessee simply relied upon the gift deeds furnished along with the return and in support of which affidavits sworn by each donor have been filed during the course of assessment proceedings. The explanation of the assessee before the Assessing Officer was that the identities of the donors have been proved, the amounts have been received by account payee cheques and all the donors are assessed to tax. In this way, it was explained that the initial burden of proving the credits in the capital has been duly discharged and the source of funds in the hands of the donors need not be proved. Reliance was placed on the decision of the Hon'ble Gujarat High Court in the case of Dy. CIT v. Rohni Builders (2002) 256 ITR 36011. The Assessing Officer did not accept the decision of the Hon'ble Gujarat High Court and stated that discharging of initial burden of proof does not take the assessee to a beneficial position of proving a credit in the books of the assessee to its hilt. The Assessing Officer also observed that he can very well enquire into the genuineness of the transactions after receiving the initial proof from the asse....
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....tion that they have gifted amounts as mentioned by them, though their financial position is very poor. The Assessing Officer also observed that person doing petty business opens an account with bank at Katni and deposits money in that account a day prior or on the same day when gift amounting to Rs. 1,00,000 is given to a party with whom he has no blood relation. Donors are either running a cycle shop or aata chakki or earns a monthly income of Rs. 5,000 to Rs. 6,000. The Assessing Officer also observed that there is no blood relation or any human bondage between the donors and the assessee to justify any such gift. No regular books of account are maintained and they are paying income-tax to the vicinity of Rs. 100 or so per annum. The Assessing Officer also observed that the assessee was reluctant to file copy of capital account of the said donors on the plea that it is improbable to insist upon a donor to furnish his capital account, who has favoured the assessee with a gift of Rs. 1 lakh. The Assessing Officer also noticed that the same type of proforma for gift and also affidavit have been used by the assessee and the gift deeds have been witnessed by the same persons. The Asse....
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....; no substantial question of law is involved; appeal under section 260A is dismissed." He further submitted that the identity of the donors has been proved, the amounts have been received by account-payee cheques and all the donors are assessed to income-tax and therefore, there was no reason to make the impugned addition. He also relied on the following decisions: 1. Mehrotra Bros'. case (supra) 2. CIT v. Padam Singh Chouhan (2009) 315 ITR 433 (Raj.) 3. Pramod Kumar Agrawal v. Asstt. CIT [IT Appeal No. 171 (Jab.) of 2007, dated 15-2-2008] passed by the ITAT, Jabalpur Bench), 4. Supreme Tyres v. Assessing Officer (2004) 1 SOT 406 (Asr.) (SMC) 5. Nevendram Ahuja's case (supra) 6. Ms. Mayawati v. Dy. CIT (2008) 113 TTJ 17812 (Delhi) 7. CIT v. R.S. Sibal (2004) 269 ITR 42913 (Delhi) 8. Murlidhar Lahorimal's case (supra) 9. CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008] 10. ITO v. Rakesh Kumar Rathi [I.T. Appeal No. 137 (Jab.) of 2008, dated 17-2-2009] passed by the I.T.A.T., Jabalpur Bench. 7. Shri S.P. Choudhary, ld. CIT(DR) relied upon the pro....
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....den is on the assessee to rebut the same and if he fails to rebut it, it can be held against the assessee that it was receipt of an income nature. The Hon'ble Supreme Court also ruled that the burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. In view of the above decision, the matter is required to be examined. 9. During the course of appellate proceedings before the ld. CIT (A), the assessee was asked to produce all the donors before the Assessing Officer for examination but in spite of giving repeated opportunities, the assessee could not produce any one. However, another opportunity was allowed but which the assessee could produce only one donor, namely, Shri Suresh Kumar, whose statement was recorded and in which he stated that earlier he was a broker but now is selling footwears and his annual income is about Rs. 60,000. His family consists of himself, his wife, a daughter of two years and his mother. Though, after meeting the household expenses, he is saving about Rs. 2,0....
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....Now, I will discuss the decisions relied upon by the ld. Counsel for the assessee. 13. In the case of Sumer Chand Jain v. CIT (2007) 292 ITR 24116 (M.P.), the Hon'ble M.P. High Court held that the source of C essentially was not to be proved inasmuch as the assessee had been able to prove the identity, entry and source of the third party and that should be regarded as discharge of burden of proof by the assessee. In this case following question was referred to the Hon'ble High Court under section 256(1) of the Act: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in arriving at the finding that the purchase of silver vide bill dated October 8, 1985, of M/s. Chouksey Rajnikant and Co., for silver ornaments of 59.547 Kgs. amounting to Rs. 1,50,000 which was found recorded in the books of account found at the time of search, was not genuine purchase?" The Hon'ble High Court answered the above question in the negative i.e., in favour of the assessee. The facts of the above case are distinguishable because in that case the capacity of donors and genuineness of gifts was not involved. 14. In the cas....
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....section 68 were not called for. In the said case, the assessee had proved the identity of the creditors, capacity of the creditors and genuineness of the transaction and therefore, the Tribunal held that the assessee has discharged the burden under section 68 of the Act. In the instant case, the assessee has failed to prove the capacity of the donors and genuineness of the transactions. Therefore, the aforesaid case is also of no help to the assessee. 18. The decision relied upon by Shri G.N.Purohit, Learned Counsel for the assessee in the case of Nevendra Ahuja (supra) is also not applicable to the facts of the present case. In that case, the Hon'ble High Court held that once the identity of the tenant and the genuineness of the deposit made by him are established by showing that the depositor is in occupation of the assessee's premises and the payment is made by cheque/draft and it is fully accounted in the books of the assessee as also the tenant, the burden on the assessee under section 68 stands discharged. In the said case, the deposit was made by the tenant who was in occupation of assessee's premises and the payment was made by cheque and it was duly accounte....
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....e. In the instant case, donors have a very low financial status. In fact, they are just hand to mouth and are struggling to manage their livelihood. It is, thus, unbelievable that such a person can ever dream of making a gift. In that view of the matter, this decision is also of no help to the assessee. 22. The decision of the Hon'ble Supreme Court rendered in the case of Lovely Exports (P.) Ltd. (supra) is also not applicable to the facts of the present case because that case pertains to the share application money received by the assessee-company from alleged bogus shareholders. In the instant case, we are concerned with the capacity of donors and the genuineness of gifts. 23. The decision rendered by the I.T.A.T., Jabalpur Bench in the case of Shri Rakesh Kumar Rathi (supra) is also not applicable to the facts of the present case. In that case, the persons from whom the assessee received the loans were assessed to tax in the same way in which the assessee furnished his return of income. In their respective returns, all the creditors have disclosed the impugned transaction and had also shown the source from where they received the gifts while giving loans to the assesse....
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.... withdrawals to support their large family and had nominal income. None of them was assessed to tax whereas the assessee had turnover of Rs. 2 crores and more. Thus the gifts had flown from persons of humble means to the rich assessee. (7) There was no evidence that the assessee or his family had given gifts to the members of the donors' family at my time. When the individual factors, like relationship, occasion, non-giving gifts by the donors to the kith and kin, the donee not giving any help to the donors at any time, the donors being men of petty means were put together, they left no doubt that the gifts were not genuine and that it was the unaccounted money of the assessee, which had flown in the form of the gifts. As the assessee was the beneficiary of this money, it was safely inferred that it was her unaccounted money which had come back to her in the form of gifts to inflate the capital without paying taxes." 26. In the case of Sajan Dass and Sons (supra), the Hon'ble Delhi High Court took the view that not only must the assessee establish the identity of the donor and his capacity to make gift, but he must also establish that the amount received by him ....
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....e 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 of the present case as well as the decisions referred to above, I hold as under: (i) There is no relationship between the donors and donee; (ii) The donors never received similar gifts from the assessee on any occasion. (iii) There is no evidence on record that there was any love and affection or friendship between the donors and donee. There is no evidence that there was any business transaction between the donors and the assessee and therefore, it could not be believed that how a stranger would part away his savings to give gifts to any unknown person sacrificing his chances of bettering his/her living conditions with that money. (iv) There is no evidence that assessee or his family members has given gift to the members of donor's family at any time. (v) The donee filed returns for the current as well as for the preceding year and each one had declared income just above the taxable limit of Rs. 50,000. Never before any o....