TaxTMI 
TaxTMI 
2016 (5) TMI 482
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....Saproo. Accordingly, Smt. Kanti Saproo is taken on record as the legal heir of the deceased assessee, Sh. Arjan Nath Saproo. 4. On behalf of the assessee, the following written submissions have been filed, challenging the impugned order, which written submissions will be dealt with in extenso, in the succeeding paragraphs: "May it please your honour that the order passed by the Learned Assessing Officer and confirmed by the Ld. Commissioner of Income Tax Appeals is bad in law and is being challenged on the basis of submissions stated hereunder in seriatim. 1. HISTORY OF THE CASE a. The appellant - Late Mr. Arjan Nath Saproo during the financial year 2005-2006 received a revocable gift of Rs. 5.00 Lacs from his nephew Mr. B.L. Saproo S/o Mr. Soom Nath Saproo R/o Gurgaon, Haryana which was received by Cheque No 367629 dt. 06/03/2006 drawn on State Bank of India, Gurgaon, Haryana. b. The appellant during the course of assessment for the assessment year 2006-2007 declared the said gift by way of credit to his capital account in the balance sheet filed before the Ld. Assessing Officer duly supported by relevant documentary evidence including the gift dee....
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....ellant does not fall within the definition of money received without consideration as enumerated U/s 56(2)(v) of the Act and further does not fall within the definition of a gift as defined U/s 2(xii) of the Gift Tax Act, 1958. b. That the valid essentials of a gift which have to be complied with/fulfilled to enable a transaction to be called a valid gift is lacking in this transaction between the appellant and his nephew since the gift made by the nephew to his uncle was incomplete being loaded with an unrestricted power to take it back the next minute. c. That conditional/revocable gift being outside the preview of a valid gift does not constitute a gift received by any person to be subjected to tax under provisions of Section 56(2)(v) of the Act and therefore can not be subjected to tax as any sum of money received without consideration under any provisions of the Act. d. That the appellant being a senior citizen having attained more than 75 years of age who is not carrying on any kind of profession or occupation and merely had his sustenance on pension income from government service wherein he has retired more than 15 years before can not be deemed to....
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....e following sum to my uncle - SH. ARJAN NATH SAPROO S/O PT. LATE RAM CHAND SAPROO as per detail given under :- CHEQUE NO. & DATE DRAWN ON AMOUNT GIFTED (RS.) 367629 Dt.06/03/2006 STATE BANK OF INDIA, DLF QUTAB ENCLAVE, GURGAON, HARYANA. 5,00,000/= TOTAL : 5,00,000/= I, further declare that the amount gifted as shown above out of love & affection towards him has been duly delivered to the donee who has accepted the same and he is free to deal with the money so gifted by me to him in any manner. I further declare that the above gift is however revocable at any time hereinafter during my life time and the Donee shall be bound to honour any revocation hereinafter of the said gift by the Donor by express or implied consent. WITNESSES : 1] ____Sd/-________ Sd/- ---------------------- ________________ [ DONOR ] PAN : AHOPS1245A Sd/- --------------------- [ DONEE ] PAN : APQPS6538G The copy of gift deed executed by Mr. B.L. Saproo is annexed as ANNEXURE-1. c. That the Ld. Appellate Authority has wrongly proceeded to conclude that there can not be any gift deed of ....
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....suspended or revoked "The donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be. A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded. Save as aforesaid, a gift cannot be revoked. Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice. Illustrations (a) A gives a field to B, reserving to himself, with B's assent, the right to take back the field in case B and his descendants die before A. B dies without descendants in A's lifetime. A may take back the field. (b) A gives a lakh of rupees to B, reserving to himself, with B's assent, the right to take back at pleasure Rs. 10,000 out of the lakh. The gift holds goods as to Rs. 90,000, but is void as to Rs. 10,000, which continue to belong to A.". Therefore in light of above provision of law the gift rec....
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....othing but miscarriage of justice and bad in law. The assessee also submits that all such revocable gifts which are dictated at the whims and fancies of the donor are outside the purview of a valid gift and therefore in other words can not be classified as complete gifts which are neither recognized as valid transfers under Transfer of Property Act, 1882 or under Gift Tax Act, 1958 & cannot be subject to levy of income tax under provisions of Section 56 (2)(v) of the Act under any pretext. The appellant submits that the transaction between the assessee and his nephew under appeal is nothing but a temporary loan exchanged between two parties which was returnable to the giver at any time from the date given and as such under any interpretation of law can not be classified/termed as money received without consideration and subjected to levy of tax arbitrarily. B. That under Para (ii) of the Appellate Order the Appellate Authority has again wrongly proceeded to hold as under :- "Even if it is not a proper gift the appellant is liable to explain the source of the amount of Rs. 5.00 Lacs received from Mr. Bhushan Lal Saproo, which has not been explained before the asses....
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....een a retired senior army officer & therefore sufficient disposable income & funds to justify gift of Rs. 5.00 Lacs to the appellant. Failure by the Ld. Assessing Officer with regard to non-invocation of provisions of Section 68 of the Income Tax Act, 1961 against the donor does not entitle the Ld. Appellate Authority to proceed and decide against the assessee on presumptions only. e. The appellant submits that the general belief about the provision of the Section 56(2)(v) of the Act at the time assessment was that even if it is an interest free unsecured loan, same shall also be considered as " sum of money received without consideration" within the meaning of Section 56(2)(v) of the Act. Therefore it would not make any difference for the appellant to prove the source of money received unless it was hit by the proviso to Section 56(2)(v) of the Act, .This position is now settled in the decision of CHANDRAKANT H. SHAH vs. INCOME TAX OFFICER ITAT, MUMBAI 'C' BENCH ITA No. 3966/Mum/2008; Asst. yr. 2005-06. (Copy enclosed as ANNEXURE-3) wherein it has been held that unsecured interest free loan shall not be covered U/s 56(2)(v), C. That under Para (iii) of the appell....
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....s speak the truth of certain motive behind the transaction." The appellant submits that since the gift was revocable from the inception in unambiguous terms as evidenced by the deed, mere revocation by the donor at any point of time in accordance with the terms of gift has not been done with an ulterior motive but the option of the revocation which the donor had deliberately reserved unto himself was exercised on 27/03/2011and in accordance with the revocation notice the amounts have been refunded to the donor as per the details given below, there cannot be any presumption with regard to any motives of a law abiding citizen without placing any concrete evidence on record to establish and prove that the appellant had some ulterior motive to repay the amount back when demanded by the donor. 5. CONCLUSIONS OF THE APPELLATE ORDER The conclusions arrived at by the Ld. Appellate Authority stated at the conclusion of the order are as under :- "In view of the above, I do not find any merit in the argument of the appellant and uphold the addition." The appellant humbly submits that the Ld. Appellate Authority before whom the appellant had filed t....
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....een the applicant and his nephew is in other words a temporary loan given by the nephew to his uncle with a right to ask for repayment of same at any given time without jeopardizing own financial interests. Therefore under the circumstances and in the facts of the case at the most assessing officer could have invoked provisions of Section 68 of the Income Tax Act 1961. e. That the appellant being a aged person having retired from services of J&K Government more than fifteen years back has not been engaged in any commercial or vocational activity since retirement but has been solely making his living on pension income and some interest income received from bank deposits. As such, there can be no ulterior motive for such appellants to have received money without consideration only to conceal his income under one pretext or the other. The total income of the appellant from pension and interest for the financial year 2005-06 relevant to assessment year 2006-2007 has been Rs. 215110/= only which itself speaks of the unreasonable addition to his income on presumptions and disbeliefs. f. That the appellant has conclusively proved before the Ld. Appellate Authority that t....
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....ions without proper application of mind is fit to be quashed and appropriate relief due to the appellant under law be granted to meet ends of justice." 5. The ld. DR has placed strong reliance on the impugned order. 6. The written submissions have been perused. The ld. DR has been heard. The material placed on record has been carefully gone through. 7. Before the AO, the assessee submitted that the brother of the assessee, i.e., father of the assessee was covered by the definition of 'relative', as given by the proviso to section 56(2)(v) of the Act and that, therefore, the lineal descendent of the said brother of the assessee was covered by such definition, being relative to the assessee by blood. It was also submitted that since the gifts by blood relatives are covered by the said definition, the gift received by the assessee was exempt from tax. 8. The AO rejected the assessee's stand, observing that son of brother is not lineal descendent of the recipient of gift and so he is not covered under the definition of 'relative' within the meaning of the proviso to section 56(2)(v) of the Act. 9. Before the ld. CIT(A), the assessee contended that the amount of Rs. 5 lac....
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....es by the transferor to the assessee. It also gets buttressed by the very relevant fact of return of the amount by the assessee to the transferor on 27.03.2011, which fact has also been affirmed by the ld. CIT(A). It shows as covered in the written submissions that the assessee was never vested absolute ownership of the amount transferred. The transfer of the amount of Rs. 5 lacs to the assessee was a revocable transfer and it was in fact revoked. The nomenclature employed is not determinative of the transaction, as is well settled. In fact, by making this observation, the ld. CIT(A) has himself accepted that the transaction was not a gift. It was a temporary transfer of money, which was revoked at the option and instance of the donor. 12. The ld. CIT(A) has next observed that even if it was not a proper gift, the assessee was liable to explain the source of the amount, which had not been done before the AO. This evidently is incorrect. The ld. CIT(A) has himself observed at page 5 of his order that the assessee had explained before the AO that the amount had been received as a gift from the lineal descendent/son of his brother and that the gifts from blood relatives were exempt....