TMI Blog1995 (6) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981 Smt. Lalita Devi Gupta Rs. 15,000 25-7-1981 Master Nipun Jain: Sh. Ajit Kr. Agarwal Rs. 20,000 16-7-1981 Sh. Radhey Shyam Rs. 15,000 17-7-1981 Sh. Suresh Kr. Agarwal Rs. 15,000 17-7-1981 Sh. Hari Kishor Rathi Rs. 15,000 17-7-1981 Sh. G.D. Jhunjhunwala Rs. 15,000 17-7-1481 Sh. Mahesh Kumar Gupta Rs. 20,000 26-7-1981 Returns of minor children had been filed for the first time for asst. year 1982-83 and the afore-mentioned gifts were duly shown in the said returns. Investments were made in the name of the minor children and in the name of wife of the assessee. When assessee was asked to explain the source of these investments, it was stated that his wife and children were assessed to tax separately and had their own sources of income. The Assessing Officer made enquiries regarding the gifts claimed to have been received by the minor children of the assessees and it was found that all the donors lived in Calcutta. Necessary enquiries were made by the Assessing Officer from DDI at Calcutta and on the basis of his report, it was found that out of the six donors making gifts to Master Nipun, only two persons i.e. Mahesh Kumar Gupta and Shri Ajit Kumar Agarwal had fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idavits had been prepared by one person which could be none other than father of the children. Moreover, there was nothing on record to establish that the donors were capable of making the gifts. 6. In appeal, assessee had claimed that " all the donors are existing persons and were assessed to income-tax at Calcutta and had their permanent account numbers. The affidavits of these persons have been filed contracts of which had not been controverted. The balance-sheets and capital accounts of these persons had also been filed which clearly establish the capacities of these persons to make gifts. All these gifts had been received by means of account payee bank drafts ". 7. The CIT(A) had called for a remand report from the Assessing Officer on the following points : (1) What is the relationship between donors and the donees ? (2) What are the sources of income of the donors and since when they had been assessed to tax ? (3) What are the income returned and assessed of the donors for the five years previous to the year and in which the gifts were made ? (4) Have the donors made any gifts to any other persons and if so the details thereof ? (5) In para 9 of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of making the enquiry. According to the learned CIT(A), capacity to make the gifts had also been established in so far as copies of the balance sheets had been furnished before the Assessing Officer to show the financial capacities of the donors. These gifts had been indicated in the balance sheet of the donors. Referring to the finding of the Assessing Officer that the donors were totally strangers to the donees and had no relationship with them, the learned CIT(A) held that it would not make any dent on the issue as what is required to be shown is that the money had been received from the donors. The decision of the Delhi High Court in the case of CIT v. Mrs. Sunita Vachani [1990] 184 ITR 121 has been cited in support of the finding that even if the gifts were received from strangers from abroad it will be difficult to record that money received in India from abroad was representing the income of the assessee until and unless something more tenable than suspicion is proved. The learned CIT(A) further observed that Assessing Officer has failed to rebut the evidence furnished on behalf of the assessee. 9. The CIT(A) has further considered the assessability of the gifts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n each case along with return of income-tax. These balance sheets were verified by the Assessing Officer, Calcutta to be on record of the respective donors. Gift-tax assessments had also been made. In this connection our attention has been drawn to the gift-tax demand notices in respect of all the donors placed in the paper book. The learned counsel vehemently argued that the onus that rested upon the assessee stood discharged as donors' sworn affidavits and confirmations had been filed. The balance sheets from their income-tax assessment records had been filed. The evidence regarding filing of gift-tax returns had also been furnished. The moneys had been received by bank draft. The Department had not collected any evidence in rebuttal. Assessee had also filed affidavits, the contents of which had not been controverted. It was not therefore permissible for the Revenue to ignore the same. In this connection, reliance has been placed on the decision of the Allahabad High Court in the case of CIT v. Shamshuddin Manzoor Haque [1988] 172 ITR 696. It has further been contended that gift-tax assessments made in the name of the donors have not been cancelled. In such circumstances, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information assessee had been confronted and asked to produce the donors. Assessee, however, failed to produce the donors. The Assessing Officer accordingly treated the gifts as bogus and since the minor children had no means of earning the income, the gifts claimed to have been received in the name of minor children were treated to be the income introduced by the father out of undisclosed sources. 14. The CIT(A) has deleted the addition on the ground that assessee had furnished the evidence before the Assessing Officer and the mere fact that the gifts had been made by the strangers and that they were not available at the given addresses was not sufficient for treating the gifts as not genuine. The learned CIT(A) has strongly relied upon the decision of the Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 and the decision of the Delhi High Court in the case of Mrs. Sunita Vachani in support of his findings. We have to consider as to whether on the facts and in the circumstances of this case, the assessee can be said to have discharged the burden that lay on him and as to whether the principle in the case of Orissa Corporation (P) Ltd. and in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it is true, as held by their Lordships of the Delhi High Court in the case of Mrs. Sunita Vachani that the mere fact that the gifts had been received from strangers may not be enough to hold the gifts as not to be genuine, yet it was for the assessee to establish that the gifts received from the strangers were genuine. The decision of the Delhi High Court in the case of Mrs. Sunita Vachani has got to be read in the light of the facts and findings recorded by the Tribunal in that case. In that case, the Tribunal has recorded a categorical finding that on the basis of the evidence on record, it was established beyond doubt that the gifts had been genuinely made to the donees. Therefore, the mere fact that the gifts have been made by the strangers may not be enough to uphold the addition provided there is sufficient evidence on record to establish that the gifts had been genuinely made to the donees. 15. In the case of K.L. Aggarwal their Lordships of Delhi High Court held that " the onus of proving the validity of the gifts made to the assessee is on the assessee. It is for the assessee to produce the donors for being examined. The question of summoning the donors for being exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Raj Kr. Aggarwal 37,896 15,000 3,000 17 Gouri Ditt Gupta 64,449 15,000 5,387 Nil Lalit Gupta 36,940 20,000 3,000 Nil Ajit Aggarwal 34,332 20,000 3,000 Nil Radhey Shyam 39,504 15,000 5,000 Nil Jhunjhunwala Suresh Aggarwal 39,880 15,000 3,750 Nil Harikishan Rathi 37,607 15,000 3,100 Nil Ghanshyam Das 31,603 15,000 4,500 Nil Jhunjhunwala Mahesh Kr. Gupta 64,633 20,000 3,600 Nil The above chart depicts the financial strength of the donors. The withdrawals for household expenses in the case of all the donors but for one does not exceed Rs. 5,000 p.a. On the basis of financial strengths depicted in the balance sheets of the donors it cannot be said that assessee had established the financial capacity of the donors to make the gifts. The capital of the donors in most of the cases is less than Rs. 50,000. The income of the donors is meagre, not even exceeding the maximum amount not liable to tax. In most of the cases, no tax was payable. In such circumstances, it is not understood as to why the income-tax returns had been filed when no tax was payable by the donors. It is not difficult in the current scheme of summary assessments for any person to file ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be said to be substantial in view of the meagre drawings for household expenses and financial capacity visible as per the balance-sheets attached to income-tax returns. 19. In the light of the above circumstances, the affidavits of the donors filed before the Assessing Officer could not be accepted as correct. In the case of Shri Krishna, their Lordships of the Allahabad High Court held as under : " It is neither a rule of prudence nor a rule of law that the statements made in an affidavit which remains uncontroverted, must invariably be accepted as true and reliable. Ordinarily, in the absence of denial, the statements may be accepted as true but if there are circumstances which suggest that that statements on affidavit should not be accepted as true, the absence of denial by the other side, would not by itself be sufficient to clothe the statements on affidavit with truthfulness and reliability." At this stage, we may also refer to the decision of the Supreme Court in the case of Durga Prasad More where it has been held as under : " It is true that an apparent must be considered real unless until it is shown that there are reasons to believe that the apparent is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h human probabilities. We are unable to swallow the story of the gifts having been made by 12 unknown persons to the minor children of the assessee. We do no state that assessee was precluded from producing evidence to establish the claim even if it did not accord with human probabilities. In a case of such nature as already held, the onus of the assessee is heavy and the evidence that is required to be produced should be sufficient for shifting the onus to the Department. In the case of Mrs. Sunita Vachani, the Tribunal had recorded a finding of fact that there was sufficient evidence to establish that genuine gifts had been made by persons of substantial means. On the basis of that finding the Hon'ble High Court declined to call for a statement of case. 22. Considering the facts and circumstance of this case, we are of the view that the CIT(A) was not justified in holding that the onus that lay on the assessee to establish the identity of the donors, creditworthiness of the donors and genuineness of the gifts had been discharged. On the contrary, we are of the view that the onus that lay upon the assessee has not been discharged. 23. Now the only issue that remains to be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n received by cheques and the donors had paid gift-tax on the gifts and on the basis of evidence on record, it was held that the gifts were genuine. On an application to direct reference, their Lordships of the Allahabad High Court held that the gift-tax assessment shaving been made on the donors and that fact having not been controverted by the Commissioner and the latter having failed to take any steps to disturb these assessments made on the donors, it was amply clear that the gifts were genuine. In this case, the amounts had been received by payee's account cheque. The Hon'ble High Court, taking note of this fact coupled with the fact that the gift-tax assessment had been made and not doubted, was of the view that since the amounts had flown from the donors, therefore, the credit in the capital account of the partners would not be doubted. In the present case, the amounts have not been received by account payee cheques but by drafts. We have already pointed out elsewhere in this order that the drafts could be purchased by any person in the name of any other person. Therefore, the decision is distinguishable on facts. Moreover, the decision has been read in the context in which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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