TMI Blog2008 (7) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... s relating to this issue are that the assessee received an amount of Rs. 11 lakhs as gifts in instalments through cheques from Shri R.K. Chaudhary, Prop. M/s. Stanchart International, Laxmi Nagar, New Delhi. The Assessing Officer was of the opinion that the assessee has channellised his own surplus fund in the garb of gift and so the introduction of the amount of Rs. 11 lakhs in the capital account of the assessee was not genuine and, hence, he added the same to the income of the assessee under the provisions of section 68 of the Act after rejecting the explanation of the assessee. 4. Aggrieved with the order of the Assessing Officer, the assessee filed an appeal before the CIT(A) and contended before him that the assessee had received Rs. 11 lakhs from Shri R.K. Chaudhary through cheques which were deposited in the assessee s S.B. Account No. 8251 of Punjab Sindh Bank. These cheques were encashed from the bank account of the donor. Further, according to the assessee, he filed a copy of the Balance Sheet of the donor along with copy of bank account before the Assessing Officer, hence, the identity of the donor, capacity of the donor and mode of transaction was explained befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the gift transaction and, so, on examining the bank account of the assessee as well as the donor and also considering the facts that the assessee had filed the return of the donor for assessment year 1998-99 and not thereafter and, further, considering the fact that the balance sheet of the donor filed by the assessee for the assessment year 2001-02 under consideration having not been supported by the return for that assessment year, mere balance sheet filed by the assessee is of no significance for the purpose of establishing the source/creditworthiness of the donor by any return, the balance sheet is of no consequence. Hence, the Assessing Officer has rightly come to the conclusion that the assessee even failed to prove the capacity of the donor. The learned DR for the revenue further contended that in this case, the circumstances in which donor has given a gift of Rs. 11 lakhs in instalments to the assessee creates doubt regarding genuineness of the gifts because the gift transactions amounting to Rs. 11 lakhs to a stranger is against the norms of all human probabilities. The learned DR for the revenue concluded, thus, the assessee having not proved the capacity of the donor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and CIT v. Deviprasad Khandelwal Co. Ltd. [1971] 81 ITR 460 (Bom.). With regard to the contention that unless the Assessing Officer finds something more tangible than mere suspicion it would be difficult to regard the monies received in India from abroad as representing the income of the assessee in India, hence, no addition could be made in respect of the gift. The ld. AR for the assessee placed reliance on the decision of Delhi High Court in the case of CIT v. Mrs. Sunita Vachani [1990] 184 ITR 121 in the case of Prem Nath Goel Co. v. CIT [2004] 271 ITR 390 (Delhi). Regarding the contention that for considering the impugned addition made in the case of the assessee, we have to look into the peculiar facts of the case because making of addition depends upon the facts in each case. The ld. AR for the assessee placed reliance on the decision in the case CIT v. Divine Leasing Finance Ltd. [2007] 158 Taxman 440 (Delhi) and the case of Prem Nath Goel Co. ( supra ) wherein the Hon ble High Court observed that what evidence would be sufficient to prove the claim by the assessee under section 68 would depend upon the facts of each case and there cannot be one g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the return of income of the donor for assessment year 1998-99 and no return for assessment year thereafter had been filed. The assessee filed the balance sheet for assessment year under consideration which was not accompanied by the return for that assessment year. When the Assessing Officer gave specific opportunities to the assessee for producing the donor for examination for the purpose of ascertaining the genuineness of the gift transaction, as well as, the creditworthiness, the assessee failed to produce the donor before the Assessing Officer and never submitted before the Assessing Officer that he was unable to produce the donor and that the Assessing Officer should himself summon the donor under section 131 of the Act for examination. Keeping in mind the above-mentioned facts we are of the opinion that the case law ( supra ) relied upon by the ld. AR for the assessee on the points; that the assessee has prima facie discharged the burden by filing returns, balance sheet, bank account as well as the gift deed of the donor and nothing contrary has been proved on record by the Assessing Officer and, hence, no addition could be made; secondly on the point that merely becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee for any previous year the same may be charged to Income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature 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 hails to rebut, the said evidence being un-rebutted, can be used against him by holding that it was a receipt of an income nature. In that case the amount was credited in the capital account in the books and the assessee offered her explanation about the said receipt being her winnings from horse races. The explanation was not accepted. There was no dispute that the amount was received by the assessee from various race clubs on the basis of winning tickets presented by her. This court based on the material available on record found that an inference about such a purchase has to be drawn on the basis of the circumstances available on record inasmuch as no direct evidence about such purchase would be rarely available. This court accordingly upheld the majority opinion of the Settlement Commission based on surrounding c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra ), relied upon by the learned AR for the assessee, and held as under : "Held, dismissing the appeal, that there was nothing on record to show the financial capacity of the donor, the creditworthiness of the donor, relationship of the donor with the assessee, what were the sources of funds gifted to the assessee and whether they had the capacity of giving large amounts of gift to the assessee. Therefore, the gifts received by the assessee from the donor could not be held to be genuine gifts and the authorities below were fully justified in treating the amount received as gifts as representing the concealed income of the assessee and adding it to the income of the assessee as being the assessee s income from undisclosed sources." 12.6 In the case of Rajeev Tandon ( supra ), the Tribunal after considering the entire case law on the subject, including the decision of the Apex Court in the case of Durga Prasad More ( supra ), and Sumati Dayal ( supra ), wherein the Apex Court observed that the taxing authorities were entitled to look into the surrounding circumstances and the aspect of human probabilities to find out the real and factual position. Further, also conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and donee and other material on record as well as considering all probabilities came to a conclusion that the gifts though apparent were not real and accordingly treated all those amounts credited in the books of the assessee as the income of the assessee. On appeal the CIT(A) also considering the preponderance of probabilities, the common course of human beings points to the contrary upheld the order of the Assessing Officer and rejected the story of the assessee regarding the genuineness of the gifts. On second appeal the Tribunal concurred with the findings of the tax authorities below after re-appreciating the entire material available on record. The Apex Court while upholding the concurrent findings of facts recorded by the authorities below observed and concluded that these were based on proper appreciation of facts and the material available on record and the surrounding circumstances, the doubtful nature of the transaction and the manner in which the sums were found credited in the books of account maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a proprietor of a firm, which means that both, donor and donee, are in business. From the bank statement of the donor we find the donor was having opening balance of Rs. 1399.40 p. Thereafter the donor deposited on 4-3-2001, 28-3-2001 and 30-3-2001 an amount of Rs. 4 lakhs, Rs. 4 lakhs and Rs. 3 lakhs respectively, and issued cheques in the name of the assessee for an amount of Rs. 4 lakhs, Rs. 2 lakhs, Rs. 2 lakhs and Rs. 3 lakhs on 24-3-2001, 28-3-2001, 30-3-2001 and 30-3-2001, respectively and the same were credited in the assessee s saving bank account with Punjab Sindh Bank. 15. The capital account of the donor revealed that his opening balance was Rs. 14,32,612 and after giving gift of Rs. 11 lakhs he was only left with Rs. 3,32,612. The donor did not come forward before the Assessing Officer to state why he parted with a huge amount of Rs. 11 lakhs by gifting the same to the assessee with whom he could be having business relation and except that he was a complete stranger in the sense that the donee was not related to him for giving such huge amounts as gift out of love and affection. The donor further did not prove his creditworthiness, as mere filing of return for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the impugned gift amount received by the assessee was not a genuine gift, and the same can be treated as assessee s own income from undisclosed sources representing assessee s own money introduced in the garb of gift, therefore, it is required to be seen under which provision of Income-tax Act the addition of this amount could be made because the alleged gift amount was not found credited in the books of account of the assessee, but, undisputedly this amount was found credited in the bank account of the assessee and so the provisions of section 68 of the Act are clearly not applicable for making the impugned addition. 18. We are of the opinion that merely because the addition made by the Assessing Officer was under a wrong provision of the Act it cannot absolve the assessee from the impugned amount being taxed under the correct provision of Income-tax Act, 1961 because the tax authorities below are duty bound to tax the undisclosed incomes under the provisions of Income-tax Act, 1961. 18.1 In order to appreciate whether the amount found credited in the bank account of the assessee, allegedly received as gift, and the same being found as bogus by the Tribunal, can be add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions are to be made under section 69A of the Income-tax Act, 1961 and not under section 68 of the Act as held by the Assessing Officer. The order of the Assessing Officer is modified to this extent only. 20. In consequence of our findings, the Ground Nos. 1 to 3 of the appeal taken by the revenue pertaining to addition of the Rs. 11 lakhs made on account of unexplained gift amount are allowed. 21. Now we shall deal with Ground No. 4 of the appeal relating to the issue of interest paid by the assessee to Smt. Anju Aggarwal. 22. Briefly stated, the facts relating to the issue are that as per copy of unsecured loan in the name of Smt. Anju Aggarwal, who is wife of the assessee, she had opening balance of Rs. 3,66,031 on which interest amounting to Rs. 54,905 has been paid to her, which gives interest rate of 15 per cent. Whereas balance sheet of the assessee shows an amount of Rs. 2,00,000 in the name of Ansul Vaish and Rs. 2,75,000 in the name of Shri Nitesh Garg under the head Loans and advances , vide detailed notice dated 3-9-2003, assessee was required to explain as to why proportionate amount out of interest on loan debited to the Profit and Loss Account may ..... 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