TMI Blog2007 (3) TMI 659X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed as to how they are known to each other. Only in one case, the assessee is stated to be maternal aunt of the donor and a distant relation. (2) There is no occasion for making gifts. (3) There is no evidence that there was any love and affection or friendship between the donors and donee so that it could motivate the person to gift practically his entire capital, like precious money received as retirement benefit of the husband. (4) There is no evidence that there was any business transaction between the donors and the assessee as it is not believable that a stranger would part away his lifetime savings by giving gifts to unknown person sacrificing his chances of improving his living conditions with that money. (5) Most of the donors had given gifts of their entire capital. (6) All the persons had meagre withdrawals to support their large family. They had very nominal income. None of them are assessed to tax whereas donee has turnover of Rs. 2 crores and more. Thus gifts are flowing from persons of humble means to the rich assessee. (7) There is no evidence that the assessee or his family has given gifts to the members of the donor s family at any time. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (A) and hold that the gifts are not genuine and that creditworthiness of the donors is not proved and therefore, additions have to be made u/s 68 of the Act. The appeal filed by the assessee is, therefore, dismissed. - U. B. S. BEDI Judicial Member and D. C. AGRAWAL Accountant Member For the Assessee : Suraj Prasad For the Department : Suresh Chandra , for the Department. ORDER 1. D. C. Agrawal (Accountant Member). This is an appeal filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals) wherein he has confirmed the additions of Rs. 80,000, Rs. 50,000 and Rs. 2,50,000 being gifts received by the assessee from three different persons during the accounting year. 2. The facts of the case are that the assessee is deriving income from dealing in zarda and cigarettes on wholesale basis. During the year under consideration, the assessee has shown to have received the gifts from the following persons : 1. Smt. Sharda Devi = Rs. 2,00,000 2. Sri Deonath Mishra = Rs. 50,000 3. Janardan Prasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee. 7. The learned Commissioner of Income-tax (Appeals) noted in the case of Smt. Sharda Devi that she is a widow whose husband had died probably as a Class IV employee of Sales Tax Department in December, 2000. Her only son is employed as a Class IV official and she also has a married daughter. She has a meagre pension from the Government Department. It is claimed that she gave all the gratuity and provident fund of her deceased husband to the assessee, who runs a business with a turnover of Rs. 2.25 crores. The learned Commissioner of Income-tax (Appeals) noted that the whole situation smacks of dubious tax planning. Smt. Sharda Devi is not doing any business and it was not believable that she could have saved a sum of Rs. 80,000 to be deposited in cash and gifting it on the same day. The learned Commissioner of Income-tax (Appeals), thus confirmed the addition of Rs. 80,000. 8. In the case of Sri Deonath Mishra, the learned Commissioner of Income-tax (Appeals) noted that he is a police constable posted at Kushinagar, He is aged 47 years and has wife, one college going son and four daughters out of which two were married in the financial years 2000 and 2003 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of these persons are established but the capacity and genuineness to the extent of disallowance remained unproved. Thus, the learned Commissioner of Income-tax (Appeals) confirmed the addition. 11. Regarding the addition of Rs. 18,500 the learned Commissioner of Income-tax (Appeals) noted that a sum of Rs. 18,500 was deposited on September 7, 2000. There is no evidence of agricultural land and it is also not known where and in what capacity Sri Ramesh Kumar Mishra was employed. His capacity to advance loan remained doubtful. He confirmed this addition also. 12. Before us, the learned Authorised representative submitted that Smt. Sharda Devi had three bighas of agricultural land. Her statement was recorded. She has accepted to have given gift. It was out of pension funds received on the death of her husband. The assessee is a friend of the donor. The Assessing Officer had called her and recorded her statement. She has confirmed to have given gift. There is no necessity of any occasion or any relationship. What is relevant is availability of money and giving of gift by the donor and acceptance thereof by the donee. Regarding Sri Deonath Mishra, the learned Authorised represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition that if the capacity of the creditors is proved by showing that amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors, then the assessee was not expected to prove the genuineness of the cash deposited in the bank account of those creditors because under the law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source. He then relied on the decision of the hon ble Rajasthan High Court in Nek Kumar v. Asst. CIT [2005] 274 ITR 575 ; [2004] 191 CTR 207 for the proposition that where there is no material evidence whatsoever to show that the money was deposited by the assessee or by any relative in the bank account from where it came back to the assessee as a gift, then gift cannot be treated as non-genuine by mere conjectures and surmises. He then referred to the decision of the Income-tax Appellate Tribunal, Amritsar Bench in Asst. CIT v. Manoj Kumar Sekhri [2005] 142 Taxman 15 in I. T. A. No. 619(Asr) of 1997 decided on November 13, 2003, for the proposition that where there is nothing to prove that money received by the assessee by way of gifts is in fact the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to make gifts is not sufficient for holding the gifts to be non-genuine. 14. On the other hand, the learned Departmental representative submitted that entire arrangement is for conversion of unaccounted money into accounted money through the route of gifts. The persons who have claimed to have given gifts are men of very humble means. Smt. Sharda Devi has claimed to have given gifts out of pensionary benefits which were received by her on the death of her husband who was Class IV employee in Sales Tax Department. It is not expected that a widow would part away her precious money to a rich person without any rhyme or reason. In fact, she needed that money very dearly for her own future. Similarly, in the case of Deonath Mishra, who is a constable having a big family of seven persons including four daughters, it is not expected that such a lowly placed person would part away his dear money to a rich person. The learned Departmental representative also expressed similar sentiments in respect of the third donor, i.e., Shri Janardan Chaurasia, who was a retired havildar and drawing a meagre salary of Rs. 3,750. Though he claimed that he has agricultural land but neither evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be applicable in a case of an assessee, who is maintaining books of account. So far as this proposition is concerned, we agree with the learned Authorised representative that the provisions of section 69 would not be applicable in a case where the assessee is maintaining books of account. This fact is undisputed. However, the learned Commissioner of Income-tax (Appeals) has clearly considered the addition under section 68 as he has given finding about identity of the donor, their creditworthiness and genuineness of the gifts. Even though he has not clearly mentioned section 68, once he discusses these three attributes elaborately then he has really meant to consider addition under section 68. To this extent, section 292B, would help the Revenue. But the question is whether the Commissioner of Income-tax (Appeals) can consider alternatively an addition under section 68 though the Assessing Officer has made the addition under section 69. In our considered view, the learned Commissioner of Income-tax (Appeals) can do so because he has powers conterminous with that of the Assessing Officer. What the Assessing Officer can do, the Commissioner of Income-tax (Appeals) can do. He can di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain properties given by the assessee and made an estimate of the value for the purposes of wealth-tax. The assessee preferred appeals to the Commissioner (Appeals) contending that the Assessing Officer should not have made an estimate but should have referred the matter of valuation to the valuation cell. Accepting the contention of the assessee, the Commissioner (Appeals) held that the valuation of the properties ought to have been referred to the valuation cell in accordance with the provisions of section 16A of the Wealth-tax Act, 1957, read with rule 3B of the Wealth-tax Rules, 1957, and directed the Assessing Officer to recompute the value of the properties after obtaining reports from the valuation cell. But on further appeal, the Appellate Tribunal held that the Commissioner (Appeals) could not have directed the Assessing Officer to refer the matter to the valuation cell. On a reference : Held, reversing the decision of the Appellate Tribunal, that there was no error of jurisdiction in the Commissioner (Appeals) giving the direction that he gave. The discretion vested in the original authority with relation to the assessment was a matter in regard to which it was open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard as under (page 496) : Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the affirmative and against the assessee. The powers of the Appellate Assistant Commissioner in deciding an appeal under section 251 of the Act are wide enough to include the power to examine all matters covered by the assessment order and even to correct the assessment in respect of all such matters to the prejudice of the assessee. The Appellate Assistant Commissioner by his order of remand has not introduced any new source of income not processed by the Income-tax Officer. The question as to whether any expenditure could not be deductible in view of the provisions of section 40A(3) of the Act, was a matter which directly arose in the course of assessment and as the Income-tax Officer had failed to examine that aspect of the matter, the Appellate Assistant Commissioner had directed him to do so. In these circumstances, the Tribunal, in our opinion, was justified in holding that the Appellate Assistant Commissioner had not exceeded his jurisdiction in passing the remand order in question. 21. Thus, in our considered view, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allegedly gifted the money. Even though she has given a confirmatory letter and also a gift deed to the same effect but in our considered view they are merely paper formalities to justify the transactions. But once one looks at the background of the donor and evaluates the transactions on the scale of human probability one finds it difficult to believe as to how a widow of a Class IV employee would part away with pensionary benefits received on the death of her husband to a person who is extremely rich and having turnover of over Rs. 2 crores. 24. Similar is the position in respect of the gift allegedly given by Deo Nath Mishra. He was a constable and has large family to support. He claims that he and his father had together for 8 bighas of agricultural land, but no evidence thereof or the income earned therefrom have been submitted. Thus, this fact remains merely a bald assertion and no more. Even though his statement is recorded, he has filed a confirmation and he has also filed a gift deed, we are unable to believe that a person of such a humble means serving as a Class IV employee would part away with Rs. 50,000 which is apparently so dear to him. The story of gift also beco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows from the rich person to a person of lesser worth, whereas present flows from a person of lessor worth to a person of higher worth. A present is out of respect and reverence and is generally given by persons of equal status or person of lower status to higher status. What is presently termed as gift is, in fact, not a gift but it has attributes of present. In any way, the transaction from all the three donors to the donee i.e., the assessee is unusual and against all human probabilities. There is no explanation of the immediate source of money for gift. There is no explanation from where cash had come. Even though money has flown through bank account, but that is not sacrosanct unless the donors are men of worth. In all the three cases, money is deposited in cash in their bank account. It is deposited only on the same day when cheques/drafts are issued. All the gifts are taken on the same day as if there was some programme or function on the date of the gift at the premises of the assessee. All the three persons are of humble means. If the donors had any real savings they could have utilised it for the welfare of their own family or to augment their income. It is not expected fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not only were they made the other people s children, but some of them were made to other people s wives. In any place, excepting in a tax court, gifts to other people s wives, even if they are wives of co-partners, would raise a host of questions and not a few eye-brows, excepting when there is an understanding nod, Ah, it is all for purposes of income-tax . The Income-tax Officer saw the facts with a layman s eyes, which was the correct way to look at them. The Tribunal, for their part, however, got involved in the convolutions of the Mitakshara Law of gifts and brought to bear a dry and unreal legalistic approach to the application of section 64, which the provision does not call for, if we understand Kothari s case [1963] 49 ITR (SC) 107 aright. 27. Now we will deal with the authorities relied upon by the parties : The learned Authorised representative of the assessee relied on the following decisions : (i) Deputy CIT v. Rohini Builders [2002] 256 ITR 360 (Guj) This is a case of cash credit wherein the hon ble Gujarat High Court held that source of credits need not be proved. The creditors in those cases had complete addresses, GIR Nos., permanent account Nos. and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking channels is not sufficient. In the present case also, it is not established that donors had money to deposit in the bank. Therefore, the learned Commissioner of Income-tax (Appeals) was justified in holding that the amount claimed as gift, was the assessee s own money. (ii) Ram Lal Agrawal v. CIT [2006] 280 ITR 547 (All) In this case, the hon ble Allahabad High Court that where there is a finding given by the Income-tax authorities that creditworthiness of depositors was not proved, the amount could be assessed as income of the assessee. (iii) Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 (SC) It was held by the hon ble Supreme Court that it is the right of the Income-tax authorities to consider genuineness of the transactions and to penetrate the veil and ascertain the truth. It is within their power to consider whether a particular transaction was to evade tax. (iv) K. Ramasamy v. CIT [2003] 261 ITR 358 (Mad) It was held that veil can be pierced in exceptional circumstances. The Income-tax authorities are entitled to look at the reality of the transaction. 29. The following decisions are relevant on the point at issue : (1) ITO v. Diza Holdings P. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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