TMI Blog2009 (7) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... urrent address - The said account statement stands relied upon only by the assessee itself and, secondly only in establishment of its claim in respect of the donor's creditworthiness, so that this argument is fallacious in the least, particularly as in the context of serious doubts raised on the donor's creditworthiness on the basis of the material on record, and the inability of the assessee and, therefore, also the donor, to establish the antecedents of the source of the funds with the donor; given his income level - source of the gift is the receipt through a cheque of ₹ 2,46,000 received by the donor from the Balaji Trading Corporation, Delhi, and a cash amount of ₹ 3,500 - decided in the favour of the assessee - IT APPEAL NO. 204 (AGRA) OF 2006 - - - Dated:- 30-4-2009 - Member(s) : R. P. GARG., HARI OM MARATHA. ORDER-HARI OM MARATHA, J.M.: October, 2008 This appeal of the assessee for asst. yr. 2002-03, is directed against the order of learned CIT(Al, dt. 1st Feb., 2006. 2. The lone issue raised in this appeal relates to addition of ₹ 2.5 lakhs as unexplained income of the assessee under s. 68 of the IT Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, From all the above evidence the learned AO drew his own inferences that the donor had no capacity to make this gift and he also held it to be ingenuine. So, added this sum of ₹ 2.5 lakhs as assessee's undisclosed income under s. 68 of the Act. 5. In first appeal also this addition was maintained with reference to human conduct, system prevalent in the society, practicability of life etc. He also relied on certain decisions to finally hold that the donor is a person of low financial status having monthly income of less than ₹ 5,000 and has shown withdrawals from his capital account less than ₹ 3,000 per month. He has also observed the deposit by the donor of ₹ 1,25,000 with Balaji Trading Corporation was also not proved. He has also stated that the donor has no house, no telephone number, no fixed deposit and not any other immovable assets. so it is not possible to make gift in question. He has held that it is the income of the assessee only which was not disclosed by him to the Department. 6. After considering rival stands vis-a-vis the entire evidences available on record, when viewed from the angle of numerous evidences, which are in a comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her whys and wherefores. In these circumstances. it would be too harsh and too illogical to decide against the assessee who has produced entire evidences desired, required and insisted on by learned AO and that would result in an illegality and injustice. We have to go by evidences available on the record. The possibilities and realities of life come only thereafter, and when the adverse possibilities are also found to be explained there should be an end of these possible realities , otherwise no gift would be or can be treated as genuine, as the reality of life, in this era is that even a father would not give a gift to his son. Thus, we are bound by the positive evidences which are available on record and form a complete chain of events. Here, we accept this gift as genuine because the identity and the creditworthiness of the donor have been established on record. The reason for making this gift is also stated and its genuinity stands proved. Entire evidences, which have been referred to above like the declaration of gift. affidavit of donor, direct letter sent to AO, statement on oath both of donor and the donee, proof of source of the draft of ₹ 2,50,000 with further evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to produce the donor Shri Rakesh Walia of Delhi. A letter dt. 29th Nov., 2004 was also sent to the assessee, requiring the details of the information required in respect of the donor, in verification of his creditworthiness, as also pointing out that the affidavit dt. 21st April, 2001 of the donor as filed by the assessee bore the name of the deponent as Shri Rajesh Walia, while the donor's name as stated by the assessee was Shri Rakesh Walia, even as the assessee had vide letter dt. 25th Nov., 2004 by his counsel raised objections qua the AO's requirement for the production of the donor. Summons (and letter) were also issued to the donor directly calling for the requisite information, and though the summons were not complied with, some information stood submitted. The donor was finally produced on 31st Jan., 2005, i.e., subsequent to the assessee being informed that the AO, along with his Inspector (ITI), would visit Delhi on 1st Feb., 2005 to record the statement of Shri Rakesh Walia (donor), and which proposition stood conveyed to the assessee by the AO vide his letter dt. 27th Dec., 2004, requiring of him to, in case of inability to produce the donor, on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and deemed the same as the assessee's income under s. 68, relying for the purpose on the decisions in the case of CIT vs. R.S. Sibal (2004) 187 CTR (Del) 291 : (2004) 269 ITR 429 (Del) and Sajan Dass Sons vs. CIT (2003) 181 CTR (Del) 581 : (2003) 264 ITR 435 (Del), as also by the Tribunal in the case of ITO vs. Dr. Jagdish J. Kansagara (1998) 60 TTJ (Ahd) 288 : (1998) 66 ITD 381 (Ahd). 2.7 In appeal, the matter was again examined at length by the learned CIT(A), calling for a report from the AO, who was also asked to conduct necessary enquiries from M/s Sri Balaji Trading Corporation. The facts in this regard also make for interesting reading and merit mention. As the assessee could not submit any details in this respect, despite availing several opportunities, the AO furnished a report dt. 23rd Sept., 2005 to the learned CIT(A), explaining that the letter issued to M/s Sri Balaji Trading Corporation, C-35/3, 1st Floor, Industrial Area, Lawrence Road, Delhi, had been received back undelivered with a remark 'left without address' by the postal authorities. On this, the learned CIT(A) himself required the donor to furnish the current address of the said concern and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 : (2008) 1 DTR (Del) 24; - Ms. Mayawati vs. Dy. CIT (2008) 113 TTJ (Del) 178 : (2008) 1 DTR (Del) 68; - Kim Garg vs. ITO (ITA No. 484/Agra/2007, order dt. 19th May, 2008) (Tribunal, Agra Bench). 3.2 The learned Departmental Representative, on the other hand, relied extensively on the orders by the authorities below, stating the same to be comprehensive and cogent, meriting acceptance, even he has made specific reference to the decision by the apex Court in the case of Sumati Dayal vs. CIT. The findings 4.1 The authorities below have impugned the assessee's claim of having received a gift of ₹ 2.50 lacs from one Shri Rakesh Walia S/o Shri Laxman Singh, R/o A-69, Kamla Nagar, Delhi, vide demand draft No. 087294, dt. 21st April, 2001 drawn on Punjab National Bank, Firozabad, by Punjab National Bank, Kamla Nagar, Delhi. 4.2 The facts of the case stand listed in some detail only to exhibit, firstly, the conduct of the assessee, which is of prime relevance, as well as the primary facts, which are undisputed, as it is only the inferences drawn by the Revenue therefrom which are essentially under challenge; the law in the matter being unambiguous and abundantl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it being not an everyday affair, but a highly sporadic, eventful and, rather, epoch-making, to have made a gift for such a substantial sum of money, doing it for the first time in his life, and parting ostensibly thereby with a significant portion of his wealth, so that the same is incomprehensible by any standards. Again, the draft is admittedly sent to the assessee per post, Le., from Delhi to Firozabad. Also, neither any gift stands made to the assessee's father (or even mother), to whom the donor was actually obliged, i.e., assuming so, nor to any of the assessee's two brothers. 4.4 Next, let us examine the creditworthiness of the donor, which stands also doubted by the Revenue, i.e., apart from genuineness of the transaction. To sum it up in one sentence, one could say that what is required to be seen in this regard is whether the donor can be said to be in a position to pay. This, it may be clarified, represents a separate and an independent qualifying criteria on the touchstone of which the assessee's explanation is to be adjudged, so that only on the assessee meeting both of them, being doubted by the Revenue in the instant case, that the assessee stands to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23 years of age in 1995. Even his current earnings, i.e., after years of standing, are at less than ₹ 5,000 per month, so that his earnings could not be a possible source of the said advance, nor has been even claimed to be, and which would, again, if so, have to be on the basis of some materials. As such, the source of the said sum, stated to be advanced to the said concern, remains unexplained. Secondly, the donor has also not clarified about the balance amount lying in the account with the said concern. The same appears to be on account of interest accrued thereon since April, 1995. The first thing that strikes one is that interest, though contracted for, stands not been paid for years together, and which is itself quizzical, particularly considering the donor's financial status. That is, the source of the creditor's debt is unexplained; there is no realization of interest, leave alone principal, for several years and, the debt, including accumulated interest, stands liquidated all at once. To verify these claims, enquiries were sought to be made by the Revenue from the said concern, to no avail, with both the assessee and the donor, despite sufficient opportunity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the contra balances which would be _presently discussed. Secondly, while the authorities below make no reference to this statement of account, rather, failing in their efforts to access this concern, the assessee has placed this account statement in its paper book, and which only implies, even as certified by the learned Authorised Representative, as having been submitted before the authorities below; it is also not clear from the record as to before whom the same stood produced. On its perusal, it is found that though the opening balance (as on 1st April, 2001) as reflected therein, matches with the donor's balance sheet (as on 31st March, 2001/paper book p. 32), the closing balances do not. While the donor's balance sheet (as at 31st March, 2002) reflects no outstanding from the said concern, his account as per the books of the said concern states of a due of ₹ 1 lac, and which was highlighted during hearing to the learned Authorised Representative by the Bench. He failed to explain the said difference, stating the same to be not relevant as the said account only represented the source of the assessee's creditor, i.e., the donor. The said account statement sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name thereto (implying the acceptance of an intermediation, as was the case for the preparation of the bank demand draft), does it mean that the deponent also did not read the document before signing the same, so that the same stood inferably executed by him without going through the contents of the deposition; in fact being too blatant a mistake as far as the executor is concerned, being in respect of his identity. The affidavit is sworn, so that it stands duly attested. Is it that the witness as well as the attesting authority were also not aware of the donor's identity, and merely authenticated the same, even as the sole premise of the authentication is the verification of the identity of the deponent. Further, does it also mean that the assessee also either did not read the affidavit or was not aware of his identity? There are too many co-incidents to be passed or considered as a mistake, which came to light only on its perusal by the AO. The second aspect of the matter is that the affidavit is sans any details and thus only in the nature of a confirmation. As such, in the facts and circumstances of the case, it has no evidentiary value, i.e., apart from a confirmation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no law that an affidavit where filed must necessarily be regarded as correct or as representing the truth is borne out by this decision, which is not, to repeat, in the context of s. 68 or the like, and the case law in the matter is abundant. I shall for the purpose reproduce the following observation by the Tribunal (Agra Bench) in the case of ITO vs. Nandkishore Goyal Brijkishore Goyal (in ITA Nos. 342 and 343/Agra/2005, dt. 29th Aug., 2008): An affidavit, thus, in the context of s. 68 has, even otherwise, a limited application. Questions of fact, invocation of s. 68 being essentially a matter of factual finding, need to be proved on the basis of materials and not on the basis of affidavits and counter affidavits [Mahendra Kumar Agrawalla vs. ITO 1975 CTR (Pat) 33 : (1976) 103 ITR 688 (Pat) and ITO vs. S.B. Singhar Singh Sons Anr. 1976 CTR (SC) 412 : (1976) 105 ITR 570 (SC)]. It is in this context that the rules of evidence invariably provide for the filing of an affidavit at the discretion of the Court or the Tribunal, which are to consider the same along with the other material, and not de hors the same, in arriving at its conclusions or findings of fact [Rame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such entries as are found in the assessee's books. Why such an interpretation would make the section (s. 68) itself otiose, internally inconsistent, and inoperable. The law does not in fact, nor possibly can, draw any distinction between the books of the assessee-debtor and those of the creditor; the premise of the relevant provisions of law (s. 68) being, as explained per a host of decisions by the Hon'ble apex Court, to ascertain if these entries do reflect the, actual state of affairs, requiring the assessee to lead evidence on the identity, capacity and the genuineness aspect of the transaction, so as to explain its nature and source, for the assessing authority to arrive at a positive satisfaction on the basis thereof on the truth of the matter by examining the assessee's explanation with reference to its nature and source qua the three parameters aforesaid, and on the touchstone of the reasonableness, so that the AO's non-satisfaction cannot be arbitrary, and which (reasonableness) is the only limitation placed thereon under law, and only rightly so. Attention in this respect is drawn to the decisions in the cases of CIT vs. S. Kamaraja Pandian (1984) 150 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e donors to the kiths and kins or by the donors to the kiths and kins, donee not giving any help to the donors at any time or the donors are men of petty means may not carry enough weight individually but when they are put together and viewed as a whole then one discovers the reality. Picture that emerges is that it is only a make-belief affair. All these factors put together leave no doubt in our mind that it is a fit case wherefrom has to be ignored and one has to go into the substance of the whole transaction. The substance is that the gifts are not genuine but it is the unaccounted money of the assessee, which has flown in the form of the gifts. As the assessee is the beneficiary of this money, it is safely inferred that it was her unaccounted money which has come back to her in the form of gifts to inflate the capital without paying taxes. 5.2 Finally, the learned Authorised Representative strongly emphasized his reliance on the decision in the case of Murlidhar Lahorimal vs. CIT (2006) 200 CTR (Guj) 109 : (2006) 280 ITR 512 (Guj). It may be clarified that the said decision stands referred to and distinguished by the Hon'ble Gujarat High Court per its subsequent decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay be stated, represents the unqualified view of the Hon'ble jurisdictional High Court expressed as in the cases of Nanak Chandra Laxman Das vs. CIT (1982) 28 CTR (All) 280 : (1983) 140 ITR 151 (All), CIT vs. Kapur Brothers (1979) 10 CTR (All) 280 : (1979) 118 ITR 741 (All) and Badri Pd. Sons vs. CIT (1975) 98 ITR 657 (All). 7. In the result, the assessee's appeal deserves to be dismissed. R.P. GARG, SENIOR VICE PRESIDENT (AS THIRD MEMBER): 30th April, 2009 The President Tribunal, on a difference of opinion between the two Members referred the following points of differences for my opinion as Third Member: Whether the impugned gifts, in the given facts and circumstances of the case, is genuine or not. 2. The facts are that assessee received an amount of ₹ 2.5 lakhs, allegedly as gift from Rakesh Walia resident of Delhi. He was produced before AO and he had confirmed the gift. He is an income-tax assessee. He filed his income and expenditure statements as well as balance sheets for different years. The assessee had also enclosed a copy of declaration of gift dt. 21st April, 2002 executed by the donor Shri Rajesh Walia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; that apart from the declaration of gift, donor's affidavit, statement on oath recorded by AO, of the assessee and of the donor statement and the direct reply of the donor to the AO proved the factum of making gift, its genuineness because it was made through a draft as admitted by both parties and the source of the gift with a complete sequence of events. Narrating two possibilities of the situations-one, that the gift stands proved in the light of the above-mentioned overwhelming evidences, where the identity and creditworthiness of the donor, and the factum of deposit by way of gift and the second, the capacity of the donor as well as the genuineness of this gift is doubtful in view of the other part of the statement of the donor wherefrom it is noticed that he does not own any valuable assets and lives in the house of his Buwaji and was doing business of commission (Dalali) as grain merchants, there being no direct relation between the donor and the donee and finding no answer to a question as to why one would make a gift when he is not possessing enough assets and deposits and whose earning is not much and that too to a person who is known to him through assessee's f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of interest accrued thereon since April, 1995. The first thing that strikes one is that interest, though contracted for, stands not been paid for years together, and which is itself quizzical, particularly considering the donor's financial status. That is, the source of the creditor's debt is unexplained; there is no realization of interest, leave alone principal, for several years and, the debt, including accumulated interest, stands liquidated all at once. To verify these claims, enquiries were sought to be made by the Revenue from the said concern, to no avail, with both the assessee and the donor, despite sufficient opportunity, failing to provide its current address. In fact, the said concern allowing interest to the donor, and which would only be after TDS, he (or the assessee) could have at least furnished the deductor's TAN, along with his returns for the relevant period to exhibit the same. There thus exist valid grounds for doubting the authenticity of the donor's claims in this regard. In fact, given the mandate of s. 68, so that the Revenue has to have a reasonable and objective basis for recording satisfaction or non-satisfaction in the matter, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction; (iii) that the donor visited his house one or two times though never beyond the drawing room; (iv) that the donor is a person of low financial status having monthly income of less than ₹ 5,000 and has shown withdrawals from his capital account less than ₹ 3,000 per month; (v) that the donor has no house, no telephone number, no fixed deposit and not any other immovable assets; or that the original deposit by the donor of ₹ 1,25,000 with Balaji Trading Corporation was not proved are not so material to hold the gift not a genuine one or sources thereof unsatisfactory so long as the immediate source of the gift is admittedly established to be from a third party, the donor had appeared in person before the AO and confirmed the making of the gift and the reasons which persuaded him to make the gift, he being the friend of the assessee's father who helped him in past. 12. Sec. 68 provides for charging the sum credited in the assessee's books of account as income of the assessee if the assessee offers no explanation about the nature and sources of the sum so credited or if the explanation offered by the assessee thereof is not satisfactory. On the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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