TMI Blog2012 (4) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to s. 139(9) clearly requires the assessee to furnish his financial statements, including balance-sheet, along with the return of income. The assessee/s, thus, ought to have filed the income and expenditure account as well as the balance-sheet, along with his returns of income, and which have admittedly not been, with the AO going on to state that the capital account or the copy of the bank account bearing the said credits - the gifts being claimed to have been banked - had not been filed along with the returns. As such, while the entries in the books of accounts or documents or transactions may be of relevance and consequence in assailing a search action u/s. 132, where that is the only information in possession of the Revenue, leading to a 'reason to believe' by it, the same would be adequate and/or sufficient to qualify it to be an undisclosed income u/s. 158B(b), where the same represents, wholly or partly, income for property. Genuineness of gift - held that:- Gifts are generally also exchanged between close friends and relatives on important occasions, as new borns in the family; landmark birth anniversaries; weddings; etc. It is noteworthy that no gifts have been g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds made a part of the assessment order/s by the Assessing Officer (AO), being Dy. CIT, Central Circle, Calicut by way of annexure there-to. Further, the seized material included a voluminous file wherein the complete account of these transactions was maintained, i.e., the capital account, income and expenditure account, balance-sheet, statement of source and application of funds for each of the years, besides the copy of the acknowledgement of the income-tax returns. The gifts were being received year after year and the donors were mainly from Fancy Bazar, Gauhati. So, however, none of it was filed alongwith the return of income for any of the years covered by the block period. 3.2 Enquiries were made by the AO in the matter during the course of the assessment proceedings, which revealed that barring a few, most of the donors were 'friends' (and not relatives), as claimed, and the gifts were not received on any special or ceremonial occasion. On being called upon specifically to establish the genuineness of these gifts, the assessee stated that the donors were in fact tax payers, and had confirmed the gifts. Being not satisfied with the explanation, the AO deemed the same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income may not have lapsed), could it be said that the same has not been or could not have been disclosed, as the case may be, for the purpose of the Act, the qualifying condition for the income to be considered as undisclosed (s. 158B(b)). The provision of sec. 158B(b), defining the undisclosed income, is thus in full harmony with the provision of s. 158BB, the machinery provision for computing the undisclosed income. The term 'evidence' is of wide import, and is judiciously well settled to be a matter of fact, the effect, tendency or design of which is to produce in the mind a persuasion, affirmative or disaffirmative, of the existence of some other matter of fact. For the purpose of assessment under the Act, the law provides for reliance on materials or information in the possession of the AO, even as it would be clear that the same would also stand to qualify as evidence, and which is further clarified as not only as found during, but in consequence of search as well. The purpose is not to restrict the admission to only those evidences directly discovered during the search, but to include that discovered through post search enquiries, and that is how the higher co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant of disclosure. However, sub clause (i) of clause (d) of Explanation to s. 139(9) clearly requires the assessee to furnish his financial statements, including balance-sheet, along with the return of income. The assessee/s, thus, ought to have filed the income and expenditure account as well as the balance-sheet, along with his returns of income, and which have admittedly not been, with the AO going on to state that the capital account or the copy of the bank account bearing the said credits - the gifts being claimed to have been banked - had not been filed along with the returns. The assessee/s claims that the said provision applies only where the assessee is undertaking business or profession. We can hardly agree. There is nothing in the provision of law indicating so; the only qualification for attracting the same being that the assessee is maintaining regular books of accounts, and on which there is no dispute, even as the records maintained by the assessee exhibit it to be the case. The said requirement obtains - in an indirect manner though - even where no regular books of accounts are being maintained (refer clause (f) of Explanation to s. 139(9)). The whole purport of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, which is a complete code in itself. 4.5 The assessee's reliance on the decision in the case of L.R. Gupta ( supra ) is, again, misconceived. In that case, the hon'ble court found that the search is bad in law in view of the non-satisfaction of the ingredients of s. 132 of the Act, action under which is unchallenged in the present case, so that the search is admittedly valid, implying satisfaction of the requirements of s. 132 of the Act. Secondly, the definition of undisclosed income u/s. 158B(b), which alone is relevant in the present case, is much wider than that per s. 132(1)(c) of the Act. The same includes 'any income based on any entry in the books of accounts or other documents or transactions', and which is completely missing in s.. 132(1) (c). As such, while the entries in the books of accounts or documents or transactions may be of relevance and consequence in assailing a search action u/s. 132, where that is the only information in possession of the Revenue, leading to a 'reason to believe' by it, the same would be adequate and/or sufficient to qualify it to be an undisclosed income u/s. 158B(b), where the same represents, wholly or partly, income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive in itself, and which came to light only on search. This is as gifts of hard earned money are very difficult to come by, and by their very nature given, firstly, voluntarily, out of natural love and affection and/or secondly, to (say) bail out the donee - a loved and dear one - of a difficult situation or for a particular purpose or an auspicious/special occasion, etc. It is in this context that the courts/tribunals are generally inclined to take judicial notice of the gifts being deployed as a method of money laundering, in circumstances that are unusual and not in accord with the test of human probabilities as to conduct. The observation by the hon'ble court in the case of Addl. CIT v. C.R. Ranganathan Chetty [1985] 153 ITR 456/23 Taxman 535 (Mad.) (at pg. 466) are relevant in this regard:- "Look at the way the gifts were made. Not only were they made to 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 the purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.8 Further, none of the donors were produced for examination before the AO. Though the assessee was not specifically called upon to do so by him, the onus to establish the genuineness of the gifts, particularly where being called upon to do so, and repeatedly, by the assessing authority, is only on the assessee. No evidence in support of their financial capacity also stands submitted. It is well accepted that the receipt of credit through the banking channel, or of it being confirmed by the creditor/donor, is itself not sufficient to prove the gifts in terms of s. 68. The word 'genuine', in fact, itself signifies that what is apparent is real, so that it represents the truth. If the foregoing attributes were to be itself sufficient, mere entries in the books of accounts, which constitute evidence u/s. 34 of the Evidence Act, would by themselves be sufficient to prove the credits. As explained by the apex court, time and again that receipt of money is itself an evidence against the assessee for receipt of income, unless of course he establishes the genuineness of the same on the parameters of identity, creditworthiness of the creditor, and the genuineness of the transactions, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by him and his wife. The same was explained to be belonging to the assessee's wife, giving the break-up thereof. The said break-up included 250 gms. stated to be received from close relatives on the occasion of the assessee's 25th marriage anniversary on 16-02-1997. The same was added in the absence of the assessee being unable to furnish any evidence in substantiation of his claim. In appeal, the assessee pleaded non-grant of proper opportunity to present his case, which he sought to support with affidavits from the donors. The matter, in view of the assessee' claim/s, was restored by the ld. CIT(A) to the file of the AO for consideration of the said material. The AO, however, found it not acceptable as the assessee's wife was a wealth tax payer for the relevant year, i.e., in which the gift was received, and also for the subsequent years, while this gift was not verifiable with reference to her total wealth. The ld. CIT(A), however, was of the view that the affidavits contained full details of the gifted jewellery, the genuineness of which has not been doubted by the AO. Aggrieved, the Revenue is in appeal. 6. We have heard the parties, and perused the material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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