TMI Blog2008 (5) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... e the nature and source of the deposit or investment, as the case may be. As held by the various High Courts and apex Court in Sreelekha Banerjee vs. CIT [ 1963 (3) TMI 47 - SUPREME COURT] , CIT vs. P. Mohanakala [ 2007 (5) TMI 192 - SUPREME COURT] to prove the nature and source, the assessee has to prove the identity of the person, the genuineness of the transaction and capacity to pay. If all the aforesaid three conditions are proved the burden shifts on the Revenue to prove that the amount belongs to the assessee. CIT vs. United Commercial Industrial Co. (P) Ltd.[ 1989 (5) TMI 18 - CALCUTTA HIGH COURT] , M.A. Unneeri Kutty vs. CIT [ 1991 (9) TMI 31 - KERALA HIGH COURT] . W e are of the view that there is no reason to doubt the genuineness of the gift by Sri K.C. Kapadia to the assessee. In any view of the matter, the assessee was able to establish the nature and source of the money. The nature and source of the money found deposited in the bank account of the assessee were the maturity amounts of the four bonds which were purchased by Sri K.C. Kapadia on 1st Oct., 1998. Therefore, so far as year under consideration is concerned, the nature and source are fully establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account No. 0119017878 of SBI, Main Branch, Lucknow. The said amount was claimed to be gifted by Shri Kishore Chhagan Lal Kapadia, to the petitioner. During the course of the assessment proceeding, the assessing authority had recorded the statements of the petitioner on 31st Jan., 2006 and on 9th Oct., 2006. It also appears from the perusal of the assessment order that two letters dt. 19th Sep 2006 and 10th Oct., 2006 were sent on the address of Shri Kishore Chhagan Lal Kapadia, given in the confirmatory letter as 83, Fairview Awe, New Jersy, NJ 07306, USA. As per the assessment order, the said letters were returned unserved with the remark Not deliverable as addressed-unable to forward . It appears that ITO wrote a letter dt. 15th Feb., 2006 to the Chief Manager, SBI, NRI Branch, Mumbai, with the request to provide the copy of letter/document through which the said bonds had been gifted to the petitioner or any other document/letter available on this transfer. Chief Manager, SBI, NRI Branch, Mumbai through his letter dt. 28th Feb., 2006 informed that The RBI certificate Nos. C041622 to C041625 were transferred by way of gift to Kanchan Singh, by Shri Kishore Chhagan Lal Kapadia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chhagan Lal Kapadia in the year 1998 against the US dollars. He submitted that it is not in dispute that amount of ₹ 26,78,504 was the maturity amount of the four bonds, which were purchased by Shri Kishore Chhagan Lal Kapadia in the year 1998 and were subsequently, transferred in favour of the petitioner. He submitted that after the amendment in the GT Act by the Finance Act (No. 2) of 1991 it was not necessary that NRI could make gift of bonds to the relatives only. He submitted that the petitioner had established beyond doubt, the source of the amount of ₹ 26,78,504. He submitted that though the identity of Shri Kishore Chhagan Lal Kapadia had been fully established beyond doubt, inasmuch as the bonds were issued on his application being NRI he submitted that the letters, which are alleged to have been issued at the given address to Shri Kishore Chhagan Lal Kapadia have not been returned back with the remark that, he was not traceable but with the remark not deliverable as addressed-unable to forward , which does not mean that Shri Kishore Chhagan Lal Kapadia was not traceable and was not residing at the given address. He submitted that after the return of the let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous years. 69. Unexplained investments'Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the AO, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 7. Under s. 68 of the Act if any sum is found credited in the books of account of the assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the AO satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, what has to be enquired into by the assessing authority is about the nature and source of the deposit. If the explanation with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is necessary for the assessee to establish, if asked, what the source of that money was and to prove that it was not income. The Department was not at that stage required to prove anything. It could ask the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one was furnished and examine the evidence and the explanation. If the explanation showed that the receipt was not of an income nature, the Department could not act unreasonably and reject that explanation to hold that it was income. If, however, the evidence was unconvincing, then such rejection could be made. The Department cannot by merely rejecting a good explanation unreasonably, convert good proof into no proof. 13. In the case of CIT vs. Orissa Corpn. (P) Ltd. (1986) 52 CTR (SC) 138: (1986) 159 ITR 78(SC), the apex Court observed as follows : In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has to be exercised keeping in view the facts and circumstances of the particular case. 15. Sec. 68 of the Act has been recently considered by the apex Court in the case of CIT vs. P. Mohanakala (2007) 210 CTR (SC) 20: (2007) 291 ITR 278(SC), the apex Court held as follows : The question is what is the true nature and scope of s. 68 of the Act ? When and in what circumstances would s. 68 of the Act come into play ? A bare reading of s. 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the AO is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression the assessees offer no explanation means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true that the opinion of the AO for not accepting the explanation offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the assessee in his statement stated that she met donor when she was in Class VI or VII at her grand parents' place. After that she did not meet him. The identity of the person is not established because he is not available on a given address. On record there is one declaration dt. 8th Feb., 2006 stating that he made this gift of ₹ 40,000 dollars to Ms. Kanchan Singh, but the donor is not available for confirming the same on the address given in the declaration nor is the donee aware of his present address. In these circumstances, it is held that the identity of the donor is doubtful. What is the source of these forty thousand dollars, what are the assets and liabilities; nothing is known even to the donee, i.e., the beneficiary. On the basis of the aforesaid letter of the Addl. CIT, the ITO held that the gift of ₹ 26,78,504 from the alleged donor. Shri Chhagan Lal Kapadia, whose identity and creditworthiness assessee failed to establish is nothing else but assessee's own money routed through some fictitious person and the same is added in the income of the assessee as income from other sources. This view of the assessing authority has been confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration. 7. After the amendment in s. 5(iiie) of the GT Act by the Finance (No. 2) Act of 1991, gift could be made to the person other than relatives also. The omission of the word 'relative' in the section shows that the amendment was made to promote the gift by NRI to the persons other than relatives to encourage inflow of foreign money in India through gifts. 8. Sri K.C. Kapadia, by confirmatory letter dt. 8th Feb., 2006 duly notarized by Notary Public of New Jersey, has confirmed the gift of four such bonds. The letters written by the assessing authority were returned unserved with the remark Not deliverable as addressed unable to forward does not mean that Sri K.C. Kapadia, was not traceable and was not in existence. There may be so many reasons that the letter could not be delivered. Merely because the assessee could not tell any other address of Sri K.C. Kapadia, it cannot be inferred that Sri K.C. Kapadia was/is not in existence and his identity is doubtful. 9. The application moved by Sri K.C. Kapadia for the purchase of four bonds with the SBI, the issue of the bonds in the name of Sri K.C. Kapadia against US dollars is by itself an evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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