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2015 (10) TMI 1017 - DELHI HIGH COURT

2015 (10) TMI 1017 - DELHI HIGH COURT - TMI - Addition under Sections 68 and 69 - non establish the claim a sum of US $ 6 lacs received as a gift - Tribunal held that the Assessee had established the source of the gift as well as the creditworthiness of the donor and, accordingly, deleted the addition - whether the assessee had proved the capacity of the donor? - Held that:- Insofar as the issue regarding discrepancy in the statement of the donor is concerned, we find that the same is not materi .....

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onship going back several years. The certificate dated 26th March, 1997 issued by Blackfin and the statement of account of the donor in the books of Blackfin clearly indicated that the donor had access to the funds necessary for making the gift in question. The rent deed relating to a hotel in Dubai also indicated that the donor was a person of means. The donor himself had affirmed that his annual income was 3-4 million dollars. Plainly, the above material could not be ignored by the AO. The don .....

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n.

Insofar as the professional consultancy fee received from Blackfin is concerned, the Assessee had produced a copy of the agreement as well as the letter of termination. The agreement itself was in force for a period of six months and in terms of the agreement, the Assessee was to receive a sum of US$ 1,20,000 against, which the Assessee had received a sum of US$ 1,16,833. Whilst the receipt of the consultation fee indicated that the Assessee had rendered certain services, the Tribu .....

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ged ledger showing withdrawal of US$ 10,000 as fee would also be considered as insufficient for treating the gift in question as income.

The Tribunal had evaluated the material and evidence on record and had concluded that the Assessee had discharged its burden of justifying the receipt in question as gift. On the other hand that the AO had no material or had not collected any evidence to reject the claim made by the Assessee. Apart from doubting and questioning the material produced .....

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a with Ms Poonam Ahuja, Mr Somil Agarwal, Mr Rohit Kumar Gupta JUDGMENT Vibhu Bakhru, J 1. This is the Revenue s appeal under Section 260A of the Income Tax Act, 1961 (hereafter the Act ), against an order dated 30th July, 2002 passed by the Income Tax Appellate Tribunal (hereafter Tribunal ) in ITA No. 1124/Del/2001. The aforesaid appeal (ITA No. 1124/Del/2001) was preferred by the Assessee impugning an order dated 12th March, 2001 passed by the Commissioner Income Tax (Appeals) [hereafter CIT( .....

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ed by him was a gift. The Assessee s appeal to the CIT(A) against the said decision was also rejected. On a further appeal, the Tribunal held that the Assessee had established the source of the gift as well as the creditworthiness of the donor and, accordingly, deleted the addition. Aggrieved by the aforesaid decision, the Revenue has preferred the present appeal. 3. The present appeal was admitted on 5th March, 2004 and the following questions of law were framed for determination by the Court:- .....

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6 on 31st October, 1995 along with the requisite audit report under Section 44AD of the Act, returning an income of ₹ 2,59,300/-. 4.2 The return filed by the Assessee indicated gross professional receipts of ₹ 18,95,901/- out of which ₹ 18,05,400/- was received as consultancy fees from a US based company - M/s Blackfin Development Company Inc., USA (hereafter referred to as Blackfin ). In addition the Assessee had also received US$ 6,00,000/- ( US dollars Six hundred thousand) .....

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thdrawn in the financial year 1994-95 and the remaining US$ 10,000 was withdrawn during the relevant financial year. During the assessment proceedings on 3rd March, 1997, the donor appeared before the AO and was examined on oath. The donor affirmed that he and the Assessee had been close friends since 1971 and the remittance made was as a gift from him out of love and affection for the Assessee. He also stated that he had a business turnover of US$ 3-4 million. 4.4 The Assessee also produced a l .....

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questionnaire to the donor, inter alia, asking him to provide the following details:- (i) Details of all the past and present business activities alongwith annual turnover of such activities. (ii) Tax statements for the business outside India in places like Dubai, China, Russia, Africa, USC etc. (iii) Statements of assets and liabilities for the year 1992 to 1996 giving details of properties, stocks and other assets acquired during the above period, alongwith cost of such assets and date of pur .....

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profit from business association with Blackfin and dealings in Africa. (ix) To produce evidence to show that Shri Jaspal was actually associated with M/s Blackfin and further that the money remitted by Blackfin to Shri Budhiraja actually belonged to Shri Jaspal and Blackfin remitted this amount to Jaspal. In this context, Shri Jaspal was also requested to give a note on his acts of involvement in the business of Blackfin and a copy of the transactions of business done together, the profit shari .....

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provide any details regarding his foreign assets, businesses and other personal matters as according to him, the same did not have a direct bearing on the assessment of the Assessee s income. However, on 27th March, 1997, the donor faxed a copy of the confirmation certificate from Blackfin which was typed on the letter head of Blackfin and signed by Art De Pue of Blackfin before a Notary Public of the State of Texas, USA on 26th March, 1997. 4.7 The aforesaid certificate confirmed that the donor .....

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n 5th September, 1995 under the Account Fee-Income . This amount represented the withdrawal of US$ 10,000 by the Assessee from the EEFC A/c. 4.9 The Assessee was called upon to produce the agreement with Blackfin pursuant to which the Assessee had been engaged to provide consultancy services. In response thereto, the Assessee, during the course of hearing held on 24th February, 1998, produced a copy of the agreement dated 4th June, 1994 with Blackfin, to provide consultancy services in terms of .....

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d, the Assessee had failed to establish the capacity of the donor to make the gift or the genuineness of the transaction. The AO drew an adverse inference from the fact that the Assessee had not been able to persuade the donor to produce the documentary details as required by the AO. The AO noted that there were certain discrepancies in the statements of the donor and the Assessee, inasmuch as the donor did not know the date of the Assessee s marriage and there were also some inaccuracies in the .....

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s remitted to the Assessee had been reduced from the account of the donor maintained by Blackfin. However, the CIT(A) did not interfere with the assessment made by the AO and, by an order dated 12th March, 2001, rejected the Assessee s appeal. 4.12 The Assessee appealed before the Tribunal against the order dated 12th March, 2001 passed by the CIT(A) rejecting the Assessee s appeal, which was allowed by the Tribunal after considering the facts and circumstances of the case. 5. In order for the A .....

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t based on any material. In CIT v. Sunita Vachani: (1990) 184 ITR 121 (Del) this court held that : in our opinion, the Tribunal had, on merits, come to the conclusion that the gifts were genuine. This is a pure question of fact. The Tribunal has examined the evidence which was available on the record and has arrived at the aforesaid finding. Even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad, unless there is .....

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issue, it is necessary to examine the material that persuaded the Tribunal to accept the Assessee s claim that the amount of US$ 6,00,000/- (US Dollars Six hundred thousand) received by the Assessee was indeed a gift and not income received from abroad by the Assessee. 7. There is no dispute that the identity of the donor has been established. The donor had appeared before the AO and recorded his statement on oath. He had affirmed (i) that he had gifted the amount in question to the Assessee out .....

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ed that he and the donor were friends since long and the donor was a highly successful businessman. 9. The Assessee had produced a letter dated 2nd April, 1994 wherein the donor had mentioned that the Assessee had stood by him in his time of crisis and, therefore, he was arranging some funds as a token of love and affection towards the Assessee. 10. In addition to the above material, the Assessee had also produced a copy of the notarised certificate issued by Blackfin confirming that the donor a .....

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by US$ 4,34,600 and had decreased by US$ 6,00,000/- ( US Dollars six hundred thousand) - the amount remitted to the Assessee as gift - as well as other amounts, which resulted in the amount lying to the credit of the donor to be reduced to US$ 4,99,400 as on 30th June, 1994. The Tribunal also noted that the Assessee had submitted a copy of a rent deed which indicated that the donor had leased Hotel Sunrock in Dubai from one Mr Abdul Rehman Ahmad at a rent of 23 lac Dhirams (equivalent to ₹ .....

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e fact that the Assessee had received ₹ 18,05,400/- amount as consultancy fees from Blackfin and this indicated a business connection between Blackfin and the Assessee; (iv) that US$ 10,000 withdrawn by the Assessee from the EEFC Account (which was a part of the alleged gift) had been credited in a ledger as Fee Income . 14. Insofar as the issue regarding discrepancy in the statement of the donor is concerned, we find that the same is not material in determining the question of the genuine .....

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d that he and the Assessee knew each other since 1971 and had done their CA together; but, the Assessee had affirmed that he and the donor had done their graduation and CA together during the period 1967 to 1975. In addition, the AO also found certain other minor discrepancies. The Tribunal had noted the above and did not consider the discrepancies to be material. We do not find any infirmity with this view as it is apparent that the discrepancies in the statement are not significant. 15. Insofa .....

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hat the donor was a person of means and that such gift has been made out of love and affection. The Assessee had produced the donor who answered all questions put to him. The Assessee as well as the donor had sworn statements indicating their close relationship going back several years. The certificate dated 26th March, 1997 issued by Blackfin and the statement of account of the donor in the books of Blackfin clearly indicated that the donor had access to the funds necessary for making the gift .....

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t was available with the Assessee, or should have been available with the Assessee, and had been withheld by him. In our opinion, the Tribunal rightly considered the issue in its correct perspective while holding that the Assessee had discharged his burden. 16. Insofar as the professional consultancy fee received from Blackfin is concerned, the Assessee had produced a copy of the agreement as well as the letter of termination. The agreement itself was in force for a period of six months and in t .....

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ection with Blackfin. Further the discrepancy in the amount received by the Assessee as consultancy fees and the amount receivable in terms of the agreement could not possibly be a ground for doubting the amount of gift as consultancy fees. 17. The alleged ledger showing withdrawal of US$ 10,000 as fee would also be considered as insufficient for treating the gift in question as income. 18. The Tribunal had evaluated the material and evidence on record and had concluded that the Assessee had dis .....

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