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2015 (12) TMI 1129 - GUJARAT HIGH COURT

2015 (12) TMI 1129 - GUJARAT HIGH COURT - [2016] 381 ITR 283 - Unexplained cash credit u/s 68 - gifts received from NRI - ITAT reversing the order of CIT (A) of deleting the addition - Held that:- It is not possible to state that the impugned order passed by the Tribunal is based on conjectures or surmises. The Tribunal, on the contrary, has considered all the relevant material and based its conclusions on the findings recorded by it after appreciating the material on record. From the findings r .....

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ne. In the present case, the returns of income filed by the Indian donors have been placed on record, which clearly reveal that the donors did not have the financial capacity to gift such huge sums of money. Clearly therefore, the assessee has failed to prove the creditworthiness of the donors. Even the donors who appeared before the Assessing Officer clearly did not have the capacity to make such gifts. In relation to the gifts received from the NRI donors, except for the fact that such amount .....

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e of the Tribunal, in the opinion of this court, in the absence of any cogent material having been brought on record by the assessee to prove the financial capacity of the NRI donors or the genuineness of the gifts, no case has been made out for restoring the matter to the file of the Tribunal. - Decided in favour of the revenue and against the assessee - TAX APPEAL NO. 1383 of 2007 - Dated:- 25-8-2015 - MS. HARSHA DEVANI AND MR. A.G.URAIZEE, JJ. FOR THE APPELLANT : MR SN DIVATIA, ADVOCATE FOR .....

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e following question of law : Whether on the facts and in the circumstances of the case, Income-tax Appellate Tribunal, was right in law in reversing the order of CIT (A) of deleting the addition of ₹ 7,02,000/- in respect of gifts received by the appellant as unexplained cash credit u/s 68 of the Income-tax Act, 1961? 3. The assessment year is 2002-03 and the relevant accounting period is the year ended on 31.03.2002. The assessee, who is engaged in the business of developers/housing proj .....

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rutiny. During the course of assessment proceedings, upon verification of the capital account, it was noticed that an amount of ₹ 7,02,000/- had been credited as fresh capital introduced during the year. The source of the same was shown as gifts received from the following persons: [1] Ramesh Kheshani Rs.2,00,000/- [2] Vinod Manghnani Rs.1,00,000/- [3] Niranjan Chhotala Rs.1,00,000/- [4] Rupchand Ramlal Prajapati ₹ 50,000/- [5] Piraram Chelaram Rabari ₹ 50,000/- [6] Mahavir Pra .....

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ons, the assessee produced two persons, viz., Shri Niranjan Chhotalal Kshatriya, who had made a gift of ₹ 1,00,000/- and Shri Piraram Chelaram Rabari, who had made a gift of ₹ 50,000/-. Their statements under section 131 of the Act came to be recorded. According to the Assessing Officer, these persons did not have the capacity or source of making such gifts and that, before issue of cheque or gift, they had deposited cash in their bank account, for which no satisfactory explanation w .....

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The Assessing Officer further noted that the reason for giving the gifts in all the cases was to help the assessee during the time of the earthquake. That these persons had no relations with the assessee and the assessee did not know the full names of the persons from whom such gifts were received and that there was no natural love and affection between the parties. The Assessing Officer, accordingly, came to the conclusion that the amount of ₹ 7,02,000/- credited in the capital account of .....

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given the confirmation letters, Pan numbers and the copies of returns and bank statements of Indian donors and as regards two donors from Dubai i.e. Shri Ramesh Kheshkani and Shri Vinodkumar Manghnani, the appellant has filed copy of confirmation letter and copy of passport and details regarding the period of stay of the donors in Dubai. The donor Ramesh Keshkani has been staying at Dubai since last 24 years and Vinod Manghnani has been staying since last 13 years. Most of these donors have giv .....

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e fact that they have given the gift to the appellant. Shri Piraram Rabari has stated in reply to question No.9 that he has made cash deposits in his bank account and has given the gift from his savings of salary. Similarly, Niranjan Kshatriya has confirmed in his statement that the cash deposits in his bank account were from his savings. The gift of ₹ 1,00,000/- from Niranjan Kshatriya has been reflected in his capital account filed as annexure to his return of income filed on 27.5.2002 w .....

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passed by the Commissioner (Appeals), the revenue went in appeal before the Tribunal, which reversed the order passed by the Commissioner (Appeals) and upheld the order passed by the Assessing Officer in treating the gifts in question as unexplained cash credit and adding the same under section 68 of the Act. Being aggrieved, the assessee is in appeal. 6. Mr. S. N. Divatia, learned advocate for the appellant submitted that the Tribunal has failed to appreciate the material on record in proper pe .....

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uspicion and cannot be equated to that of findings based on evidence. It was submitted that improper inference drawn from proven facts definitely gives rise to a substantial question of law. 6.1 Referring to the findings recorded by the Tribunal, it was submitted that the Tribunal has disbelieved the source of source in the hands of the persons who had given the gifts. The attention of the court was invited to the decision of this court in the case of Murlidhar Lahorimal v. Commissioner of Incom .....

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ing a gift which had admittedly been received by the assessee as a gift and being treated as undisclosed income of the assessee. Reliance was also placed upon the decision of this court in the case of Commissioner of Income Tax v. Pragati Co-operative Bank Ltd., [2005] 278 ITR 170 (Guj), for the proposition that once the assessee had given the names and addresses of the alleged creditors and it was in the knowledge of the revenue that the said creditors were income-tax assessees, if the revenue .....

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l further placed reliance upon the decision of this court in the case of Commissioner of Income-tax-VI v. Bhanwarlal Sharma, [2013] 214 Taxman 122 (Gujarat), wherein the court noticed that the Assessing Officer had not summoned any of the donors. However, he had issued letters under section 133(6) of the Act and had also called for confirmation letters which were received by him. The assessee had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of ack .....

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sed by both the Assessing Officer and CIT(A) were causing concern to those authorities. Gifts to assessee by 24 different unrelated persons, residing at different places in Mumbai on the same day, with the draft of huge sum from the same bank and deposit within a span of 2 to 3 days would raise the eyebrows. Their non reply of letter under section 133(6) and non appearance of assessee personally may further strengthen such suspicion coupled with difference in economic strata of assessee and that .....

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v. Income Tax Officer, rendered on 19.11.2014 in Tax Appeals No.600 of 2005 to No.602 of 2005, wherein the court placed reliance upon an earlier decision of this court in the case of Murlidhar Lahorimal v. Commissioner of Income Tax (supra) and held that the assessee cannot be asked to prove the source of source. It was submitted that in the present case, two of the donors had appeared before the Assessing Officer and confirmed the gifts and accordingly, the requirements of proving the genuinen .....

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the assessee to produce the parties as the same was necessary to establish identity and to enable the Assessing Officer for examination and further investigation regarding genuineness of persons and creditworthiness, it was submitted that all relevant details with regard to the said persons had been furnished to the Assessing Officer and hence, the Assessing Officer could have summoned the said persons on his own. It was submitted that the Commissioner (Appeals) after duly considering the materi .....

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stitution of findings by the High Court is impermissible. It was submitted that once the explanation offered by the assessee is found to be unsatisfactory, the sums credited in the books are to be charged to income tax as income of the assessee. The duty is heavily cast upon the assessee to offer a reasonable explanation as regards the nature and source of the amounts found credited in the books maintained by the assessee. It was submitted that the Assessing Officer had carefully analyzed the ev .....

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Shri Piraram Chelaram Rabari, did not have the capacity or source to make such gifts and that the cash had been deposited in their bank account before the gifts came to be made. It was submitted that Shri Ramesh Kheshkani, who is alleged to be a resident of Dubai, has not come forward to record his statement and that no document has been produced to prove the genuineness of the gift and creditworthiness of that person. It was submitted that in the case of Vinod Manghnani, who is also a resident .....

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ifts, is by way of an afterthought. Referring to the facts of the case, it was pointed out that insofar as Shri Rupchand Ramlal Prajapati, who is alleged to have given a gift of ₹ 50,000/- is concerned, his salary income is only ₹ 49,200/-. In the return of income, his salary income is not reflected. That though it has been recorded that most of the donors have been bringing customers for the assessee, they did not get any commission for bringing such customers and on the contrary, t .....

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. Referring to the findings recorded by the Commissioner (Appeals) wherein he has recorded that the donors had given the gifts from their accumulated income, it was submitted that the same is not supported by an iota of evidence on record and is therefore, without any basis. It was submitted that the Commissioner (Appeals) while reversing the order passed by the Assessing Officer, has cursorily made reference to the evidence and without any detailed analysis in respect of each donor, by simply p .....

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learned counsel placed reliance upon the decision of the Supreme Court in the case of Commissioner of Income Tax v. P. Mohanakala, [2007] 291 ITR 278 (SC), wherein the court has observed that 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. The court observed that it is true that the opinion of the Assessing Officer for not accepting the .....

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revious year, the same may be charged to income tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is, in the opinion of the Assessing Officer, not satisfactory. Such opinion formed itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence, the same can be used against the ass .....

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e assessees to show that the amount received by purported gifts from the two donors was a gift in the legal sense. The court observed that the assessees had not led evidence to show whether the alleged donors had adequate funds in their respective accounts to make these purported gifts in Singapore Dollars which was almost running into more than five lakhs. Mr. Mehta submitted that therefore, the financial capacity of the donor has to be established by the assessee and merely submitting tax retu .....

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ss of the donor, but the assessee had failed to adduce any proof in this regard. The onus then could not have been shifted to the Assessing Officer without dealing with the findings recorded by the subordinate authorities. Reliance was also placed on the decision of this court in the case of Kaushal H. Patel v. Income Tax Officer, [2014] 365 ITR 383 (Guj), with particular reference to paragraphs 6, 7 and 16 thereof. Reference was also made to the decision of this court in the case of Dinesh Babu .....

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sent case and would not be applicable. 7.3 The decision of the Delhi High Court in the case of Sarita Aggarwal v. Income Tax Officer, [2015] 92 CCH 0055 Delhi HC, was cited for the proposition that it is necessary to establish the factum of love and affection to establish the genuineness of gift. Reliance was also placed upon the decision of the Punjab and Haryana High Court in the case of Commissioner of Income Tax v. Y. M. Singla, [2014] 366 ITR 242 (P & H), for the proposition that, to pr .....

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sufficient reasons for arriving at the conclusion that the gifts are not genuine. 7.4 In conclusion, it was submitted that thus, firstly the burden of establishing the source of the donor lies on the assessee, which the assessee has failed to prove; secondly the assessee has failed to prove the relationship of natural love and affection between the donor and donee, and thirdly, the gift far exceeds the returned income, under the circumstances, the Tribunal was wholly justified in reversing the o .....

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capital account. Referring to the return of income filed by the said assessee, it was submitted that the return of income of the said assessee was duly submitted. As regards Shri Rupchand Ramlal Prajapati, it was pointed out that his return of income for the year 2000-2001 had been produced on record along with PAN card, xerox copies of balance sheet, statement of income, xerox copy of bank passbook, statement etc. As regards donor Shri Piraram Chelaram Rabari, it was pointed out that in his st .....

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horized by the Reserve Bank of India. It was submitted that the Assessing Officer has not established as to how such funds could have gone from the pocket of the assessee to the NRI at Dubai. It was submitted that the Tribunal has observed that the original passbooks have not been produced, in which case the opportunity should have been granted to the assessee to produce the passbooks. As regards the decisions on which reliance has been placed by the learned counsel for the respondent, it was su .....

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Lahorimal v. Commissioner of Income Tax (supra) has held that section 68 and the genuineness of a gift are different things. Referring to the decision of this court in the case of Kaushal H. Patel v. Income Tax Officer (supra), it was submitted that the assessee did not give any explanation and hence, factually, the said decision is distinguishable and is not applicable to the facts of the present case. As regards the decision of this court in the case of Commissioner of Income Tax v. Mira S. K .....

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to the file of the Tribunal to decide the same after affording an opportunity to the assessee to produce the same. As regards the decision of the Supreme Court in the case of Commissioner of Income Tax v. P. R. Ganapathy (supra), it was pointed out that in the facts of the said case, the court had restored the matter to the Tribunal and directed the Tribunal to examine the question in the light of what was stated in the said decision and does not in any manner come to the aid of the respondent. .....

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sion of the Rajasthan High Court in the case of Commissioner of Income Tax v. Padam Singh Chouhan, [2008] 3 DTR (Raj) 190 = 315 ITR 433, for the proposition that there is no legal basis to assume, that to recognize the gift to be genuine, there should be any blood relationship, or any close relationship, between the donor and the donee. Instances are not rare, when even strangers make gifts, out of very many considerations, including arising out of love, affection and sentiments. It was submitte .....

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unal was justified in reversing the order of the Commissioner (Appeals) at the first instance. A perusal of the order passed by the Assessing Officer reveals that he has discussed the details with regard to each donor while coming to the conclusion that the gift made by each of the donors was not genuine in nature. The Assessing Officer has further come to the conclusion that except for Shri Niranjan Chhotalal Kshatriya and Shri Piraram Chelaram Rabari, the identity of the other persons is not p .....

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donors have given the gifts from their cash in hand or capital account and adequacy of current year income to give gift is not to be considered as they have given gifts from the accumulated income. However, this finding of the Commissioner (Appeals) is not based on any supporting material. On the contrary, the evidence on record shows that the Indian donors have very meagre income and no reasonable person could ever come to the conclusion that they have the capacity to make such gifts. Consideri .....

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uch gifts. The Commissioner (Appeals) has also observed that Shri Piraram Chelaram Rabari has stated that he had deposited cash in his bank account and had given the gift from his salary. In this regard, the statement of Shri Piraram Chelaram Rabari recorded under section 131 of the Act reveals that he was working as a watchman (chowkidar) and two years prior thereto, he used to earn ₹ 2,500/- and presently, was earning ₹ 3,200/-. In answer to the query as to whether he had any incom .....

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stated that Shri Piraram Rabari used to bring customers for his scheme and they used to give some discount to such members and it is possible that such members may be giving him some commission. As regards Shri Niranjan Chhotalal Kshatriya, the Commissioner (Appeals) has observed that he has confirmed that the cash deposits in his bank account were from his savings and that the gift of ₹ 1,00,000/- has been reflected in his capital account filed as Annexure to his return of income filed on .....

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on of ₹ 7,02,000/- made by the Assessing Officer. 11. The Tribunal after considering the record of the case in detail, has recorded the following findings : 9. We have heard rival submissions and perused material available on record. Facts have been narrated in details above. At the outset, we would like to mention that cases regarding cash credits and gifts depend on intrinsic facts of each transactions and its only when parity of the facts is established that a principle settled by some .....

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he was showing interest income in the return. On further questioning, he did not remember from whom interest has been earned. He did not disclose any source of income except watchman salary, besides, answer to question No.8, he stated that he has no relationship with the assessee and has only met on number of times. Whereas in answer to question No.35, assessee contended that I have business relationship with Piraram Chelaram Rabari. Answer of the assessee itself make statement of Rabari unbeli .....

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istencies to replies of both the persons i.e. assessee and Rabari and the fact that Mr. Rabari utterly failed to establish his creditworthiness, gifts in question cannot be accepted. AO has rightly treated the same as undisclosed income of the assessee. CIT (A) except some reference to case laws, has made no objection consideration. [ii] Shri Niranjan Chhotalal Kshatriya : He is only an accountant having earning of ₹ 5,500/- per month, who is having household expenses of ₹ 3,500/- an .....

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n, has to be established by the assessee. It is clear that Shri Niranjan Kshatriya did not remember, even the name of any family members of the assessee and the reason of friendship is only meeting at some Advocate office. Assessee in contradiction, in answer to question No.42, said that Shri Niranjan Kshatriya used to come with Jaswantbhai on our occasion , implying thereby some family functions. Similarly, assessee contends that Shri Niranjan happens to meet him after six to eight months. In o .....

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ent under section 131, subsequent affidavit becomes inadmissible being contrary to deposition on oath under statutory provision i.e. section 131 and cannot be relied on. In view of these facts and circumstances, gift cannot be held to be genuine. Coming to two NRIs, it is evident that they were never produced before the AO. Assessee in his own statement also expressed his inability of any knowledge about members of the family of Shri Ramesh Keshkani and said that he met him through one Shri Maha .....

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d he is not a relative. Assessee has no knowledge about the family members. He did not remember names and his family members and local addresses of Shri Vinod Meghani at Ahmedabad, he had not contacted him by mail or telephone since last six to seven years. In view of these glaring deficiency and proper establishment of identity of the donors in the form of original passport and their proper existence, relationship as alleged by the assessee, we are unable to treat this gift as genuine gift as i .....

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h identity and to enable AO for examination and further investigation regarding genuineness of persons and creditworthiness could have been carried out. In the eventuality of assessee having failed to prove its burden, onus does not shift on the AO to accept gifts valid only on the basis of confirmations. 12. Thus, the Tribunal, after duly appreciating the material on record, has recorded findings of fact for the purpose of coming to the conclusion that the gifts in question are not genuine. In .....

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eived from banking channel and their confirmations were filed, no other supporting material had been produced by the assessee to prove the identity of the donors, the genuineness of the gifts and the creditworthiness of the parties. As held by the Supreme Court in the case of Commissioner of Income Tax v. P. R. Ganapathy (supra), the burden is on the assessee to show that the amount received by purported gifts from the donors was a gift in the real sense. In the facts of the present case, the as .....

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nothing to reveal that the relationship between the assessee and the donors was the one involving natural love and affection. In the opinion of this court, having regard to the financial capacity of the donors as emerging from the record, considering the facts of the case from the point of view of a reasonable man taking a reasonable view, it is not possible to believe that the gifts in question are genuine. 13. The Supreme Court in Commissioner of Income Tax v. P. Mohanakala (supra) has held th .....

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revious 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 the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer .....

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ey, the burden is on the assessee to rebut the same, and if he fails to rebut it, it could be held against the assessee that it was a receipt of an income nature. The court further held that section 68 of the Act itself provides, where any sum is found credited in the books of the assessees for any previous year, the same may be charged to income-tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found cred .....

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e by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence. In Commissioner of Income Tax, U.P. v. Bharat Engineering and Construction Co., [1972] 83 ITR 187, the Supreme Court held that in the absence of satisfactory explanation from the assessee, the Income Tax Officer may assume that cash credit entries in its books represent income from undisclosed sources. But what inference should be drawn from the facts proved is a question of fac .....

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erein, inasmuch as, in the facts of the said case, the identity of the donor was established as the donor had appeared in person before the Assessing Officer, the genuineness of the transaction was established, not only by the receipt of the bank draft, but also by the fact of the transaction having borne gift tax once the assessment was framed. The primary onus which rested on the assessee, thus, stood discharged. The court, on facts, found that the donor had produced evidence in support of the .....

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