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TMI Blog2010 (10) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... essment was completed after hearing of the assessee. 5. In appeal the learned CIT(A) vide order dt. 3rd March, 2006 has partly allowed the appeal of the assessee and confirmed the addition of ₹ 2,00,000 made by the AO being undisclosed income. 6. The assessee is in appeal before us. 7. The learned counsel for the assessee has filed paper book giving brief facts and citations relied and submissions before the learned CIT(A), copy of the gift deed and IT returns of the donors and submission of Smt. Manisha Devi Jain was also brought on record and relied on the order of the Tribunal in ITA No. 118/Gau/2001, dt. 27th Sept., 2006. Therefore, submitted that the donors are taxpayers and filed financial statements, gift deed and disclosed the gift in their financial accounts. Therefore, the gifts shall not be treated as undisclosed income of the assessee and no addition is called for. 8. The learned Departmental Representative relied on the order of the AO and that of the learned CIT(A). 9. We have heard the rival submissions and perused the records. As regards ground No. 1 10. Ground No. 1 is not pressed before the learned CIT(A). Therefore, the same cannot be adjudicated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentity for earlier assessments, the addition cannot be justified. Shri Anil Kr. Jajodia is also a taxpayer on record with Revenue for asst. yr. 2002-03 filed return of income along with statements of accounts filed before the AO, substantiated by gift deed and confirmation. The non-application of judicious mind and unilateral attitude of the AO does not serve the purpose for the Revenue for making addition for namesake. 18. Therefore, on the basis of the facts before us, we delete the addition made by the AO and sustained by the learned CIT(A) while relying on the decision relied by the assessee i.e., order passed by the Hon'ble Gauhati Bench of the Tribunal in ITO vs. Some Prakash Nahata & Sons (ITA No. 118/Gau/ 2001, dt. 27th Sept., 2006), orders in CIT vs. Shree Gopal & Co. (1994) 117 CTR (Gau) 357: (1993) 204 ITR 285(Gau), Tolaram Daga vs. CIT (1966) 59 ITR 632(Assam), Sarogi Credit Corporation vs. CIT 1975 CTR (Pat) 1: (1976) 103 ITR 344(Pat) and Khandelwal Constructions vs. CIT (1998) 145 CTR (Gau) 65: (1997) 227 ITR 900(Gau). Our views get support from orders in CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138: (1986) 159 ITR 78(SC), CIT vs. Shanti Swarup (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be accepted as an evidence of their capacity to give the gift and the gifts could not be considered genuine. 4. The source of income shown in the respective returns of the donors clearly establish that these were the cases of bogus capital formation by filing IT returns. 5. The cash in hand shown by the donors was abnormally high. 6. No bank account was kept by Shri Anil Kumar Jajodia and even after giving the alleged cash gift of ₹ 1,00,000 the cash in hand was shown as ₹ 64,772. 7. The bank balance in the case of Smt. Manisha Jain was only ₹ 1,101 and the alleged gift was shown to have been given in cash and the cash in hand thereafter was shown at ₹ 2,03,955. 8. The alleged donors did not have any fixed deposits or any other investments and the income was too small to meet their own expenses. 9. There was no ceremonial occasion to give the gifts and the assessee had failed to establish the genuineness of cash gifts of large sum of ₹ 1,00,000 each by these two persons. 5. The learned CIT(A) observed that from totality of the facts and circumstances it was clear that the claim of gift was only a colourable device adopted by the assessee and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in the case of Shree Gopal & Co. (supra). With due, respect, it is seen that the Hon'ble jurisdictional High Court has observed that when there was suspicion about entries regarding alleged borrowings of substantial amounts, it was for the assessee to show that the entries were genuine and represented borrowings from a genuine creditor. In the case of Shree Gopal & Co. (supra) the finding given was that credits were genuine and the Hon'ble High Court observed that in a reference under s. 256(1) it was not expected to reappreciate the evidence and circumstances and to arrive at a finding on such appreciation and differ from the conclusion of the statutory authority or the appellate authority. Thus, with due respect, the ratio of the decision in the case of Shree Gopal & Co. (supra) is not applicable to the facts of the case before us. Similarly in the case of Raichand Kothari (HUF) vs. CIT (1997) 139 CTR (Gau) 329: (1997) 223 ITR 250(Gau) it was held that the decision of the CIT(A) was reversed by the Tribunal, without a reasoned order and, therefore, the order of the Tribunal was not valid. In the case of Jalan Timbers (supra) it was held that the Tribunal did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stomary gifts were received by cheque and the "amounts" were accumulated over a period of several years and invested and, therefore, the decision is not applicable to the case before us where large amount of cash was claimed to have been received as gift. Similarly, with due respect, in the case of Nemi Chand Kothari (supra) the amounts as deposits and not as gifts, were received by way of cheques and the identity of the creditors and the fact of amount received by cheques were established. It was also held by the Hon'ble jurisdictional High Court that : "In order to establish the receipt of a cash credit, as required under s. 68 of the IT Act, 1961, the assessee must satisfy three conditions, viz., (i) identity of the creditor, (ii) genuineness of the transaction, and (iii) creditworthiness of the creditor." 13. With due respect, in the case before us the amount of ₹ 2,00,000 claimed as gift was received in cash and the capacity of the donor and genuineness of transaction could not be proven. The action of the lower authorities cannot be considered wrong. 14. In the case of Shanti Swarup (supra) the reference was rejected because the finding had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 In this appeal there is difference of opinion between the Members of the Bench. Therefore, the following question is referred to the Hon'ble President of the Tribunal under s. 255(4) of the IT Act, 1961, for the opinion of the Third Member. The question framed is as under : "Whether on the facts and circumstances of the case the lower authorities were justified in considering the amount of ₹ 2,00,000 claimed to have been received as gift by the assessee as her income from undisclosed sources ?" D.K. Tyagi, J.M. (As Third Member) : Since there was a difference of opinion between the learned Members constituting Guahati Bench of Tribunal, Guahati in respect of the aforesaid appeal, I was nominated as Third Member by the Hon'ble President, Tribunal under s. 255(4) of IT Act, 1961. The question referred in this case reads as under : "Whether on the facts and circumstances of the case, the lower authorities were justified in considering the amount of ₹ 2,00,000 claimed to have been received as gift by the assessee as her income from undisclosed sources ?" 2. The brief facts of the case, as found by the learned Members, are that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord the identity of both the donors on the basis of their PAN, sources of funds, statement of income and expenditure, balance sheets and gift deeds. Further, the assessee was not required to prove the source of the source. (b) In response to summons under s. 131, Smt. Manisha Devi Jain appeared before the AO, but she was not examined on that day. She is assessed to tax and filed her return for asst. yr. 2002-03 along with income and expenditure statement, balance sheet etc. showing the gift. The assessee also filed confirmation of gift from this donor. (c) No notice under s. 131 was ever issued on the other donor Sri Anil Kr. Jajodia alleging incomplete address in the copy of the gift deed. That the AO should have issued fresh notice/summons in order to verify the genuineness of the gift. The AO did not do so and without considering the evidence on record, i.e., gift deed, balance sheet, income and expenditure statement, income-tax identity for earlier assessments, gift could not be disbelieved and addition could not be made. Further, Sri Anil Kr. Jajodia is taxpayer on record for asst. yr. 2002-03 and the gift was supported by gift deed. The learned JM in support of his above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned counsel appearing on behalf of the assessee argued at length and referred to several decisions in support of the claim of the assessee, as also supporting the proposed order of learned JM. His submissions are summarized as below : (a) That both the donors are assessed to income-tax. The assessee furnished copies of returns for asst. yr. 2002-03 along with bank statement (only in case of Smt. Manisha Devi Jain), balance sheet, income and expenditure statement, gift deeds etc. in support of her getting the gifts from the respective donors. Further, as desired by the AO, the assessee produced Smt. Manisha Devi Jain, donee, before the AO on 4th March, 2005 for examination when a notice under s. 131 was served upon her. However, till 4 pm she was not examined by the AO on that day and as she was suffering from high fever and due to physical compulsion, she had to leave the AO's office. (b) That subsequently vide her letter dt. 21st March, 2005 addressed to the AO, Smt. Manisha Devi Jain explained the reason for her leaving the AO's office on 4th March, 2005 at 4 pm and further confirmed with supporting evidence the gift having been made by her to the assessee. Smt. Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, as held by the learned JM or otherwise, as held by the learned AM. 9. In this case, admittedly, no notice was served on one of the donors, viz. Sri Anil Kr. Jajodia, on the plea that address recorded in the gift deed was incomplete. But at the same time it is also a fact that income-tax details of this person were already with the AO wherein the full address was furnished. Therefore, it was well within the jurisdiction of the AO to have issued notice/summons on that person at the said address with a view to verify the genuineness of gift claimed to have been given to the assessee, which the AO did not pursue. In regard to other donor Smt. Manisha Devi Jain, it was the allegation of the AO that though in response to notice under s. 131 she appeared on the scheduled date, but she could not be examined as she left the office on that day. I find from the assessment order that the said person subsequently filed a letter of her own dt. 21st March, 2005, which is also placed, on pp. 23 and 24 of the paper book filed before the Tribunal, confirming the said gift and also explaining the reasons for her leaving the AO's office in the afternoon on 4th March, 2005. In fact, she also sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be that an inquiry under s. 68 need not necessarily be kept confined by the AO to the transactions, which took place between the assessee and his creditor but the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the AO is, under s. 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under s. 68 is definitely limited." (Emphasis, italicized in print, supplied) It was in this context that Hon'ble jurisdictional High Court in the above case has held that under s. 68, creditor's creditworthiness has to be judged vis-a-vis transactions, which have taken place between the assessee and the creditor, and it is not the business of assessee to find out source of money of his creditor or genuineness of transactions which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors, for these aspects may not be within special knowledge of the assessee. Their Lordships of Hon'ble Gauhati High Court in the said case has further held as under : "Since it is not the business of the assessee to find out the source(s) from whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has to prove the identity of the creditor, the creditworthiness of the creditor and the genuineness of the transaction so as to discharge the burden laid upon him. Similarly in the case of gift, the donee has to prove the identity of the donor, the creditworthiness of the donor and the genuineness of the gift so as to discharge the onus. Thus, ingredients which are required to be proved to discharge the onus of proving the cash credit are identical to the ingredients which are required to prove the gift. Therefore, the ratio of a decision given in the case of cash credit would be squarely applicable in the case of gift also. The facts in the case of the assessee are identical to the facts in the case of Orissa Corporation (P) Ltd. (supra). In this case the assessee has furnished all the particulars of the donors including their PANs. The AO did not enquire into the matter in true spirit and treated the gifts as bogus on surmise and conjecture. 11. The learned AM relying on the decision of Hon'ble Supreme Court in the case of Sumati Dayal (supra) upheld the observation of the CIT(A) that the assessee failed to prove the capacity of the donor and genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Sumati Dayal (supra). In the case of Sumati Dayal (supra), there were the claims for winning of substantial amounts in horse race in two consecutive years and the Hon'ble Supreme Court rejected the assessee's claim about her winnings from races as genuine and gave finding keeping in view the facts relating to that issue only. While in the case of the assessee, she received gifts of ₹ 1 lakh each from two donors. Therefore, the ratio of decision in the case of Sumati Dayal (supra), in my opinion, is not applicable to the case of the assessee. 12. Further, the learned AM in his proposed order has stated that the decision in the case of Sajan Dass & Sons (supra) relied upon by the learned CIT(A) is directly on the issue and thus upheld the action of the authorities below. In the said case, decision was rendered on entirely different set of facts of that case. In that case the Tribunal found that the signature of the creditor did not tally with the signature on his passport and further the creditor has categorically denied having made any gift to any person at any point of time and also the opening of any bank account from which the alleged gift was made. Basing on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the conclusion arrived at by the learned JM in his proposed order in deleting the addition of ₹ 2 lakhs in the hands of the assessee.
15. The matter will now go to the regular Bench for passing the order as per the majority view.
BY THE BENCH :
Since there was a difference of opinion between the learned Members constituting the Division Bench of Tribunal, Guahati in this case, the matter was referred to the learned Third Member under s. 255(4) of IT Act, 1961 for his opinion in regard to one question referred to therein.
2. The learned Third Member vide his order dt. 6th Oct., 2010, after hearing the parties, considering the facts and circumstances of the case and for the reasons mentioned therein, concurred with the proposed order of learned JM on the question referred to him. In view of the above, as per majority view, the appeal of the assessee on the issue referred to the learned Third Member stands allowed. There were other grounds in this appeal, on which there was no difference of opinion and, therefore, decision on those grounds in the proposed orders of learned Members remains the same.
3. In the result, the appeal of the assessee is partly allowed. X X X X Extracts X X X X X X X X Extracts X X X X
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