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2016 (6) TMI 561 - GUJARAT HIGH COURT

2016 (6) TMI 561 - GUJARAT HIGH COURT - TMI - Addition u/s 68 on unexplained cash credit - gift receipt - Held that:- The assessee cannot be asked to prove the source of source. Moreover, Gift Tax Act nowhere provides that a gift by somebody who is not creditworthy is not a gift. The Tribunal instead of addressing itself to the requirement of Section 68 of the Act, has adopted an approach which is unwarranted in law. See SMT. NEELAMBEN GOPALDAS AGRAWAL Versus INCOME TAX OFFICER [2015 (6) TMI 135 .....

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ribunal, Ahmedabad Bench (hereinafter referred to as the Tribunal) dated 17.02.2006 in ITA No. 3543/Ahd/2002, for the Assessment Year 199697, the assessee has preferred the present Tax Appeal for consideration of the following substantial question of law which were framed while admitting the matter on 23.07.2007. (1) Whether on the facts and in circumstances of the case the Tribunal was right in law in upholding the addition of ₹ 2,20,000/under Section 68 of the I.T.Act? (ii) Whether the T .....

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g the alternative plea of the appellant to work out peak credit instead of adding the entire amount of ₹ 2,20,000 2. Since the original appellant assessee has expired his legal heirs are brought on record. 3. The facts of the case are that the assessee was given ₹ 2,20,000/advanced by Shri YN Rokade by cheques on various dates and the said amounts were collected from various devotees of the assessee. The Assessing Officer held that creditworthiness and genuineness of the transaction .....

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the view of the revenue authorities. Being aggrieved and dissatisfied with the impugned order passed by the Tribunal, the assessee has preferred the present Tax appeal for consideration of aforesaid substantial question of law. 4. Mr. Manish Shah, learned advocate appearing for the assessee submitted that the assessee has collected some amount of ₹ 5000/from his followers and total amount came to ₹ 2,20,000/. He further submitted that the assessee has produced on record the confirma .....

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ssions made by learned advocates for both the sides. It is borne out from the records that a nonresident Indian Shri Chinubhai Gangadas Thakkar, permanently residing in Middlesex, U.K had given gift of ₹ 2 lakhs by way of a cheque from his Non Resident External Account to the assessees. The said gift is also evidenced by the Deed of Gift executed by said Chinubhai Thakkar. The cheque was credited in the bank account of the applicant on realisation. It is clear that the assessees had produc .....

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ircumstances, is succinctly laid down by this Court in the decision in case of CIT v. Pragati Cooperative Bank Ltd., Suffice it to state that an assessee can be asked to prove the source of credit in books, but cannot be asked to prove the source of the source. 12. Unfortunately, as noted hereinbefore, the Tribunal has proceeded on an entirely fallacious premise, when it is observed, we have to decide the question about the genuineness of the gift on the balance of probabilities and, in our view .....

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inted out that it had received a gift from Shri Ramji Nanji. Shri Ramji Nanji appears before the assessing officer and confirms the fact of having made the gift. He produces evidence in support of the source from which the funds for making the gift are available with him. The gift is given by way of a bank draft. The revenue does not dispute any of these facts. In fact, the revenue commences the present proceedings on the day it makes gift tax assessment qua this very gift in the hands of the do .....

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d with the source of the funds in the hands of the donor, it was upto the revenue to take appropriate action. The Tribunal fails to consider all these aspects. In fact, the donor having filed gift tax return and assessment having been framed on the donor, is not taken into consideration by the Tribunal at all. This was a very strong factor in support of the explanation tendered by the assessee. 14. The Tribunal, to the contrary, goes on to discuss and question as to why the donor should make a g .....

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onor as well as the assessee, it is apparent that despite minor discrepancies, the factum of the gift having been made has been accepted by the donor and in the circumstances, it cannot be stated that the credit entry in the capital account of the assessee did not reflect the true picture. The assessee had shown the same as gift received. The assessee tendered an explanation and nothing has been brought on record to even hold for a moment that the said explanation is not satisfactory. Though the .....

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stablished beyond any semblance of doubt and genuineness of the transaction was also established not only by the receipt of bank draft but also by other contemporaneous record. The Revenue although in that case also was not satisfied with the source of fund in the hands of donor and yet, the Court held it was for the Revenue to take appropriate steps in that event, but, that would not lead to question genuineness of transaction. We find that the case of the assessee respondent in the matter on h .....

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ities have given cogent and sufficiently acceptable reasons for arriving at positive conclusions that such gifts are genuine and the transactions are creditworthy. 5.2 As far as the decision of Harishbhai Raojibhai Patel (supra) is concerned, this Court observing that the gift amount was paid through cheque upheld the Tribunal's order deleting the addition of cash credit made by the Assessing Officer. 5.3 So far as the decision cited by Mr. Parikh is concerned, in the case of Shri Anil Kumar .....

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the case of Murlidhar Lahorimal (supra). We are bound by the decision of the coordinate Bench of this Court in the case of Murlidhar Lahorimal (supra) wherein it is held that the assessee cannot be asked to prove the source of source. Moreover, Gift Tax Act nowhere provides that a gift by somebody who is not creditworthy is not a gift. The Tribunal instead of addressing itself to the requirement of Section 68 of the Act, has adopted an approach which is unwarranted in law. The assessees pointed .....

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