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2016 (7) TMI 103 - ITAT PUNE

2016 (7) TMI 103 - ITAT PUNE - TMI - Addition u/s 68 - gifts received from two donors - bonafides and genuineness of gifts - Donors financial capacity to make the gift not established - Held that:- Statement of donors when read with underlying documents & return of donors etc. does not foster any confidence on the bonafides of the gift . Donors have meager resources to be assigned any capacity to gift such sizeable amount as claimed having regard to the capital available, yearly withdrawals made .....

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to giving a voluntary gift to the tune of ₹ 5 lacs or 7 lacs which is equivalent to his income of nearly 4 to 5 years. The purported gift would lead to almost total erosion of the capital of the person concerned. Apparently, the overall behaviour of the so called donors is thus very intriguing and does not accord with ordinary human conduct. - When seen in totality, facts and circumstances are squarely against the assessee. Logical conclusion that follows from above is that the claim o .....

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ction 56(1)(v) not applicable in the instant case. CIT(A) in our view, has rightly endorsed the contention of AO on applicability of S. 56(1)(v) also. - Decided against assessee. - ITA No.698/PN/2011 - Dated:- 8-6-2016 - MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri M. K. Kulkarni For The Respondent : Shri Mahesh Jarnam, JCIT ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal filed by the assessee is against the order of CIT(A)-II, Pune dated 15.03.2011 rela .....

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y the assessee are that the assessee filed the return of income for the assessment year 2006-07 declaring total income of ₹ 5,39,080/-. From the extract of the capital account of the assessee, the Assessing Officer found that the assessee has received gifts from two parties namely Shri Mohan Dattaraya Pandit and Shri Kamalakar Moreshwar Bokil amounting to ₹ 5,00,000/- and ₹ 7,00,000/- respectively. It was submitted by the assessee before the Assessing Officer that donor Shri Mo .....

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er that a gift of ₹ 7,00,000/- was received in cash on 17.08.2004 which is also supported by an affidavit in confirmation thereof. It was claimed by the assessee that this gift was made in assessment year 2005-06 but the assessee deposited the amount in bank in assessment year 2006-07. Copy of IT return of Shri Bokil was also annexed. To verify the bonafides of the gifts received in cash, both these parties were summoned under section 131 of the Act and their respective statements were rec .....

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n there was no balance available at the disposal of the donor. The Assessing Officer, thereafter, noted that finally the amount was stated to have been given in cash inspite of very grim financial background of the donor. The Assessing Officer analyzed the data of the donor for last 3 financial years and noted that withdrawal in the last three years harbours around meager ₹ 50,000/- per year. Pertinently, the donor has never made any investment worth ₹ 1,00,000/- or more. The returne .....

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, thus, concluded that the explanation offered by the assessee towards nature and source of receipt of cash credit in the capital account is not found to be satisfactory. He accordingly invoked section 68 of the Act and added the aforesaid amount of ₹ 5,00,000/- as a deemed income of the assessee. The statement of another donor Shri Kamalakar Moreshwar Bokil was also recorded and similar revelation came to the fore. Shri Bokil also admitted that he has not made any investment exceeding  .....

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before the Assessing Officer that he and the assessee are good friends from last 12-13 years. There is, however, no particular reason and occasion for grant by way of gift. It was merely given out of natural love and affection. The Assessing Officer did not find any legitimacy in the submissions made by the assessee in the light of statement of the donor and other evidences placed before him. The Assessing Officer noted from the return of income of donor Shri Bokil that for the assessment year .....

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31.03.2004 against the total capital of ₹ 7.69 lakhs whereas it has come to as low as ₹ 1469/- as on 31.03.2006. No bank statement of the donor was produced before the Assessing Officer to support the creditworthiness of the donor for gift of this size. He accordingly concluded that : (i) no occasion or particular reason to give the gift is discernible from the statement of the donors under section 131 of the Act, (ii) creditworthiness is not proved, (iii) the genuineness of the tra .....

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actions. The Assessing Officer relied upon the decision of the Hon ble Supreme Court in the cases of Sumati Dayal vs. CIT, (1995) 125 CTR 124 (SC) and CIT vs. P. Mohanakala, (2007) 291 ITR 278 (SC) to hold that credit of ₹ 12,00,000/- on the capital account remains unexplained in terms of section 68 of the Act. 4. The Assessing Officer also tested the issue on the touchstone of section 56(1)(v) and made an alternative opinion that the gift so claimed to have been received is to be treated .....

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e in the case of the assessee. The CIT(A) thus also upheld the addition both under section 68 as well as on the alternative ground under section 56(1)(v) of the Act. 6. Aggrieved further by the order of the CIT(A), the assessee is in second appeal before the Tribunal. 7. The Ld. Authorized Representative (AR) for the assessee Shri M. K. Kulkarni submitted that the Assessing Officer was in error in invoking section 68 of the Act. He submitted that the donors were produced before the Assessing Off .....

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fficer as well as the CIT(A) has analyzed the issue threadbare on facts and placed reliance on the orders of the authorities below. 9. We have carefully considered the rival submissions and perused the material on record. The solitary issue involved in the instant case is bonafides and genuineness of gifts received from two donors aggregating to ₹ 12,00,000/- found credited in the capital account of the assessee. From the assessment order, We observe that the assessee claims to have receiv .....

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ed in the financial year 2005-06 relevant to the assessment year 2006-07 in the bank and credited in his capital account in the same year. The gift from other party namely Shri Kamalakar Bokil is also received in cash. The Assessing officer has dealt with the statement of the donors extensively and demonstrated that the gift received from these parties are sham in as much as these parties have neither any financial capacity nor any tangible relationship to motivate them to surrender such whoppin .....

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ft such sizeable amount as claimed having regard to the capital available, yearly withdrawals made, yearly income generated etc. Coupled with this, We find that both the gifts have been given without there being any occasion to do so. One of the donors is claimed to have parted with gift cheque for an amount of ₹ 5 lacs to the assessee without there being any balance in the bank. The balance did not eventually come to the account. The donor then claims to have handed over gift in cash for .....

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nderlying capacity or any other documentary evidence of source to prove such payment. The Hon ble Supreme Court in P.R. Ganapathy (2012) reported in 26 taxmann.com 354 has held that under S. 68, the burden is on the assessee to show that the amount received by purported gift(s) from the donors is a gift in the legal sense. The assessee has to show whether the donors have the financial capacity to make the gift(s) in favour of the assessee. The fact that the two are assessed to tax at Singapore d .....

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see. The donors appear to be mere acquaintances. It is difficult to visualize that a person of this grim financial background will venture into giving a voluntary gift to the tune of ₹ 5 lacs or 7 lacs which is equivalent to his income of nearly 4 to 5 years. The purported gift would lead to almost total erosion of the capital of the person concerned. Apparently, the overall behaviour of the so called donors is thus very intriguing and does not accord with ordinary human conduct. 9.3 Thus, .....

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