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2016 (11) TMI 1039 - ITAT VISAKHAPATNAM

2016 (11) TMI 1039 - ITAT VISAKHAPATNAM - [2016] 50 ITR (Trib) 567 - Undisclosed gifts - Held that:- We are of the view that in the absence of anything to show that the transaction was by way of money laundering, additions could not be made towards gifts when the assessee has discharged his burden by proving the identity, genuineness and capacity of the donor. We further opined that gifts are normally made by relatives through natural love and affection and do not necessarily require any particu .....

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s and capacity of the donor. Therefore, we direct the Assessing Officer to delete the additions made towards alleged gifts of ₹ 15 lakhs for the assessment year 2009-10, ₹ 22,90,000 for the assessment year 2010-11 and ₹ 43,00,789 for the assessment year 2011-12. In respect of the remaining amount of ₹ 21,16,611 for the assessment year 2011-12, we deem it appropriate to send the issue to the file of the Assessing Officer and direct the Assessing Officer to verify the claim .....

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e, as well as the Revenue are directed against common order passed by the Commissioner of Income-tax (Appeals), Visakhapatnam dated November 13, 2014, for the assessment years 2009-10, 2010-11 and 2011-12. Since the facts are identical and issues are common, they are heard together and disposed of, by this common order for the sake of convenience. 2. The brief facts of the case are that the assessee is a physician, deriving income from running hospital, diagnostic centre, viz., Chandana Hospital .....

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y operation, certain incriminating documents were impounded which revealed suppression of professional receipts. The post-survey investigation reveals that during last 3 financial years, the assessee has made substantial investments in various firms in the form of share capital and loans to the extent of ₹ 1,05,50,000 and the sources for the investments in the said firms were claimed to be out of gifts received from his brother to the tune of ₹ 1,02,07,400 during the subject years an .....

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of ₹ 14 lakhs each offered during the course of survey operation. The case has been selected for scrutiny and, accordingly, notices under section 143(2) and section 142(1) of the Act were issued. In response to the notices, the authorised representative of the assessee appeared from time to time and furnished details called for. 3. During the course of assessment proceedings, the Assessing Officer issued a show-cause notice and asked to explain gifts received from his brother with necessa .....

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ved from his brother and also failed to prove the capacity of the donor to give such huge gifts. The Assessing Officer further held that though the assessee furnished proof of transfer of money through banking channel, failed to prove the sources of alleged gift in the hands of the donor. The Assessing Officer further observed that there is no occasion for the donor to give gift to his brother and also the gifts have been given periodically according to the necessity of the assessee, therefore, .....

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made before the Assessing Officer. The assessee further submitted that the Assessing Officer was not correct in making additions towards gifts received from his brother as unexplained credits, in spite of furnishing necessary details such as bank statements of the donor, sources of the donor and also proof of transfer of money through banking channel. The assessee further submitted that the Assessing Officer has summoned the donor under section 131 of the Act and the donor has personally appeare .....

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of Income-tax (Appeals), after considering the relevant submissions of the assessee, confirmed the additions made by the Assessing Officer towards alleged gifts for the assessment years 2009-10 and 2010-11, however, allowed partial relief of ₹ 20 lakhs for the assessment year 2011-12 and confirmed the balance amount of ₹ 44,17,400. The Commissioner of Income-tax (Appeals) further held that the assessee has failed to correlate the alleged gifts stated to be received from his brother S .....

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e-tax (Appeals) held that all credits appearing in the HDFC Bank account of the assessee are local clearing cheques and the assessee has failed to correlate transfer of money from his brother's foreign bank account to Indian bank account or directly to the assessee's bank account by way of remittance of foreign currency. As regards the assessment year 2011-12, the Commissioner of Income-tax (Appeals) held that on careful consideration of bank statement filed by the assessee, it would sho .....

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is able to link the credits with transfer vouchers, which shows transfer of money by his brother, Shri V. Bala Sudhakar, to the assessee's account. Similarly, the assessee is able to correlate and link for the deposits made on February 2, 2011, and February 3, 2011, aggregating to ₹ 20 lakhs. The Commissioner of Income-tax (Appeals) further observed that though the assessee is able to correlate and link the credits in the assessee's bank account with necessary transfer vouchers fro .....

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assessment year 2011-12, out of total gifts of ₹ 64,17,900, deleted gifts to the extent of ₹ 20 lakhs and the balance amount of ₹ 44,17,420 has been confirmed. Aggrieved by the Commissioner of Income-tax (Appeals) order, the assessee as well as the Revenue are in appeal before us. 6. The learned authorised representative for the assessee submitted that the Commissioner of Income-tax (Appeals) was erred in confirming the additions made by the Assessing Officer towards the allege .....

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vouchers and credits in the assessee's bank account corresponding with deposits in the donor's bank account has been established before the Assessing Officer. The Assessing Officer, during the course of assessment proceedings, summoned the donor and the donor has personally appeared before the Assessing Officer and admitted that he had given gifts to his brother on various occasions. The donor also confirmed that he had sufficient means to give gifts to his brother and to this effect, fu .....

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as considered bank account of the assessee maintained at HDFC Bank, where these credits are found credited, but the fact is that the assessee has received gift from his brother to his bank account maintained at ICICI Bank and from ICICI Bank the same amount has been transferred to HDFC Bank. The assessee has correlated all the entries in the ICICI Bank to HDFC Bank and explained the sources for the credits with necessary bank transfer vouchers from his brother's account in abroad. The Assess .....

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s that once the relationship is established between donor and the donee, there is no necessity of any occasion for giving gift and the gifts can be given out of natural love and affection between relatives. 7. On the other hand, the learned Departmental representative strongly supported the order of the Commissioner of Income-tax (Appeals) in respect of the assessment years 2009-10 and 2010-11, however in respect of the assessment year 2011-12, the Departmental representative submitted that the .....

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is order should be upheld. 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The Assessing Officer made additions towards alleged gifts stated to be received from his brother, Shri V. Bala Sudhakar for the reason that the assessee has failed to prove genuineness of gifts received from his brother and also capacity of the donor to give gifts. The Assessing Officer was of the opinion that the assessee has received per .....

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that gifts are genuine transactions and received from his brother out of natural love and affection. The assessee further contended that his brother is having sufficient sources of income to give gift and he had furnished necessary proof of bank statements of the donor, proof of his sources of income and also transfer vouchers for transfer of money in the foreign currency to his Indian account. It was further claimed that he had correlated each and every entry in the bank account with correspond .....

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r of money from his foreign account to Indian Bank and maintained in ICICI Bank along with proof of his sources of income in abroad. We find force in the arguments of the assessee, for the reason that the assessee has furnished details of gifts received from his brother. The assessee right from the beginning claims that the sources for his investments in various firms is out of gifts received from his brother for the past 3 years. The assessee also furnished all proof with regard to gift receive .....

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le ground that the assessee has failed to prove the capacity of the donor to give such a huge case. The Assessing Officer further alleged that the assessee has received periodical gifts from his brother according to his necessity and there is no occasion for the donor to give gifts to his brother. We do not agree with the findings of the Assessing Officer, for the reason that once the relationship is established between the donor and the donee, there is no reason for the Assessing Officer to dou .....

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. The burden cast upon the assessee stands discharged, the moment the assessee proves the identity and genuineness of the transactions. The assessee cannot be further required to prove sources of the money out of which gifts are given. Therefore, we are of the view that the Assessing Officer was completely erred in making additions towards alleged gifts in spite of furnishing necessary proof with regard to identity of the donor, genuineness of the transactions and also capacity of the donor to g .....

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. Bala Sudhakar, along with the telegraphic transfer vouchers issued by authorised foreign exchange dealers. On a perusal of the paper book filed by the assessee, we find that the Assessing Officer has made additions of ₹ 15 lakhs towards alleged gift stated to be received by the assessee from his brother credited in the ICICI Bank account on December 4, 2008, January 28, 2009, and March 17, 2009. On further verification of the details filed by the assessee, we find that the said amount wa .....

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d in the HDFC Bank account of the assessee is correlated to the bank account of Shri V. Bala Sudhakar, further supported by transfer of money in foreign currency to his bank account at ICICI Bank. 11. Similarly, for the assessment year 2010-11, the assessee has filed paper book. On a perusal of the paper book filed by the assessee, we find that the assessee has furnished bank statement of HDFC Bank and ICICI Bank along with the bank statement of his brother maintained at ICICI Bank with money tr .....

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tails filed by the assessee, we find that the entire gift amount of ₹ 22,90,000 has been correlated with corresponding credits in the donors bank account, further supported by transfer vouchers for having transfer of money from abroad to his Indian bank account. From the above facts, it is clear that the entire amount of ₹ 22,90,000 stands explained and also correlated to the bank account of Shri V. Bala Sudhakar. 12. Coming to the assessment year 2011-12. Out of the total gifts of & .....

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or has proved the sources for the gifts of ₹ 20 lakhs. In respect of ₹ 18,00,789, though the assessee able to correlate the entries with necessary bank entries, the Commissioner of Income-tax (Appeals) confirmed the additions, by stating that, the assessee failed to prove the sources of donor for the gift to the extent of ₹ 18,00,789. The assessee has filed a paper book containing details of bank statements of HDFC Bank and ICICI Bank along with bank statements of donor, Shri V .....

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the alleged gift by stating that the donor does not have sources of income. The moment the assessee proves the identity and the genuineness of the transactions, he need not to prove the sources for the gifts he had received. 13. Coming to the balance amount of ₹ 21,16,631. The assessee initially claims to have received gifts of ₹ 64,17,400 from his brother but failed to prove the gifts with necessary evidences to the extent of ₹ 21,16,631. The assessee claims that the remainin .....

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has been received from various persons. The assessee further submitted that though he claims that the entire amount is received from his brother, an amount of ₹ 21,16,631 has been received through banking channels from his close friends and relatives. The assessee has filed a paper book containing details of amount received from his friends and relatives along with confirmation letters. On a perusal of the details filed by the assessee, we find that out of ₹ 21,16,631 a sum of ₹ .....

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assessee has initially claimed that the total amount is received from his brother, subsequently changed his argument and stated that the balance amount is received from his friends and relatives. Therefore, we are of the view that the assessee is able to explain the sources to the extent of ₹ 43,00,789 out of the total gift of ₹ 64,17,400. Therefore, we are of the view that the assessee has proved the identity, genuineness and the capacity of the donor to the extent of ₹ 43,00 .....

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suspicion or doubt or perspectives of culpability or on the quantum of the amount, involved. The court further held that suspicion and doubt may be starting point of investigation but cannot at the final stage of assessment, take the plea of relevant facts, particularly where a deeming provision is sought to be invoked. The relevant portion of the order is extracted below : "Suspicion and doubt may be the starting point of an investigation but cannot, at the final stage of assessment, take .....

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e furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the Revenue to prove that these facts are not correct. The Revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved. Any ambiguity or any ifs and buts in the material collected by the Assessing Officer must necessarily be read in favour of the assessee, particularly when the question is one of taxation, under a de .....

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equiring an answer to a 'substantial question of law'. A question of fact may, however, partake of the nature of a substantial question of law if the process of reasoning or the reasons assigned are perverse and/or arbitrary or relevant facts have been ignored or misconstrued. A set of facts may admit, as they often do, to two different and diametrically opposing views but interference under section 260A of the Act, would only be warranted, if findings are so incomprehensible as to be pe .....

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isclosed the identity of the donors and denied that the gifts were his income. The assessee produced Dr. O. S. Gill, before the Assessing Officer, who stated that he had an annual income of $ 12,0000. The Assessing Officer was dissatisfied and sought informa tion through the Central Board of Direct Taxes, which, in turn, sought information from the Inland Revenue Service, Great Britain. The information received, confirmed that Dr. O. S. Gill and B. P. Bhardwaj had accounts in Midland Bank, Unite .....

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in detail in preceding paragraphs, particularly in the context of the ques tions of law framed on April 8, 2002, is whether the assessee has discharged his onus to prove that gifts are valid and there cannot be treated as his deemed income under section 69A of the Act. As already recorded, the Tribunal has, after examining the entire mate rial, in detail, recorded a finding that the assessee has discharged onus to prove that the gifts are genuine, thereby affirming the opinion recorded by the C .....

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wers were held to be vague and there does not appear to be any such relationship between the parties that would warrant such a large gift. As Dr. O. S. Gill appeared before the Assessing Officer, admitted that it was his money and admitted the gift, his accounts and income were verified, his failure to remember his account number, which was already known to the Revenue, could not justify the raising of an inference against the assessee. A question may, however, legitimately arise that such a lar .....

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required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section 69A of the Act. As already held, If the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the Revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of section 69A of the Act. It .....

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inations and where concrete facts are not available, relevant facts, as would raise a credible inference of culpability requiring an assessee to rebut the inference so raised. More often than not, Revenue authorities, for want of relevant mate rial, institute 'inquisitions', as opposed to inquiries and by addressing questions that the more inculpatory in nature, seek to build their case, from answers proffered by an assessee. The findings of fact recorded by the Commissioner of Income-ta .....

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ace Shri Varinder Sharma but, unfortunately, no further enquiry was carried out but instead the assessee was asked to disclose the whereabouts and his connection with Shri Varinder Sharma. The assessee denied any association, business or otherwise with Shri Varinder Sharma but admitted that Shri Varinder Sharma was known to him. The onus, therefore, shifted to the Revenue to prove that Shri Varinder Sharma was an associate or an employee and only thereafter could the Revenue raise an infer ence .....

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icer, thus, drew an adverse infer ence against the assessee for his failure to 'disprove' his relationship with Shri Varinder Sharma. An arrangement between a donor and another is an arrangement between the donor and his source of money. The onus to probe and prove this aspect lies upon the Revenue and not upon the assessee, particularly where the income is being dealt with under a deeming provision. A person who receives a gift, is not required to prove the source of the money of his do .....

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the assessee, ignored the material received from the Central Board of Direct Taxes from the Inland Revenue Service, Great Britain and failed to follow the matter any further with respect to Shri Varinder Sharma and on the basis of suspicion, held that gifts are not genuine. Having already held that it was for the Revenue to proceed to investigate the matter further, I find no error in the opinion recorded by the Tribunal, which has been reproduced in detail in preceding paragraphs or that in th .....

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27 DTR (Delhi) 65. The hon'ble High Court of Delhi, under similar circumstances held that finding of the Tribunal that the assessee has discharged his burden as to the identity as well as the capacity of the donor was based on material and evidence on record and Assessing Officer had not produced any positive evidence which could lead to the inference that the amount received by the assessee was not gift. The Tribunal was correct in deleting the additions made by the Assessing Officer under .....

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