TMI Blog1993 (4) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... pal in which he stated as under : (1) that he gifted Rs. 1,00,000 to Smt. Bhagwati Devi Mohata in Indian currency by means of a demand draft drawn on Chartered Bank, Calcutta, issued by Nepal Bank Ltd., Kathmandu ; (2) that he was assessed to Income-tax in Nepal ; and (3) that he had made the said gift out of love and affection to Smt. Bhagwati Devi Mohata. The Assessing Officer did not accept this version of the assessee and added the said sum of Rs. 1 lac as her income from undisclosed sources for want of proper verification. No other ground or reason was mentioned by the Assessing Officer nor did he mention under which provision of the Income-tax Act such gifted sum was treated by him as income of the assessee from undisclosed sources. Not being satisfied with this addition, the assessee carried the matter to the Appellate Commissioner (A.C.) by way of first appeal. 3. During the course of first appeal proceedings the assessee again filed a sworn declaration of the donor, Shri R.N. Agarwal, duly notarised before a Notary Public of West Bengal and who was identified by one Shri Dilip Kumar Basu, Advocate of Chief Metropolitan Magistrate Court, Calcutta. The assessee al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly the declaration filed by the donor before the Assessing Officer as well as before the A. C. to support his case that the gift was made by Shri R.N. Agarwal, money passed and that the gift was complete upon the acceptance of the gift by the assessee. When the gift is complete in accordance with law, it is not open to the A.C. to take a different view and hold that it is a collusive transaction and the gift is invalid or not genuine. The assessee's counsel took us to the order of the A.C. to satisfy us that he has taken irrelevant factors into consideration and has doubted the gift on frivolous reasons branding the same as a collusive transaction without placing on record any concrete or positive evidence. Arguing further the assessee's counsel submitted that the A.O. made the addition for want of proper verification ; whereas, the A.C. turned the table and brought out a wholly altogether new story and improved the case of the A.O. on new grounds. It was not the case of the A.O. that the gift was invalid or that the transaction was a collusive transaction whereas the A. C. held that it was a collusive transaction and the gift was invalid. The A.C. has unjustifiably igno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, he invented a new case for the A.O. and held that the gift was not genuine and the transaction of gift was a colourable device to evade tax and held that the A.O. was justified in treating the sum of Rs. 1 lac as assessee's income under section 68 of the Income-tax Act whereas the addition was not made by the A.O. as stated by us above, taking the aid of section 68 of the Act. The A.O. has stated that the issue to be decided in this appeal is whether in the facts and circumstances of the case the gift was genuine and whether the A.O. was justified in treating the amount of Rs. 1 lac as assessee's income from undisclosed sources. It was not the case of the A.O. that the gift was invalid or non-genuine. Therefore, it was not open for the A.C. to embark upon the issue about the validity or genuineness of the gift. The A.C. has stated as under in the impugned order : " It was indeed an extraordinary thing that a person like R.N.Agarwal,with whom the chances of the assessee's social interactions are so remote and far in between, gifted a sum of Rs. 1,00,000 to the assessee just like that. Neither Sri R.N. Agarwal was rich enough to make such an unusual gesture of love and aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the true colour of the transaction as a device to evade tax is evident to any man of commonsense. In support of this finding, the famous observations of the Supreme Court in the case of McDowell Co. Ltd. 154 ITR 148 readily come to my mind : ' The proper way to construe a taxing statute, while considering a device in avoid tax, is not to ask whether the provisions should be construed literally or nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction.' When the Supreme Court frowned upon even legal devices to avoid payment of tax, this facade of gift put up by the assessee to evade payment of tax on her unaccounted money should be imposed for what it is with greater vigour a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 by the family members and viewed the gift with suspicion. The observations made by the A.C. to confirm the addition are imaginary and general and appear to us as tainted with prejudice vitiating his order. The provisions of section 68 also ; in our view, are not attracted in the instant case as the sum of Rs. 1 lac was not found credited in the books of account maintained by the assessee for the previous year relevant to the year under appeal. Section 68 comes into operation if any sum is found credited in the books of account maintained by the assessee and no satisfactory explanation is offered in respect of the sum so credited. The sum of Rs. 1 lac was found credited in the bank account of the assessee in Union Bank of India through the bank demand draft of Chartered Bank, Calcutta, drawn by the donor in favour of the assessee. When the amount is found directly credited to the bank account of the assessee then the provisions of section 68 are not at all attracted and, therefore, the A.C. grossly erred in coming to the conclusion that the A.O. was justified in treating the said sum of Rs. 1 lac as income from undisclosed sources under section 68 of the Income-tax Act, 1961. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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