Mere receipt of money through banking channels not sufficient to prove genuineness of its receipt as a gift
CASE LAWS DETAILS
DECIDED BY: ITAT, `C’ BENCH , AHMEDABAD, IN THE CASE OF: Dinesh Babulal Thakkar v. ACIT, APPEAL NO: ITA Nos. 4434 & 4435/Ahd/2006, DECIDED ON March 31, 2010
15. We have heard the rival submissions and perused the material on record. In our considered view there is no case to interfere in the order of the Ld. CIT(A). Reasons are that it is not proved that Biral M. Patel was known to the assessee. No evidence in support of any acquaintance or love or affection with the assessee has been filed. There are no reasons or occasion for giving gift, except relying on the decision of Hon’ble Rajasthan High Court that blood relation is not necessary for giving gift. In our considered view the Judgement of Hon’ble Supreme Court in Mohan Kala’s case (supra) will be more applicable on the facts of the present case. It require the necessity of blood relation, and surrounding circumstances for accepting the gift to be genuine, in addition to evidence of transfer of money. Hon’ble S.C. in above case held that transfer of moneys through Banking channels is not sufficient to hold the gift as genuine. In this regard we refer to the following portion of the Judgement. (Head notes)
“In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature.
The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature. The assessees received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective account of the assessees by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on the Citibank, N. A. Singapore. The evidence indicated that the donor was to receive suitable compensation from the assessees. On this material the Assessing Officer held that the gifts though apparent were not real and accordingly treated all those amounts which were credited in the account books of the assessees as their income applying section 68 of the Income-tax Act, 1961. The assessees did not contend that even if their explanation was not satisfactory the amounts were not of the nature of income. The Commissioner (Appeals) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the Assessing Officer and the Commissioner (Appeals). On appeal the High Court re-appreciated the evidence and substituted its own findings and came to the conclusion that the reasons assigned by the Tribunal were in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court :
Held,_ reversing the decision of the High Court, that the findings of the Assessing Officer, the Commissioner (Appeals) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process of banking transaction was not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. Sumati Dayal v. CIT  214 ITR 801 (SC) ;  Supp 2 SC453 relied on.
16. From the above decision, it is clear that genuineness of the gift transactions cannot be determined without looking into the human probability aspects, surrounding circumstances such as relationship of the donor and donee and if assessee fails to establish any of these factors, the gift transaction cannot be treated as genuine. In this regard we also refer to the following Judgements:-
(i) Sajan Dass and Sons v. CIT  264 ITR 435 (Delhi) :
In this case, the hon’ble Delhi High Court held that mere identification and showing movement through banking channels is not sufficient. In the present case also, it is not established that donors had money to deposit in the bank. Therefore, the learned Commissioner of Income-tax (Appeals) was justified in holding that the amount claimed as gift, was the assessee’s own money. (ii) Ram Lal Agrawal v. CIT  280 ITR 547 (All) In this case, the hon’ble Allahabad High Court that where there is a finding given by the Income-tax authorities that creditworthiness of depositors was not proved, the amount could be assessed as income of the assessee. (iii) Sunil Siddharthbhai v. CIT  156 ITR 509 (SC) It was held by the hon’ble Supreme Court that it is the right of the Income-tax authorities to consider genuineness of the transactions and to penetrate the veil and ascertain the truth. It is within their power to consider whether a particular transaction was to evade tax. (iv) K. Ramasamy v. CIT  261 ITR 358 (Mad) It was held that veil can be pierced in exceptional circumstances. The Income-tax authorities are entitled to look at the reality of the transaction.
17. In addition to above, following Judgements are also relevant on the issue :-
(1) ITO v. Diza Holdings P. Ltd.  255 ITR 573 (Ker);
(2) Raunaq Ram Nand Lal v. CIT [2002 254 ITR 617 (P & H);
(3) Smt. Iva Gogoi v. CIT  254 ITR 576 (Gauhati);
(4) CIT v. Precision Finance Pvt. Ltd.  208 ITR 465 (Cal);
(5) Rajshree Synthetics Pvt. Ltd. v. CIT  256 ITR 331 (Raj);
(6) R. B. Mittal v. CIT  246 ITR 283 (AP) ;
(7) CIT v. United Commercial and Industrial Co. P. Ltd.  187 ITR 596 (Cal);
(8) M. A. Unneeri Kutty v. CIT  198 ITR 147 (Ker);
(9) Nemi Chand Kothari v. CIT  264 ITR 254 (Gauhati); and
(10) Hindusthan Tea Trading Co. Ltd. v. CIT  263 ITR 289 (Cal).
18. We infer from the discussion made in these judgements that Revenue authorities are entitled to consider genuineness of the transactions and to penetrate the veil and ascertain the truth. They are entitled to look into the surrounding circumstances to find out the realities of the transactions shown to have been entered into by the parties. The other factors e.g. relationship, occasion for giving gifts, and gifts not given by the donee to the family members of the donor etc. In the present case, also all these factors put together leave no doubt that it is a fit case where form has to be ignored and one has to go into the realities of the transaction. Hon’ble Rajasthan High Court in Chainsukh Rathi vs. CIT (2009) 270 ITR-360 (Raj.) held that even occasion is relevant for finding out whether gift is genuine. If there is no occasion, gift cannot be accepted as genuine. Applying the ratio of Hon’ble S.C. and other courts, as referred above, we draw following inferences :-
(i) Mere identification of donor and showing movements of gift amount through banking channels is not sufficient to prove the genuineness of the gift,
(ii) Since the claim of the gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift. The assessee has to prove that the money has actually been received as a gift from donor,
(iii) It is the burden of the assessee to show and demonstrate what kind of relationship or what kind of love and affection the donor has with the assessee, and to explain circumstances in which gift were made.
If the explanation as regards the claim of the gift offered by the assessee is not proper, reasonable and acceptable one, an inevitable conclusion would be drawn that the assessee has not offered any explanation, as the expression “the assessee offers no explanation” means the assessewe offers no proper, reasonable and acceptable explanation (see P. Mohanakala 291 ITR 278 (SC). (v) The opinion of the A.O. for not accepting the explanation offered by the assessee as not satisfactory or proper or reasonable or acceptable is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the A.O. is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion by the A.O. (vi) In cases where the explanation offered by the assessee about the nature and source of the money received by the assessee is not satisfactory, there is, prima facie, evidence against the assessee, viz, the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature, (vii) The burden is on the assessee to prove and establish that, even if the explanation offered by the assessee is not acceptable, the material and attending circumstances – available on record do not justify the money received by the assessee being not treated as a receipt of income nature.
19. Similarly, ITAT Delhi F-Bench in the case of Rajendrakumar Mittal vs. ACIT in ITA. NO.1199/Del/ 07 pronounced on September 7, 2009, wherein Judgement of Delhi High Court, Punjab & Haryana High Court and Hon’ble S.C. on the issue of gift are referred came to the same legal inference.
20. In the present case, explanation offered by the assessee about the gift is not satisfactory because (1) there is no direct confirmation from the donor and that he has given gift to the assessee. (2) Creditworthiness of the donor is not proved through independent sources particularly about his assets, from the record of US Revenue Agencies. (3) there is no occasion or reasons for giving gift to the assessee. (4) It is not proved that donor had any acquaintance or any love and affection for the assessee. It is not shown as to when donor had come to India and interacted with the donee or donee had gone to USA and interacted with the donor. (6) Assessee has not shown income from any definite sources. On the other hand it is showing income from sources which are vague indicating that he is engaged in the activities which are not defined. The allegation of the A.O. that assessee is engaged in the cricket betting and for that purpose he is engaged in money laundering gets supported from undefined source of income declared by the assessee in his return. (7) No gift deed as such has been filed showing the gift by the donor and receipt of the gift by the assessee.
21. As stated above mere receipt of amount through banking channels is by itself not sufficient to prove the genuineness of the gift. We are more concerned here about the genuineness of the gift and not about the mode of the payment. Thus, we are concerned with the reality of the transaction not with the form alone. The burden of proving the genuineness of gift is more and heavier as compared to proving the burden in the case of credit to be taxed u/s. 68 because in gift, donor forgoes lien over the money forever, whereas in the case of loan/cash credit the creditor retains the right to recover the money from the assessee and he may have suitable evidence to prove that he has given credit. Therefore, merely by saying that money is transferred through banking channels will not be sufficient to discharge the burden laying on the assessee. Unless said burden is discharged, AO cannot be asked to accept the apparent.