Case Law Details
RELEVANT PARAGRAPH
2. We have heard the parties. The brief facts of the case are that the assessee received 33.7 bigha of agriculture land from Smt. Navita Gupta, wife of Shri Ravi Kumar Gupta of Jaipur . The rights on this land were relinquished by Smt. Gupta without any consideration and the same was registered on 25-10-2004 witlj the Sub-Registrar who valued the land i atRs.40,80,380/ – for valuation of stamp duty. The land was not shown in the .balance sheet by the assessee and the reason given was that as the land was received as a capital asset on relinquishment of rights, the same was not shown in the balance sheet. It was stated that Sh. Ravi Kumnr Gupta, husband of the donor is a close friend of Sh.Kushal Chand Bader, father of the assessee. Sh. Ravi Kumar Gupta and Shri Kushal Chand Bader is director in M/s. Arihant Jewels Limited. As the relinquishment of right the agriculture land by Smt Navita Gupta was considered as a gift, the AO applied provisions of section 56(2)(v). The section is reproduced below:-
“Where any sum of money exceeding twenty five thousand rupees is received without consideration by an individual or a HUF from any person on or after 1/9/2004, the whole of such sum will be considered as income from other source. “
The AO interpreted the word “money” by taking support from Oxford Advanced Learner’s Dictionary and held that the word “sum of money” as given in section 56 could not be restricted to hard cash and it should be read in a broader sense because if it was restricted to hard cash the purpose of legislation would to be defeated.” the Act with these findings applied provisions of section 56(2)(v) and value of Rs.40,80,380/ – was treated as income from other source. The AO also held the gill received by the assessee as non-genuine and for this he gave his finding which is summarized below:-
(i) There is no relationship between the donor and donee as both asp from different caste or religion.
(ii) As affirmed by the assessee » husband of the donor and father of the donee are directors in one company which proves that both the families have business relationship. Under the circumstances it was beyond imagination that under consideration was not passed on transfer of the agriculture land.
(iii) From the statement recorded of Smt Navita Gupta some points state emerges and AO* concluded that statement of affairs were not enclosed with the return of income by the donor Smt Navita Gupta. The investment in two properties by her were Rs.1,26,000/ – only. She has been filing return showing interest income only. From the copy of bank statement filed by SmtNavita Gupta for the period t.4.2003 to 31.3.2006 it appears that the maximum balance in her account was Rs.5,22,092/ – and most of the time credit ttalance was. below Rs.I lac. That the land was purchased on the advice of ShJCushal Chand Baders as Admitted by SmtNavita Gupta am investment of R.90,000/- was made to purchase this agriculture land. The reason given by her to make a gift of agridculture land after 20 years of purchase when her own son was around 20 years old was not found acceptable by the AO. The AO also observed that there was no occasion for making such gift. There was neither any marriage nor other occasion which can justify the gift. From the financial statement one can notice that the value of asset side is not more than Rs.2 lacs and therefore Smt Navita Gupta did not have any capacity. Shri is also having a son to inherit the property whereas such a huge property was gifted tea person not related to her at all. Thus the transaction was, not considered &s genuine. The AO ajso relied upon the Following case laws:
1. Rajiv Tandon Vs ACH 294 ITR 488 (Delhi): In order to prove the genuineness of gifts the surrounding circumstances are to be looked into.
2. Chain Shukh Rathi Vs CIT 270 ITR 368 (Raj.): There should be some occasion for making gift.
3. R.S.Sibal 269 ITR 429 and Sajon Das and Sons 264 ITR 435 (Delhi): Mere identification of the donor was not sufficient to prove the genuineness of the gift but the assessee was also required to prove the capacity of the donor to make a gift.
4. Durga Prasad More 821 ITR 540 (SCj .
5. Sumati Dayal 214 ITR 801 (SC)
6. Lal Chand Kalra 77 CTR 135: Tax authorities were entitled to look into the surrounding circumstances to find out the genuineness of the transactions by applying the test of human probabilities-
The AO therefore considered the gift as non-genuine as the donor had no capacity to give such a huge gift and there was no occasion to make such a gift. The AO the0refore made addition of Rs.40,80.380/ – under section 56(2)(v) and also alternatively under section 56(1).
7. We have heard the rival contentions and perused the facts of the case. We concur with the views of the Id. CIT (A) whose order appears to be reasoned one and who has given finding that the ownership of the agriculture land gifted has not been doubted by the Assessing Officer. In the statement of affairs filed along with the return of income by Smt. Gupta, the land has been appearing as an asset of the donor. Its value has been shown at Rs.30.000/- in all the balance sheets filed by the donor for the assessment year 1994-95, 1988-99 and 1999-2000 as it was purchased about 20-25 years back for Rs.90,000/- only. Relinquishment deed was executed and property has been registered by the Sub-Registrar in favour of donee and stamp duty, has been paid. As such conditions laid down in Section 122 andl23 of Transfer of Property Act have been fulfilled. Thus it is a valid transfer of immovable asset in favour of the assessee donee. The Hon’ble Supreme Court in the case of CIT Vs Sirelimal Nawalkha 25I.ITR 108 has held that requirement of complying with the provisions of Transfer of Property Act and Registration Act had to be fulfilled in order that there could be valid gift. However, transfer of capital asset as a gift is not a transfer u/s 47 for the purpose of capital gain and therefore. Provisions of Section 50C cannot be applied. As issue is not charging of Gift under Gift Tax Act and therefore, valuation of the gifted asset is not the subject of our concern. Now coming to issue of applicability of Section 56(2) (v), the words used in the sub-section are “any sum of money”. If any sum of money exceeds twenty five thousand rupees and it is received without any consideration then whole of such sum will be taxed as income from other source. Whether “sum of money may. Include an immovable property also is the issue to hi decided. The AC has observed that” it should not be restricted to hard cash and it should be read in a broader some because otherwise the purpose of legislation would be defeated. As the Id. AR in his submission has stated that when these Provisions were introduced through Finance Act. 2004, the Finance Minister in his budget speech maintained that to prevent money laundering, loophole was required to be plugged and accordingly purported gifts from unrelated persons above Rs. 25,000/- should be taxed as income in the hands of the donee. “Money laundering” denotes siphoning off money from country by illegal channels. Changing lands of an agricultural land within the country and between two citizens cannot be considered as money laundering. Thus it cannot be said that the provisions were introduced to stop such transfer of capital assets within India. Further when the language of the section is clear, there is no need to interpret in own’s way. If the intention of the legislature was to cover any asset apart from money, it could be a used the word `asset’ or like any other denotive movable/immovable properties. The Id. AR has given several instances from the IT Act where the word `money’ is used as different from bullion, jewellery, immovable property etc. various case laws have been cited where the phrase `any sum’ higher side been used as money only in section 80G. Thus if agriculture land cannot be considered as `any sum’ higher side been used as money only in section 80G. Thus if agriculture land cannot be considered as ‘any sum of money’ . Provisions of Section 56(2)(v) cannot be applied. The AO as an alternative has also applied Provisions of Section 56(1). As the agriculture income is exempted and it h not chargeable to income tax under any head of income specified in Section 14, it is not covered by sub-Section (i) of Section 56. Only an ‘income’ can be taxed under I.T. Act and income is defined u/s 2(24). An asset cannot be termed as ‘any sum’ as used in various sub-clauses of Section 2(24) or an ‘income’ and therefore, agriculture land which was gifted cannot be taxed as income. It is not covered by any heads of income given in Section 14 and therefore, neither agriculture land nor agriculture income is chargeable to tax under any heads of income. The application of Provisions of Section 56(i) therefore, cannot be upheld in the present case. Now coming to the genuineness of the gifts, as agreed, the donor and donee though are not related by blood or marriage but are old family friends. The donors husband donee’s father are old college friends and dose family relationship is proved by various photographs attached with the written submission. The tact dial both them are directors in a company also establishes their friendship. Just because both are directors in one company and have business relationship cannot establish, (hot some underhand consideration would have changed hands, tt is long back held by the Hon’ble Supreme Court in the case of K..P. Verghese that Revenue is to prove Hint some underhand consideration was paid. Similarly making assumption will not prove the transaction sham. It is customary to give gifts on birth of a child, marriage and other social or religious occasions. However, it is not necessary that a gift can be given only on specific occasion. Once, donor expressed her intention to give gift and by registering the land in favour of donee, executed her intention and by petting registered in his name, the donee accepted die gilt and in absence of any material with the AO to prove that any consideration was paid hi lieu of the gilt, all the ingredients of a an fulfilled. Now coming to the capacity of the donor. It is an admitted fact that the donor had agricultural land in question in her possession and she had been showing agriculture income also from the land. She has been staying with her husband who is a well known architect. For her livelihood, she was not depending on the agriculture land gifted but only on her husband. As long she was not living alone and independent, capacity of her family cannot be ignored. Once capacity of the donor ‘s proved and all other ingredients to make a gift complete also fulfilled, there is no reason to disbelieve the gift as agriculture land given by Suit. Gupta to the assessee. In such circumstances and facts of the case, we find no infirmity in the order of the Id. C1T (A) who has rightly deleted the addition made by the AO. Thus the solitary ground of the Revenue is dismissed.
