Case Law Details
Brief Facts
1. In AY 1994-15, the assessee (Sarita Aggarwal) had shown credit of Rs.2,60,000/- in the capital account under the narration Gift. The Assessing Officer disbelieved the claim and made an addition of the aforesaid amount to the income as declared, holding that the assessee was unable to establish genuineness of the gift. However, the assessee succeeded before the Commissioner of Income Tax (Appeals), who by order dated 27th February, 1998, deleted the addition after taking on record additional evidence. Revenue on appeal, has succeeded before Tribunal.
2. The assessee was specifically called upon to prove capacity of the donor and furnish evidence in support of genuineness of the gift. In response thereto, the assessee filed photocopy of the draft of Rs.2,60,000/- issued by the Standard Chartered Bank, Deira, Dubai. No other material or evidence was brought on record. The Assessing Officer held that the aforesaid evidence did not show and prove the financial status and capacity of the donor.
3. The Assessing Officer observed that as it was a case of cash credit, the onus was on the assessee to establish identity, capacity or creditworthiness of the donor and also the genuineness of the transaction. In cases of gift, the degree of proof was substantially higher. The donor and donee should have a close association with each other.
4. Assessee has succeeded in 1st appeal in CIT(A), and CIT(A) hold that records that Chhatrapalsinh Jadeja was working as a Regional Manager with Air India in Dubai and was maintaining an account with the Standard Chartered Bank, Dubai. Chhatrapalsinh Jadeja had purchased the demand draft and made the said gift to the assessee. He held that the Assessing Officer was not justified in holding that the assessee had not been able to establish identity the donor or his creditworthiness.
5. In Tribunal, the Revenue had succeeded before the Tribunal wherein it was held that the assessee had failed to prove or establish a close relationship with the donor and had not been able to show the circumstances under which the gift was made. It was observed that the donor was a stranger to the donee. The fact that the money had originated from a foreign bank account maintained by the donor was not sufficient to establish genuineness of the gift.
Issue
Whether the assessee had discharged onus and proved genuineness of the gift of Rs.2,60,000/-.
Assessee’s Contention
1. The assessee has drawn our attention to the letter dated 25th September, 1996 and the subsequent letter dated 26th February, 1997 to highlight that in the former, the Assessing Officer had not specifically asked the assessee to prove genuineness of the gift. In contrast, in the subsequent letter dated 26th February, 1997, the assessee was categorically and specifically called upon to prove capacity of the donor as well as genuineness of the transaction. The Assessing Officer by the said letter had accepted that the assessee had adequately proved the identity of donor, but had asked the assessed to prove capacity of donor and the genuineness of transaction by way of evidence or by producing the donor himself, noticing that the donor was then living in Bombay (now Mumbai).
2. the assessee had filed copy of passport of Chhatrapalsinh Jadeja, his bank account statement as well as letter written by Chhatrapalsinh Jadeja asserting that he was employed in Dubai, U.A.E. and that as he had started residing in Bombay (now Mumbai), and therefore, it had taken time for him to collect the requisite information from Dubai.
3. The appellant has drawn our attention to affidavit of the appellant filed in this court on 19th August, 2003, enclosing therewith letter dated 19th July, 2003 purportedly written by the donor, Chhatrapalsinh Jadeja. The aforesaid letter is a typed letter stating that in November, 1993, the donor had gifted Rs.2,60,000/- to the appellant by way of demand draft from his bank account in Dubai and at that time his family comprised of wife and two children. In 1993, he was working with Air India and was posted at Dubai as Regional Manager for the Gulf and the Middle East. His salary was Rs.6 lacs per annum with additional perquisites which included a house and conveyance. He joined Air India in 1962 and retired after 33 years of service.
4. Appellant has relied upon two decisions of this Court in Commissioner of Income Tax, Delhi versus Mayawati (2011) 338 ITR 563 (Del) and Commissioner of Income Tax, Delhi versus R.S. Sibal [2004] 269 ITR 429 (Del).
Revenue contention
Assessee had failed to prove or establish a close relationship with the donor and had not been able to show the circumstances under which the gift was made.
High Court held that
1. The letter produce by assesee is conspicuously silent and does not set forth and propound a close relationship either by way of blood or friendship between the donor and the assessee.
2. It is peculiarly noticeable that the affidavit of donor was not filed. Thus, the donor has evaded and refrained from making any deposition on oath. What repudiates and belies the assertion that the appellant and the donor were known to each other or were close family friends, is that this proposition was never asserted or propounded before the Assessing Officer, and even the order of the first appellate authority is quiet on the said aspect. The impugned order of the Tribunal records that the donor was a complete stranger to the donee and no evidence had been brought on record to show their relationship
3. The gift from an NRE or non-resident‟s account is not sacrosanct and unquestionable; the appellant must prove genuineness of the gift and the fact that it was made out of love and affection. It was the duty of the Assessing Officer to ask and the assessed inescapable obligation to truthfully answer. The Assessing Officer would necessarily have verified and cross checked the assertion.
4. In case the said facts and evidence in the form of affidavit or even a letter, would have been pleaded and relied upon before the Assessing Officer, the factual assertions would have been appropriately and adequately examined and gone into. It would not be correct but rather assumptuous at this stage to take the letter of the donor and the affidavit of the appellant as satisfactory proof that the donor was a long standing and an age old friend of the husband of the appellant. This will amount to introducing and taking on record new and fresh evidence and accepting a factual assertion without permitting the Revenue to confront the donor and the donee, check and ascertain the true and correct facts. An appeal under Section 260A of the Act is maintainable on a substantial question of law only.
5. Learned counsel for the appellant has drawn our attention to two decisions of this Court in Commissioner of Income Tax, Delhi versus Mayawati (2011) 338 ITR 563 (Del) and Commissioner of Income Tax, Delhi versus R.S. Sibal [2004] 269 ITR 429 (Del). In R.S. Sibal (supra), it was specifically mentioned that mere identification of donor and payment through banking channels would not be sufficient to prove genuineness of the gift and the onus lies on the assessee not only to establish the identity but also the capacity of the donor to make the gift. The judgment in the case of Mayawati (supra), also refers to decisions of Division Bench of this Court in CIT versus Anil Kumar [2007] 292 ITR 552 (Del). This decision in favour of the Revenue observes that when there was nothing on record to show financial capacity of the donor, their creditworthiness and what kind of relationship the donors had with the assessee, addition would be justified.
6. In Pawan Kumar Aggarwal versus Income Tax Officer, ITA No.137/2003, decided on 27th November, 2014, this court held that:
“8. Possibly, some of the information/confirmation may not have been possible for the appellant assessee to procure, but the close relationship, not necessarily blood relationship, between the parties could have been asserted and fortified. Genuineness of the transaction has to be examined by not only taking into consideration the paper/documents, which were executed, but surrounding circumstances are also relevant. These aspects are of significance and importance, when genuineness of a transaction is in issue. A gift is a voluntary act, by a person who out of love and affection transfers of money, moveable or immoveable asset to another person. Element of personal and close relationship between the two is the motivating factor as the donor parts with and transfers what belongs to him to someone, whom he/she loves and cares. This mandates and requires a close association between the donor and the donee, except where gifts are made for charity and philanthropic purposes. In the present case, the appellant merely relies upon the form of declaration by Bhupinder Kumar that the gift was made out of love and affection.
… In fact, this section [Section 68] casts a burden on the assessee to show genuineness of the transaction by establishing identity of the person from whom the payment was received, the source of payment, which necessarily need not be confined only to the details of the bank account from which payment was made but also corroborating and surrounding circumstances.
7. Referring to the facts of the present case, we find the order passed by the Tribunal is justified and correct. They were right in holding that the assessed has not been able to prove genuineness of the gift and also the factum that the transaction was out of love and affection, a sine qua non to establish a genuine gift.
Analysed by CA Rahul Sureka
