In the case of: Deputy Commissioner of Income Tax Vs. Alok Gautam, Decided by: ITAT, Lucknow, Assessment Year: 1994- 95, Decision Date: 23rd January, 2009
Gist of decision: The facts argued in favour of the gifts being genuine are:
(i) gifts were transferred through banking channels;
(ii) existence of NRE accounts from which gifts were given are not disputed;
(iii) the credits into NRE accounts came from outside India;
(iv) Identity of donors is established through NRE accounts;
(v) creditworthiness of the donors is established because no one else could deposit money into NRE account;
(vi) there is no evidence that it is the assessee’s money which is routed through NRE accounts by way of hawala or otherwise;
(vii) there is a relationship between assessee and the donors in as much as S was a composer contractor and he taught the assessee the art of composing and further that when assessee visited Saudi Arabia , arrangements for stay in Jeddah was made by S.
These facts are not enough to establish either the identity of the donors or their creditworthiness. The question of holding that transactions are genuine is too remote to be given even a thought of acceptance. In spite of repeated requests by the AO to produce the donors for examination, the assessee failed to do so. If the donors had any acquaintance with the assessee, or they had any semblance of love or affection with the assessee, which was claimed to be existing as they have given a sum of Rs. 6 lakhs or Rs. 7,40,000 to the assessee by way of gift, they could have come forward to bail out the assessee by producing themselves before the AO in support of alleged transaction of gifts. So far as identity of donors is concerned, it is not proved as to who has given gifts to the assessee. Copies of their passports which could have been used to verify the signatures of the donors on the letters of gift were not produced. It was also not explained as to how the money into the NRE accounts claimed to be belonging to the donors was transferred and whether such transfer was actually done by the alleged donors as the linkage between transfer from the accounts of donors to the NRE account in India was not established. The claim of the assessee that in the NRE account of the donors only the donors can deposit money is not acceptable because at the direction of any third party, money can be credited into a NRE account operated by owner’s representatives. It is not for the AO to prove that money into NRE account had come from a third source and not from the donors. It is for the assessee to show that money in the NRE account which is maintained and operated through Authorised Representatives in India had actually come from the alleged donors. The claim of the assessee that merely because money had come into NRE account of donors, it must have actually been transferred by the donors cannot be upheld. It is necessary to establish the nexus between money deposited in NRE accounts and the donors, which the assessee has failed to do so. Assessee having failed to prove the identity of the non-resident donors who are said to have gifted substantial amounts to him from their NRE accounts by producing them personally or copies of their passports and also failed to prove the creditworthiness of the said donors, the alleged gifts cannot be treated as genuine, more so since the assessee had no direct relationship with the donors, there was no occasion for making the gifts, and there was no contact between the parties for almost ten years before the time of said gifts.