Delhi High Court held In the case of CIT vs. Sudhir Budhraja that the findings of the Tribunal are based on sufficient material and cannot be stated to be perverse. On the other hand that the AO had no material or had not collected any evidence to reject the claim made by the Assessee. Apart from doubting and questioning the material produced by the Assessee, the AO had not produced any positive evidence which could lead to the inference that the amount received by the Assessee was not gift. High Court has has held that Insofar as the failure on the part of the donor to provide his business details, details of his assets, bank accounts and his agreements with his associates and other information is concerned; clearly, a donor could not be expected to share such details, which understandably may be considered as confidential.
Facts of the Case
The Assessee is a Chartered Accountant. The Assessee filed a return of income for the AY 1995-96 on 31st October, 1995 indicating gross professional receipts of Rs.18,95,901/- out of which Rs.18,05,400/- was received as consultancy fees from a US based company – M/s Blackfin Development Company Inc., USA (Blackfin). In addition the Assessee had also received US$ 6,00,000/- from Blackfin. It was the Assessee’s case that Blackfin had remitted the amount at the instance of Sh. Jaspal and it was a gift from him.
During the assessment proceedings on 3rd March, 1997, the donor appeared before the AO and was examined on oath. The donor affirmed that he and the Assessee had been close friends since 1971 and the remittance made was as a gift from him out of love and affection for the Assessee. He also stated that he had a business turnover of US$ 3-4 million. The Assessee was also examined on oath on 14th March, 1997 and 28th May, 1997. Thereafter, the Income Tax Authorities conducted a survey under Section 133A on the Assessee’s business premises and a questionnaire was issued to the donor. The donor replied the said questionnaire stating that he has already offered all explanations including his capacity and capability to make the gift and also the source of the gift. The Assessee was called upon to produce the agreement with Blackfin pursuant to which the Assessee had been engaged to provide consultancy services. The assessee produced the same
The AO passed an assessment order dated 27th March, 1998, inter alia, holding that although the entity of the donor had been established, the Assessee had failed to establish the capacity of the donor to make the gift or the genuineness of the transaction. The AO held that the Assessee had failed to substantiate his claim of having received the gift and added the amount of the aforesaid gift as income in the hands of the Assessee.
Held by CIT (A)
CIT (A) rejected the appeal of assessee.
Held by ITAT
ITAT allowed the appeal of assessee. It was held that the Assessee had established the source of the gift as well as the creditworthiness of the donor, so accordingly addition is not allowed.
Held by High Court
The Tribunal held that the Assessee had discharged its burden as to the identity of the source as well as the capacity of the donor. The Tribunal’s findings are, essentially, findings of fact and there is little scope to interfere with the same unless it is concluded that the findings are perverse in law and/or are not based on any material. In CIT v. Sunita Vachani (1990) 184 ITR 121 (Del) this court held that ““in our opinion, the Tribunal had, on merits, come to the conclusion that the gifts were genuine. This is a pure question of fact. The Tribunal has examined the evidence which was available on the record and has arrived at the aforesaid finding. Even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad, unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as representing the income of the assessee in India.”
There is no dispute that the identity of the donor has been established. The donor had appeared before the AO and recorded his statement on oath. He had affirmed (i) that he had gifted the amount in question to the Assessee out of love and affection; (ii) that the amount had been remitted by Blackfin at his instance; (iii) that he had known the Assessee since 1971 and was close to the Assessee; (iv) that his average annual income was 3-4 million dollars (equivalent to Rs.15 crores approximately); and the donor had also answered all other questions that were put to him.
Also the Assessee had recorded his statement affirming that he had received the gift from the donor. His statement also clearly indicated that he and the donor were friends since long and the donor was a highly successful businessman. The Assessee had also produced a copy of the notarised certificate issued by Blackfin confirming that the donor and Blackfin were associated since 1993 and the donor was to receive monies from Blackfin and that a sum of US$ 6,00,000/- had been remitted by Blackfin to the Assessee through its bank account on the instructions of the donor.
Insofar as the issue regarding discrepancy in the statement of the donor is concerned, we find that the same is not material in determining the question of the genuineness of the gifts or the capacity of the donor. it is apparent that the discrepancies in the statement are not significant. Insofar as the failure on the part of the donor to provide his business details, details of his assets, bank accounts and his agreements with his associates and other information is concerned; clearly, a donor could not be expected to share such details, which understandably may be considered as confidential.
The Assessee had produced the donor who answered all questions put to him. The Assessee as well as the donor had sworn statements indicating their close relationship going back several years. The Tribunal had concluded that the Assessee had discharged the burden. The AO on the other hand had not identified any material that was available with the Assessee, or should have been available with the Assessee, and had been withheld by him. In our opinion, the Tribunal rightly considered the issue in its correct perspective while holding that the Assessee had discharged his burden.
Insofar as the professional consultancy fee received from Blackfin is concerned, the Assessee had produced a copy of the agreement as well as the letter of termination. The agreement itself was in force for a period of six months and in terms of the agreement, the Assessee was to receive a sum of US$ 1,20,000 against, which the Assessee had received a sum of US$ 1,16,833. The Assessee had affirmed that except for the said arrangement it had no connection with Blackfin. The discrepancy in the amount received by the Assessee as consultancy fees and the amount receivable in terms of the agreement could not possibly be a ground for doubting the amount of gift as consultancy fees.
In Umacharan Shaw & Bros v. CIT: (1959) 37 ITR 271 (SC), the supreme court held that “ there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine and further observed “the conclusion is the result of suspicion which cannot take the place of proof in these matters”. In the present case too, the AO had rejected the evidence produced and based his conclusion only on surmises; there was hardly any material for him to conclude that the amount in question was not a gift.
Accordingly, appeal of the revenue dismissed.