Case Law Details
Mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift
RELEVANT PARAGRAPH
Brief facts of the case are that the assessee received a gift of Rs.30,00,000/- from Mrs. Chandra Hingorani. The genuineness of the gift was examined by the Assessing Officer by considering the various documents including taking statements of the assessee which was recorded on 19.12.2006.
The AO noticed that the assessee is not remotely connected with the family of the donor. She has no knowledge about the family of the donor, she never visited their house. She never attended any social function or normal get together with the family of the donor. She was never invited by the donor family and the same was the case with the assessee as the donor family had no link whatsoever with the assessee. It has also being noted by the Assessing Officer that Mrs. Chandra Hingorani, the alleged donor was required to be produced. Instead of attending she preferred to file letter at the receipt counter on 29.11.2006. The details filed along with the said letter by Mrs. Chandra Hingorani before the AO. The observation of the Assessing Officer thereon noted by the Assessing Officer’s in his order reads as under: –
“Thereby filing the details of her I.T. Returns where the gifts had been disclosed. The donor pleaded that due to her old age she could not travel. It is relevant to mention here that as per copy of the I.T. Return filed, she has declared that she is proprietor of M/s. International Export Corporation and the sales were declared at Rs.20,75,000/-. These facts coupled with the facts that the donor has declared the income of about Rs.64 lakhs from interest, dividend and gains on sales of investment (Rs.48.67 lakhs) conclusively proves that the donor was simply avoiding to attend the proceedings to avoid the truth to come out. A person running a business, making sales of Rs.20 lakhs and earning other income of Rs.64 lakhs cannot claim exemption on the ground of old age specially when she is living in Bandra (West) and the Income-tax office is located at Bandra (East). It is relevant to mention here that Mrs. Chandra Hingorani is not in any way connected to the assessee or to her family. There was no occasion for such huge gifts to the assessee. The donor has simply made lame excuse not to attend proceedings. The apparent is that only fake documents of gift were prepared on consideration and, the donor and the donee is avoiding the truth to come out and are accordingly avoiding the presence. I have, therefore, no alternative but to conclude that this is a case of bogus gifts and the assessee has introduced her concealed income in the form of alleged gift from any unknown lady, who is not in any way connected with the assessee and who is also now avoiding to attend the Income-tax proceedings to avoid the truth to come out. Accordingly, the amount of gift of Rs.30,00,000/- is added to the income of the assessee as undisclosed income of the assessee and penalty proceedings for concealment of income are initiated separately.”
HELD
We have heard learned representatives of the parties perused the record and gone through the decisions cited and referred. In the case under consideration the issue is in respect of gift of Rs 30/- lakh. The ordinary meaning of the gift is a transfer by one person to another of any existing movable or immovable property made voluntarily or without consideration of money or money worth. In legal effect, there cannot be a `gift’ without a giving and taking. The giving and taking are the two contemporaneous reciprocal acts which constitute a `gift’. In order to make a valid gift, there must be perfect knowledge in the mind of the person making the gift of the extent of the beneficial interest intended to be conferred, and of which making it. Donor gives gift in money or money’s worth and taking love and affection from donee. To examine the issue from point of view of the provisions of Income Tax Act we are to see the nature of the transaction. Gift, Its nature is credit in the hands of the donee because donee credited gift amount his/her capital account and being treated as own money/capital. Normally such credit entry in capital account can be made only of the transition which has been processed through the provisions of the Income Tax Act. It appears from reading of section 68 of the Act that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee then, it is for the Income-tax Officer to be satisfied whether the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly the persons from whom money is alleged to have been received actually existed or not. Secondly depending upon the facts of each case, the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depositor is a mere name lender or not. Be that as it may, it is clear that the Income-tax Officer has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of gift. The use of the words `any sum found credited in the books’ in section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as gift. What is clear, however, is that section 68 clearly permits an Income-tax Officer to make enquiries with regard to the nature and source of any or all the sums credited in the books of account of the company irrespective of the nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the Income-tax Officer. There is no quarrel with the proposition that a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift and since the claim of a gift is made by the assessee the onus lies on him not only to establish the identity of the donor but his capacity to make such a gift. The assessee is required to prove three important conditions, namely, (i) the identity of the creditor, (ii) the capacity of the creditor to advance the money, and (iii) the genuineness of the transaction. What evidence would be sufficient to establish the said conditions or what material would be relevant in a particular case, would depend on the facts of each case. There cannot be one general guiding yardstick in the matter.
If we consider the facts of the case under consideration and the surrounding circumstances, prevailing practice/customs in the society, we find that the assessee is not remotely connected with the family of the donor as evident from the replies given by the assessee in her statement recorded by the AO which are reproduced above in Para No 3 of this order. She has no knowledge about the family of the donor, she never visited their house. She never attended any social function or normal get together with the family of the donor. She was never invited by the donor family and the same was the case with the assessee as the donor family had no link whatsoever with the assessee. That Donor, Mrs. Chandra Hingorani is not in any way connected to the assessee or to her family. There was no such occasion for such huge gifts to the assessee. Under the alleged circumstances gift received by the assessee is not a genuine gift. When gift is not genuine, the addition u/s 68 is warranted. Further, as said above those two elements are essential in the gift, `giving’ and `taking. In the case under consideration, the assessee has failed to establish second part of that element i.e. giving any love and affection to donor. One of the aspect of the gift is that unless it is in favour of a relative, a disposition can be said to operate as a gift only if it can be shown to contain some element of bounty. In the case under consideration gift is not given to relative, therefore, the burden is on the assessee to prove some element of bounty. But the assessee has failed in this regard. Under the circumstances we are of the considered view that the AO has rightly made the addition u/s 68 of the Act as gift was not a genuine gift.
ORDER
Per A L GEHLOT (AM)
This is an appeal filed by the Assessee against the order of Ld. CIT(A)-XXIV, Mumbai, dated 19.10.2007, relating to the assessment year 2004-05.
2. The effective grounds of appeal raised by the assessee reads as under: –
1) “The Learned Commissioner (Appeals) erred in confirming the order of the Assessing Officer by treating genuine gift of Rs.30,00,000/- received from Mrs. Chandra Hingorani as nongenuine and upholding the addition u/s.68 of the Income Tax Act.
2) The Learned Commissioner (Appeals) erred in concluding that the donor and donee were strangers, not remotely connected and the element of natural love and affection was missing in the case.
3) The Learned Commissioner (Appeals) erred in concluding that appellant failed to prove that the gift was genuine for natural love and affection.”
3. Brief facts of the case are that the assessee received a gift of Rs.30,00,000/- from Mrs. Chandra Hingorani. The genuineness of the gift was examined by the Assessing Officer by considering the various documents including taking statements of the assessee which was recorded on 19.12.2006. The Assessing Officer has reproduced the question and answer replied by the assessee in the statement at page 2 & 3 of the Assessment Order. The same is reproduced below: –
“Q.1. Please state how many gifts you have made during your life? Ans. No, I have not made any gifts at any stage of my life. Q.2. Have you received any gifts, if so please intimate the details? Ans. I do not remember having received any gifts in my life or after my marriage, except one gift of Rs.30,00,000/- received from one Mrs.Chandra Hingorani. However, I do not know her exact address of the house, but she lives in her own house at Pali Hill, Bandra (West). She is about 83 years old and is widow of late Shri Nanak Bhai. Her husband was friend of my father and is widow of late Shri Nanak Bhai. Her husband was friend of my father late Shri Munshiram Gupta. I have visited her house in Pali Hill, only when I was 7 or 8 years old. Thereafter, I never visited her and they also never visited our house, except when my father expired in March, 1996. Q.3. Please tell about the donor Smt. Chandra Hingorani? Ans. She is of fair colour, 5ft 4 inches approx, 83 years old with well built body. I do not know her telephone numbers, address, her business interests, the business/ profession of her children. I do not know about the children she has. I do not know their names. I have never visited their families even on the marriages of her 4 sons or for that matter even on family functions like Birthdays, etc, as I was never invited, nor we were inviting them for such social get togethers.
Q.4. Please tell me about her Husband Mr. Hingorani?
Ans. He is no more. He expired 6 to 7 years back. He was fair, well built, 5ft 10 inches, however, cannot explain anything about him as I never met him.
Q.5. What was the occasion of making gifts to you and how the offer was made?
Ans. Smt.Chandra Hingorani offered the gift suo-moto to my mother, who in turn had a talk with my husband and finally the gift was made by her by cheques. I had my second baby on 2nd Feb., 2003. My mother informed this to Smt. Chandra Hingorani who offered the gift on this occasion in March, 2003. In fact she is a well off lady and wanted to make this gift out of love and affection for our family.
Q.6. When you do not have any interaction with Smt. Chandra Hingorani almost for 26 years now and she has her own sons and grand sons, how is it that she has made such a huge gift to you without any apparent consideration or love and affection for you and your family members and that too when you claimed that you have never visited her house and you and your parents have no social link with them as none of you made any gifts to her or her family even on the marriages of her 4 sons and on birthdays and other social functions of her grand children?
Ans. Whatever gift if any made to the family of the donor were made by my parents without my knowledge, however I confirm that I have never visited donors house, her children nor have I attended any function in her family. I have never given any gifts to her and her family members. And I do not know about any gifts made by my parents.
Q.7. Did the donor ever visit you or your family at any social occasion?
Ans. No. No gifts were received from her family.
Q.8. What was the mode of receipt of gift made by you? Ans. The gift was received through cheques. However, I do not know the name of the bank, my bank account number or my bank. My husband Shri Mukul Agarwal received the cheques of gift. I do not know where he deposited the cheques and how he is utilizing the gift is also not known to me.
Q.9. When you and your family have such limited relationship with Smt.Chandra Hingorani and you and your family have never given such a big amount of gift to her family, how is it that she gave you a gift of Rs.30 Lacs without any consideration, reason, occasion or reciprocal love and affection?
Ans. The donor told my mother on the occasion of birth of my second baby that she had been advised by her late husband to give something to our family out of love and affection and she fulfilled his last wish. I believe it to be my destiny through my daughter that what my father could not give to me at the time of marriage, I have been blessed by my father’s friend
through his last wish.
Q.10. You have purchased a flat. Did you require the white money for payment of the flat, had you arranged the money as gift? From your return filed for 2005-06 it is clear that you have shown flat investment at 13.67 lakhs and another flat cost for Rs.96 lakhs.
Ans. No….”
4. On the basis of the above statement the AO noticed that the assessee is not remotely connected with the family of the donor. She has no knowledge about the family of the donor, she never visited their house. She never attended any social function or normal get together with the family of the donor. She was never invited by the donor family and the same was the case with the assessee as the donor family had no link whatsoever with the assessee. It has also being noted by the Assessing Officer that Mrs. Chandra Hingorani, the alleged donor was required to be produced. Instead of attending she preferred to file letter at the receipt counter on 29.11.2006. The details filed along with the said letter by Mrs. Chandra Hingorani before the AO. The observation of the Assessing Officer thereon noted by the Assessing Officer’s in his order reads as under: –
“Thereby filing the details of her I.T. Returns where the gifts had been disclosed. The donor pleaded that due to her old age she could not travel. It is relevant to mention here that as per copy of the I.T. Return filed, she has declared that she is proprietor of M/s. International Export Corporation and the sales were declared at Rs.20,75,000/-. These facts coupled with the facts that the donor has declared the income of about Rs.64 lakhs from interest, dividend and gains on sales of investment (Rs.48.67 lakhs) conclusively proves that the donor was simply avoiding to attend the proceedings to avoid the truth to come out. A person running a business, making sales of Rs.20 lakhs and earning other income of Rs.64 lakhs cannot claim exemption on the ground of old age specially when she is living in Bandra (West) and the Income-tax office is located at Bandra (East). It is relevant to mention here that Mrs. Chandra Hingorani is not in any way connected to the assessee or to her family. There was no occasion for such huge gifts to the assessee. The donor has simply made lame excuse not to attend proceedings. The apparent is that only fake documents of gift were prepared on consideration and, the donor and the donee is avoiding the truth to come out and are accordingly avoiding the presence. I have, therefore, no alternative but to conclude that this is a case of bogus gifts and the assessee has introduced her concealed income in the form of alleged gift from any unknown lady, who is not in any way connected with the assessee and who is also now avoiding to attend the Income-tax proceedings to avoid the truth to come out. Accordingly, the amount of gift of Rs.30,00,000/- is added to the income of the assessee as undisclosed income of the assessee and penalty proceedings for concealment of income are initiated separately.”
5. The addition made by the Assessing Officer has been confirmed by the CIT(A) relying on the judgment of Hon’ble Supreme Court in the case of CIT vs. P. Mohanakala (2007) 291 ITR 278 (SC) and the judgment of Hon’ble Punjab & Haryana High Court in the case of Jaspal Singh vs. CIT (2007) 290 ITR 306 (P&H). The CIT(A) held that the assessee failed to prove that the gift was genuine .
6. The Learned Authorised Representative pointed that Mrs. Chandra Hingorani was the family friend of the assessee; she gave gift out of love and affection. She is 83 years old lady. There was no doubt on the genuineness of her and identity and capacity to give the gift, which was given through banking channel as was given duly confirmed by the donor.
7. The Learned AR in support of its contentions referred to the various pages of the paper book; viz. copy of the bank account of the donor which has been placed at page 10 of the paper book, copy of the return filed at page 5 of the paper book, copy of deed of gift declaration at page 1 to 3 of the paper book and while referring page 9 of the assessee’s paper book where the capital account of International Exports Corporation for year ended 31st March, 2004 is placed Ld. AR pointed out that the gift given by Mrs. Chandra Hingorani have been debited as gift a/c. in her capital a/c.
8. The Ld. AR submitted that the gift deed is signed by the donor on `oath’ and in case of any falsity liable to perjury under IPC. The AO has over looked the fact , that Donor’s husband was friend of assessee’ father. To fulfill last wish of her husband, the donor has offered gift to mother of the assessee which ultimately devolved to the assessee. The Ld. AR referred to question 9 of the statements of the assessee and submitted that the gift rose out of love and affection and sentiments. He submitted that the donor is 83 years old and furnished all relevant material particularly like bank statement, return filed, deed of gift, etc. Ld. AR submitted that the networth of donor was 6.87 crores even after giving gift of Rs.30,00,000/-. The Ld. AR submitted that the advance tax on 30 lacs on 21.03.2003 and the capacity of the gift given is a major. He submitted that the gift was given at the time in the case of second baby of the assessee on 2nd Feb., 2003.
9. The Ld. AR submitted that assessee herself has declared substantial taxable income of Rs.28.71 lacs. There no allegation of generation of cash. No allegation that the alleged cash has been given to donor in return. He submitted that without considering the facts namely the Assessing Officer held that the gift is unproved while referring page 11 of the paper book. Ld. AR submitted that the donor reiterated that the donor is family friend of the assessee. The Ld. AR submitted close relationship and occasion is not legally necessary. Ld. AR supported on his contentions relied on the decision of ITAT, Chandigarh Bench in the case of R.K. Syal vs. CIT reported in 66 TTJ 656, R.S. Sibal 269 ITR 429 (Del.) and Murlidhar Lahorimal 280 ITR 512.
10. Ld. AR further submitted that instances are not rare, when even strangers make gifts out of very many considerations, including arising out of love, affection and sentiments. The Ld. AR relied on the decision of Rajasthan High Court in the case of CIT vs. Padam Singh Chouhan reported in 215 CTR 303 (Raj.). It is also submissions of ld. AR that the opinion was same of love and affection and the material available on record. Ld. AR on support of its contention relied upon the decision of Kanchan Singh 221 CTR 456 (All.). He submitted that bald justification is not sustainable. He relied upon CIT vs. Gangaur Investment Ltd. Ld. AR submitted that the donor had compensated in cash or on kind is a mere conjecture and surmise in absence of specific evidence. Ld. AR supported its contentions relied on the decision in the case of R.K. Syal vs. CIT (supra). He further submitted that under section 68, the explanation of the assessee has to be only satisfactory as against requirement of demonstrative or infallible proof. He relied on Malhotra Jewellers 47 TTJ 354 (Del.) and on the order of the Hon’ble ITAT, Mumbai in the case of Asha Hampannawar vs. ITO which is confirmed by the Hon’ble Bombay High Court and the SLP against the order of the High Court has been dismissed by the Apex Court.
11. The Ld DR on the other hand relied upon the assessee and relied upon the authorities below. The Assessee has failed to prove that the gift was given out of love and affection. The DR referred to the various question and answers of the statement of the assessee recorded by the Assessing Officer. The Ld. DR submitted that the CIT has rightly relied on the decision of P. Mohankala 291 ITR 278 (SC). It is also the submissions of the Ld DR that proof is on the assessee on such cases, since the assessee has failed to prove genuineness of the gift therefore the Assessing Officer has rightly made addition.
12 We have heard learned representatives of the parties perused the record and gone through the decisions cited and referred. In the case under consideration the issue is in respect of gift of Rs 30/- lakh. The ordinary meaning of the gift is a transfer by one person to another of any existing movable or immovable property made voluntarily or without consideration of money or money worth. In legal effect, there cannot be a `gift’ without a giving and taking. The giving and taking are the two contemporaneous reciprocal acts which constitute a `gift’. In order to make a valid gift, there must be perfect knowledge in the mind of the person making the gift of the extent of the beneficial interest intended to be conferred, and of which making it. Donor gives gift in money or money’s worth and taking love and affection from donee. To examine the issue from point of view of the provisions of Income Tax Act we are to see the nature of the transaction. Gift, Its nature is credit in the hands of the donee because donee credited gift amount his/her capital account and being treated as own money/capital. Normally such credit entry in capital account can be made only of the transition which has been processed through the provisions of the Income Tax Act. It appears from reading of section 68 of the Act that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount. When an explanation in regard thereto is given by the assessee then, it is for the Income-tax Officer to be satisfied whether the said explanation is correct or not. It is in this regard that enquiries are usually made in order to find out as to whether, firstly the persons from whom money is alleged to have been received actually existed or not. Secondly depending upon the facts of each case, the Income-tax Officer may even be justified in trying to ascertain the source of the depositor, assuming he is identified, in order to determine whether that depositor is a mere name lender or not. Be that as it may, it is clear that the Income-tax Officer has jurisdiction to make enquiries with regard to the nature and source of a sum credited in the books of account of an assessee and it would be immaterial as to whether the amount so credited is given the colour of a loan or a sum representing the sale proceeds or even receipt of gift. The use of the words `any sum found credited in the books’ in section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as gift. What is clear, however, is that section 68 clearly permits an Income-tax Officer to make enquiries with regard to the nature and source of any or all the sums credited in the books of account of the company irrespective of the nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the Income-tax Officer. There is no quarrel with the proposition that a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift and since the claim of a gift is made by the assessee the onus lies on him not only to establish the identity of the donor but his capacity to make such a gift. The assessee is required to prove three important conditions, namely, (i) the identity of the creditor, (ii) the capacity of the creditor to advance the money, and (iii) the genuineness of the transaction. What evidence would be sufficient to establish the said conditions or what material would be relevant in a particular case, would depend on the facts of each case. There cannot be one general guiding yardstick in the matter.
12.1 The assessee has furnished various type of material/evidence in the form of gift deed, confirmation and others, to appreciate those material/ evidences we would like refer one of the judgment of the Apex Court in the case of CIT v Durga Prasad More 82 ITR 540 (SC) wherein the Court held that Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. It has been further held as under:-
“It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.”
12.2 We would also like refer one more judgment of the Apex Court in the case of Commissioner of Income-tax v. P Mohanakala 291 ITR 278 (SC) In this case following questions have been answered by the High Court in favour of the assessees and against the Revenue :
“(a) Whether, in the facts and circumstances, the Income-tax Appellate Tribunal was correct in law to accept the principle of preponderance of probabilities in holding that the claim of the appellant that the sum of Rs. 15,62,500 received him by way of gifts through normal banking channels was not genuine and that it was liable to be assessed under section 68 of the Income-tax Act, 1961 ?
(b) Whether, in the light of the law established and based on the facts and in the circumstances of the case, the learned Income-tax Appellant Tribunal is legally justified in concluding that burden of proof cast on the appellant under section 68 of the Income-tax Act, 1961 has not been discharged and the ingredients for invoking section 68 of the Income-tax Act are present ?
(c) Whether in the facts and circumstances of the case, the conclusion of the Tribunal that the claim of gift is not genuine is rea sonable and based on relevant material and not perverse ?”
The dispute in all these appeals relates to the addition made by the Assessing Officer in respect of several foreign gifts stated to have been received by the assessees from one common donor namely Sampath Kumar. The gifts received were from one Ariavan Thotan and Suprotoman. It is during the enquiry by the Revenue it is asserted that they were the aliases of Sampathkumar. These gifts were made to A. Srinivasan and his wife, Smt. S. Kalavathy, his son, S. Balaji Manikandan and to one of his brothers, Rajendran and Smt. Mohanakala.In all the aggregate gifts received by the assessees is to the extent of Rs.1,79,27,703. The Assessing Officer did not accept the explanation offered by the respective assessees that the amount of credit is a gift from NRI and proceeded to add it as the income of the assesses from undisclosed sources. The credit entries have been made during the period from July 8, 1992 to October 19, 1995. There is no dispute that the payments were made by instruments issued by a foreign bank and credited into the respective assessee’s account by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on Citibank, N.A. Singapore. The Assessing Officer dealt with the controversy as regards the cash credit entries received from the foreign donor. He noticed that the gifts have been sent in the name of Ariavan Thottan and received by A. Srin ivasan and others who are all his family members. Each one of them is an individual assessee. All the assesses were summoned and their statements have been recorded by the Assessing Officer. Srinivasan who is the key person in his statement said that he knew Sampathkumar for the last 20 years and he had been helping Sampathkumar prior to 1985 by paying Rs. 100 to 200 every month as he had no source of income to get himself educated. Sampathkumar in his own statement stated that he was in Indonesia up to the year 1992 and employed as an engineer. Thereafter, he shifted to England and started consultancy profession there. Later in the end of the year 1994-95, he joined New Century Machinery Ltd., Cheshire, SK 16 4xS and became its director in 1996. It is in his statement that he is paying taxes in England from his income earned in England. As far as his Indian income is concerned, he stated that he filed the returns for the assessment years 1996-97 and 1997-98 before the Income-tax Officer, Ward 1(4), CBE only on October 23, 1997. His investment in Indian companies according to him will be around Rs. 5 crores and made out of his income earned in the foreign countries. He did not reveal the details of his bank account in India and stated that he would be submitting the details through his auditor which he did not. Except the self serving statement there is no material evidence as regards his financial status. He stated from 1972-73 he knew Srinivasan, Rajendran and their families. His father was a taxi driver, and was very poor. Srinivasan and his family members were supporting him when he was in India. To a pointed query as to whether there is any evidence to show that he was also known by any other name other than Sampathkumar, he stated that “no evidence. Only Mr. Srinivasan used to call me as Suprotoman.” The Assessing Officer in the circumstances came to the conclusion that the gifts though apparent are not real and accordingly treated all those amounts credited in the books of the assessees as the income of the assessees. On appeal the Commissioner of Income-tax concluded that the story set up by the assessees is unacceptable and hard to believe and the “preponderance of probabilities, the common course of human livings point to the contrary”. The appeals were accordingly dismissed. The ITAT concurred with the findings and conclusions arrived at by the Assessing Officer and the Commissioner of Income-tax. The Tribunal noticed that the letters exchanged “by the per- son who had sent foreign exchange to the assessees only indicate that there is no love and affection between them and that he is clearly materialistic and his statement of accepting a reciprocation is also an indication to the fact that he is not doing anything free but clearly the compensation was a roundabout manner of showing of he having been compensated either in India or abroad.” The Tribunal also took note of the various other attending circumstances and found it difficult to accept the explanation offered by the assessees. The High Court came to the conclusion that the reasons assigned by the Tribunal and other authorities “are in the realm of surmises, conjectures and suspicions . . . the authorities under the Act have failed to draw the only conclusion that is possible legally and logically.”
The Apex Court held as under:
“explanation offered was not satisfactory. The assessees did not 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 to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority. All the decisions cited and referred to hereinabove are required to be appreciated and understood in the light of the law declared by this court in Sumati Dayal [1995] Supp 2 SCC 453. Whether the High Court was justified in interfering with the concurrent finding of fact arrived at by all the authorities including the Tribunal? The Assessing Officer found that all the so-called gifts came from Ariavan Thotan and Suprotoman. The assessees did not declare that they are the aliases of Sampathkumar. It is only an afterthought they have come forward with the said plea. The Assessing Officer also found that the gifts were not real in nature. Various surroundings circumstances have been relied upon by the Assessing Officer to reject the explanation offered by the assessees. The Commissioner of Appeals confirmed the findings and conclusion drawn by the Assessing Officer. The Tribunal speaking though its Senior Vice President concurred with the findings of fact. The findings in our considered opinion are based on the material available on record and not on any conjectures and surmises. They are not imaginary as sought to be contended. Relying on the decisions of this court in Bejoy Gopal Mukherji v. Pratul Chandra Ghose, AIR 1953 SC 153 and Orient Distributors v. Bank of India Ltd. AIR 1979 SC 867, Shri Iyer, learned senior counsel contended that the issue relating to the propriety of the legal conclusion that could be drawn on the basis of proved facts gives rise to a question of law and, therefore, the High Court is justified in interfering in the matter since the authorities below failed to draw a proper and logical inference from the proved facts. We are unable to persuade ourselves to accept the submission. The findings of fact arrived at by the authorities below are based on proper appreciation of the facts and the material available on record and surrounding circumstances. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence.”
No question of law much less any substantial question of law had arisen for consideration of the High Court. The High Court misdirected itself and committed an error in disturbing the concurrent findings of fact.”
12.3 In the light of above law laid down by the Apex Court in the case of CIT v Durga Prasad More 82 ITR 540 (SC) and in the case of Commissioner of Income-tax v. P Mohanakala 291 ITR 278 (SC). If we consider the facts of the case under consideration and the surrounding circumstances, prevailing practice/customs in the society, we find that the assessee is not remotely connected with the family of the donor as evident from the replies given by the assessee in her statement recorded by the AO which are reproduced above in Para No 3 of this order. She has no knowledge about the family of the donor, she never visited their house. She never attended any social function or normal get together with the family of the donor. She was never invited by the donor family and the same was the case with the assessee as the donor family had no link whatsoever with the assessee. That Donor, Mrs. Chandra Hingorani is not in any way connected to the assessee or to her family. There was no such occasion for such huge gifts to the assessee. Under the alleged circumstances gift received by the assessee is not a genuine gift. When gift is not genuine, the addition u/s 68 is warranted. Further, as said above those two elements are essential in the gift, `giving’ and `taking. In the case under consideration, the assessee has failed to establish second part of that element i.e. giving any love and affection to donor. One of the aspect of the gift is that unless it is in favour of a relative, a disposition can be said to operate as a gift only if it can be shown to contain some element of bounty. In the case under consideration gift is not given to relative, therefore, the burden is on the assessee to prove some element of bounty. But the assessee has failed in this regard. Under the circumstances we are of the considered view that the AO has rightly made the addition u/s 68 of the Act as gift was not a genuine gift. Since we followed the law laid down by the Hon’ble Supreme Court, therefore, the decision cited by the learned AR does not help the assessee. In the result the Appeal of assessee is dismissed. Order pronounced in open court on 4th June, 2010.
