Income Tax Appellate Tribunal - Chandigarh
Ashok Kumar Narwania vs Ito on 26 April, 2005
Equivalent citations: [2005]95ITD103(CHD)
ORDER
N.K. Saini, A.M. This is an appeal by the assessee directed against the order of learned CIT (A) dated 19-2-2002.
2. In this appeal the assessee has taken the following ground:
"That assessing officer Kaithal/Ld. CIT (A) erred in making/confirming addition of Rs. 20,200 on account of gifts received by the assessees minor daughters which were treated non-genuine by assessing officer."
3. The facts of the case in brief are that during the course of gift-tax proceedings in the case of one Shri Om Parkash Narwania, it was held that the gifts made to the daughters of the assessee were not true and bogus one. Accordingly, proceedings under section 147/148 were initiated in the case of the assessee. The assessing officer held that claim of receipt of gifts of. Rs. 10,100 each in the hands of minor daughters of the assessee were sham and the same were held as unexplained income of the assessee. Accordingly, the addition of Rs. 20,200 was made.
4. The assessee carried the matter to the learned CIT (A) and stated that notice issued under section 148 was not valid notice because all the facts were disclosed in the return of income filed which was duly processed on 23-11-1990 under section 143(l)(a) of Income Tax Act, 1961. It was stated that the gifts were received by cheque and were given to M/s. Hari Chand Pawan Kumar, Commission Agent, Kaithal by cheque. It was further stated that the assessing officer never asked Shri Om Parkash Narwania, the donor who was produced before the assessing officer either about the gift-tax return filed by him or the affidavits submitted by him.
5. Learned CIT (A) asked for the comments of the assessing officer who stated as under:
"(i) That while completing gift-tax assessment on 20-3-1991 in the case of Shri Om Parkash Narwania, donor, it was held that the gifts made by him to the daughters of the assessee, Shri Ashok Kumar Narwania were bogus. Actually, this amount of Rs. 20,200 was assessees own income which escaped assessment and the notice under section 148 was rightly served on the assessee.
(ii) The contention that the gifts were received through cheque had already been rejected by the then assessing officer while completing assessment. The statement of donor was recorded to verify the genuineness and capacity. In his statement, the donor admitted that his only source of income was from property and which was stated to be just sufficient to make his household expenses and that he had not given any gift to any person even to his sons or daughters. The donor, on a specific question had admitted that he never made any gift to his sister even and that the donor did not know the names of both the donees. The age of the donees was 6-7 years of the elder and 4-5 years of the younger who needed services instead of doing service for old couple te., donor although gifts were made by the donor through cheques but the capacity was not proved to make these gifts and actually it was the income of the assessee. This amount was given as loan to M/s. Hari Chand Pawan Kumar and the same was treated as genuine in the bank account of minor daughters but in the case of the assessee, donor Shri Om Parkash Narwania was not in a position to make gifts and the assessee has utilised his own income by changing the character through gifts.
(iii) Through the affidavit, the donor, Shri Om Parkash Narwania wanted to say that he had not gifted any amount except stated in the gift-tax return. In this regard it is submitted that when the donor was produced and his statement was recorded he did not admit that he made any gift even to his sons/daughters/sisters and there was no need to put question about the filing of affidavit of gift-tax return. He admitted that he did not make any gift to anyone."
6. Learned CIT (A), after considering the submissions of the assessee and the comments of the assessing officer, observed that the objection regarding initiation of proceedings under section 148/147 was not valid. On merits, learned CIT (A) confirmed the action of the assessing officer by observing as under:
"The assessing officer has discussed in details the facts as well as the extracts from the statement made by the donor to prove that the claim of gifts was not genuine. The assessee could not rebut this fact in the written submissions. Neither the capacity of the donor of making the alleged gifts could be established nor the genuineness of the gifts that the donor has actually made those gifts could be established. In view of these facts, the addition made by the assessing officer is hereby confirmed."
Now the assessee is in appeal.
7. Learned Counsel for the assessee reiterated the submissions made before the authorities below. He vehemently argued that the assessee produced donor before the assessing officer. The gifts were received through cheques and the donor was directly related to the donees since he is the uncle of the assessee and made gifts to the minor daughters of the assessee who used to serve food to him and to his wife. Therefore, gifts were made under love and affection only and not for any consideration. It was further stated that the gifts were made on the occasion of Karan Bedhan Sanskar. So, there was an occasion when the gifts were made. He further submitted that the gifts were given through account payee cheque and were deposited in the bank accounts of the minors and then given as loan to M/section Hari Chand Pawan Kumar, Commission Agent, Kaithal on interest for the benefit of the minors. It was argued that no evidence had been brought on record that the aforesaid genuine gifts were the undisclosed income of the assessee. However, the additions had been made by the assessing officer only on the basis of assumptions and the learned CIT (A) without applying his own mind and without taking into consideration the facts, had confirmed the action of the assessing officer. He, therefore, prayed to delete the addition made by the assessing officer and sustained by the learned CIT (A).
8. In his rival submissions, learned Departmental Representative for the revenue strongly supported the order of learned CIT (A) and stated that the donor had not made any gifts to his sister or to his sons or daughters and it was not believable that he had made the gifts to the daughters of his nephew. It was emphasised that the donor in his statement had stated that he had not made any gifts to anyone. Therefore, gifts were bogus and it was the undisclosed income of the, assessee which had been routed through gifts, He accordingly, relied on the order of learned CIT (A).
9. We have heard both the parties and also gone through the material available on record. In the instant case, it is not in dispute that the gifts had been received through cheques. It is not the case of assessing officer that undisclosed income of the assessee was deposited in the account of the donor and then he made the gifts to the daughters of the assessee. It is also not in dispute that the donor was related to the donees and gifts had been made at the time of Karan Bedhan Sanskar. So, there was also an occasion. It is true that the gifts can be made only under natural love and affection and without any consideration. For making a gift it is not necessary that there should be a blood relation and very very close relationship. In that view of the matter, the assessing officer was not justified in considering the gifts as non-genuine on the basis that the donor had not made any gifts to his sister or sons or daughters. In the instant case the assessing officer had not appreciated the fact that neither the sister nor the sons or the daughters were living with the donor. The assessing officer in the assessment order dated 5-10-1992 at para 2 had stated that the contention of the assessee before him was that the donor and his wife resided at Kaithal whereas his sons lived outside and in their absence the assessee looked after them and he was happy with the services of the assessee and therefore, gifts were made to his minor daughters. The assessing officer at page 3 had pointed out that the donor in his statement had stated that no son or brotherdid any service for him and even the assessee, Shri Ashok Kumar Narwania did not serve him but only his small daughters came and sometime gave tea or water etc. From the above facts, it was clear that minor daughters were serving the assessee by giving tea or water etc. and in those circumstances, it cannot be said that there was no natural love and affection of the donor towards the minor daughters of the assessee. In the instant case, from the above discussion, it would be clear that the donor in his statement before the assessing officer had admitted that the minoi daughters of the assessee were serving him by giving tea or water etc. and the gifts had been made through account payee cheques. The assessing officer had not brought any material on record that the amount deposited in the bank account of the donor, was the income earned by the assessee. In that view of the matter, he was not justified in stating that gifts were undisclosed income of the assessee. Considering the totality of the facts as narrated hereinabove, we are of the view that learned CIT (A) was not justified in confirming the action of the assessing officer without appreciating the facts in right perspective. We, therefore, delete the addition made by the assessing officer and confirmed by the learned CIT (A).
10. In the result, appeal of the assessee is allowed.
JUDGMENT M.A. Bakshi, V.P. I have gone through the order proposed by my learned brother in this appeal and have also discussed the issue with him. However, since I am unable to persuade myself to subscribe to the view proposed by my learned brother, I hereby pass a separate dissenting order.
2. Though the facts have been stated by my learned brother in the proposed order, I would like to reiterate the same, in brief, in my own words for the sake of easy reference and coherence.
3. One Shri Om Parkash Narwania had filed gift-tax returns claiming to have gifted a sum of Rs. 10,100 each to the daughters of the assessee. In the gift-tax proceedings, the assessing officer held that the claim of gift to the minor daughters of the assessee was not genuine. The assessing officer considering the fact that the minor daughters of the assessee had no independent source of income, initiated proceedings under section 147 read with section 148 in the case of the assessee as, in his opinion, the amount of Rs. 20,200 claimed to have been received as gift by the minor daughters was out of the undisclosed income of the assessee. Assessee had filed confirmation from Shri Om Parkash Narwania as also his affidavit. The alleged donor was produced before the assessing officer and his statement recorded. He was also cross-examined by the counsel of the assessee. In his statement, Shri Om Parkash Narwania has categorically stated that his only source of income is income from house property which was hardly sufficient to meet day-to-day expenses and that he had not made any gift even to his sister and that wherefrom he could have made the gifts. The assessing officer accordingly treated the alleged gifts as income of the assessee from undisclossed sources.
4. Assessee appealed to the CIT(A). Written submissions were furnished before the CIT (A) which had been forwarded to the assessing officer for his comments. The contentions on behalf of the assessee and the comments of the assessing officer have been reproduced by the CIT (A) in para 2.1 as under:-
"2.1 During the course of the appellate proceedings, the counsel of the assessee filed the written submissions. The same are reproduced below:-
In this case notice under section 148 was given to the assessee on 5-6-1992. This notice under section 148 is not valid as the facts of the case are not covered under section 147. Assessee disclosed all the material facts in the return of income filed which was duly processed on 23-11-1990 under section 143(l)(a). The detailed facts are that one Sh. Om Parkash gifted Rs. 20,200 to the daughters of the assessee by cheque (10,10OX2).
The assessee further gave these amounts to M/s. Hari Chand Pawan Kumar, Commission Agent, Kaithal by cheque.
The assessing officer even did not accept gifts which were made by cheque. If at all the bank payments are treated as benami, than the real beneficiary is M/s. Hari Chand Pawan Kumar, C/A Kaithal. On this account addition cannot be made in assessee income. Rather it should be in hands of M/s. Hari Chand Pawan Kumar C/A Kaithal, the ultimate beneficiary.
Further in our case, the assessing officer never asked Shri Om Parkash who was produced before him either about gift-tax return filed by him or affidavit submitted by him. Actual position is that Shri Om Parkash wanted to say that he had not gifted any amount except stated in gift-tax return and affidavits filed already.
Keeping in view above-stated facts addition made may please be deleted."
The comments of the present assessing officer thereon also obtained. The same are reproduced below:-
"2. My comments on the written statement are as under:-
(i) In the para I of the written statement, the assessee stated that notice under section 148 issued on 5-6-1992 is not valid as the facts of the case are not covered under section 147. In this regard, it is submitted that while completing the gift-tax assessment on 20-3-1991 in the case of Sh. Om Parkash Narwania, donor, it was held that the gifts made by him to the daughters of the assessee Sh. Ashok Kumar Narwania were bogus. Actually, this amount of Rs. 20,200 was assessees own income. As the income of Rs. 20,200 was escaped assessment, notice under section 148 of the Incometax Act, 1961 was rightly issued and served upon the assessee on 5-6-1992.
(ii) In second para, the assessee stated that the assessing officer even did not accept gifts which were by cheque. In this regard, it is submitted that this contention has already been considered and rejected by the then assessing officer while completing the assessment. The facts of this case are that one Sh. Om Parkash Narwania made two gifts of Rs. 10,100 each to the daughters of the assessee during the year under consideration. Therefore, to verify the genuineness and capacity of the donor, his statement was recorded. In his statement, the donor had admitted that his only source of income was from property and which was stated to be just sufficient to meet his household expenses, he had not given any gift to any person even to his sons or daughters. On a specific question, the donor had also admitted that he never made any gift to his sister even. The reply of the donor regarding the exact question put to him is reproduced below:-
Meri Bahin Shimati Maya Devi hai ushebhi kabhi gift nahi di; kahan se deta From the above, it is clear that no service was made by the assessee and his wife. Regarding the services done by the daughters of the assessee, it is submitted that the donor even did not know the names of both the donees and during the year under consideration the age of the elder one was 6-7 years and 4-5 years of younger one and the children of her age needs service instead of doing service for the old couple. It is true that the gifts were made by the donor through cheques. But as the capacity of the donor was not proved as he was not having sufficient sources to make such gifts, these gifts were not treated as genuine. Actually, it was the income of the assessee, the character of which was tried to be changed by the assessee by showing gifts through Sh. Om Parkash Narwania, a distant relation. This amount was given as loan to M/s. Hari Chand Pawan Kumar and the same was treated as genuine in the bank account of minor daughters and have filed evidence. It may be mentioned here that in the case of firm money/loan was given and evidence was produced but in the case of assessee Sh. Om Parkash, donor, was not in a position to make gifts and the assessee had utilized his own income by changing the character through gifts by Sh. Om Parkash, donor. Therefore, the loan in the hands of that firm was treated as genuine and at that time proceedings against the donor and assessee were contemplated. So assessees this contention has got no force.
(iii) In the third para the assessee stated that the assessing officer never asked Sh. Om Parkash who was produced before him about gift-tax return filed by him or affidavit submitted by him actual position is that Sh. Om Parkash wanted to say that he had not gifted any amount except stated in gift-tax return and affidavits filed already. In this regard, it is submitted when the donor was produced and his statement was recorded and while recording the statement, he did not admit that he made any gift even to his sons/daughters/sisters, there was no need to put question about filing of affidavit or gift-tax return does not arise. He even admitted even while cross examining by Sh. J.P. Goel, Advocate counsel for the assessee that he did not make any gift to any one. So assessees contention that actual position is that Sh. Om Parkash wanted to say that he had not gifted any amount except stated in gift-tax return and affidavit filed already is a concocted story only to help the assessee.
In view of the above facts, it is clear that there are no merits in the contentions raised by the assessee and may kindly be rejected and the additions may kindly be confirmed."
The CIT (A) has accordingly confirmed the addition of Rs. 20,200.
5. It is evident from the findings recorded by the revenue authorities that the donor was not having any capacity to make the gifts to the minor daughters of the assessee. This finding is based by the assessing officer and upheld by the CIT (A) mainly on the basis of statement of the donor. No evidence to the contrary has been placed on record of the revenue authorities or before us. Since the donor has himself stated that he was having a meagre income hardly to meet his household expenses and that he had no capacity to make the gifts, the addition made by the assessing officer of Rs. 20,200 is justified and there is no scope, in my humble view, for deleting the same. I am, therefore, of the considered view that there is no merit in the appeal of the assessee.
6. The appeal of the assessee, as per the view expressed by me, is liable to be dismissed.
ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 Since there is a difference of opinion between the Members of the Bench in the abovementioned case, we state the following point of difference and refer the same to the Honble President for further necessary action as envisaged under section 255(4) of the Income Tax Act:
"Whether, on the facts and in the circumstances of the case, the assessing officer was justified in making the addition of Rs. 20,200 on account of gifts claimed to have been received by the minor daughters of the assessee?"
THIRD MEMBER ORDER Shri Vimal Gandhi, President On account of difference between the Honble Members of Income Tax Appellate Tribunal, B-Bench, the following question has been referred to me under section 255(4) of the Income tax Act:-
"Whether, on the facts and in the circumstances of the case, the assessing officer was justified in making the addition of Rs. 20,200 on account of gifts claimed to have been received by the minor daughters of the assessee?"
2. The facts of the case briefly stated are that one Shri Om Parkash Narwania is stated to have made two gifts of Rs. 10, 100 each to minor daughters of the assessee, aged between 4-1/2 to 6 years in the period relevant to assessment year 1990-91. The said Shri Om Parkash Narwania filed gift-tax return in respect of above gifts. In those proceedings, the Gift tax Officer recorded the statement of Shri Om Parkash Narwania in which Shri Om Parkash Narwania denied having made any gift. It was otherwise recorded that said Shri Om Parkash Narwania had no capacity to make any gift. Accordingly, gifts made were not accepted. As minor daughters of the assessee had no independent source of income, the said gifted amounts were held to be undisclosed income of the assessee.
3. On the basis of the findings recorded by the GTO, the reassessment proceedings under section 147/148 were taken against the assessee. In the reassessment proceedings, assessee placed reliance on the fact that gifts were made through cheques and were supported by affidavits of the donor and the gift-tax return filed by him. It was established on record that gifts were made out of love and affection which the donor had for the minor girls. There was, therefore, no question of doubting the genuineness of gifts.
4. The assessing officer, after considering detailed submissions of the assessee and the material relied upon by him, held that no gift was made by Shri Om Parkash Narwania and that alleged gifted amounts deposited with M/s. Hari Chand Pawan Kumar were assessees income from undisclosed sources. In arriving at above conclusion, the assessing officer relied upon statement of Shri Om Parkash Narwania, extracts whereof are reproduced in the assessment order. In the said statement, the donor clearly stated that he has not made any gift to anybody at least in the last 4-5 years. As per his memory, he does not remember what happened before the above period. He did not make gift to even his only sister and he had no money to make such a gift. Accordingly, addition of Rs. 20,200 was made in the hands of the assessee as income from undisclosed sources.
5. The above assessment was challenged in appeal before the CIT (A) and submissions were advanced which are noted by the learned CIT (A) in para 2.1 of his order. The learned CIT (A) also obtained a remand report from the assessing officer on the claims made before him by the assessee. After considering the submissions of the assessee, he upheld as valid the initiation of reassessment proceedings. The learned CIT (A) relied upon the finding of the Gift Tax Officer that gifts made were not genuine. In the light of above finding and also on the basis of statement of Shri Om Parkash Narwania, the learned CIT (A) maintained that gifts were not acceptable as genuine. He held that assessee was unable to rebut submissions and material brought on record by the assessing officer. The assessee failed to establish that gifts were actually made to the alleged donees. The learned CIT (A) accordingly confirmed the action of the assessing officer.
6. The assessee being aggrieved came up in appeal before the Appellate Tribunal. After considering the submissions of both the parties, the learned Accountant Member accepted the gifts and deleted the addition. He held in his proposed order that in the instant case, it was not in dispute that the gifts had been received through cheques. It was not the case of assessing officer that undisclosed income of the assessee was deposited in the account of the donor and then gifts to assessees daughters were made. The donor was related to the donees and gifts had been made at the time of Karan Bedhan Sanskar. So, there was also an occasion. For making a gift it was not necessary that there should be a blood relation and very very close relationship. In that view of the matter, the assessing officer was not justified in considering the gifts as non-genuine on the basis that the donor had not made any gifts to his sister or sons or daughters. The assessing officer had not appreciated the fact that neither the sister nor the sons or the daughters were living with the donor. The assessing officer in the assessment order dated 5-10-1992 at para 2 had stated that the contention of the assessee before him was that the donor and his wife resided at Kaithal whereas his sons lived outside and in their absence the assessee looked after them and he was happy with the services of the assessee and, therefore, gifts were made to his minor daughters. Only small daughters of the assessee served the donor and in those circumstances, it could not be said that there was no natural love and affection of the donor towards the minor daughters of the assessee. It was clear that the donor in his statement before the assessing officer admitted that the minor daughters of the assessee were serving him by giving tea or water etc. and the gifts had been made through account payee cheques. The assessing officer had not brought any material on record to establish that the amount deposited in the bank account of the donor, was the income earned by the assessee. The assessing officer was not justified in holding that gifts represented undisclosed income of the assessee. Thus the learned Accountant Member held that learned CIT (A) was not justified in confirming the action of the assessing officer without appreciating the facts in the right perspective. He directed that the addition be deleted.
7. The learned Judicial Member (the Honble Vice President) did not agree with the above view. He noted findings of the assessing officer and of CIT (A) and quoted extensively from these findings in para 4 of his proposed order and thereafter confirmed the action of the assessing officer and dismissed the appeal as per following observations in his proposed order:-
"5. It is evident from the findings recorded by the revenue authorities that the donor was not having any capacity to make the gifts to the minor daughters of the assessee. This finding is based by the assessing officer and upheld by the CIT (A) mainly on the basis of statement of the donor. No evidence to the contrary has been placed on record of the revenue authorities or before us. Since the donor has himself stated that he was having a meagre income hardly to meet his household expenses and that he had no capacity to make the gifts, the addition made by the assessing officer of Rs. 20,200 is justified and there is no scope, in my humble view, for deleting the same. I am, therefore, of the considered view that there is no merit in the appeal of the assessee."
This is how the matter had been brought before me.
8. The learned counsel for the assessee submitted that the donor had agricultural income as submitted by the assessee and noted by the assessing officer at page 2 in para 3 of the assessment order. He argued that there was no justification to reject affidavit of the donor and gift-tax return filed by him. As regards statement of the donor that he did not make any gift to anybody, the learned counsel explained that this remark pertains to any other gifts made in the last four years, the information which is required to be given as per the Gift Tax Act and did not relate to the gifts in question. The learned counsel further argued that the assessing officer while examining Shri Om Parkash Narwania should have drawn his attention to the affidavit and gift-tax return filed by Shri Om Parkash Narwania. The learned counsel accordingly argued that gifts made were established on record to be genuine and there was no justification to make addition in the hands of the assessee. The learned counsel further submitted that addition, if any, should have been made in the hands of M/s. Hari Chand Pawan Kumar, Kaithal where the amounts in question were deposited as cash credits. The learned counsel for the assessee supported the order of the learned Accountant Member.
9. Shri P.S. Punia, the learned Departmental Representative, drew my attention to page 5 para 7 of the assessment order. He argued that no source of income of the donor was established and the claim that he had agricultural income was merely as assertion. As recorded by the Gift Tax Officer and the assessing officer, Shri Om Parkash Narwania had meagre property income just sufficient to meet his both ends. He had no capacity to make any gift even to his real sister as clearly admitted by Shri Om Parkash Narwania. The assessee did not file any rebuttal to evidence and clear findings recorded by the revenue authorities. The learned Departmental Representative accordingly supported the proposed order of learned Vice President.
10. I have given careful thought to the rival submissions of the parties. This is a very small matter and I am of the view that no difference should have arisen between the learned Members. Anyhow, as the difference has been referred to me, I have no choice but to dispose of the matter in accordance with law. In my considered view, the arguments advanced on behalf of the revenue are well taken. In the gift-tax proceedings, the alleged donor had denied having made any gift to minor daughters of the assessee. A specific finding was further recorded by the Gift Tax Officer that the donor had no capacity to make any gift as he was managing himself with meagre income from house property. The aforesaid finding may not be binding on the assessee as he was not party to the proceedings under the Gift Tax Act, but those were relevant and could be relied upon to initiate action against the assessee. The purpose of taking action under sections 147 and 148 of the Income Tax Act was to provide opportunity to the assessee to rebut whatever was being used against him by the revenue (collected in the gift tax proceedings). The assessee was entitled to show that despite the statement of Shri Om Parkash Narwania, the gifts made to his minor daughters were genuine or gifted amount could not be added as his income from undisclosed sources. The onus was clearly on the assessee to show that Shri Om Parkash Narwania had capacity and sufficient income to make two gifts in question. The assessee could have placed evidence to the above effect. However, this onus has not been discharged by the assessee in spite of opportunities provided to him. The assessee merely asserted that Shri Om Parkash Narwania had agricultural income but placed no evidence to show agricultural or other income from any source of Shri Om Parkash Narwania from which gifts could be made. This was necessary as Shri Om Parkash Narwarria had denied having made any gift to the children of the assessee. He had stated that there was no money with him to make gift to anybody not even to his real sister. Without material to the contrary and in the light of statement of Shri Om Parkash Narwania, the assessees claim of gifts to his minor daughters could not be accepted as established. Likewise, affidavit of Shri Om Parkash Narwania and the gift-tax return are of no help to the assessee, as the return stood rejected for good reasons and contents of affidavit contradicted in the statement on oath.
11. The assessee operated accounts on behalf of minor daughters and made investment of alleged gifted amounts in concern M/s. Hari Chand Pawan Kumar, Kaithal, Commission Agent, Kaithal. The minors, admittedly, have no independent source of income. Therefore, on facts and circumstances of the case, a reasonable inference could be drawn that money utilized for investment with M/s. Hari Chand Pawan Kumar, Kaithal was assessees money from "undisclosed sources". The assessee created a smoke screen-adopted a device to give this unaccounted money a colour of genuine gifts to his daughters. However, the device did not work. It is fairly established on record that the disputed amount representing undisclosed income of the assessee utilized for making investments. The addition made is held to be justified on the facts of the case.
12. The argument that addition should be sustained as cash credit in the hands of M/s. Hari Chand Pawan Kumar, Kaithal, is of no avail to the assessee. The amount has been transferred to books of account of above concern by the assessee through cheque and, therefore, there is no question of treating the amount as income of above concern.
13. In the light of above discussion, I agree with the proposed order of learned Vice President and uphold the assessment.
14. The matter should now go back to the regular Bench for disposal of appeal in accordance with law.