Income Tax Appellate Tribunal - Agra
Manak Chand Garg, Agra vs Assessee on 19 April, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No.192/Agr/2007
Assessment Year: 2000-01
Shri Manak Chand Garg, vs. Income Tax Officer 4(2), Agra.
B-12, Natraj Puram, Agra.
Kamla Nagar, Agra.
(PAN: ABYPG 5266 B).
(Appellant) (Respondent)
Appellant by : Shri Anurag Sinha, Advocate
Respondent by : Shri A.K. Sharma, Jr. D.R.
Date of Hearing : 19.04.2012
Date of Pronouncement : 08.06.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order dated 18.10.2006 passed by the Ld. CIT(A)-II, Agra for the Assessment Year 2000-01 on the following grounds :-
"1. That the Ld. CIT(A) has erred in law and on facts in sustaining the addition of Rs.1,00,000/- representing Gift received from Smt. Neelam Kumari without properly appreciating that the assessee has proved the identity, financial capacity of the Donor and genuineness of the transaction which is through Banking Channels. The Donor who is assessed to tax has duly confirmed the fact of Gift.2 ITA No.192/Agr/2007
A.Y. 2000-01 .
2. That the Ld. CIT(A) has erred in Law and on facts in sustaining another addition of Rs.2,00,000/- received from Shri Ratan Singh as Gift who is assessed to Income Tax and has given Gift through Banking Channels. Since the Donor has expired his Son who was summoned u/s 131 and whose statement was recorded by the Ld. A.O. has duly confirmed the said Gift, capacity of the Donor, reason for giving the Gift and that even after thorough examination the Ld. A.O. could not find anything adverse.
3. That the Ld. Authorities below have erred in Law and on facts in disbelieving the Gifts which are supported by documentary evidence and by the statement recorded by the Ld. A.O.
4. That the Ld. Authorities below have been highly unjust and arbitrary in disbelieving the evidence of Gifts without bringing on record any contrary evidence in support of his presumptions.
5. That the appellant craves to leave add, alter, amends or withdraw any ground of appeal."
2. The brief facts of the case are that the appeal was heard on 13.01.2009. The order was pronounced on 30.01.2009. The said order of I.T.A.T. is reproduced as under: -
"Order in ITA No.192/Agr/2007, Asstt. Year: 2000-2001, Manak Chand Garg vs. ITO --
This appeal of the assessee is directed against the order of ld. CIT(A) dated 18.10.2006 and pertains to A.Y. 2000-01.
2. Briefly stated, the facts of the case are that the assessee is a partner in the firm, M/s. Manak Chand Garg & Co. action u/s. 147 read with section 148 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act' for short) was initiated and in response to notice issued the assessee filed a copy of Income-tax return which he had already filed on 10.01.2001 showing total income of Rs.1,22,649/- , with a request that the original return should be treated as return 3 ITA No.192/Agr/2007 A.Y. 2000-01 .
filed in compliance of notice u/s. 148. The assessee requested the ld. AO on 10.11.2005 for supply of copy of reasons recorded and the AO supplied it on the same day. Following reasons were recorded by the AO for making re-assessment :
"Information has been received vide letter F.No.Addl.CIT/R-4/Suvey/2004-05 of the Adl. CIT, Range-4, Agra dated 28.3.2005 that a survey u/s. 133A was conducted on 22.4.2001 at the office premise of Shri D.K. Agarwal, CA, 245, Madhav Kunj, Pratap Nagar, Agra. The survey party has reported that as many as 292 trusts and their funds are controlled by Shri D.K. Agarwal. These trusts mostly show their addresses at 245-Madhav Kunj, 51/46-A, Madhav Kunj or 41/67, Lohar Gali, Agra Shri D.K. Agarwal has been creating bogus trust in the name of God/Goddesses of which he or his family members and his other associates are trustees. These trusts do not conduct any business but large receipt of money is shown in the hands of trust by way of gift business profit, donation etc. The trust have received gift in cash from other trust and these trusts have given gift to various persons. There is no relationship between donor and donee.
Further more one Shri Lalit Kumar Agarwal assessee of Ward 4(2), Agra has stated that Shri D.K. Agarwal has created bogus trust in the name of Lalit Kumr Agarwal and that although he has been shown as trustee, he has no knowledge of the activities of the trust. The CIT(A)-II, Agra has also given his finding in the cases of the trustees Vishnu Bhagwan Agarwal, Smt. Kusum Kumari, Shri Ravinder Kumar, Shri Radha Ballabh & D.K. Agarwal, Shri Shital Prasad Jain that M/s. Vishnu Bhagwan (P) Family Trust are bogus trusts and the income shown in the hands of trust actually belongs in trustee vide his appellate order dated 8/9.7.2004. All these trusts are actually managed and controlled by Shri D.K. Agarwal, CA.
It has also been informed that Annexure-II of seized material during the survey shows that one of the trust Narmada Benefit Trust, 31/67, Lohar Gali, Agra is also managed and controlled by Shri D. K. Agarwal, CA has given gift of Rs.1,00,000/- on 25.08.1999 to the above named assessee.4 ITA No.192/Agr/2007
A.Y. 2000-01 .
In view of the above, it is clear that Shri D. K. Agarwal has been creating bogus trusts which are involved in giving entry of gifts. As per information received these gifts have been found to be unaccounted money of the beneficiaries themselves. I have therefore, reasons to believe that income to the tune of Rs.1,00,000/- has escaped assessment in the case of Shri Manik Chand Garg S/o. Shri Laxmi Narain Garg, B-12, Natrajpuram, Kamla Nagar, Agra for AY 2000-01 to issue notice u/s. 148."
3. In reassessment proceedings, the AO sought explanation with regard to two gifts and ultimately found that these are in-genuine gifts being made by unidentified persons without their creditworthiness having been proved. The ld. CIT(A) has also confirmed the impugned additions. Now the assessee is aggrieved and has raised the following grounds :-
"1. That the Ld. CIT(A) has erred in Law and on facts in sustaining the addition of Rs.1,00,000/- representing Gift received from Smt. Neelam Kumari without properly appreciating that the assessee has proved the identity, financial capacity of the donor and genuineness of the transaction which is through Banking Channels. The Donor who is assessed to tax has duly confirmed the fact of Gift.
2. That the Ld. CIT(A) has erred in law and on facts in sustaining another addition of Rs.2,00,000/- received from Shri Ratan Singh as Gift who is assessed to Income Tax and has given Gift through Banking Channels. Since the Donor has expired, his son who was summoned u/s 131 and whose statement was recorded by the Ld. A.O. has duly confirmed the said Gift, capacity of the. Donor, reason for giving the Gift and that even after thorough examination the Ld. A.O. could not find any thing adverse.
3. That the ld. Authorities below have erred in Law and on facts in disbelieving the Gifts which are supported by documentary evidence and by the statement recorded by the Ld. A.O. 5 ITA No.192/Agr/2007 A.Y. 2000-01 .
4. That the Ld. Authorities below have been highly unjust and arbitrary in disbelieving the evidence of Gifts without bringing on record any contrary evidence in support of his presumptions.
5. That the appellant craves to leave add, alter, amend or withdraw any ground of appeal."
4. In addition to the above grounds, the assessee has raised additional grounds which are three in number and read as under :-
"1. That the ld. CIT(A) has erred in Law and on facts in dismissing ground No.1 and 2 of assessee's appeal without properly appreciating that the ld. AO has erroneously and unlawfully assumed jurisdiction u/s. 148 on the basis of general and sterio typed reasons without any verification, without application of mind and without forming his own belief.
2. That the ld. CIT(A) has erred in Law and on facts sustaining addition of Rs.3,00,000 without properly appreciating that the reasons for issue of notice u/s.148 allege escapement of income of Rs.1,00,000/- and not of Rs.3,00,000/-.
3. That the ld. CIT(A) has erred in Law and on facts in not properly appreciating that the provisions of Section 68 are not applicable as the amount in question has not been found recorded in assessee's books of accounts as he is not maintaining the same."
5. The above grounds are simply legal grounds. The ld. D.R. did not object to their admission. The grounds are purely legal grounds for which no further investigation of facts is required. Therefore in view of the decision of Hon'ble Supreme Court rendered in the case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC), these are admitted as ground Nos.6, 7 and 8.
6. On merits, the two gifts - one of Rs.1,00,000/- representing the gift received from Smt. Neelam Kumar and second of Rs.2,00,000/- received from Shri Ratan Singh are the subject matter of challenge. 6 ITA No.192/Agr/2007
A.Y. 2000-01 .
7. In so far as gift of Rs.1 lakh received from Smt. Neelam Kumari is concerned, the relevant facts are that the assessee has declared this gift received through cheque No.864439 dated 25.08.1999. A copy of gift deed signed by Smt. Neelam Kumari was filed before the AO on 16.11.2005. In the gift deed as well as in the information dated 25.08.1999, a gift of Rs.l lakh made on 25.08.99 to Shri Manak Chand Garg S/o. Shri Laxmi Narain Garg, B-12, Natrajpuram, Kamla Nagar, Agra were also enclosed and in the balance sheet as on 31.03.1998 a cash/bank balance of Rs.18,485/- was shown. Alongwith this reply, the assessee also filed copies of two informations dated 12.09.1999 and 26.09.1999 from which Shri Ratan Singh has informed two gifts amounting to Rs.l,00,000/- each having been made by him through cheque Nos.597902 and 597904 respectively to Shri Manak Chand Garg. Smt. Neelam Kumari is the wife of Ratan Singh's friend. On 20.11.2005 and on 08.12.2005, the advocate appearing on behalf of the assessee produced books of accounts and bank passbooks of the assessee which were test checked. Written reply dated 25.11.2005 enclosing therewith a copy of bank account No.KHSB00001558 in Canara Bank, Kamla Nagar standing in the joint names of Shri Manak Chand Garg, Ritu Garg and Vandana Garg, B-12, Natraj Puram, Kamla Nagar, Agra. The bank account reflected the amount of gift of Rs.1,00,000/- each deposited on 28.08.1999, 17.9.1999 and 4.10.1999. In the written reply, the assessee has mentioned that he had also received a gift of Rs.2,00,000/- from Shri Ratan Singh, proprietor of Rama Brick Field. Two gift deeds were also enclosed in respect of these gifts, but copy of account of Shri Ratan Singh was not filed. Since the assessee did not produce any evidence regarding the creditworthiness of the donors including Smt. Neelam Kumari, a summons u/s. 131 of the Act was issued on 17.11.2005 to her requiring her to be present personally before the AO on 24.11.2005. In compliance to the summons, Shri D.K. Agarwal, C.A. attended and filed an application for fixing another date for compliance and also informed that Smt. Neelam Kumari, who was one of the trustees of M/s. Narmada Benefit Trust, had expired on 20.12.2002. Consequently, the next date of compliance was fixed as 06.12.2005. But on that date none appeared nor any written reply in compliance of the summons was received. Consequently, the AO did not accept this gift having been made by persons whose identity as well as creditworthiness were not established on record. Before the ld. CIT(A), the assessee fought 7 ITA No.192/Agr/2007 A.Y. 2000-01 .
vehemently and the ld. CIT(A) sought remand report from the A.O. vide his order sheet entry dated 18.05.2006, and also directed the A.O. to allow legal heir of Smt. Neelam Kumari to state in favour of the gifts by allowing fresh opportunity. After compliance of the direction of the ld. CIT(A), the A.O. submitted the following report. :
"Smt. Neelam Kumari Donor of gift Rs.1 lac :
In written reply dated 29.5.2006, the assessee again expressed his inability to produce the legal heir of Smt. Neelam Kumari and requested to enforce the presence of Shri D.K. Agarwal, CA, 46-A Mahadev Kunj, Pratap Nagar, Jaipur House, Agra as legal heir of Smt. Neelam Kumari. A summon u/s. 131 of the I.T. Act, 1961 was issued on the same day to Shri D.K. Agarwal, CA on the given address requiring him to attend my office personally on 5.6.2006 and to produce complete books of account in case of Smt. Neelam Kumari Prop. M/s. Brij Mohan Lal & Sons, 51-Madhav Kunj Pratap Nagar, Agra, Managing Trustee of M/s. Narmada Benefit Trust 31/67, Lohar Gali, Agra for the A.Y. 2000-01, bank statement for the period 1.4.98 to 31.3.2001 and explanation regarding sources of funds through which amount of Rs.1 lac was gifted by Smt. Neelam Kumari to Shri Manak Chand Garg with amount and date of making gift. Any how, on 5.6.2006, Shri D.K. Agarwal, CA could not appear before me therefore, on verbal request of the assessee another summon u/s.131 dated 7.6.2006 was sent by Speed Post to Shri D.K. Agarwal, CA requiring him to produce personally on 12.6.2006 the same documents which were required by the summon dated 29.5.2006.
Shri D.K. Agarwal, CA attended on 12.6.2006 in response to summon u/s. 131 dated 7.6.2006 and has filed a bunch of 95 copies of papers which were submitted by him before the ACIT-2(l), Agra on 31.3.1999. Statement on oath of Shri D.K. Agarwal, CA has been recorded by me which is submitted for kind perusal as placed on record.
In the bunch of 95 papers, Shri D.K. Agarwal has enclosed at page No.5, a copy of bank account of M/s. Brij Mohan Lal & Sons at Oriental Bank of Commerce, Agra w.e.f. 25.8.1999 to 8.9.1999. In the bank statement, there are certain 8 ITA No.192/Agr/2007 A.Y. 2000-01 .
cash deposits which have been confronted with Shri D.K. Agarwal, CA in Qn. 2. Shri D.K. Agarwal, CA has replied in his statement that it was the capital of the trust and is on record. In the summon issued on 7.6.2006, Shri D.K. Agarwal, CA was required to produce the complete books of accounts of Smt. Neelam Kumari Prop. M/s. Brij Mohan Lal & Sons, Managing trustee of M/s. Narmada Benefit Trust 31/67, Lohar Gali, Agra, Bank Statements of Smt. Neelam Kumari for the period from 1.4.1998 to 31.3.2001 and to explain the sources of funds from which Smt. Neelam Kumari gifted the amount of Rs.1,00,000/- to Shri Manak Chand Garg. Shri D.K. Agarwal, CA has stated in his statement that he has given a bunch of 95 papers and everything is written therein. Nothing more is with him regarding bank statement for the remaining period. Shri Agarwal, CA has further stated that whatever was available with him he has filed. From the perusal of the entries of cash deposits in the bank statement and the reply of Shri D.K Agrwal I am of the view that it is the unaccounted money introduced by those persons who have been benefited by the trust by receiving gifts. Shri Manak Chand Garg is one of them who have introduced his own unaccounted money in the garb of gift through artificial donor Smt. Neelam Kumari Prop. M/s. Brij Mohan Lal & Sons managing trustee of M/s. Narmada Benefit Trust."
8. Against this, in rejoinder, it was stated on behalf of the assessee that sufficient documentary evidences establishing the creditworthiness and genuineness of transaction had been filed by the Authorized Representative 8hri D.K. Agarwal. The relevant reply is as under:
"Gift from Smt. Neelam Kumari:
The donor Smt. Neelam Kumari has already expired on 22.12.02. Her legal heirs Shri D.K Agarwal, CA in response to summon u/s. 131 had appeared before Ld. AO and confirmed that donor Smt. Neelam Kumari had given a gift of Rs.1 lac to the assessee. Besides his statement Shri D.K Agarwal also filed a copy of a/c. of M/s. Brij Mohan Lal & Sons of which Smt. Neelam Kumari was a prop. He also stated that Smt. Neelam Kumari, prop. of M/s. Brij Mohan Lal & Sons was also a 9 ITA No.192/Agr/2007 A.Y. 2000-01 .
managing trustee of M/s. Narmada Benefit Trust, the AO put certain other questions to Shri D.K. Agarwal in response to which Shri D.K. Agarwal filed bunch of 95 papers including bank a/c. before the Ld. A.O. The Ld. A.O. in his remand report has partly discussed about the bunch of 95 papers which shows that the AO was satisfied about this gift of Rs.1 lac also.
The assessee has thus proved both the gifts which have been received by him through a/c. payee cheques, legal heir of both the donors has duly confirmed about the facts of gift."
9. After considering these evidences, finally, the ld. CIT(A) has come to the conclusion that the gift was arranged by the assessee to introduce his unaccounted money in regular books of accounts and, therefore, he confirmed this addition. Now the assessee is further aggrieved.
10. It was vehemently argued by the ld. A.R. 8hri J.L. Verma that with regard to 8mt. Neelam Kumari, the entire evidence were produced to confirm this gift and copies of those evidences are again enclosed at pages 30, 34, 35 & 36 of his paper book. On the other hand, the ld. D.R. has vehemently argued that neither the identity nor the creditworthiness of the donor has been established, so this gift is bogus one. We have examined the relevant evidences in the light of the oral submissions of the parties. At page 30 of the paper books of the assessee, the statement on oath of Shri D.K. Agarwal, C.A., has been enclosed. In his statement, Shri Agarwal has relied upon a bunch of 95 pages, which is stated to be a written reply and with reference to the same it was categorically stated that he had nothing to say anything more beyond that. Regarding the bank statement, he said that the AO was competent enough to call the required record from the bank directly. At page 34, copy of letter dated 25.08.1999, an acknowledgement of gift by Smt. Neelam Kumar is enclosed. At page 35, copy of gift deed is enclosed. At page 36, statement of bank account of M/s. Brij Mohan Lal & Sons is enclosed. From none of the above evidences, it is established that Smt. Neelam Kumari had died and if died, she died on a particular date. Definitely, her identity remained in doubt. Even in his statement Shri D.K. Agarwal has mentioned nothing about the death of Smt. Neelam Kumari, but 10 ITA No.192/Agr/2007 A.Y. 2000-01 .
obviously his statement was recorded as a legal heir of Smt. Neelam Kumari. The creditworthiness of Smt. Neelam Kumari is also not found established on record. In the absence of proof of identity of donor and proof of creditworthiness of the donor, the gift cannot be treated as genuine. Therefore, we confirm the finding of ld. CIT(A) in this regard and sustain the impugned addition. What is this bunch of 95 pages is still a mystery and nothing was stated even before us as to what evidence(s) was kept therein. The assessee is bound to prove the identity of the donor. Even the death of the donor was not proved on record. The question of Legal Heir comes only after accepted proof of the death of the donor. There is no direct evidence available on record in this regard. The proof of her creditworthiness is lacking in toto. No proof of her creditworthiness is available on record. Such a gift cannot be held to be genuine.
11. With regard to the gift of Sri Ratan Singh of Rs.2,00,000/-, remand report was sought by the ld. CIT(A) from the ld. AO and the same was submitted which, verbatim, reads as under :
"Shri Ratan Singh, donor for the gift of Rs.2 lac-
On 29.05.2006 the assessee Shri Chand Garg attended with his counsel and produced one Shri Vijay Singh resident of Village Panwai, Tehsil Kirawali, Agra as legal heir of the donor Shri Ratan Singh. In evidence of his identity Shri Vijay Singh has filed copy of Khatoni and a certificate dated 15.5.2006 issued by Chaudhri Vijay Singh the Pradhan of Gram Panchayat, Panwari Vikas Khand Ahhnera, Agra. The Pradhan has certified that Shri Ratan Singh S/o. Shri K Mwasi Singh has been expired on 16.6.2001. He has three sons but he used to reside with his some Shri Vijay Singh. Shri Ratan Singh was running a brick kilm at Deori Road, Deori under the name and style of M/s. Rama Brick Field. Later on he did dalali of bricks.
An statement on oath of Shri Viay Singh S/o Shri Rattan Singh aged about 48 years R/o. Village Panwari Tehsil Kirawali, Agra has been recorded by me on 29.5.2006 which is self explanatory and is submitted with case record of Shri Manak Chand Garg for your kind perusal. In this statement on 11 ITA No.192/Agr/2007 A.Y. 2000-01 .
oath, in replies to question No.4 to question No.7, Shri Vijay Singh has categorically stated as under :-
- Before his death my father told me that he had given gift of Rs.2 lac to Shri Manak Chand Garg (Ans. To quen. 4)
- Shri Manak Chand Garg is our family friend. He generally used to come to my father. In 1987 my other met with an accident and at that time Shri Manak Chand Garg helped my father physically and financially. Impressed with the same my father decided to do something for Shri Manak Chand Garg and therefore, he gifted Rs.2 lac to Shri Manak Chand Garg. It is told to me by my father Shri Vijay Singh has stated (Ans. to Qn.5)
- My father gifted two cheques of Rs.1 lac each, to Shri Manak Chand Garg in the year 1999-2000 it was told by my father (Ans. to Qn.6).
- My father was having two saving accounts one at PNB, Rohta and another at Jamuna Gramin Bank-Panwari but it cannot say that out of which account, my father issued the cheques for gift of Rs.1 lac each to Shri Manak Chand Garg and what was the date of these cheques (Ans to Qn.7)
- Shri Vijay Singh S/o Shri Rattan Singh has expressed his inability to produce the copies of bank statements and books of account of Shri Rattan Singh in order to substantiate the source of funds out of which the gift of Rs.2 lac was given to Shri Manak Chand Garg by Shri Rattan Singh. However, Shri Vijay Singh has stated that his father was a regular tax payer and PAN AMMPS 5126M was allotted to him by the department. Shri Vijay Singh has filed copy of capital account, computation of income and acknowledgement of the return filed by Shri Rattan Singh for the AY 2000-01 on total income of Rs.91250 + Agriculture income Rs.58,500/- in Ward-l(3) Agra in august, 2000 vide receipt No.22050 (Ans. to Qn.8).12 ITA No.192/Agr/2007
A.Y. 2000-01 .
It is submitted that copy of capital account of Shri Rattan Singh for the A Y 2000-01 depicts debit of total gift of Rs.5,10,000/-. In answer to question No.9 Shri Vijay Singh has stated that out of this amount of Rs.5,10,000/- my father had given gift of Rs.2 lacs to Shri Manak Chand Garg and Rs.1 lac ten thousand were gifted to me. For the rest of the amount, I have no knowledge.
It is submitted for kind perusal that during the assessment proceedings the assessee Shri Manak Chamd Garg never informed me that donor of gift of Rs.2 lac Shri Rattan Singh has been expired, nor he expressed his intention to produce before me the legal heir of Shri Rattan Singh to justify the genuineness of gift of Rs.2 lacs made to him by Shri Rattan Singh. Since Shri Vijay Singh, appeared as legal heir of Shri Rattan Singh has failed to produce any documentary evidence in the shape of bank statement and books of accounts of Shri Rattan Singh for verification of genuineness of the gift and to explain the source of funds out of which the gift was given therefore, after examining Shri Vijay Singh, it appears to me that a self cooked story has been put by the assessee in the mouth of Shri Vijay Singh. The donor Shri Rattan Singh was having no relationship with the donee Shri Manak Chand Garg and there was no love and affection in between them out of which the said gift was made and there is no specific occasion on which the gift of Rs.2 lac was made by Shri Rattan Singh to Shri Manak Chand Garg. In fact, Shri Manak Chand Garg has introduced his own unaccounted money in the garb of gift through an artificial donor.
In view of the above fact it is humbly submitted that the assessee does not deserve for any relief from the addition of Rs.2 lac made u/s. 68 as undisclosed income of the assessee in the assessment order passed for the AY 2000-01."
12. Again the reply in rejoinder to the remand report tendered by the assessee is being extracted below:-
"Gift from Shri Ratan Singh 13 ITA No.192/Agr/2007 A.Y. 2000-01 .
Since the donor Shri Ratan Singh has already expired on 16.6.2001 his son Shri Vijay Singh appeared before the Ld. A.
0., filed the evidence of death of his father Shri Ratan Singh and proved his identity.
In his statement Shri Vijay Singh confirmed that his father Shri Ratan Singh had given gift of Rs.2 lacs to the assessee, on queries he further deposed that the assessee is a family friend and generally used to visit his father. On further question the said Shri Vijay Singh clarified that in 1987 his mother admitted in an accident and the assessee Shri Manak Chand Garg help the family physically and financially. His father being impressed by the help rent deed by the assessee had decided to do something for the assessee at any time. His father had gifted Rs.2 lacs to the assessee by way of two cheques of Rs.1 lacs each in the year 99-2000 out of his bank account.
On further question the said Shri Vijay Sing stated that the fact of gift Rs.2 lacs had been mentioned to him by his father, Shri Vijay Singh also confirmed that his father Ratan Singh was income tax assessee and was having his PAN AMMPS5126M. The donor Shri Ratan Singh used to file capital a/c. and computation of income with the return. Evidence of filing return of income for 2000-01 was also furnished.
Several questions were put to the said Shri Vijay Singh but he formally confirmed the above mentioned facts. The AO could not get from his mouth any contradiction. The ld. AO duly admitted all the aforesaid facts in his remand report submitted before your honour. Thus the facts of the fact of Rs.2 lac from Shri Rattan Singh stand duly proved.
It is further submitted that the relationship between donor and donee and there being any specific occasion as stated by AO is not necessary under law.
It is therefore prayed that the addition made by the AO may kindly be deleted."14 ITA No.192/Agr/2007
A.Y. 2000-01 .
13. It was argued by the Id. A.R. with reference to pages 12 to 18 and 21 of his paper book that the gift made by Shri Ratan Singh to the assessee is genuine. Again, we are not convinced regarding the identity and the creditworthiness of this donor as well. The scrutiny of the remand report vis-a-vis the reply of the assessee, it becomes manifest that no documentary evidence (s) was produced in support of what was stated by Shri Vijay Singh. During assessment proceedings, the assessee did not even inform Ld. AO that this donor had already expired. A statement simpliciter made only to suit the requirement of this assessee's case throws a shroud of disbelief and absence of documentary proof takes out this gift from the kitty of genuineness. The evidences filed in the form of acknowledgement of ROI again disprove the case of the assessee. The donor has disclosed meager incomes in both these years. Thus the creditworthiness of the donor is also not proved. From the remand report as well as assessee's reply, the creditworthiness of the donor is not at all established. Therefore, we do not accept this gift also
14. Now coming to legal ground taken by the assessee as additional ground, ground No.1 of additional ground which has been treated as ground No. 6 challenges the assumption of jurisdiction u/s. 148 of the Act on the ground that the reasons recorded with regard to escapement of income are not specific, but are general in nature. After perusing the reasons recorded by the AO which have been extracted in above part of this order, it becomes clear that the reasons with regard to escapement of income qua alleged gift of Rs.l,00,000/-, given by Smt. Neelam Kumari through cheque No.864439 drawn on a particular bank is definitely a specific and not a general information. Therefore, this ground is not maintainable and is, therefore, dismissed.
15. With regard to ground No.2, it is found that when one of the reasons recorded for reopening of assessment is found to be correct and existent, thereafter, it is trite that the assessment order is open for any other additions. During the re-assessment proceedings, the gifts of Rs.2,00,000/- was found to have been allegedly received by the assessee, which was not even disclosed in the original return filed by the assessee. Therefore, this ground is not material and does not raise any good legal ground and the same is liable to be dismissed. We, 15 ITA No.192/Agr/2007 A.Y. 2000-01 .
therefore, dismiss ground No.2 of additional ground, which has been admitted as ground No.7 of appeal.
16. In so far as the application of provisions of section 68 is concerned, the same again is of no use to the assessee because it is very much clear from the assessment order itself that the assessee had maintained books of accounts. So there is no question of not applying the provisions of section 68 of the Act in this case. This issue is not at all covered by the decisions relied by the ld. AR and are distinguishable for the reason that in those cases, the assessee did not maintain books of accounts.
17. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 30.01.09."
3. The assessee filed Miscellaneous Application (M.A.) against the said order before the I.T.A.T. The I.T.A.T. vide M.A. 20/Agra/2010 Order dated 17.09.2010 allowed the M.A. of the assessee as under:-
"This is a miscellaneous application filed by the assessee arising out of order of the Tribunal in ITA No.192/Agr/2007 for Assessment year 2000-01.
2. The appeal of the assessee was disposed off by the Tribunal vide order dated 30.1.2009. In appeal of the assessee the issue involved was against deletion of addition of ` 3,00,000/- made on account of two gifts of ` 2 lacs and ` 1 lac. The Tribunal has recorded a finding that though statements of donors were recorded, however, no supporting evidence was filed. These observations are recorded by the Tribunal in para 13 of its order.
3. The ld. Counsel of the assessee vehemently argued that the finding record by the Tribunal in para 13 are contrary to the facts of the case. Attention of the Bench was drawn on pages 16 & 17 where copy of supporting evidence i.e. ownership of agricultural land is placed. Therefore, it was submitted that the Tribunal has rejected the appeal of the assessee under misconception. Therefore, it should be 16 ITA No.192/Agr/2007 A.Y. 2000-01 .
recalled. Reliance is placed on various case laws mentioned in the written submission filed by the assessee.
4. On the other hand, the D/R stated that miscellaneous application of the assessee may be disposed off on merit.
5. After considering the submissions and perusing the order of Tribunal, we find that a mistake has been crept in the order of the Tribunal. Whether the addition is liable to be deleted or not is another aspect, but the fact is that the assessee has filed supporting evidence in its case. Copy of ownership of agricultural land is placed on record as mentioned in the order of the Tribunal at pages 16 & 17. Therefore, it is a mistake on the part of the Tribunal in mentioning that no documentary evidence was produced in support of ownership of agricultural land, as stated by Shri Vijay Singh legal heir of donor Shri Ratan Singh. Since supporting evidence produced, copy of which is placed on record in the original file, therefore, we hold that the order of the Tribunal is liable to be recalled. In view of above facts and circumstances, we recall the order of the Tribunal and direct the Registry to fix the appeal in due course. We order accordingly.
6. The order is pronounced in the open Court on 17.09.2010."
4. Thus the appeal was accordingly fixed for hearing.
5. We have heard the ld. Representatives of the parties and records perused. The assessee is a partner in the firm M/s. Manak Chand Garg & Co. The case was reopened under section 147 of the Act and issued notice under section 148 on 30.03.2005. A copy of reason was issued to the assessee on 10.10.2005. It was noticed that a gift of Rs.1,00,000/- was received to the assessee from Smt. Neelam Kumari, proprietor of M/s Brij Mohan Lal & Sons, 51, Madhav Kunj, Pratap Nagar, Agra through cheque No.864439 dated 25.08.1999. On examination of the 17 ITA No.192/Agr/2007 A.Y. 2000-01 .
genuineness of the gift, the A.O. asked the assessee to furnish the supporting evidence and material. The A.O. examined the materials filed by the assessee. The A.O. noticed that the assessee has produced nothing about the creditworthiness of the donor. The A.O. has also noticed that two gifts of Rs.1, 00,000/- each 12.09.1999 and 26.09.1999 through cheque no.597909 and 597904 respectively received to the assessee. It was explained that the donor Smt. Neelam Kumari is the wife of assessee's friend and also having family relations with them and they usually attend their functions. In order to examine the donors, summon under section 131 of the Act was issued on 17.11.2005 to the donor Smt. Neelam Kumari but the donor Smt. Neelam Kumari did not appear before the A.O. Similarly, summon under section 131 of the Act was also issued to Shri Rattan Singh on 25.11.2005 by Speed Post on the address given in the Gift Deed. But the summon was returned un-served with the postal remark "Pata galat he - Waldeeyat Nahin". The A.O. has also noticed that the CIT(A) vide his order dated 8/9.07.2004 has given finding in the case of trustees S/Shri Vishnu Bhagwan Agarwal, Ravaindra Kumar, Radha Ballabh, D.K. Agawal and Shri Sheetal Prasad Jain that M/s. Vishnu Bhagwan Family Trust, M/s Radha Trust, M/s Renu Agarwal Trust and M/s. Sheetal Prasad Jain (P) Family Trust etc. are bogus trusts and the income shown in the hands of the trusts are actually belongs to its trustees. All these trusts were managed and controlled by Shri D K. Agarwal, Chartered Accountant. Smt. Neelam Kumari is also one of the trustees of M/s. Narmada Benefit Trust who has 18 ITA No.192/Agr/2007 A.Y. 2000-01 .
expired on 22.12.2002. The A.O. noticed that gift of Rs.1,00,000/- made to the assessee by Smt. Neelam Kumari has also been routed through M/s. Narmada Benefit Trust which has also been also managed and controlled by Shri D.K. Agarwal, C.A. It has also been noted by the A.O. that certain facts as noted by the A.O. in paragraph no.4 of his order from which it is clear that the assessee has initially misguided the department by giving false name and address the Gift Deed. The A.O. held that the assessee introduced his own unaccounted money in the garb of gift through artificial donors. The A.O. found that the assessee has failed to establish the creditworthiness of both the creditors Shri Rattan Singh and Smt. Neelam Kumari. The CIT(A) confirmed the addition. It was submitted before the CIT(A) that the Donor Shri Rattan Singh has also expired on 16.06.2001. Therefore, it was not possible to produce him before the A.O. The CIT(A)provided fresh opportunity to the assessee to produce the Legal Heir of the donor for examination before the A.O. The A.O. submitted the remand report dated 15.06.2006 which is reproduced in the original I.T.A.T. order. The CIT(A) reproduced the assessee's submission against the remand report submitted by the assessee which have also reproduced above in the original order of the I.T.A.T. The CIT(A) confirmed the addition observing as under :-
"3.4 I have considered the facts of the case, submission of AR and AO's report. In my view appellant deserves to fail. Considering the facts of the case alleged gifts under reference cannot be said to be 19 ITA No.192/Agr/2007 A.Y. 2000-01 .
genuine. In case of gift from Smt. Neelam Kumari, though in the photocopy of gift deed it was mentioned that gift was given by donor out of natural love & affection, however, appellant failed to furnish evidence showing that the donor was related to him by way of relationship or friendship. In spite of sufficient opportunity, the assessee failed to produce the L/h of Smt. Neelam Kumari. Even the complete address of L/h was not furnished. The appellant has requested the AO to issue summon to Shri D K Agarwal, CA, 46A, Madhav Kunj, Pratap Nagr, Agra for ascertaining the source of fund in the hands of donor. Summon was issued and Shri D K Agarwal was asked to produce the books of account and bank statement of the donor family regarding source of fund. The bank accounts produced by Shri D K Agarwal indicate various cash deposits and the source of the same were not explained by him. When he was specifically asked to explain the source of cash deposit though it was claimed by him that the aforesaid cash was deposited by him out of capital of the trust, however, no documentary evidence and details in this regard was submitted. In fact on 28.3.05 a survey u/s 133A was conducted at the office premises of Shri D K Agarwal and during the course of survey it was found that as many as 292 trusts are being operated from the aforesaid address. It was also found during the course of survey that the trust do not conduct any actual business but they are utilized for providing accommodation entries to various beneficiaries by way of gift, business profit, donation etc. In fact official letter head and seals of various Income-tax authorities were also found during the course of search which indicate that genuineness of documents in respect of the entities are doubtful. The appellant's donor Smt. Neelam Kumari, Prop. of M/s Brij Mohan Lal & Sons, which was the managing trustee of one of the such trust M/s Narmada Benefit Trust, 31, Lohargali, Agra. During the course of assessment proceedings, Shri D K Agarwal has claimed that the fund of Narmada Benefit Trust was utilized for aforesaid gift of Rs.1 lakh. It is also seen that besides giving gift to appellant the aforesaid trust has distributed gift of more than Rs.25 lacs to various beneficiaries. The facts of the case clearly indicate that Narmada Benefit Trust was created with the sole intention of defrauding the revenue by providing fictitious entries in respect of gift etc. There are unexplained cash deposits in the bank account of aforesaid trust, in such circumstances gift advanced by Smt. Neelam Kumari cannot be held as genuine gift.20 ITA No.192/Agr/2007
A.Y. 2000-01 .
3.5 Similarly, in the case of Ratan Singh though his L/h has confirmed the facts regarding gift of Rs.2 lacs, however, copy of bank accounts was not produced. During the concerned year, the total income of Ratan Singh was only Rs.1,49,750/-. From the copy of his capital account produced by L/h it appears that Late Shri Ratan Singh has given gift of Rs.5,10,000/-. Appellant failed to produce bank statement or books of account of late Shri Ratan Singh, in such circumstances creditworthiness of Ratan Singh remained unproved. A person having measure income of Rs.1,49,750/- cannot have sufficient fund to give gift to the tune of Rs.5,10,000/-. It is difficult to appreciate why a person of such low financial will part with their hard earned money in the form of gift to appellant and other persons. While examining the genuineness of the gift the facts of the case are to be considered; human conduct and preponderance of the probability are to be seen. In today's commercial world when no person would part with even a small amount of gift without any reason, occasion and relationship such huge gift from person of unknown identity cannot be complete disregard to this situation, he still had receipt a valid gift. The Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More 82 ITR 540 has held that human probability and conduct has to be considered in taxation matters. At page 545 the Hon'ble Supreme Court has held as under :-
"It is true that 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 relied 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."21 ITA No.192/Agr/2007
A.Y. 2000-01 .
Similarly, the Hon'ble Supreme Court in the case of Workmen of Associated Rubber Industry Ltd. vs. Associated Rubber Industries Ltd. and Another in 157 ITR 77 has held as under :-
"It is the duty of the court, in every case where ingenuity is expended to avoid taxing and welfare legislations, to get behind the smoke-screen and discover the true state of affairs. The court is not to be satisfied with form and leave well alone the substance of a transaction. ........... Avoidance of welfare legislation is as common as avoidance of taxation and the approach in considering problems arising out of such avoidance has necessarily to be the same."
3.6 In the case of Sumati Dayal 214 ITR 801 the Supreme Court has held that surrounding circumstances and human probabilities are to be kept in view in taxation matter. In such matter a superficial approach has to be avoided.
3.7 The Calcutta High Court in the case of CIT vs. L.N. Dalmia in 207 ITR 89 has held that for determining whether the transaction sham or a device or a route, Income-tax Authorities are entitled to enter the factual cover and ascertain the truth.
3.8 In the case of Sunil Sidharth vs. CIT 156 ITR 507 the Supreme Court has held that it was open to the Income-tax Authorities to go behind the transaction and examine whether the transaction was genuine or not.
3.9 Similarly the Hon'ble Supreme Court in the famous case of McDowell has held that avoidance of tax through colorable device was not permissible. The aforesaid decision has been followed by the Kerala High Court in the case of CIT vs. S. Ami in 210 ITR 585 and the Kerala High Court has held that even after the decision in the case of CWT vs. Arvind Narrotam 173 ITR 479 the decision of the Apex court in the case of McDowell still hold the flit. If the conduct of appellant/donor is seen in the light of the above decision the same would not appeal to even the person of ordinary prudence. 3.10 In view of the above discussion, the contention of the AR that genuineness, identity and creditworthiness of the donor has been proved and AO has not brought any material to support his stand that 22 ITA No.192/Agr/2007 A.Y. 2000-01 .
the appellant has introduced his unaccounted money in the garb of gift is not acceptable. It is abundantly clear the gift under question was arranged by the appellant to introduce his own unaccounted money in regular books of account. The addition made by the AO is therefore confirmed. Thus, appellant's grounds are rejected."
6. We have perused the orders of A.O., CIT(A) and also gone through and examined copy of the statement of Shri D.K. Agarwal, Legal Heir of Smt. Neelam Kumari of which copy has been placed at old Paper Book page nos.30 & 31. On perusal of this document, statement on oath of Shri D.K. Agarwal, L.H. of Smt. Neelam Kumari, we notice that the statement was recorded on 12.06.2006 relating to gift of Rs.1,00,000/- by Smt. Neelam Kumari. Shri Agarwal replied that he has furnished a bunch of papers of 95 pages and everything is written in those papers. In addition to that he did not want to say anything. In question no.2, it was asked that in bank account Rs.1,30,000/- and Rs.1,10,000/- cash was deposited on 26.08.1999, 27.08.1999 and 28.08.1999 respectively. It was asked to explain the source. In reply to that it was stated that the amount was out of trust capital which is on record. The assessee vide dated 21.12.2005 filed before the A.O stated that Smt. Neelam Kumari has expired on 22.12.2002. Therefore, the question does not arise to appear before the A.O. It was also stated that in M/s. Brij Mohan Lal & Sons and M/s. Narmada Benefit Trust Smt. Neelam Kumari was managing Trustee. A survey dated 24.04.2001 was carried out at the residence/office of Shri D.K. Agarwal, C.A. and records relating to trust were taken over by the 23 ITA No.192/Agr/2007 A.Y. 2000-01 .
Department. The trust has closed the activities w.e.f. 31.03.2002. The gift of Rs.1,00,000/- was given on 25.08.1999 by Managing Trustee Smt. Neelam Kumari by cheque. The relevant entries are duly recorded in the books of account which were also in the possession of the Department. The trust is a valid trust assessed under section 151 of the Income Tax Act. In respect of Gift by Smt. Neelam Kumari, it was stated that she is assessed to tax and PAN was also given. The gift was given through cheque. In respect of gift from Rattan Singh, it was stated that the assessee has discharged the onus as he has proved the identity of the donor who has been assessed to tax. The gift was given through account payee cheque. The gift deed of Smt. Neelam Kumari and its acceptance, confirmation of gift, reply given by the D K Agarwal was also field as evidence before the A.O. In respect of gift from Shri Rattan Singh, confirmation of two gifts, two gift deeds and its acceptance copy of return were filed. Statement of Shri Vijay Singh, son of L.H. of late Shri Rattan Singh recorded under section 131 of the Act on 29.05.2006. In the said statement it was stated by the Shri Vijay Singh that Rattan Singh has expired on 16.06.2001. A death certificate issued by Gram Panchayat Panvari dated 15.06.2006 was also filed. In respect to question no.4 it was stated that before the death late Shri Rattan Singh has told to Shri Vijay Singh that he has given gift of Rs.2,00,000/- to the assessee. In question no. nil the purpose of the gift was asked wherein Vijay Singh replied that the assessee and his father were family members and in 1987 when his mother got accident the assessee has extended physical as 24 ITA No.192/Agr/2007 A.Y. 2000-01 .
well as financial help. Therefore, the gift was given for Rs.2,00,000/-. In reply to question no.8, it was stated that since it was an old letter, therefore copy of bank account could not be produced. However, late Shri Rattan Singh was doing Dalali of bricks. In reply to question no.9 it was stated that out of total Rs.5,10,000/- his father has given gift of Rs.2,00,000/- to the assessee and gift of Rs.1,10,000/- was given to Vijay Singh. He did not know about the balance amount. In reply to question no.10, it was stated that his father was having two bhigas of agricultural land.Sl. Copies of return filed by Shri Rattan Singh for A.Y. 1997-98 to 2000-01 and copies of Balance Sheet and Profit & Loss Account have been placed at old Paper Book page nos. 21 to 29. Copy of reply dated 22.05.2006 and 28.05.2006 filed before A.O. of which copy has been placed at Paper Book page nos.6 & 7 wherein it was requested to issue summon in the name of Legal Heirs of the donors.Copy of death certificate dated 15.05.2006 issued by Gram Panchayat Panwari, photocopy of the same has been placed at page no. 8 of the Paper Book Copy of Katauni of agriculture land in the name of Shri Rattan Singh and his son.
7. On perusal of the order of M.A. dated 17.09.2009, we find that certain evidence in the form of copy of ownership of agricultural land which has been placed on record and were available at the time of original order of Tribunal mentioned at page nos.16 & 17 but same were not considered by the ITAT. The I.T.A.T. has recalled the order, accepting the assessee's contention that the copy of 25 ITA No.192/Agr/2007 A.Y. 2000-01 .
ownership of agricultural land which has been placed at page no mentioned at page nos.16 & 17 but same were not considered by the I.T.A.T. In the name of Rattan Singh and after the death of Rattan Singh their Legal Heir is on record, but the same was not considered. The effective ground raised in this appeal is pertaining to addition made on account of gift Rs.1,00,000/- given by Smt. Neelam Kumari and Rs.2,00,000/- by Shri Rattan Singh. The crux of the argument and contention of the assessee that the addition on account of gifts are not warranted as the assessee has proved the identity and financial capacity of the donor and genuineness of the transaction which is through banking channel. The donors are assessed to tax and have confirmed the facts of gift. The case of the A.O. is that the assessee has introduced his own unaccounted money in the garb of gift through artificial donor. Therefore, the addition is warranted under section 68 of the Act. The view of the A.O. has been confirmed by the CIT(A). In other words, the case of the Revenue is that the gifts were not genuine. Before coming to the facts of the case, we would like to discuss the issue what is genuine gift. To examine the issue let us see what is meaning of the gift. 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 26 ITA No.192/Agr/2007 A.Y. 2000-01 .
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 27 ITA No.192/Agr/2007 A.Y. 2000-01 .
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 and genuineness of the 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 28 ITA No.192/Agr/2007 A.Y. 2000-01 .
the matter. However, in this regard, an important clue can be taken from some judgments of the courts.
8. Accordingly, we would like to refer one of the judgments of the Apex Court in the case of CIT vs. 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."
9. The Apex Court in the case of Commissioner of Income Tax vs. P. Mohanakala, 291 ITR 278 (SC) has laid down certain guidelines in respect of the genuineness of a gift. In this case, following questions have been answered by the High Court in favor of the assessee and against the Revenue :- 29 ITA No.192/Agr/2007
A.Y. 2000-01 .
"(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 reasonable and based on relevant material and not perverse ?"
9.1 The brief facts of the case which was before the Apex Court were that the dispute in all those 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 30 ITA No.192/Agr/2007 A.Y. 2000-01 .
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 assessees 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. Srinivasan and others who are all his family members.
Each one of them is an individual assessee. All the assessees 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 31 ITA No.192/Agr/2007 A.Y. 2000-01 .
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 assessee as the income of the assessee. On appeal the Commissioner of Income Tax concluded that the story set up by the assessee is unacceptable and hard to believe and the 32 ITA No.192/Agr/2007 A.Y. 2000-01 .
"preponderance of probabilities, the common course of human livings point to the contrary". The appeals were accordingly dismissed. The I.T.A.T. 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 person who had sent foreign exchange to the assessee 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 assessee. 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.
9.2 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 453.33 ITA No.192/Agr/2007
A.Y. 2000-01 .
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."
34 ITA No.192/Agr/2007
A.Y. 2000-01 .
10. Delhi High Court in the case of Rajeev Tandon vs. ACIT, 294 ITR 488 (Delhi) held as under:-
"Having heard learned counsel for the assessee, we find that the Tribunal considered the entire case law on the subject including several decisions of the Supreme Court and this court. Reference has been made to CIT v. Durga Prasad More [1971] 82 ITR 540, wherein the Supreme Court observed that the taxing authorities were entitled to look into the surrounding circumstances to find out the real and factual position. Similarly, this court in Sajan Dass and Sons v. CIT [2003] 264 ITR 435 took the view that not only must the assessee establish the identity of the donor and his capacity to make the gift, but he must also establish that the amount received by him was in fact a gift.
We may note that very recently, the Supreme Court dealt with a somewhat similar situation in CIT v. P. Mohanakala [2007] 291 ITR
278. While dealing with section 68 of the Act, the Supreme Court held that :
(i) There has to be a credit of the amount in the books maintained by the assessee.
(ii) Such credit has to be of a sum during the previous year.
(iii) The assessee offers no explanation about the nature and source of such credit found in the books, or if the assessee offers an explanation then, in the opinion of the Assessing Officer, it is not satisfactory.
It is only then that the sum so credited may be charged to income-tax as the income of an assessee.
The Supreme Court considered the expression "the assessee offers no explanation" and observed that what it means is that the assessee offers no proper, reasonable and acceptable explanation in the opinion of the Assessing Officer, formed objectively with reference to the material available on record."
35 ITA No.192/Agr/2007
A.Y. 2000-01 .
11. Punjab & Haryana High Court in the case of Yash Pal Goel v. CIT(A), 310 ITR 75 (P&H) under the circumstances held that gift transaction was not genuine. The Court also observed as under:-
"The so-called gift set up by the appellant was not bona fide transaction. The unscrupulous use every gimmick to avoid paying income-tax. If the State exchequer is made the target of deceit and the revenue comes down, the development of the country will be a casualty. It is reprehensible that same citizens spend on litigation and unnecessarily bring matters before courts than to pay tax on their income. The tendency needs to be discouraged and curbed. This court is constrained to feel that the Department of Income-tax has unnecessarily been dragged in this litigation and the time of the court has also been wasted. Therefore, Rs.30,000/- is imposed as costs on the appellant. The amount shall be deposited by the appellant within 45 days from today failing which the income-tax authorities shall recover it from him as arrears of income-tax."
12. In the light of the above background of discussion, if we consider the facts of the case under consideration, we notice that for the purpose of genuine gift, merely giving amount through banking channel, proving identity and creditworthiness of the donor are not sufficient. The important thing in addition to identity and creditworthiness of donor in such case which it requires to prove by the assessee is genuineness of the gift. On perusal of the records including the documents pointed out in the order of Miscellaneous Application by the I.T.A.T., we find that no documents support to the fact that there was genuine gifts. Merely filing of holdings of agricultural land of donor does not amount that the gift was genuine. Filing of gift deed and copies of bank account also does not serve the 36 ITA No.192/Agr/2007 A.Y. 2000-01 .
purpose to hold that there was a genuine gift. These documents referred by the assessee are required to be considered in the light of law laid down by the Apex Court in the case of CIT v Durga Prasad More 82 ITR 540 (SC) where in it has been 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 that 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 which is under consideration who relies on such balance sheet, gift deed and other documents, they has to establish the truth of those documents, otherwise it will be very easy to make self-serving documents/statements like gift deeds either executed or taken by a party and rely on those documents. 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. Therefore in the case under consideration, On perusal of copies of returns of the donor, in the case of Shri Ratan Singh, we observed that there is a practice of filing such returns showing 37 ITA No.192/Agr/2007 A.Y. 2000-01 .
meager amount of income and paying tax of Rs.1, 000/or so and creating capital to accommodate the same to other parties by introducing their own unaccounted money. This finding is supported by Capital account for the year ended 31.03.2000 of late Rattan Singh, the same is reproduced from page 23 of the Paper Book as under for the purpose of ready reference :-
Capital account as on 31.03.2000 To withdrawal 42,000.00 By Balance 7,09,774.00 To Gift given 5,10,000.00 By Income 91,250.00 To Balance C/d 3,07,524.00 By Agriculture income 58,500.00
--------------- ---------------
8,59,524.00 8,59,524.00
-------------- ---------------
13. It is relevant to mention that in A.Y. 2000-01 the late Shri Rattan Singh did not pay a single penny on account of tax. The income of Rs.22,500/- shown on Brick Dalali and interest and other income of Rs.68,750/- total income Rs.91,250/-.
The tax due on the said income is Rs.8,250/- but the claim was made under section 88 of the Act. The balance tax payable was nil. The assessee was having opening balance of capital Rs.7,09,774/- out of which he made gift Rs.5,10,000/- without pointing out the name to whom the gift was made. After giving gift amount and withdrawal, the balance carried forward was Rs.3,07,524/-. A balance sheet as on 31.03.1997 has been filed of which copy is filed at page no.29 of the Paper Book. For the purpose of ready reference, the same is reproduced as under :- (translated in English) 38 ITA No.192/Agr/2007 A.Y. 2000-01 .
"Balance Sheet as on 31.3.97 515024.00 Ratan Singh, Prop. of firm 50000.00 Soil A/c.
467763.00 old balance 16500.00 Bhatta Golta A/c.
47261.00 Net profit 600.00 PNB Bank A/c.
----------------- 447924.00 Closing Balance
------------- -------------
515024.00 515024.00
------------- -------------"
14. In the said balance sheet, closing balance of Rs.4,47,924/- has been shown with pointing out whether it was cash or bank or other balance. In practice such capital account and source of income is not believable. These are the facts which support what we have stated above that such return are being filed to create the capital to accommodate unaccounted money. Therefore, in spite of the fact that the assessee filed returns and the same have been processed cannot be said to be good and sufficient evidence in support of the fact that the donor having real capacity to give the gift and the gift was genuine. To curtail such wrong practice going on, it is very much necessary to hold that in such type of cases the gift cannot be said to be genuine.
15. In respect of gift from Smt. Neelam Kumari of Rs.1,00,000/-, merely submitting by Legal Heir of donor that he has given a bunch of paper of 95 pages therefore the donor has discharged the burden is not acceptable. The A.O. in his remand report clearly submitted that on perusal of the entries of cash deposits in 39 ITA No.192/Agr/2007 A.Y. 2000-01 .
bank statement and reply of D.K. Agarwal it was clear that the transaction was unaccounted money introduced by those persons who have been benefited by the trust by receiving gifts and Manak Chand Garg, the assessee, is one of them who introduced his unaccounted money in the garb of gift through a donor which is not a genuine gift. On the cost of repetition, we would like reproduce the reasons recorded for reopening of the case which is self explanatory to the situation in this regards, reads as under:-
Following reasons were recorded by the AO for making re-assessment :
"Information has been received vide letter F.No.Addl.CIT/R- 4/Suvey/2004-05 of the Adl. CIT, Range-4, Agra dated 28.3.2005 that a survey u/s. 133A was conducted on 22.4.2001 at the office premise of Shri D.K. Agarwal, CA, 245, Madhav Kunj, Pratap Nagar, Agra. The survey party has reported that as many as 292 trusts and their funds are controlled by Shri D.K. Agarwal. These trusts mostly show their addresses at 245-Madhav Kunj, 51/46-A, Madhav Kunj or 41/67, Lohar Gali, Agra Shri D.K. Agarwal has been creating bogus trust in the name of God/Goddesses of which he or his family members and his other associates are trustees. These trusts do not conduct any business but large receipt of money is shown in the hands of trust by way of gift business profit, donation etc. The trust have received gift in cash from other trust and these trusts have given gift to various persons. There is no relationship between donor and donee.
Further more one Shri Lalit Kumar Agarwal assessee of Ward 4(2), Agra has stated that Shri D.K. Agarwal has created bogus trust in the name of Lalit Kumr Agarwal and that although he has been shown as trustee, he has no knowledge of the activities of the trust. The CIT(A)-II, Agra has also given his finding in the cases of the trustees Vishnu Bhagwan Agarwal, Smt. Kusum Kumari, Shri Ravinder Kumar, Shri Radha Ballabh & D.K. Agarwal, Shri Shital Prasad Jain that M/s. Vishnu Bhagwan (P) Family Trust are bogus trusts and the income shown in the hands of trust actually belongs in 40 ITA No.192/Agr/2007 A.Y. 2000-01 .
trustee vide his appellate order dated 8/9.7.2004. All these trusts are actually managed and controlled by Shri D.K. Agarwal, CA.
It has also been informed that Annexure-II of seized material during the survey shows that one of the trust Narmada Benefit Trust, 31/67, Lohar Gali, Agra is also managed and controlled by Shri D. K. Agarwal, CA has given gift of Rs.1,00,000/- on 25.08.1999 to the above named assessee.
In view of the above, it is clear that Shri D. K. Agarwal has been creating bogus trusts which are involved in giving entry of gifts. As per information received these gifts have been found to be unaccounted money of the beneficiaries themselves. I have therefore, reasons to believe that income to the tune of Rs.1,00,000/- has escaped assessment in the case of Shri Manik Chand Garg S/o. Shri Laxmi Narain Garg, B-12, Natrajpuram, Kamla Nagar, Agra for AY 2000-01 to issue notice u/s. 148." (Letters Bold and under lined by us)
16. Even otherwise also, we find that the assessee has failed to prove the occasion as well as the relation that how the assessee has passed the consideration in the form of love and affection to the donors against the amount gifted.
17. The assessee has relied upon various decisions which are on record. After perusal of those decisions we notice that the issue under consideration cannot be said to be covered by those decisions as those decisions have been decided after considering the facts of the respective cases. Facts of those cases are not similar to the facts of the case under consideration. Thus, those decisions do not help the assessee.41 ITA No.192/Agr/2007
A.Y. 2000-01 .
18. On the basis of above discussion, we are of the considered view that the gifts were not genuine gifts even after considering documents which have been pointed out in the M.A. order of the I.T.A.T. Thus, the order of the CIT(A) on the issue is confirmed.
19. The assessee has also raised additional ground challenging jurisdiction under section 147 on the ground that the reasons recorded with regard to escapement of income are not specific but are general in nature. In this regards the assessee did not point out any mistake in the original order of the I.T.A.T. If we read the M.A. order in the light of section 254(2) of the Act which provides power to ITAT to amend the order with a view to rectifying any mistake apparent from the record, passed by it under sub-section (1), we do not find any reason to disturb the original finding of the I.T.A.T. on the issue as stated above that neither any mistake in this regard has been pointed out by the ld. A.R. at the time of hearing before us nor such mistake has been pointed in M.A. order by the Tribunal. In original order the I.T.A.T. held that the reasons recorded by the A.O. were very clear that the reasons with regard to escapement of income qua alleged gift of Rs.l,00,000/-, given by Smt. Neelam Kumari through cheque No.864439 drawn on a particular bank is definitely a specific and not a general information. Therefore, it was held that the ground is not maintainable and is, therefore, dismissed. Similar is the 42 ITA No.192/Agr/2007 A.Y. 2000-01 .
position regarding application of section 68 of the Act raised in additional ground at the time of original hearing of the appeal.
20. In the result, appeal of the assessee is dismissed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
Date: 8th June, 2012
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