Income Tax Appellate Tribunal - Amritsar
Mr. Arjan Nath Saproo, New Delhi vs Assessee on 28 April, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR(SMC).
BEFORE SH. A.D. JAIN, JUDICIAL MEMBER
ITA No.199(Asr)/2015
Assessment year:2006-07
PAN:AFQPS6538G
Smt. Kantra Sproo vs. Income Tax Officer,
L/H of Late Sh. Arjan Nath Saproo Ward-3(1),
C/o R-8, Ground Floor, Srinagar.
South Extension Part-II, Kashmir ( J & K )
New Delhi-110049.
(Appellant) (Respondent)
Appellant by: Written submissions
Respondent by: Sh.R.K. Sharda, DR
Date of hearing: 25/02/2016
Date of pronouncement: 28/04/2016
ORDER
This is the assessee's appeal for the assessment year 2006-07 against the ld. CIT(A)'s action in confirming the addition of Rs. 5 lacs made by the AO to the assessee's income.
2. The facts are that the assessee received a sum of Rs. 5 lacs from his nephew Sh. B.L. Saproo. The AO made the addition by invoking the provisions of section 56(2)(v) of the Income Tax Act, 1961. The ld. CIT(A) confirmed the addition.
3. Before this Bench, an application under Rule 26 of the Income Tax (Appellate Tribunal) Rules, has been filed for bringing on record Smt. 2 ITA No.199(Asr)/2015 Assessment Year: 2006-07 Kanti Saproo wife of the assessee, who expired on 09.06.2012. The report of the concerned ITO has been received. The said report does not challenge the said application, which is accompanied by an affidavit of the said Smt. Kanti Saproo. Accordingly, Smt. Kanti Saproo is taken on record as the legal heir of the deceased assessee, Sh. Arjan Nath Saproo.
4. On behalf of the assessee, the following written submissions have been filed, challenging the impugned order, which written submissions will be dealt with in extenso, in the succeeding paragraphs:
"May it please your honour that the order passed by the Learned Assessing Officer and confirmed by the Ld. Commissioner of Income Tax Appeals is bad in law and is being challenged on the basis of submissions stated hereunder in seriatim.
1. HISTORY OF THE CASE a. The appellant - Late Mr. Arjan Nath Saproo during the financial year 2005-2006 received a revocable gift of Rs.5.00 Lacs from his nephew Mr. B.L. Saproo S/o Mr. Soom Nath Saproo R/o Gurgaon, Haryana which was received by Cheque No 367629 dt. 06/03/2006 drawn on State Bank of India, Gurgaon, Haryana.
b. The appellant during the course of assessment for the assessment year 2006-2007 declared the said gift by way of credit to his capital account in the balance sheet filed before the Ld. Assessing Officer duly supported by relevant documentary evidence including the gift deed executed by Mr. B.L. SAPROO at the time of issuance of banker Cheque.
c. The gift deed executed by the parties inter alia was placed before the Ld. Assessing Officer to prove that the gift received by the assessee is incomplete being loaded with a rider by the giver to revoke and receive back the money any time he may choose to at his absolute discretion. (Copy of gift deed is enclosed as ANNEXURE-1).
d. The Ld. Assessing Officer during the course of assessment proceedings invoked Section 56(2)(v) of the Income Tax Act, 1961 3 ITA No.199(Asr)/2015 Assessment Year: 2006-07 on the pretext that money received without consideration by way of revocable gift by the appellant from his nephew Mr. B.L. Saproo amounting to Rs.5.00 Lacs is not covered by the definition of the blood relatives under proviso to section 56(2)(v) but overlooked the contents of the gift deed which specifically provided for the donor's exclusive right of revocation of the said gift at any time which was subject to his absolute discretion.
e. The Ld. Assessing Officer while seeking explanations from the appellant with regard to the gift U/s 56(2)(v) of the Act did not take cognizance of the gift deed filed by the appellant in support of the gift wherein the parties had mutually agreed that the gift shall be revocable at the option of donor at any time after the gift was made.
f. The appellant filed reply to the query raised by the Ld. Assessing Officer with regard to definition of relative as provided under proviso to Section 56(2)(v) of the Act with the reply that the gift by Mr. B.L. Saproo is duly covered by the definition being gift from blood relation and also is exempt from tax in view of the factum that the said gift was revocable since inception.
g. The Ld. Assessing Officer unilaterally proceeded to hold the said gift as not hit by proviso to Section 56(2)(v) of the Act and proceeded to add the same to the income of the appellant in the computation of income framed in the assessment order passed on30/12/2008.
h. The appellant being aggrieved by the order passed by the Ld. Assessing Officer filed appeal before the Ld. CIT Appeals, J&K Circle on 30/01/2009.
2. APPEAL BEFORE THE APPELLATE AUTHORITY The appellant's appeal filed before the Appellate Authority was agitated on the following grounds :-
a. That the amount of Rs.5.00 Lacs received by the appellant does not fall within the definition of money received without consideration as enumerated U/s 56(2)(v) of the Act and further does not fall within the definition of a gift as defined U/s 2(xii) of the Gift Tax Act, 1958.4 ITA No.199(Asr)/2015
Assessment Year: 2006-07 b. That the valid essentials of a gift which have to be complied with/fulfilled to enable a transaction to be called a valid gift is lacking in this transaction between the appellant and his nephew since the gift made by the nephew to his uncle was incomplete being loaded with an unrestricted power to take it back the next minute.
c. That conditional/revocable gift being outside the preview of a valid gift does not constitute a gift received by any person to be subjected to tax under provisions of Section 56(2)(v) of the Act and therefore can not be subjected to tax as any sum of money received without consideration under any provisions of the Act.
d. That the appellant being a senior citizen having attained more than 75 years of age who is not carrying on any kind of profession or occupation and merely had his sustenance on pension income from government service wherein he has retired more than 15 years before can not be deemed to be in receipt of any income directly or indirectly by way of such gifts received which can be subjected to tax.
e. That the notice of revocation of gift together with details of amounts paid in consequence thereto as refund by the appellant to Mr. B.L. Saproo on 27/03/2011 duly evidenced by the bank statements in itself prove conclusively that the amount received by the appellant in the financial year 2005-2006 was a temporary loan in the garb of an revocable gift. Such, temporary loans in itself does not constitute "any sum of money received without consideration" within the meaning of section 56(v)(2) of the Act and thus outside the perview of being subject to any tax under Income Tax Act.
3. FINDINGS OF THE APPELLATE AUTHORITY The Ld. Appellate Authority while disposing off the appeal filed by the appellant has decided the appeal against the appellant based on presumptions and assumptions which are challenged Para wise as per the appellate order passed :-
A. That under Para (i) of the order the learned Commissioner of Appeals has proceeded to hold that "the gift cannot be revoked after acceptance. There cannot be any gift deed of revocable gift at the option of the donor".5 ITA No.199(Asr)/2015
Assessment Year: 2006-07 With regard to the above conclusion of the learned Appellate Authority, the appellant submits as under :-
a. That there has been a payment of Rs.5.00 Lacs by Mr. B.L. Saproo nephew of the assessee to assessee himself by way of A/c payee cheque. The impugned payment is subject to conditionalties as imposed by the giver and as evidenced by the deed executed at that time wherein the payment transferred to the assessee was revocable at any time after transfer at the option of the giver. Therefore, the transaction of transfer of money by nephew to his uncle does not fall within the definition of a proper gift as defined under various Acts.
b. That the recipient has never been vested with absolute ownership of the property transferred by Mr. B.L. Saproo which was attached with a right of revocation without notice by him since in terms of the gift deed executed by him at the time of transfer of property the gift deed inter alia provided as under :
G I F T - D E E D Be it known to all that I, BUSHAN LAL SAPROO S/O SH. SOOM NATH SAPROO R/O DEVINDER VIHAR, GURGAON, HARYANA do hereby declare that I have gifted the following sum to my uncle - SH. ARJAN NATH SAPROO S/O PT. LATE RAM CHAND SAPROO as per detail given under :-
CHEQUE NO. & DATE DRAWN ON AMOUNT GIFTED (RS.)
367629 Dt.06/03/2006 STATE BANK OF INDIA, 5,00,000/=
DLF QUTAB ENCLAVE,
GURGAON, HARYANA. ----------------
TOTAL : 5,00,000/=
---------------
I, further declare that the amount gifted as shown above out of love & affection towards him has been duly delivered to the donee who has accepted the same and he is free to deal with the money so gifted by me to him in any manner.
I further declare that the above gift is however revocable at any time hereinafter during my life time and the Donee shall be bound to honour any revocation hereinafter of the said gift by the Donor by express or implied consent. WITNESSES :
1] ____Sd/-________ Sd/-
----------------------
6 ITA No.199(Asr)/2015
Assessment Year: 2006-07
________________ [ DONOR ]
PAN : AHOPS1245A
Sd/-
---------------------
[ DONEE ]
PAN : APQPS6538G
The copy of gift deed executed by Mr. B.L. Saproo is annexed as ANNEXURE-1.
c. That the Ld. Appellate Authority has wrongly proceeded to conclude that there can not be any gift deed of revocable gift at the option of the donor. In this regard, the assessee submits that the conclusions as put forth by the Ld. Appellate Authority are unfounded on the following grounds :-
1. Under explanation (b) to the provisions of section 4(5) of the Wealth-tax Act the word irrevocable transfer has been defined under the said section as under :
"(b) the expression irrevocable transfer includes a transfer of assets which, by the terms of the instrument effecting it, is not revocable for a period exceeding six years or during the lifetime of the transferee, and under which the transferor derives no direct or indirect benefit, but does not include a transfer of assets if such instrument.
(i) contains any provision for the re-transfer, directly or indirectly, of the whole or any part of the assets or income there from to the transferor, or
(ii) in any way gives the transferor a right to re-assume power, directly or indirectly, over the whole or any part of the assets or income there from;] "
As such, the unilateral conclusion of the Ld. Appellate Authority that a gift can not be revocable at the option of the donor is without any basis and does not stand the test of law as laid down under various Acts.
2 That a gift U/s 122 of the Transfer of Property Act 1882 has to be conclusive and irrevocable to qualify to be classified as a valid gift. In event of the gift being revocable wholly or in part at the mere will of donor, the gift in itself is void either in part or in full and therefore does not constitute a valid gift U/s 122 of 7 ITA No.199(Asr)/2015 Assessment Year: 2006-07 the Transfer of Property Act, 1882. To support the above submissions the assessee also places his reliance on the decided case of Bombay High Court in CGT v. Dr. R. B. Kamdin [1974] 95 ITR 476, (Copy enclosed as ANNEXURE-2) wherein it has been held "that under section 126 of the Transfer of Property Act "
irrevocability of the gift is one of the essential features of the gift to qualify as a valid transfer under law."
The plain reading of Section 126 of the Transfer of Property Act, 1882 clearly states that " a gift can be revoked in any of the cases in which if it were a contract, it might be rescinded ." The full text of Section 126 of the Transfer of Property Act, 1882 is reproduced for the ready reference of your honour.
Section 126 - When gift may be suspended or revoked "The donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be. A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded. Save as aforesaid, a gift cannot be revoked. Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice. Illustrations
(a) A gives a field to B, reserving to himself, with B's assent, the right to take back the field in case B and his descendants die before A. B dies without descendants in A's lifetime. A may take back the field.
(b) A gives a lakh of rupees to B, reserving to himself, with B's assent, the right to take back at pleasure Rs. 10,000 out of the lakh. The gift holds goods as to Rs. 90,000, but is void as to Rs. 10,000, which continue to belong to A.".
Therefore in light of above provision of law the gift received by the appellant had been void ab initio. Accordingly a gift which is recognized as void under law does not tantamount to a valid transfer qualifying for tax U/s 56(2)(v)of the Income Tax Act, 1961.
8 ITA No.199(Asr)/2015Assessment Year: 2006-07
3. That U/s 63 of the Income Tax Act, 1961 the definition of revocable transfer has been clearly stated as under :
a) a transfer shall be deemed to be revocable if--
(i) it contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor, or
(ii) it, in any way, gives the transferor a right to re-assume power directly or indirectly over the whole or any part of the income or assets ;
(b) "transfer" includes any settlement, trust, covenant, agreement or arrangement.
4. That as provided U/s 6(2) of the Gift-tax Act, 1958 "Where a person makes a gift which is not revocable for a specified period, the value of the property gifted shall be the capitalised value of the income from such property during the period for which the gift is not revocable"
d. That under provisions of the above stated laws the concept of revocable/ irrevocable gift is clearly and unambiguously defined and subsistence of such gifts is recognized under law. Since the donor is a principle person responsible for the gift, the donor has an overriding title to decide the terms of gift as to whether to make an outright gift or a revocable gift and the same is expressly stated in the instrument of the gift itself which has been examined by the Ld. Assessing Officer as well as by the Appellate Authority .
e. That the distinction between the revocable and irrevocable gifts has itself been defined under provisions of Section 63 of the Income Tax Act, 1961 in clear cut terms which clarifies distinction between permanent transfers & revocable transfers depending upon the basic terms of transfer between the transferor and the transferee. Therefore the findings/conclusions confirmed by the Ld. CIT Appeals, that a gift can not be revocable are baseless and imaginary & without mandate of law in light of above submissions and the position defined by the law.
Therefore, the assessee humbly submits before the Hon'ble Bench that the conclusions of the Ld. Appellate Authority in not recognizing the revocable transfer received by the assessee under law is nothing but miscarriage of justice and bad in law. The assessee also submits that all such revocable gifts which are dictated at the whims and fancies of the donor are outside the purview of a valid 9 ITA No.199(Asr)/2015 Assessment Year: 2006-07 gift and therefore in other words can not be classified as complete gifts which are neither recognized as valid transfers under Transfer of Property Act, 1882 or under Gift Tax Act, 1958 & cannot be subject to levy of income tax under provisions of Section 56 (2)(v) of the Act under any pretext. The appellant submits that the transaction between the assessee and his nephew under appeal is nothing but a temporary loan exchanged between two parties which was returnable to the giver at any time from the date given and as such under any interpretation of law can not be classified/termed as money received without consideration and subjected to levy of tax arbitrarily.
B. That under Para (ii) of the Appellate Order the Appellate Authority has again wrongly proceeded to hold as under :-
" Even if it is not a proper gift the appellant is liable to explain the source of the amount of Rs.5.00 Lacs received from Mr. Bhushan Lal Saproo, which has not been explained before the assessing officer."
The conclusions of the Ld. Appellate Authority are challenged being grossly incorrect on the following grounds.
a. That the Ld. Appellate Authority on the face of the order passed is itself in contradiction to what has been stated by him at Para "1" of the order under appeal before the Hon'ble Bench about the validity of the gift received by the assessee. The conclusions arrived at by the Ld. CIT Appeals in the order itself that " even if it is not a proper gift........................" are in itself conclusive to prove that the Ld. Appellate Authority was by & large satisfied with the submission of the assessee that a transfer between appellant and his nephew is not a valid gift but a void transfer not recognized under law as a valid transfer but in spite of having his own doubts about the captioned transfer has proceeded to hold that the proof of payment by the donor has not been proved. The findings of the Ld. Appellate Authority in this regard are grossly misleading as no such comments/findings have been made by the Ld. Assessing Officer in the body of the assessment order passed U/s 143(3) of the Act that the assessee at any time has failed to prove the source of gift by the donor.
b. That the appellant submits that at no stage during assessment proceedings the assessee was confronted/asked to produce evidence with regard to the source of income/funds by the donor 10 ITA No.199(Asr)/2015 Assessment Year: 2006-07 to justify the amount received by the appellant. No such comments have been recorded by the Ld. Assessing Officer in the impugned order that the assessee has failed to produce any evidence with regard to the source of funds with the donor. The appellate authority in order to cover up his own apprehensions about the validity of the gift/transfer as claimed by the assessee has grossly exceeded his jurisdiction by wrongly stating contrary to those matters not recorded in the assessment order.
c. That the appellant has voluntarily furnished proof of source and capacity of the donor during appellate proceedings by enclosing copy of the income tax acknowledgement return for the assessment year 2008-2009 filed with Assessing Officer, Gurgaon, Haryana under PAN # AHOPS1245A showing a returned income of Rs.11,16,119/= for the assessment year 2008-09. The income of the donor in itself is proof of the fact d. that MR. B.L. Saproo has been a retired senior army officer & therefore sufficient disposable income & funds to justify gift of Rs.5.00 Lacs to the appellant. Failure by the Ld. Assessing Officer with regard to non-invocation of provisions of Section 68 of the Income Tax Act, 1961 against the donor does not entitle the Ld. Appellate Authority to proceed and decide against the assessee on presumptions only.
e. The appellant submits that the general belief about the provision of the Section 56(2)(v) of the Act at the time assessment was that even if it is an interest free unsecured loan, same shall also be considered as " sum of money received without consideration"
within the meaning of Section 56(2)(v) of the Act. Therefore it would not make any difference for the appellant to prove the source of money received unless it was hit by the proviso to Section 56(2)(v) of the Act, .This position is now settled in the decision of CHANDRAKANT H. SHAH vs. INCOME TAX OFFICER ITAT, MUMBAI 'C' BENCH ITA No. 3966/Mum/2008; Asst. yr. 2005-06. (Copy enclosed as ANNEXURE-3) wherein it has been held that unsecured interest free loan shall not be covered U/s 56(2)(v), C. That under Para (iii) of the appellate order the Ld. Appellate Authority has held as under :
"that the appellant has changed its stand now from what was stated before the assessing officer. Earlier he was contesting the genuineness of gift from relative but now he is questioning the veracity of the same gift."11 ITA No.199(Asr)/2015
Assessment Year: 2006-07 The appellant submits that as stated by the Ld. Assessing Officer in the order itself that the appellant was asked to show cause as to why the amount received as gift from Mr. B.L. Saproo may not be added to the taxable income of the appellant U/s 56(2)(v) of the Act. The Ld. Assessing Officer neither asked the assessee/appellant to prove the source of income of Mr. B.L. Saproo in so far as his capacity to pay the amount to the assessee as gift nor the veracity of the gift in relation to the gift deed placed on record before him. The appellant submits that he was provided opportunity only to explain as to whether the transaction between the nephew and the appellant was covered under the definition of relative as defined U/s 56(2)(v) of the Act which the appellant has duly replied but at no stage during assessment proceedings the Ld. Assessing Officer made any comments with regard to the contents in the copy of gift deed submitted along with other documentary evidence. The appellant submits that as has been stated above the general belief the provision of the Section 56(2)(v) of the Act at the time assessment was that even if it is an interest free unsecured loan, same shall also be considered as " sum of money received without consideration" within the meaning of Section 56(2)(v) of the Act. Therefore it would not make any difference for the appellant to prove the source of money received unless it is hit by the proviso to Section 56(2)(v) of the Act. As such, in absence of any clarification asked for by the Ld. Assessing Officer or any opportunity provided to the appellant to explain his position with regard to the revocable gift and the capacity of the donor to pay the sum of money the conclusions of the Ld. Appellate Authority are unfounded and devoid of any merits.
D. That under Para no. (iv) of the Appellate order the Ld. Appellate Authority has held as under :
"Mere repayment to the donor after more than five years does not serve the purpose. This has been done with a motive to give it a colour other than gift. The passage of more than five years speak the truth of certain motive behind the transaction."
The appellant submits that since the gift was revocable from the inception in unambiguous terms as evidenced by the deed, mere revocation by the donor at any point of time in accordance with the terms of gift has not been done with an ulterior motive but the option of the revocation which the donor had deliberately 12 ITA No.199(Asr)/2015 Assessment Year: 2006-07 reserved unto himself was exercised on 27/03/2011and in accordance with the revocation notice the amounts have been refunded to the donor as per the details given below, there cannot be any presumption with regard to any motives of a law abiding citizen without placing any concrete evidence on record to establish and prove that the appellant had some ulterior motive to repay the amount back when demanded by the donor.
5. CONCLUSIONS OF THE APPELLATE ORDER The conclusions arrived at by the Ld. Appellate Authority stated at the conclusion of the order are as under :-
"In view of the above, I do not find any merit in the argument of the appellant and uphold the addition."
The appellant humbly submits that the Ld. Appellate Authority before whom the appellant had filed the appeal has summarily dismissed the arguments of the appellant in respect whereof neither any justifiable and legal reasons have been placed on record to uphold that the submissions of the appellant has been inadequate or incorrect . The Ld. Appellate Authority has failed to pass a speaking order with respect to the each & every submissions furnished by the appellant and therefore the order passed is without application of proper mind and against principles of natural justice.
6. SUPPORTING ARGUMENTS Based on the submissions hereinabove the appellant would humbly like to submit before the Hon'ble bench as under :-
a. That the amount of Rs.5.00 Lacs received by the appellant does not at all fall within the definition of money received without consideration as enumerated U/s 56(2)(v) of the Income Tax Act, 1961 nor the said transaction does fall within the definition of gift as per Section 2(xii) & (xxiv) of the Gift Tax Act, 1958 and therefore application of provisions of Section 56(2)(v) on the said transaction is improper and against cannons of natural justice.
b. That to constitute a valid gift there has to be a transfer of property either by way of ownership or by way of profit. Mere handing over the property with an unrestricted power to take it back the next minute or any time is not enough to constitute a valid gift which is not considered as a valid transfer under transfer of Property Act, 1988.13 ITA No.199(Asr)/2015
Assessment Year: 2006-07 c. That the appellant has proved by documentary evidence conclusively that the gift of Rs.5.00 Lacs from MR. B.L. Saproo has been revocable from day one at the discretion of the donor and such gifts which are dictated by whims and fancies of the donor does not constitute a gift which can be construed as amounts received without consideration wherein provisions of Section 56(2)(v) of the Act can be invoked and the liability to tax determined in an arbitrary and presumptive manner.
d. That the appellant has conclusively proved that MR. B.L. Saproo the donor of the amount had adequate funds available with him to justify payment of Rs.5.00 Lacs to his uncle. As such, the captioned transaction between the appellant and his nephew is neither in relation to avoidance of any tax liability nor with an ulterior intension to circumvent any process of law of the land in force. The transaction of Rs.5.00 Lacs between the applicant and his nephew is in other words a temporary loan given by the nephew to his uncle with a right to ask for repayment of same at any given time without jeopardizing own financial interests. Therefore under the circumstances and in the facts of the case at the most assessing officer could have invoked provisions of Section 68 of the Income Tax Act 1961.
e. That the appellant being a aged person having retired from services of J&K Government more than fifteen years back has not been engaged in any commercial or vocational activity since retirement but has been solely making his living on pension income and some interest income received from bank deposits. As such, there can be no ulterior motive for such appellants to have received money without consideration only to conceal his income under one pretext or the other. The total income of the appellant from pension and interest for the financial year 2005-06 relevant to assessment year 2006-2007 has been Rs.215110/= only which itself speaks of the unreasonable addition to his income on presumptions and disbeliefs.
f. That the appellant has conclusively proved before the Ld. Appellate Authority that the donor with the passage of time at his own sweet will and discretion has exercised his option for revocation of the gift and the appellant forthwith repaid the g. amounts back on 27/03/2011 by A/c payee cheques which are evidenced by the bank statement of the appellant and confirmed by the donor leaving no room for apprehension and estimation that the amounts received by the appellant have been directly or indirectly 14 ITA No.199(Asr)/2015 Assessment Year: 2006-07 his concealed income which has been intended to be regularized by way of gift deed. In this case the appellant has received money by A/c payee cheques and refunded the amount back by A/c payee cheques, there is no benefit derived by the appellant ultimately on which the tax could be levied under any provisions of the law.
h. The assessee further submits that the very essential ingredient"
without consideration" imbedded in the section 56(2)(v) is altogether missing in this transaction for the reason the the doner has retained the power of revocation of the gifted property duly accepted by the done. Therefore repayment of the said amount itself tantamount to consideration as has been decided in the case of CHANDRAKANT H. SHAH vs. INCOME TAX OFFICER ITAT, MUMBAI 'C' BENCH ITA No. 3966/Mum/2008; Asst. yr. 2005-06. (Copy enclosed as ANNEXURE-3) i. That the appellant has breathed his last on 10th September, 2012 as per copy of his death certificate submitted before the Hon'ble Bench on 08/06/2015 and therefore the case of the assessee also deserves due consideration in view of the said fact that the appellant is no more alive and the principles of natural justice demand no harm to his legal heirs as the loan from the nephew stands already paid by him during his life itself.
Based on the facts & circumstances of the case and the submissions given hereinabove, the additions to the income of the appellant by the Ld. Assessing Officer is coercive and excessive and contrary to the established principals of law laid down by the Income Tax Act nor by the dictum of cases decided by Hon'ble Courts and the matter has not been duly considered and discussed by the Ld. Assessing Officer in the assessment order passed U/s 143(3) of the Act before making the addition to the income of the appellant.
Summing up, the appellant humbly prays hat the order passed by the Ld. Assessing Officer based on assumptions and presumptions without proper application of mind is fit to be quashed and appropriate relief due to the appellant under law be granted to meet ends of justice."
5. The ld. DR has placed strong reliance on the impugned order.
6. The written submissions have been perused. The ld. DR has been heard. The material placed on record has been carefully gone through.
15 ITA No.199(Asr)/2015Assessment Year: 2006-07
7. Before the AO, the assessee submitted that the brother of the assessee, i.e., father of the assessee was covered by the definition of 'relative', as given by the proviso to section 56(2)(v) of the Act and that, therefore, the lineal descendent of the said brother of the assessee was covered by such definition, being relative to the assessee by blood. It was also submitted that since the gifts by blood relatives are covered by the said definition, the gift received by the assessee was exempt from tax.
8. The AO rejected the assessee's stand, observing that son of brother is not lineal descendent of the recipient of gift and so he is not covered under the definition of 'relative' within the meaning of the proviso to section 56(2)(v) of the Act.
9. Before the ld. CIT(A), the assessee contended that the amount of Rs. 5 lacs received was a temporary receipt in the hands of the assessee, since the gift was revocable at the discretion of the donor, the transaction thereby not being covered under section 56 of the Act and the donor had served notices for revocation of the gift and the money had been returned to the donor by the assessee on 27.03.2011. It was submitted that since the gift was an invalid gift and had been repaid, it could not be added under the provisions of section 56 of the Act.
16 ITA No.199(Asr)/2015Assessment Year: 2006-07
10. The ld. CIT(A), however, confirmed the addition by observing as follows:
"I have considered the rival arguments and find that the contention of the appellant acceptable because of following reasons:
i) The gift cannot be revoked after acceptance. There cannot be any gift deed of revocable gift at the option of the donor.
ii) Even if it is not a proper gift the appellant is liable to explain the source of the amount of Rs.5 lacs received from Sh. Bhushan Lal Saproo, which has not been explained before the assessing officer.
iii) The appellant has changed its stand now from what was stated before the assessing officer. Earlier he was contesting the genuineness of gift from relative but now he is questioning the veracity of the same gift.
iv) Mere repayment to the donor after more than five years does not serve the purpose. This has been done with a motive to give it a colour other than gift. The passage of more than five years speak the truth of certain motive behind the transaction.
In view of the above, I do not find any merit in the arguments of the appellant and upheld the addition."
11. The first observation of the ld. CIT(A) is that a gift cannot be revoked after acceptance and there cannot be any gift deed of revocable gift at the option of the donor. This observation does not favour the addition being confirmed. The gift deed, as reproduced hereinabove, clearly shows that the amount was being transferred, but such transfer was irrevocable at the instance of the transferor. It is trite that a document has to be read as a whole, in order to gather the intention behind the transaction. A reading of the gift deed shows 17 ITA No.199(Asr)/2015 Assessment Year: 2006-07 that though the term employed is 'gift', the transferor intended to transfer the source of Rs. 5 lacs to the assessee only temporarily. This fact is also confirmed by the fact of issuance of revocation notices by the transferor to the assessee. It also gets buttressed by the very relevant fact of return of the amount by the assessee to the transferor on 27.03.2011, which fact has also been affirmed by the ld. CIT(A). It shows as covered in the written submissions that the assessee was never vested absolute ownership of the amount transferred. The transfer of the amount of Rs. 5 lacs to the assessee was a revocable transfer and it was in fact revoked. The nomenclature employed is not determinative of the transaction, as is well settled. In fact, by making this observation, the ld. CIT(A) has himself accepted that the transaction was not a gift. It was a temporary transfer of money, which was revoked at the option and instance of the donor.
12. The ld. CIT(A) has next observed that even if it was not a proper gift, the assessee was liable to explain the source of the amount, which had not been done before the AO. This evidently is incorrect. The ld. CIT(A) has himself observed at page 5 of his order that the assessee had explained before the AO that the amount had been received as a gift from the lineal descendent/son of his brother and that the gifts from blood relatives were exempt from tax. Even the ld. CIT(A) has challenged the propriety of the gift. Moreover, whereas 18 ITA No.199(Asr)/2015 Assessment Year: 2006-07 the AO never questioned the transaction, the ld. CIT(A) held, wrongly, on the basis of mere assumptions and presumptions, disregarding the explanation offered by the assessee before the AO, that the assessee had not explained the source of the amount received. Rather, it is nowhere in dispute that the amount came to the assessee from his nephew, Sh. B.L. Saproo. Therefore, the source of the receipt stood duly explained. Asking the assessee to explain the source of the source is, in my considered view, asking too much of the assessee, particularly when no such issue was raised by the AO and also when the amount stood repaid. Further, the assessee had also filed before the ld. CIT(A), the acknowledgment of the Income Tax Return of the transferor for the assessment year 2008-09, showing a returned income of Rs.11,16,119/-, which acknowledgment has not been discussed in the impugned order.
13. The ld. CIT(A) further observed that the assessee had changed his stand from that taken before the AO. This, however, also does not act as a detriment to the assessee's case, even if the transfer, as stated, is taken to be interest free unsecured loan. It amounts to money received, which money was returned. Moreover, even before the AO, the assessee had offered the explanation of the transaction being a gift, which position does not undergo any change in view of the document of transfer, as per which, the transfer was a 19 ITA No.199(Asr)/2015 Assessment Year: 2006-07 revocable transfer. Revocation notices were issued and the money was ultimately returned.
14. The next observation of the ld. CIT(A) is that the mere repayment after more than five years was done with a motive to change the colour of the transaction from that of a gift. Here, again, the observation of the ld. CIT(A) is erroneous. The fact remains that the transfer was revocable a transfer, at the instance of the transferor, which fact has not been disputed. Rather, to reiterate, revocation notices were issued by the transferor and in response to such notices, the transfer was revoked and the money was returned to the transferor. The ld. CIT(A) talks of 'certain motive' behind the transaction. However, as to what such 'certain motive' could be, does not have any reference to whatsoever in the impugned order. This observation of the ld. CIT(A) is also based only on assumptions and presumptions and the same cannot stand in the eye of law.
15. Thus, the transaction in question has neither been shown to have been undertaken to avoid any tax liability, nor to have been undertaken for any ulterior intention of the assessee to circumvent any legal process. It was a temporary advancement of the money by the transferor to the assessee and the amount was repaid when asked for, as per the transfer document.
20 ITA No.199(Asr)/2015Assessment Year: 2006-07
16. In view of the above discussion, finding merit in the grievance sought to be raised by the assessee, the same is accepted.
The order of the ld. CIT(A) is reversed. The addition is deleted.
17. In the result, the appeal is allowed.
Order pronounced in the open court on 28/04/ 2016.
Sd/-
(A.D. JAIN) JUDICIAL MEMBER /SKR/ Dated: 28/04/2016 Copy of the order forwarded to:
1. The Assessee:Smt. Kanta Saproo L/H of Late Sh. Arjan Nath Saproo, New Delhi.
2. The ITO ward 3(1), Srinagar
3. The CIT(A), Jammu.
4. The CIT, Jammu.
5. The SR DR, ITAT, Amritsar.
True copy By order (Assistant Registrar) Income Tax Appellate Tribunal, Amritsar Bench: Amritsar.