Income Tax Appellate Tribunal - Kolkata
Smt. Bhagwati Devi vs Income-Tax Officer on 26 April, 1993
Equivalent citations: [1993]47ITD58(KOL)
ORDER
Abdul Razack, Judicial Member
1. Controversy in this assessee's appeal is whether the sum of Rs. 1 lac received by the assessee as gift through banking channels from a resident of Nepal is to be considered as income of the assessee from some undisclosed sources and assessed to tax.
2. The pertinent facts giving rise to this controversy are that during the previous year relevant to the assessment year 1983-84 the assessee received a gift of Rs. 1 lac by way of bank draft credited to the assessee's bank account in Union Bank of India. It was contended by the assessee that she received a gift from one Shri R.N. Agarwal who was his dharambhai for over two decades and he, out of natural love and affection for her, made a gift of the said sum from out of the moneys brought by him from Nepal Bank Ltd., Kathmandu drawn on Chartered Bank, Calcutta. The assessee also filed a sworn declaration by the donor, Shri R.N. Agarwal of Kathmandu, Nepal in which he stated as under :
(1) that he gifted Rs. 1,00,000 to Smt. Bhagwati Devi Mohata in Indian currency by means of a demand draft drawn on Chartered Bank, Calcutta, issued by Nepal Bank Ltd., Kathmandu;
(2) that he was assessed to Income-tax in Nepal; and (3) that he had made the said gift out of love and affection to Smt. Bhagwati Devi Mohata.
The Assessing Officer did not accept this version of the assessee and added the said sum of Rs. 1 lac as her income from undisclosed sources for want of proper verification. No other ground or reason was mentioned by the Assessing Officer nor did he mention under which provision of the Income-tax Act such gifted sum was treated by him as income of the assessee from undisclosed sources. Not being satisfied with this addition, the assessee carried the matter to the Appellate Commissioner (A.C.) by way of first appeal.
3. During the course of first appeal proceedings the assessee again filed a sworn declaration of the donor, Shri R.N. Agarwal, duly notarised before a Notary Public of West Bengal and who was identified by one Shri Dilip Kumar Basu, Advocate of Chief Metropolitan Magistrate Court, Calcutta. The assessee also produced before the A.C. copies of the demand draft of the Chartered Bank in the name of the assessee and a copy of the Income-tax assessment order of the donor from the Income-tax Department, - Nepal. The A.C. ignored the evidence in support of the assessee's claim and dealt with the issue from a totally different angle than that of the Assessing Officer holding that the gift was a collusive transaction and a device to evade tax. According to A.C. a person of Nepal who is not related to the assessee cannot made a gift of Rs. 1 lac. The A.C. in deciding the issue against the assessee also took the aid of the observation of Their Lordships of the Supreme Court in the case of McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 : 22 Taxman 11. Thus, according to the A.C, the gift was not genuine and that the source of the sum of Rs. 1 lac credited to the assessee's bank account was not satisfactorily explained and, therefore, the Assessing Officer was justified in treating the sum of Rs. 1 lac as assessee's income under Section 68 of the Income-tax Act. Not being satisfied with the observations, findings and conclusion of the A.C. in the impugned order, the assessee has preferred this second appeal before us.
4. The assessee's counsel filed a paper book which contains xerox copy of the bank draft of Chartered Bank, Calcutta favouring assessing, a copy of declaration of the donor, Shri R.N. Agarwal, a copy of the sworn declaration of Shri R.N. Agarwal notarised on 28-5-1986, a copy of the Income-tax assessment order of donor of the Income-tax Department, Kathmandu, Nepal, which is in Hindi. It was contended by the assessee's counsel that the sum of Rs. 1 lac credited to the bank account of the assessee in Union Bank of India by and through the demand draft of Chartered Bank, Calcutta was a gift from Shri R.N. Agarwal, a resident of Kathmandu, Nepal made by him out of natural love and affection for the assessee, he being the dharambhai of the assessee since last two decades. The assessee also accepted the said gift made to her by the said donor. Thus, according to assessee's counsel the essential conditions for making valid gift were present and complied with both by the donor and therefore, the Assessing Officer was not justified in holding that the gift was not genuine and was a collusive transaction. The assessee's counsel drew our attention to the various supporting evidence particularly the declaration filed by the donor before the Assessing Officer as well as before the A.C. to support his case that the gift was made by Shri R.N. Agarwal, money passed and that the gift was complete upon the acceptance of the gift by the assessee. When the gift is complete in accordance with law, it is not open to the A.C. to take a different view and hold that it is a collusive transaction and the gift is invalid or not genuine. The assessee's counsel took us to the order of the A.C. to satisfy us that he has taken irrelevant factors into consideration and has doubted the gift on frivolous reasons branding the same as a collusive transaction without placing on record any concrete or positive evidence. Arguing further the assessee's counsel submitted that the A.O. made the addition for want of proper verification; whereas, the A.C. turned the table and brought out a wholly altogether new story and improved the case of the A.O. on new grounds. It was not the case of the A.O. that the gift was invalid or that the transaction was a collusive transaction whereas the A.C. held that it was a collusive transaction and the gift was invalid. The A.C. has unjustifiably ignored and rejected the positive and reliable evidence placed by the assessee on record. The order of the A.C. is a biased order and is based on speculation, suspicion and conjectures and should not. be sustained by us. It was further submitted that the assessee has not maintained any account books and the said sum of Rs. 1 lac was not credited in its account books so as to bring it within the mischief of Section 68 of the Income-tax Act as was done by the A.O. The bank draft of Chartered Bank, Calcutta favouring assessee was directly credited to the account of the assessee in Union Bank of India and, therefore, the provisions of Section 68 wholly became inapplicable. Even the A.O. has not stated as to under what deeming provision of the Income-tax Act the said amount of Rs. 1 lac was added by him. The addition was made by the A.O. on the simple ground "for want of verification" whereas factually all the details and evidence relating to gift were filed before him and are on record. Reliance placed by the A.C. on the observation of Their Lordships of the Supreme Court in the case of McDowell & Co. Ltd. (supra) is wholly misplaced and misconceived and no aid ought to have been taken by the A.C. in deciding the controversy which lay before him in the first appeal. There has been no income to assessee and no dubious device is adopted to evade tax. In view of the above submissions it was urged strenuously by the assessee's counsel that the impugned order of the A.C. be reversed.
5. The departmental representative, on the other hand, relied upon the reasonings given by the A.C. in the impugned order and submitted that the appeal of the assessee be dismissed.
6. We have given our anxious consideration to the rival submissions made before us by the representatives of both the parties. We have also perused the order of the A.O. as well as the impugned order of the A.C. and the copies of various documents placed by the assessee's counsel in the paper book filed in this appeal. In our view, the assessee has a very strong case to succeed in this appeal. The A.O. added Rs. 1 lac to assessee's income from undisclosed sources "for want of verification" and not on the ground that the gift was invalid or non-genuine or that the provisions of Section 68 got attracted, or that the gift was a dubious device to evade tax. When the matter rested before the A.C. by way of first appeal, he invented a new case for the A.O. and held that the gift was not genuine and the transaction of gift was a colourable device to evade tax and held that the A.O. was justified in treating the sum of Rs. 1 lac as assessee's income under Section 68 of the Income-tax Act whereas the addition was not made by the A.O., as stated by us above, taking the aid of Section 68 of the Act. The A.O. has stated that the issue to be decided in this appeal is whether in the facts and circumstances of the case the gift was genuine and whether the A.O. was justified in treating the amount of Rs. 1 lac as assessee's income from undisclosed sources. It was not the case of the A.O. that the gift was invalid or non-genuine. Therefore, it was not open for the A.C. to embark upon the issue about the validity or genuineness of the gift. The A.C. has stated as under in the impugned order :
It was indeed an extraordinary thing that a person like R.N. Agarwal, with whom the chances of the assessee's social interactions are so remote and far in between, gifted a sum of Rs. 1,00,000 to the assessee just like that. Neither Sri R.N. Agarwal was rich enough to make such an unusual gesture of love and affection nor was the assessee in need to be at the receiving end of such generosity. Gifts in such huge amounts are unusual even between a brother and sister born to the same mother and hence, given the status of the donor, I cannot believe that he gave the gift out of his own hard earned money. The disclosure of incomes by the assessee's family members under the Voluntary Disclosure Scheme, 1975 makes the genuineness of the gift look all the more suspicious.
When even worthwhile charitable causes find it difficult to get willing donors it is surprising as to how the donor all of a sudden came forward with this gift of Rs. 1,00,000 to the assessee. And there is no evidence that the donor is of such charitable disposition that he is in the habit of making such donation to charitable causes and individuals deserving of his natural love and affection which is claimed to be the motivating factor of the gift under consideration.
By any standard, the gift of Rs. 1,00,000 by the donor to the assessee was an extraordinary event and the genuine occurrence of such event cannot be accepted unless the circumstances that led to the event are explained properly. An event repugnant to normal course of human relation has to be rejected as not being true, unless the probability of the event having taken place is proved with circumstantial evidence. Not a single instance of any social interaction between the assessee and the donor has been cited to justify this unusual transaction of gift.
Viewed objectively and taking into account the realities of life, one cannot shut one's eye to the transparent fraud embedded in the transaction, namely, that the donor was used as a medium of launder the assessee's own unaccounted money as a receipt of gift claiming exemption of the same from levy of income-tax. By this colourful device of taking gift from a resident of Nepal, where Indian currency is freely in circulation, gift tax is also avoided.
The A.O. placed much reliance on the evidence produced in support of the gift received. The evidence consisted of the declaration of the donor and receipt of the money through Banking channel. In view of the sheer absurdity that is characteristic of the gift as discussed above, the evidence adduced was nothing but a facade to give a make-believe cover of genuineness of the transaction of gift. Such collusive evidence deserved to be ignored when the true colour of the transaction as a device to evade tax is evident to any man of commonsense.
In support of this finding, the famous observations of the Supreme Court in the case of McDowell & Co. Ltd. 154 ITR 148 readily come to my mind :
The proper way to construe a taxing statute, while considering a device in avoid tax, is not to ask whether the provisions should be construed literally or nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction.' When the Supreme Court frowned upon even legal devices to avoid payment of tax, this facade of gift put up by the assessee to evade payment of tax on her unaccounted money should be imposed for what it is with greater vigour and no legal sanction for such tax evading device should be accorded.
7. It is evident from the discussion extracted by us above from the impugned order that the A.C. did not decide the issue with an open mind and was perhaps biased that the assessee, a lady, residing in India, could receive a gift of Rs. 1 lac from a resident of Nepal out of natural love and affection and also without there being any evidence of social interaction between donor and donee, namely, the assessee. We fail to understand as to how and why it is necessary for the donor and the assessee to prove the social interaction between them or for that matter to prove natural love and affection by donor towards donee assessee. A person may have or develop love and affection for another person instantly and some persons may not even develop love and affection for years together but so far as the validity of a gift is concerned, these are not the considerations which are to be weighed. As per Section 122 of Transfer of Property Act, 1882 a gift is complete in respect of existing movable and immovable property when there is a transfer of such property by a person called 'donor' and acceptance of such gift of such property by a person called 'donee'. If these essential conditions are prevalent or satisfied, then the gift is complete and it is not open for challenge until the same is proved to the contrary with cogent and strong evidence which in the instant case neither the A.C. nor the A.O. possess. The donor has categorically stated more than once that he has gifted Rs. 1 lac to the donee assessee and also transferred the money. The donee assessee has also stated that she has accepted the gift and received the money. Such being the case, we see no reason for the A.C. to come to the conclusion that the gift was invalid or not genuine. Apart from expressing his surprise and dissatisfation over the amount gifted to the assessee, the A.C. has not led any iota of evidence to prove that the gift was collusive or a dubious device or a subterfuge to evade tax. The assessee did not have such income so as to collude with a Nepal Resident and adopt a dubious device to evade payment of tax. No such evidence or material is on record of the A.O. nor anything is collected by the A.C. and placed on record, as stated by us above. The A.C. has given more weightage to the voluntary disclosure made in 1975 by the family members and viewed the gift with suspicion. The observations made by the A.C. to confirm the addition are imaginary and general and appear to us as tainted with prejudice vitiating his order. The provisions of Section 68 also; in our view, are not attracted in the instant case as the sum of Rs. 1 lac was not found credited in the books of account maintained by the assessee for the previous year relevant to the year under appeal. Section 68 comes into operation if any sum is found credited in the books of account maintained by the assessee and no satisfactory explanation is offered in respect of the sum so credited. The sum of Rs. 1 lac was found credited in the bank account of the assessee in Union Bank of India through the bank demand draft of Chartered Bank, Calcutta, drawn by the donor in favour of the assessee. When the amount is found directly credited to the bank account of the assessee then the provisions of Section 68 are not at all attracted and, therefore, the A.C. grossly erred in corning to the conclusion that the A.O. was justified in treating the said sum of Rs. 1 lac as income from undisclosed sources under Section 68 of the Income-tax Act, 1961. The A.C. as observed above, has not placed any evidence on record to agree with him that the gift transaction was a colourable device or a subterfuge to evade tax and thus hit the assessee with the aid of the judgment of the Supreme Court in the case of McDowell & Co. Ltd. (supra).
8. Before ending we would like to emphasise that the purpose of filing appeals either under Section 246 before Departmental authorities or under Section 253 of the Income-tax Act, 1961 before this Tribunal is for redressal of grievances by affected parties by these two different appellate authorities and not for enhancement or addition to their already existing grievances. The appellate authorities cannot improve the case of the lower authorities or cover up the lacunae or deficiencies in the impugned orders of the lower authorities or make out a wholly new case adverse to the appellant's case and put him in a more worst position than what he was before filing the appeal. In the instant case the A.C. has acted adversely to the case of the appellant by improving the case of the A.O. covering up the deficiencies made by the A.O. and inventing new grounds for and on behalf of the A.O. to hold against the appellant (assessee) and cause prejudice to her. The Andhra Pradesh High Court in the case of CIT v. G.M. Chennabasappa [1959] 35 ITR 261 and the Bombay High Court in the case of J.B. Greaves v. CIT [1963] 49 ITR 107 have held that it is not open to the Tribunal to make out a new case for the assessee by taking up grounds or arguments or indulge in guesses and conjectures which the assessee never raised before the Tribunal or the lower authorities. What applies to Tribunal equally applies to the First Appellate Authorities under the tax laws.
9. From the above discussion we are clearly of the opinion that there was a valid and complete gift of Rs. 1 lac in favour of the assessee and the same was not a colourable transaction or a dubious device or a facade of gift, as observed by the A.C. in the impugned order. The sum of Rs. 1 lac, therefore, deserves to be deleted and we direct accordingly. The impugned order is vacated and the appeal of the assessee is allowed.