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TMI Blog2009 (2) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ors. 3. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) overlooked the facts that the assessee did not know the business activity of the donors and also that he did not know correctly even the name of the one of the donors i.e., Vayyat Kizhakethil Sudhakaran Panciker and referred to him in the statement recorded only as Palrecha uncle." 2. Briefly stated, the relevant facts of the case are that the assessee is a dealer in yarn and filed the return of income declaring the income at Rs. 28,43,508. The same was scrutinised under section 143(3) and total income was determined at Rs. 75,38,201 after making addition on account of gifts of Rs. 46,87,378 as unexplained cash credits under section 68 of the Income-tax Act ( Act ). 3. During the assessment proceedings, the Assessing Officer found that the assessee along with two minor sons received gifts of $70,000 (equivalent of Rs. 46,87,370) in the form of SBI Resurgent India Bonds (RIBs) during the previous year under consideration. It was noted by the Assessing Officer that the assessee directly received SBI Resurgent India Bond (RIBs) worth of US$ 30,000 from Sri VKS Panicker, resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer placed heavy reliance on the statement given by the assessee and held that the creditworthiness of the donor as well as the genuineness of the gifts were not proved by the assessee. It was also finding of the Assessing Officer that the donors were not related to the assessee and his minor kids and it was not the case of the assessee that the gift received out of natural love and affection. It was also in consideration of the Assessing Officer that the assessee did not know much about the donors. Finally, the Assessing Officer held that gifts received by the assessee in his own name as well as in names of his minor sons represent assessee s own unaccounted money which was ploughed back in the form of gifts. 5. Aggrieved with the above, the assessee filed an appeal before the CIT(A). The assessee submitted before him that he discharged the onus rested on him in respect of gift received by him from V.K.S. Panicker and the gifts received by Master Samkit M Shah and Master Shreyans M Shah from Jaspal Singh Oberoi by way of proving the identity of donors, genuineness of the gift and establishing the creditworthiness of the donors. As regards to the identity of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter written by Chief Manager, Incharge of SBI Resurgent Bond, SBI NRI Branch, Mumbai, addressed to the assessee regarding the event of transfer of bond in the name of the assessee. Further, the assessee added that the document relating to redemption of SBI Resurgent Bond in the name of assessee is a conclusive proof to establish the genuineness of the gift. 6. Similar documentary evidences were also filed in respect of the gifts given by Mr. Jaspal Singh Oberoi to Master Samkit M Shah and Master Shreyans M Shah as claimed by the assessee. Being similar facts and circumstances in respect of gifts donated by Mr. Jaspal Singh Oberoi to minor sons of the assessee, the arguments placed in respect of gift received by himself were relied upon. In this way, the assessee tried to establish that he has fully discharged the onus resting on him. On the point of the objection raised by the Assessing Officer that the donors were not the close relatives of the assessee, it was argued that the donors were known to this father and they gifted out of natural love and affection. The assessee placed reliance on the following two decisions: ( i ) CIT v. Mrs. Sunita Vachani [1990] 184 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and hence it should be ignored. Further, the DR relied on the Supreme Court judgment in the case of CIT v. P. Mohanakala [2007] 291 ITR 278. Further, learned DR distinguished the decision in the case of LIC of India ( supra ) which is on issue of loan and not on the gifts. He also distinguished other cases delivered by the Delhi High Court mentioned above. Per contra , the learned Counsel for the assessee filed a paper book, the summary particulars touching upon the identity of the donors, capacity and creditworthiness of the donors, the details of correspondence with the banks etc. From the write-up, we find that there are two donors i.e., V.K.S. Panicker who is a resident of UAE aged 55 years who gave gift of US$ 30,000 in Dubai to a Calcutta agent i.e., SBI vide Draft No. 702022 issued by the Bank of Baroda, Dubai for the issue of Resurgent India Bonds issued by SBI on 17-8-1998 in return SBI allotted 3 Bonds of amounting to US$30,000 on 1-10-1998. Similarly, another donor named Mr. Jaspal Singh Oberoi, aged 62 years resident of UAE borne in Pakistan, Indian resident gave the gifts of US$ 40,000 to Samkit M Shah Master Shreyans M Shah, the sons of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no issue about the identity and the controversies are source or genuineness-centric. In the other cases, the controversies generally center-around the identity and the creditworthiness of the donor and therefore, the whole transaction is doubted. Among this later group of gifts, the gift transactions involving the unrelated NRI persons as donors are always a matter of dispute between revenue and the assessees. The aspects of identity of the donor, creditworthiness of the donor and the genuineness of the transaction become relevant. This is simply for the reason as to why or what reason an unrelated person or not so well-related person or geographically segregated person makes gifts to an unknown or unfamiliar donee, when there is no scope for love and affection or any other expressions of that kind, which are commonly seen in the transactions of gifts in general and valuable gifts in particular. Therefore, the commonsense approach of the Assessing Officer is to investigate into other reasons for such valuable gifts. Such investigations of the Assessing Officer in matters of such transactions of gifts between the unrelated persons revolve around the following. They are: whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness, genuineness of the transaction and the discretion of the Assessing Officer. In the light of the above, we find that the identity of the donors must be undoubted in view of the undisputed nature of the copies of the passports of the donors. In any case, the aspect of identity is no issue in such transactions as NRI donors are organized professionally by commission agents in the gray market. Regarding the creditworthiness, there is information about the business or profession or employment details or their source of income on the records. In such circumstances, we find the subtle distinction between the ownership of the RIBs and his creditworthiness. Ownership must be qualified by the worthiness to acquire the said owned asset. The documents available on records do not indicate basic financial capabilities of donors as there are no elementary particulars about the income particulars of the donors such as annual statements or income-tax assessment particulars etc. This is not the case of the assessee that he is in a position to submit them either. Thus, we are of the considered opinion that assessee must not be treated to have furnished requisite basic details relating to variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of P. Mohanakala ( supra ), which was relied on by the DR. While deciding the case against the assessee on the issue of gifts from the NRIs, the Apex Court, in the context of additions of gifts under section 68, held that the money came by way of bank cheques and was paid through banking transactions was not by itself of any consequence . Further, we find, as discussed in page 288, an adverse opinion of the Assessing Officer in itself constitutes a prima facie evidence against the assessee i.e., against the receipt of money and if the assessee fails to rebut the said evidence, the same can be used against the assessee, relevant paragraphs is reproduced as under : "It is true that even after rejecting the explanation given by the assessee if found unacceptable, the crucial aspect whether on the facts and circumstances of the case it should be inferred the sums credited in the books of the assessee constituted income of the previous year must receive the consideration of the authorities provided the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. We are required to notice that section 68 of the Act itself prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly sound for making such gifts because the bank statements merely indicate the movement of the funds and not the creditworthiness of the account holder. One cannot ignore that in case of NRI donors the Assessing Officer is handicapped in verifying the creditworthiness of the donors in comparison to an Indian donor because in case of Indian donors after examining the donors and questioning them the Assessing Officer can conveniently verify the creditworthiness but in case of foreign donors he cannot do so and has to simply depend upon the documents filed by the assessee. Creditworthiness of a donor can be safely proved by the donor by producing a certified/notarized copy of the return accompanied by balance sheet indicating his capital base and the assets owned by him. Mere issuance of a cheque from a bank account cannot establish the creditworthiness of the donor. ... The CIT(A) was not justified in presuming that this donor may be having other bank accounts also which were not disclosed before the Assessing Officer by the assessee in the absence of any such evidence before him by holding this donor to be financially sound. The assessee has failed in establishing the creditwor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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