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TMI Blog2010 (3) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... vously erred in law and or on facts in disallowing the short-term capital loss in respect of land transactions. 3.2.That in the facts and circumstances of the case as well as in law, the ld. CIT(A) ought not to have upheld the disallowance of short-term capital loss in respect of land transaction. 3.3.The ld. CIT(A) has grievously erred in law and/or on facts in rejecting the additional evidence furnished by the appellant, though no sufficient opportunity was allowed by Assessing Officer before making the impugned disallowance. 3.4.The observations made and conclusion reached by CIT(A) in upholding the disallowance of short-term capital loss in respect of land transaction are uncalled for in the facts of the case. 4.1.The ld. CIT(A) has grievously erred in law and/or on facts in confirming that the gift received from Biral Patel was unexplained." 3. The ld. A.R. did not press ground Nos. 1.1 and 2.1 and, hence, they are rejected as not pressed. 4. The facts of the case are that assessee is an Individual. A search was carried out by Ahmedabad Police on 26-8-2003 at the premises of M/s. Kalgi wherein cash, gold jewellery and various documents were found and seized. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is document was notarized. As the payment could not be made in time, this amount was forfeited for which cancellation of Banakhat was executed in presence of Executive Magistrate. There was condition in Banakhat to forfeit the amount if the final deed was not executed. Copy of the Banakhat was furnished to your good self on 17-3-2006. . . . When I enter into an agreement to buy any property and make payment towards this property, it is payments for acquiring property or right in property and any gain or loss arises out of this transaction its capital income/loss. Thus, I have rightly claimed this loss as capital loss. This claim is supported by decision in the case of CIT v. Tata Services Ltd. 122 ITR 594 , Bombay. Copy of which is enclosed herewith." 5. The Assessing Officer considered the reply and inferred that the main benefit of cancellation of Banakhatnama is to set off long-term capital gains arising on account of sale of diamond/jewellery declared under VDIS. In a similar manner, the assessee is found to have suffered a loss of Rs. 6,50,000 in assessment year 2000-01 also by giving advance against some property by entering into agreement to purchase them. Later on, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation no capital right would be generated in favour of the assessee. For finding out whether assessee had actually incurred any capital loss we look to sections 45, 2( 14 ) and 2( 47 ). The essential requirement for charging capital gains (or allowing capital loss) is that a transfer of capital asset should be effected in the previous year. The transfer is defined under section 2( 47 ). The clause ( ii ) thereof states that transfer includes extinguishment of rights therein. It requires assignment of a meaning to the term "therein". Section 2( 47 )( ii ) can be invoked when there is an extinguishment of any right in a capital asset. Therefore, for the purposes of extinguishment of a right in a capital asset, existence of capital asset is a must. Till the point of time, the agreement to purchase the land is cancelled, the assessee did not get any right which could be termed as a property so as to fall within the definition of "capital asset" as defined in section 2( 14 ) of the Act. The right (or in reality an obligation) which the assessee, had till the point of time of cancellation of the agreement by consent deed was to make the payment of the balance amount and get the registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has received gift from one Shri Mahendra Ambalal Patel of Rs. 1,42,845 in the assessment year 1999-2000 and of Rs. 12 lakhs in the assessment year 2000-01. The Assessing Officer found that the gifts were received in two years from the same person. The Assessing Officer required the assessee to furnish address and confirmation with evidence of creditworthiness and other details of the donor. The assessee, however, submitted confirmation from Shri Mahendrabhai Ambalal Patel, who is a father and Power of Attorney holder of Shri Biral M. Patel, the donor. In support of the creditworthiness, the copy of NRE Account No. 0971-0-000-010372 from 7-7-1999 onwards was filed. The source of gift was claimed to be sale of certain asset, the donor had in USA. The Assessing Officer examined the documents being confirmation from the father of the donor and details about the creditworthiness, claimed to be sent by the donee but rejected them and taxed the sum of Rs. 1,42,845 as undisclosed income of the assessee. In this regard, the Assessing Officer made following observation: "( a )Biral M. Patel has made gift to his mother Smt. Rohiniben M. Patel and assessee s wife Smt. Sonal D. Thakkar al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not mention the quantum, of gift, name of recipient or any reason for giving gift. The assessee in the return of income has shown income from some non-specific activities such as liaison work and resolving disputes, etc. One Shri Tarun Karia who was under the employment of the assessee was found engaged in betting and gambling. He held that these transactions involving money laundering were apparently carried out with the help of the said donor. 13. Against this, the learned A.R. for the assessee submitted that the authorities have treated the gift as not genuine on hypothetical conside-rations. The gift is given by Shri Biral M. Patel to his family members which has been accepted as genuine then there is no reason why this gift to the assessee should not be accepted as genuine. There is no requirement for gift to be genuine that there should be relation or occasion. The money has been transferred through Banking channel. It has come from the NRE account of the donor. The gift given by the donor to the wife of the assessee has been accepted by the department. The document furnished by the donor or his father are not doubted, therefore, gift to the assessee should have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to 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 being treated as a receipt of income nature. The assessees received foreign gifts from one common donor. The payments were made to them by instruments issued by foreign banks and credited to the respective account of the assessees by negotiation through a bank in India. Most of the cheques sent from abroad were drawn on the Citibank, N.A. Singapore. The evidence indicated that the donor was to receive suitable compensation from the assessees. On this material the Assessing Officer held that the gifts though apparent were not real and accordingly, treated all those amounts which were credited in the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. ( iii ) Sunil Siddharthbhai v. CIT [1985] 156 ITR 509 : It was held by the Hon ble Supreme Court that it is the right of the income-tax authorities to consider genuineness of the transactions and to penetrate the veil and ascertain the truth. It is within their power to consider whether a particular transaction was to evade tax. ( iv ) K. Ramasamy v. CIT [2003] 261 ITR 358 (Mad.) : It was held that veil can be pierced in exceptional circumstances. The income-tax authorities are entitled to look at the reality of the transaction. 17. In addition to above, following judgments are also relevant on the issue : (1) ITO v. Diza Holdings (P.) Ltd. [2002] 255 ITR 573 (Ker.); (2) Raunaq Ram Nand Lal v. CIT [2002] 254 ITR 617 (Punj. Har.); (3) Smt. Iva Gogoi v. CIT [2002] 254 ITR 576 (Gau.); (4) CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465 (Cal.); (5) Rajshree Synthetics (P.) Ltd. v. CIT [2002] 256 ITR 331 (Raj.); (6) R.B. Mittal v. CIT [2000] 246 ITR 283 (AP); (7) CIT v. United Commercial Industrial Co. (P.) Ltd. [1991] 187 ITR 596 (Cal.); (8) M.A. Unneeri Kutty v. CIT [1992] 198 ITR 147 (Ker.); (9) Nemi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion by the Assessing Officer. ( vi )In cases where the explanation offered by the assessee about the nature and source of the money received by the assessee is not satisfactory, there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. ( vii )The burden is on the assessee to prove and establish that, even if the explanation offered by the assessee is not acceptable, the material and attending circumstances - available on record do not justify the money received by the assessee being not treated as a receipt of income nature. 19. Similarly, ITAT Delhi F-Bench in the case of Rajendrakumar Mittal v. Asstt. CIT [IT Appeal No. 1199 (Delhi) of 2007 pronounced on 7-9-2009], wherein judgments of Delhi High Court, Punjab Haryana High Court and Hon ble Supreme Court on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and assessee, reasonable degree of acquaintance between creditor and assessee, presence of broker, details about credit such as mode, payment of interest and repayment of principal, etc. On the other hand, genuineness of gift can be shown by relationship and acquaintance which should be of such a degree, showing emotional bondages so as to prompt and motivate the donor to part away his hard earned money to the assessee. Such acquaintance or relationship are not mere statement to be given by the donor or by the assessee before the Assessing Officer or in the affidavit but has to be established by surrounding circumstances, past history of the two persons, their mutual relationship and help to each other in the past, or blood relationship from where one could infer a natural bondage of affection between donor and donee. 23. In addition to these, it has to be shown that there has been a reciprocity while giving to each other. It cannot be merely a one way process that only donor has given gift to the donee and at no time donee has given gift to the family members of donor. Another evidence of surrounding circumstances to establish genuineness of the gift is occasion for giving gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case remain the same except names of power of attorney holders and amount of advance forfeited after expiry of the six months through consent deed. 27. In view of the similar facts, similar arguments of the parties, we follow the same reasoning as given by us in the assessment year 1999-2000 and hold that capital loss did not accrue to the assessee and, therefore, it cannot be adjusted against capital gains arising to the assessee against sale of jewellery declared under VDIS. This ground of the assessee is, accordingly, dismissed. 28. The next ground is about receipt of gift from Shri Biral M. Patel for a sum of Rs. 12 lakhs. The facts and circumstances of the case and evidences furnished by the assessee in support of the gifts are the same as in assessment year 1999-2000. The deficiency in the evidence is also the same, the arguments of the parties for and against the issue are also the same as in assessment year 1999-2000. Following our reasoning given by us in assessment year 1999-2000, we hold that assessee was unable to discharge the onus which lay on him to prove that the gifts are genuine. Therefore, authorities below were justified in treating the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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