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TMI Blog2011 (8) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... annually, but the term capacity has vided term and that can be perceived by how wealthy he is. All the formalities, as per law are met by the assessee and donors as well. All the donors have admitted that they are great admirer of the assessee as she is working for the upliftment of poor people. - Decided in favor of assessee. - ITA No.438/2008 - - - Dated:- 3-8-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE SURESH KAIT, JJ. Appellant Through: Mr.Vivek K. Tankha, ASG with Mr.Rishabh Sancheti and Mr.Sumeer Sodhi, Advocates Respondent Through: Mr.S.C.Mishra, Sr.Advocate with Dr.Rakesh Gupta, Mr.Shail Divedi, Mr.Ashok Chhabra, Mr.Kunal Varma, Mr.Ashwani Taneja and Mr.Johnson Bara, Advocates SURESH KAIT, J. 1. The present appeal is preferred by the Revenue/Department against the order of Income Tax Appellate Tribunal (Delhi Bench) dated 30.11.2007. The facts of the instant appeal are as under:- 2. The Income Tax return for the Assessment Year 2003-04 was filed by the assessee on 06.08.2003 declaring total income of Rs.13,29,090/-. The Assessee enjoys the income from salary, house property and other sources. The Assessing Officer, on perusal of the return, found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid gifts. For this purpose he summoned the donors. He recorded the statement of Mrs.Veena Jain on 26.12.2004. 6. From the statement of Mrs.Veena Jain, the Assessing Officer brought out the following facts:- 1. She is Graduate. 2. The sources of income are rental, salary, interest, dividend, sale purchase of shares. 3. She is filing her income tax return since 1979 and the details of income declared by her is given hereunder:- A.Y. Gross Net 2000-01 1,39,910/- 95,330/- 2001-02 1,35,920/- 98,720/- 2002-03 2,10,658/- 1,82,410/- 4. She does not pay wealth tax. 5. She is not a director, partner or proprietor in any company or firm or concern. 6. She has never gifted any amount to any social organization, temples and other religious organizations. 7. The gift is stated to be out of natural love and affection. 8. There is no correspondence with the donee and it is out of personal meetings as well as telephonic discussion. 9. The done has never gifted any amount to Smt.Veena Jain, the donor. 10. She has never received or given any gift in the past. 7. The Assessing Officer recorded his observation on the creditworthine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no relation between the donor and the donee and the genuineness and creditworthiness is not proved. Sh.Pankaj Jain 10. By profession he is a Chartered Accountant. He is assessed to tax at Ghaziabad. He is partner in P.Jain Co. His statement on oath was recorded by Addl.DI(Investigation). 11. The Assessing Officer recorded that his statement revealed as under:- 1. He is a C.A. and is partner in M/s P Jain Co. and is also doing the business of purchase and sale of shares. 2. The income declared during the last three years is given hereunder. He is filing his income tax return since 1994. A.Y. Gross Net 2000-01 1,90,280/- 1,50,879/- 2001-02 1,96,553/- 1,32,577/- 2002-03 1,81,009/- 1,25,024/- 3. The family consists of self, wife and two dependent children. 4. He has admitted that no substantial amount has been gifted in his personal capacity to social organization, temples and other religious organizations. The sources of gift given to the assessee have been given above. 5. The gift is stated to be out of natural love and affection and regard for work done by her towards down trodden society. 6. He does not have any correspondenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onors as well as the financial statement of affairs depicting net worth of Sh.Ashok Jain, Sh.Pankaj Jain and Smt.Veena Jain. In response to the same, the Assessing Officer submitted his Remand Report dated 30.10.2006 and certified the net worth of the donors as on 31.03.2002 as under:- (i) Sh.Ashok Jain : Rs.1,14,74,817/- (ii) Smt.Veena Jain: Rs.1,32,14,312/- (iii) Sh.Pankaj Jain: Rs.1,36,01,314/- On perusal of the above Report, it was seen that Sh.Ashok Jain had gifted immovable property worth Rs.40,68,450/-, Smt.Veena Jain has gifted immovable property worth Rs.22,03,850/- and Sh.Pankaj Jain has made a gift of Rs.2,00,000/. These gifts were seen in the light of the net worth and creditworthiness of the above three donors. 18. The CIT(A) noted that the Assessing Officer had in his impugned order disallowed the gifts of Sh.Pankaj Jain on the following grounds:- (a) All the persons in Jain group have admitted that they do not know the donees personally and they are not aware about their addresses and other details related to the donees. (b) It is seen that the entire gift of Pankaj Jain was made by him out of amount received from M/s Blue Bell Finance Company, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion for making the gift and relationship with donor are not very relevant, rather what is relevant is the genuineness of the transaction together with the identity and capacity of the donor. 20. CIT (A) held that the Assessee, had duly discharged the onus by filing substantial documentary evidence including gift deeds, copies of Bank Accounts, IT returns, sworn affidavits apart from stating on oath and reaffirming the gifts and also indicating amply his financial status. In this manner the assessee had, thus, proved the identity of all the donors, their source of immediate funds gifted to her, and all the donors have on oath confirmed that the gifts are genuine and were given to the assessee out of natural love and affection for her. 21. Likewise, CIT (A) hold that the assessee had justified that the gifts of Sh.Ashok Jain and Smt.Veena Jain deserved to be accepted on the following grounds:- (i) The donors appeared before the Assessing Officer and confirmed the genuineness of the gifts as well, therefore the identity, creditworthiness of the donors are proved with documentary evidence. (ii) The conclusion of the Assessing Officer was not substantiated by any material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the A.O. was right in charging interest u/s 234B. 24. As regards the issue No. 1 of Sh. Ashok Jain who has gifted property No. C-57, Inderpuri. Sh. Ashok Jain is a practicing advocate and he is assessed to tad since last so many years. He has placed details of income tax assessment and bank account before Assessing Officer. He has filed an affidavit certifying the above gift and he has also appeared before the Assessing Officer for statement on oath where also he has confirmed giving of gift out of natural love and affection. He has also brought on record that the assessee is his Rakhi Sister and has relationship for so many years which is even evidenced by photographs of family occasions etc. Sh. Ashok Jain has also submitted that reciprocation of gift not mandatory and his creditworthiness has been accepted by the Assessing Officer himself in the Remand Report. 25. Further, the immovable properties were first transferred and registered in the name of donor and then only gifted to donee. Thus, stamp duty was also paid twice and no lien of the donor remains on the property. Sh. Ashok Jain has also clarified that the donee has accepted the gift the same has been made wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer for statement on oath where he confirmed giving of gift. He has also established that he has been meeting the assessee, and his family members on family functions since so many years. The CIT (A) also found that the gift vide A-C payee cheque no. 17186 dated 17.12.2002 drawn on Andhra Bank for Rs. 2 lacs. 30.The CIT (Appeal), thus, accepted the genuineness of gift inasmuch as the identity and capacity of the donors was proved and came to the conclusion that factum of gift stood established. He thus, partly allowed the appeal of the assessee. 31. The revenue as well as the assessee filed cross appeals registered as ITA No.279/Del/07 and ITA No.422/Del/07 against the aforesaid order dated 18.11.2006 for A.Y.2003-04 before Ld.Income Tax Appellate Tribunal. The revenue in its appeal ITA No.422/Del/07 took a stand that the Ld. CIT (Appeals) had erred in deleting the addition of Rs.2,00,000/- made on account of gift from Shri Pankaj Jain and further deleting the addition of Rs.40,68,450/- and Rs.22,03,850/- on account of claim of gift of property from Shri Ashok Jain and Smt.Veena Jain. 32. The ITAT dismissed the aforesaid two appeals vide its order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d document and transfer of immovable property has to be effected by a registered instrument signed by on behalf of donor attested by at least two witnesses, whereas in the case of movable property such gift should be effected either by registered instrument or by delivery. The ITAT has relied upon on the case of CIT. U.P. Lko Vs. Shyamo Bibi, Kanpur AIR 1967 (Alld.) 82 wherein the Court has observed that whether the transaction is gift or not has to be examined in the light of Section 122 and 123 of Transfer of Property Act. The Court has also observed that there is on warrant for the saying that the law contained u/s 123 of Transfer of Property Act does not apply when an Income Tax Authority has to decide whether there was a gift or not. The observation of the Allahabad High Court reads as under:- Section 123 of the Transfer of Property Act lays down the law governing all gifts made for whatever purpose and it is to be applied whenever the question arises there was a gift or not. Regardless of whether the question arises in a suit by a donee to recover possession or in a suit to define his title or in an income tax assessment proceeding it has to be answered with reference to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the ITAT have examined as to whether these legal requirements as laid down in Section 122 and 123 of T.P. Act are satisfied in the case of gifts made to the present assessee or not. So far as the gift from Sh. Pankaj Jain is concerned, the transaction was carried out through account payee cheque and reflected in the bank account of the assessee, which is as per S.B. A/c No. 9195 on Union Bank of India, Moti Bagh, New Delhi. The amount of RS. 2 lac is gifted by Sh. Pankaj Jain S/o Sh. P.C.Jain, Kavi Nagar, Ghaziabad. The date of entry is 07.12.2002. Sh. Pankaj Jain has confirmed the transaction of gift and filed affidavit dated 07.12.2002 to this effect. The statement of Sh. Pankaj Jain was also recorded on 30.12.2005 on oath by the ACIT Central Circle-11. 39. The ITAT came to the conclusion that the donor is a Chartered Accountant. He is income tax assessee since 1994. His net worth as reported by the Assessing Officer to the CIT (Appeal) is Rs.1,36,01,314/-. Keeping the above documentary and oral evidence on record, the requirement of law for establishing a validity executed gift of movable properties are fully satisfied inasmuch as the donor gifted the amount volu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantiate the fact that the assessee was directly or indirectly benefited by such gifts, which were received by her family members nor has the Assessing Officer added the gifts received by family members as the income of the assessee from undisclosed sources while framing the assessment of the assessee for the year under consideration. 44. The ITAT has held that the Assessing Officer was wrongly influenced by the fact that there is no relationship between the donor and donee and, therefore, the genuineness of the transaction of gifts are not proved. The ITAT has taken a view that a gift may be made to a stranger. The reference of Section 123 of the Transfer of Property Act which has been made above does not require that the gift may be made to a relation only. Thus, the Assessing Officer has taken a incorrect view of law. The ITAT has referred the case of CIT Vs. Ms. Sunita Vachani 84 CTR Delhi/184 ITR 121 Delhi, wherein the assessee had received gifts from abroad, the commissioner of Income Tax by invoking the provisions of Section 262 set aside the order of ITO and directed him to pass fresh assessment order. In that case CIT was of the view that the order of ITO was prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, in a case where the assessee does not maintain books of account, does not attract the provisions of Section 68. 47. Keeping in view the above in the instant case neither the gifts relating to immovable property can be covered under Section 68 nor the gift of Rs.2 lacs received by the assessee can be covered under the provisions. In view of the ITAT all gifts satisfied the requirement of a valid and genuine gift. The assessee has fully explained the same and therefore it cannot be said the addition can be sustained even u/s 69 of the Income Tax Act. In this manner the ITAT has dismissed the appeal of the Revenue Department. 48. The Revenue has preferred the instant appeal by challenging order/judgment passed by ITAT on 30.11.2007. Initially, the questions of law proposed by the Revenue were as under:- (a) Whether the ITAT was correct in law in deleting the addition of Rs.40,68,400/- and Rs.23,03,850/- made by the Assessing Officer by treating the alleged gifts of immovable properties from Sh. Ashok Jain and Smt.Veena Jain on the ground that the genuineness and creditworthiness of the transaction and the donor has not been proved. (b) Whether the ITAT was correct in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj during last seven years and the only gift she made to the assessee is one property no. C-58, Inderpuri, New Delhi and Rs.5 lac in July, 2003 to the assessee. She has also stated that she visited the resident of assessee for making above gift. The donee has not given any gift to her. She also stated that gift was made out of her personal saving and also out of the loan from her near relatives. As argued by the learned Addl. Solicitor that it is difficult to believe that she has given gifts of money and immovable assets by taking loan from various persons and later on gifted the assets to the assessee with whom she has no relation whatsoever although it is stated that assessee is Rakhi/Dharam sister of her husband. The value of gift given by her exceeded the income declared by assessee during five years. The loan taken by the donor Smt. Veena Jain was never repaid and it remains the dispute of genuineness. Creditworthiness stand disputed since she did not have sufficient funds and she had taken loan and sold her jewellery. 51. In regard to the Mr.Ashok Jain, he gifted value of property C-57, Inderpuri, New Delhi is of worth Rs. 40,68,450/-. His source of income are tax consultan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer has wrongly co-related the loan taken in May with property purchased in September. On this issue he has argued that there was no other sources of legality to show by assessee hence this co-relation is correct. The burden is always on donor to show the sources of funds, and it was the assessee who was showing this loan of Rs. 20 lacs from Mangals as a source. He argued the findings of the ITAT is thus wholly perverse. He further argued that the exercise to distinction between the question of fact and question of law is normally difficult because there are some common areas between the two, where the distinction must be clear. But finding on a question of fact can be changed as erroneous in law where there is no evidence to support it, or it is based on material which is irrelevant or partly relevant and partly irrelevant, or it is based on contentions or surmise or partly on these and partly on evidence or the finding is so perverse or unreasonable or no person acting judicially, instructed on law could have arrived at it. 56. Lastly, he argued that in this case the two donors had absolutely no connection with the assessee and they made gift to the assessee only becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the present appeal filed by the Revenue is accepted and the impugned order passed by the Income-tax Appellate Tribunal is set aside. (iii) (2007) 294 ITR 0488-(Delhi High Court) Rajeev Tondon Vs. Commissioner of Income Tax We find from the facts of this case that two donors had absolutely no connection with the assessee and they made gifts to the assessee only because he needed money to buy a house and they wanted to help him. It appears to us that this is not only quite unusual but also quite unnatural. It sounds rather incredible that a complete stranger would want to gift lakhs of rupees to a person only because that person wanted the amount for purchasing a house. The taxing authorities were entitled to look into the surrounding circumstances, which they did, and came to the conclusion that the gifts could not be said to be genuine. On these facts, we find no reason why a different view should be taken. (iv) (2002) 254 ITR 0225-(Delhi High Court) Commissioner of Income Tax Vs. B.L.Passi It is submitted by Ms. Bansal that the findings recorded by the Tribunal are perverse inasmuch as there is no material on record to support the same. It is asser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as brought on record by the assessed before the lower authorities during the course of re-examination of the issue in pursuance of the directions contained in the Commissioner of Income-tax (Appeals) order dated February 20, 1990. therefore, prima facie, the findings recorded by the Tribunal on the issue of user of trucks do not seem to be based on any material. But we say no more lest it may prejudice the case of either side. We are, therefore, of the view that the orders of the Tribunal give rise to substantial questions of law. We, accordingly, admit the appeal. 58. Refuting the aforesaid arguments, Mr. S. K. Mishra, Ld. Sr. Counsel for the Assessee, argued that question of law does not arise at all and the attempt of the Revenue is to only show that findings of the two authorities are perverse and even in this attempt it has failed. He pointed out that CIT (A) had called for a remand report from the Assessing Officer and who had himself submitted this report to the CIT (A) on the basis of which creditworthiness of the donors was fully proved beyond doubt. Even otherwise, this question cannot be raised for the first time in appeal under Section 266(A) when no ground of this n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not the case of the Revenue that the issue or question was raised but not decided by the Tribunal. In the circumstances, we do not propose to dwell on this question. (ii) Commissioner of Income Tax vs. R.S.Sibal in ITA No.264/2003 decided on 12.11.2003 wherein it was held that: 5. According to the Revenue, the impugned order involves the following substantial questions of law: a) Whether ITAT was correct in law in deleting the addition of Rs. 9,25,000/- made by the A.O. under section 68 of the Income Tax Act being the alleged gifts of Rs. 7,00,000/- and Rs. 2,25,000/- received from the NRI's? b) Whether ITAT was correct in holding that the assessed had filed the necessary evidence in support of the genuineness of the alleged gifts when the assessed had not established the relationship between the alleged donors and the donee? c) Whether ITAT was correct in holding that the A.O. was not justified in not treating the gifts as genuine merely on suspicion conjecture and surmises? d) Whether ITAT was correct in law in holding that the assessed had discharged the onus in establishing the nature of the transaction?" 6. We have heard learned counsel for the parties. Assailing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it was held that:- The Tribunal states that motivation for making the gift is not established. This finding is neither here nor there. The assessee was called upon to explain the credit entry found in its capital account. The assessee pointed out that it had received a gift from Shri Ramji Nanji. Shri Ramji Nanji appears before the assessing officer and confirms the fact of having made the gift. He produces evidence in support of the source from which the funds for making the gift are available with him. The gift is given by way of a bank draft. The revenue does not dispute any of these facts. In fact, the revenue commences the present proceedings on the day it makes gift tax assessment qua this very gift in the hands of the donor. Despite this factual position, the Tribunal singularly fails to note the fact that the identity of the donor is established, the donor having appeared in person before the assessing officer, the genuineness of the transaction is established, not only by the receipt of the bank draft, but also by the fact of transaction having borne gift tax once the assessment was framed. The primary onus which rested with the assessee, thus, stood disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Officer. The Commissioner of Income-tax issued notice under section 263 of the Income-tax Act, 1961, and passed an order setting aside the order or Income-tax Officer and directing the Income-tax Officer pass a fresh assessment. The view of the commissioner of Income-tax Officer to that the order of the Income-tax Officer was prejudicial to the interests of the Revenue as the Income-tax Officer had gone into the sources of the gifts and had not satisfied himself about the genuineness thereof. The assessed filed an appeal to the Tribunal went into the facts, saw the balance-sheet of the donors which had been placed on the record and then came to the conclusion that, on merits the decision of the Income-tax Officer to treat the moneys received as gifts was correct and, secondly there was no error committed by the Income-tax Officer and that there was nothing more which he would investigate into than what he had already done. The order of the Commissioner of Income-tax was accordingly, quashed. In our opinion, the Tribunal had, on merits, come to the conclusion that gifts were genuine. This is a pure question of fact. The Tribunal has examined the evidence which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficates which had been issued with regard to the said cash credits. The Tribunal has also referred to the statements of the witnesses which had been recorded and has then come to the conclusion that the burden which was on the assessed had been discharged. It is pertinent to note that one of the items on which reliance was placed by the Tribunal was that some payments by way of interest had also been made by cheques. In our opinion, it cannot be said that the conclusion of the Tribunal is perverse. The question as to whether the cash credits were genuine or not is a pure question of fact and we find no question of law arising in this case. The petition is, accordingly, dismissed. No costs. (vii) Commissioner of Income Tax vs. Orissa Corporation (P) Ltd. being Appeals No.1379 1380 of 1974 decided on 19.03.1986 wherein it is held as under:- The question was again considered by this Court in Homi Jehangir Gheesta v. Commissioner of Income-tax, Bombay City [1961]41ITR135(SC) , when this Court reiterated that it was not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second appeal, treating it as substantial question of law. Where the first appellate Court is shown to have exercised its discretion in a judicial manner, it cannot be termed to be an error either of law or of procedure requiring interference in second appeal. In another case reported as Panchugopal Barua v. Umesh Chandra Goswami [1997]2SCR12 , it has been laid down that existence of substantial question of law is sine qua non for the exercise of jurisdiction. It was held: A bare look at Section 100 C.P.C. shows that the jurisdiction of the High Court to entertain a second appeal after the 1976 amendment is confined only to such appeals as involve a substantial question of law, specifically set out in the memorandum of appeal and formulated by the High Court. Of course, the proviso to the Section shows that nothing shall be deemed to take away or abridge the power of the Court to hear, for reasons to be recorded, the appeal on any other substantial question of law, not formulated by it, if the Court is satisfied that the case involves such a question. The proviso presupposes that the Court shall indicate in its order the substantial question of law which it proposes to decide even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re ITAT, and therefore, in the instant appeal the revenue cannot challenge the same. It is further submitted that the alleged substantial questions of law raised by the Revenue in the revised statement does not arise from the order of the Tribunal as the same was neither the ground of appeal taken by the Revenue before the Tribunal, thus the Revenue cannot take this question in the present appeal. Learned counsel for the assessee further argued that there are three donors from one family two of them namely Sh.Ashok Jain and Mrs.Veena Jain (Husband-wife) and Sh.Pankaj Jain (Nephew of Mr.Ashok Jain), thus aggregate gift is of Rs.64.72 lacs from three said persons. All the three donors have confirmed giving of gifts on oath in their respective affidavits and also appeared before the Department and gave their statements confirming giving of impugned gifts. All the three donors appeared before the Registrar and executed registered gift deeds since all three have a close relationship of more than 15 years and are family friends of the assessee. The ITAT has recorded exhaustive finding of facts on the identity and capacity and genuineness of the gifts of all the three donors. Even the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na Jain is that if a person buys any property for her personal use, she will definitely not make the gift for the same. Here on perusal of the record it is revealed that she has stated before the Department that the assessee is a Rakhi sister of her husband and she is great admirer of the assessee because she is working for the upliftment of the down trodden and poor persons of the society. Sometimes a person does not have to be related to a particular trust or a charitable institution, but in their view that trust or institution is doing a great service to the particular section of the society. Therefore, we do not find any force in the arguments advanced by the learned counsel for the Revenue. Further, it is also not necessary that a person should be a habitual donor. It depends from person to person, thinking to thinking and situation to situation. Sometimes a person keeps donating throughout their life and sometimes he donates once and sometimes during the last stage of his life. Therefore, we do not agree with the arguments advanced by the learned counsel for the Revenue. 63. Learned counsel for the Assessee has vehemently argued that the Revenue has relied upon the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Registrar and the gifts are duly registered. All gifts are absolute and without any lien of anyone. There is no evidence on record to prove that the assessee has favoured the donor in any manner whatsoever by acquiring the gifts in question. The capacity of any person does not mean how much they earn monthly or annually, but the term capacity has vided term and that can be perceived by how wealthy he is. All the formalities, as per law are met by the assessee and donors as well. All the donors have admitted that they are great admirer of the assessee as she is working for the upliftment of poor people. 69. The issue raised by the Revenue in the instant appeal cannot be said to involve any question of law, much less a substantial question of law. A question of fact becomes a question of law, if the finding is either without any evidence or material, or if the finding is contrary to the evidence, or is perverse, as was held in the case of Mahavir Woolen Mills (Supra). 70. In the light of above facts and circumstances, we are of the considered view that no substantial question of law arises from the instant appeal. Therefore, we confirm the judgment passed by the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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