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TMI Blog2010 (6) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... to me under section 255(4) of the Income-tax, Act, 1961 (In short the Act ). Whether, on the facts and in the circumstances of the case, addition of Rs. 12 lakhs, being the amount of 12 gifts of Rs. 1 lakh each have to be held as non-genuine ? 2. Briefly stated the facts of the case are that the assessee is proprietor of M/s. Shiv Shakti Industries, Madhavnagar, Katni. He derives income from manufacturing and trading of pulses and foodgrains. During the assessment year under consideration, the assessee had shown the total sales at Rs. 14,64,88,957 and the gross profit declared was Rs. 50,43,415. The AO has accepted the gross profit declared by the assessee. On a perusal of the capital account of the assessee, the AO noticed that the assessee has introduced with M/s. Shiv Shakti Industries a total sum of Rs. 13,27,680. Perusal of the Capital Account revealed that in order to enable the assessee to introduce such amount, the source of funds with the assessee is explained to be out of gifts received from the following twelve parties: 1. Rajdas Bakshmal Roopwani, Hospital Line, Madhav Nagar, Katni. Rs. 1,00,000 2. Gopichand Chairmal Madhwani, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of the assessee to its hilt. The AO also observed that he can very well enquire into the genuineness of the transactions after receiving the initial proof from the assessee. The enquiries made by him revealed that the entry is not genuine. Therefore, the AO held that the decision relied upon by the assessee was distinguishable from the facts of the present case. According to the AO, the main contention of the assessee was that he had received gifts from 12 different persons. All are existing assessees and are filing their Income-tax returns. All the donors have admitted by way of affidavit and also some are ready to state on solemn affirmation before the AO that they have made such gifts as stated by the assessee in his return. The AO did not accept the above contention of the assessee stating that in order to reach the root of the matter, the AO is well within the ambit of the provisions of the Act to enquire into the source of funds with the donors to make a genuine gift. The AO, therefore, made the efforts to enquire into the source of funds in the hands of the donors and their capacity to gift such amount as claimed by the assessee. The AO observed that on examining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case in respect of each donor, he was satisfied that none of the donors was in a position to give gift to the assessee as claimed. According to the AO, the assessee has procured some evidence to support the capital accumulation in his hands by way of so called gifts. The AO held that the money belongs to the assessee and only to give it a colour of genuineness, they have been routed through the so called donors. Accordingly, it was held that the so called gifts are the assessee s own money introduced in his account under the guise of gifts. Thus, the sum of Rs. 12 lacs was treated as assessee s income from undisclosed sources and was added to the total income of the assessee. 3. On appeal, the ld. CIT(A) upheld the order of the AO stating that in such case of exceptional behaviour because of the fact that a peson with little means is making a gift to a person who is very prosperous, the issue 1 required to be decided having regard to the circumstances so as to find out whether the evidence in support of this claim is manufactured one or not ? The ld. CIT(A) opined that no one will gift away the money to another person unless there is a deep and emotional relationship with that pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) 8. Murlidhar Lahorimal v. CIT [2006] 280 ITR 512(Guj.), 9. CIT v. Lovely Exports (2008) 216 CTR 195(SC) 10. ITO v. Rakesh Kumar Rathi, ITA No. 137(Jab.)/2008, Order dated 17.2.2009 passed by the ITAT Jabalpur Bench. 7. Shri S.P. Choudhary, ld. CIT(DR) relied upon the proposed order of the ld. A.M. He also relied on the following decisions : 1. CIT v. L.N. DaImia [1994] 207 ITR 89(Cal.) 2. CIT v. Durga Parsad More [1971] 82 ITR 540 (SC) 3. Ishrawati Devi v. ITO [2008] 298 ITR (AT) 313 (All.) 4. CIT v. P. Mohankala [2007] 291 ITR 278(SC) 5. Sajan Dass and Sons v. CIT [2003] 264 ITR 435 (Del.) 6. Rajeev Tandon v. Asstt. CIT [2007] 294 ITR 488 (Del.) 7. ITO v. Naveen Kumar Agarwal [2004] 25 SOT 253(Del.). 8. I have carefully considered the rival submissions of the parties and have also perused the materials available on record. In this case, the above gifts were found to be doubtful. The AO required the assessee to prove the source of funds in the hands of donors and also to prove the identity of the said donors. The assessee has claimed that he had received the gifts from 12 persons. The onus lies on him not only to est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 p.m. His family is comprised of himself, wife and a son aged bout 22 years. Further, his son is an assistant to an electrician but earning some money. He has denied to have any moveable or immovable property. He has stated to have never received nor has given any gift to any other person except the one in question. (ii) Shri Gopichand Roopwani It is stated that when the gift Vas made he was running a tea stall at the railway station road. At present, he is making artificial payals on wage basis earning upto Rs 4,000/- p.m. His monthly expenses are Rs 3,000/- and the family is comprised of himself, wife and two school going children aged about 14 to 16 years. Except for this, he has never received nor has given any gift to anyone. (iii) Shri Harish Kumar Mooljani He claims to be a cable operator and is earning about Rs. 65,000/- p.a. and his saving per month is Rs. 2500/- but which is not deposited in any bank. His family is comprised of himself, wife and a son aged about 1 year. Except for this, he has never received nor has given any gift to anyone. (iv) Shri Gopichand He claims to be earning about Rs. 50,000/- p.a. as commission on sale of bidi, cigarettes to var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before me. 10. In the instant case, efforts were made by the AO to enquire into the source of funds in the hands of donors and their capacity to give such amount as claimed by the assessee. The AO is Investigating Officer as well as Assessing Officer. In the case of L.N. Dalmia (supra), the Hon ble Calcutta High Court held as under : In the context of determining whether a transaction is sham or illusory or a device or a ruse, the Income-tax authorities are entitled to penetrate the veil covering it and ascertain the truth. The taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in the documents. It is the duty of the court, in every case, where ingenuity is expended to avoid taxing and welfare legislations, to get behind the smoke-screen and discover the true state of affairs. The court is not to be satisfied with the form and leave alone the substance of the transactions. The Hon ble Supreme Court in the case of Durga Prasad More (supra) also observed that the Income-tax authorities are entitled to look into n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has furnished GIR/PAN, addresses and confirmation from the creditors and the Department has not brought any material to disprove the genuineness of the parties, capacity of the lenders and the transactions on the basis of cogent facts on record; no substantial question of law is involved; appeal under section 260A is dismissed. This decision is also not applicable to the facts of the present case. In the instant case, the Department has brought sufficient material on record to disprove the capacity of donors and the genuineness of gifts. 15. In the case of Padam Singh Chouhan (supra), the Hon ble Rajasthan High Court held that the assessee having produced copies of gift deeds and affidavits of NRI donors, in the absence of anything to show that the transaction was by way of money laundering, addition could not be made in the hands of the assessee donee for absence of blood relationship between the donor and the donee. In my opinion, this decision is also not applicable to the facts of the present case because the facts are distinguishable. In the above case, the Department failed to show that the transaction was by way of money laundering. In the instant case, issue r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are not similar to the above case and therefore, this decision is also of no help to the assessee. 19. The decision rendered by the ITAT, Delhi Bench in the case of Ms. Mayawati (supra) is also not applicable to the facts of the present case. In the said case, the assessee established the identity of the donors, capacity of the donors and also the genuineness of the transaction. In the instant case, the assessee failed to prove the capacity of the donors and also the genuineness of the gifts. This decision is also of no help to the assessee. 20. The decision of the Hon ble Allahabad High Court in the case of R.S. Sibal (supra) is also not applicable to the facts of the present case. Ins the said case both the appellate authorities recorded a categorical finding that by producing the copies of gift deeds, affidavits of the donors, extracts from their bank accounts and bank certificate, the assessee has discharged the onus which lay on him with regard to genuineness of gifts received by him from NRIs. The Hon ble High Court held that the findings are factual in nature and hence no substantial question of law is involved. In the said case, the Hon ble High Court held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r respective capital accounts and Balance Sheets filed alongwith the return of income. In these circumstances, the Tribunal held that the assessee proved beyond doubt the identity and creditworthiness of the creditors and also the genuineness of the transactions. In the instant case on perusal of the acknowledgements for filing the returns for the current and preceding year, the AO noticed that each donor had declared income just above the taxable limit of Rs. 50,000. In other words, it was ranging from Rs. 50,000 to Rs. 51,000. Never before any of the donors had filed any tax return and even thereafter never did any donor filed the return. Thus, the AO doubted the capacity of the donors and the genuineness of gifts. 24. The decisions relied upon by the ld. D.R. are discussed hereinbelow. 25. In the case of Ishrawati Devi (supra), the ITAT, Allahabad held (Head Note) as under: That the transactions from all the three donors to the assessee were unusual and against all human probabilities. There was no explanation of the immediate source of money for gift. There was no explanation from where the cash had come. Even though money had flown through bank account, that is not sacr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o quite unnatural. It was 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 come to the conclusion that the gifts could not be said to be genuine. The reason offered by the assessee did not appear to be reasonable, much less acceptable. Therefore, there was no error in the view taken by the Tribunal. The Hon ble Delhi High Court held that 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. 28. In the case of Naveen Kumar Agarwal (supra), the ITAT, Delhi Bench held as under : The general principles, which could be culled out from the decisions (supra) of Apex Court and the High Court are that - (i) it is for the assessee to lead evidence to prove the identity, creditworthiness and financial capacity of the donors as well as the genuineness of the gift transaction, (ii) mere identification of the donor and movements of the amounts through banking channels are not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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