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TMI Blog2014 (7) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Lakhan Singh, Mumbai, in which case the same, i.e., the retirement funds, in almost their totality, disprove the assessee’s case rather than establishing the creditworthiness - for the three members of the Verma family, the amount gifted, as apparent from the bank accounts furnished, are sourced from loan funds - Apart from the legal issue of whether the same would qualify as a gift, which could only be of one’s own property, i.e., over which one has absolute rights, including of disposition, as well as the proprietary issue in-as-much as the bank had advanced funds only for business purposes, it raises serious doubts qua the genuineness of the gifts, besides in no manner establishing the credit-worthiness of the donors, if not actually disproving it – the credits claimed to be gifts, as unproved on the anvil of section 68 of the Act – Decided against Assessee. Inaccurate particulars furnished – Penalty u/s 271(1)(c) of the Act – Held that:- The genuineness of the gifts, again, remain completely unproved in the absence of any personal relationship being claimed, much less proved - the credits only represent laundering of his money by the assessee, masqueraded as gifts - The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mangla 1,00,000 3. Jyoti P. Nairi, Santacruz, Mumbai 3,00,000 4. Ram Lakhan Singh, Bhandup 3,50,000 5. Chetan M. Morjaria, Uganda 8,00,000 6. Pawan Churiwala, Dubai (UAE) 7,51,000 7. Ramesh Verma, Mumbai 6,00,000 8. Vijay Verma, Mumbai 3,00,000 9. Gopal Verma, Mumbai 7,00,000 Total 42,01,000 The same were subject to test on the parameters of identity and creditworthiness (of the donors) and genuineness (of the credit transactions) in the verification proceedings initiated by issue and service of notice u/s.143(2). The gifts having been treated as genuine in the case of first two donors (of the Mangla family), we delineate the facts as recorded by the Assessing Officer (A.O.) only for the balance gifts aggregating to ₹ 38.01 lacs from the remaining seven (7) creditors, as under: i) Jyoti P. Nairi, Mumbai (Rs.3 lacs): The gift was acknowledged. However, apa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing these gifts by three members of a family being almost identical, the same are taken together to avoid repetition. The gifts stand acknowledged. The perusal of the respective bank accounts all with the same bank branch, of the donors, as furnished by the assessee the donors failing to respond to the summons issued by the A.O., revealed them to be enjoying credit facility from the bank, ostensibly for the business purposes, and the gift amount being out of the said borrowing. No relationship with the donors for the gifts or occasion therefor stands specified. The gifts were accordingly treated as not genuine. The assessee was unable to improve its case the gifts having been treated as the assessee s unexplained income u/s.68 in assessment, stood made in the appellate proceedings, even as he relied on the decision in the case of Krishnakumar K. Ashar vs. ACIT (in ITA No.9355/Mum/2004 dated 21.02.2008/PB pgs. 87-94). No convincing reason/s had been given for making the gift/s. Why would anyone gift his hard earned money, which in one case represents retirement funds and in three cases borrowed funds, to any other for no ostensible reason. In fact, no relationship with the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the property being gifted forever, so that the test of human probabilities assumes critical significance (refer: Sumati Dayal [1995] 214 ITR 801 (SC)). The Courts have discountenanced and, in fact, come down heavily on the practice and phenomenon of gifts , observed only in the files of the income-tax payers, in complete contradistinction to the experience of every day real life where gifts, even from near and dear ones, are hard to come by, and can be regarded as only rare and exceptional, moved and occasioned by (say) compelling circumstances, as for example a dire need, a medical emergency/bill, etc. of the donee or his/her family, of the case. We are reminded of the famous observations by the hon ble Madras high court in Addl. CIT vs. C.R. Ranganathan Chetty [1985] 153 ITR 456 (Mad) (at pg. 466)), even as many such abound the judicial pronouncements and annals, which we quote as under: Look at the way the gifts were made. Not only were they made to other people's children, but some of them were made to other people's wives. In any place, excepting in a tax Court, gifts to other people's wives even if they are wives of co-partners, would raise a host of ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generally start with small sums? Whether any gift has been similarly made to the assessee (or his family members) any time in future? Have the assessee (or even his family members) at any time gifted to the donors (or their families); love and affection being almost certainly a two-way process? Have, in fact, the donor/s gifted like amount to anyone in their own families? These and such like questions, answers to which would form the crux of the assessee s explanation in-as-much as it is the genuineness of the gift that has been doubted, remain completely unaddressed and unanswered. Rather, they even do not stand to be posed in-as-much as there is no whisper of any personal relationship or the basis of love and affection and good relations cited in justification or as the reason for the gift/s. Then, again, what is the financial standing of the donor/s, i.e., quite apart from their relationship, if any, with the assessee. The same has nowhere been demonstrated. The value of the money, like any other material thing in life, is relative. ₹ 1 lac, for example, would carry significant value for the same by different person, assuming a capital base of ₹ 5 lacs; ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the absence of any explanation, or the explanation being found as false, or being unsubstantiated. The assessee, however, has not furnished any explanation, i.e., which could be regarded as proper or acceptable, from the standpoint of a layman or a reasonable person. The findings with regard to the capacity (of the donors) or the genuineness (of the gifts) being not proved are essentially findings of fact, arrived at in assessment on a consideration of the facts and circumstances of the case and, therefore, have persuasive value in the penalty proceedings as well. No improvement to its case, however, stood made by the assessee at, in fact, any stage of the penalty proceedings, including before us. That an incorrect claim does not by itself amount to furnishing inaccurate particulars of income is not a statement of fact, but of law, and we are unable to appreciate its import in the facts and circumstances of the case the explanation u/s.68 being primarily a matter of fact. No immediate source of gift, except in one case for gift of ₹ 3.50 lacs (by Shri Ramlakhan Singh) has been clarified, much less established, so that the capacity is not proved. In fact, barring one case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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