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TMI Blog2015 (10) TMI 1017X X X X Extracts X X X X X X X X Extracts X X X X ..... f Blackfin clearly indicated that the donor had access to the funds necessary for making the gift in question. The rent deed relating to a hotel in Dubai also indicated that the donor was a person of means. The donor himself had affirmed that his annual income was 3-4 million dollars. Plainly, the above material could not be ignored by the AO. The donor himself was under no obligation to subject himself to the inquisition by the AO. The Tribunal had considered the above and had concluded that the Assessee had discharged the burden. The AO on the other hand had not identified any material that was available with the Assessee, or should have been available with the Assessee, and had been withheld by him. In our opinion, the Tribunal rightly considered the issue in its correct perspective while holding that the Assessee had discharged his burden. Insofar as the professional consultancy fee received from Blackfin is concerned, the Assessee had produced a copy of the agreement as well as the letter of termination. The agreement itself was in force for a period of six months and in terms of the agreement, the Assessee was to receive a sum of US$ 1,20,000 against, which the Assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appeal relates to an addition of ₹ 1,87,38,100/- made by the AO to the taxable income of the Assessee under Sections 68 and 69 of the Act. This addition was made as the AO held that the Assessee had been unable to establish his claim that a sum of US $ 6 lacs received by him was a gift. The Assessee s appeal to the CIT(A) against the said decision was also rejected. On a further appeal, the Tribunal held that the Assessee had established the source of the gift as well as the creditworthiness of the donor and, accordingly, deleted the addition. Aggrieved by the aforesaid decision, the Revenue has preferred the present appeal. 3. The present appeal was admitted on 5th March, 2004 and the following questions of law were framed for determination by the Court:- Whether ITAT was correct in law in deleting the addition of US $ 6 lacs (Rs.1,87,38,100/-) made by the A.O. U/s. 68 and 69 of the Income Tax Act ? Whether order passed by the ITAT is perverse in laws and on facts when ITAT had observed that the assessee had proved the capacity of the donor? 4. The aforesaid questions have to be considered in the backdrop of the following facts:- 4.1 The Assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, Africa, USC etc. (iii) Statements of assets and liabilities for the year 1992 to 1996 giving details of properties, stocks and other assets acquired during the above period, alongwith cost of such assets and date of purchase. (iv) Documentary evidence in support of the claim that the annual business turnover was 3-4 millions as claimed in the statement of Shri Jaspal recorded on 3.3.97. (v) Copies of bank statements of bank accounts in India and abroad. (vi) Description of the nature of business association with Blackfin Development Co. giving details of the goods and/or services in which Shri Jaspal and Blackfin Development together. (vii) Copy of business agreement with Blackfin. (viii) Evidence for share of profit from business association with Blackfin and dealings in Africa. (ix) To produce evidence to show that Shri Jaspal was actually associated with M/s Blackfin and further that the money remitted by Blackfin to Shri Budhiraja actually belonged to Shri Jaspal and Blackfin remitted this amount to Jaspal. In this context, Shri Jaspal was also requested to give a note on his acts of involvement in the business of Blackfin and a cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessee after a period of 90 days. 4.10 The AO passed an assessment order dated 27th March, 1998, inter alia, holding that although the entity of the donor had been established, the Assessee had failed to establish the capacity of the donor to make the gift or the genuineness of the transaction. The AO drew an adverse inference from the fact that the Assessee had not been able to persuade the donor to produce the documentary details as required by the AO. The AO noted that there were certain discrepancies in the statements of the donor and the Assessee, inasmuch as the donor did not know the date of the Assessee s marriage and there were also some inaccuracies in the names of the children of the Assessee as mentioned by the donor. The AO held that the Assessee had failed to substantiate his claim of having received the gift and added the amount of the aforesaid gift as income in the hands of the Assessee. 4.11 The Assessee preferred an appeal before the CIT(A) and also sought to produce additional evidence in the form of a statement of accounts of the donor as certified by Blackfin. The statement of accounts indicated that the sum of US$ 6,00,000/- which was remitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded his statement on oath. He had affirmed (i) that he had gifted the amount in question to the Assessee out of love and affection; (ii) that the amount had been remitted by Blackfin at his instance; (iii) that he had known the Assessee since 1971 and was close to the Assessee; (iv) that his average annual income was 3-4 million dollars (equivalent to ₹ 15 crores approximately); and the donor had also answered all other questions that were put to him. 8. In addition, the Assessee had recorded his statement affirming that he had received the gift from the donor. His statement also clearly indicated that he and the donor were friends since long and the donor was a highly successful businessman. 9. The Assessee had produced a letter dated 2nd April, 1994 wherein the donor had mentioned that the Assessee had stood by him in his time of crisis and, therefore, he was arranging some funds as a token of love and affection towards the Assessee. 10. In addition to the above material, the Assessee had also produced a copy of the notarised certificate issued by Blackfin confirming that the donor and Blackfin were associated since 1993 and the donor was to receive monies from B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inor. Further, the donor had stated that he and the Assessee knew each other since 1971 and had done their CA together; but, the Assessee had affirmed that he and the donor had done their graduation and CA together during the period 1967 to 1975. In addition, the AO also found certain other minor discrepancies. The Tribunal had noted the above and did not consider the discrepancies to be material. We do not find any infirmity with this view as it is apparent that the discrepancies in the statement are not significant. 15. Insofar as the failure on the part of the donor to provide his business details, details of his assets, bank accounts and his agreements with his associates and other information is concerned; clearly, a donor could not be expected to share such details, which understandably may be considered as confidential. The donor had, therefore, responded by saying that the details sought for did not have a bearing on the assessment proceedings. In order for the Assessee to discharge its burden, he had to show that the donor was a person of means and that such gift has been made out of love and affection. The Assessee had produced the donor who answered all questions put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as gift. On the other hand that the AO had no material or had not collected any evidence to reject the claim made by the Assessee. Apart from doubting and questioning the material produced by the Assessee, the AO had not produced any positive evidence which could lead to the inference that the amount received by the Assessee was not gift. 19. In Umacharan Shaw Bros v. CIT: (1959) 37 ITR 271 (SC), the Income Tax Officer did not consider the firm in question as being genuine and rejected the Assessee s claim for registration of the said firm. The Appellate Assistant Commissioner upheld the decision of the ITO and rejected the Assessee s appeal. Assessee s further appeal to the Tribunal met the same fate. The Supreme Court set aside the decision of the Tribunal and directed registration of the firm in question. The Court held that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine and further observed the conclusion is the result of suspicion which cannot take the place of proof in these matters . In the present case too, the AO had rejected the evidence produced and based his conclusion only on surmises; there was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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