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TMI Blog2016 (5) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ken on record as the legal heir of the deceased assessee, Sh. Arjan Nath Saproo. 4. On behalf of the assessee, the following written submissions have been filed, challenging the impugned order, which written submissions will be dealt with in extenso, in the succeeding paragraphs: "May it please your honour that the order passed by the Learned Assessing Officer and confirmed by the Ld. Commissioner of Income Tax Appeals is bad in law and is being challenged on the basis of submissions stated hereunder in seriatim. 1. HISTORY OF THE CASE a. The appellant - Late Mr. Arjan Nath Saproo during the financial year 2005-2006 received a revocable gift of Rs. 5.00 Lacs from his nephew Mr. B.L. Saproo S/o Mr. Soom Nath Saproo R/o Gurgaon, Haryana which was received by Cheque No 367629 dt. 06/03/2006 drawn on State Bank of India, Gurgaon, Haryana. b. The appellant during the course of assessment for the assessment year 2006-2007 declared the said gift by way of credit to his capital account in the balance sheet filed before the Ld. Assessing Officer duly supported by relevant documentary evidence including the gift deed executed by Mr. B.L. SAPROO at the time of issuance of banker Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further does not fall within the definition of a gift as defined U/s 2(xii) of the Gift Tax Act, 1958. b. That the valid essentials of a gift which have to be complied with/fulfilled to enable a transaction to be called a valid gift is lacking in this transaction between the appellant and his nephew since the gift made by the nephew to his uncle was incomplete being loaded with an unrestricted power to take it back the next minute. c. That conditional/revocable gift being outside the preview of a valid gift does not constitute a gift received by any person to be subjected to tax under provisions of Section 56(2)(v) of the Act and therefore can not be subjected to tax as any sum of money received without consideration under any provisions of the Act. d. That the appellant being a senior citizen having attained more than 75 years of age who is not carrying on any kind of profession or occupation and merely had his sustenance on pension income from government service wherein he has retired more than 15 years before can not be deemed to be in receipt of any income directly or indirectly by way of such gifts received which can be subjected to tax. e. That the notice of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K OF INDIA, DLF QUTAB ENCLAVE, GURGAON, HARYANA. 5,00,000/= TOTAL : 5,00,000/= I, further declare that the amount gifted as shown above out of love & affection towards him has been duly delivered to the donee who has accepted the same and he is free to deal with the money so gifted by me to him in any manner. I further declare that the above gift is however revocable at any time hereinafter during my life time and the Donee shall be bound to honour any revocation hereinafter of the said gift by the Donor by express or implied consent. WITNESSES : 1] ____Sd/-________ Sd/- ---------------------- ________________ [ DONOR ] PAN : AHOPS1245A Sd/- --------------------- [ DONEE ] PAN : APQPS6538G The copy of gift deed executed by Mr. B.L. Saproo is annexed as ANNEXURE-1. c. That the Ld. Appellate Authority has wrongly proceeded to conclude that there can not be any gift deed of revocable gift at the option of the donor. In this regard, the assessee submits that the conclusions as put forth by the Ld. Appellate Authority are unfounded on the following grounds :- 1. Under explanation (b) to the provisions of section 4(5) of the Wealth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be. A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded. Save as aforesaid, a gift cannot be revoked. Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice. Illustrations (a) A gives a field to B, reserving to himself, with B's assent, the right to take back the field in case B and his descendants die before A. B dies without descendants in A's lifetime. A may take back the field. (b) A gives a lakh of rupees to B, reserving to himself, with B's assent, the right to take back at pleasure Rs. 10,000 out of the lakh. The gift holds goods as to Rs. 90,000, but is void as to Rs. 10,000, which continue to belong to A.". Therefore in light of above provision of law the gift received by the appellant had been void ab initio. Accordingly a gift which is recognized as void under law does not tantamount to a valid transfer qualifying for tax U/s 56(2)(v)of the Income Tax Act, 1961. 3. That U/s 63 of the Income Tax Act, 1961 the definition of revocable transfer has been clearly stated as under : a) a transfer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to levy of income tax under provisions of Section 56 (2)(v) of the Act under any pretext. The appellant submits that the transaction between the assessee and his nephew under appeal is nothing but a temporary loan exchanged between two parties which was returnable to the giver at any time from the date given and as such under any interpretation of law can not be classified/termed as money received without consideration and subjected to levy of tax arbitrarily. B. That under Para (ii) of the Appellate Order the Appellate Authority has again wrongly proceeded to hold as under :- "Even if it is not a proper gift the appellant is liable to explain the source of the amount of Rs. 5.00 Lacs received from Mr. Bhushan Lal Saproo, which has not been explained before the assessing officer." The conclusions of the Ld. Appellate Authority are challenged being grossly incorrect on the following grounds. a. That the Ld. Appellate Authority on the face of the order passed is itself in contradiction to what has been stated by him at Para "1" of the order under appeal before the Hon'ble Bench about the validity of the gift received by the assessee. The conclusions arrived at by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of the Section 56(2)(v) of the Act at the time assessment was that even if it is an interest free unsecured loan, same shall also be considered as " sum of money received without consideration" within the meaning of Section 56(2)(v) of the Act. Therefore it would not make any difference for the appellant to prove the source of money received unless it was hit by the proviso to Section 56(2)(v) of the Act, .This position is now settled in the decision of CHANDRAKANT H. SHAH vs. INCOME TAX OFFICER ITAT, MUMBAI 'C' BENCH ITA No. 3966/Mum/2008; Asst. yr. 2005-06. (Copy enclosed as ANNEXURE-3) wherein it has been held that unsecured interest free loan shall not be covered U/s 56(2)(v), C. That under Para (iii) of the appellate order the Ld. Appellate Authority has held as under : "that the appellant has changed its stand now from what was stated before the assessing officer. Earlier he was contesting the genuineness of gift from relative but now he is questioning the veracity of the same gift." The appellant submits that as stated by the Ld. Assessing Officer in the order itself that the appellant was asked to show cause as to why the amount received as gift from Mr. B. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been refunded to the donor as per the details given below, there cannot be any presumption with regard to any motives of a law abiding citizen without placing any concrete evidence on record to establish and prove that the appellant had some ulterior motive to repay the amount back when demanded by the donor. 5. CONCLUSIONS OF THE APPELLATE ORDER The conclusions arrived at by the Ld. Appellate Authority stated at the conclusion of the order are as under :- "In view of the above, I do not find any merit in the argument of the appellant and uphold the addition." The appellant humbly submits that the Ld. Appellate Authority before whom the appellant had filed the appeal has summarily dismissed the arguments of the appellant in respect whereof neither any justifiable and legal reasons have been placed on record to uphold that the submissions of the appellant has been inadequate or incorrect . The Ld. Appellate Authority has failed to pass a speaking order with respect to the each & every submissions furnished by the appellant and therefore the order passed is without application of proper mind and against principles of natural justice. 6. SUPPORTING ARGUMENTS B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity since retirement but has been solely making his living on pension income and some interest income received from bank deposits. As such, there can be no ulterior motive for such appellants to have received money without consideration only to conceal his income under one pretext or the other. The total income of the appellant from pension and interest for the financial year 2005-06 relevant to assessment year 2006-2007 has been Rs. 215110/= only which itself speaks of the unreasonable addition to his income on presumptions and disbeliefs. f. That the appellant has conclusively proved before the Ld. Appellate Authority that the donor with the passage of time at his own sweet will and discretion has exercised his option for revocation of the gift and the appellant forthwith repaid the g. amounts back on 27/03/2011 by A/c payee cheques which are evidenced by the bank statement of the appellant and confirmed by the donor leaving no room for apprehension and estimation that the amounts received by the appellant have been directly or indirectly his concealed income which has been intended to be regularized by way of gift deed. In this case the appellant has received money by A/c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escendent of the said brother of the assessee was covered by such definition, being relative to the assessee by blood. It was also submitted that since the gifts by blood relatives are covered by the said definition, the gift received by the assessee was exempt from tax. 8. The AO rejected the assessee's stand, observing that son of brother is not lineal descendent of the recipient of gift and so he is not covered under the definition of 'relative' within the meaning of the proviso to section 56(2)(v) of the Act. 9. Before the ld. CIT(A), the assessee contended that the amount of Rs. 5 lacs received was a temporary receipt in the hands of the assessee, since the gift was revocable at the discretion of the donor, the transaction thereby not being covered under section 56 of the Act and the donor had served notices for revocation of the gift and the money had been returned to the donor by the assessee on 27.03.2011. It was submitted that since the gift was an invalid gift and had been repaid, it could not be added under the provisions of section 56 of the Act. 10. The ld. CIT(A), however, confirmed the addition by observing as follows: "I have considered the rival arguments and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift. It was a temporary transfer of money, which was revoked at the option and instance of the donor. 12. The ld. CIT(A) has next observed that even if it was not a proper gift, the assessee was liable to explain the source of the amount, which had not been done before the AO. This evidently is incorrect. The ld. CIT(A) has himself observed at page 5 of his order that the assessee had explained before the AO that the amount had been received as a gift from the lineal descendent/son of his brother and that the gifts from blood relatives were exempt from tax. Even the ld. CIT(A) has challenged the propriety of the gift. Moreover, whereas the AO never questioned the transaction, the ld. CIT(A) held, wrongly, on the basis of mere assumptions and presumptions, disregarding the explanation offered by the assessee before the AO, that the assessee had not explained the source of the amount received. Rather, it is nowhere in dispute that the amount came to the assessee from his nephew, Sh. B.L. Saproo. Therefore, the source of the receipt stood duly explained. Asking the assessee to explain the source of the source is, in my considered view, asking too much of the assessee, particularly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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