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TMI Blog2023 (8) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... orthiness of the donor and genuineness of the transaction, there is no justification to treat the credit / gift as unexplained or non-genuine. Therefore, it is abundantly clear that where the assessee had produced enough evidence to prove identity of donor, his creditworthiness and also genuineness of gift, addition on account of such gifts could not be sustained. Appeal of the Revenue are dismissed. - ITA No. 289/SRT/2022 - - - Dated:- 31-7-2023 - Shri Pawan Singh, JM And Dr. A.L.Saini, AM For the Assessee : Shri Tushar P. Hemani, Sr. Advocate And Shri Parimal Parmar, Advocate For the Respondent : Shri Vinod Kumar, Sr-DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to assessment year 2014- 15, is directed against the order passed by the National Faceless Appeal Centre, Delhi, [ NFAC/Ld.CIT(A) for short] dated 16.08.2022, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short the Act ), dated 30.12.2016. 2. The grounds of appeal raised by Revenue are as follows: (i) On the facts and circumstances of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Assessing Officer, the source of income of the assessee for the year is income from `salary , income from house property , income from business and profession and income from other sources comprising interest income. During the assessment proceedings, the assessing officer observed that assessee has purchased a property amounting to Rs. 6,37,97,760/- during the assessment year under consideration. The source of the funds are mostly loans and gifts received by the assessee from various persons during the year other than loans received from different parties. Two gifts amounts have been claimed, as received by the assessee, from his son Shri Dhwanil P Shah during the year, out of that one gift amounting to Rs. 38,63,733/- has been received on 26.02.2014 and second gift amounting to Rs. 1,22,02,780/- has been received on 18.03.2014. These two amounts of gifts, have been received in the form of foreign remittances, through the HSBC account of Shri Dhwanil P Shah, assessee s son. 5. Therefore, the Assessing Officer has examined the details and documents to establish the creditworthiness of Shri Dhwanil P. Shah. From the details and documents furnished it was observed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore Assessing Officer held the credit worthiness of the giver of gift has not at all been established. The total gift amount of Rs. 1,60,66,513/- was therefore treated as unexplained credits in the books of account u/s 68 of the Act. 7. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal, before Ld. CIT(A), who has deleted the addition. In sum and substance, the ld CIT(A) observed that assessee submitted the gift declaration/copy of gift deed before the Assessing Officer, which is duly signed by the donor and donee. On, going through the said declaration of gift, it was observed by ld CIT(A) that it is apparent and patent on the face of gift deed that the gifts were made by the donor to the done, without any consideration and the gift was accepted by the done. It has been established that there was absence of consideration, the subject matter of the gifts were foreign remittance of Rs. 38,63,733/- and Rs. 1,22,02,780/-, totaling to Rs. 1,60,66,513/- on 26-02-2014 and 18-03-2014 respectively, and the same were transferred by the donor Sh. Dhwanil P Shah to the donee Sh. Pravin Pannalal Shha and the donee accepted the gifts. It has also bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in treating the gift of Rs. 1,60,66,513/- as unexplained credit u/s 68 of the Act whereas there is separate provision for gift in the Income Tax Act, which are contained in Section 56(2) (vii) of the Act. The ld Counsel also relied on various judicial precedents in support of his stand and contended that ld CIT(A) has passed a detailed and speaking order, therefore conclusion reached by the ld CIT(A) may be upheld. 11. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee with the able assistance of Shri Tushar Himarni, (Senior advocate), representing the assessee and Shri Vinod Kumar, Learned Sr-DR, representing the Revenue. Though facts have been discussed in detail in the foregoing paragraphs, however in the succinct manner, the relevant facts and background are reiterated in order to appreciate the controversy and the issue for adjudication. The Assessing Officer noted that during the year under consideration, the assessee purchased a property for total consideration of Rs. 6,37,97,760/-, the source of fund was stated to be as loans and gifts received by the assessee. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Pravin Pannalal Shha and the donee accepted the gifts. It has also been established that consequent to the said declaration, the donee recognized the gifts as valid and legal and consequently encashed the above transfer in his bank account and purchased the property. It is also apparent and patent on the face of the record that the assessing officer failed to prove that any consideration by way of cash or otherwise passed by the assesses to the donor. The assessing officer has failed to prove that it was not gift but was a transfer for cash consideration. There is nothing on record which could prove either directly or indirectly that cash or any other benefit passed on to the donor either before or after making the gift. Thus, the provisions of Transfer of Property Act are complied with fully. 13. The ld CIT(A) noted that assessee has furnished various following documentary evidences to establish the identity, creditworthiness and genuineness of the transaction: (i) Copy of ledger account alongwith gift deed (ii) Copy of bank statement of the donor, i.e. Mr.Dhwanil Shah, reflecting the transactions of the amount given as gift to his father along with bank advices duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to give gift. To establish the capacity of Sh. Dhwanil P Shah, the assessee furnished copy of Certified Public Accountants of Hong Kong Auditors which duly reflecting the receivables balance of the donor, i.e., assessee son's, in the company Ankit Gems (Hong Kong) Ltd., from where the amount was received which duly prove the capacity of the donor. If the amount reflected in the CPA certificate is in US$ which after converting to HK$ by applying the conversion rate of 7.8 HK$ tallies with the audited financial statement of the Ankit Gems (Hong Kong) Ltd. The receivable balance of the donor as on 31/03/2013 in the Ankit Gems (Hong Kong) Ltd., as per CPA certificate is $ 45,71,684.90 which is equivalent to HK$ 3,56,59,142.22 ($ 45,71,684.90 * 7.8). The receivable balance is duly reflected in the Note 17 of the audited balance sheet of Ankit Gems (Hong Kong) Ltd. (iii) Genuineness of the transactions: To establish the genuineness of the transaction, the assessee has furnished copies of account statement of HSBC from which funds were advanced to the assessee and stated that gifts were accepted through proper banking channels, hence, genuineness of the transaction is to be demo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal has examined the evidence which was available on the record and has arrived at the aforesaid findings. Even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad, unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as money representing the income of the assessee in India . (iv) The Hon'ble Delhi Bench of ITAT in the case of M.S. Agarwal vs. Deputy Commissioner - reported in 90 ITD 80 at 103 - observed: At this stage, we may refer to the contention of the Id. Sr. DR that there was no occasion or relationship between the donor and the donee for making the gifts in the instant case. In our considered view, genuineness of the gift transaction has to be considered on the basis of attendant facts and circumstances of the case like identity of the donor, financial capacity and factum of the transaction. Even though relationship between the donor and the donee as well as the occasion for the gift may be relevant circumstances for adjudication of the issue of genuineness of the transaction yet, no inference can be dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogent and strong evidence which in the instant case neither the A.C. nor the A.O. possess. The donor has categorically stated more than once that he has gifted Rs. 1 lac to the donee assessee and also transferred the money. The donee assessee has also stated that she has accepted the gift and received the money. Such being the case, we see no reason for the A.O. to come to the conclusion that the gift was invalid or not genuine. Apart from expressing his surprise and dissatisfaction over the amount gifted to the assessee, the A.O. has not led any iota of evidence to prove that the gift was collusive or a dubious device or a subterfuge to evade tax. The assessee did not have such income so as to collude with a Nepal Resident and adopt a dubious device to evade payment of tax. No such evidence or material is on record of the A.O nor anything is collected by the A.C. and placed on record, as stated by us above. The provisions of section 68 also in our view, are not attracted in the instant case as the sum of Rs. 1 lac was not found credited in the books of account maintained by the assessee for the previous year relevant to the year under appeal. Section 68 comes into operation if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had not given any gift to the children of the donor in the past. In our opinion, this observation of the assessing officer is against the provisions of law because the amount can be treated as gift if it is given without any consideration and under the natural love and affection. Similarly, the observation of the assessing officer that there was no blood relation and occasion to receive the gift, is also not acceptable because for making the gift, it is not necessary that there should be some blood relation or the gift should be made only to the relatives and not to the friends . (ix) The Hon'ble Jaipur Bench of the ITAT in the case of ACIT vs. Sampat Raj Ranka - reported in 24 Tax World 172 - observed that: It is observed that the assessee's claim of receipt of gift is supported by the declaration of the donor Smt. Sua Bai. Further, this claim has been substantiated by the confirmation of Shri Kanwar Lal, the grandson of late Smt. Sua Bai in his statement recorded by the assessing officer. As against this direct evidence, it is observed that, the lower authorities have examined the issue on the basis of human probabilities while observing that no such gifts were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, who was a 'Sadhvi' in Jain Dharam and donor also visited so many times to Jaipur and stayed with his family and gift has been given. On these admitted facts and the reasons given in detail by the Commissioner of Income (Appeals), we see no reason to confirm the view taken by the Tribunal. Even merely on conjectures and surmises, such gifts cannot be treated as not genuine . (xi) When the availability of funds has been adequately proved, the capacity of the donors to make the gifts also stands proved. The onus to explain the credit being on the assessee, reflects the general rule of law of evidence codified in section 106 of the Evidence Act, 1872, as per which the source of income is a matter with the exclusive knowledge of the assessee which he has to prove and demonstrate. It is for this reason only that the source of source, which is not within the knowledge of the assessee at all, is not required to be proved by the assessee. The Hon'ble Punjab and Haryana High Court, while dealing with an identical issue in the case of Jawahar Lal Oswal (supra), has categorically held at pg 27 of its order, An arrangement between a donor and another is an arrangement betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that in the return of income for AY 2014-15, the donor had shown only income of Rs. 9,515/-. However, we find that the Assessing Officer failed to take note of the fact that donor Sh. Dhwanil P Shah is NRI since long he only had some receipt interest income and STCG and LTCG on investments made in India which were declared in the return filed for the AY 2014-15. However, we note that income declared by the assessee's son in India is not only his income and his major income is from abroad in the capacity of NRI, hence genuineness of the transaction should not be doubted. We find that in the instant the case, the assessee has adduced sufficient evidences to explain the gifts as valid by proving the identity and creditworthiness of the donor and genuineness of the transaction. In the various precedents cited above, the Hon'ble Courts consistently held that where the assessee by way of documentary evidence satisfactorily established the identity and creditworthiness of the donor and genuineness of the transaction, there is no justification to treat the credit / gift as unexplained or non-genuine. Therefore, it is abundantly clear that where the assessee had produ ..... 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