1994 (3) TMI 128

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..... e was accepted under s. 143(1) vide order dt. 16th Jan., 1987. The ITO issued a notice under s. 143(2) on 18th March, 1988 and the assessment was completed under s. 143(3) on 30th March, 1988. It is this assessment which is the subject matter of appeal before us. During the course of scrutiny of accounts, the learned ITO noted that the assessee had made a gift of Rs. 5,000 on 1st July, 1983 to the wife of his younger brother—Smt. Mumtazben and likewise his younger brother, viz., Shri Faizulla Abdullabhai Makati made a gift of Rs. 5,000 on 1st July, 1983 to the wife of the assessee Smt. Bilkishbai. Both these ladies on receipt of these amounts of Rs. 5,000 cash, formed a partnership firm on 1st July, 1983, i.e., the day of the two gifts with .....

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..... same day, i.e., on 1st July, 1983. 5. In the written submissions filed on behalf of the assessee, it has been submitted that the issue in question was covered in favour of the assessee by the decision of the Bombay High Court in the case of N.K. Pandya. 6. We have considered the rival submissions. From the facts of the case it is evident that the two brothers, viz., Shri Gulam Abbas Abdullabhai and Shri Faizulla Abdullabhai Makati made cross gifts of Rs. 5,000 each on 1st July, 1983 to enable the two ladies, viz., Smt. Mumtazben (wife of brother of assessee) and Smt. Bilkisbai (wife of the assessee) to become partners of the firm M/s Makati Commercial Metal Agencies, Jamnagar which came into existence on 1st July, 1983, i.e., the d .....

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..... 966 after a lapse of four months and the wife of Shri N.K. Pandya contributed this amount as partner in M/s Kumar Enterprises. On these facts the Hon'ble Bombay High Court held that though the gifts by the assessee and his brother were cross gifts, there was no nexus between the amount gifted by the assessee's brother to Leelavati and the share of profit which she received from the firm. In the case before us cross gifts of identical amounts of Rs. 5,000 were made on the same day, i.e., 1st July, 1983 and these amounts were invested as capital by the two ladies on the same day in the newly constituted firm, viz., M/s Makati Commercial Metal Agencies, Jamnagar. Thus the intention of the assessee was to circumvent the provisions of s. 64(1) .....

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