2007-VIL-482--DT

Equivalent Citation: [2007] 293 ITR 294 (Delhi)

HIGH COURT, DELHI

I.T.A. No. 380 of 2007

Date: 25.04.2007

SANDEEP KUMAR (HUF)

Vs

COMMISSIONER OF INCOME-TAX

BENCH

JUDGMENT

JUDGMENT

The judgment of the court was delivered by

1. V. B. GUPTA J.—The appellant has filed the present appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the Act") challenging the order dated July 21, 2006, passed by the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal"), Delhi Bench "C" in IT(SS) No. 6(Del)/1999 for the block period April 1, 1986 to August 29, 1996.

2. The facts of this case are that a search and seizure operation under section 132 of the Act was conducted. at the residence of the karta of the assessee-Hindu undivided family, Shri Sandeep Kumar. Certain documents/ his loose papers were seized during the course of search. Proceedings under section 158BD were initiated against the assessee on January 7, 1998, and the assessee filed a return declaring "nil" undisclosed income on February 17, 1998. During the course of search, a set of cheque books and pass books of NRE accounts of the donors of the alleged gifts to this group were recovered from the business premises of the karta of the assessee-Hindu undivided family. From the perusal of the seized documents it was noticed by the Assessing Officer that the assessee has received a sum of Rs. 3,37,000 and Rs. 36,000 as gifts by cheques on February 20, 1993, and March 5, 1993 respectively from one Banshi L. Sawhney, 32 West Spring- way Lutherville MD-21093, USA. The Assessing Officer asked the assessee to prove the genuineness of these gifts. The assessee in its reply stated that since these gifts are received from NRI, the same are genuine. The source from where these gifts have been made by the donor, the details and particulars of bank account from where these gifts have been made and declaration from the donor in support of his financial status, the annual income and total wealth owned by him has been filed. Further, in support of these gifts the assessee also filed two separate affidavits by the donor before the Assessing Officer affirming the facts that he was a permanent resident of the USA having source of income by virtue of being a professor and that he has NRE account No. 47 with OBC, Karol Bagh, New Delhi from where he has forwarded the gifted amount by cheques to the assessee-Hindu undivided family. Two confirmations on plain paper regarding total income and taxes paid along with the copy of income-tax return of the, donor and certificate regarding the fact that the pass book and cheque book of NRE account No. 47 was kept with Gaurav Gambhir for donor's personal convenience and the latter and his family members have no interest in this account. In view of these documentary evidence the onus cast upon the assessee in respect of the genuineness of these gifts stands discharged.

3 However, after considering the submissions of the assessee and perusing the documents, the Assessing Officer was of the opinion that the assessee has not been able to discharge its onus of proving the identity, capacity and the creditworthiness of the donors as well as the genuineness of the gifts due to the reason that the copies of affidavits merely confirm the fact that the money has been transferred from NRE account to the assessee but it does not give any information regarding the source of funds as well as the source from where funds are alleged to have been given as gifts, came into the NRE account.; that the confirmation of the donor regarding the income declared and tax paid along with copy of individual income-tax return without any balance-sheet or annexures, does not throw any light on the source of funds utilized for the purpose of alleged gifts; that the

financial capacity and the creditworthiness of the donor does not stand established ; that during the course of such proceedings Shri Sandeep Kumar could not even furnish the exact address of the donor ; that the assessee has not brought out any circumstances to show any close relationship with the so called donor; that these gifts are unilateral, time specific and need based and now have been utilized by the assessee in the business of the group companies in one way or other; that the fact that the bank pass book and cheque books of some of NRE donors were found from the premises of the assessee which itself shows that these accounts were operated by the assessee and his family members, including his brother; that the bank cheque books and pass books of the donor in possession of the members of the group in itself show that the assessee was in fact in control and application of funds; that during the search, the karta of the assessee-Hindu undivided family could not even furnish the address of the donor and during the assessment proceedings could not establish the circumstances in which the gifts of such quantum were made i.e., the occasion etc.; that the assessee could not give any instance of any kind of reciprocal gifts to any of the relatives of the donor or to the donor himself. Thereafter, the Assessing Officer concluded that though the assessee is able to establish the identity of the donor but has not been able to establish the financial capacity of the donor and genuineness of the gifts. So by invoking section 68 of the Act a sum of Rs. 3,73,000 received by the assessee as gift was treated as income of the assessee from undisclosed source and added to the income of the assessee.

4 Being dissatisfied with the assessment order, the appellant filed an appeal before the Tribunal and vide impugned order the Tribunal dismissed the appeal filed by the appellant.

5 It has been contended by learned counsel for the appellant that on identical facts in the case of Shri Sandeep Gambhir, individual who is the karta of the assessee-Hindu undivided family, a similar addition in the block assessment under section 158BC was made by the Assessing Officer and the same has been deleted by the Tribunal vide order dated February 26, 2003 passed in IT(SS) No. 203(Del)/97 for the block period April 1, 1986, to August 29, 1996. Since the facts of the instant case of the assessee as well as that of individual Sandeep Gambhir are identical, the addition made by the Assessing Officer in the instant case of the assessee in respect of the amount received as gifts by the assessee should have also been deleted by the Tribunal. Since, the amount involved in the present case of the assessee has come from the same donor the same may also be treated as genuine. Further, learned counsel for the appellant in support of his contention has referred a decision of this court in CIT v. Ravi Kant Jain [2001] 250 ITR 141 and a decision of Bombay High Court in CIT v. Vinod Danchand Ghodawat[2001] 247 ITR 448.

6 The Tribunal while considering the genuineness of the gift transactions, vide impugned order has held that :

"In the instant case, admittedly, the donors are even not distantly related to the assessees. The donors are NRIs who were not available to the Assessing Officer for examination nor could be made available by the assessee as they were residents of foreign countries. It means that in such circumstances the assessees were required to furnish proper and authenticated evidence on which reliance could be placed by the Assessing Officer as the documents would be foreign documents and the genuineness of the same could not possibly be easily verified by the Assessing Officer. In the instant case the return of the NRI donor filed by the assessee, having not been accompanied by the balance-sheet, is simply a copy not bearing any authentication from the Revenue Department of that country and not even properly notarized by an authorized person of that country, so, it is not possible for us to look into such unauthenticated evidence filed by the assessee to support and corroborate the financial status of the donor for coming to a conclusion; that in fact the donor was in a capacity to give such huge amounts as gifts to persons unrelated to him out of love and affection as claimed by the donors in their affidavits in the case of the respective assessees. Since the donors in the affidavits claimed to have made the gifts out of love and affection, here comes the importance of human probability which prompted the donors to donate generously huge amounts to persons not related out of love and affection for determining the genuineness of the gifts, irrespective of the fact that the amounts have been received as gifts by the assessee from the NRI donors through banking channels of the NRE accounts to the bank accounts of the assessees. Here, for determining the genuineness of the gifts we are required to look into relevant attendant facts and circumstances of the instant cases. It is also important to mention here that in this case the donor who has given gifts to Sandeep Kumar, Hindu undivided family, the instant assessee, has also given gifts to the assessee Sandeep Kumar, individual, also and similar was the case of other donors and the other assessees. It appears to be humanly most improbable for a donor to develop love and affection even for the individual as well as the assessee Hindu undivided family and that too when the donor has no relationship with the assessees and further when there was no occasion for the donors to make such gifts of huge amount and there was no reciprocation between the donor and the donee, as in the instant cases, the assessees claimed to have received the gifts though never ever made gifts to the said donors."

7  The question to be seen in the present case is as to whether the identity of the donor has been established, and whether the donor had the capacity to make such a gift or not. In a decision of this court in CIT v. R. S. Sibal [2004] 269 ITR 429, it has been laid down (page. 432)

"There is no quarrel with the proposition that a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift and since the claim of a gift is made by the assessee the onus lies on him not only to establish the identity of the donor but his capacity to make such a gift. But, in the instant case, we find that though the assessee had admittedly produced the bank statements, the Assessing Officer did not raise any query with regard to the capacity of the donors to make the gift. From the assessment order, we find that the only ground on which the genuineness of the gifts has been doubted is the alleged failure on the part of the assessee to establish relationship between the donor and the donee."

8 Similarly in another decision of this court reported as Sajan Dass and Sons v. CIT [2003] 264 ITR 435, it has been held that (page 438)

"……a mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift Since the claim of gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make a gift and that it has actually been received as a gift from the donor. Having regard to the inquiries conducted by the Assessing Officer from the bank, with which the assessee was admittedly confronted and bearing in mind the fact that admittedly said Subhash Sethi was not related to the assessee, we are of the view that the findings recorded by the Tribunal are pure findings of fact warranting no interference. We find it difficult to hold that on the facts of the instant case proper opportunity had not been granted to the assessee to prove the gift."

9 So, from the aforesaid judgments, the position which emerges is as  under :

(i) Mere identification of the donor and showing the movement of the gift amount through banking channels is not sufficient to prove the genuineness of the gift.

(ii) Since the claim of the gift is made by the assessee, the onus lies on him not only to establish the identity of the person making the gift but also his capacity to make such a gift.

10 Here in the present case, there is nothing on record to show as to what was the financial capacity of the donor; what was the creditworthiness of the donor; what kind of relationship the donors had with the assessee; what are the sources of funds gifted to the assessee and whether they had the capacity of giving large amount of gift to the assessee.

11 Accordingly, the gifts received in this case by the assessee from NRI donor cannot be held to be genuine gifts and the tax authorities below were fully justified in treating the amount received as gifts to be representing the concealed income of the assessee and adding the same to the income of the assessee as being the assessee's income from undisclosed sources.

12 So, in view of the concurrent findings of fact given by the two statutory authorities, we do not find any reason to disagree with the decision of the Tribunal.

13 The above being the position, no fault can be found with the view taken by the Tribunal. Thus, the order of the Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of section 260A of the Act, which is confined to entertaining only such appeals against the order which involves a substantial question of law.

14 Accordingly, the present appeal filed by the assessee is, hereby, dismissed.

 

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