Shri. Madan R, Bangalore V. ITO, Bangalore

ITA 1145/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51285 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATAP SINGH
• Assessee Lawyers: V SRINIVASAN
• Keywords: Gift; Source of fund
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO. 1145/BANG/2010 ASSESSMENT YEAR : 2006-07 SHRI MADAN R., # 67, 4 TH PHASE, 4 TH CROSS, II MAIN ROAD, DOLLARS COLONY, J.P. NAGAR, BANGALORE 560 078. PAN : ACAPM3025F VS. THE INCOME TAX OFFICER, WARD 4(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, C.A. RESPONDENT BY : SHRI PRATAP SINGH, ADDL.CIT(DR) DATE OF HEARING : 20.09.2011 DATE OF PRONOUNCEMENT : 29.09.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 14.6.2010 BY THE CIT(APPEALS)-II, BANGALORE FOR THE ASSESSMENT Y EAR 2006-07. 2. GROUNDS OF APPEAL NO.1 & 4 ARE GENERAL IN NATURE , SO THESE DO NOT REQUIRE ANY ADJUDICATION ON OUR PART. THE OTHER GR OUNDS READ AS UNDER: 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDIN G THE ADDITION MADE BY THE LEARNED A.O. IN RESPECT OF THE GIFT OF RS.20,00,000/- RECEIVED BY THE APPELLANT FROM HIS FATHER-IN-LAW HO LDING THAT THE SAME HAS NOT BEEN PROVED UNDER THE FACTS AND CIRCUM STANCES OF THE APPELLANTS CASE. 2.1 THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED TH AT THE RECEIPT OF GIFT DURING THE YEAR WAS FOR THE PURPOSES OF PUR CHASE OF THE ITA NO.1145/BANG/10 PAGE 2 OF 14 RESIDENTIAL HOUSE AND THAT THE APPELLANT HAD PRODUC ED ENOUGH EVIDENCE TO SUBSTANTIATE THE IDENTITY OF THE DONOR, WHO IS A CLOSE RELATIVE AND THE CAPACITY OF THE DONOR TO GIVE THE GIFT AND THUS, THE GENUINENESS OF THE TRANSACTION STANDS ESTABLISHED A ND CONSEQUENTLY, THE ADDITION MADE OUGHT TO HAVE BEEN DELETED. 3. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HONBLE CCIT/DG, THE APPELLANT DENIES HIMSELF LIABL E TO BE CHARGED TO INTEREST U/S. 234-A, 234-B AND 234-C OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS C ASE AND THE LEVY DESERVES TO BE CANCELLED. 3. VIDE GROUNDS 2 AND 2.1, THE GRIEVANCE OF THE ASS ESSEE RELATES TO THE CONFIRMATION OF ADDITION OF RS.20 LAKHS WHICH WAS RECEIVED BY THE ASSESSEE AS A GIFT FROM HIS FATHER-IN-LAW. THE FACTS RELATE D TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 4.7.07 D ECLARING TOTAL INCOME OF RS.7,85,833 AND AGRICULTURAL INCOME OF RS.4,50,000. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO FURNISH VARIOUS DETAILS. IN RESPONSE TO THAT, THE ASSESSEE FURNISHED STATEMENT OF AFFAIRS AS ON 31.3. 2006 ALONG WITH COPIES OF BANK ACCOUNTS. FROM THOSE DETAILS, THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED GIFTS DURING THE YEAR FOR PURCHASE OF THE HOUSE AND THEREFORE ASKED THE ASSESSEE TO FURNISH THE CASH FLOW STATEMENT AND SOURCES OF CASH DEPOSITS IN THE BANK. THE AO NOTED FROM THE CASH FLOW STATE MENT THAT THE ASSESSEE RECEIVED FOLLOWING GIFTS WHICH WERE DEPOSITED IN TH E BANK ACCOUNT: DATE SOURCE CLAIMED AMOUNT 21.06.05 GIFT 5,00,000 31.08.05 GIFT 5,00,000 13.09.05 GIFT 3,00,000 03.10.05 GIFT 1,00,000 15.11.05 GIFT 3,00,000 02.01.05 GIFT 3,00,000 TOTAL 20,00,000 ITA NO.1145/BANG/10 PAGE 3 OF 14 ALL THE ABOVE GIFTS WERE STATED TO BE GIFTS FROM TH E ASSESSEES FATHER-IN-LAW IN CASH, WHO IS AN AGRICULTURIST. THE ASSESSEE ALSO FI LED CONFIRMATION IN SUPPORT OF THE ABOVE GIFTS. THE AO DID NOT CONSIDER THOSE GIFTS AS GENUINE BY OBSERVING THAT THE DONOR WAS NOT ASSESSED TO TAX. SHE ALSO OBSERVED THAT ALL THE RECEIPTS WERE IN CASH AND THAT THE PROOF OF AGR ICULTURAL LANDS OWNED BY THE DONOR WAS FURNISHED, BUT THERE WAS NO EVIDENCE IN R EGARD TO DETAILS OF CROP GROWN, PROCEEDS RECEIVED AND ALSO PROFIT EARNED. S HE WAS OF THE VIEW THAT IT WAS NOT THAT ALL THE INCOME EARNED BY THE DONOR COU LD BE GIVEN TO THE ASSESSEE FOR THE SIMPLE REASON THAT THE FAMILY MIGH T HAVE BEEN CONSISTING OF OTHER MEMBERS, WHO TOO WOULD HAVE THE RIGHT OVER TH E INCOME. SHE THEREFORE HELD THE GIFTS RECEIVED BY THE ASSESSEE AS NON-GENU INE AND BROUGHT THE SAME TO TAX BY MAKING THE ADDITION. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS). THE SUBMISSIONS MADE BEFORE HIM AS MENTIONED IN PARA 3. 1 OF THE IMPUGNED ORDER READS AS UNDER: 4. THE ASSESSEES FATHER-IN-LAW (DONOR) HAS EXTENSIVE CULTIVATED AGRICULTURAL LAND HOLDING OF ABOUT 70 ACRES. THE D ETAILS OF CULTIVATED LAND HOLDING AND ALSO THE NATURE OR CROP AS CERTIFIED B Y THE VILLAGE ACCOUNTANT IS AVAILABLE TO THE EXTENT OF 54.26 ACRES. THE PROOF O F REALISATION OF SALE PROCEEDS OF AGRICULTURAL PRODUCE IS ALSO AVAILABLE. THE DONO R HAS ONLY TWO CHILDREN, ONE DAUGHTER AND ONE SON, AND THE SON IS STAYING WITH T HE DONOR. THE DONOR STATES THAT THE AGRICULTURAL PROPERTY HE OWNS IS ANCESTRAL AND THAT HIS CHILDREN ARE ALSO ELIGIBLE TO GET THE SHARE OF THE AGRICULTURAL INCOM E. 5. THE AGRICULTURAL PRODUCTS LIKE ARECANUT ARE KEP T IN STOCK WAITING FOR BEST MARKET PRICE. THE SAME WILL BE SOLD WHEN THE MARKET PRICE IS GOOD OR WHEN IN NEED OF FUNDS. THIS AMOUNT WAS USED TO GIVE GIFT TO SON-IN-LAW. 6. THE FOLLOWING DOCUMENTS & EVIDENCES ARE ENCLOSED FOR YOUR KIND PERUSAL: ITA NO.1145/BANG/10 PAGE 4 OF 14 A) RECORD OF RIGHTS ISSUED BY VILLAGE ACCOUNTANT TO WARDS PROOF OF AGRICULTURAL LAND HOLDINGS TO THE EXTENT OF 54.26 A CRES. B) COPY OF LEASE AGREEMENT WITH SRI K.C.CHANDRASEK AR, KOODLU VILLAGE, KASABA HOBLI, TIRTHAHALLI TQ. SHIMOGA DISTRICT, DAT ED 25.04.2005 TOWARDS LEASING THE STANDING CROP OF BANANA CULTIVA TION FOR A SUM OF RS. 10,00,000/-. C) PROOF OF REALIZATION OF SALE PROCEEDS OF ARECAN UT ON THE FOLLOWING DATES: DATE AMOUNT(RS.) 15/06/2005 58,588 17/06/2005 20,083 16/08/2005 1,84,732 23/08/2005 1,27,462 25/08/2005 1,43,573 27/08/2005 56,114 03/09/2005 1,16,783 06/09/2005 1,47,763 08/09/2005 2,05,995 15/09/2005 52,293 08/11/2005 1,42,934 10/11/2005 1,08,483 19/01/2006 1,82,809 26/01/2006 1,38,513 TOTAL 16,86,125 7. THE OCCASION WHEN THE GIFT WAS GIVEN AND THE US E OF THE SAME FOR PURCHASE OF THE HOUSE ARE NOT IN DISPUTE. THE LEARN ED A.O. MERELY SUSPECTS THAT APPELLANTS FATHER-IN-LAW WOULD NOT H AVE SUFFICIENT FUNDS TO GIVE THE GIFT AND THEREFORE, SHE MADE THE IMPUGNED ADDITION, WHICH IS PURELY ON SUSPICION AND SURMISE, ASSUMPTIONS AND PR ESUMPTIONS AND OPPOSED TO GROUND REALITIES. IT MAY NOT BE OUT OF P LACE TO MENTION HERE THAT THE LEARNED A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONSIDER THE APPELLANTS FATHER-IN-LAW DID NOT HAVE THE RESO URCES TO MAKE THE GIFTS. THE ASSESSEE ALSO FURNISHED DETAILS OF AGRICULTURAL PRODUCE SOLD BY THE DONOR BEFORE THE LD. CIT(APPEALS), WHICH READ AS UNDER: ITA NO.1145/BANG/10 PAGE 5 OF 14 A) RECORDS OF RIGHT ISSUED BY THE VILLAGE ACCOUNT ANT TOWARDS PROOF OF AGRICULTURAL LAND HOLDINGS TO THE EXTENT O F 54.26 ACRES. B) COPY OF LEASE AGREEMENT ENTERED INTO WITH SHRI K.C.CHANDRASEKAR, KODLU VILLAGE, KASABA HOBLI, TIRT HAHALLI TALUK, SHIMOGA DISTRICT DATED 24/4/2005 TOWARDS LEA SING OF THE STANDING CROP OF BANANA FOR A SUM OF RS.10,00,000/-. C) COPIES OF BILLS FOR SALE OF ARECANUT BY SHRI V.M.SA DANANDA, FATHER-IN-LAW OF THE APPELLANT. 5. THE LD. CIT(APPEALS) FORWARDED THE DOCUMENTS AND WRITTEN SUBMISSIONS TO THE AO FOR FURTHER VERIFICATION. IN THE REMAND REPORT DATED 4.2.10, THE AO REPORTED THAT THE LETTER WAS SENT TO ITO, WARD 1, SHIMOGA, TO VERIFY THE GENUINENESS OF THE TRANSACTIONS AND THE ITO, SHIMOGA FORWARDED HIS VERIFICATION REPORT DATED 9.12.09 IN RESPECT OF FOUR PARTIES TO WHOM IT WAS CLAIMED THAT AGRICULTURAL PRODUCE WAS SOLD. SHE FU RTHER REPORTED THAT ENQUIRY REPORT REVEALED THAT M/S. MANJUNATH ARECANUT CO. ST ATED THAT NO BUSINESS WAS DONE WITH SHRI SADANANDA. SHE ALSO POINTED OUT THA T THE NOTICES SENT TO M/S. SHANKAR ARECANUT CO. AND M/S. VEERABHADRESHWARA TRA DERS, SHIMOGA, RETURNED UNSERVED AND IT WAS ONLY IN RESPECT OF M/S . SHARADAMBA ARECANUT CO. THE SALE TRANSACTION TO THE EXTENT OF RS.78,670 HAD BEEN CONFIRMED. 6. THE LD. CIT(APPEALS) ALSO PROVIDED COPY OF THE R EMAND REPORT TO THE ASSESSEE. IN THE REJOINDER, THE ASSESSEE CONTENDED AS UNDER: 2. THE LEARNED A.O. HAS STATED THAT, OUT OF FOUR PARTIES TO WHOM THE ARECANUT HAS BEEN SOLD, ONE PARTY, M/S MANJUNAT HA ARECANUT COMPANY HAVE STATED THAT NO BUSINESS WERE MADE WITH MR.SADANANDA AND IN THE CASE OF OTHER TWO PARTIES N OTICE WERE RETURNED UNSERVED. A.O. ALSO REPORTED THAT IN CASE OF M/S SHARADAMBA ARECANUT COMPANY, THE SALE TRANSACTION H AS BEEN CONFIRMED. IN THIS CONNECTION, I WOULD LIKE TO BRIN G TO YOUR KIND NOTICE THE GROUND REALITIES: ITA NO.1145/BANG/10 PAGE 6 OF 14 I) DURING THE YEAR 2006-07 THERE HAS BEEN HEAVY FL UCTUATION IN THE PRICES OF ARECANUT. MANY TRADERS, WHO HAD STORE D ARECANUT PURCHASED AT HIGH PRICES HAD TO SELL THE STOCK AT V ERY LOW PRICES, SINCE THE PRICES HAD CRASHED. DUE TO THIS MANY TRAD ERS LOST HEAVILY AND HAD TO SHUT THEIR SHOPS. THE FACT THAT NOTICE COULD NOT BE SERVED SINCE THE SHOPS ARE NOT EXISTING NOW, DOE S NOT MEAN THAT THEY WERE NOT TRADING IN THE YEAR 2005-06. FUR THER, THE STATEMENT STATING THAT THE SHOPS ARE NOT EXISTING S INCE 5 - 6 YEARS IS A GENERAL STATEMENT, WHICH IS OBTAINED IN JAN, 2 010 AFTER A GAP OF 4 YEARS. II) IN ORDER TO ESTABLISH THAT SUCH TRADERS WERE E XISTING DURING THE YEAR 2005- 06, WE APPROACHED AGRICULTURAL PRODUCE M ARKETING COMMITTEE, SHIMOGA (APMC IS ESTABLISHED AND CONTROL LED BY GOVERNMENT OF KARNATAKA) TO ISSUE A CONFIRMATION TH AT SUCH TRADERS WERE EXISTING AS PER THEIR RECORDS. SINCE A PMC HAD TO SEARCH OLD RECORDS, AND ALSO DUE TO RECENT PUBLIC D ISTURBANCES LOCALLY, OBTAINING SUCH CONFIRMATION IS BEING DELAY ED. HOWEVER, AS ON DATE APMC HAS ISSUED CONFIRMATION IN CASE OF M/S SHANKAR ARECANUT COMPANY VIDE THEIR LETTER NO.4101/ 2009-10 DATED 20.03.2010, WHICH STATED THAT M/S SHANKAR ARE CANUT COMPANY, WHO WERE TRADING IN APMC YARD, HAVE NOT AP PLIED FOR RENEWAL OF LICENSE FOR THE PERIOD 2008 ONWARDS AND ARE NOT TRADING IN APMC YARD ANY MORE. THE CERTIFICATE IS A TTACHED HEREWITH. 3. THE LEARNED A.O. HAS REPORTED THAT SOME OF THE T RADERS TO WHOM AGRICULTURAL PRODUCE ARE SOLD ARE NOT EXISTING NOW AND CONFIRMATION COULD NOT BE OBTAINED. IN THIS CONNECTION, I BEG TO STATE THAT NOTHING TURNS MUCH ON THESE FACTS REPORTED BY THE LEARNED A .O. IT IS SUBMITTED THAT THE DENIAL OF ONE OR TWO TRADERS IS UNDERSTANDABLE IN AS MUCH AS, THEY BEING INCOME TAX ASSESSEES MIGHT H AVE NOT ACCOUNTED THE PURCHASE OR SALE OF ARECANUT AND HENC E THEY MIGHT HAVE DENIED THE TRANSACTION. MY FATHER-IN-LAW IS ON LY AN AGRICULTURIST AND HAS NO OTHER INCOME. IT IS SUBMIT TED THAT THE ARECANUTS ARE SOLD NOT ONLY AT APMC YARD BUT ALSO T O SO MANY UNORGANIZED AND UNREGISTERED TRADERS, WHEREIN THE P ROOF OF SALE ARE NOT MAINTAINED. THAT APART, IT IS SUBMITTED THAT MY FATHER IN LAW HAS NOT ONLY INCOME FROM SALE OF ARECANUT, BUT HE ALSO DERIVES INCOME FROM SALE OF BANANA. I HAVE ALREADY SUBMITTED AN AG REEMENT ENTERED INTO BY MY FATHER-IN-LAW WITH ONE SRI K.C.CHANDRASH EKHAR, KOODLU VILLAGE, TIRTHAHALLI TALUK, SHIMOGA DIST. FOR SALE OF BANANA FOR RS.10.00 LAKHS. CONSIDERING ALL THESE FACTS IN TOTO , THE SOURCES OF INCOME OF MY FATHER-IN-LAW FROM AGRICULTURAL OPERAT ION CAN NOT BE BLINDLY DISREGARDED BUT MUST BE ESTIMATED ON A RATI ONAL BASIS AND FROM A PRACTICE STAND POINT BASED ON THE OTHER EVID ENCE TENDERED BY ME IN THE SHAPE OF CROPS GROWN AS AVAILABLE FROM VI LLAGE ACCOUNTANTS CERTIFICATE. VIEWED FROM THIS ANGLE OF THE MATTER, THERE ITA NO.1145/BANG/10 PAGE 7 OF 14 IS NO DOUBT THAT CAN BE ENTERTAINED WITH REGARD TO THE CAPACITY OF MY FATHER-IN-LAW TO MAKE THE IMPUGNED GIFT TO ME DURIN G THE YEAR UNDER CONSIDERATION. 4. A.O. STATED THAT THE GIFT WAS NOT RECEIVED AT O NCE INSTANCE BUT WAS SHOWN AS GIFT RECEIVED IN CASH WHENEVER A DEPOS IT INTO THE BANK WERE MADE. AS ALREADY STATED IN OUR EARLIER SUBMISS ION, MY WIFE IS THE ONLY DAUGHTER FOR MY FATHER- IN-LAW. WE HAVE A VERY GOOD FAMILY RELATIONSHIP AND WE ARE NOT TREATED BY MY FATHER-IN -LAW AS OUTSIDE THE FAMILY MEMBER. WE USED TO REGULARLY TRAVEL TO O UR HOME TOWN, SHIMOGA AND WHENEVER, I AM IN NEED OF CASH, MY FATH ER IN LAW USED TO HANDOVER TO ME WHICH WAS DEPOSITED INTO MY BANK ACCOUNT. THEREFORE, THE CONTENTION OF THE LEARNED A.O. THAT THE GIFT WAS NOT RECEIVED AT ONE INSTANCE BUT AT SEVERAL TIMES DURIN G THE YEAR DOES NOT HOLD ANY SUBSTANCE. 7. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE AO, OB SERVED THAT THE FOLLOWING FACTS EMERGE IN THIS CASE: I) THE APPELLANT HAS FURNISHED COPIES OF BILLS IN RESPECT OF THE SALE OF ARECANUT BY SHRI V.M.SADANANDA, FATHER-IN-LAW OF THE APPELLANT. ONE OF THE PARTIES VIZ. M/S SHREE MANJUN ATHA ARECANUT COMPANY DENIED HAVING PURCHASED AGRICULTUR AL PRODUCE FROM SHRI V.M.SADANANDA. NOTICES U/S 133(6) WERE ISSUED TO M/S SHANKAR ARECANUT COMPANY AND M/S VEERABHADRESHWAR TRADERS BUT THE SAME WERE RETURNED UNSERVED. IN THE REJOINDER, THE APPELLANT FURNISHED COPY OF C ERTIFICATE ISSUED BY THE SECRETARY, APMC, SHIMOGA CERTIFYING THAT M/S SHANKAR ARECANUT COMPANY WERE TRADING IN AGRICULTURAL PRODU CE MARKET COMMITTEE YARD IN SHIMOGA; HOWEVER, THE CERTIFICATE IS GENERAL IN NATURE AND DOES NOT GIVE SPECIFIC TRANSACTION. H ENCE, IT DOES NOT SOLVE THE PURPOSE. IN REGARD TO M/S VEERABHADRE SHWAR TRADERS, NO COMMENTS HAVE BEEN OFFERED BY THE APPEL LANT. II) IT IS ALSO CONTENDED THAT AS PER THE LEASE AGR EEMENT ENTERED INTO BY HIS FATHER-IN-LAW WITH ONE SRI K.C. CHANDRASHEKA R, KOODLU VILLAGE FOR SALE OF BANANA FOR RS.10,00,000/-. IT I S PERTINENT TO REPRODUCE THE CONFIRMATION FROM SHRI V.M.SADANANDA: I ALSO DECLARE THAT I AM AGRICULTURIST AND THE SOU RCES OF INCOME FOR THE GIFT IS OUT OF AGRICULTURAL INCOME. I HAVE ABOUT 90 ACRES OF AGRICULTURAL PROPERTY, OUT OF WHICH ABOUT 65 ACRES IS CULTIVATED AND YIELDING INCOME. I GROW MAINLY AREOCONUT (SIC). I HAVE ONLY ITA NO.1145/BANG/10 PAGE 8 OF 14 TWO CHILDREN, ONE DAUGHTER AND ONE SON. THE AGRICUL TURAL PROPERTY I OWN IS ANCESTRAL AND MY CHILDREN ARE ALS O ELIGIBLE FOR SHARE OF THE AGRICULTURAL INCOME. HOWEVER, THE ANCE STRAL AGRICULTURAL PROPERTY IS UNDIVIDED AND IS LOOKED AF TER AND ENJOYED BY ME. THEREFORE, I FEEL IT IS MY MORAL RES PONSIBILITY TO HELP MY DAUGHTER AND SON-IN-LAW BY ASSISTING THEM F INANCIALLY WHENEVER THEY ARE IN NEED OF FUNDS. HENCE, I HAVE G IVEN RS.20,00,000/- AS GIFT TO MY SON-IN-LAW DURING THE PERIOD 01.04.2005 TO 31.03.2006. AS AN AGRICULTURIST, I KE EP STOCK OF AREOCONUT (SIC) WAITING FOR THE BEST MARKET PRICE. HOWEVER, IN TIMES OF REQUIREMENT OF FUNDS, I SELL THE AGRICULTU RAL PRODUCTS. SINCE CASH IS RECEIVED UPON SALE OF AGRICULTURAL PR ODUCTS, THE SAME IS HANDED OVER TO MY SON-IN-LAW AS GIFT. 8. THE LD. CIT(A) OBSERVED THAT FROM THE CONFIRMATI ON LETTER IT WAS SEEN THAT NOWHERE IT WAS MENTIONED THAT THE DONOR DERIVE D INCOME FROM LEASING OF BANANA AND OUT OF THAT HE HAD GIVEN THE GIFT. ACCO RDING TO HIM, THE SOURCE AND THE TRANSACTION OF GIFTS REMAINED UNEXPLAINED. HE FURTHER OBSERVED THAT THE ASSESSEE USED TO TRAVEL REGULARLY TO HIS HOMETO WN SHIMOGA AND WHENEVER HE WAS IN NEED OF CASH, HIS FATHER-IN-LAW USED TO HAND OVER TO HIM CASH, WHICH WAS DEPOSITED INTO HIS BANK ACCOUNT, BU T THE ASSESSEE HAD FAILED TO ESTABLISH THE GENUINENESS AND CREDITWORTHINESS R EGARDING GIFTS RECEIVED FROM THE DONOR ON ANY SPECIFIC OCCASION, WHICH WAS UTILIZED TO ACQUIRE IMMOVABLE PROPERTY BY THE ASSESSEE. 9. THE LD. CIT(APPEALS) ALSO OBSERVED THAT THE IDEN TITY OF DONOR HAD BEEN ESTABLISHED, HOWEVER THE FINANCIAL CAPACITY OF THE DONOR COULD NOT BE ESTABLISHED AND THAT THE ASSESSEE HAD FAILED TO EST ABLISH THE FACT THAT THE GIFT WAS GENUINE. HE POINTED OUT THAT THE ASSESSEE RE CEIVED GIFT FROM HIS FATHER- IN-LAW FOR THE FIRST TIME AND THE ASSESSEE ALSO NEI THER RECEIVED NOR MADE ANY GIFT EXCEPT THE INSTANT GIFTS OSTENSIBLY RECEIVED T O PURCHASE AN IMMOVABLE PROPERTY AND THE DONOR DID NOT APPEAR BEFORE THE AO FOR EXAMINATION IN THE ITA NO.1145/BANG/10 PAGE 9 OF 14 ASSESSMENT OR REMAND PROCEEDINGS AND THAT THERE WAS NO INFORMATION ABOUT THE OCCASION FOR RECEIVING THE GIFT. ACCORDING TO THE LD. CIT(APPEALS), CULTIVABLE LAND HOLDING AND NATURE OF CROP GROWN AS CERTIFIED BY THE VILLAGE ACCOUNTANT WAS TO THE EXTENT OF 54.26 ACRES, BUT TH E DONOR HAS STATED THAT HIS CHILDREN WERE ALSO ELIGIBLE TO GET THE SHARE OF AGR ICULTURAL INCOME AND THAT THE ASSESSEE HAD NOT GIVEN THE DETAILS OF PROFIT FROM A GRICULTURAL OPERATIONS DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER CONSIDERATION APPORTIONING THE PROFIT AMONG THE DONOR AND HIS CHI LDREN. HE ALSO POINTED OUT THAT FROM THE DETAILS FURNISHED, THE DONOR CLAIMED TO HAVE AGRICULTURAL INCOME TO THE EXTENT OF RS.26,86,125, OUT OF WHICH RS.20 L AKHS WAS GIVEN AS GIFT TO HIS SON-IN-LAW I.E., THE ASSESSEE, WHICH MEANS THAT A M AJOR PORTION OF AGRICULTURAL INCOME WAS GIVEN AS GIFT I.E., 74% AND ONLY 26% OF THE PROFIT WAS KEPT BY THE DONOR AND HIS FAMILY MEMBERS. ACCORDING TO HIM, IT IS HUMAN PROBABILITIES THAT A MAJOR PORTION OF HARD EARNED MONEY CANNOT BE DEPARTED SPECIFICALLY TOWARDS GIFTS. HE THEREFORE WAS OF THE VIEW THAT T HE AO RIGHTLY HELD THAT THE RECORD OF RIGHT ISSUED BY THE VILLAGE ACCOUNTANT TO WARDS PROOF OF AGRICULTURAL LAND HOLDING TO THE EXTENT OF 54.26 ACRES BY SHRI V .M. SADANANDA, ASSESSEES FATHER-IN-LAW, ONLY CONFIRM THE LAND HOLDINGS BUT D O NOT GIVE ANY OTHER INFORMATION. 10. THE LD. CIT(APPEALS) WAS OF THE OPINION THAT TH E DOCUMENTS FURNISHED FOR SUPPORT OF GIFTS COULD NOT BE CONSIDERED TO BE GENUINE GIFTS TAKEN BY THE ASSESSEE. HE THEREFORE CONFIRMED THE ADDITION MADE BY THE AO. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (I) SUMATI DAYAL V. CIT (1995) 214 ITR 81 SC (II) ITAT DELHI BENCH ORDER IN THE CASE OF ITO V. USHA AGARWAL ITA NO.1186/DEL/2006. ITA NO.1145/BANG/10 PAGE 10 OF 14 11. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND FURTHER SUBMITTED THAT THE AO DURING THE ASSESSMENT PROCEED INGS DISBELIEVED THE CLAIM OF GIFT FROM ASSESSEES FATHER-IN-LAW ON THE GROUND THAT HE HAD NOT FURNISHED THE DETAILS OF INCOME DERIVED FROM AGRICU LTURAL OPERATIONS. IT WAS STATED THAT THE DONOR I.E., FATHER-IN-LAW OF THE AS SESSEE CLEARLY EXPLAINED IN HIS CONFIRMATION LETTER THAT HE MADE THE GIFTS TO HIS S ON-IN-LAW OUT OF NATURAL LOVE AND AFFECTION ON SEVERAL DATES DURING THE FINANCIAL YEAR TO ENABLE THE ASSESSEE TO PURCHASE A HOUSE AT BANGALORE AND SOURC E OF INCOME WAS AGRICULTURAL INCOME. IT WAS FURTHER STATED THAT T HE CAPACITY OF THE ASSESSEES FATHER IN LAW TO GIVE THE GIFT COULD NOT BE DOUBTED IN LIGHT OF THE PROOF OF THE EXTENSIVE AGRICULTURAL LAND HOLDING AND THE NATURE OF CROP GROWN, WHICH WAS FURNISHED BEFORE THE AO. IT WAS STATED THAT THE IN FORMATION WHEN THE GIFT WAS GIVEN AND USE OF THE SAME FOR PURCHASE OF A HOUSE W AS NOT IN DISPUTE AND THE FATHER-IN-LAW OF THE ASSESSEE WAS HAVING SUFFICIENT FUNDS FROM HIS AGRICULTURAL INCOME TO GIVE THE GIFTS, THEREFORE THE ADDITION MA DE BY THE AO AND CONFIRMED BY THE LD. CIT(A) WAS PURELY ON SUSPICION AND SURMI SES, ASSUMPTIONS AND PRESUMPTIONS, AND OPPOSED TO GROUND REALITIES. 12. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO PAGE NOS. 4 TO 16 OF THE ASSESSEES COMPILATION TO SUBSTANTIATE TH AT THE DONOR I.E., FATHER-IN- LAW OF THE ASSESSEE WAS HOLDING AGRICULTURAL LAND W HICH WAS CULTIVATED. HE ALSO DREW OUR ATTENTION TOWARDS PAGE 17 AND 18 OF T HE ASSESSEES COMPILATION, WHICH IS A COPY OF VERNACULAR LEASE AG REEMENT WITH SHRI K.C. CHANDRASHEKAR DATED 25.4.05 TOWARDS LEASING THE STA NDING CROP OF BANANA CULTIVATION FOR RS.10 LAKHS. HE ACCORDINGLY SUBMIT TED THAT THE IDENTITY OF DONOR WAS NOT DISPUTED, DONOR WAS CLOSE RELATIVE OF THE A SSESSEE BEING FATHER-IN-LAW ITA NO.1145/BANG/10 PAGE 11 OF 14 AND WAS HAVING FUNDS TO MAKE THE GIFT ON THE OCCASI ON OF PURCHASE OF A HOUSE BY THE ASSESSEE. THEREFORE, THERE WAS NO REASON T O DISBELIEVE THE GIFT AS NON-GENUINE AND MAKING THE ADDITION. HE PRAYED TO DELETE THE ARBITRARY ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CI T(A). 13. IN HIS RIVAL SUBMISSIONS, THE LD. DR CONTENDED THAT THE ASSESSEE DID NOT FURNISH PROOF FOR EARNING AGRICULTURAL INCOME B Y THE DONOR AND THE SOME OF THE PARTIES DENIED THAT THEY PURCHASED ANY AGRICULT URAL PRODUCE FROM THE ASSESSEE. IT WAS CONTENDED THAT THE FINANCIAL CAPA CITY OF THE DONOR WAS NOT PROVED AND GIFT WAS IN CASH, WHICH WAS NOT VERIFIAB LE. THEREFORE, THE ADDITION WAS RIGHTLY MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A). 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE RECEIVED GIFTS AMO UNTING TO RS.20 LAKHS FROM HIS FATHER-IN-LAW. IDENTITY OF THE DONOR WAS NOT I N DISPUTE. THE ONLY DOUBT OF THE AO WAS TOWARDS THE FINANCIAL CAPACITY OF THE DO NOR AND THE OCCASION FOR MAKING THE GIFT. AS REGARDS THE OCCASION WAS CONCE RNED, THE ASSESSEE WAS IN NEED OF FUNDS FOR PURCHASING A HOUSE AT BANGALOR E AND THIS FACT WAS CONFIRMED BY THE DONOR VIDE HIS CONFIRMATION LETTER , WHICH THE ASSESSEE FILED BEFORE THE AO. 15. IN THE INSTANT CASE, IT IS NOTICED THAT THE DON OR WAS HAVING ONLY TWO CHILDREN, ONE SON AND ONE DAUGHTER AND HAD GIVEN TH E GIFT TO THE HUSBAND OF HIS DAUGHTER I.E., HIS SON-IN-LAW, SO IT IS NOT A C ASE THAT THE DONOR WAS HAVING VERY LARGE FAMILY. IT IS ALSO NOTICED THAT THE ASS ESSEE FILED A COPY OF THE AGREEMENT ENTERED BY HIS FATHER-IN-LAW WITH ONE SHR I K.C. CHANDRASHEKAR FOR SALE OF BANANA FOR RS.10 LAKHS ON 25.4.2005 AND THE ASSESSEE HAD CLAIMED ITA NO.1145/BANG/10 PAGE 12 OF 14 THAT HE HAD RECEIVED THE GIFT OF RS.5 LAKHS ON 21.6 .05 AND ANOTHER RS.5 LAKHS ON 31.8.05. SO THE EXPLANATION OF THE ASSESSEE THA T HE RECEIVED THE GIFT FROM HIS FATHER-IN-LAW, WHO WAS HAVING AGRICULTURAL INCO ME APPEARS TO BE PLAUSIBLE BECAUSE NOTHING IS BROUGHT ON RECORD TO SUBSTANTIAT E THAT THE AFORESAID AMOUNT OF RS.10 LAKHS RECEIVED BY THE ASSESSEES FA THER-IN-LAW CLAIMED TO HAVE BEEN GIVEN AS GIFT WAS UTILIZED ELSEWHERE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE FURNISHED EVIDENCE FOR REALIZATION OF SALE PROCEEDS OF ARECANUT AMOUNTING TO RS.16,86,125 AND THE CLAIM OF THE ASSE SSEE WAS THAT REST OF THE GIFT AMOUNTING TO RS.10 LAKHS WAS OUT OF THE AFORES AID AGRICULTURAL INCOME, THE SAID CLAIM ALSO APPEARS TO BE PLAUSIBLE, BECAUSE IT IS NOT THE CASE OF THE DEPARTMENT THAT THE SAID INCOME WAS UTILIZED BY THE DONOR ELSEWHERE AND NOT GIVEN TO THE ASSESSEE AS A GIFT AS CLAIMED IN HIS C ONFIRMATION LETTER. 16. IN THE PRESENT CASE IT IS ALSO NOTICED THAT NOW HERE THE AO MENTIONED THAT HE ISSUED SUMMONS U/S. 131 OF THE ACT TO THE D ONOR TO APPEAR BEFORE HIM, SO THE PLEA TAKEN BY THE LD. CIT(A) THAT THE DONOR DID NOT APPEAR BEFORE THE AO FOR EXAMINATION IN THE ASSESSMENT PROCEEDINGS OR REMAND PROCEEDINGS WAS NOT SUFFICIENT TO HOLD THAT THE GIFT GIVEN BY T HE FATHER-IN-LAW OF THE ASSESSEE FOR PURCHASING A HOUSE WAS A NON-GENUINE O R BOGUS GIFT. 17. ANOTHER REASON GIVEN BY THE LD. CIT(APPEALS) WH ILE CONFIRMING THE ACTION OF THE AO WAS THAT THE DONOR WAS HAVING TWO CHILDREN I.E., ONE SON AND ONE DAUGHTER, AND THE SON WAS STAYING WITH THE DONO R AND WAS ELIGIBLE TO GET THE SHARE OF AGRICULTURAL INCOME, BUT NOTHING HAS B EEN BROUGHT ON RECORD TO SUBSTANTIATE THAT ALL THE AGRICULTURAL INCOME EARNE D BY THE ASSESSEE IN THIS YEAR OR IN THE EARLIER YEARS WAS GIVEN TO THE SON O NLY. ON THE CONTRARY, THE DONOR, SHRI V.M. SADANANDA, FATHER-IN-LAW OF THE AS SESSEE, IN HIS CONFIRMATION ITA NO.1145/BANG/10 PAGE 13 OF 14 LETTER CLEARLY STATED THAT IT WAS HIS MORAL RESPONS IBILITY TO HELP HIS DAUGHTER AND SON-IN-LAW BY ASSISTING THEM FINANCIALLY WHENEVER T HEY WERE IN NEED OF FUNDS, HENCE HE HAD GIVEN RS.20 LAKHS AS GIFT FROM 1.4.200 5 TO 31.03.2006. THE SAID CONTENTION OF THE DONOR HAD NOT BEEN CONTROVER TED AT ANY STAGE. 18. DURING THE COURSE OF HEARING, THE LD. DR ALSO A RGUED THAT EARNING OF AGRICULTURAL INCOME WAS NOT SUFFICIENT TO HOLD THAT THE DONOR HAD GIVEN GIFTS OUT OF HIS AGRICULTURAL INCOME AND SOME AMOUNT WAS ALSO REQUIRED TO BE SPENT FOR AGRICULTURAL EXPENSES. HOWEVER, IN THE INSTANT CAS E, IT IS NOT BROUGHT ON RECORD THAT THE AGRICULTURAL INCOME EARNED BY THE D ONOR WAS UTILIZED ELSEWHERE AND NOT USED FOR GIVING GIFT TO THE ASSES SEE. IT IS ALSO NOT THE CASE OF THE DEPARTMENT THAT THE DONOR WAS NOT HAVING ANY EARLIER SAVINGS TO BE SPENT FOR AGRICULTURAL EXPENSES OR HE WAS SPENDING THE AMOUNT FOR AGRICULTURAL EXPENSES ONLY OUT OF THE CURRENT AGRICULTURAL INCOM E. 19. WE, THEREFORE, CONSIDERING THE TOTALITY OF FACT S AS DISCUSSED HEREINABOVE, ARE OF THE VIEW THAT THE ASSESSEE ESTA BLISHED THE IDENTITY OF THE DONOR WHO WAS HIS FATHER-IN-LAW AND THE DONOR CONFI RMED THE GIFT GIVEN TO THE ASSESSEE FOR PURCHASING A HOUSE AT BANGALORE, SO TH ERE WAS AN OCCASION WHICH WAS TO PURCHASE THE HOUSE. THE GIFT OF RS.20 LAKHS WAS GIVEN OUT OF AGRICULTURAL INCOME OF RS.26,86,125, WHICH FACT HAS ALSO BEEN MENTIONED BY THE LD. CIT(A) AT PARA 3.8(III) OF PAGE 13 OF THE I MPUGNED ORDER AND THE DEPARTMENT HAD NOT BROUGHT ANY MATERIAL ON RECORD T HAT THE AGRICULTURAL INCOME EARNED TO THE EXTENT OF RS.26,86,125 BY THE DONOR I.E., FATHER-IN-LAW OF THE ASSESSEE WAS UTILIZED ELSEWHERE AND NOT FOR GIV ING THE GIFT AS CLAIMED BY THE ASSESSEE AND CONFIRMED BY THE DONOR. THEREFORE , CREDITWORTHINESS WAS ALSO PROVED, AS SUCH THE LD. CIT(A) WAS NOT JUSTIFI ED IN CONFIRMING THE ACTION OF ITA NO.1145/BANG/10 PAGE 14 OF 14 THE AO WHO CONSIDERED THE GIFT TO THE ASSESSEE AS N ON-GENUINE AND MADE ADDITION. IN THAT VIEW OF THE MATTER, WE DELETE TH E ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(APPEALS). 20. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF SEPTEMBER, 2011. SD/- SD/- ( GEORGE GEORGE K. ) ( N.K. SAI NI ) JUDICIAL MEMBER ACCOUNTANT ME MBER BANGALORE, DATED, THE 29 TH SEPTEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.