DCIT, New Delhi V. Shri Ajeet Singh Karan, Noida

ITA 28/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86554 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 04-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Gift; Salary income; Source of fund; Additional evidence; Tangible material
• Section: 56

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO. 28 /DEL/201 0 ASSESSMENT YEAR 200 5 - 0 5 D CIT, CIRCLE 43 (1) VS. SHRI AJEET SINGH KARAN, NEW DEL HI. H.NO.36, SECTOR 37, ARUN VIHAR, NOIDA - 201303 (PAN AA GPK 5575 J ) ( APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PARWINDER KAUR, SR. D.R. RESPONDENT BY: SH . DEEPAK CHOPRA, AND SH. ROHAN KHARE, ADVOCATES ORDER PER SHRI GE ORGE GEORGE K , J M : 1. THIS APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT(A) S ORDER DATED 13 . 10 .20 09 . THE RELEVANT ASSESSMENT YEAR IS 200 5 - 0 6 . 2. THE SOLITARY GROUND RAISED READS AS FOLLOWS: - ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3.00 CRORES MADE BY THE AO ON ACCOUNT OF GIFT RECEIVED BY THE ASSESSEE. 3. T HE ASSESSING OFFICER VIDE LETTER DATED 24.12.2014 HAD RAISED AN A DDITIONAL GROUND WHICH READS AS UNDER: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.3.00 CRORES MADE BY AO BY ADMITTING THE ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A(3) OF I. T. RULES BY WAY OF EXAMINING THE WITNESS PRODUCED BY ASSESSEE BEFORE HIM DURING APPELLATE STAGE WITHOUT ALLOWING THE REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER TO CROSS EXAMINE THE WITNESS. IT A NO. 28 /DEL /201 0 2 4. THE ASSESSEE IS AN INDIVIDUAL. HE IS EARNING INCOME FROM SALARY. FOR THE RELEVANT ASSESSMENT YEAR , RETURN OF INCOME WAS FILED DECLARING AN INCOME OF RS.98,56,088/ - . THE ASSESSEE HAD RECEIVED AS GIFT A SUM OF RS.3.00 CRORES FROM MADAN LAL ARYA (DONOR) VIDE CHEQUE NO. 712656 DATED 21.08.2004 DRAWN ON ICICI BANK, N EW DELHI. THE SAID GIFT WAS CHARACTERIZED AS PART OF THE CAPITAL OF THE ASSESSEE AND REFLECTED IN THE CAPITAL ACCOUNT ANNEXED TO THE BALANCE SHEET FILED BY THE ASSESSEE , ALONG WITH THE RETURN OF INCOME. THE A SSESSMENT WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. THE ASSESSING OFFICER, DURING THE COURSE OF SCRUTINY ASSESSMENT , ISSUED SUMMON TO THE DONOR . THE DONOR, THROUGH HIS REPRESENTATIVE, COMPLIED WITH THE NOTICE ISSUED BY THE ASSESSING OFFICER AND FURNISHED THE INFORMATION SOU GHT FOR BY THE ASSESSING OFFICER FROM TIME TO TIME. HOWEVER, ASSESSMENT WAS CONCLUDED BY THE ORDER DATED 26.12.2007, WHEREIN GIFT RECEIVED BY THE ASSESSEE FROM SHRI MADAN LAL ARYA WAS TREATED AS BOGUS AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSEE BEING AGGRIEVED FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOWS: - (AT PAGE 7) I F IND THAT THE ASSESSING OFFICER HAS TREATED THE GIFT OF RS.3 CRORES RECEIVED BY THE APPELLANT IN THE F.Y. RELEVANT TO ASSESSMENT YEAR 2005 - 06 HAS NOT GENUINE ON THE GROUNDS THAT; A) THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY OF THE ALLEGED DONER . B) THE CAPACITY OF THE DONER HAS REMAIN ED IN DOUBT C) THE GENUINENENESS OF TRANSACTION IS ALSO NOT PROVED. THE APPELLANT HAS CHALLENGED THE ABOVE INFERENCE OF THE AO STATING THAT THE ASSESSEE HAD PRODUCED THE NECESSARY EVIDENCE TO CLARIFY ALL THE OBJECTIONS RAISED BY THE AO. THE IDENTITY OF THE DONOR HAS BEEN CONFIRMED BY THE REPORT OF THE INSPECTOR WHO HAD BEEN DEPUTED BY THE AO HIMSELF. THE FINANCIAL CAPACITY OF THE DONOR IS PROVED BEYOND ANY DOUBT BY THE STATEMENT OF AFFAIRS AND RETURNS OF INCOME OF THE DONOR FILED BY THE ASSESSEE. THE DOC UMENTS/EVIDENCE PRODUCED BY THE ASSESSEE TO ESTABLISH THE IDENTITY AND FINANCIAL CAPACITY OF THE DONER HAVE NOT BEEN DISPUTED OR CONTROVERTED BY THE ASSESSING OFFICER. THE ASSESSEE HAS ALSO PRODUCED ALL THE PAPERS LIKE COPY OF BANK ACCOUNT ETC. TO SHOW THA T THE TRANSACTION HAS TAKEN PLACE THROUGH IT A NO. 28 /DEL /201 0 3 BANKING CHANNELS AND IT WAS GENUINE. IN VIEW OF THE ABOVE FACTS THE AO WAS NOT JUSTIFIED IN DRAWING ADVERSE INFERENCE AND TREATING THE GIFT AS NOT GENUINE. AS FAR AS ESTABLISHING THE GENUINENENESS OF GIFT ON GROUND S OF IDENTITY AND FINANCIAL CAPACITY OF THE DONER AS WELL AS GENUINENESS OF THE TRANSACTION IS CONCERNED I AGREE WITH THE ASSESSEE THAT GIVEN THE FACT THAT THE ASSESSEE HAD SUBMITTED THE NECESSARY AND SUFFICIENT DOCUMENTARY EVIDENCE BEFORE THE AO TO PROVE THE IDENTITY AND FINANCIAL CAPACITY OF THE DONOR, THE AO WAS NOT JUSTIFIED IN DRAWING AN ADVERSE INFERENCE. HOWEVER, AS FAR AS FINAL TEST OF GIFT REGARDING GENUINENESS IS CONCERNED IT HAS BEEN HELD BY VARIOUS COURTS THAT THE GENUINENESS OF THE GIFT CANNOT BE DETERMINED WITHOUT LOOKING INTO THE ASPECT OF HUMAN PROBABILITIES, RELATIONSHIP OF DONER AND DONE, OCCASION OF MAKING A GIFT AND EXISTENCE OF RECIPROCITY. IN THIS CASE THE COUNSEL OF THE ASSESSEE HAS TRIED TO PROVE THE GENUINENESS OF THE GIFT BY BRINGI NG ON RECORD INFORMATION THAT WHILE THE' ASSESSEE WAS WORKING WITH THE COMPANY IN WHICH THE DONER WAS A DIRECTOR, HE HAD DEVELOPED FAMILY RELATIONSHIP WITH THE DONER AND HIS SONS AND TOGETHER THEY MANAGED TO TAKE THE COMPANY TO GREAT HEIGHT RESULTING IN AN INCREASE OF 6 TIMES IN THE TURNOVER OF THE COMPANY IN A SPAN OF 4 YEARS. AS A RESULT OF APPELLANT'S CLOSE ASSOCIATION WITH THE FAMILY, THE DONER ASSUMED THE ROLE OF AN ELDERLY FATHER FIGURE FOR THE APPELLANT AND HE GIFTED THE MONEY TO THE APPELLANT WITHOU T ANY CONSIDERATION OUT OF NATURAL LOVE AND AFFECTION THAT HAD DEVELOPED OVER' A PERIOD OF TIME. IT HAS ALSO BEEN STATED BEFORE ME THAT THE DONER IS A PHILANTHROPIST AND A GENEROUS PERSON AND HE HAS GIVEN GIFTS TO OTHER INDIVIDUALS AS WELL . THE DONOR MR. A RYA AND THE ASSESSEE MR. A.S. KARAN HIMSELF APPEARED BEFORE ME AND EXPLAINED THE CIRCUMSTANCES WHICH LED TO 'THE DEVELOPMENT OF A CLOSE FAMILY RELATIONSHIP BETWEEN THEM. THE EXPLANATION GIVEN BY THE APPELLANT IS SUPPORTED BY SUFFICIENT EVIDENCE AND IT IS ALSO SEEN THAT MR. ARYA, THE DONOR HAS ON MANY OCCASIONS GIFTED SUBSTANTIAL AMOUNTS AS GIFTS TO HIS CLOSE RELATIONS AND FRIENDS SOME OF WHO WERE PERSONS IN NEED. IT IS ALSO SEEN THAT HE HAS GIFTED A HUGE SUM OF RS.3 CRORES TO THE ASSESSEE IN THE YEAR 2006 - 07 ALSO AND THIS SECOND GIFT OF RS. 3 CRORES HAS BEEN OFFERED TO TAX IN VIEW OF CHANGE IN LAW RELATING TO GIFTS. IN FACT IT HAS ALSO BEEN ARGUED BY THE ASSESSEE THAT IF THERE WAS ANY INTENTION TO AVOID PAYMENT OF TAX BY DISGUISING AN ITEM OF INCOME AS GIFT THEN THERE WOULD NOT HAVE BEEN ANOTHER GIFT IN THE VERY NEXT YEAR WHEN SUCH GIFTS BECAME TAXABLE. I AM OF THE VIEW THAT ALTHOUGH THE AO IS RIGHT IN HOLDING THAT THE GENUINENESS OF GIFT TRANSFERRED CANNOT BE DETERMINED WITHOUT LOOKING INTO THE ASPECT OF HUMAN PROBABILITIES, YET, IN THE CASE OF THE ASSESSEE EVEN THOUGH IT APPEARS HIGHLY IMPROBABLE THAT A PERSON HAVING A FAMILY OF HIS OWN WILL DONATE SUCH HUGE AMOUNT NOT EVEN ONCE BUT TWICE TO A PERSON WHO IS NOT A FAMILY RELATION BUT HAS BEEN ONLY A BUSINE SS ASSOCIATE, WE CANNOT REJECT/DISREGARD THE CIRCUMSTANCES OF THE CASE AND THE EVIDENCE PRODUCED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN TOTALITY, I AM INCLINED TO TREAT IS AS A RARE CASE AND HOLD THAT THE AO IS NOT JUSTIFIED IN REJECTING T HE EXPLANATION OF THE ASSESSEE SUPPORTED BY NECESSARY AND SUFFICIENT EVIDENCE MERELY ON THE GROUND OF HUMAN PROBABILITIES, SPECIALLY WHEN HE HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE TRANSACTION WAS NOT GENUINE. I AM THEREFORE CONVINCED AB OUT THE GENUINENESS OF GIFT AND THEREFORE DELETE THE ADDITION OF RS.3 CRORES MADE BY THE AO ON ACCOUNT OF GIFT RECEIVED BY THE ASSESSEE. IT A NO. 28 /DEL /201 0 4 6) IN THE RESULT, THE APPEAL IS ALLOWED. 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD. DR REFERRI NG TO ADDITIONAL GROUND SUBMITTED THAT THE CIT(A) IN CONTRAVENTION OF RULE 46A(3) OF THE I.T. RULE S , EXAMINED THE DONOR , D URING APPELLATE STAGE, WITHOUT ALLOWING REASONABLE OPPORTUNITY TO THE AO TO EXAMINE THE WITNESS. THE LD. A.R. ON THE OTHER HAND, REITE RATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES AND RELIED ON THE FINDING/CONCLUSION OF THE FIRST APPELLATE AUTHORITY. THE AR HAD ALSO FILED PAPER BOOK COMPRISING OF 121 PAGES , ENCLOSING THE DETAILS OF SOURCE OF FUNDS, BANK STATEMENT AS WELL A S THE ASSESSMENT ORDERS OF THE DONOR. THE C OPIES OF THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT(A) WERE ALSO PLACED ON RECORD. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS TREATED THE GIFT RECEIVED BY T HE ASSESSEE FROM SHRI MADAN LAL ARYA AS BOGUS FOR THE FOLLOWING THREE REASONS: (I) T HE IDENTITY OF THE DONOR IS NOT SUBSTANTIATED BY THE ASSESSEE . (II) CAPACITY OF THE DONOR IS DOUBTED . (III) GENUINENESS OF THE TRANSACTION IS NOT PROVED . 7.1 AS REGARDS, THE FIRST OBJECTION RAISED BY THE ASSESSING OFFICER , IT IS DISCERNABLE FROM THE PAPER BOOK FILED THAT SUFFICIENT DOCUMENTARY EVIDENCE IS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDING IN THE FORM OF : A FFIDAVIT OF TH E DONOR IN CONFIRMING THE GIFT; CO PIES OF THE ACKNOWLEDGEMENT OF RETURN FILED BY THE DONOR. COPY OF CHEQUE OF RS.3.00 CRORES RECEIVED FROM DONOR OF THE GIFT. 7.2 FROM THE ABOVE DOCUMENTS, PRODUCED BEFORE THE ASSESSING OFFICER, THE COMPLETE DETAILS OF THE DONOR INCLUDING HIS NAME, ADDRESS AND THE PAN ARE CLEARLY STATED. FURTHER, IT A NO. 28 /DEL /201 0 5 IN RESPONSE TO SUMMON ISSUED BY TH E AO , T HE DONOR , THROUGH HIS REPRESENTATIVE SUBMITTED THE INFORMATION SOUGHT FOR BY THE AO . FURTHER, THE IDENTITY OF THE DONOR IS ALSO PERSONALLY VERIFIED BY THE INSPECTOR WHO HAD V ISITED THE RESIDENCE OF THE DONOR ON 18.12.2007. THEREFORE, THE ASSUMPTION OF THE AO THAT IDENTITY OF THE DONOR IS NOT ESTABLISHED IS WITHOUT ANY BASIS. 7.3 AS REGARDS, THE DOUBT RAISED WITH REGARD TO CREDITWORTHINESS OF THE DONOR IT HAS BEEN BROUGHT TO OUR NOTICE BY PLACING R ELIANCE ON THE PAPER BOOK FILED, T HAT SUFFICIENT DOCUMENT ARY EVIDENCE IN THE FORM OF COPY OF ACKNOWLEDGEMENT OF INCOME TAX RETURN OF THE DONOR IN RESPECT OF AYS 2005 - 06 & 2006 - 07, WHEREFROM IT IS CLEAR THAT THE DONOR WAS A MAN OF MEA NS AND FALLS IN HIGH INCOME BRACKET GROUP. THE STATEMENT OF AFFAIRS/WEALTH TAX RETURN ARE ALSO PLACED ON RECORD, WHICH CLEARLY SHOWS THAT THE NET WOR TH OF THE DONOR IS MORE THAN SEVENTY CRORES . T HEREFORE, THE ASSUMPTION OF THE AO THAT THE DONOR IS LACKING CREDITWORTHINESS IS ALSO DEVOID OF ANY MERIT. 7. 4 AS REGARDS, THE GENUINENESS OF THE TRANSACTION AO WITHOUT PLACING ANY EVIDENCE ON RECORD TO PROVE THE TRANSACTION IS SHAM , FALSE OR NOT GENUINE HAD DISBELIEVED THE VERSION OF THE ASSESSEE . THE DOCUMENTARY EVIDENCE SUCH AS THE DETAILS OF THE DONOR AFFIDAVIT OF THE DONOR, CONFIRMING THE GIFT , THE C OPY OF THE CHEQUE OF RS.3.00 CRORE RECEIVED FROM DONOR AND THE BANK STATEMENT REFLECTING THE CREDIT IN RESPECT OF THE GIFT , WERE FURNISHED BEFORE THE ASSESSING OFFI CER. HOWEVER, THE AO HELD THAT THERE WAS NO RELATIONSHIP BETWEEN THE DONOR AND DONEE AND THERE WAS NO OCCASION FOR GIVING THE GIFT TO THE ASSESSEE BY THE DONOR. T HERE IS NO REQUIREMENT UNDER THE INCOME TAX ACT OR ANY OTHER LAW THAT THE GIFT CAN BE MADE ONL Y TO A RELATIVE. FURTHER, THERE IS NO REQUIREMENT THAT THE GIFT CAN BE MADE ONLY ON SPECIFIC OCCASION S . 7.4 .1 THE TERM GIFT HAS NO WHERE BEEN DEFINED UNDER THE INCOME TAX ACT. HOWEVER, THE GIFT TAX ACT, 1958 (NOW REPEALED) NOW DEFINED THE GIFT AS FOLLOWS: IT A NO. 28 /DEL /201 0 6 . TRANSFER BY ONE PERSON TO ANOTHER OF ANY EXISTING MOVABLE OR IMMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION IN MONEY OR MONEY S WORTH I N SIMPLE WORDS, GIFT MAY BE DEFINED AS TRANSFER OF ANY PROPERTY FROM ONE PERSON TO ANOTHER GRATUI TOUSLY. IN VIEW OF THE ABOVE DEFINITION, FOLLOWING ARE THE ESSENTIAL ELEMENTS OF A GIFT DONOR S INTENTION TO MAKE A GIFT, AND THE GIFT SHOULD BE MADE VOLUNTARILY AND WITHOUT CONSIDERATION BY THE DONOR 7.4.2 FURTHER, SECTION 123 OF THE TRANSFER OF PROPER TY ACT DEALS WITH THE PROCEDURE RELATING TO TRANSFER OF GIFTED PROPERTY AND IN RELATION TO MOVABLE PROPERTY STATES THAT THE TRANSFER MAY BE EFFECTED MERELY BY DELIVERY. 7.4.3 IN THE INSTANT CASE, THE DOCUMENTARY EVIDE NCES ON RECORD CLEARLY ESTABLISH THAT ALL THE PRE CONDITIONS OF A VALID GIFT ARE FULLY SATISFIED. THE DONOR HAS GIFTED THE AMOUNT VOLUNTARILY OUT OF NATURAL LOVE AND AFFECTION WITHOUT ANY CONSIDERATION. FURTHER, THE PROPERTY IN THE GIFT ALSO STANDS TRANSFERRED TO THE ASSESSEE , AS THE GIFT CHE QUE HAS BEEN DELIVERED TO THE ASSESSEE. T HE AO HAS NOT BEEN ABLE TO BRING OUT ANY TANGIBLE MATERIAL ON RECORD TO DEMONSTRATE THAT THE GIFT WAS MADE BY THE DONOR OUT OF SOME ULTERIOR MOTIVE OR DESIGN. 7. 4.4 IN THE INSTANT CASE, AS NOTICED BY THE CIT(A), TH E ASSESSEE WAS EMPLOYED AS A SENIOR VICE PRESIDENT ( OPERATION ) WITH A COMPANY WHICH WAS OWNED BY THE DONOR. THE ASSESSEE ON ACCOUNT OF LONG RELATIONSHIP WITH THE DONOR, HAD DEVELOPED A FATHERLY RELATIONSHIP WITH THE DONOR. MOREOVER, ASSESSEE WAS MAINLY INS TRUMENTAL IN TAKING THE DONOR S COMPANY TO GREATER HEIGHTS, BY INCREASING THE TURNOVER OF THE COMPANY SIX TIMES WITHIN A SPAN OF FOUR YEARS. THE DONOR HAD ALSO GIFTED THE ASSESSEE A SUM OF RS.3.00 CRORES IN THE ASSESSMENT YEAR 2006 - 07 , WHICH WAS NEVER DOUB TED AS NOT GENUINE , SINCE THE ASSESSEE HAD PAID TAXES ON THE SAID GIFT TRANSACTION U/S 56 OF THE ACT , IN VIEW OF THE IT A NO. 28 /DEL /201 0 7 PREVAILING LAW IN AY 2006 - 07. THE HUMAN PROBABILITIES CLEARLY ESTABLISH THE GENUINENESS OF THE GIFT/TRANSACTION. 7. 4.5 AS REGARDS, THE AD DITIONAL GROUND IT IS TO BE MENTIONED THAT AT THE VERY FIRST INSTANCE , ASSESSEE HAD PRODUCED THE AFFIDAVIT OF THE DONOR WHEREIN IT IS CLEARLY MENTIONED THAT THE GIFT IS MADE OUT OF NATURAL LOVE AND AFFECTION . WHAT HAS BEEN STATED IN THE AFFIDAVIT , IS WHAT IS REITERATED BY THE DONOR WHEN HE APPEARED BEFORE THE CIT(A) AND N O FRESH EVIDENCE WAS BROUGHT ON RECORD BEFORE THE FIRST APPELLATE AUTHORITY , THEREBY THERE IS NO VIOLATION OF PROVISION OF RULE 46A OF THE I.T. RULES. 8. FOR THE AFORESAID REASONS, WE HOLD THAT THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.3.00 CRORES. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT , THE REVENUE S APPEAL IS DISMISSED. TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 16 TH JANUARY , 201 5 . SD/ - SD/ - ( N.K. SAINI ) (GEORGE GEORGE K.) A CCOUNTANT MEMBER J UDICIAL MEM BER DATED: 16 TH JANUARY , 201 5 . AKS/ - COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI