ITO 22(2)(4), NAVI MUMBAI V. SANGEETA M SAHANI, MUMBAI

ITA 29/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92965 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N V NADKARNIDR
• Assessee Lawyers: PARESH VAKHARIA; HETAN PATEL
• Keywords: Unexplained cash credit; Gift; Business income; Source of fund; Additional evidence; Onus to prove
• Section: 68; 56

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , . . , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.29/MUM/2013 ASSESSMENT YEAR: 2009-10 ITO 22(2)(2), ROOM NO.20,4 TH FLOOR, TOWER NO.6, VASHI RAILWAY STATION COMPLEX, VASHI NAVI MUMBAI, / VS. MS. SANGEETA M. SAHANI, BLDG. NO.4G, TRISHUL BAUG, BEHIND SINDHI SOCIETY, CHEMBUR, MUMBAI-400071 ( ! / REVENUE) ( '#$ % /ASSESSEE) P.A. NO. ABDPS6218C ! / REVENUE BY SHRI N.V. NADKARNI-DR '#$ % / ASSESSEE BY SHRI PARESH VAKHARIA AND MS. HETAN PATEL & ! ' % ( / DATE OF HEARING 15/04/2015 ' % ( / DATE OF ORDER: 12/06/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATED 31/03/2012 OF THE LD. FIRST APPELLATE AUTHORI TY, MUMBAI, ON THE GROUNDS AS MENTIONED IN THE GROUNDS OF MS. SANGEETA M. SAHANI 2 APPEAL. THE ONLY GROUND RAISED IN THIS APPEAL PERT AINS TO GIFT RECEIVED BY THE ASSESSEE FROM BROTHER AND SIST ER. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION FROM THE CONCLUSION DRAWN BY THE LD. COMMISSIONER(APPEALS) FOR READY REFERENC E:- 2. IN THIS CASE, RETURN OF INCOME DECLARING INCOME A T RS.5,20,610/- WAS FILED ON 30.09.2009 AND THE ASSESSMENT WAS COMPLETED UJ S.143(3) OF THE I.T.ACT, 1961, ON 29.12.2011 DETERMINING THE TOTAL INCOME AT RS.3, 11,94,587/-. IT IS AGAINST ORDER OF THE A.O THAT THE PRESENT APPEAL HAS BEEN FILED WITH THE FOLLOWING GR OUNDS OF APPEAL. ADDITION OF 3,01,73,975/- UNDER SECTION 68 OF THE I T ACT:- THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDIT ION OF 3,01,73,975/- TO THE RETURNED INCOME BY INVOKING SECTI ON 68 OF THE INCOME TAX ACT. 1.2 THE LEARNED ASSESSING OFFICER FAILED TO APPRECIAT E THAT YOUR APPELLANT HAD COMPLETELY DISCHARGED THE BURDEN OF PROVING THE IDENTITY AND CAPACITY OF HER BROTHER WH O HAD GIFTED THE AFORESAID SUM AND ALSO THE GENUINENESS O F THE TRANSACTION. THE LEARNED ASSESSING OFFICER COMPLETE LY MISDIRECTED HIMSELF ON RELYING UPON A FOREIGN TAX L AW FOR JUSTIFYING THE ADDITION IN THE CASE OF RESIDENT IND IAN. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THAT PAYMENT OR NON PAYMENT OF TAXES ON THE FOREIGN GIFT IS OF NO RELEVANCE TO ESTABLISH THE SOURCE AND GENUINENES S OF THE GIFT RECEIVED BY YOUR APPELLANT. 1.4 WITHOUT PREJUDICE TO THE FOREGOING, A GENUINE REC EIPT OF GIFT FROM OVERSEAS DONOR DOES NOT BECOME IN GENU INE ONLY BECAUSE OF LEARNED ASSESSING OFFICER'S PERCEPT ION T.HAT HE DONOR OUGHT TO HAVE PAID TAXES AS PER THE FOREIGN TAX LAW OVER WHICH THE LEARNED ASSESSING OFFICER HA S NO JURISDICTION. 1.5 LEARNED ASSESSING OFFICER OUGHT TO HAVE APPRECIAT ED THAT YOUR APPELLANT HAVING DISCHARGED PRIMARY ONUS CAST ON HER IN PROVING THE SOURCE OF RECEIPT; THE ONUS O F PROVING THAT THE APPARENT IS NOT REAL WAS ON THE LE ARNED ASSESSING OFFICER AND HE HAVING FAILED TO BRING ANY EVIDENCE ON RECORD THAT THE IMPUGNED GIFT WAS INCOM E OF YOUR APPELLANT, THERE WAS NO JUSTIFICATION FOR MAKI NG ADDITION UNDER SECTION 68 OF THE ACT. WITHOUT PREJUDICE, THE LEARNED ASSESSING OFFICER FA ILED TO BRING ON RECORD ON IOTA OF EVIDENCE AS TO HOW YOUR APPELLANT COULD HAVE EARNED INCOME OF SUCH MAGNITUD E MS. SANGEETA M. SAHANI 3 WITHOUT ANY MATCHING SOURCE OF INCOME. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THAT YOUR AP PELLANT WAS A SMALL TAXPAYER WHO COULD NOT HAVE EARNED HUGE INCOME WITHOUT ANY PROSPEROUS SOURCE OF INCOME FOUN D BY HIM. THE LEARNED ASSESSING OFFICER HAVING ACCEPTED THE BUSINESS INCOME OF YOUR APPELLANT AT FACE VALUE, ER RED IN CONTRADICTING HIMSELF IN THE AFORESAID ADDITION WIT HOUT ESTABLISHING ANY CONNECTION WITH YOUR APPELLANT'S K NOWN SOURCE OF INCOME. 1.7 THE LEARNED ASSESSING OFFICER FAILED TO APPRECIAT E THAT THE APPELLANT'S BROTHER (DONOR) WHO WAS A SALARIED EMPLOYEE AND WHOSE COPY OF INCOME TAX RETURN WAS PRODUCED BEFORE HIM COULD NOT HAVE FILED CAPITAL AC COUNT AND BALANCE SHEET DEMANDED BY HIM ON 28.12.2011 AND IN ANY CASE, WHEN AS A SALARIED EMPLOYEE, HE IS NOT REQUIRED TO MAINTAIN OR FILE SUCH RECORDS WITH THE US TAX AUTHORITIES. 1.8 THE ADDITION MADE BY LEARNED ASSESSING OFFICER IS DEVOID OF ANY ACCEPTABLE CANNONS OF TAXATION AND AR E BASED ON MERE CONJECTURES, SURMISES AND SUSPICIONS. 1.9 THE LEARNED ASSESSING OFFICER HAS RELIED UPON JUD ICIAL PRECEDENTS WHICH ARE NOT RELEVANT TO THE FACTS OF T HE CASE AND HAS FAILED TO APPRECIATE BINDING JUDICIAL PRECE DENTS WHICH ARE RELEVANT TO THE FACTS OF THE CASE. 2. ADDITION OF 5,00,000/- UNDER SECTION 68 OF THE I T ACT. 2.1 THE LEARNED ASSESSING OFFICER ERRED IN MAKING ADDITION OF 5,00,000/- TO THE RETURNED INCOME BY INVOK ING SECTION 68 OF THE INCOME TAX ACT. 2.2 THE LEARNED ASSESSING OFFICER FAILED TO APPRECIAT E THAT YOUR APPELLANT HAD COMPLETELY DISCHARGED THE BURDEN OF PROVING THE IDENTITY AND CAPACITY OF HER BROTHER WH O HAD GIFTED THE AFORESAID SUM AND ALSO THE GENUINENESS O F THE TRANSACTION. 2.3 THE LEARNED ASSESSING OFFICER COMPLETELY FAILED T O APPLY HIS MIND THAT THE GIFT WAS RECEIVED BY YOUR A PPELLANT FROM HER SISTER, A RESIDENT OF UNITED ARAB EMIRATES , WHO UNDER THE LAWS OF THAT COUNTRY COULD NOT HAVE FILED RETURN OF INCOME AS DEMANDED BY HIM. 2.4 WITHOUT PREJUDICE TO THE FOREGOING, A GENUINE REC EIPT OF GIFT FROM OVERSEAS DONOR DOES NOT BECOME IN GENU INE ONLY BECAUSE OF LEARNED ASSESSING OFFICER'S PERCEPT ION THAT THE DONOR OUGHT TO HAVE PAID TAXES S PER THE F OREIGN TAX LAW OVER WHICH THE LEARNED ASSESSING OFFICER HA S NO JURISDICTION. 2.5 LEARNED ASSESSING OFFICER OUGHT TO HAVE APPRECIAT ED THAT YOUR APPELLANT HAVING DISCHARGED PRIMARY ONUS CAST ON HER IN PROVING THE SOURCE OF RECEIPT; THE ONUS O F MS. SANGEETA M. SAHANI 4 PROVING THAT THE APPARENT IS NOT REAL WAS ON THE LE ARNED ASSESSING OFFICER AND HE HAVING FAILED TO BRING ANY EVIDENCE ON RECORD THAT THE IMPUGNED GIFT WAS INCOM E OF YOUR APPELLANT, THERE WAS NO JUSTIFICATION FOR MAKI NG ADDITION UNDER SECTION 68 OF THE ACT. 2.6 WITHOUT PREJUDICE, THE LEARNED ASSESSING OFFICER FAILED TO BRING ON RECORD AN IOTA OF EVIDENCE AS TO HOW YO UR APPELLANT COULD HAVE EARNED INCOME OF SUCH MAGNITUD E WITHOUT ANY MATCHING SOURCE OF INCOME. THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THAT YOUR AP PELLANT WAS A SMALL TAXPAYER WHO COULD NOT HAVE EARNED HUGE INCOME WITHOUT ANY PROSPEROUS SOURCE OF INCOME FOUN D BY HIM. THE LEARNED ASSESSING OFFICER HAVING ACCEPTED THE BUSINESS INCOME OF YOUR APPELLANT AT FACE VALUE, ER RED IN CONTRADICTING HIMSELF IN THE AFORESAID ADDITION WIT HOUT ESTABLISHING ANY CONNECTION WITH YOUR APPELLANT'S K NOWN SOURCES OF INCOME. 2.7 THE ADDITION MADE BY LEARNED ASSESSING OFFICER IS DEVOID OF ANY ACCEPTABLE CANNONS OF TAXATION AND AR E BASED ON MERE CONJECTURES, SURMISES AND SUSPICIONS. 2.8.THE LEARNED ASSESSING OFFICER HAS RELIED UPON JUD ICIAL PRECEDENTS WHICH ARE NOT RELEVANT TO THE FACTS OF T HE CASE AND HAS FAILED TO APPRECIATE BINDING JUDICIAL PRECE DENTS WHICH ARE RELEVANT TO THE FACTS OF THE CASE.' 3. GROUND NO.1 DEALS WITH ADDITION OF RS.3,01,73,975/- MADE U/S.68 OF THE ACT GROUND NO.2 DEALS WITH ADDITION OF RS.5,OO,OOO 1 - MADE BY THE A.O U/S. 68.AS BOTH THE ADDITIONS ARE ON ACCOUNT OF GIFT CLAIMED TO HAVE BE EN MADE BY THE APPELLANT'S BROTHER AND SISTER RESPECTI VELY, THEY ARE DEALT WITH TOGETHER. I HAVE GONE THROUGH ASSESSMENT ORDER. THE A.O HAS DISCUSSED THE ISSUE F ROM PARA 4 ONWARDS WHICH IS REPRODUCED AS BELOW:- ' UNEXPLALINED CASH CREDIT: 4 THE REPRESENTATIVE OF THE ASSESSEE AND ASSESSEE HE RSELF ATTENDED THIS OFFICE ON 28.1 1.2011 AND FILED DETAILS VIDE LETTER DATED 28.11.2011. ON VERIFICATION OF THE SUBMISSIONS, IT WAS NOTICED THAT ASSESSEE HAS SHOWN GIFT RECEIVED FROM BROTHER AND SISTER IN THE CAPITAL ACC OUNT FOR THE YEAR ENDED 31.03.2009, AS UNDER:- GIFT FROM BROTHER RS.3,01,73,975 GIFT FROM SISTER RS. 5,00,000 5. THE ASSESSEE WAS FURTHER ASKED TO FURNISH THE DET AILS OF GIFT DONOR, IDENTIFY, CREDITWORTHINESS ALONGWITH DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF TH E GIFT RECEIVED. IN RESPONSE TO THE SAME, ASSESSEE VI DE LETTER DATED 12.12.20 I I SUBMITTED THE GIFT DEED (CONFIRMATION), RELATIONSHIP WITH DONOR AND SOURCES OF DONOR. ON FURTHER ANALYSIS OF THE DETAILS SUBMITTED IT IS OBSERVED THAT THE GIFT WAS RECEIVED FROM USA FROM S HIR MS. SANGEETA M. SAHANI 5 RAJOO MOTILAL SAHANI. THEREAFTER, THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN, AS UNDER:- ' IN YOUR CASE, YOU HAVE NEITHER ESTABLISHED THE FI NANCIAL CAPACITY OF THE CREDITOR (SUPPORTED BY DOCUMENTARY EVIDENCE) NOR HAVE YOU PROVED THE GENUINENESS OF TH E TRANSACTION. MOREOVER, IT IS ALSO APPARENT THAT THE AMOUNT RECEIVED BY YOU, OSTENSIBLY AS 'GIFT' FROM SHRI RAJ OO MOTILAL SAHANI AMOUNTS TO U.S$600,OOO/-. UNDER THE U.S. GIFT TAX PROVISIONS, DURING THE F. Y.2008-09 A DONOR CANNOT GIFT MORE THAN U.S.$11,000/-TO A PARTICULAR DONEE IN A YEAR, UNLESS THE DONOR HAS PAID GIFT TAX THEREON. AS THE AMOUNT RECEIVED BY YOU IN F.Y. 2008-09 EXCEEDS U.S. $ 11,000/-, IT IS FOR YOUR TO EXPLAIN IF THE DONOR HAD P AID GIFT TAX IN U.S. AS THE AMOUNT IS STATED TO HAVE BEEN GI FTED TO YOU. PLEASE NOTE THAT THIS IS A PART OF THE PROCES S OF PROVING THE GENUINENESS OF THE TRANSACTION.' 6. IN RESPONSE TO THE SAME, ASSESSEE VIDE LETTER DAT ED 12.12.2011 I SUBMITTED AS UNDER:- ' I AM IN RECEIPT OF YOUR LETTER DATED 12.12.2011 WHEREIN I HAVE BEEN CALLED UPON TO EXPLAIN AND PROVE THE GENUINENESS OF THE AMOUNT RECEIVED BY ME DURING THE YEAR I.E. USD 6,00,000 (RS.3,01,73,975/-) 1. MY ANTECENDENTS/BACKGROUND: I AM 44 YEARS OF AGE, UNMARRIED AND LIVE WITH MY AGED MOTHER AND SON OF MY BROTHER. MY FAMILY CONSISTS OF MY MOTHER, MRS. USHA SHAHANI, ELDER BROTHER RAJOO MOTI LAL SHAHANI (WHO HAS GIVEN THE AFORESAID AMOUNT OF RS.3,01,73,975), ELDER MARRIED SISTER, MRS. ANITA SIPP Y. I AM THE YOUNGEST OF THE THREE CHILDREN. MY FATHER EX PIRED IN 1991. MY ELDER BROTHER, RAJOO HAS BEEN A NON-RESIDENT SIN CE THE PAST 26 YEARS WAS INITIALLY TILL 1994 WORKING IN DUBAI AN D SINCE 1994 HAS BEEN PERMANENTLY SETTLED IN THE USA. HE WORKS AS A MARKETING MANAGER IN A MULTI NATIONAL CONGLOMERATE TELEBRANDS CORPORATION, NEW JERSEY SIN CE MORE THAN 10 YEARS. MY BROTHER'S SON AVISHESHA SHAHAN I IS 18 YEARS OF AGE AND HAS BEEN LIVING WITH ME FOR HI S EDUCATION IN INDIA, PRESENTLY IN STUDYING B.COM AT H.R. COLLEGE. MY ELDER SISTER IS MARRIED AND SETTLED IN DUBAI FOR THE PAST 20 YEARS. HER HUSBAND IS A VERY SUCCESSFUL RESTAURATE UR IN DUBAI, OWNS AND OPERATES THE FAMOUS RESTAURANT MOGH UL ROOM AT AI NASR LEISURELAND UNDER THE BUSINESS ENTI TY SCREENPLAY LLC. I HAVE BEEN CARRYING ON THE BUSINESS OF CALL CENTRE AND SMALL EVENT MANAGEMENT FIRM UNDER THE NAME OF GLOBA L SERVICES. DUE TO DISTURBANCE IN MARRIAGE LIFE, MY BROTHER HAS GIVEN ME RESPONSIBILITY OF BRINGING UP HIS SON, FOR LAST MANY MS. SANGEETA M. SAHANI 6 YEARS, WHICH RESPONSIBLY I HAVE FULFILLED AND WILL CONTINUE TO DO SO DURING MY LIFETIME. I AM ALSO SUPPORTING M Y MOTHER FOR LAST MANY YEARS. IN CONSIDERATION OF THE ABOVE AND OUT OF NATURAL LO VE AND AFFECTION, MY BROTHER PROVIDED MONETARY ASSISTANCE OF THE AFORESAID AMOUNT TO BUY A NEW HOUSE WHICH CAN COMFORTABLY ACCOMMODATE OUR FAMILY AND POTENTIAL EXPANSION OF THE FAMILY MEMBERS UPON MARRIAGE OF MY BROTHER'S SON IN FUTURE. AS PER OUR FAMILY UNDERST ANDING, MY BROTHER'S SON WILL BE THE SUCCESSOR OF ALL MY PR OPERTIES AND ASSETS. 2. MY BROTHER HAS BEEN VERY SUCCESSFUL IN THE USA AN D IN THE RELEVANT YEAR HE HAS EARNED INCOME OF USD 9,5 1,574/- I HEREBY PLACE ON RECORD THE FOLLOWING DOCUMENTS A) MY BROTHER RAJOO SHAHANI'S US TAX RETURN VIDE FORM I 040FOR YEAR ENDING 31 DECEMBER 2008, WHERE INCOME REFLECTED IS USD 9,5 1,574/- WHICH SUPPORTS THE FINAN CIAL CAPACITY OF MY BROTHER. B) COPY OF MY BROTHER'S PASSPORT BEARING NO. Z 1605 770, PROVING HIS IDENTITY. C) COPY OF CONFIRMATION OF MY BROTHER IN RESPECT OF TH E AFORESAID SUM OF RS. 3,0 1,73,975 WHICH INTER ALIA GIVES DETAILS OF US SOCIAL SECURITY NUMBER, ADDRESS, AND BANK PARTICULARS WHICH PROVE THE IDENTITY AND GENUINENES S OF THE TRANSACTION. D) COPIES OF BANK STATEMENT FROM HONGKONG BANK REFLECT ING THE REMITTANCE OF GIFT OF USD 600,000/-. IT MAY BE NOTE D THAT THERE WAS BALANCE OF USD 10,00,000/- (APX.) ON TH E DATE OF TRANSFER OF THE AMOUNT INDICATING THE GENUI NENESS AND FINANCIAL CAPACITY OF MY BROTHER. E) COPIES OF MY BANK STATEMENT WITH IC/CI BANK LTD. WH EREIN THE AFORESAID GIFT WAS RECEIVED THROUGH NORMAL BANK ING CHANNELS, AGAIN PROVES THE GENUINENESS OF THE TRANS ACTION. 3. TO THE BEST OF MY UNDERSTANDING I HAVE DISCHARGED MY ONUS OF PROVING IDENTITY, CREDITWORTHINESS AND GENU INENESS IN RESPECT OF THE AFORESAID AMOUNT AS DESIRED BY YO UR GOOD OFFICE. IN CASE ANY ADDITIONAL INFORMATION IS REQUIRED IN THIS CONNECTION I SHOULD BE GIVEN ADEQUATE OPPOR TUNITY. 4. AS REGARDS INQUIRY FROM YOUR GOOD OFFICE AS REGAR DS GIFT TAX PAYMENT BY MY BROTHER IN USA, I HAVE BEEN ADVIS ED THAT THE SAME IS OF NO RELEVANCE TO PROVE THE IDENT ITY, CREDITWORTHINESS OR GENUINENESS OF THE AMOUNT RECEI VED BY ME FROM MY BROTHER. MS. SANGEETA M. SAHANI 7 HOWEVER, WITHOUT PREJUDICE TO THE FOREGOING I HAVE BEEN INFORMED BY MY BROTHER THAT IN THE FACTS AND CIRCUMSTANCES, TO THE BEST OF HIS INFORMATION, KNOW LEDGE AND UNDERSTANDING OF THE RELEVANT LAWS OF UNITED ST ATES OF AMERICA, THE AFORESAID AMOUNT IS NOT LIABLE TO THE GIFT TAX. I REPEAT THAT THE ABOVE ASPECT HAS NO BEARING TO MY CASE UNDER CONSIDERATION OF YOUR GOOD OFFICE. 5. WITHOUT PREJUDICE, I CATEGORICALLY SUBMIT TO YOUR GOOD OFFICE THAT THE AFORESAID AMOUNT OF RS. 3,01,73,975/- I S NOT INCOME EARNED BY ME FROM ANY SOURCE WHATSOEVER, AND IT IS NOT LIABLE TO TAX. KINDLY TAKE THE ABOVE ON RECORD, DROP THE PROPOSED ADDITION AND OBLIGE.' 7 FURTHER, THE ASSESSEE VIDE LETTER DATED 09.12.20 II, HAS SUBMITTED AS UNDER:- ' I AM IN RECEIPT OF YOUR LETTER DATED 12.12.20 II WHERE IN I HAVE BEEN CALLED UPON TO EXPLAIN AND PROVE THE GENUINENESS OF THE AMOUNTS RECEIVED BY ME DURING TH E YEAR I.E. RS.5,00,000 FROM MY SISTER MS. ANITA SIPPY . I. MY ANTECENDENTS / BACKGROUND: I AM 44 YEARS OF AGE, UNMARRIED AND LIVE WITH MY AGED MOTHER AND SON OF MY BROTHER. MY FAMILY CONSISTS OF MY MOTHER, MRS. USHA SHAHANI, ELDER BROTHER RAJOO MOTI LAL SHAHANI (WHO HAS GIVEN THE AFORESAID AMOUNT OF RS.3,01,73,975), ELDER MARRIED SISTER, MRS. ANITA SIPP Y. I AM THE YOUNGEST OF THE THREE CHILDREN. MY FATHER EX PIRED IN 1991. MY ELDER BROTHER, RAJOO HAS BEEN A NON-RESIDENT SIN CE THE PAST 26 YEARS WAS INITIALLY TILL 1994 WORKING IN. DUBAI AND SINCE 1994 HAS BEEN PERMANENTLY SETTLED IN THE USA. HE WORKS AS A MARKETING MANAGER IN A MULTI NATIONAL CONGLOMERATE TELEBRANDS CORPORATION, NEW JERSEY SIN CE MORE THAN 10 YEARS. MY BROTHER'S SON AVISHESHA SHAHAN I IS 18 YEARS OF AGE AND HAS BEEN LIVING WITH ME FOR HI S EDUCATION IN INDIA, PRESENTLY IN STUDYING B.COM AT H.R. COLLEGE. MY ELDER SISTER IS MARRIED AND SETTLED IN DUBAI FOR THE PAST 20 YEARS. HER HUSBAND IS A VERY SUCCESSFUL RESTAURATE UR IN DUBAI, OWNS AND OPERATES THE FAMOUS RESTAURANT MOGH UL ROOM AT AI NASR LEISURELAND UNDER THE BUSINESS ENTI TY SCREENPLAY LLC. I HAVE BEEN CARRYING ON THE BUSINESS OF CALL CENTRE AND SMALL EVENT MANAGEMENT FIRM UNDER THE NAME OF GLOBA L SERVICES. IN CONSIDERATION OF THE FACT THAT I AM SUPPORTING M Y MOTHER FOR THE LAST MANY YEARS AND OUT OF NATURAL L OVE AND AFFECTION, MY SISTER ANITA HAS GIVEN THE AFORES AID AMOUNT BY WAY OF FOREIGN REMITTANCE. 2 MY SISTER AND HER HUSBAND HAVE COMBINED INCOME OF ABOUT AED 3 MILLION (APPROX RS.3,90,00,000) PER YEAR. MS. SANGEETA M. SAHANI 8 I HEREBY PLACE ON RECORD THE FOLLOWING DOCUMENTS. A. COPY OF MY SISTER'S PASSPORT PROVING HER IDENTIT Y. B. COPY OF CONFIRMATION OF MY SISTER IN RESPECT OF THE AFORESAID SUM OF RS 5,00,000 WHICH INTER ALIA GIVES DET AILS OF HER ADDRESS WHICH PROVES THE IDENTITY AND GENUIN ENESS OF THE TRANSACTION. C. COPIES OF TRANSACTION VOUCHERS EVIDENCING THE REMITTANCE OF THE AMOUNT FROM UAE EXCHANGE CENTRE, DUBAI, KARAMA BRANCH IN FAVOUR OF MY BANK ACCOUNT I N HDFC BANK JOINTLY HELD WITH MY MOTHER, MRS. USHA SHAHANI. D. COPY OF BANK ACCOUNT STATEMENTS OF EMIRATES NBD HELD JOINTLY BY MY SISTER ANITA SIPPY & HER HUSBAND RAJA N SIPPY FOR THE PERIOD 1ST JUNE 2008 TILL 27 NOVEMBER 2008 TO SUPPORT THE REMITTANCE MADE IN AUGUST 2008 IN OUR BANK ACCOUNT. THE SAID BANK STATEMENT PROVES THE ID ENTITY OF MY SISTER AND ALSO THE CREDITWORTHINESS. IT MAY BE NOTED THAT AT THE RELEVANT TIME WHEN THE REMITTANCE WAS MADE THE BALANCE WAS APPROXIMATELY AED 2,00,0001- EQUIVALENT TO RS 26,00,0001 -( APPROX.) E. DOCUMENTS DOWNLOADED FROM INTERNET WHICH SUPPORT S THE CREDENTIALS OF MOGHUL ROOM, DUBAI OWNED BY MY S ISTER JOINTLY WITH HER HUSBAND RAJAN SIPPY WHICH FURTHER SUPPORTS THE CREDITWORTHINESS OF MY SISTER. F. COPIES OF MY BANK STATEMENT WITH HDFC BANK LTD, WHEREIN THE AFORESAID AMOUNT WAS RECEIVED THROUGH NORMAL BANKING CHANNELS, AGAIN PROVES THE GENUINENE SS OF THE TRANSACTION. 2. TO THE BEST OF MY UNDERSTANDING I HAVE DISCHARGED MY ONUS OF PROVING IDENTITY, CREDITWORTHINESS AND GENU INENESS IN RESPECT OF THE AFORESAID AMOUNT AS DESIRED BY YO UR GOOD OFFICE. IN CASE ANY ADDITIONAL INFORMATION IS REQUIRED IS REQUIRED IN THIS CONNECTION I SHOULD BE GIVEN AD EQUATE OPPORTUNITY. 3. WITHOUT PREJUDICE, I CATEGORICALLY SUBMIT TO YOUR GOOD OFFICE THAT THE AFORESAID AMOUNT RS 5,00,000/- IS NOT INCOME EARNED BY ME FROM ANY SOURCE WHATSOEVER, AND IT IS NOT LIABLE TO TAX. KIN DLY TAKE THE ABOVE ON RECORD, DROP THE PROPOSED ADDITION AND OBLIGE.' 8. THE ASSESSEE VIDE THIS OFFICE ORDER SHEET NOTING DATED 19.12.2011 WAS ASKED TO FURNISH COPIES OF IRS FORM 709 OF THE DONOR WHICH IS UNITED STATES GIFT TAX RETURN RELEVANT TO AY 2009-10. FURTHER VIDE ORDER SHEET NOTING DATED 22.12.2011 THE REPRESENTATIVE OF THE ASSESSEE WAS STRESSED ON THE SAME ISSUE OF COPY OF IRS FORM 709. HOWEVER THERE IS NO REPLY FROM THE ASSESSEE SO FAR IN THIS RESPECT. MS. SANGEETA M. SAHANI 9 9. FURTHER, SUMMONS WERE ISSUED TO THE ASSESSEE VIDE SUMMONS DATED 23.12.20 II AND OPPORTUNITY WAS PROVIDED TO ASSESSEE TO PRODUCE THE FOLLOWING DETAILS:- - ORIGINAL PASSPORT OF YOURSELF. - ORIGINAL PASSPORT OF SON OF DONOR - BANK STATEMENT IN ORIGINAL OF ICICI BANK - BANK STATEMENT IN ORIGINAL HSBC BANK - COPY OF IRS 709 OF DONOR FOR GIFT CONFIRMATION. - COPY OF CAPITAL ACCOUNT AND BALANCE SHEET OF DONO RS - COPY OF BANK ACCOUNTS STANDING IN THE NAME OF DON ORS IN INDIVIDUAL OR ANY JOINT NAME IN RESPONSE TO THE ABOVE THE ASSESSEE ALONG WITH H ER AUTHORIZED REPRESENTATIVE SHRI HETAN PATEL ATTENDED AND FILED A LETTER DATED 28.12.2011. SHE PRODUCED ORIGINAL PASSPORT, BANK STATEMENT OF ICICI BANK AND HSBC BAN K. REGARDING COPY OF IRS 709 OF THE DONOR FOR GIFT, SHE I S NOT HAVING THE COPY OF THE SAME, FOR REASONS AS STATED IN' HER EARLIER LETTER DATED 19.12.2011. REGARDING COPY OF BALANCE SHEET AND CAPITAL ACCOUNT AND BANK STATEMENT IN IND IA OF THE DONOR, I HAVE EMAILED MY BROTHER REQUESTING HIM TO SEND ME THE PAPER AS SOON AS POSSIBLE. COPY OF THE SAME WILL BE PRODUCED AS SOON AS I RECEIVE. 10. THE SUBMISSIONS OF THE ASSESSEE HAVE BEEN EXAMINE D. HOWEVER, THE RECEIPT OF HUGE GIFT BY THE ASSESSEE I S NOT ACCEPTABLE FOR THE FOLLOWING REASONS:- I) THE ASSESSEE HAS NOT FURNISHED THE CERTIFIED COP IES OF THE CAPITAL ACCOUNT /BALANCE SHEET OF THE DONOR. RE LIANCE IS PLACED ON THE DECISION OF SHRI ANUPAM ANAND PRAK ASH GUPTA PROP. M/S ANUPAM TRADERS THE LD.CIT(A)-XIV, MUMBAI, WHILE DISMISSING THE APPEAL OF THE ASSESSEE FOR AYR 01-02 WHEREIN HE OBSERVED THAT' A VERY HEAVY ONUS WOULD LIE UPON THE ASSESSEE WHERE THE AMOUNT IS REC EIVED AS A GIFT WHICH IS NOT GOING TO BE RETURNED BY THE ASSESSEE.' II) THE MERE FILING OF BASIC DETAILS IS NOT ENOUGH EVIDENCE TO PROVE THEIR IDENTITY AND CREDITWORTHINESS AS HEL D BY THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF CLT V S. CORLAY TRADING COMPANY LTD. 232 ITR 820. SECONDLY, THE FACT THAT THE TRANSACTION WAS THROUGH BANK/DD IS NO T A CONCLUSIVE PROOF TO ESTABLISH THE IDENTITY OF CREDI TOR AND THEIR CREDITWORTHINESS AND IT WAS SO HELD BY CALCUT TA HIGH COURT IN THE CASE OF CIT VS. UNITED COMMERCIAL INDU STRIAL COMPANY LTD. REPORTED IN 187 ITR 596 (CAL). MERE FILING O F CONFIRMATION OF LENDERS DOES NOT DISCHARGE THE ASSE SSEE FROM ITS DUTY AND ONUS TO PROVE THE IDENTITY AND CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TION. THE GENUINENESS OF THE CASH CREDIT APPEARING IN THE ACCOUNT OF THE ASSESSEE HAVE TO BE PROVED BEYOND DO UBT MS. SANGEETA M. SAHANI 10 AND THE NORMS LAID DOWN IN THIS REGARD BY THE DIFFE RENT COURTS ARE QUITE STRINGENT. FURNISHING OF NAME AND ADDRESS OF THE CREDITORS AND THEIR BANK ACCOUNT NUMBER ETE. DOES NOT DISCHARGE THE APPELLANT FROM THE ONUS WHICH IS SQUARELY ON HIM TO ADDUCE THE EVIDENCE IN SUPPORT O F SUCH TRANSACTION. IN THE CASE OF SATE KALE KHAN MOHD HA NIF VS. CIT 50 ITR I, DECIDED BY THE SUPREME COURT AND RELIED UPON BY THE ASSESSING OFFICER, THE COURT OBSERVED T HAT' IF THE ASSESSEE OFFERS AN EXPLANATION ABOUT THE CASH C REDIT, INCOME TAX DEPARTMENT CAN PUT THE ASSESSEE TO PROVE ALL HIS EXPLANATION AND IF THE ASSESSEE FAILS' TO TENDE R EVIDENCE OR BREAKS AN ENQUIRY, THEN THE ASSESSING O FFICER IS JUSTIFIED IN REJECTING EXPLANATION AND HOLDING T HAT THE INCOME IS FROM THE UNDISCLOSED SOURCE. THE ASSESSIN G OFFICER IS REQUIRED TO SPECIFY A PROOF WHAT THAT SO URCE IS, WHICH FROM THE NATURE OF THE CASE MUST BE KNOWN ONL Y TO THE ASSESSEE.' FURTHER, IN THE ANOTHER CASE, THE HO N'BLE SUPREME COURT HELD THAT ONCE THE ASSESSING OFFICER FOUND THAT THE RECEIPT BY THE ASSESSEE WERE IN FACT IN TH E NATURE OF INCOME OF THE ASSESSEE, IT WAS NOT NECESSARY FOR HIM TO LOCATE THE EXACT SOURCE EVEN THOUGH ENTRIES WERE FO UND OF SUCH RECEIPTS IN THE BOOKS OF THE ASSESSEE (C.LT. V S. DURGAPRASAD MORE [1969] 72 ITR 807[SC]) III) THE SAID ONUS IS STILL HIGHER IN CASE OF FOREI GN GIFTS AS THE DONOR DOES NOT FALL WITHIN THE JURISDICTION OF INDIAN LAWS TO ENABLE THE REVENUE TO SUMMON HIM AND EXAMIN E HIM ON OATH AND IN THE PRESENT CASE THE ASSESSEE HA S NOT PROVED THE GENUINENESS OF TRANSACTION WHICH IS THE IMPORTANT INGREDIENT OF ONUS U/S.68. THE INCOME TAX L AW IS BASED ON THE PRINCIPLE OF 'PREPONDERANCE OF PROBABI LITIES.' IN THE PRESENT CASE, APPARENTLY THE REQUIREMENTS OF U.S. GIFT TAX LAWS HAVE ALSO BEEN VIOLATED. IF IT WAS A GENUINE TRANSACTION, THERE WAS NO NEED FOR THE SAID VIOLATI ON. IT IS A WELL ESTABLISHED FACT THAT WHEN AS ASSESSEE VIOLA TES ONE LAW E.G. CENTRAL EXCISE, OCTROI, SALES TAX ETC., TH E VIOLATION OF OTHER LAWS LIKE INCOME TAX ACT ARE ALSO THERE AS A NATURAL CONSEQUENCE. IV) IT IS DIFFICULT TO ACCEPT THE PREPOSITION THAT ONE CAN RECEIVE SUCH HUGE GIFTS REPETITIVELY FROM ONE RELAT IVE OR THE OTHER AND FROM DIFFERENT COUSINS OUT OF LOVE AN D AFFECTION. RELIANCE IS ALSO PLACED ON THE PRINCIPLE LAID DOWN IN THE CASE OF C.LT. VS DURGA PRASAD MORE (1972) 82 ITR 540(SC) THAT FOR THE PURPOSE OF UNCOVERING THE REALITY THE AUTHORITIES ARE EMPOWERED TO LOOK INTO THE SURROUND ING CIRCUMSTANCES OF THE MATTER. THEY ARE ALSO ENTITLED TO GO BEHIND THE MOTIVE OF THE TRANSACTIONS. FURTHER IN T HE CASE OF SUMATI DAYAL V CLT( 1995)214 ITR 801, THE SUPREME COURT HAS HELD THAT THE PRINCIPLE' WHAT IS APPARENT IS REAL' MS. SANGEETA M. SAHANI 11 IS NOT SACROSANCT AND MAY BE OVERLOOKED IF SURROUND ING CIRCUMSTANCES SO SUGGEST. V) GIFTS IN SUCH HUGE AMOUNTS ARE UNUSUAL EVEN BETW EEN A BROTHER AND SISTER BORN TO THE SAME MOTHER AND HENC E, GIVEN THE STATUS OF THE DONOR, IT IS DIFFICULT TO B ELIEVE BY ANY STRETCH OF IMAGINATION THAT HE GAVE THE GIFT OU T OF HIS OWN HARD EARNED MONEY. VI) FROM THE ABOVE, IT IS APPARENT THAT A NON GENUI NE TRANSACTION WAS ENTERED INTO BY THE ASSESSEE IN THE GARB OF GIFT AND THE GIFT WAS A COLOURABLE DEVICE TO EVA DE TAX. BY ANY STANDARD THE GIFT OF RS.3.07 CRORE (APPROX) BY THE DONOR TO THE ASSESSEE WAS AN EXTRAORDINARY EVENT AN D THE GENUINE OCCURRENCE OF SUCH EVENT CANNOT BE ACCEPTED UNLESS THE CIRCUMSTANCES THAT LED TO THE EVENT ARE EXPLAINED PROPERLY. AN EVENT REPUGNANT TO NORMAL CO URSE OF HUMAN RELATION HAS TO BE REJECTED AS NOT BEING T RUE, UNLESS THE PROBABILITY OF THE EVENT HAVING PLACE IS PROVED WITH CIRCUMSTANTIAL EVIDENCE. VII) IT IS COMMON KNOWLEDGE THAT HAWALA BUSINESS IS INVOKED IN INDIA AND ELSEWHERE AND THE MERE FACT TH AT MONEY HAVING BEEN RECEIVED IN INDIA IN FOREIGN EXCH ANGE WOULD NOT BE SUFFICIENT TO RELIEVE THE ASSESSEE OF THE BURDEN OF ESTABLISHING THE IDENTITY AND FINANCIAL C APACITY OF THE DONOR AND THE GENUINENESS OF GIFTS. IN THIS CASE WE FIND ONLY A CONFIRMATION FROM PARTIES THAT THE GIFT HAS BEEN MADE. THERE IS EVIDENCE THAT THE MONEY HAS BEEN RECEIVED BY CHEQUE FROM ABROAD. IN SUCH CIRCUMSTANC ES NO ENQUIRY COULD BE CONDUCTED BY THE ASSESSING OFFI CER TO VERIFY THE CLAIM OF THE ASSESSEE. THERE IS NO SATIS FACTORY EVIDENCE ON RECORD TO ESTABLISH THE GENUINENESS OF THE GIFT. VIII) RELIANCE IS ALSO PLACED IN THE DECISION OF D. C.RASTOGI VS ACIT 57 ITD 295 WHERE IT WAS HELD THAT 'IN CASE OF NR I GIFTS ONUS LIES ON THE ASSESSEE TO ESTABLISH THE ID ENTITY AND CAPACITY OF THE CREDITOR AND THE GENUINENESS' O F THE TRANSACTION'. IX) AS HELD IN THE CASES OF ROSHAN D HATTI VS C.I.T . 107 ITR 938(SQ AND KALE KHAN MOHAMMED HANIF VS.C.I.T (1963) 50 ITR I (SQ. UNDER THE PROVISIONS OF SECTION 68. THE ONUSES OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE IS ON HIM/HER WHERE THE NATURE AND SOURCE OF A RECEIPT WHETHER IT BE OF MONEY OR THE OTHER PROPERTY CANNOT BE SATISFACTORILY EXPL AINED BY THE ASSESSEE. IT IS OPEN TO THE REVENUE TO HOLD THA T IT IS THE INCOME OF THE ASSESSEE. I I WITHOUT PREJUDICE TO THE ABOVE FURTHER THE ASSE SSEE EXPLANATION THAT GIFT TAX LAWS ARE NOT APPLICABLE I N USA IS ALSO NOT APPLICABLE. THE GIFT TAX LAWS EXISTING IN THE USA MS. SANGEETA M. SAHANI 12 ARE DOWNLOADED THROUGH INTERNET. THE PROVISIONS OF GIFT TAX ARE AS UNDER:- GIFT TAX IN THE UNITED STATES FROM WIKIPEDIA, THE FREE ENCYCLOPEDIA A GIFT TAX IS A TAX IMPOSED ON THE GRATUITOUS TRANS FER OF OWNERSHIP OF PROPERTY. THE UNITED STATES INTERNAL REVENUE SERVICE INTERNAL REVENUE SERVICE SAYS A GIF T IS ' ANY TRANSFER TO AN INDIVIDUAL, EITHER DIRECTLY OR I NDIRECTLY, WHERE FULL CONSIDERATION (MEASURED IN MONEY OR MONE Y'S WORTH) IS NOT RECEIVED IN RETURN.' WHEN A TAXABLE GIFT IN THE FORM OF CASH, STOCKS, RE AL ESTATE, OR OTHER TANGIBLE OR INTANGIBLE PROPERLY IS MADE THE TAX IS USUALLY IMPOSED ON THE DONOR ( THE GIVER)UNL ESS THERE IS A RETENTION OF AN INTEREST WHICH DELAYS CO MPLETION OF THE GIFT. A TRANSFER IS COMPLETELY GRATUITOUS WH ERE THE DONOR RECEIVES NOTHING OF VALUE IN EXCHANGED FOR TH E GIFTED PROPERTY. A TRANSFER IS GRATUITOUS IN PART W HERE THE DONOR RECEIVES SAME VALUE BUT THE VALUE OF THE PROP ERTY RECEIVED BY THE DONOR IS SUBSTANTIALLY LESS THAN TH E VALUE OF THE PROPERTY GIVEN BY THE DONOR. IN THIS CASE, T HE AMOUNT OF THE GIFT IS THE DIFFERENCE. IN THE UNITED STATES, THE GIFT TAX IS GOVERNED BY C HAPTER 12, SUBTITLE B OF THE INTERNAL REVENUE CODE. THE TAX IS IMPOSED BY SECTION 2501 OF THE CODE.(2) FOR THE PURPOSE S OF TAXABLE INCOME, COURTS HAVE DEFINED A 'GIFT' AS THE PROCEEDS FROM A 'DETACHED AND DISINTERESTED GENEROSITY.'[3] GIFTS ARE OFTEN GIVEN OUT OF 'AFFEC TION, RESPECT, ADMIRATION, CHARITY OR LIKE IMPULSES. [4] GENERALLY, IF AN INTEREST IN PROPERTY IS TRANSFERRE D DURING THE GIVER'S LIFETIME (OFTEN CALLED ON INTER VIVOS G IFT ) THEN THE GIFT OR TRANSFER WOULD NOT BE SUBJECT TO THE ES TATE TAX. IN 1976, CONGRESS UNIFIED THE GIFT AND ESTATE TAXES LIMITING THE GIVER'S ABILITY TO CIRCUMVENT THE ESTA TE TAX BY GIFTING DURING HIS OR HER LIFETIME. NOTWITHSTANDING , THERE REMAIN DIFFERENCES BETWEEN ESTATE AND GIFT TAXES SU CH AS THE EFFECTIVE TAX RATE, THE AMOUNT OF THE CREDIT AV AILABLE AGAINST TAX, AND THE BASIS OF THE RECEIVED PROPERTY . THERE ARE ALSO TYPES OF GIFTS WHICH WILL BE INCLUDED IN A PERSON'S ESTATE SUCH AS CERTAIN GIFTS MADE WITHIN THE THREE YEAR WINDOW BEFORE DEATH AND GIFTS IN WHICH THE DONOR RE TAINS AN INTEREST, SUCH AS GIFTS OF REMINDER INTERESTS TH AT ARE NOT EITHER QUALIFIED REMAINDER TRUSTS OR CHARITABLE REM AINDER TRUSTS. THE REMAINDER INTEREST GIFT TAX RULES APPLY THE GIFT TAX ON THE ENTIRE VALUE OF THE TRUST BY ASSIGNING A ZERO VALUE TO THE INTEREST RETAINED BY THE DONOR. CONTENTS 1 NON-TAXABLE GIFTS 2 GIFT TAX EXEMPTIONS MS. SANGEETA M. SAHANI 13 3 TAX DEDUCTIBILITY FOR GIFTS 4 U.S. FEDERAL GIFT TAX CONTRASTED WITH U.S. FEDE RAL INCOME TAX TREATMENT OF GIFTS 5 HISTORY 6 SEE ALSO 7 REFERENCES 8 EXTERNAL LINKS [EDIT] NON-TAXABLE GIFTS GENERALLY, THE FOLLOWING GIFTS ARE NOT TAXABLE GIFT S.[5] GIFTS THAT ARE NOT MORE THAN THE ANNUAL EXCLUSION FOR THE CALENDAR YEAR GIFTS TO A POLITICAL ORGANIZATION FOR ITS USE GIFTS TO CHARITIES. GIFTS TO ONE'S (US TAXPAYER) SPOUSE TUITION OR MEDICAL EXPENSES ONE PAYS DIRECTLY TO A MEDICAL OR EDUCATIONAL INSTITUTION FOR SOMEONE. [EDIT1 GIFT TAX EXEMPTIONS THERE ARE TWO LEVELS OF EXEMPTION FROM THE GIFT TAX . FIRST, TRANSFERS OF A PRESENT INTEREST UP TO $13,000 PER PERSO N PER YEAR (AS OF 20 II) ARE NOT SUBJECT TO THE TAX ('P RESENT INTEREST' IS DEFINED AS: WHEN THE RECIPIENT OF THE GIFT CAN IMMEDIATELY AND WITHOUT RESTRICTION USE, POSSESS, O R ENJOY THE GIFTED PROPERTY', IF IT'S NOT THIS 'PRESENT INT EREST' THEN IT'S A 'FUTURE INTEREST' AND THEREFORE THE ANNUAL E XCLUSION AMOUNT OF $13,000(20 I I) IS NOT AVAILABLE TO USE AS A DEDUCTION FROM THE GIFT). AN INDIVIDUAL CAN MAKE GI FTS UP TO THIS AMOUNT TO AS MANY PEOPLE AS HE/SHE WISHES E ACH YEAR. A MARRIED COUPLE CAN POOL THEIR INDIVIDUAL GI FT EXEMPTIONS TO MAKE GIFTS WORTH UP TO $26,000 PER RECIPIENT PER YEAR WITHOUT INCURRING ANY GIFT TAX. FOR 20 II AND 2012, THE LIFETIME GIFT TAX EXEMPTION IS $5,000,000 WHICH IS THE SAME AS THE FEDERAL ESTATE TAX EXEMPTI ON. THE LIFETIME GIFT TAX EXEMPTION IS TIED DIRECTLY TO THE FEDERAL ESTATE TAX EXEMPTION SUCH THAT IF YOU GIFT AWAY ANY AMOUNT OF YOUR LIFETIME GIFT TAX EXEMPTION, THE N THIS AMOUNT WILL BE SUBTRACTED FROM YOUR ESTATE TAX EXEM PTION AFTER YOU DIE. IF AN INDIVIDUAL OR COUPLE MAKES GIFTS OF MORE THAN THE LIMIT, GIFT TAX IS INCURRED. THE INDIVIDUAL OR COUP LE HAS THE OPTION OF PAYING THE GIFT TAXES' THAT YEAR, OR TO U SE SOME OF THE 'UNIFIED CREDIT' THAT WOULD OTHERWISE REDUCE THE ESTATE TAX. IN SOME SITUATIONS IT MAY BE ADVISABLE TO PAY THE TAX IN ADVANCE TO REDUCE THE SIZE OF THE ESTATE . MS. SANGEETA M. SAHANI 14 IN MANY INSTANCES, HOWEVER, AN ESTATE PLANNING STRA TEGY IS TO GIVE THE MAXIMUM AMOUNT POSSIBLE TO AS MANY PEOPLE AS POSSIBLE TO REDUCE THE SIZE OF THE ESTATE . FURTHERMORE, TRANSFERS (WHETHER BY BEQUEST, GIFT, O R INHERITANCE) IN EXCESS OF $1 MILLION MAY BE SUBJECT T O A GENERATION -SKIPPING TRANSFER TAX IF CERTAIN OTHER CRITERIA ARE MET. FURTHER INFORMATION: ESTATE TAX IN THE UNITED STATE S PURSUANT TO 26 U.S.C S102(A) .. PROPERLY ACQUIRED BY GIF T, BEQUEST, DEVISE, OR INHERITANCE IS NOT INCLUDED IN GROSS INCOME AND THUS A TAXPAYER DOES NOT HAVE TO INCLUDE THE VALUE OF THE PROPERTY WHEN FILING AN INCOME TAX RET URN. ALTHOUGH MANY ITEMS MIGHT APPEAR TO BE GIFT, COURTS HAVE HELD THAT THE MOST CRITICAL FACTOR IS THE TRANSFERO R'S INTENT BOGARDUS V. COMMISSIONER, 302 U.S.34,43,58 S.CT.61 ,65,82,LED.32.( 1937). THE TRANSFEROR MUST DEMONSTRATE A 'DETACHED AND DISINTERESTED GENEROSITY' WHEN GIVING THE GIFT TO ACTUALLY EXCLUDE THE VALUE OF THE GIFT FROM THE TAXPAYER'S GROSS INCOME. COMMISSIONER OF INTERNAL REVENUE V. LOBUE, 352 U.S.243,24,676 S.CT800,803, 100 LED.1142( 1956). UNFORTUNATELY, THE COURT'S ARTICULATION O F WHAT EXACTLY SATISFIES A 'DETACHED AND DISINTERESTED GENEROSITY' LEAVES MUCH TO BE DESIRED . SOME SITUATIONS ARE CLEARER, HOWEVER, I. 'GIFTS' RECEIVED AT PROMOTIONAL EVENTS ARE NOT E XCLUDED FROM TAXATION: FOR EXAMPLE, OPRAH'S SEEMINGLY GOOD DEED OF GIVING NEW CARS TO HER AUDIENCE DOES NOT SATISFY THE DEFINITIO N BECAUSE OF OPRAH'S INTEREST IN THE PROMOTIONAL VALU E THAT THIS EVENT CAUSES FOR HER TELEVISION SHOW. I. 'GIFTS' RECEIVED FROM EMPLOYERS THAT BENEFIT EMP LOYEES ARE NOT EXCLUDED FROM TAXATION: 26 U.S.E. S 102(C) CLEARLY STATES THAT EMPLOYERS CANNOT EXCLUDE AS A GIFT ANYTHING TRANSFERRED TO AN EMPLOY EE THAT BENEFITS THE EMPLOYEE. CONSEQUENTLY, AN EMPLOYER CA NNOT GIFT AN EMPLOYEE'S SALARY TO AVOID TAXATION. ' IN ADDITION, POLICY REASONS FOR THE GIFT EXCLUSION FROM GROSS INCOME ARE UNCLEAR. IT IS SAID THAT NO JUSTIF ICATION EXISTS. IT IS ALSO SAID THAT THE EXCLUSION IS FOR ADMINISTRATIVE REASONS, BOTH FOR TAXPAYERS AND FOR THE IRS. WITHOUT THE EXCLUSION TAXPAYERS WOULD HAVE TO KEEP TRACK OF ALL THEIR GIFTS, INCLUDING NOMINAL ONES, D URING THE MS. SANGEETA M. SAHANI 15 YEAR, AND THIS WOULD CREATE ADDITIONAL OVERSIGHT PR OBLEMS FOR THE IRS. [EDIT] U.S. FEDERAL GIFT TAX CONTRASTED WITH U.S. F EDERAL INCOME TAX TREATMENT OF GIFTS THE TREATMENT OF A GIFT FOR U.S. GIFT TAX PURPOSES (THE TRANSFER TAX ) SHOULD NOT BE CONFUSED WITH THE TREA TMENT OF GIFTS FOR OTHER TAX PURPOSES. FOR EXAMPLE, FOR U .S. INCOME TAX PURPOSES, MOST GIFTS ARE EXCLUDED (UNDER INTERNAL REVENUE CODE SECTION 10296) FROM THE GROSS INCOME OF THE RECIPIENT, AND THUS ARE NOT TAXED AS INCOME. FOR THE PURPOSES OF TAXABLE INCOME, COURTS HAVE DEF INED 'GIFT' AS PROCEEDS FROM A 'DETACHED AND DISINTEREST ED GENEROSITY'. SEE COMMISSIONER V. DUBERSTEIN (QUOTI NG COMMISSIONER V. LOBUE, 351 U.S. 243 (1956). GIFTS FROM CERTAIN PARTIES WILL ALWAYS BE TAXED FOR U.S. FEDERAL INCOME TAX PURPOSES. UNDER INTERNAL REVENU E CODE SECTION 102(C)[7], GIFTS TRANSFERRED BY OR FOR A N EMPLOYER TO, OR FOR THE BENEFIT OF, AN EMPLOYEE CAN NOT BE EXCLUDED FROM THE GROSS INCOME OF THE EMPLOYEE FOR FEDERAL INCOME TAX PURPOSES. WHILE THERE ARE SOME STATUTORY EXEMPTION UNDER THIS RULE FOR DE MINIMIS FRINGE AMOUNTS, AND FOR ACHIEVEMENT AWARDS, THE GENERAL RU LE IS THE EMPLOYEE MUST REPORT A 'GIFT' FROM THE EMPLOYER AS INCOME FOR FEDERAL INCOME TAX PURPOSES. THE FOUNDAT ION FOR THE PRECEDING RULE IS THE PRESUMPTION THAT EMPL OYERS DO NOT GIVE EMPLOYEES ITEMS OF VALUE OUT OF 'DETACH ED AND DISINTERESTED GENEROSITY' DUE TO THE EXISTING EMPLO YMENT RELATIONSHIP. UNDER INTERNAL REVENUE CODE SECTION I 02(B)( I), INCO ME SUBSEQUENTLY DERIVED FROM ANY PROPERTY RECEIVED AS A GIFT IS NOT EXCLUDABLE FROM THE INCOME TAXED TO THE RECIPIENT[B] IN ADDITION, UNDER INTERNAL REVENUE CO DE SECTION 102(B)(2), A DONOR MAY NOT CIRCUMVENT THIS REQUIREMENT BY GIFTING ONLY THE INCOME AND NOT THE PROPERTY ITSELF TO THE RECIPIENT. [9] THUS, A GIFT OF INCOME IS ALWAYS INCOME TO THE RECIPIENT. PERMITTING SUCH AN EXCLUSION WOULD ALLOW THE DONOR AND THE RECIPIENT T O AVOID PAYING TAXES ON THE INCOME RECEIVED, A LOOPHOLE CON GRESS HAS CHOSEN TO ELIMINATE. [EDIT] HISTORY THE GIFT TAX IS A BACK STOP TO THE UNITED STATES ES TATE TAX WITHOUT THE GIFT TAX, LARGE ESTATES COULD BE REDUCE D BY SIMPLY GIVING THE MONEY AWAY PRIOR TO DEATH AND THU S ESCAPE ANY POTENTIAL ESTATE TAX. GIFTS ABOVE THE AN NUAL EXEMPTION AMOUNT ACT TO REDUCE TO THE LIFETIME GIFT TAX MS. SANGEETA M. SAHANI 16 EXCLUSION[ 10]. CONGRESS INITIALLY PASSED THE GIFT T AX IN 1932 AT A MUCH LOWER RATE THAN THE ESTATE TAX, A FULL 25% UNDER THE ESTATE TAX RATE, WHILE ALSO PROVIDING A $50 ,000 EXEMPTION, SEPARATE FROM THE $50,000 EXEMPTION UNDER ESTATE TAX. [11] THE BENEFIT WERE CLEAR: A $10,000,000 GIFT WOULD BE TAXED ONLY $2,300,000 EFFECTIVELY ONLY IB.7%, WELL BELOW THE ESTATE TAX RATE. [ 12] THE INTENTION WAS TO RAPIDLY GENERATE REVENUE IN THE GREAT DEPRESSION. EFFECTIVELY ENCOURAGING AVOIDANCE OF THE ESTATE TAX BY DOING SO, WHILE LAWMAKERS AT THE SAME TIME PUBLICLY , AND IN BOTH HOUSE AND SENATE, PROCLAIMED THE EXACT OPPO SITE OBJECTIVE. [ 13] MOREOVER, THIS WAS DIRECTLY AT THE EXPENSES OF STATE TAX REVENUES, AS WELL AS OF FUTUR E FEDERAL TAX REVENUES.[ 14] THE PRIMARY BENEFICIARIES WERE THE WEALTHIEST CITIZENS, WHOM THE ESTATE TAX WAS SUPPOS EDLY DESIGNED TO TARGET, SINCE ONLY THEY HAD CASH ) ENOUGH TO FREELY MAKE LARGE GIFTS. [ 15] THIS WAS T HE EXPRESS INTENTION [16]. . 12. THE GIFT TAX LAWS EXISTED IN USA, AS QUOTED ABOVE , ARE SUMMARIZED AS UNDER:- THE GIFT TAX LAWS EXISTED IN USA. AS QUOTED ABOVE, ARE SUMMARIZED AS UNDER:- I) A GIFT TAX IS A TAX IMPOSED ON THE GRATUITOUS TRANS FER OF OWNERSHIP OF PROPERTY. THE UNITED STATES INTERNAL REVENUE SERVICE SAYS A GIFT IS ' ANY TRANSFER TO AN INDIVIDUAL, EITHER DIRECTLY OR INDIRECTLY, WHERE FU LL CONSIDERATION (MEASURED IN MONEY OR MONEY'S WORTH) IS NOT RECEIVED IN RETURN.' II) WHEN A TAXABLE GIFT IN THE FORM OF CASH, STOCKS, RE AL ESTATE , OR OTHER TANGIBLE OR INTANGIBLE PROPERTY IS MADE THE TAX IS USUALLY IMPOSED ON THE DONOR (THE GIVER) UNLESS THERE IS A RETENTION OF AN INTEREST WHICH DELAYS COMPLETION OF THE GIFT. A TRANSFER IS COMPLETELY GRATUITOUS WHERE THE DONOR RECEIVES NOTHING OF VALUE IN EXCHANGE FOR THE GIFTE D PROPERTY. A TRANSFER IS GRATUITOUS IN' PART WHERE T HE DONOR RECEIVES SOME VALUE BUT THE VALUE OF THE PROPERTY R ECEIVED BY THE DONOR IS SUBSTANTIALLY LESS THAN THE VALUE O F THE PROPERTY GIVEN BY THE DONOR. IN THIS CASE, THE AMOU NT OF THE GIFT IS THE DIFFERENCE. III) IN THE UNITED STATES, THE GIFT TAX IS GOVERNED BY C HAPTER 2, SUBTITLE B OF THE INTERNAL REVENUE CODE. THE TAX IS IMPOSED BY SECTION 250 I OF THE CODE. FOR THE PURPOSES OF TAXABLE INCOME, COURTS HAVE DEFINED A 'GIFT' AS THE PROCEEDS FROM A 'DETACHED AND DISINTERESTED GENEROS ITY.' MS. SANGEETA M. SAHANI 17 GIFTS ARE OFTEN GIVEN OUT OF 'AFFECTION, RESPECT, A DMIRATION, CHARITY OR LIKE IMPULSES. IV) FOLLOWING GIFTS ARE NOT TAXABLE GIFTS IN USA: GIFTS THAT ARE NOT MORE THAN THE ANNUAL EXCLUSION FOR THE CALENDAR YEAR. GIFTS TO A POLITICAL ORGANIZATION FOR ITS USE. GIFTS TO CHARITIES. GIFTS TO ONE'S (US TAX PAYER) SPOUSE. TUITION OR MEDICAL EXPENSES ONE PAYS DIRECTLY TO A MEDICAL OR EDUCATIONAL INSTITUTION FOR SOMEONE. V) GIFT TAX EXEMPTIONS IN USA: THERE ARE TWO LEVELS OF EXEMPTION FROM THE GIFT TAX. FIRST, TRANSFERS OF A PRESENT INTEREST UP TO $13,000 PER PERSON PER YEAR (AS OF 20 I I ) ARE NOT SUBJECT TO THE TAX ('PRESENT INTEREST' IS D EFINED AS : WHEN THE RECIPIENT OF THE GIFT CAN 'IMMEDIATELY A ND WITHOUT RESTRICTION USE, POSSESS, OR ENJOY THE GIFT ED PROPERTY', IF IT'S NOT THIS 'PRESENT INTEREST' THEN IT'S A 'FUTURE INTEREST' AND THEREFORE THE ANNUAL EXCLUSIO N AMOUNT OF $13,000(20 I I) IS NOT AVAILABLE TO USE AS A DEDUCTION FROM THE GIFT). AN INDIVIDUAL CAN MAKE GI FTS UP TO THIS AMOUNT TO AS MANY PEOPLE AS HE/SHE WISHES E ACH YEAR. 13 IN VIEW OF THE ABOVE DISCUSSION IT IS HELD THAT T HE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS U/S68 OF TH E I.T. ACT SPECIFICALLY ON THE FOLLOWING GROUNDS:- I) IN CASE OF A RESIDENT OR CITIZEN A GIFT OF US$13,000/- OR MORE IS REQUIRED TO BE INTIMATED TO THE US AUTHORI TIES IN FORM NUMBER 709 IRS, WHICH IS THE GIFT TAX RETURN FORM OF U.S.A. EVEN IF THE GIFT IS GIVEN JOINTLY, BY DONOR AND HIS/HER SPOUSE, IT IS REQUIRED TO BE INTIMATED TO THE US REVENUE AUTHORITIES IF THE TOTAL AMOUNT EXCEEDS US$13,000/-. EARLIER THIS LIMIT WAS US$I 1,000/-. FORM NO 709 IS AN ANNUAL RETURN OF GIFT AND IN CASE OF JOINT G IFTS BY HUSBAND AND WIFE BOTH HAVE TO FILE THE SAME. II) VIOLATION BY THE DONOR OF THE LAWS OF THE LAND. THE DONOR HAS NOT FILED ANY INTIMATION AS PER FORM NO.709 OF UNI TED STATES FIFT ( AND GENERATION-SKIPPING TRANSFER) TAX RETURN. III) NOTICES U/S.133(6) HAVE BEEN ISSUED TO THE BANK TO V ERIFY THE PURPOSE OF REMITTANCE MADE BY THE REMITTER. THE . BANK VIDE LETTER DATED 28.12.2011 HAS STATED THAT THE REMITTER HAS NOT MENTIONED ANY PURPOSE. IT IS CLEAR FROM THE ABOVE THAT THE REMITTER HAS PURPOSELY DID NOT P UT THE MS. SANGEETA M. SAHANI 18 REASON TO EVADE US TAX LAWS AND FURTHER, THE RECEIP T IN THE HANDS OF THE ASSESSEE IN ABSENCE OF ANY PURPOSE MENTIONED CANNOT BE TREATED AS 'GIFT'. IV) THE ONUS IS ON THE ASSESSEE TO PROVE THE FACT OF G IFT. IF THE DONOR DID NOT FILE GIFT TAX RETURN IN USA DECLARING THE GIFT, IT IS FOR THE ASSESSEE TO PROVE WHY THE SAME WAS NO T DONE. THE ASSESSEE ALSO HAS TO PROVE THAT HOW THE DONOR T REATS THE PAYMENT TO THE DONER IN USA. IT HAS TO PROVE HO W THE DONOR HAD SHOWN THE SAID AMOUNT IN HIS RETURN OF IN COME, WHETHER IT IS SHOWN AS GIFT OR AS A PAYMENT FOR SOM ETHING ELSE. THE ASSESSEE NEVER FILED CRUCIAL DETAILS TO D ETERMINE WHETHER THE PAYMENT IS FOR A GIFT OR PAYMENT FOR SOMETHING ELSE. IT MAY BE A PAYMENT FOR SERVICES RENDERED OR ANYTHING ELSE. THE CONFIRMATION FILED B Y THE ASSESSEE CANNOT BE ACCEPTED BECAUSE IT IS ON A PLAI N PAPER. V) THE ABOVE CONCLUSIONS DRAWN SUPPORTS WITH THE ASSES SEE'S OWN SUBMISSION THAT HER BROTHER'S SON IS STAYING WI TH HER AND FOR THAT ALL SHE IS TREATING THAT AS ALLEGED 'G IFT' IN HER HANDS. HOWEVER, SHE NEVER PROVED THAT THE DONOR HAS GIVEN GIFT AND THE DONOR HAS SHOWN AS 'GIFT' IN HIS RETURN OF INCOMES. THE PRIMARY ONUS HAS NOT BEEN FULFILLED BY THE ASSESSEE. A GIFT CANNOT BE A GIFT WITHOUT THE MUTUA L UNDERSTANDING OF TWO PERSONS. IT IS A COMPENSATION RECEIVED IN THE GARB OF A GIFT. A MUTUAL UNDERSTAND ING SHOULD BE PROVED WITHIN THE LAWS OF THE LAND. THERE FORE, THE CREDITS IN HER ACCOUNTS ARE NOT AT ALL IS A GIF T BUT ENJOYMENT OF FUNDS AT HER DISPOSAL. THEREFORE, CERT AINLY AN INCOME, WHICH SHE NEVER HAS TO REPAY DURING HER LIF E 14.RELIANCE IS PLACED ON THE DECISION IN THE CASE OF CIT VS. MOHANKALA 291 ITR 278(SC)(2007) WHEREIN THE SUPREME COURT REVISING THE JUDGMENT OF HIGH COURT STATED TH AT A BARE READING OF SECTION 68 SUGGESTS THAT THERE HAS TO BE CREDIT OF AMOUNTS IN THE BOOKS MAINTAINED BY AN ASSESSEE; SUCH CREDIT HAS TO BE OF A SUM DURING THE PREVIOUS YEAR; AND IF THE ASSESSEE OFFER NO EXPLANA TION ABOUT THE NATURE AND SOURCE OF SUCH CREDIT FOUND IN THE BOOKS, OR THE EXPLANATION OFFERED BY THE ASSESSEE I N THE OPINION OF THE ASSESSING OFFICER IS NOT SATISFACTOR Y, IT IS ONLY THEN THE SUM SO CREDITED MAY BE CHARGED TO INC OME TAX AS THE INCOME OF 'THE ASSESSEE OFFER NO EXPLANA TION' TO MEAN THAT THE ASSESSEE OFFER NO PROPER REASONABLE A ND ACCEPTABLE EXPLANATION AS REGARDS THE SUM FOUND CRE DITED IN THE BOOKS MAINTAINED BY THE ASSESSES. ACCORDING TO THE SUPREME COURT, THE OPINION OF THE ASSESSING OFFICER FOR NOT ACCEPTING THE EXPLANATION OFFERED BY THE ASSESS EE AS MS. SANGEETA M. SAHANI 19 NOT SATISFACTORY IS REQUIRED TO BE BASED ON PROPER APPRECIATION OF MATERIAL AND OTHER ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD. THE SUPREME COUR T HELD THAT IT IS TRUE THAT EVEN AFTER REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE IS FOUND UNACCEPT ABLE, THE CRUCIAL ASPECT IS WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE IT SHOULD BE INFERRED THA T THE SUMS CREDITED IN THE BOOKS OF THE ASSESSEE CONSTITU TED INCOME OF THE PREVIOUS YEAR. IT MUST RECEIVE THE CONSIDERATION OF THE AUTHORITIES, PROVIDED THE ASSE SSEE REBUT THE EVIDENCE AND THE INFERENCE DRAWN TO REJEC T THE EXPLANATION OFFERED AS UNSATISFACTORY. IN THE CASE IN HAND, THE SUPREME COURT NOTED THAT THE AUTHORITIES CONCUR RENTLY FOUND THE EXPLANATION OFFERED BY THE ASSESSES UNACCEPTABLE. THE AUTHORITIES HAD UPHELD THE OPINIO N FORMED BY THE ASSESSING OFFICER THAT THE EXPLANATIO N OFFERED WAS NOT SATISFACTORY. THE ASSESSEE HAD NOT TAKEN THE PLEA THAT EVEN IF THE EXPLANATION WAS NOT ACCEP TABLE THE MATERIALS AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DID NOT JUSTIFY THE SUM FOUND CREDITED IN TH E BOOKS TO BE TREATED AS A RECEIPT OF AN INCOME NATURE. THE BURDEN IN THIS REGARD WAS ON THE ASSESSEE. THE SUPREME COU RT HELD THAT THE HIGH COURT HAD MISDIRECTED ITSELF AND COMMITTED AN ERROR IN DISTURBING THE CONCURRENT FIN DINGS OF THE ACT. 15. SIMILARLY, THE ASSESSEE RECEIVED GIFT FROM HER SI STER. THE ASSESSEE HAS NOT FURNISHED THE CERTIFIED COPIES OF THE CAPITAL ACCOUNT / BALANCE SHEET OF THE DONOR I.E. S ISTER. AS ENUMERATED ABOVE, SHE NEVER PROVED THAT THE DONOR H AS GIVEN GIFT AND THE DONOR HAS SHOWN AS 'GIFT' IN HER RETURN OF INCOMES. THE PRIMARY ONUS HAS NOT BEEN FULFILLED BY THE ASSESSEE. A GIFT CANNOT BE A GIFT WITHOUT THE MUTUA L UNDERSTANDING OF TWO PERSONS. A MUTUAL UNDERSTANDIN G SHOULD BE PROVED WITHIN THE LAWS OF THE LAND. 16. I, THEREFORE, INVOKE THE PROVISIONS OF SECTION 68 A ND ADD THE GIFT OF RS.3,06,73,975 TO TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM OTHER SOURCES' . PENALTY PROCEEDINGS ARE BEING INITIATED U/S.27I (I )( C) SEPARATELY OF THE INCOME TAX ACT, 1961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME THEREBY CONCEALING THE INCOME.' 3.1. DURING THE APPELLANT PROCEEDINGS, APPELLANT HAS FILED PAPER BOOK WHEREIN ALONGWITH WRITTEN SUBMISSIONS VA RIOUS ANNEXURE AS WELL AS DETAILS OF BOTH THE DONORS AND A COPY OF US GIFT TAX GUIDELINES HAVE BEEN FILED ALONGWITH CASE LAWS INCLUDING THAT OF DECISION GIVEN BY THE HON 'B LE DELHI HIGH COURT IN THE CASE OF OASIS HOSPITALITIES PVT. LTD. 33 MS. SANGEETA M. SAHANI 20 ITR 119, IN SUPPORT OF THE SUBMISSIONS MADE. THE RELE VANT PORTIONS OF THE WRITTEN SUBMISSIONS DEALING WITH TH E ISSUE ARE REPRODUCED AS UNDER:- GIFT FROM BROTHER INR 3,01,73,975/- (USD 6.00,000) 'IN THE COURSE OF ASSESSMENT, YOUR APPELLANT FILED THE FOLLOWING INFORMATION, EXPLANATIONS AND DOCUMENTS I N SUPPORT OF IDENTITY, CAPACITY OF THE DONOR AND GENU INENESS OF THE GIFT: A. LETTER DATED 19.12.2011 B. COPY OF US TAX RETURN IN FORM 1040 FOR THE YEAR ENDI NG 3 I ST DECEMBER, 2008 C. COPY OF HER BROTHER'S PASSPORT BEARING NO. Z 1605770 D. COPY OF CONFIRMATION FROM HER BROTHER GIVING INT ER-ALIA DETAILS OF US SOCIAL SECURITY NUMBER ADDRESS AND BA NK PARTICULARS E. COPIES OF BANK STATEMENT FROM HONGKONG BANK REFLECTING THE REMITTANCE OF GIFT F. COPIES OF HER BANK STATEMENTS WITH ICICI BANK LT D. WHEREIN THE AFORESAID GIFT WAS RECEIVED THROUGH NOR MAL BANKING CHANNELS G. ORIGINAL PASSPORT OF HERSELF.' 3.2 THE LATER PART OF THE SUBMISSION HAS SUBMITTED AS BELOW:- 'RELEVANCE OF PAYMENT OF GIFT TAX BY THE DONOR IN USA : AT THE OUTSET, IT IS SUBMITTED TO YOUR HONOR THAT P AYMENT OF TAXES BY A DONOR OR LENDER OF MONEY IN RESPECT O F THE AMOUNT RECEIVED BY A DONEE OR A BORROWER IS WHOLLY IRRELEVANT IN DECIDING WHETHER PROVISIONS OF SECTIO N 68 OF IT ACT ARE ATTRACTED. FOR EXAMPLE, HYPOTHETICALLY, IF MR. A. AS EARNED HUGE INCOME AND IS ON RECORD OF THE TAX DEPARTMENT BUT DOES NOT PAY PROPER TAXES TO THE GOVERNMENT. NOW, IF MR. B WHO NEEDS FINANCE, APPROA CHES MR. A, WHO LENDS HIM MONEY ON COMMERCIAL TERMS. MR. A IS HOLDING PERMANENT ACCOUNT NUMBER AND LENDS THE MONEY MR. B BY PROPER BANKING CHANNELS. THERE IS NO THING ON RECORD TO SUGGEST THAT MONEY GIVEN BY MR. A TO M R. B IS B'S OWN MONEY. IN THIS CIRCUMSTANCES, ONLY BECAUSE MR. A HAS NOT PAID TAXES ON HIS INCOME, CAN BE THE REASON TO CONSIDER THE TRANSACTION AS NON GENUINE? THE ANSWER IS OBVIOUSLY NEGATIVE, B) WITHOUT PREJUDICE TO THE ABOVE. THE LEARNED ASSE SSING OFFICER IS NOT COMPETENT TO DECLARE THAT THE DONOR WAS LIABLE TO GIFT TAX. MORE SO, WHEN THE SAID PERCEPTI ON OF MS. SANGEETA M. SAHANI 21 LEARNED ASSESSING OFFICER WAS DENIED BY THE DONOR. IT IS RESPECTFULLY SUBMITTED THAT THE LEARNED ASSESSING O FFICER NOT BEING COMPETENT TO INTERPRET THE USA TAX LAWS, COULD NOT HAVE DRAWN CONCLUSIONS ON THE GIFT TAX LIABILIT Y OF THE DONOR IN USA BY JUST REFERRING TO THE TEXT OF THE M ATERIALS DOWNLOADED FROM THE INTERNET - THE SOURCE OR AUTHEN TICITY NOT HAVING BEEN CITED OR ESTABLISHED. FURTHER, THE COMPLETENESS OF THE LAW CITED BY HIM IS ALSO NOT ESTABLISHED. IN THIS CONNECTION, YOUR APPELLANT TAKES LIBERTY TO PRODUCE THE RELEVANT PROVISIONS OF THE US GIFT TAX LAW - WH ICH HAS NOT BEEN CITED BY THE LEARNED ASSESSING OFFICER - T O THE EFFECT THAT THERE IS EXEMPTION FROM GIFT TAX FOR GI FTS UP TO AGGREGATE USD I MILLION DURING THE LIFETIME OF A US TAXPAYER WHICH IS IN ADDITION TO ANNUAL GIFT TAX EX EMPTION OF USD 13.000 PER YEAR. WITHOUT CONSIDERING THE ABOVE PROVISION, THE LEARNE D ASSESSING OFFICER COMPLETELY ERRED IN ARRIVING AT C ONCLUSION THAT THE DONOR FAILED TO PAY THE GIFT TAX. THE DONOR HAS CONVEYED TO YOUR APPELLANT THAT HE HA D NOT MADE ANY SIGNIFICANT GIFT BEFORE THE IMPUGNED GIFT AND THEREFORE, THE SAID GIFT BEING MUCH LOWER THAN THE THRESHOLD OF USD I MILLION, THERE WAS NO GIFT TAX L IABILITY ON HIM WHICH HE WAS REQUIRED TO DISCHARGE. IT IS THEREFORE SUBMITTED TO YOUR HONOR THAT THE LE ARNED ASSESSING OFFICER HAS ARRIVED AT A CONCLUSION UNDER A WRONG PREMISE OR ASSUMPTION OF THE FACT FOR JUSTIFY ING THE ADDITIONS MADE BY HIM, RENDERING THE SAID ADDITIONS INVALID. NULL AND VOID AND UNSUSTAINABLE UNDER THE IT ACT OF INDIA. 2. YOUR APPELLANT NOT UNDER OBLIGATION TO PROVE SOUR CES OF THE SOURCE: THE COURTS HAVE LAID DOWN THE LEGAL PRINCIPLE THAT AN ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCES OF TH E SOURCE. ILLUSTRATIVELY, WE REFER TO THE RAJASTHAN H C JUDGMENT IN THE CASE OF LABH CHAND BOHRA (219 CTR 571) FOLLOWING THE SUPREME COURT DECISION IN THE CASE OF DAULAT RAM RAWAT MULL (87 ITR 349) WHICH LAID DOWN THE ABOVE PRINCIPLE. THE RELEVANT EXTRACT ARE AS FOLLOWS: '7, REALLY SPEAKING, THE JUDGMENT IN DAULAT RAM'S C ASE (SUPRA) IS THE AUTHORITY, FOR THE PROPOSITION, THAT ASSESSEE CANNOT BE REQUIRED TO PROVE THE SOURCE OF THE SOURC E. IT WAS PRECISELY HELD IN DAULAT RAM'S CASE (SUPRA), TH AT THE FACT THAT LENDER HAS NOT BEEN ABLE TO GIVE SATISFAC TORY MS. SANGEETA M. SAHANI 22 EXPLANATION REGARDING THE SOURCE OF THE FUND LENT B Y HIM, WOULD NOT BE DECISIVE, EVEN OF THE MATTER, AS TO WH ETHER, THE LENDER WAS THE OWNER OF THAT SUM, EVEN THOUGH T HE EXPLANATION FURNISHED BY HIM, REGARDING THAT SOURCE OF MONEY. IS FOUND TO BE NOT CORRECT. FROM THE SIMPLE FACT, AT E EXPLANATION REGARDING SOURCE OF MONEY. FURNISHED BY THE LENDER. WHOSE MONEY IS LYING DEPOSITED, HAS BEEN FO UND TO BE FALSE, IT WOULD BE A REMOTE AND FAR-FETCHED CONC LUSION TO HOLD, THAT THE MONEY BELONGS TO THE ASSESSEE, AN D THAT, HE WOULD IN SUCH A CASE HAD ANY DIRECT NEXUS BETWEE N THE FACTS AND CONCLUSIONS FOUND THEREFROM. ' 3.3 THEN THE APPELLANT HAS TAKEN THE PLEA THAT THE APPELLANT IS NOT UNDER OBLIGATION TO PROVE SOURCE O F THE SOURCE AND ALSO THAT NO ADDITION U/S.68 CAN BE MADE WITHOUT AN INFERENCE THAT THE RECEIPT IS INCOME OF THE ASSESSEE AS DECIDED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF R.B.N.J NAIDU IN 29 ITR 194. THE APPELLANT HAS THEN ALSO RELIED UPON G.M. MADAPPA VS .CIT, MADRAS(1948) 16 ITR 385 AND NARAYANDAS KEDARNATH VS. CIT, CENTRAL( 1952) 22 ITR 18, ISSARDAS V. TALREJA, ITAT MUMBAI (117 TTJ 1), A.RAJENDRAN & ORS., HIGH COURT OF MADRAS (291 ITR 178), SURESH KUMAR KAKAR, HIGH COURT OF DELHI (324 ITR 231), RAMESH K SHAH & ORS, ITAT BANGALORE (93 TTJ 556), NARENDRA KUMAR SEKHRI, ITAT AMRITSAR (81 TTJ 1036), VIJAY PRAKASH(HUF), ITAT AMRITSAR (120 TTJ 429), ASHA HAMPANNAVAR, THE SUPREME COURT OF INDIA [319 ITR (ST)5], SMT. P.K.NOORJAHAN, T HE SUPREME COURT OF INDIA (237 ITR 570), P.MOHANKALA & ORS., THE SUPREME COURT OF INDIA (291 ITR 278) AND CIT VS. DEVIPRASAD KHANDE1WAL & CO. LTD.(1971) 81 ITR 460(BOM). 3.4 THE APPELLANT THEN HAS MADE AN ALTERNATIVE SUBMISSION ALSO THAT AS PER THE REQUIREMENT OF SEC.56(2)(VI)OF THE INCOME-TAX ACT ALSO AS THIS TRANS ACTION OF GIFT IS FROM BROTHER TO SISTER AND THE SECOND TR ANSACTION OF GIFT IS FROM SISTER TO SISTER THE CASE IS COVERE D UNDER EXPLANATION (II) OF SEC.56(2)(VI) OF THE INCOME-TAX A CT. AT THE END, APPELLANT HAS SUBMITTED THAT ONCE THE TRANSACTIONS HAVE NOT BEEN DOUBTED AS IT IS NOT DIS PUTED THAT THE TOTAL TRANSACTION WAS THROUGH BANKING CHAN NEL, IDENTITY OF DONORS AND THEIR CREDITWORTHINESS IS PR OVED ADDITIONS SHOULD NOT HAVE BEEN MADE U/ S 68. 3.5 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS WRITTEN SUBMISSION MADE BY THE APPELLANT. A READING OF PARA 8 OF THE ASSESSMENT ORDER SHOWS THAT THE A.O A SKED FOR COPIES OF IRS FORM 709 OF THE DONOR WHICH THE APPELLANT DID NOT FILE AND RATHER REPLIED THAT IN A NY CASE MS. SANGEETA M. SAHANI 23 SHE IS NOT OBLIGATED TO PROVE SOURCE OF WHEN CONFIR MATION HAS BEEN FILED. IN ABSENCE OF THE SAME, THE A.O HAS ASKED FOR CERTIFIED COPIES OF CAPITAL ACCOUNT J BALANCE S HEET OF THE DONOR WHICH ALSO SHE DID NOT FILE AND THUS THE A.O CONCLUDED IN PARA 10 OF THE ASSESSMENT ORDER THAT RE CEIPT OF THIS GIFT CLAIMED BY THE ASSESSEE IS NOT ACCEPTA BLE FOR THE REASON THAT THESE DETAILS WERE NOT FILED AND FU RTHER THERE IS NO PROOF THAT THIS AMOUNT OF GIFT WAS MADE FOR WHICH NO GIFT TAX HAS BEEN PAID BY THE DONOR IN USA . THE A.O IN THE LATER PART OF ASSESSMENT ORDER HAS DISCU SSED THAT AS PER US LAW ONLY AN AMOUNT UPTO $13,000 PER PERSON PER YEAR (AS OF 2011) IS EXEMPTED AND IN CASE O F LIFETIME GIFT TAX EXEMPTION OF AN AMOUNT F RS.50,00, 000$ IS EXEMPTED, IN VIEW OF A,O AS PER US LAW; SINCE EX CEPT FOR THE PROPERTY ACQUIRED BY GIFT, BEQUEST, DEVICE OR INHERITANCE IS NOT INCLUDIBLE IN GROSS INCOME (SAME IS NOT TO BE INCLUDED IN VALUE OF PROPERTY WHEN FILING RET URN OF INCOME) , ALL OTHER HAVE TO BE TAXED IN USA AND IN CASE OF GIVING A GIFT, THE TRANSFER MUST DEMONSTRATE, DETAC HED AND DISINTERESTED GENEROSITY. AS PER A,O'S VIEW, SINCE NOTHING OF THIS SORT HAS BEEN SHOWN BY THE APPELLANT IN CAS E OF THE DONOR, MR. RAJU, HER BROTHER IT CANNOT BE PRESUMED THAT THIS GIFT WAS EXEMPTED FROM GIFT TAX AND HENCE HAVI NG FAILED TO SHOW THE GENUINENESS OF THE TRANSACTION, THE AMOUNT TAKEN FROM BROTHER CLAIMED TO BE GIFT BY NAT URE WERE ADDED U/S.68 OF THE ACT. 3.6. I HAVE GONE THROUGH THE ASSESSMENT ORDER. THE A .O. HAS MADE OBSERVATIONS THAT ASSESSEE COULD NOT PROVE CREDITWORTHINESS IN ABSENCE OF IRS 709 FORM. NOW, TH E APPELLANT HAS FILED 2008 W -2 AND EARNING SUMMARY ON PAGE 47 OF THE PAPER BOOK. I HAVE GONE THROUGH THE S AME AND IT IS NOTED THAT THE EARNING SUMMARY OF MR. RAJ U, THE DONOR BROTHER IS $9,49,723/- FOR THE YEAR 2008.THE APPELLANT HAS ALSO FILED COY OF TRANSACTION DETAILS OF DONOR BROTHER AND SISTER'S ACCOUNT HELD RESPECTIVELY IN U SA AND DUBAI. THE DONOR BROTHER'S ACCOUNT SHOWS CREDIT MON EY IN THE HSBC ACCOUNT AND THERE IS BALANCE OF RS.1O,60,002.69$ AVAILABLE AS ON 24.03.2009 AND THEN THERE IS A WITHDRAWAL OF 6 MILLION $ ON 25.03.2009 WHICH IS CREDITED IN ICICI BANK OF THE APPELLANT MAINTAINED WITH CHEMBUR ON 26.03.2009 WITH A CONVERSION RATE OF RS.50.29 PER $ SHOWING CREDIT OF RS.3,0 1,73,975/-. 3.7 HOWEVER, AS THE A.O HAS SAID THAT SUCH SUPPORTING DETAILS WERE NEVER FURNISHED, I HAVE GONE THROUGH ASSESSMENT FOLDER. APPELLANT HAS CATEGORICALLY STAT ED THAT THERE ARE NO ADDITIONAL EVIDENCES IN THE PAPER BOOK . IT IS NOTED FROM THE ASSESSMENT FOLDER THAT THESE BANK AC COUNT STATEMENTS WITH COMPLETE TRAIL OF MONEY GIFTED FROM THE MS. SANGEETA M. SAHANI 24 CONCERNED BANK ACCOUNT OF DONORS TO THE BANK ACCOUN T RECIPIENT WERE FILED BEFORE A.O DURING ASSESSMENT PROCEEDINGS. 3.8 ON THE OTHER HAND, IN THE PAPER BOOK FILED BY THE APPELLANT, A COPY OF US GIFT TAX GUIDELINES HAS BEE N PROVIDED, WHICH SAY THAT A GIFT UPTO US$ 1 MILLION TI LL LIFETIME IS EXEMPT FROM GIFT TAX, THE SOURCE OF THI S TAX GUIDELINES IS IRS WEBSITE WHICH IS UPDATED ON 13.0 C20L J9. I HAVE GONE THROUGH THE SAME AND FIND THAT THE VERY FIRST LINE SAYS THAT GIFT TAX LAW ALLOWS A ONETIME TRANSF ER OF AN AMOUNT UP TO $1 MILLION BY U.S. TAX PAYER. EVEN THE A .O IN THE ASSESSMENT ORDER HAS MENTIONED THAT AS PER G IFT TAX LAW PREVAILING IN 2011-2012, THE RIGHT TIME THE GIFT TAX EXEMPT IS RS.$50,00,000/-, WHICH IS SAME AS FEDERAL TAX EXEMPT. 3.9 IN VIEW OF THIS GUIDELINES AVAILABLE, THE GIFT BE ING WITHIN THE LIMIT OF EXEMPTED GIFT TAX, THE THEORY B EING BUILT BY THE A.O THAT APPELLANT HAVING FAILED TO PROVE TH AT ANY TAX WAS PAID ON THE GIFT AMOUNT OF RS.6 MILLION $ I.E . RS.3,01,73,975/- DOES NOT STAND ANY MORE. I HAVE CONSIDERED THE FACTS CAREFULLY. LOOKING INTO THE CIRCUMSTANCES THE APPELLANT IS YOUNGEST, UNMARRIED SISTER LEAVING IN INDIA DOING SMALL BUSINESS ON HER OWN, L OOKING AFTER HER MOTHER AND DONOR BROTHER'S SON (I.E. NEPH EW). IT IS ALREADY A FACT ON RECORD BEFORE A.O. ALSO THAT D ONOR BROTHER HAD SOME PERSONAL REASON AS A RESULT THEREO F HIS SON I.E. APPELLANT'S NEPHEW IS STAYING WITH APPELLA NT AND IS STUDYING IN INDIA. IT IS NOT ANY UNREASONABLE TRANS ACTION BEYOND THE NORMAL PERCEPTION OF INDIAN SOCIETY WHER E BROTHER HAS MADE THE GIFT TO SISTER TO ENABLE HER T O PURCHASE A BIGGER HOUSE WHEREIN SHE WITH THEIR MOTH ER AND HER NEPHEW WHO IS THIS VERY BROTHER'S SON CAN S TAY. COMING TO THE GIFT MADE BY THE SISTER, AGAIN THE AP PELLANT HAS SUBMITTED THAT WHEN THE BASIC FACT THAT SISTER WHOSE HUSBAND IS RUNNING A RESTAURANT IN DUBAI, WHICH IS FREQUENTLY VISITED BY CELEBRITIES AND MOST OF THEM ARE BOLLYWOOD PERSONALITIES, AS IS EVIDENT BY THE BLOGS WRITTEN BY THEM , IS HAVING A GOOD INCOME. SHE IS HAVING A JOINT ACCOUNT WITH HER HUSB AND WITH MORE THAN ADEQUATE FUNDS AND FROM THERE HAS WITHDRAWN MONEY TO MAKE THE GIFT TO THE SISTER WHIC H INFACT HAS COME TO BANK ACCOUNT OF APPELLANT'S MOTH ER; MRS. USHA MOTILAL SAHANI .MAINTAINED WITH HDFC BANK , CHEMBUR, MUMBAI BRANCH, THE ADDITION SHOULD NOT HAV E BEEN MADE U/S.68 OF THE INCOME-TAX ACT. MS. SANGEETA M. SAHANI 25 3.10 AS REGARDS GIFT MADE BY THE SISTER, SMT. ANITA RA JAN SIPPY HER JOINT ACCOUNT WITH HER HUSBAND WITH EMIRA TES NBD SHOWS FREQUENT CREDIT AND DEBIT TRANSACTION THROUGHOUT THE YEAR INCLUDING CASH WITHDRAWALS OF RS.44,968/-UAE DIRHAM AND ON 03.08.2008, 07/08/2008, 19/08/2008, 5000,50,000 ADN 30,000 UAE DIRHAM RESPECTIVELY. IT IS ALSO SEEN THAT THE AMOUNT WAS TRANSFERRED BY UAE EXCHANGE CENTER ON 02.08.2008 AND 04.08.2008 OF 21,802.50 AED EQUIVALENT TO RS.2,50,000 I- IN INR. THIS AMOUNT IS FOUND CREDITED IN THE BANK A CCOUNT OF APPELLANT'S MOTHER MRS. USHA MOTILAL SAHANI. 3.11 HERE, IN THE INSTANT CASE AS DISCUSSED ABOVE SHE HAS NOT ONLY GIVEN NATURE AND SOURCE OF SUCH AMOUNT, GENUINENESS OF GIFT TRANSACTION RECEIVED THROUGH BA NKING CHANNEL HAS ALSO BEEN PROVED AND SUPPORTED BY DOCUMENTARY EVIDENCE DURING THE ASSESSMENT PROCEEDI NGS BEFORE THE A.O. IN VIEW OF THESE DETAILS AVAILABLE WHERE IDENTITIES WERE PROVED, BLOOD RELATIONS OF DONORS I S WELL ESTABLISHED AND CREDITWORTHINESS IS PROVED AND TRANSACTIONS ARE SUPPORTED BY BANKS BOTH ON GIVING AS WELL AS THE RECEIVING END ADDITION FOR THE AMOUNT RS.5,00,000/- SHOWN FROM APPELLANT'S SISTER CANNOT BE SAID UNEXPLAINED CASH CREDITORS AND HENCE ADDITION MADE U/S.68 BEING NOT SUSTAINABLE IS DELETED HEREWITH. 3.12 I HAVE ALSO GONE THROUGH THE DECISION GIVEN BY HON'BLE SUPREME COURT IN THE CASE OF CIT V IS. P.MOHANKALA & ORS WHICH HAS BEEN RELIED UPON BY THE A.O IN THIS CASE IN THE INSTANT APPEAL. THE FACTS IN TH E CASE IS DISCUSSED BY HON'BLE ITAT IN ITA NO.3867/M/2009 IN THE CASE OF SMT. NEETA G.KARIA VS. ITO- 23(3)(1), MUMBAI , THE RELEVANT PORTION IS REPRODUCED AS UNDER:- ' THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. P. MOHANKALA AND ORS(SUPRA), CONSIDERED A CASE IN WHIC H THE ALLEGED GIFTS WERE RECEIVED FROM NRLS. THE ASSESSEE COULD NOT OFFER ANY EXPLANATION ABOUT THE NATURE AND SOUR CE OF SUCH AMOUNTS CREDITED IN HIS BOOKS OF ACCOUNTS. THE EXPLANATIONS THAT WERE TENDERED IN SUPPORT OF THE GENUINENESS OF THE GIFTS WERE FOUND TO BE UNACCEPTA BLE BY THE AO, CIT(A) AND THE TRIBUNAL. THE HON'BLE HIGH C OURT REVERSED SUCH FINDINGS OF THE AUTHORITIES BELOW BY, INTER ALIA, RELYING ON THE FACT THAT THE GIFTS WERE RECEI VED THROUGH THE BANKING CHANNELS. IN FURTHER APPEAL, TH E HON'BLE SUPREME COURT OVERTURNED THE FINDING OF THE HON'BLE HIGH COURT AND SUSTAINED THE ADDITION. ADVE RTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE MS. SANGEETA M. SAHANI 26 HAS MISERABLY FAILED TO LEAD ANY COGENT EVIDENCE FO R SUBSTANTIATING HER CLAIM ABOUT THE GENUINENESS OF T HE GIFTS.' HENCE IN THE GIVEN SET OF FACTS, I AM OF THE CONSID ERED VIEW THAT THE ADDITION MADE FOR GIFT AMOUNT OF RS.30,195/- SHOWN FROM BROTHER OF APPELLANT CANNOT BE SAID TO BE UNEXPLAINED CASH CREDIT AND HENCE ADDITI ON MADE OF RS. 3,01,73,975 AND RS.5,00,000/- MADE BY A.O U/S 68 IN THE HANDS OF APPELLANT IS NOT SUSTAINABLE . 3.13 APPELLANT HAS TAKEN ALTERNATIVE SUBMISSION U/S. 56 OF THE ACT AS THERE IS NO DENIAL OF BLOOD RELATION AND THE AMOUNTS ARE INDIRECTLY COVERED BY THE PROVISIONS OF SEC.56(2)(VI). HOWEVER, FOR THE REASON THAT THE PLEA TAKEN FOR ADDITION MADE UJS.68 HAS ALREADY BEEN ADJUDICATED , ALTERNATIVE SUBMISSION IS NOT DISCUSSED HEREWITH. 4.IN THE RESULT, APPEAL IS ALLOWED. 2. AT THE TIME OF HEARING, LD. MRS. N.V. NADKARNI, ADVANCED HIS ARGUMENTS WHICH ARE IDENTICAL TO THE G ROUND RAISED BY SUBMITTING THAT WHILE GRANTING RELIEF TO THE ASSESSEE, THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) IGNORED THE FACT THAT THE ASSESSEE DID NOT DISCHARG E THE ONUS OF PROVING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT PROVED THE TRANSACTI ON BEYOND DOUBT, ON THE OTHER HAND SHRI PARESH VAKHARI A ALONG WITH MS. HETAL PATEL DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IF THE OB SERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION M ADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MS. SANGEETA M. SAHANI 27 MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY TH E LD. RESPECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND A NALYZED, WE FIND THAT THE LD. ASSESSING OFFICER MADE ADDITIO N OF RS. 3,01,73,975/-, INVOKING SECTION 68 OF THE INCOME-TA X ACT AS UNEXPLAINED CASH CREDIT. THE ASSESSEE ATTENDED THE OFFICE OF THE REVENUE AUTHORITIES AND FILED THE NECESSARY DET AILS. THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF PROMOTION, EVENT AND CUSTOMER RELATIONSHIP MANAGEME NT IN THE NAME OF M/S GLOBAL SERVICES. DURING THE YEAR THE ASSESSEE SHOWED TURNOVER OF RS. 1.17 CRORES ALONG W ITH COMMISSION RECEIVED, INTEREST ON FDS ETC. IT WAS F OUND BY THE ASSESSING OFFICER THAT THE ASSESSEE RECEIVED TO HAVE DECLARED/SHOWN GIFT OF RS. 3,01,73,975/- FROM BROTH ER AND SISTER. THE ASSESSEE WAS ASKED TO FURNISH THE DETAI LS OF GIFT FROM THE DONOR, IDENTITY, CREDITWORTHINESS AND GENU INENESS OF THE GIFT. THE ASSESSEE SUBMITTED THE GIFT DEED/CONFIRMATION, RELATIONSHIP WITH THE DONOR AND SOURCES OF THE DONOR. IN RESPONSE TO THE QUERY RAISED BY TH E ASSESSING OFFICER, THE ASSESSEE EXPLAINED VIDE COMMUNICATION DATED 19.12.2011 THAT SHE RECEIVED US D 6,00,000/- (RS. 3,01,73,975/-). THE ASSESSEE FURTHE R CLAIMED THAT SHE IS UNMARRIED AND LIVE WITH AGED MO THER AND SON OF HER BROTHER. THE DONOR (ELDER BROTHER) A T THE RELEVANT TIME WAS A NON-RESIDENT FOR THE LAST 26 YE ARS AND WAS INITIALLY TILL 1994 WAS WORKING IN DUBAI AND TH EREAFTER PERMANENTLY SETTLED IN USA, WORKING AS MARKETING MA NAGER IN MULTINATIONAL CONGLOMERATE TELEBRANDS CORPORATIO N, NEW JERSE. THE ELDER SISTER OF THE ASSESSEE IS MARR IED AND MS. SANGEETA M. SAHANI 28 SETTLED IN DUBAI FOR THE LAST 20 YEARS. FROM THE RE CORD, WE NOTE THAT THE SOURCE OF EARNING OF THE ELDER BROTHE R (DONOR) HAS ALSO BEEN EXPLAINED SATISFACTORILY WITH DOCUMEN TARY EVIDENCES AS IS EVIDENT FROM PAGE 2 OF THE ASSESSME NT ORDER ITSELF. SO FAR AS THE IDENTITY OF THE DONOR, GENUINENESS OF THE TRANSACTION, THROUGH BANKING CHANNEL IS ALSO ESTABLISHED. NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT IN FACT ANY CASH WAS DEPOSIT ED IN THE ACCOUNT OF THE DONOR OR ANY UNDERHAND TRANSACTION W AS EFFECTED. THE CREDITWORTHINESS OF THE DONOR IS ALSO NOT IN DOUBT, THEREFORE, WE FIND THAT THE ONUS OF PROVING THE INGREDIENTS CONTEND IN SECTION 68 OF THE ACT HAS BE EN DULY DISCHARGED BY THE ASSESSEE, IT SEEMS THAT THE ASSES SING OFFICER MERELY DOUBTED THE TRANSACTION ON THE BASIS OF AMOUNT INVOLVED. IN THE ABSENCE OF ANY CONTRARY MAT ERIAL, WE ARE OF THE VIEW THAT SUSPICION CANNOT TAKE THE S HAPE OF EVIDENCE, HOWEVER, STRONG IT MAY BE. TOTALITY OF FA CTS CLEARLY INDICATES THAT THE TRANSACTION WAS GENUINE MORE SPE CIFICALLY WHEN THE ASSESSEE DULY FURNISHED THE COPY OF US GIF T TAX GUIDELINES, WHICH ALLOWS ONE TIME TRANSFER AS A GIF T OF AN AMOUNT UP TO ONE MILLION US DOLLARS BY A TAX PAYERS . THE AMOUNT WAS CREDITED THROUGH BANKING CHANNEL. IN SUC H A SITUATION, WE ARE IN AGREEMENT WITH THE FINING OF T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSES SEE NOT ONLY PROVED THE NATURE AND SOURCE OF AMOUNT BUT ALSO PROVED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WITH DOCUMENTARY EVIDENCES EVEN BEFORE THE ASSESSING OFFICER. THE GIFT IS WITHIN THE BLOOD REL ATIONS, MS. SANGEETA M. SAHANI 29 THEREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION D RAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE S TAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS AFF IRMED. 2.2 WITH REGARD TO THE GIFT OF RS.5 LAKHS RECEIVED FROM THE SISTER OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGHTLY CONCLUDED THAT THE ASSESSEE HAS PROVED THE IDENTITY , CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE OF BOTH SIDES, AT TH E CONCLUSION OF HEARING ON 12/06/2015. SD/- SD/- ( B.R.BASKARAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & MUMBAI; ) DATED : 12/06/2015 F{X~{T? & FA ? ; P.S/. . . ) %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. & 0% ( *+ ) / THE CIT, MUMBAI. P4. & 0% / CIT(A)- , MUMBAI 5. 2!3 .%' , *+( *' 4 , & / DR, ITAT, MUMBAI 6. 5# 6 / GUARD FILE. / BY ORDER, /2+% .% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI