SMT. MAMTABEN GOPALDAS AGRAWAL V. INCOME TAX OFFICER

TAXAP/601/2005

AI Insights

The case involves Smt. Neelamben Gopaldas Agrawal, the appellant, who received a gift of Rs. 2,00,000 from a non-resident Indian, Shri Chinubhai Gangadas Thakkar, through a cheque from his Non Resident External Account. The Assessing Officer initially treated this amount as unexplained cash credit under Section 68 of the Income Tax Act due to insufficient proof of the donor's financial capacity. However, the CIT (Appeals) reversed this decision, which was later contested by the revenue before the Tribunal. The Tribunal upheld the revenue's stance, leading to the present appeals by the assessees. The High Court, referencing previous decisions and the specifics of the case, concluded that the assessees had adequately demonstrated the legitimacy of the gift, thereby allowing the appeals.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 753970 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 19-11-2014
• Assessment Year: misc
• Other Referred Cases: Murlidhar Lahorimal vs. Commissioner of Income Tax, Commissioner of Income-tax II vs. Harishbhai Raojibhai Patel HUF, Commissioner of Income-tax-VI vs. Heena Sharma, Commissioner of Income Tax vs. Shri Anil Kumar, Tirath Ram Gupta vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K M PARIKH
• Assessee Lawyers: J P SHAH; MANISH SHAH
• Keywords: Creditworthiness; Gift; Income tax appellate tribunal; NRE account; Unexplained income
• Section: 68; 69

Judgement Text

"O/TAXAP/600/2005 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 600 of 2005 TO TAX APPEAL NO. 602 of 2005 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ SMT. NEELAMBEN GOPALDAS AGRAWAL....Appellant(s) Versus INCOME TAX OFFICER....Opponent(s) ================================================================ Appearance: MR JP SHAH, ADVOCATE for the Appellant(s) No. 1 MR KM PARIKH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI Page 1 of 8 O/TAXAP/600/2005 JUDGMENT and HONOURABLE MR.JUSTICE K.J.THAKER Date : 19/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as ‘the Tribunal’) dated 26.08.2004 in ITA Nos. 3609/Ahd/2002, 3610/Ahd/2002 & 3611/Ahd/2002 for the Assessment Years 1996-97, the assessees have preferred the present Tax Appeals for consideration of the following substantial question of law which were framed while admitting the matters: “Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in treating the gift of Rs. 2,00,000/- as unexplained income of the assessee under Section 68 or section 69 of the Income Tax Act, 1961?” 2. The assessees were given Rs. 2 lakhs as gift by a non- resident Indian by way of a cheque from his Non Resident External Account. The Assessing Officer held that since the financial capacity of the donor is not proved under section 68, Rs. 2 lakhs is added as unexplained cash credit. On appeal the CIT (Appeals) allowed the appeal. 2.1 On appeal before the Tribunal by the revenue, by impugned judgment and order, Tribunal allowing the appeal Page 2 of 8 O/TAXAP/600/2005 JUDGMENT held that section 69 will apply if section 68 does not and that under section 69 also creditworthiness of the donor has to be proved and that bank account cannot prove it. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Tribunal, the assessees have preferred the present Tax Appeals for consideration of the aforesaid substantial questions of law. 3. Mr. J.P. Shah, learned advocate appearing with Mr. Manish Shah, learned advocate for the assessees submitted that the Tribunal has erred in holding that the assessees had not proved the donor to be creditworthy inspite of the fact that he was giving the money from his NRE Account. He submitted that the Tribunal failed to appreciate that there was a receipt of cheque from NRE account backed by Gift Deed executed by the donor and therefore there ought to have been no room for suspicion that these are the unaccountd money of the assessees. 3.1 Mr. Shah has relied upon a decision of this Court in the case of Murlidhar Lahorimal vs. Commissioner of Income Tax reported in 280 ITR 512 where a similar question came up before this Court. He has also relied upon decisions rendered by this Court in the cases of Commissioner of Income-tax II vs. Harishbhai Raojibhai Patel HUF reported in 39 taxmann.com 13 (Gujarat) and Commissioner of Income-tax-VI vs. Heena Sharma reported in 33 taxmann.com 176 (Gujarat). 4. Mr. K.M. Parikh, learned advocate for the revenue supported the impugned order passed by the Tribunal. He Page 3 of 8 O/TAXAP/600/2005 JUDGMENT submitted that the Tribunal has considered the fact that the assessees failed to prove the three ingredients viz. identity, genuineness and creditworthiness of the donor under sections 68 & 69 of the Act and that crediworthiness was not established in a meaningful manner. He has relied upon a decision of the Delhi High Court reported in Commissioner of Income Tax vs. Shri Anil Kumar reported in [2007] 292 ITR 552 (Delhi) and a decision of the Punjab & Haryana High Court in the case of Tirath Ram Gupta vs. Commissioner of Income Tax reported in 304 ITR 145. 5. We have carefully considered the submissions made by learned advocates for both the sides. It is borne out from the records that a non-resident Indian Shri Chinubhai Gangadas Thakkar, permanently residing in Middlesex, U.K had given gift of Rs. 2 lakhs by way of a cheque from his Non Resident External Account to the assessees. The said gift is also evidenced by the Deed of Gift executed by said Chinubhai Thakkar. The cheque was credited in the bank account of the applicant on realisation. It is clear that the assessees had produced complete details of the identity of the donor. In this regard it shall be fruitful to refer to the decision of this Court in the case of Murlidhar Lahorimal (supra) which is reproduced hereunder: “11. As Section 68 of the Act denotes, once there is a credit in the books maintained by the assessee, the primary onus is on the assessee, namely, to offer an explanation as to nature and source of the credit. What would be the degree of the onus and what should be the extent of explanation in such circumstances, is succinctly laid down by this Court in the decision in case of CIT v. Pragati Co- operative Bank Ltd., Suffice it to state that an Page 4 of 8 O/TAXAP/600/2005 JUDGMENT assessee can be asked to prove the source of credit in books, but cannot be asked to prove the source of the source. 12. Unfortunately, as noted hereinbefore, the Tribunal has proceeded on an entirely fallacious premise, when it is observed, we have to decide the question about the genuineness of the gift on the balance of probabilities and, in our view, it is not probable that the assessee received Rs. 50,000/- or any part thereof as a gift from Ramji Nanji, the donor.. Instead of addressing itself to the requirement of Section 68 of the Act, the Tribunal has adopted an approach which, to say the least, is unwarranted in law. The Tribunal states that motivation for making the gift is not established. This finding is neither here nor there. The assessee was called upon to explain the credit entry found in its capital account. The assessee pointed out that it had received a gift from Shri Ramji Nanji. Shri Ramji Nanji appears before the assessing officer and confirms the fact of having made the gift. He produces evidence in support of the source from which the funds for making the gift are available with him. The gift is given by way of a bank draft. The revenue does not dispute any of these facts. In fact, the revenue commences the present proceedings on the day it makes gift tax assessment qua this very gift in the hands of the donor. 13. Despite this factual position, the Tribunal singularly fails to note the fact that the identity of the donor is established, the donor having appeared in person before the assessing officer, the genuineness of the transaction is established, not only by the receipt of the bank draft, but also by the fact of transaction having borne gift tax once the assessment was framed. The primary onus which rested with the assessee, thus, stood discharged. Thereafter, if the revenue was not satisfied with the source of the funds in the hands of the donor, it was upto the revenue to take appropriate action. The Tribunal fails to consider all these aspects. In fact, the donor having filed gift tax return and assessment having been framed on the donor, is not taken into consideration by the Page 5 of 8 O/TAXAP/600/2005 JUDGMENT Tribunal at all. This was a very strong factor in support of the explanation tendered by the assessee. 14. The Tribunal, to the contrary, goes on to discuss and question as to why the donor should make a gift to the assessee; the size of the donor's family and availability or otherwise of the amount in hands of the donor; the area of the land held by the donor etc. At best, these could be factors for the donor to be called upon to explain the source of the funds in his hands, but that could not be a ground for disbelieving a gift which had admittedly been received by the assessee as a gift and being treated as undisclosed income of the assessee. 15. Having gone through the statements of the donor as well as the assessee, it is apparent that despite minor discrepancies, the factum of the gift having been made has been accepted by the donor and in the circumstances, it cannot be stated that the credit entry in the capital account of the assessee did not reflect the true picture. The assessee had shown the same as gift received. The assessee tendered an explanation and nothing has been brought on record to even hold for a moment that the said explanation is not satisfactory. Though the same is stated as a conclusion, the reasoning for stating so is as to disbelieving source of source. In these circumstances, the impugned order of Tribunal cannot be sustained. “ [Emphasis Supplied] 5.1 Similarly in the case of Heena Sharma (supra), this Court has observed as under: “Tribunal also relied on the decision of this Court rendered in case of Muralidhar Lahorimal v. Commissioner of Income-tax reported in (2006) 280 ITR 512(Guj.). In the said decision also identity of the donor had been established beyond any semblance of doubt and genuineness of the transaction was also established not only by the receipt of bank draft but also by other Page 6 of 8 O/TAXAP/600/2005 JUDGMENT contemporaneous record. The Revenue although in that case also was not satisfied with the source of fund in the hands of donor and yet, the Court held it was for the Revenue to take appropriate steps in that event, but, that would not lead to question genuineness of transaction. We find that the case of the assessee respondent in the matter on hand can be largely equated with the one decided by this Court in case of Muralidhar Lahorimal(supra). However, those decisions relied upon by the Revenue discussed hereinabove have materially and substantially different factual aspects. Again, we also are of the opinion that essentially this case is based on material that had been adduced by the assessee before the Revenue Authorities. Tribunal while upholding the say of the assessee and deleting the addition made by both the adjudicating authorities have given cogent and sufficiently acceptable reasons for arriving at positive conclusions that such gifts are genuine and the transactions are creditworthy.” 5.2 As far as the decision of Harishbhai Raojibhai Patel (supra) is concerned, this Court observing that the gift amount was paid through cheque upheld the Tribunal’s order deleting the addition of cash credit made by the Assessing Officer. 5.3 So far as the decision cited by Mr. Parikh is concerned, in the case of Shri Anil Kumar (supra), the Delhi High Court held that mere identification of the donor and establishing movement of gift through banking channels, would not be sufficient to establish their genuineness. Similar view has been taken by Punjab & Haryana High Court in the case of Tirath Ram Gupta (supra). 6. Having gone through the decisions cited hereinabove Page 7 of 8 O/TAXAP/600/2005 JUDGMENT coupled with the facts of the present case, we find that the facts in the present case are akin to the facts in the decision rendered by this Court in the case of Murlidhar Lahorimal (supra). We are bound by the decision of the co-ordinate Bench of this Court in the case of Murlidhar Lahorimal (supra) wherein it is held that the assessee cannot be asked to prove the source of source. Moreover, Gift Tax Act nowhere provides that a gift by somebody who is not creditworthy is not a gift. The Tribunal instead of addressing itself to the requirement of Section 68 of the Act, has adopted an approach which is unwarranted in law. The assessees pointed out that it had received a gift from Shri Chinubhai Thakkar produces the bank certificate and gift deed. The gift is given by way of a cheque. The revenue does not dispute any of these facts. We therefore are of the opinion that the question raised in the present appeals are required to be answered in favour of the assessees. 7. Accordingly, we answer the question raised in the present set of appeals in the negative i.e. in favour of assessees and against the revenue. Appeals are allowed accordingly. (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 8 of 8 "