ORDER
B. L. CHHIBBER, A.M. :
The first two assessees and the assessee at serial no. 4 are Doctors by profession. They run a hospital under the name and style of Kansagara Surgical Hospital at Rajkot. Dr. (Smt.) Daxaben J. Kansagara is the wife of the first assessee viz. Dr. J. J. Kansagara. Dr. Pradeep J. Kansagara is the son of Dr. J. J. Kansagara. The assessee at serial No. 3 is the HUF stayled as Dr. J. J. Kansagara (HUF) of which Dr. J. J. Kansagara is the Karta.
2. The common grievance projected in all these appeals by the Revenue is that the learned Dy. CIT(A) is not justified in directing the AO to exclude the amounts of gifts received by the assessee and held by the AO as non-genuine, from the total income of the assessees.
2.1 Dr. J. J. Kansagara (Individual) received the following gifts :
Asst. yr. 1984-85
Rs. 25,000
from Shri Madhavbhai Shambhubhai
Rs. 10,000
from Shri Khimji Gokalbhai
Rs. 25,000
from Shri Babubhai Tapubhai
Rs. 20,000
from Shri Nagji Ravji
Rs. 80,000
Asst. yr. 1985-86
Rs. 25,000
from Shri Liladhar Bhimji
Rs. 25,000
from Shri Bhola Tapubhai
Rs. 50,000
Asst. yr. 1986-87
Rs. 25,000
From Shri Khimji Gokulbhai
2.2 Dr. (Smt.) Daxaben J. Kansagara received the following gifts :-
Asst. yr. 1984-85
Rs. 25,000
From Shri Liladhar Bhimji
Rs. 25,000
From Shri Mohanbhai Lavjibhai
Rs. 50,000
Asst. yr. 1985-86
Rs. 25,000
From Shri Khimjibhai Gokulbhai
Asst. yr. 1986-87
Rs. 25,000
From Shri Liladhar Bhimji
2.3 Dr. Pradeep J. Kansagara (Individual) received the following gifts :
Asst. yr. 1984-85
Rs. 25,000
From Shri Vallabhbhai Mohanbhai Desai.
2.4 Dr. J. J. Kansagara (HUF) received the following gifts :-
Asst. yr. 1986-87
Rs. 25,000
From Shri Babubhai Tapubhai on 7-8-85.
3. During the course of assessment proceedings, the AO noted that all the donors were illiterate farmers living in different villages around Rajkot. They were not at all related to the assessees and the gifts had been made without any motive to the assessees who were well educated, well settled in profession and having substantial income i.e. the donors were financially, socially and academically low placed when compared to the donees. The AO further noted that the donors had not given gifts to their own children but to these strangers who belong to higher strata of society. He further noted that the donees received the gifts in a short span of period and that the action of the villager-donors to come to Rajkot and making of gifts were stage managed. The donors did appear before the AO during the course of gift-tax proceedings and confirmed that they had made gifts to the donees by cheques and that they had made gifts out of their savings out of agricultural income. They also furnished evidence in respect of agricultural holdings held by them. The AO completed the gift-tax assessments on protective basis, holding that it would not appeal to the human common sense that illiterate agriculturists would give gifts of huge amounts to the assessees who were running an ultra modern surgical hospital at Rajkot and having very lucrative practice. Holding that so-called gifts were in reality income of the assessee from undisclosed sources, the AO added the same to the respective total income of the assessees.
4. On appeal, the learned Dy. CIT(A) held that no independent reasons had been given by the AO for holding the gifts as income of the assessees. He held that the donors had appeared in person before the GTO and the donors had confirmed having made the gifts to the assessees. The details of the agricultural land holdings with proofs were furnished before the GTO and that the gifts had been made by cheques/drafts. The identity of the donors and the credit-worthiness of the donors had been furnished and proved and accordingly the AO was not justified in treating the gifts as non-genuine and assessees income from undisclosed sources.
5. Shri V. K. Mathur, the learned Departmental Representative submitted that the whole process of getting gifts from illiterate agriculturists who were strangers to the assessees was a managed affair and the whole attempt was to convert their black money into white by inducing illiterate farmers to gift to the assessees who were having roaring practice as Doctors at Rajkot. According to the learned Departmental Representative preponderance of probabilities does not appeal to human sense that rank outsiders who were not so well of in society would gift to the persons like the assessees who were much advanced than the donors in the matter of education, status and riches. He further submitted that the gift-tax assessments in the cases of the donors were completed by the GTO on protective basis and till today such assessments are only on protective basis and the assessees cannot take the benefit of the fact that since the amounts have been subjected to gift-tax in the hands of the donors the same should not be treated as the undisclosed income of the donors as proceedings in the IT Act and the GT Act are distinct and independent.
6. Shri R. T. Shah, the learned counsel for the assessees reiterated the submissions made before the Dy. CIT(A). He submitted that the donors appeared in person before the GTO and their statements were recorded. The learned counsel for the assessees drew our attention to the statements of the donors placed at pages 1 to 21 of the paper book. He submitted that the donors had admitted very categorically that they had made the gifts to the assessees and that too by cheques/drafts. The donors had also furnished the evidence in support of their sources of income which were mainly from agriculture and in support of their respective agricultural holdings they had furnished before the GTO the necessary evidence. He therefore submitted that the Dy. CIT(A) was justified in deleting the impugned additions.
7. We have considered the rival submissions and perused the facts on record. Here are the assessees who belong to a well to do family; doctors by profession, running an ultra-modern surgical hospital having very lucrative practice at Rajkot. It is strange that they approached some illiterate/semi literate agriculturists for getting donations for their personal ends. All the donees are undisputedly wealthier in education, reputation, earthly belongings vis-a-vis the donors who are rank outsiders and simple-natured agriculturists who at the instance of the assessees did appear before the GTO and confirmed of having made gifts to the assessees. The donors also filed gift-tax returns obviously at the instance of the assessees but the GTO completed the assessments on protective basis and rightly so and till today such assessments remain on protective basis. This queer behaviour of the assessees is contrary to the normal human behaviour and cannot be ignored off. It is well settled law that the taxing authority can take note of surrounding circumstances – [CIT v. Durga Prasad More (1971) 82 ITR 540 (SC)].
In Sumati Dayal v. CIT (1995) 214 ITR 801 (SC), the apex Court has held that considering the surrounding circumstances and applying the test of human probabilities is a must. Applying the test of human probabilities it cannot be accepted that the gifts received by the assessees from the agriculturists were genuine ones. The fact that the gifts were received by cheques/drafts has no relevance because as held by the Honble Calcutta High Court in the case of CIT v. Precision Finance (P) Ltd. (1994) 208 ITR 465 (Cal) “mere payment by account payee cheque is not sacrosanct nor can it make the non-genuine transaction genuine”. As stated above, the donors were rank outsiders/strangers (not related to the assessees even distantly) and there was no occasion for making the huge gifts to the well-to-do assessees and as such the genuineness of the gifts to the assessees cannot be accepted. In this, we are fortified by the judgment of the Honble Punjab & Haryana High Court in the case of Lall Chand Kalra v. CIT (1981) 22 CTR (P&H) 135. In this case, the donor was a stranger to the assessee and the Honble High Court held that there was no reason why he should make a gift of Rs. 10,000 to the assessee. It was further held in that case that gift from a relative who had other more important liability like marrying four sisters of his own would not be a genuine gift and especially when there was no occasion for such a gift.
8. In the light of the above discussion we uphold the action of the AO in treating so-called gifts from stranger/agriculturists as income of the assessees from undisclosed sources. We accordingly reverse the findings of the Dy. CIT(A).
9. In the result, the appeals are allowed.