ORDER
D.R. Singh, Judicial Member
1. These three appeals filed by the respective assessees against the respective orders of the CIT (A), Bareilly, passed in Appeal Nos. 1728/Rampur/04-05 dated 1st December 2004, 1730/Rampur/04-05 dated 7th December 2004 and 1729/Rampur/04-05 dated 24th November 2004 were heard together and are being disposed off by this common order for the sake of convenience as the facts and issues in all these appeals are identical except variation in amounts and names of donors giving gifts to these three assessee who are family members.
2. In all the appeals, since, the Ground Nos. 1 and 4 are identical, the same are stated as under:
1. That the order passed by the Assessing Officer Under Section 148/143(3) was arbitrary, unjust and illegal on various factual and legal grounds and consequently the same ought to have been cancelled/annulled by the ld. CIT(A).
4. That the levy of interest Under Section 234B and 234C was wholly illegal and at any rate, without prejudice very
3. In the remaining effective grounds the assessees have challenged the confirmation of additions under Section 68 of the Income Tax Act, 1961, in respect of gift of Rs. 5 lakhs received by the assessee Shri Vinod Behari Jain from Shri Qayyum Khan; Rs. 5 lakhs each received by Smt. Sarika Jain from Shri Qayyum Khan 8b Shri Vivek Kumar Kapoor and a gift of Rs. 5 lakhs & Rs. 7,20,000/- received by assessee Shri Sanjog Jain from Shri Manish Kumar Kapoor & Smt. Zakkan Begum, respectively.
4. Briefly stated, the facts relating to the issues involved in these appeals are that the assessees enjoyed income from share in partnership firm M/s S.J. Transformer. In the course of investigation, in the case of above firm, it was noticed that the assessees have introduced fresh capitals which were not verifiable in the hands of the firm for the period under consideration and so, according to the Assessing Officer, the assessees were liable to pay tax in the individual capacity. In the reasons recorded, the Assessing Officer mentioned that the impugned amounts have escaped assessment under Section 147 of the Act and, therefore, he initiated proceedings under Section 147 of the Act and issued notices to the respective assessees under Section 148 of the Act.
5. In the case of donor Late Shri Qayyum Khan, the Assessing Officer recorded the statement of his son Shri Akram Khan because Shri Qayyum Khan was murdered on 23.10.2003. In the case of the donors Late Shri Qayyam Khan and Shri Vivek Kumar Kapoor from whom the assessee, Smt. Sarika Jain, was alleged to have received gift amount of Rs. 5 lakhs each, the Assessing Officer recorded the statements of Shri Akram Khan s/o donor Late Shri Qayyam Khan as well as the statement of Shri Vivek Kumar Kapoor. Lastly, in respect of donors Shri Manish Kumar Kapoor and Smt. Zakkan Begum from whom the assessee Shri Sanjog Jain is alleged to have received amount of Rs. 6 lakhs and Rs. 7,20,000/- respectively, the Assessing Officer recorded the statements of Shri Manish Kumar Kapoor and Smt. Zakkan Begum.
6. On analyzing their statements, the Assessing Officer observed in the case of Shri Vinod Behari Jain that the assessee was only able to prove the identity of the donor giving the gift but was not able to prove the capacity of the donor as well as the genuineness of the gift transaction because the donor has not given any gift to his brother but has given such a huge amount in gifts to the assessee who is not his family member. In the case of the assessee, Smt. Sarika Jain, the Assessing Officer observed that the donor Shri Vivek Kumar Kapoor who is alleged to have given a gift of Rs. 5 lakhs to the assessee has no capacity to give this amount and is totally stranger to the assessee, the gift transaction was not genuine. Further, after examining the cases of assessee, Shri Sanjog Jain, husband of the assessee Smt. Sarika Jain, for financial year 2000-01 and Saransh Jain Trust (family trust of assessee) & Shri Vinod Bihar Jain, Father-in-law of the assessee, for financial year 2002-03, the Assessing Officer found that Late Shri Qayyam Khan has gifted these two family members a sum of Rs. 10 lakhs which is very unusual and hence these gifts given to these assessees were not genuine gift transactions.
7. In the case of Shri Sanjog Jain, the Assessing Officer, in respect of gift amounts of Rs. 5 lakhs and Rs. 7,20,000/- received from Shri Manish Kumar Kapoor and Smt. Zakkan Begum respectively, observed that in the return of income, donor, Shri Manish Kumar Kapoor during assessment years 2003-04, 2002-03 & 2001-02 has shown total income less than Rs. 1,50,000/-. He is not having any relationship with the assessees nor he was able to justify as to what sort of love and affection the donor was having towards assessee. In case of donor Smt. Zakkam Begum, the Assessing Officer observed that this donor was not filing any return of her income nor her financial position was sound. She has already divided her entire property among her four sons and now at the age of 80 years she was dependent upon them. She was not having any relationship with the assessee so giving such a huge amount in gift was unusual which makes the entire gift transaction as non-genuine. Lastly, he observed that in the case of these donors, their capacity and genuineness of their gift transaction was not established and keeping in view all these circumstances, the Assessing Officer treated the entire gift transactions in the case of the assessees as non-genuine and made additions under Section 68 of the Act.
8. Aggrieved with the orders of the Assessing Officer, the assessees filed respective appeals before the CIT (A) who in the case of assessee, Shri Vinod Behari Jain, confirmed addition of Rs. 5 lakhs and in the case of assessee, Smt. Sarika Jain, confirmed the addition of Rs. 10 lakhs in the case of assessee, Shri Sanjog Jain, he confirmed the addition of Rs. 11 lakhs, though the Assessing Officer in his case has made an addition of Rs. 12.20 lakhs treating all these gifts as non-genuine, holding that initiation of proceedings by the Assessing Officer against these assessees under Section 147 of the Act was valid by passing detailed orders. We may mention here that in the case of assessee, Shri Sanjog Jain, though the Assessing Officer made addition of Rs. 12,20,000/- on account of gifts received by the assessee from Shri Manish Kumar Kapoor of an amount of Rs. 5 lakhs and from Smt. Zakkan Begum for an amount of Rs. 7,20,000/- totalling to Rs. 12,20,000/- the CIT (A) sustained the addition of Rs. 11 lakhs and deleted the addition of Rs. 1,20,000/- received by the assessee as according to him this amount was not relevant to the year under consideration.
9. We have considered the written submissions of the assessees as well as oral arguments advanced by both the parties; relevant case law relied upon by the them; perused the records and carefully gone through the orders of the tax authorities below.
10. We shall first take up Ground No. 1 of the assessee’s appeals relating to the framing of the assessment Under Section 148/143(3) of the Act by the Assessing Officer.
11. In this ground of the appeals we find that it is simply of general nature because the assessee’s have not mentioned anything specific how the assessment Under Section 148/143(3) framed by the Assessing Officer was arbitrary, unjust and illegal. In the circumstances, we are unable to give any specific finding on this ground taken by the assessees, which is of general nature. During course of arguments, we have expressed our observation to the ld. AR for the assessee’s for response but the ld. A.R. was not able to say anything contrary to our observation. Hence, this ground of the appeals in our opinion requires no adjudication from our side and accordingly the same is rejected.
12. The Ground No. 4 of the appeals of the assessees relating to levy of interest Under Section 234B and 234C is consequential in nature and, hence, require no adjudication and while giving appeal effect the same would be considered by the Assessing Officer.
13. We shall now deal with the remaining grounds of appeals of the assessees relating to confirmation of addition by the CIT (A) in respect of the gift amounts received by the respective assessees from different donors.
14. In this regard, we are simply required to give a finding on the genuineness of the gift transactions because while sustaining the impugned additions, the CIT recorded a finding that the assesses have been able to establish the identities and creditworthiness of the donors but have failed to establish the genuineness of the gift transactions and this finding of the CIT (A) is not under challenge before us by the Revenue as the Revenue is not in appeal against these orders of the CIT (A).
15. The undisputed facts are that on receipt of the gifts amounts from the respective donors, the assessees deposited the amounts in their respective bank accounts and that the assessees were not maintaining any books of accounts. The assessee, Sh. Vinod Bihari Jain, is father of assessee, Shri Sanjog Jain, and assessee, Smt. Sarika Jain, is the wife of assessee, Shri Sanjog Jain. It means that all the assessees are members of the same family. The donor, Late Mr. Qayyum Khan, had given a gift of Rs. 5 lakhs to assessee, Shri Vinod Bihari Jain, and gift of Rs. 5 lakhs to assessee Smt. Sarika Jain. The donors, Shri Vivek Kumar Kapoor and Shri Manish Kumar Kapoor, are real brothers. Shri Vivek Kumar Kapoor has given a gift of Rs. 5 lakhs to Smt. Sarika Jain and donor Sh. Monish Kumar Kapoor has given a gift of Rs. 3 lakhs and Rs. 2 lakhs to assessee Sh. Sanjog Jain. Further, donor Smt. Zakkan Begum has also given two gifts of Rs. 1,20,000/- on 12.2.99 and Rs. 6 lakhs on 23.10.2000 to Shri Sanjog Jain as gift of Rs. 1.20 lakhs did not pertain to assessment year under consideration only a gift amount of Rs. 6 lakhs was considered in the assessment year under consideration. There is absolutely no relationship between the donors and the assessees. The donors who are complete strangers to the assessees have parted huge amounts out of their hard earned money which is not only unusual but also quite unnatural. It is very incredible for strangers who are not related to give gifts of huge amounts out of love and affection so that the donees i.e. the assessees build up their capital account in a firm where they are partners. We may further mention that neither in their statements nor in their affidavits the donors are able to support with evidence how the love and affection developed between them and the donees i.e. assessees, on account of which they became so emotionally surcharged so as to part away with huge amounts, i.e. in lakhs, when they never gave gifts of such huge amounts to their own family members or to some other near relatives further when there was no occasion to make the gifts and there was also no reciprocity between them and the donees.
16. In the facts the question required to be answered is whether such amounts given as gift can really be termed as gift transactions or genuine gift transactions. A similar question in similar facts and in similar circumstances came up for consideration before the ITAT Delhi Bench in the case of Rajiv Tandon v. ACIT 294 ITR (AT) 219 (Del) and the Tribunal after considering the entire case law on the subject, including the decision of the Apex Court in the case of CIT v. Durga Prasad Moore , and Sumati Dayal v. CIT 214 ITR 801, wherein the Apex Court observed that the taxing authorities were entitled to look into the surrounding circumstances and the aspect of human probabilities to find out the real and factual position. Further, also considering the decision of Delhi High Court in the case of Sajjan Dass & Sons v. CIT 264 ITR 435, wherein the Court took the view that not only must the assessee establish the identity of the donor and his capacity to make the gift, but he must also establish that the amount received by him was in fact a gift, the Tribunal held that the genuineness of the gift transaction cannot be determined without looking into the aspect of human probabilities, relationships of donor and donee, the occasion for making gift and existence of reciprocity, if any. In case the assessee fails to establish any one of the facts the amounts received by the assessee can be treated as the assessee’s income from undisclosed sources representing assessees own money, introduced in the garb of a gift received by the assessee. Thereafter, the Tribunal treated the gifts as non genuine.
17. Their Lordships of Hon’ble Delhi High Court affirming the above decision (supra) of the Tribunal in Rajiv Tandon v. ACIT 294 ITR 488 (Del) held that the two donors had absolutely no connection with the assessee and they made gifts to the assessee only because he needed money to buy a house and they wanted to help him. This was not only quite unusual but also quite unnatural. It was incredible that a complete stranger would want to gift lakhs of rupees to a person only because that person wanted the amount for purchasing a house. The taxing authorities were entitled to look into the surrounding circumstances, which they did, and come to the conclusion that the gifts could not be said to be genuine. The reason offered by the assessee did not appear to be reasonable, much less acceptable. Therefore, there was no error in the view taken by the Tribunal.
18. Similarly, their Lordships of Apex Court in the case of CIT v. P. Mohanakala , had an occasion to decide the following question relating to gifts:
Whether in the facts and circumstances, the Income-tax Appellate Tribunal was correct in law to accept the principle of preponderance of probabilities in holding that the claim of the appellant that the sum of Rs. 15,62,500 received by way of gifts through normal banking channels was not genuine and that it was liable to be assessed under Section 68 of the Income-tax Act, 1961?
19. In this case, the Assessing Officer in his order while taking into consideration the statements of the donor and donee and other material on record as well as considering all probabilities came to a conclusion that the gifts though apparent were not real and accordingly treated all those amounts credited in the books of the assessee as the income of the assessee. On appeal the CIT (A) also considering the preponderance of probabilities, the common course of human beings points to the contrary upheld the order of the Assessing Officer and rejected the story of the assessee regarding the genuineness of the gifts. On second appeal the Tribunal concurred with the findings of the tax authorities below after re-appreciating the entire material available on record. The Apex Court while upholding, the concurrent findings of facts recorded by the authorities below observed and concluded that these were based on proper appreciation of facts and the material available on record and the surrounding circumstances, the doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones. May be the money came by way of bank cheques and was paid through the process of banking transaction but that itself is of no consequence.
20. From the ratio of decision of Apex Court in the case of P. Mohanakala (supra), it is clear that even the Apex Court impliedly approved the view taken by the Tribunal in the case of Rajiv Tandon (supra) as well as by the Jurisdictional High Court while affirming the above decision (supra) of the Tribunal because the Tribunal while deciding the case of Rajiv Tandon (supra) have held that the genuineness of the gift transaction cannot be determined without looking into the aspect of human probabilities, surrounding circumstances such as relationships of donor and donee, the occasion for making the gift and existence of reciprocity, if any, and in case the assessee fails to establish any one of these factors the gift transactions is non-genuine and the amounts received by the assessee can be treated as the assessee’s income from undisclosed sources representing assessee’s own money, introduced in the garb of a gift received by the assessee. Further, their Lordships while upholding the order of the Tribunal in the case of Rajiv Tandon (supra) have also held that the tax authorities below while considering the genuineness of the gift transactions were entitled to look into the surrounding circumstances, which they did and came to the conclusions that the gifts could not be said to be genuine and, therefore, there was no error in the view taken by the Tribunal.
21. From the facts as discussed hereinabove, we find that the donors in the instant case of the assessees who are having absolutely no connection with the assessees but have still parted with such huge amounts in lakhs as gifts to them. By receiving these amounts as gifts, the assessees have increased their capital account in the firm wherein all the instant assessees, who are members of same family, are partners. The donors have failed to bring on record any supportive evidence to show why they were so emotionally surcharged that out of love and affection towards the assessees they gave gifts of such huge amounts though they had never given such gifts to their own family members. Hence, the respective gift transactions between the instant assessees and the donors are very unusual and unnatural and rather seem incredible. Since, none of the necessary ingredients, as propounded in the case law (supra), have been fulfilled by the assessees in the instant cases to prove the genuineness of the gift transactions and, therefore, these gift transactions under consideration before us are held to be non-genuine in the light of the decisions (supra).
22. Admittedly, in these cases the assessees were not maintaining any books of accounts so the gift amounts could not be found credited in the books of accounts but undisputedly these were found credited in the bank accounts of the assessees. From this, it is clear that under the provisions of Section 68, the addition made by the Assessing Officer and sustained by the CIT (A) cannot be sustained but in the instant cases since we have already given a finding that the alleged gift amounts received by the assessees were not genuine the same can be treated as assessees’ income from undisclosed sources representing assessee’s own money introduced in the garb of gifts. Whether such amounts could be added under any other provisions of Income Tax Act, 1961 if the amounts cannot be technically added to the income of the assessees’ Under Section 68 of the Income Tax Act, 1961, when undisputedly the same were found credited in the bank accounts of the assessees, in this regard, we have examined the other provisions of Income Tax Act, 1961 and find that such amounts can be held as unexplained and deemed to be income of the assessees and additions thereof can be made Under Section 69A of the Income Tax Act, 1961, for reference the Section 69A is stated as under:
69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.
23. Now reverting to the facts of the instant case of the assessees, we find that the amounts in question were alleged to have been received as gifts from the respective donors. The amounts were deposited by the donee assessees in their bank accounts which means that the assessees have not denied the ownership of such amounts found credited in their bank accounts in financial year relevant to assessment year under consideration. Regarding the genuineness of the acquisition of the amounts, explained to be gifts, have already been turned down by the Tribunal by holding the transactions to be in-genuine. The Section 69A provides that such money may be deemed to be the income of the assessee for such financial year. This is a deeming provision under which when the explanation given by the assessees offered regarding acquisitions of the same is rejected then under this deeming provision the same can be added to the income of the assessee.
24. We are further of the opinion that addition made by the tax authorities below merely under a wrong provision of Income Tax Act, 1961 cannot absolve the assessees from being taxed under the correct provisions of Income Tax Act, 1961 because the tax authorities below are duty bound to tax the undisclosed income of the assessees’ under the provisions of Income Tax Act, 1961.
25. For the reasons stated above, the order of CIT (A) in treating the impugned gift amounts as non-genuine gift transactions and consequently treating the same as undisclosed income of the assessees is upheld, however, we add that the impugned additions are to be made Under Section 69A of the Income Tax Act, 1961 and not Under Section 68 a held by the CIT (A). The order of CIT is modified to this extent only.
26. In the result, the instant appeals filed by the respective assessees are dismissed.
Order pronounced in the open Court on 20.12.2007.