Judgment:
1. We find it convenient to dispose of this bunch of five appeals by a common order. Rival contentions have been heard and records perused.
Before we take up individual appeals we would like to point out that these appeals belong to same group. Shri D.C. Rastogi had made a disclosure of Rs. 58.90 lakhs in his own name and Rs. 38.70 lakhs in the name of Smt. Meena Rastogi, his wife. The gifts in the name of various family members had been claimed to have been received in earlier years as well as in the year under appeal. These gifts have not been accepted as genuine. Though the amount of the gifts have been assessed in the hands of the appellants on protective basis these sums have been added in the assessment of Shri D.C. Rastogi as his income from undisclosed sources on substantive basis. We shall deal with the facts of each appeal separately. We first take up the appeal of Shri D.C. Rastogi (HUF). Assessee is a specified HUF. For assessment year 1986-87, assessment had been completed by the Assessing Officer vide order dated 27-3-1989 at an income of Rs. 2,71,344 and agricultural income of Rs. 20,374.
(2) to (13) These paras are not reproduced here as they involve minor issues.
14. The third ground of appeal is relating to the addition of Rs. 96,496 and addition of Rs. 6,692 on account of two gifts claimed to have been received from two non-resident Indians. Assessee had claimed to have received five gifts in all amounting to Rs. 1,18,188. The three gifts of Rs. 5,000 each from Indians are not in dispute before us. The dispute is relating to the two gifts claimed to have been received from two non-resident Indians. Assessee had furnished confirmatory letters from the non-resident Indians. Assessee had however not disclosed the source of the amount nor had the identity of the donors been established. From these facts, it was held by the revenue that the burden of proof that lay on the assessee had not been discharged to the satisfaction of the Assessing Officer. On appeal, the learned CIT (Appeals) held that the Assessing Officer had called for certain details which were not filed by the assessee. The CIT (Appeals) further found that the details asked for by the Assessing Officer for verification of the claim of the assessee, were not irrelevant and on the contrary were directly connected with the transaction of the gifts.
The CIT (Appeals) has further observed that there was no relationship between the donors and the donees and therefore genuineness is not established. The additions of Rs. 96,496 and Rs. 6,692 were accordingly confirmed.
15. Before the CIT (Appeals) the assessee had also raised the plea that Section 68 was applicable only in respect of cash deposits. Since the amounts had been received either by cheque or demand drafts, Section 68, was not attracted. The learned CIT(Appeals) has held that the word 'sum' in Section 68 shall have to be given its ordinary popular and natural meaning and he has accordingly rejected the contention of the assessee.
16. Before us, the learned Counsel for the assessee reiterated the contentions and pleaded for deleting the addition. The learned D.R., on the other hand, relied upon the orders of the revenue authorities.
17. We have given our careful consideration to the rival contentions.
The contention raised on behalf of the assessee that Section 68 is applicable only to cash transactions and not in respect of amounts received by cheques or by drafts, in our view, is not well-founded. In Section 68, the words used are "any sum found credited in the books of an assessee maintained for any previous year". The sum of money is not restricted to the cash transactions only. The mere fact that headnote to Section 68 refers to cash credits is not sufficient to support the view canvassed on behalf of the assessee. Section 68 is unambiguous and the sum referred to in that section would include the sum of money by whatever mode received. We are supported in our view by the decision of the Delhi High Court in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 (FB) where their Lordships have held as under: The use of the words "any sum found credited in the books" in Section 68 indicates that the section is very widely worded and the Income-tax Officer is not precluded from making an enquiry as to the true nature and source of a sum credited in the account books even if it is credited as receipt of share application money. The mere fact that the (assessee) company chooses to show the receipt of the money as capital does not preclude the ITP from going into the question whether this is actually so. Where, therefore, an assessee-company represents that it had issued shares on the receipt of share application money then the amount so received would be credited in the books of account of the company. The ITO would be entitled, and it would indeed be his duty, to enquire whether the alleged shareholders do in fact exist or not. If the shareholders exist then, possibly, no further enquiry need be made. But if the ITO finds that the alleged shareholders do not exist, then, in effect, it would mean that there is no valid issuance of share capital. Shares cannot be issued in the name of non-existing persons. The use of the words 'may be chargeo" in Section 68 clearly indicated that the ITO would then have the jurisdiction, if the facts so warrant, to treat such a credit to be the income of the assessee.
In view of the decision of the Delhi High Court referred to above, the contention raised on behalf of the assessee is unfounded. We, therefore, confirm the view of the CIT(Appeals) in this regard.
18. With regard to the addition of Rs. 96,496 and Rs. 6,692 claimed to be gifts received from two non-resident Indians, we have to consider as to whether the assessee has discharged the onus. It is well-established principle of law that in the case of cash credits, the onus of the assessee is to establish the identity of the creditors, the capacity of the creditor as also the genuineness of the transaction. Similar is the position in regard to gifts. In fact the degree of proof in the case of gifts would be heavy. This proposition of law is not disputed by either of the parties. The dispute is as to whether the burden has been discharged. Let us examine the evidence that was produced by the assessee in this regard. We quote from the order of the Assessing Officer: These gifts are shown to have been received from the following :--(i) Sh. Thomas Mathew, Beida-Libya Rs. 96,496 ($8000)(ii) S.S. Pau PITEA Sweden Rs. 6,692 ($560)(iii) Sh. Baldev Raj, New Delhi Rs. 5,000(iv) Smt. Anupma Rastogi, Chandausi Rs. 5,000(v) Smt. Savitri Rastogi, Meerut (UP) Rs. 5,000 (i) In connection with the gift of 800 dollars from Sh. Thomas Mathew of Libya, Photostat copies of the following documents have been filed.
Letter dated 4-1-1986 purportedly signed by the donor and sent from Libya and addressed to Shri D.C. Rastogi expressing the desire out of love and affection for Shri D.C. Rastogi to make a gift of Rs. 8,000 $ as Karta of D.C. Rastogi (HUF) for the members of his HUF. Letter dated 14-1-1986 from Shri D.C. Rastogi addressed to Shri Thomas Mathew in Libya conveying his pleasure for the offer of gift to his HUF and asking to send the said gift by Post.
Letter dated 10-2-1986 from Sh. Thomas Mathew from Libya addressed to Shri D.C. Rastogi sending draft dated 31-1-1986 as gift to his HUF, namely, D.C. Rastogi (HUF) adding that this gift was for the members of his HUF. (ii) In support of this gift photostat copy of a letter dated 23-9-1995 from Shri D.C. Rastogi to one Dr. Swaraj Paul of Sweden has been filed in which Shri D.C. Rastogi has noted the desire of Shri S. Paul of making a gift of US $ 560 to him and directing him to send the same by Mail.
The second letter filed is photostat copy of letter dated 7-10-1985 purportedly signed by Shri Swaraj Paul and sent from Sweden forwarding Travelling cheques for 560 dollars adding that it was a gift from his die. This letter is addressed to Shri D.C. Rastogi (HUF).
In connection with these two gifts, the assessee was required to inform the antecedents of these donors, their exact source of income in India/aboard, their addresses in India, information as to how they knew the assessee and their present address abroad and details of their families.
In the letter dated 2-3-1989 filed by the A.R. of the assessee, the information provided is that Sh. Swaraj Paul was working with Shri D.C. Rastogi as a Chemist in M/s. Synthetics & Chemicals, Bareilly in the year 1968 to 1984 after which he migrated to Sweden.
Regarding the gift of Sh. Thomas Mathew of Libya, it has been stated that it was learned the FERA authorities (who had raided Shri D.C. Rastogi in November 1986 had investigated that gift and they had found the transaction to be genuine.
19. From the above findings of the Assessing Officer it is evident that aassessee had furnished evidence regarding the receipt of the amounts from abroad. It is, however, evident that assessee had not been able to establish the financial capacity of the donors. The genuineness of the gifts has also not been established. The Delhi High Court in the case of CIT v. Mrs. Sunita Vachani[1990] 184 ITR 121 held that "it seems unusual for the strangers to make gifts to unknown persons yet Tribunal having found sufficient evidence regarding the genuineness of the gifts, no question of law arose from the order of the Tribunal". From this decision it is clear that there is no bar for the strangers to make gifts to the Indian citizens. However, it is the duty of the assessee to establish by necessary evidence that the gift claimed to have been received from abroad was genuine. Moreover, it is also necessary for the assessee to prove the financial capacity of the donor to make the gifts. In this regard necessary evidence in the shape of the income earned by the donor as also the financial status at the time of making the gift would be necessary. The assessee is further required to give full cooperation to the Assessing Officer providing complete address of the donors so that if required proper verification is made possible. In this case, we find that assessee had even refused to give the present address of the donors. Though there is no bar for the strangers to make the gifts to the persons in India yet it would be necessary for the assessee to explain the circumstances under which the gift was made so that the genuineness of such gifts could be verified.
It is common knowledge that hawala business is in vogue in India and elsewhere and the mere fact that the money has been received in India in foreign exchange from abroad would not be sufficient to absolve the assessee from the burden of establishing the identity, financial capacity of the donors and the genuineness of the gifts. In this case, we find only a confirmation from the parties that the gift had been made. There is evidence that the money has been received by draft from abroad. The antecedents at the time of making the enquiry by the Assessing Officer were not provided to him. In such circumstances, no enquiry could be conducted by the Assessing Officer to verify the claim of the assessee. There is, no evidence on record to establish the financial status of the donors nor is there satisfactory evidence supporting the genuineness qf the gifts. We may mention that it was pointed out to the Assessing Officer that FERA authorities had accepted the receipt of Rs. 96,496 from abroad as genuine as no notice had been issued to the assessee in this regard. Firstly, we do not know as to what evidence was produced before the FERA authorities for establishing the genuineness of the receipts. Secondly, for the purposes of income-tax, the mere receipt from abroad is not sufficient to absolve the assessee from the burden of proof, required in respect of gifts.
20. Considering the facts and circumstances of this case and the evidence on record, we are of the view that the onus that lay on the assessee to establish the creditworthiness of the donors and genuineness of the gifts has not been discharged. The Assessing Officer in such circumstances, was justified in invoking Section 68 in deeming the recipt so indemanded the assessee from undisclosed sources. The additions of Rs. 96,496 claimed to have been received from Shri Thomas Mathew of Libya and Rs. 6,692 received from Shri S. Paul are accordingly confirmed.
That the learned CFT (Appeals) was wrong in not giving any finding regarding the protective assessment made "by the A.C. even though a specific ground was raised. Since the income belonged to the assessee and there is no evidence to the contrary, the assessment may be made substantive in the hands of the assessee.
22. Assessee had raised ground No. 4 before the CIT (Appeals) in respect of which no decision has been recorded. We, therefore, restore this ground to the file of the CIT (Appeals), who is directed to dispose of the same in accordance with law.
24. Assessee is minor son of Shri D.C. Rastogi, The dispute in this appeal is relating to addition of Rs. 47,095 as income from undisclosed sources. Assessee had claimed to have received the following gifts : Name Amount Mode of receipt Anil Kumar Sharma 5,000 by cheque Bidhi Chand Sharma 21,000 Cheque on NRE-a/c (of Kuwait) In this case a return of income had been filed disclosing income from book clubs earnings, income from interest, etc. However, a revised return had been filed excluding the book club earnings on the ground that the same had been disclosed in the case of father of the assessee.
In assessment year 1986-87 age of the assessee was 81/2 years. For assessment years 1983-84 to 1985-86 returns had been filed in the name of the assessee by the father of the assessee claiming receipt of certain gifts, the assessments had been completed under Section 143(1).
25. For the year under appeal apart from interest income, etc., the receipt of gifts as listed above in all amounting t,q Rs. 47,095 had been claimed to have been received. Assessee had filed a confirmation from Anil Kumar Sharma regarding the gift of Rs. 5,000. Assessing Officer had issued notices under Section 131 to Shri A.K. Jain, A.K.Mukherjee and Anil Kumar Sharma asking the following information : (i) particulars of income fro the year in which gifts were made, in case they were not income-tax assessee; (iii) a copy of the Bank Pass book for one year including period of six months prior to the date of making the gift; (iv) whether any benefit or consideration was received for the gift made; Whereas confirmations were received from these persons, the information called for was not made available to the assessee. Assessing Officer issued fresh notices under Section 131 for personal attendance and for furnishing of requisite information. Persons referred to the earlier confirmations sent but did not furnish the requisite information. The Assessing Officer accordingly asked the assessee to produce the donors.
In response to this direction the assessee pleaded that confirmations from the parties had been furnished/enquiries from them had also been made and they had confirmed the making of gifts and it was, therefore prayed that the matter may be decided on the basis of material on record. The Assessing Officer accordingly proceeded to decide the issue on the basis of material on record. In the case of Anil Kumar, a sum of Rs. 5,000 had been claimed to have been received as gift. The donor was found to be the employee/accountant of Shri D.C. Rastogi, the father of the minor assessee.
26. In the case of A.K. Jain, Assessing Officer on making enquiries found that he was ex-employee of M/s. Indcon Engg. P. Ltd., a business concern of Shri D.C. Rastogi. In fact he was an employee at the time of making the gift. The Assessing Officer also found that the wife of Shri A.K. Jain namely, Smt. Sulbha Jain had also claimed to have made a gift to Miss Vaishali Rastogi, sister of the assessee in the year under consideration. She too has not responded to the summons issued under Section 131. The Assessing Officer also found that a salary of Rs. 2,500 p.m. was drawn by Shri A.K. Jain at the time he claims to have made a gift of Rs. 5,000.
27. In the case of A.K. Mukherjee, confirmation was received by the Assessing Officer but information required was not made available.
28. In the case of B.C. Sharma of Kuwait, a photostat copy of an affidavit dated 20-6-1985 along with photostat copy from the Federal Bank, Nehru Place, New Delhi had been filed. In the affidavit it is mentioned that gift of Rs. 42,000 was made to Miss Vaishali Rastogi and Master Sidharth Rastogi, children of Shri D.C. Rastogi in token of love and affection. The certificate from the bank certifies encashment of cheque from NRE account No. 3/81 of 6-7-1985 on presenting in clearing.
29. Assessing Officer required the assessee to furnish following information in regard to this donor : (b) To inform the antecedents of Sh. Bidhi Chand Sharma, his vocation in India if any/at Al-raas at Kuwait and information as to how he knew Rastogi's family.
(c) To file the original declaration of Shri Bidhi Chand Sharma regarding the gift together with any correspondence relating to offer and acceptance of the said gift.
In response to this query assessee had filed a letter dated 26-12-1988 signed by Shri S.B. Gupta, advocate, by virtue of which Assessing Officer was informed that Shri Sharma was an Engineer and Shri D.C.Rastogi was staying at Al-raas, Kuwait. Shri Sharma had met Shri Rastogi in Kuwait but thereafter he has migrated to USA and his address was not known. Assessee had further confirmed that there was no correspondence regarding any offer or acceptance except the certificate of Shri Sharma which had been filed. Assessee had further pleaded that the requirement under Section 68 was met and as such the gifts should be accepted as genuine.
30. The Assessing Officer did not accept the claim of gifts made to the assessee, for the following reasons : Firstly, only confirmation letters had been filed by the assessee and in the case of B.C. Sharma a photostat copy of the affidavit purportedly signed by Shri B.C. Sharma had been filed. Photostat copy of the bank certificate had been filed but despite being specifically asked the assessee did not produce the original documents. The Assessing Officer further held that it was accepted position of law that assessee had to establish not only the fact of receipt of gifts but also genuineness of the gifts as also the capacity of the donors to make the gift. In this connection Assessing Officer relied upon the decision of the Tribunal in the case of S.A.Joshi v. Bharat Nariman [IT Appeal Nos. 571 to 574 dated 27-7-1982 (Bom.)].
31. In respect of Shri A.K. Jain, the Assessing Officer held that making of gifts by these persons to their employer's children was unbelievable.
32. With regard to birthday gifts from friends and relatives of Rs. 6,400, the Assessing Officer has rejected the claim of the assessee for want of evidence.
33. The CIT (Appeals) has confirmed the additions on the ground that assessee had failed to discharge the onus regarding the genuineness of the gifts.
34. We have discussed in detail the onus that lies upon the assessee in respect of gifts in the case of D.C. Rastogi. Broadly speaking, it is well-settled that assessee has not only to establish the identity of the person making the gift but also to establish the financial capacity of the donors to make the gift as also the genuineness of the gifts. In the present case, assessee has furnished mere confirmations from the parties. The Assessing Officer had made enquiries wherever possible but the information as would facilitate arriving at a fair decision was not made available either by the assessee or by the witnesses. It is observed that two of the donors are employees of the father of the assessee. The story of gifts to the employers children from the employees can hardly be swallowed. Though, there is no bar for the employees to make gifts to the children of their employers yet the burden of the assessee in such circumstances would be heavier than the burden to be discharged in other cases. In this case, though the gifts had been received by means of cheques, the Assessing Officer had made enquiries to find out as to whether the donors had the capacity to make the gifts. He had accordingly required the parties as well as the assessee to furnish copies of the bank accounts on which the cheques had been drawn so that it could be determined as to whether the donors had the capacity to make the gifts or had the cheques been issued after depositing cash before the issue of the cheques. Such information not having been furnished before the Assessing Officer, the burden that lay upon the assessee, in our view, was not discharged satisfactorily.
35. Similarly in the case of B.C. Sharma, photostat copy of the affidavit has been produced as also the photostat copy of the bank certificate. Even on demand the original affidavit as also the original bank certificate duly signed by the person was not furnished before the Assessing Officer. The present address of the donor was also not furnished. As has been pointed out in the case of Shri B.C. Rastogi, it is the duty of the assessee to establish the financial capacity of the donor to make the gift and satisfy the Assessing Officer about the genuineness of the gift. In the case of B.C. Sharma the mere fact that the amount is stated to be out of NRE account would not be sufficient to establish the financial capacity of the donor. His capacity could be examined from the copy of the bank account or from any financial statements/bank statements establishing his creditworthi-ness. Such information was not made available to the Assessing Officer. The possibility of money having been arranged through havala could not be ruled out. As such the Assessing Officer was justified in treating the amounts of gifts claimed to have been received as income from undisclosed sources.
36. With regard to claim of the assessee of birthday gifts we feel that the claim of the assessee deserves acceptance as it is common knowledge that cash gifts on the occasion of birthday are received by well-to-do families. The amount of Rs. 6,400 is not substantial, therefore, the amount be accepted as genuine.
37. A claim of savings from pocket money amounting to Rs. 4,695 is not acceptable in the absence of confirmation from the father of the assessee that substantial amount of pocket money was paid to him out of the earnings of Shri D.C. Rastogi. In that event not only the savings but the amounts spent by the assessee shall have to be considered as an expenditure in the case of Shri D.C. Rastogi. Since there is no evidence on record to suggest that substantial amount was shown by Shri D.C. Rastogi to have been paid to minor children on account of pocket money claim of saving of Rs. 4,695 cannot be accepted.
38. The amounts have been assessed on protective basis on the ground that the minor assessee had no apparent source of income and, therefore, the amount could be assessed in the hands of Shri D.C.Rastogi. The assessment of D.C. Rastogi has been set aside to be decided afresh by the CIT (Appeals). The said order has been confirmed by us by a separate order. We, therefore, consider it reasonable to set aside this issue also to the file of the Assessing Officer to be decided afresh on the basis of the decision in the case of Shri D.C.Rastogi. In case the income is assessed in the hands of Shri D.C.Rastogi on substantive basis, the income shall be deleted from the assessment of the assessee.
40. The assessee is mother of Shri D.C. Rastogi. A gift of Rs. 50,000 had been claimed to have been received from Shri Ram Krishna, NRI. In this connection, a certificate purportedly signed by Shri Rama Krishna of Libya has been filed certifying to have gifted a sum of Rs. 50,000 to the assessee by the cheque dated 21-3-1986 drawn on his NRE account No. 100348 with Syndicate Bank, Rajender Nagar, Delhi.
41. Assessee had been asked to produce the correspondence between the assessee and the donors and to give the antecedents of the donor, his present address in India and information regarding the source of income at the time of gift. Assessing Officer was informed in writing that apart from the certificate already filed with the Assessing Officer there was no correspondence with the donor and that the donors was a friend of D.C. Rastogi, son of the appellant having worked with him in Bareilly in 1974-75 and that as and when Shri Rama Krishna came to India he met Shri D.C. Rastogi and that the donor had visited India in 1986 and had gifted the amount to the assessee. Assessee had further stated that for the last one year the donor had not written to the assessee and that the present address was not known. It was further informed to the Assessing Officer that the donor had substantial income in Libya.
42. The Assessing Officer had made an enquiry from the Syndicate Bank, Rajender Nagar and found that on 21-3-1986 when a cheque for Rs. 50,000 was issued to the assessee, there has been credit balance of Rs. 5271.60 only in the bank account of the donor. On 25-3-1986 a sum of Rs. 50,000 had been credited in that account by telegraphic transfer and the same amount was debited to this account in the name of the appellant. There was no information about the source of Rs. 50,000.
43. From the evidence referred to above, it is evident that the financial capacity of the donor is not established nor is genuineness of the gift established. The finding in the case of D.C. Rastogi share in application in this case also. Considering the circumstances, of this case are of the view that the Assessing Officer was justified in not accepting the gift as genuine.
44. The only other ground in this appeal is relating to the amount having been assessed on protective basis. The issue is connected with the appeal of Shri D.C. Rastogi. The Assessing Officer is directed to decide this issue afresh on the basis of the decision in the case of Shri D.C. Rastogi.
46. The only issue involved in this appeal is relating to the income assessed on protective basis on the ground that the income actually belongs to Shri D.C. Rastogi. Since in the case of Shri D.C. Rastogi the issue regarding assessment of income on substantive basis in various names has been set aside to the file of the Assessing Officer, we consider it just and reasonable to set aside this issue also to the file of the Assessing Officer to be decided afresh in accordance with law after giving a reasonable opportunity of being heard to the assessee.
47. For statistical purposes, the appeal of the assessee is allowed.
I.T.A. No. 7686/Del. of 1989 48. In this case four gifts in all amounting to Rs. 2,11,521 had been claimed to have been received from four persons as under : Sh. Jagdish Lal Sharma of Libya 1,56,521 by draft Sh. B.L. Verma of Korea 40,000 by cheque Sushma Arora 5,000 by cheque Smt. Meera Sinha of Chandausi 10,000 by cheque The Assessing Officer required the assessee to furnish information regarding source of income of all the donors and antecedents of nonresident Indian donors, the correspondence, if any of making and acceptance of gift. Assessee could not furnish this information in respect of gift made by Shri Jagdish Lal Sharma. The amount of Rs. 1,56,521 was thus treated as income of the assessee from undisclosed sources. Similarly in the case of Shri B.L. Verma of Korea the amount of gift of Rs. 40,000 was treated as income of the assessee from undisclosed sources as the information required by the Assessing Officer was not furnished. In the case of Smt. Meera Sinha, the Assessing Officer pointed out that in the confirmation letter it had been claimed that a sum of Rs. 10,000 had been paid by cheque No.920357 dated 9-11-1985 drawn on Syndicate Bank, Chandausi from saving bank account No. 5847. In the statement of bank account it was found that the amount had been debited towards the demand draft No. 920357.
The Assessing Officer treated this amount also as not genuine and added the amount as income from undisclosed sources. In the case of Smt.
Sushma Arora, the Assessing Officer found that she was sister-in-law of Shri Anil Kumar, Accountant of Shri D.C. Rastogi and that she was not a lady of means. She was unable to maintain herself after the death of her husband. The Assessing Officer accordingly treated this amount also as income from undisclosed Sources.
49. In appeal assessee pleaded that Section 68 was not applicable in respect of receipts by cheques or drafts. This contention of the assessee has been rejected by the CIT (Appeals). We have also dealt with this issue elsewhere in this order and have not found favour with the contention raised on behalf of the assessee. The additions on account of Rs. 1,56,521 and Rs. 40,000 claimed to have been received from non-resident Indians have been confirmed by the CIT (Appeals). We have dealt with the receipts from the non-residents elsewhere in this order. The facts are similar. The creditworthiness of the donors have not been established. Genuineness of the gifts have also not been established. The present whereabout of the donors have also not been made available to the Assessing Officer so that proper enquiry could be made. We are, therefore, not inclined to interfere in the order of the CIT(Appeals). The CIT(Appeals) has set aside the addition of Rs. 10,000 for verification and the revenue is not in appeal.
50. In the case of Smt. Sushma Arora, the gift of Rs. 5,000 has been treated to be as not genuine as the lady has not been found to be a lady of means. As has already been pointed out the donor is claimed to be widow unable to support her family. In these circumstance the genuineness of the gift cannot be said to have been established as also the capacity of the donors to make the gift, we, therefore, decline to interfere.
51 to 54. [These paras are not reproduced here as they involve minor issues.)