1. The assessee in this appeal is the late S.K. Katyal, who passed away on 1st Sept., 2002. The assessment for the previous year ended on 31st March, 2002 has been framed on his wife Smt. Ranjana Katyal. The assessee filed a return declaring property income, salary from a partnership firm, profit on the sale of shares and income from other sources. While completing the assessment under Section 143(3) of the IT Act, the AO noticed that the assessee had received two gifts of Rs. 2,50,000 each from Sudhir Duggal and Satish Kumar Dhingra. In order to verify the genuineness of the donors, the AO issued summons under Section 131 of the Act. The summons were served on Satish Kumar Dhingra, but he did not appear before the AO. The summons issued to Sudhir Duggal could not be served as he was not available at the given addresses. The AO therefore called upon the assessee to produce these persons, but the assessee could not do so. The AO therefore, took the view that the assessee failed to establish the genuineness of the gifts and the creditworthiness of the donors. He therefore added the sum of Rs. 5 lacs as unexplained gifts.
2. Before the CIT(A), the assessee filed written submission in which it was stated that the donors were friends of the assessee, but they could not be produced because their whereabouts were not known to the wife of the deceased assessee. It was also stated that before the AO the assessee had filed affidavits from the donors, copies of their bank account, proof of filing IT returns etc., all of which went to show the creditworthiness of the donors and the genuineness of the gifts.
3. The CIT(A) found it surprising that the wife of the assessee did not know the whereabouts of the donors, who had made the gifts to the assessee out of natural love and affection. He observed that it was surprising that they did not continue the old family relations which they claimed to have with the assessee. He further noted that Satish Kumar Dhingra did not care to comply with the summons. From the bank accounts of the donor, he noted that prior to the issue of pay orders to the assessee, there were cheque deposits in the accounts and that it appeared from the pattern of deposits and withdrawals that the cheques were deposited in those accounts merely to facilitate the donors to make the gifts. On these facts and observations, the CIT(A) held that the creditworthiness of the donors and the genuineness of the gifts were not established by the assessee. He accordingly confirmed the addition.
4. The assessee is in further appeal before the Tribunal to contend, on the basis of the documentary evidence adduced before the AO and compiled in the paper book, that the assessee had discharged the initial onus by putting forth all the evidence available with her before the AO and that thereafter it was for the AO to disprove the assessee's claim which was not successfully done. It is pointed out on behalf of the assessee that the summons issued to Satish Kumar Dhingra was duly served on him and the assessee cannot be faulted if the donor did not appear before the AO. Our attention was drawn to the affidavits of the donor in which they confirmed the gifts and stated that they were made out of natural love and affection for the donee. It was also submitted that both the donors were borne on the file of the IT Department and in the light of this and the Ration cards, voters identity cards etc. filed before the AO the assessee has not only established the identity of the donors, but also their creditworthiness and the AO, despite being furnished with the assessment details of the donors did not consider it appropriate to make a cross-verification of the record of the Department. It was further submitted that the donors were men of means and had filed returns of income showing substantial income and Satish Kumar Dhingra had also filed WT return showing wealth of around Rs. 16 lacs consisting of shares, loans and advances, jewellery, etc. It was submitted that the assessment records of these persons established their creditworthiness. Strong emphasis was laid on the fact that the immediate source of the gifts were the cheques deposited in the bank accounts of the donors and there was material to even suggest that these cheques directly or indirectly emanated from the assessee so that it could be said that the assessee's own monies were being brought into the books in the guise of gifts. It was thus pleaded that the addition was unjustified.
5. In support of the aforesaid submissions, the learned representative for the assessee relied on the following authorities: (4) Jawahar IMI Oswal v. Asstt. CIT (2001) 71 TTJ (Chd) 240 : (1999) 71 ITD 324 (Chd);Asstt. CIT v. Manoj Kumar Sekhri (2004) 86 TTJ (Asr) 510 : (2005) 142 Taxman 15 (Asr) (Mag);ITO v. Aee. Vee. Enterprises (ITA No. 5210/Del/2004, dt. 13th Dec, 2006) (Delhi Bench); (9) Essan Remedies Ltd. v. Dy. CIT (ITA No. 256/Del/2004, dt. 19th Jan., 2007) (Delhi Bench);Smt Neena Rastogi v. Asstt. CIT (ITA No. 5086/Del/1991, dt. 6th Nov., 1996) (Delhi Bench); (11) Govind Prasad v. ITO (ITA No. 4527/Del/2004, dt. 30th Nov., 2005) (Delhi Bench).
6. The learned senior Departmental Representative, on the other hand, contended that the burden to prove the genuineness of the gifts and the creditworthiness of the donors was on the assessee and it was not discharged by him and, therefore, the gifts were rightly added as assessee's income. He pointed out that beyond the documentary evidence adduced before the AO, no other evidence to establish the creditworthiness of the donors and the genuineness of the gifts was adduced before the CIT(A) or before the Tribunal and that even now the assessee is not able to inform the Tribunal about the whereabouts of the donors. He further contended that the addition has not been made merely on suspicion, as contended by the assessee, but something more tangible is discernible from the facts and the assessee's case does not conform to the test of human probabilities and the normal course of human conduct. It was pointed out in this connection that the donors were not related by blood to the assessee and there was no question of natural love and affection resulting in the gifts. Besides, strongly relying on the orders of the Departmental authorities, the learned senior Departmental Representative also relied on the recent judgment dt. 13th March, 2007 of the Hon'ble Delhi High Court in CAT v. Anil Kumar in IT Appeal No. 875 of 2006 (copy filed). In particular he relied on paras 12 and 13 of the judgment. He thus pleaded that the addition should be confirmed.
7. We have carefully considered the facts, the rival contentions and the material on record. In our view, the assessee's claim requires to be accepted. The assessee has adduced the documentary evidence in support of the gifts. These include affidavits from the donors, their voters identity cards/PAN cards/Ration cards, copies of the returns of income and wealth filed by them and copies of their bank accounts from which the gifts were given by issue of pay orders. The identity of the donors was established as they were borne on the record of the IT Department. The summons issued by the AO was actually served on Satish Kumar Dhingra, one of the donors, and, therefore, his identity cannot be in doubt. Sudhir Duggal is also borne on the file of the IT Department and, therefore, his identity cannot also be doubted. Both the donors have bank accounts and also PAN cards. So far as their creditworthiness is concerned, it is seen that Satish Kumar Dhingra has filed IT returns declaring total income of Rs. 86,735 and Rs. 95,667 for the asst. yrs. 2000-01 and 2001-02 respectively. The income consists of salary income of Rs. 48,000, capital gains and income from other sources. He has also filed a WT return for the asst. yr.
1999-2000 and has paid wealth-tax of Rs. 1,083 on net wealth of Rs. 16,03,284. The wealth consists of movable property in the form of shares for Rs. 8,50,000, loans and advances of Rs. 9,50,000, jewellery of Rs. 4,55,750 and the balance consists of household goods, furniture and fittings, cash and bank balances. His balance sheet as on 31st March, 2000 shows capital of Rs. 23,69,015. Turning to his bank account with Oriental Bank of Commerce (p. 10 of the paper book), the opening balance as on 1st Oct., 2001 was Rs. 10,657. On 13th Oct., 2001, there is a deposit of Rs. 2,50,000 by cheque from which he has issued a pay order for Rs. 2,50,000 to the assessee on 15th Oct., 2001 after paying a commission of Rs. 250. He has filed an affidavit before the AO dt.
15th Oct., 2001 in which he has affirmed the gifts which he made out of natural love and affection for the assessee. In the case of Sudhir Duggal, we find that for the asst. yr. 2000-01, he declared income of Rs. 71,200 consisting of business income of Rs. 1,01,200 against which loss of Rs. 30,000 under the head "Income from house property" was adjusted. The assessment order in his case for the asst. yr. 1998-99 shows that the returned income was Rs. 93,620. He derived income from two proprietary concerns carrying on contract work. He has taken a housing loan on which interest is paid and has also taken a bank loan for purchase of car. His capital account stands at Rs. 24,16,400 as on 31st March, 2000. Turning to his bank account with Canara Bank, Kashmere Gate Branch for the period 9th Oct., 2001 to 12th Oct., 2001, we find that the opening balance was Rs. 49,738. A cheque for Rs. 2,41,540 was credited to the account on 9th Oct., 2001 and from the aggregating balance of Rs. 2,91,278, he gifted Rs. 2,50,000 to the assessee on 10th Oct., 2001 by issue of pay order, paying commission of Rs. 250. These details show that both the donors were men of means with the financial capacity to give the gifts. To be very precise, the immediate source of the monies gifted were the cheques credited to the bank accounts of the donors. There is no evidence or material to even suggest, as pointed out on behalf of the assessee, that the cheques directly or indirectly emanated from the assessee so that it could be said that the assessee's own monies were brought back in the guise of gifts. It would make no sense for the assessee to first issue cheques to the donors and then get them back by way of gifts. Normally, in such cases, the suspicion of the IT authorities is aroused if there are cash deposits just prior to the issue of cheques or drafts to the assessee as gifts. In such a case, the burden on the donee assessee would probably be heavier to dispel the suspicion and show that the cash did not emanate from him. In the present case, there is no cash deposit in the bank accounts of the donors prior to the gifts. The persons who can explain the cheque deposits in the bank accounts are the donors and the donee can have very little idea as to where the cheques came from. The AO did issue summons to the donors, but despite service Satish Kumar Dhingra did not appear before the AO and in the case of Sudhir Duggal, the summons could not be served as he was not available at the addresses given. The AO does not appear to have imposed any penalty on Dhingra-at any rate no information is available on this aspect. The present case appears to us not a case where the creditworthiness of the donors and the genuineness of the gifts could be called in question.
The donors had filed affidavits. Though, they could not be examined by the AO, since they were made borne on the file of the IT Department and their income-tax file numbers were made available to the AO, it was equally the duty of the AO to have taken steps to verify their assessment records and if necessary to also have them examined by the respective AOs having jurisdiction over the donors. It should be remembered that S.K. Katyal, the donee assessee had passed away in Nepal on 1st Sept., 2002 (death certificate filed) and his wife had to undertake the onus of gathering the evidence in support of the gifts.
It cannot be disputed that this would have been not an easy job.
Despite the difficulties, the assessee's wife had managed to obtain the bank account details of the donors from which the immediate source of the gifts could be established. She could also manage to obtain evidence to show that the donors were assessed to tax. In these circumstances, we are inclined to hold that the assessee has discharged the initial burden to prove the gifts and thereafter the burden did shift to the AO who also seems to have taken some steps by issuing summons to the donors but in our opinion he could have followed up the same by tracing them through their AOs and have them examined which would have helped matters. On the evidence adduced by the assessee, it is difficult to doubt the creditworthiness of the donors and the sources of the gifts and the genuineness of the transactions.
8. Several authorities have been cited by both the sides, but in our opinion, each case has to be decided on its own facts, since no two cases may be identical. The general principle which could be culled from the authorities is that it is for the assessee to lead evidence to prove the identity and creditworthiness of the donors and the genuineness of the gifts. No single factor can be said to clinch the issue in favour of the assessee or against him and the entire evidence has to be assessed on a wholesome basis. It has been held in several authorities, including the judgment of the Hon'ble Delhi High Court in CAT v. Anil Kumar (supra) cited on behalf of the Department that mere identification of the donor and the movement of the monies through banking channels are not sufficient to prove the genuineness of the gifts and that it is also necessary for the assessee to show the financial capacity and creditworthiness of the donors, their relationship with the assessee, the sources of the gifts and their capacity to give such large amounts to the assessee. In the case before the High Court, there was a gift of Rs. 20 lacs from the NRE accounts of the donors and the assessee could not prove the genuineness of the transaction or the identity and capacity of the donors to make the gift. He merely relied on the fact that the gifts came through banking channels. This was considered insufficient by the Hon'ble Delhi High Court. In the case before us, in addition to establishing the identity of the donors and the fact that the monies came through bank accounts, the assessee was able to discharge the initial burden of showing the source of the gifts and the financial capacity of the donors and was also able to point out that the donors were also assessed to income-tax. Taking the evidence adduced by the assessee overall, we hold that the Departmental authorities were not justified in adding the amount of Rs. 5 lacs as the income of the assessee. We delete the same and allow the appeal with no order as to costs.