E. UMMER BAVA vs. THE COMMISSIONER OF INCOME TAX

This appeal is filed against the order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA.515/11 pertaining to the assessment year 2005-06. The grievance of the assessee was confined to addition of gift receipt of `35 lakhs from his brother Sri.E.Hamza Bava, an NRI, and addition of `2 lakhs towards unverifiable nature of expenses. This addition was confirmed by the first appellate authority and by the Tribunal. It was in these circumstances, the assessee has come up in this revision filed under section 260A of the Income Tax Act, framing the following questions of law for the consideration of this Court: “a) Whether, in the facts and circumstances of the case, the authorities were right in invoking the provisions of Sec.68 of the Act in respect of the gift received from the appellant's brother when (1) there is no dispute regarding the identity of the “donor” (2) the donor has proved his capacity to make the gift by proving that he has received Dh.11 lakhs (Rs.110 lakhs) in connection with his retirement and (3) payment was made through Instruments issued by Foreign Banks and credited to the account of the Appellant by negotiation through a Bank in India where he maintains account? b) Whether the Appellate Authorities were right in upholding the same on the ground that the authenticity of the Certificate issued by Ms.Palm General Trading LLC has not been proved when the Assessing Authority had chosen to assess the amount under Sec.68 of the Act, on the ground that the creditworthiness and capacity of the donor have not been proved “beyond doubt”, especially when the Assessing Authority had expressed no reservations about the authenticity of the same in the Remand Report submitted by him? c) Whether the Assessing Authority was not required to conduct enquiries regarding the claim of the Appellant that the amount was received as gift when his finding is that the appellant had not proved the credit worthiness and capacity of the donor “beyond doubt”, which itself would indicate that the Appellant had discharged the initial burden cast on him? d) Whether the authorities below were right indicating that such receipts SHOULD HAVE BEEN THROUGH THE NRE ACCOUNT OF THE DONOR in order to establish a link between the amounts received from the LLC and the gift when the Appellant had received the gifts in the form of Demand Drafts - Instruments issued by Foreign Banks and credited to the respective account of the Appellant by negotiation through a Bank in India with whom the Appellant maintains account? e) Whether the Assessing Authority was right in suspecting the genuineness of the gift on the ground that “there was no special occasion for the gift”, when the gift is NOT TO THIRD PARTIES, BUT TO OWN BROTHER? f) Whether, in view of the fact that (1) the donor is the brother of the appellant, (2) admittedly he has received Rs.110 lakhs from his firm from which retired (as certified by the firm), (3) the gift has been properly confirmed through a duly Notarized Affidavit by the “donor”, the authorities were right in holding that “the genuineness of the transactions cannot be considered to have been established and that creditworthiness of the donor has not been established”? g) Whether the authorities erred in applying the principles laid down by the Hon'ble Supreme Court in COMMISSIONER OF INCOMETAX VS. P.MOHANAKALA - [2007] 291 ITR 278 (SC) to the facts of the case? h) Whether the addition of Rs.2 lakhs “to cover up the deficiencies noticed in the books of accounts relating to contract business” is sustainable?”

Heard learned counsel for the assessee and the learned senior counsel for the Revenue. 3.In so far as addition of gift receipt of `35 lakhs is concerned, the order passed by the lower appellate authority shows that it was mainly on account of the failure of the assessee to prove the requirement of section 68 that the addition was upheld. Section 68 of the IT Act requires an assessee to prove the credits appearing in the books of accounts and the nature and source of such amounts so that, if explanation furnished is not satisfactory, the Assessing Authority can enter it as the assessee's income. The conditions which are required to be proved by the assessee are the identity of the creditor, the capacity of the creditor to advance the money and the genuineness of the transaction. In so far as this case is concerned, the identity of the creditor has been established by the assessee. However, in so far as the creditworthiness of the donor is concerned, according to us, the Tribunal has, on facts, rightly held that the assessee has failed to discharge the burden. Similar is the case with the genuineness of the transactions also.

In so far as the creditworthiness of the donor is concerned, the Tribunal has found that the assessee has not produced the balance sheet or financial statement or cash flow statement of the donor. Similarly, there was also no material to show that the sums gifted were the sums received by the donor on his requirement from the firm of which he was a partner. That apart, it was also found that the donor had received his retirement benefits from the firm in the previous assessment year and in the previous year also, the assessee had received substantial sums from the donor. The authenticity of the certificate of disbursement of sums to the donor, issued by the firm, also was rightly declined to be accepted for non production of supporting documents. Therefore, we concur with the view of the Tribunal that the creditworthiness of the donor was not established.

In so far as the genuineness of the transaction is concerned, it could have been established by the assessee by producing materials to show that the money gifted were from the own funds of the donor. On this aspect also, there was total dearth of materials. In such circumstances, we are constrained to agree with the Tribunal that the assessee failed to discharge the burden under section 68 of the Act and therefore, the addition was rightly upheld. 6.The addition of `2 lakhs was sustained by the Tribunal for absence of independent cross-verifiable vouchers and other documents. Here again, this factual finding cannot be said to be wrong in any manner. In such circumstances, we uphold the factual conclusion of the Tribunal and according to us, the order of the Tribunal does not give rise to any question of law for consideration of this Court. Appeal fails and is accordingly dismissed. ANTONY DOMINIC, Judge. DAMA SESHADRI NAIDU, Judge. kkb.