MR. VIJAY KUMAR AGGARWAL,NEW DELHI vs. ACIT, NEW DELHI

This appeal by the assessee arises out of the order dated 23.03.2011 of ld. CIT(A)-XXV, New Delhi for the assessment year 2006-07 on the following grounds : “

During the assessment proceedings the assessee was asked to produce the details of gift along with documentary evidence. In this respect, the assessee produced an affidavit of Ms. Nalini Aggarwal dated 07.12.2008. The contents of the affidavit are as under : “ I, Nalini Aggarwal d/o Sri Subhash Chandra Aggarwal R/o 2238, Gali Hinga Beg, Tilak Bazar, Delhi 110006 do hereby, solemnly, confirm that:-

Nalini Aggarwal is unwell and she is not in a position to appear personally.

Copy of Nalini Aggarwal is in Account Premier Car Sales Ltd. is enclosed. 3. Copy of Bank Statement is enclosed. 4. Nalini gave a gift of 6,00,000/- by cheque to Sh. Vijay Aggarwal. 5. Gift deed has already been filed. 6. Copies of acknowledgement confirming filing of return for A.Y. 2005-06 and 2003-04 are enclosed. 7. P/A in our favor is enclosed. 5. The AO analysed section 56(2)(v) of the Act and observed that Ms. Nalini Aggarwal is not covered under the relatives as defined in the section. The AO issued show cause notice on 23.12.2008 to attend on 26.12.2008 to show cause as to why the gift of Rs.6,00,000/- should not be treated as income from other sources of the assessee. None attended on the given date. Ultimately, the AO added the amount of gift as income of the assessee from undisclosed sources.

Against the order of the AO, the assessee preferred an appeal before the ld. CIT(A) and submitted before him that the gift has been received by mistake. He stated that the said amount was, in fact, interest free advance, which has been returned to the donor on 01.12.2008. The ld. CIT(A) after relying on various judgments confirmed the addition and dismissed the appeal of the assessee. Against the order of CIT(A), the assessee has come up in this appeal before the Tribunal.

The ld. AR submitted that it was not a gift, but was received by assessee as advance. The ld. AO has wrongly treated it as gift. The said amount has been returned on 01.12.2008 to Ms. Nilini Aggarwal through banking channel before the completion of assessment. The ld. CIT(A) has relied on various case laws which are not applicable in the assessee’s case.

On the other hand, the ld. DR relied on the order of the AO and CIT(A). He submitted that the lower authorities have made correct order as per law and the same do not require any interference

After considering the submissions of both the parties and the material on record we find no substance in the contention of the assessee that the impugned amount received by the assessee was not received as gift but as interest free advance. The ld. Counsel for the assessee failed to rebut the findings of the ld. CIT(A) that a gift deed was filed before the AO which was supported by affidavit of donor. Had it been a interest free advance, there was no occasion to furnish the gift deed and its confirmation by way of affidavit. Moreover, the alleged gift was received through banking channel. Initially the assessee claimed the alleged gift as exempt from tax having been received from relative as contemplated u/s. 56(2)(v) of the Act. It was only when the AO concluded that brother’s daughter (the donor in the present case) does not come within the purview of relative as defined in the said section and hence, the impugned gift is not exempt from tax, the assessee changed its stand before the ld. CIT(A) stating that the impugned amount was received as interest free advance which was returned to the lender. In view of these facts, the ld. CIT(A) has rightly observed that it was not a genuine gift and the alleged gift was not from a genuine donor because if there was a genuine gift then either the donor or the donee would never think about the tax implications as the gift is generally give out of love and affection of the donor for the donee. In presence of these facts, in our considered opinion the ld. CIT(A) has committed no error in relying upon the principle of law laid down by Hon’ble Apex Court in the case of McDowell & Co. Ltd. vs. CTO, 154 ITR 148 (SC) where it has been laid down that colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. In the instant case, the change of stand by the assessee before the ld. CIT(A) is nothing but a colourable device for tax avoidance which cannot be accepted under law. We, therefore, find no justification to interfere with the well reasoned order passed by the ld. CIT(A) after following various case laws of higher courts.