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Income Tax Appellate Tribunal, BANGALORE BENCH A, BANGALORE
Before: SMT. P. MADHAVI DEVI
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the Revenue, it is aggrieved that addition of Rs.19,15,000/- and Rs.10,14,500/- made by the AO for unexplained gifts and unexplained capital investment respectively were deleted by the CIT (A)-II, Bangalore, vide his order dt.11.02.2013.
ITA.632/Bang/2013 Page - 2
Facts apropos are that assessee, a medical professional had filed his return of income declaring income of Rs.2,16,360/-. During the course of assessment proceedings, AO found that assessee had claimed various gifts for justifying his investment in an immovable property and in the capital of one M/s. Keshava Nethralaya. Gifts claimed by the assessee to have been received from his brother, father, mother and paternal uncle were disbelieved by the AO for want of evidence. An addition of Rs.45,24,673/-, was made. Such addition inter alia included a sum of Rs.21,75,000/- claimed to have been received from assessee’s uncle Shri Doddanna Krishna and Rs.10,14,500/- stated to have been invested by the assessee in the capital of Keshava Netralaya. Latter as per the AO was not reflected in his return of income.
Aggrieved, assessee moved in appeal before the CIT (A). Out of the addition made for the gift claimed to have been received from Shri. Dodanna Krishna, CIT (A) deleted a sum of Rs.19,15,000/- and sustained only Rs.2,60,000/-. CIT (A) also deleted the addition of Rs.10,14,500/- considered by the AO as unexplained investment in capital of Keshava Nethralaya. For giving relief to the assessee on the claim of gift from Doddanna Krishna, assessee’s paternal uncle, CIT (A) relied on a remand report from the AO.
Remand report was sought, since assessee produced letters signed by Doddanna Krishna, in support of the gift. In the remand report, AO had mentioned as under :
ITA.632/Bang/2013 Page - 3
“3. Gift of Rs.21.75 lakhs from Sri Doddanna Krishna, Paternal Uncle of the assessee :
There are no evidence with respect to the gift received from Sri Doddanna Krishna, Paternal Uncle of the assessee, except for a photocopy of an undated letter purported to have been signed by Sri Doddanna Krishna. The said letter does not state that Sri Doddanna Krishna had given a gift to the assessee. It only states that as on 15/06/2008 an amount of Rs.21.75 lakhs has been paid to the assessee. There are nobank entries to prove the payment made to the assessee. The passport copy of Sri. Doddanna Krishna also reveals that during the previous year relevant to assessment year 2009-10, Sri. Doddanna Krishna has not visited India. Such being the case, the payment could not have been received by the assessee in cash.
Sri Patalappa,( assessee's father) and his brother Sri. Doddanna Krishna maintain a joint account with Citi Bank,vide NRE AlC No.5536584805. The amount received in the bank account has been periodically withdrawn by the assessee's father, Sri Patalappa. There are no entries in the bank account to prove that payment has been made to the assessee. The copies of Income tax returns filed by Sri. Doddanna Krishna, in USA does not show or state that Sri. Doddanna Krishna has given gift to anybody.
Sri Patalappa,( assessee's father) has transferred funds from the Citi Bank Joint Alc (with Sri. Doddanna Krishna) to his Bank Account in Apex Bank bearing No.4141, instead of transferring the funds directly to the assessee, Sri Naveen Patalappa. It is evident from this fact that the funds were never transferred directly from Sri. Doddanna Krishna Account to Sri Naveen Patalappa's Account. It is clear from this that it is a colourable device and an after thought to show these funds as source for acquiring an immovable property.
The funds transferred to Sri Patalappa’s (assessee’s father) A/c No.4141 from Citi Bank Joint Account was thereafter transferred to assessee’s A/c 4932. For the sake of clarity, the same is explained as under :
ITA.632/Bang/2013 Page - 4
Sri Patalappa's A/c Apex Bank Sri Naveen Patalappa's A/c Account NO.4141 Apex Bank Account No.4932 Date Amount Date Amount 22/07/2008 Rs.5,00,000 29/08/2008 RS.10,00,00O 10/08/2008 Rs.4,00,000 02/09/2008 Rs. 5,00,000 27/08/2008 Rs.4,00,000 05/09/2008 RS.2,15,000 16/09/2008 Rs. 50,000 24/10/2008 Rs. 2,00,000 27/09/2008 Rs.5,00,000 --- --- 26/11/2008 Rs. 1 ,00,000 -- - ---
The above accounts show that up to 27/08/2008, Sri Patalappa's Account received amounts to the extent of Rs.13,00,000/- from the A/c of Sri. Doddanna Krishna. Subsequently, funds were transferred from Sri. Doddana Krishna's account to this Patalappa's account on Rs. 16.09.2008. Sri. Patalappa, ( assessee's father)transferred funds from his account to the assessee, Sri Naveen Patalappa's account, a sum of RS.17, 15,000/-, on three occasions, till 05/09/2008. Thus, there is a deficit of Rs.4,15,000/- between the funds received and funds transferred. Further funds were received on transfer from Citi Bank Account to Sri Patalappa's Account- Rs.50,000/- on 16/09/2008 and Rs.5,00,0001 - on 27109/2008. Both these amounts have not been transferred to assessee's account.
Sri. Doddanna Krishna, in his letter states that as on 15/06/2008 an amount of Rs.21.75 lakhs has been paid to Sri Naveen Patalappa. Further, he has not mentioned that the funds were transferred from his account to Sri Patalappa's Ale (assessee's father) and thereafter it was transferred to Naveen Patalapp's A/c.
As on 15/06/2008, Sri Naveen Patalappa's Bank account does not show any receipt of Rs.21,75,0001-from Sri. Doddanna Krishna. This dearly shows that Sri Naveen Patalappa has never received a gift of RS.21,75,000/- from Sri. Doddanna Krishna.
For the detailed reasons mentioned above, the order of the Assessing Officer may be upheld and the addition of Rs.21.75 lakhs may be confirmed. Without prejudice to the above, assessee’s claim for receipt of Gift of Rs.21,75,000/- is also not acceptable for the following reasons :
ITA.632/Bang/2013 Page - 5
The following views are well supported by the decisions of various ITATs and High Courts :
In the case of cash credits the onus is on the assessee to establish the identity and the capacity of the creditor as also the genuineness of the transaction. Similar is the position in regard to gift. In fact, the degree of proof in the case of a gift would be heavy. Mere fact that the money had been received in India in foreign exchange from abroad would not be sufficient to absolve the assessee of the burden of establishing the identity as well as financial capacity of the donors and genuineness of the gifts.
In cases where the explanation offered by assessee about the nature and source of the money received by assessee was not satisfactory, there is prima facie evidence against assessee, namely, the receipt of money. The burden is on the assessee to rebut the same.
Mere movement of alleged gift amount through banking channels is not sufficient to prove the genuineness of the gift as well settled vide various decisions. The AO had not accepted the asssessee's claim for the reason that assessee had failed to prove the genuineness of the factum of gift on the facts pointed by him in his order. Thus, assessee's contention that as the amount was routed through banking channels, assessee had been able to establish and prove that the amount was received by way of gift had no force. On that count alone, assessee's claim could not be accepted on the basis of documents, that is, confirmation and affidavit of donors. It could not be said that assessee had been able to discharge his onus to establish the capacity of the donor to make such a gift , and to show what kind of relationship the donor had with assessee and what was the occasion for giving such a gift.
ITA.632/Bang/2013 Page - 6
Mere identification of donor or receipt of amount through banking channels is not sufficient to satisfy the confirming the addition of the sum received by assessee as a bogus gift even though the same was received through banking channels and holding that after having proved the credibility and capacity of donor, it was further necessary for the donee to prove the ‘occasion’ for making the gift’.
Identity, creditworthiness as well as genuineness of the gift were required to be proved by assessee and only filing declaration of gift deed would not be sufficient to prove the genuineness of the transaction. More so, love, affection and occasions of gift was to be proved.”
CIT (A) while giving partial relief to the assessee on the gift of Rs.21,75,000/- claimed to have been received from Shri. Dodanna Krishna, held as under:
“3.8 As regards the addition of Rs.21,75,000/treating the gift claimed to have been received from his paternal uncle Shri Doddanna Krishna as unexplained, it seen from the AO's remand report that Shri Doddanna Krishna had transferred on six occasions from his bank account to Shri Patalappa's bank account No .4141 with Apex Bank a sum of Rs.19,50,000/- out of which a sum of Rs.19,15,000/- was transferred on four occasions to the appellant's account No.4932 with the same bank. These figures are available in the AO's remand report. Beyond this, the appellant has not been able to prove the availability of funds from the gift received from Shri Doddanna Krishna even during the appeal proceedings before me. I am, therefore, inclined to accept the availability of source to the extent of Rs.19,15,000/- and confirm the addition of Rs.2,60,000/-.”
ITA.632/Bang/2013 Page - 7
Vis-a-vis addition of Rs.10,14,500/-, observation of the CIT (A) were as under :
“3.10 The addition of Rs.10,14,500/- made u/s 69 of the Act by the AO on the ground that the investment made by appellant in M/s Keshava
Netralaya was not declared in the return of income but only in the statement of affairs for the assessment year in question and not in the statements of affairs relevant for the assessment years 2007-08 and 2008- 09. In this regard, the appellant has submitted that this business was started only during the year ended 31/3/2009. However, the appellant has furnished a copy of the return of income filed by him for the assessment year 2009-10 wherein the income from the said business has been declared in the return of income. Apart from this, the appellant has shown the details of investments by preparing balance sheets for his business and explained with bank statements the sources for the investments made out of borrowals made in this business. Hence, the investment of Rs.10,14,500/- made by the appellant in M/s. Keshava
Nethralaya stands explained and the addition made being unjustified is deleted.”
ITA.632/Bang/2013 Page - 8
Ld. DR submitted before us that CIT (A) had accepted the claim of assessee, disregarding the remand report given by the AO.
Nobody appeared on behalf of the assessee.
We have perused the orders and heard the contentions of the Ld. DR. What we find is that in respect of the gifts claimed to have been received from Doddanna Krishna, assessee had produced confirmation letters. Sum of Rs.19,15,000/- were transferred from Doddanna Krishna’s account to assessee’s father Patalappa’s bank account from where it was later transferred to the assessee’s account. Since the transactions were through bank and it was supported by the confirmation letter issued by Doddanna Krishna and considering the close relationship, we are of the opinion that CIT (A) was justified in deleting the addition to the extent of Rs.19,15,000/-.
However, vis-a-vis the addition of Rs.10,14,500/- there is contradiction between the finding of the AO that assessee had not furnished a return of income which reflected the business of Keshava Nethralaya and the finding of the CIT (A) that the income from the said business was declared in the return of income. It is also not clear whether the assessee had justified the introduction of capital through any cash-flow account. We are of the opinion that this issue requires a fresh look by the AO. We, therefore, set aside the order of CIT (A) in ITA.632/Bang/2013 Page - 9 so far as it relates to the addition of Rs.10,14,500/- and remit it back to the file of AO, for consideration thereof.
In the result, appeal of the Revenue is treated as partly allowed for statistical purposes.
Order pronounced in the open court on 30th day of June, 2015.