N. RAJGOPAL,MUMBAI vs. JCIT RG 23(3), MUMBAI

Both the appeals filed by the assessee are barred by limitation. The assessee has moved a petition explaining the reasons for the delay in filing the present appeals. We heard the parties on this preliminary issue. We notice from the affidavits filed by the assessee along with evidences that the assessee was suffering from various kind of health problems, which claim is supported by the certificates given by the doctors. Hence, having regard to the submissions made in the affidavits, we condone the delay and admit both the appeals for hearing.

We shall first take up the appeal filed for AY 2003-04. The only issue urged in this appeal relates to the assessment of Rs.25,90,343/-, being the gifts received by the assessee by way of India Resurgent bonds. The assessee had credited the above said amount in his capital account. On examination, it was noticed that the assessee has claimed to have received “India Resurgent Bonds” as gits from various persons and their equivalent rupee value was credited in the capital account. The assessee merely submitted copies of Bonds along with copies of transfer forms to show that the bonds have been transferred to the assessee’s name. Before the AO, the assessee could not furnish confirmation letters from the concerned donors. Since the assessee did not furnish evidences to prove the identity and credit worthiness of the donors and the genuineness of the transactions, the assessing officer assessed the gift amount cited above as income of the assessee. The Ld CIT(A) also confirmed the same.

The Ld A.R submitted that the assessee has received India Resurgent bonds as gifts from various persons. He further submitted that 3 And 3977/M/2009 the donee of the bonds is also entitled to all the tax benefits given to the original subscribers of the bond. He further submitted that the genuineness of the receipt of gifts is established by the fact that the said bonds have been transferred to the name of the assessee upon the signing of the transfer deeds by the concerned donors. He further submitted that the donors had subscribed the bonds in the year 1998 and they have been given as gifts to the assessee in the year 2002. He submitted that the very fact that the donors have held the bonds since 1998 would show that they were having the capacity to subscribe to the bonds and the same proves their credit worthiness. He further submitted that the assessee has furnished copies of passport of all the donors and hence the identity of the donors has also been proved. The very fact that these bonds have been transferred to the name of the assessee proves the genuineness of the transactions. Accordingly, he contended that the assessee has discharged the initial burden placed upon him under sec. 68 of the Act and accordingly contended that that order of Ld CIT(A) should be set aside. The Ld A.R also placed reliance on the following case law in support of his contentions:- (a) ITO Vs. Mahendra P Mehta (2011)(9 taxmann.com 34) (Mum Trib) (b) CIT Vs. Shri Gautam Balasaheb Ladkar & Others (ITA No.1438 of 2013 & others dated 24.08.2015)(Bom HC)

On the contrary, the Ld D.R submitted that the assessee could not prove his relationship with the donors, the occasion for making gifts. Further, the assessee could not obtain any confirmation letters from the concerned donors and, in fact, has expressed his inability to obtain the relevant details. Accordingly the Ld D.R submitted that, the assessee has failed to prove that the bonds were received as gifts.

However we notice from the assessment order that the assessee has admitted before the assessing officer that the donors were “third parties” and hence it would not be possible for him to collect the details that were called for by the assessing officer. There should not be any doubt that the “Gifts” are given out of natural love and affection, that too without consideration. Hence, in respect of claim of gifts, it is imperative to show that there existed a relationship between the donor and donee. It is further required to be shown that there was an occasion or reason, which prompted the donor to give gifts to the donee. It is also required to be shown that the gifts were given out of natural love and affection. In the instant case, admittedly the assessee has failed to prove the nature of relationship between him and the concerned donors and also failed to furnish any explanation with regard to the reason/occasion which prompted the donor to give gifts to the assessee. In fact, the assessee himself has admitted before the assessing officer that the alleged donors are third parties. When the donors are unrelated third parties, it would be hard to believe that they have given gifts to the assessee, who is not known to any of the donors. In that kind of situation, we are unable to comprehend as to how the donors could give the gifts out of “natural love and affection”. Hence, in our view, the tax authorities are justified in 5 And 3977/M/2009 holding that the assessee has failed to prove the claim of receipt of gifts. This is further fortified by the fact that the assessee has failed to furnish any of the details that were called for by the AO. With regard to the case laws relied upon by the assessee, we notice that the facts prevailing in those cases are different, i.e., in the case of Shri Gautam Balasaheb Ladkar (supra), the donors have given affidavits confirming the fact of giving of gifts and in the case of Mahendra P Mehta (supra), the assessee therein received gifts from his brother in law (wife’s brother). However in the instant case, the assessee has not received gifts from close relatives, but he has received the alleged gifts from unrelated third parties. Further, the assessee himself has admitted that he could not obtain confirmation letters from the concerned donors. Under these set of facts, we are of the view that the Ld CIT(A) was justified in confirming the assessment of gift amounts as income of the assessee. However, the Ld A.R pointed out that the gifts from Raju Jham and Patel Dhanlaxmiben Arvindbhai have been received in the earlier years and hence the same cannot be assessed in AY 2003-04. We are of the view that this claim of the assessee requires verification, since it is made for the first time before us. Accordingly, we modify the order of Ld CIT(A) and restore the matter relating to the gifts received from the above said two parties to the file of the AO with the direction to examine the claim of the assessee afresh. The order of Ld CIT(A) with regard to the remaining amounts is confirmed.

We shall now take up the appeal filed for AY 2004-05, wherein following issues are urged before us:- (a) Computation of capital gains on sale of flats by rejecting the claim of purcahse FY 1996-97 and also rejecting the claim for deduction of (i) the amount payable to the daughters.

The first issue relates to the computation of Long term capital gains on sale of four flats. It is stated that the assessee and his wife had purchased these properties jointly. They have three daughters. The spouse of the assessee expired intestate in the year 2000. Hence, prior to the sale of the properties, the assessee and his three daughters entered into a Memorandum of Understanding (MOU), as per which the daughters agreed to take 18% of the sale consideration towards their right over the share of their mother in the properties. Accordingly, the assessee deducted 18% of the sale consideration from the total sale consideration and computed capital gain upon the remaining 82%. The AO did not agree with the submissions of the assessee for the reason that the capital gains is required to be computed on “full value of consideration” as per sec. 48 of the Act. The AO also observed that the assessee has failed to show that the daughters have paid tax on their respective share. Accordingly, the AO did not allow deduction of 18% of sale consideration, being the share of daughters of the assessee. The Ld CIT(A) also confirmed the same.

We heard the parties on this issue. We notice that the facts relating to this issue have not been properly brought on record, i.e., whether the spouse of the assessee has also contributed her own money at the time of purchase of properties or her name was included for name sake only. If the spouse of the assessee had contributed her own money, then the daughters shall have right over her properties, since the spouse of the 7 And 3977/M/2009 assessee has claimed to have died intestate. In that case, the MOU entered between the assessee and her daughters have to be examined and a proper decision is required to be taken. In this regard, the Ld A.R invited our attention to the provision of Hindu Succession Act. We notice that the assessing officer has simply rejected the claim of the assessee without examining the rights of the daughters of the assessee over the properties of the assessee’s spouse. Hence, in our view, this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO for fresh consideration.

The next issue relates to the rejection of claim for deduction of expenses incurred in respect of two flats located in Chennai. The AO rejected the claim, since there was difference in the amount of expenses claimed in the original computation of income and in the revised computation of income. Further, the assessee has also failed to substantiate that the expenses were incurred in connection with the transfer of flats located in Chennai. Before Ld CIT(A) also, the assessee did not furnish any other evidence and hence the first appellate authority confirmed the rejection of the claim. Before us also, no evidence was furnished to prove the claim of the assessee that the expenses were incurred in connection with the transfer of flats located in Chennai. Further, the assessee has also failed to furnish any explanation with regard to the difference in the expenditure claim. Under these set of facts, we are of the view that the Ld CIT(A) was justified in confirming the rejection of expenditure claim.

The next issue relates to the claim of date of purchase of flat located at Punit Tower, Mumbai. The assessee claimed that he has 8 And 3977/M/2009 purchased this flat on 19-12-1997 and accordingly claimed indexation benefit from FY 1997-98. However, the AO noticed that the possession was obtained only on 03-09-1998 and accordingly allowed indexation benefit from FY 1998-99. The Ld CIT(A) upheld the view of the AO and hence the assessee is contesting this decision of Ld CIT(A). Before us, the Ld A.R placed his reliance on the agreement dated 19-12-1997 and contended that the indexation benefit should be given from FY 1997-98. However, the Ld A.R could not contradict the finding of the Ld CIT(A) that the assessee obtained actual possession of the property only on 03-09- 1998. Even otherwise, the assessee has failed to establish as to how he would be entitled to indexation benefit from FY 1997-98 merely on the basis of sale agreement. Hence, we do not find any infirmity in the decision of Ld CIT(A) on this issue.

The next issue relates to the assessment of gifts received by the assessee by way of India millennium Deposits. Since the assessee failed to furnish the details that were called for by the AO, the assessing officer assessed the gifts as income of the assessee. The Ld CIT(A) also confirmed the same. In the immediately preceding year, the assessee had received gifts by way of India Resurgent bonds and the same was assessed as his income. While adjudicating the said issue, we have noticed that the assessee has received gifts from unrelated parties and has also failed to obtain confirmation letters from the concerned donors. Further, it was noticed that the assessee has also failed to furnish any explanation with regard to the occasion/reason which prompted the donor to give gifts to the assessee. We notice that the facts prevailing in the instant year in respect of India millennium deposits are identical in nature. Hence, consistent with the view taken by us in respect of India Resurgent bonds, we uphold the order of the Ld CIT(A) in confirming the assessment

The last issue relates to the assessment of interest income to the tune of Rs.2,16,088/-. The AO noticed that the interest income shown in the TDS certificates was more than that offered by the assessee and hence assessed the difference amount as interest income of the assessee. The Ld CIT(A) also confirmed the same. Before us, the Ld A.R submitted that the assessee had offered the difference amount in the earlier year on accrual basis. If the assessee had already offered the different amount in the earlier year, the same cannot be assessed again in the current year, since double assessment of same income is not permissible. However, the claim of the assessee requires verification. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the claim of the assessee and take appropriate decision in accordance with the law.

In the result, both the appeals of the assessee are treated as partly allowed for statistical purposes.