IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: MUMBAI BEFORE SHRI A L GEHLOT, ACCOUNTANT MEMBER AND SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO 6651/MUM/2006 (ASSESSMENT YEAR: 2003-04) SHRI NALINKANT B SANGHAVI, C/O VINISHI CHEMICALS PVT LTD, 405, PARSHVA CHAMBERS, 17/21, ISSAJI STREET, MUMBAI -400 003 PAN: AAEPS 7385 J VS ITO WARD -7(3), 616, AAYAKAR BHAVAN, M K ROAD, MUMBAI -400 020 APPELLANT RESPONDENT APPELLANT BY: SHRI M S MATHURIA RESPONDENT BY: SHRI C P PATHAK ORDER PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER 1. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XXX, MUMBAI DATED 29.9.2006. 2. THE FACTS IN BRIEF ARE THAT THE APPELLANT IS AN INDIVIDUAL, AND A DIRECTOR IN M/S VINISHI CHEMICALS PVT LTD. THE RETURN OF INCOME WA S FILED ON 21.11.2003 DECLARING THE TOTAL INCOME AT RS 4,16,802/-. THIS CASE WAS S ELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) BY DETERMINING TOTAL INCOME AT RS 6,16,800/- . THE AO MADE ADDITIONS OF RS 2 LAKHS ON ACCOUNT O F GIFTS RECEIVED FROM FOUR PERSONS OF RS 50,000/- SHRI MANISH R GANDHI, RS 50,000 SMT RAJUL C SHETH, RS 50,000/- SHRI JITENDRA R SHAH AND SHRI DHIRAJLAL A SONI RS 50,000 /-. 3. THE AO FOUND THAT RELATION OF DONORS WITH THE AS SESSEE WAS VERY DISTANT AND ALSO THERE WAS NO SPECIAL OCCASION FOR THE GIFTS. FURTHER, THE FINANCIAL PROFILE OF THE DONORS WERE ALSO NOT SOUND. THEREFORE, HE TREATED THESE AS BOGUS RELYING ON THE DECISION OF 69 ITD 23(DEL) AND ADDED THE SAME TO TH E INCOME OF THE APPELLANT. SHRI NALINKANT B SANGHAVI 2 4. AGGRIEVED WITH THE ORDER OF THE AO, THE APPELLAN T PREFERRED AN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A), THE LEARNED REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE AO HAD BASED HIS OPINION ON SURM ISES AND SUSPICION THAT IT IS NOT PROBABLE FOR THE GIFT TO BE GENUINE CONSIDERING (A) RELATIONSHIP OF THE DONOR WITH THE APPEALS; (B) OCCASION OF THE GIFT DEED; AND (C) PER SONAL VERIFICATION OF THE DONORS. 5. AT PARA 5.4 OF THE ORDER OF THE CIT (A), THE LEA RNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE CONTENDED AS FOLLOWS:- IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICE R WHILE PASSING THE SAID ORDER IGNORED THE FOLLOWING GLARING POINTS:- 1. THAT THE ASSESSEE HAD ATTACHED ALL GIFT DEEDS ALONG WITH THE RETURN OF INCOME FILED BY HER. 2. ALL GIFTS WERE RECEIVED BY ACCOUNT PAYEE CROSSED CH EQUES AND THOUGH PROPER BAKING CHANNELS. 3. THAT ALL DONORS HAVE TIME AND AGAIN PRODUCED THEMSE LVES BEFORE THE ASSESSING OFFICER AND TIME AGAIN CONFIRMED HAVING F ILED THE SAID GIFTS TO THE APPELLANT AND HAD ACCEPTED THEIR RELATIONSHIP WITH THE APPELLANT. 4. THAT ALL DONORS ARE INCOME TAX ASSESSEE HAVING PERM ANENT ACCOUNT NUMBERS. 5. THE ALL HAD SUBMITTED THEIR PASS BOOKS FOR VERIFICA TIONS AND THE ASSESSING OFFICER HAS NOT FOUND ANY CASH DEPOSITS RELATING TH E SAID GIFTS. 6. THAT THE DONORS HAD GIVEN PROVED THEIR SOURCES OF S UCH GIFTS. 7. ALL THE SUMMONS U/S 131 WAS PROPERLY SERVED ON ALL; DONORS PROVING THEIR GENUINELY. 8. BASED ON THE ABOVE FACTS IS IT CLEAR THAT THE SAID ASSESSING OFFICER HAS NO SUBSTANCE IN MAKING SUCH ADDITIONS AND THE SAID ADD ITIONS DULY BASED ON SURMISE AND SUSPICION AND HENCE THE INTERIM ORDER M AY BE CANCELLED AND THE SAID ADDITIONS MAY BE DELETED. 9. THAT THE ASSESSING OFFICER HAS NOT SUPPLIED COPIES OF THE SAID STATEMENTS RECORDED BY APPELLANTS REBUTTAL. 10.THAT THE ASSESSEE HAS NOT REFUSED TO PRODUCE THE PARTIES BUT ISSUE OF SUMMONS WAS INSISTED TO SUBSTANTIATE APPELLANTS AR GUMENT OF AVAILABILITY OF THE DONOR AT THE ADDRESSES MENTIONED IN THE GIFT DEED. 6. THE CIT (A) HELD AS FOLLOWS AFTER DISCUSSING ELA BORATELY AT PARAS 6 TO 6.2 OF HIS ORDER:- 6.3 THOUGH THE DONORS ARE FOUND HAVING CONFIRMED T HE ABOVE GIFTS MADE TO THE APPELLANT BEFORE THE ASSESSING OFFICER IN STATE MENT ON OATH AND ALSO DURING THE CROSS EXAMINATION DONE BY THE AUTHORIZED REPRES ENTATIVE OF THE APPELLANT OF THEIR STATEMENTS. THUS THE IDENTITY OF THE DONO RS ARE OF COURSE PROVED BUT THE FINANCIAL CAPACITY TO MAKE SUCH GIFTS AS WELL A S GENUINENESS OF THE GIFT SHRI NALINKANT B SANGHAVI 3 TRANSACTION, IN VIEW OF THE AFORESAID FACTS STANDS NOT ESTABLISHED AS THE GENUINENESS OF THE GIFT TRANSACTION CAN ONLY BE DET ERMINED LOOKING INTO THE ASPECT OF HUMAN PROBABILITIES, IE RELATIONSHIP OF D ONOR AND DONEE, OCCASION FOR MAKING THE GIFTS AND EXISTENCE OF RECIPROCITY, IF A Y. IN CASE THE ASSESSEE FAILS TO ESTABLISH ANY ONE OF THESE INGREDIENTS THE GIFT AMOUNTS RECEIVED BY THE APPELLANT CAN BE TREATED AS APPELLANTS INCOME FROM UNDISCLOSED SOURCES REPRESENTING APPELLANTS OWN MONEY WHICH WAS INTROD UCED IN THE GARB OF A GIFT BY THE ASSESSEE. AS NONE OF THE DONORS ARE HAVING BLOOD RELATION WITH THE APPELLANT OR FAILS UNDER THE DEFINITION OF RELATIVE AS CONTEMPLATED IN EXPLANATION TO CLAUSE (V) OF SECTION 56(20 AND ALSO THERE IS NO SPECIFIC OCCASION FOR MAKING THE GIFTS AND ALSO NO RECIPROCITY IS EXI STING, MOREOVER ALL THE DONORS HAVE STATED TO HAVE MADE THIS GIFT FOR THE FIRST TI ME, IT IS JUST AN ABNORMAL HUMAN BEHAVIOUR FOR GIVING AWAY HIS/HER HARD EARNED MONEY AS A GIFT TO AN ACQUAINTANCE MERELY OUT OF LOVE AND AFFECTION. 6.4 VIEWING FROM THESE ANGLES, I DO NOT FIND ANY ME RIT IN THE SUBMISSIONS AND CLAIM OF THE APPELLANT THAT IT HAD ATTACHED THE GIFT DEED ALONG WITH THE RETURN OF INCOME, GIFTS RECEIVED BY ACCOUNT PAYEE C ROSSED CHEQUES AND THROUGH BANKING CHANNELS, DONORS WERE PRODUCED BEFO RE ASSESSING OFFICER AND CONFIRMED, DONORS ARE REGULAR INCOME TAX ASSESSES, ALL HAVE SUBMITTED THEIR BANK ACCOUNTS AND PROVED THEIR SOURCE OF GIFTS ETC, FOR THE SIMPLE REASON THAT FIRSTLY THE GIFT DEEDS ARE FOUND TO BE IN A STANDAR D FORMAT, THE TRANSACTIONS REFLECTED IN THE BANK OF THE DONORS ARE IN THE NATU RE OF ACCOMMODATION ENTRIES ONLY WHICH DO NOT PROVE THE CREDITWORTHINESS OF THE DONORS AND THE BANKING CHANNELS IS FOUND TO HAVE USED TO GIVE THE TRANSACT ION A COLOUR OF GENUINENESS. LASTLY THE DONORS HAVING PRESENTED THEMSELVES BEFOR E THE ASSESSING OFFICER AND CONFIRMED HAVING GIVEN THE GIFTS ARE NOT FOUND TO BE HAVING SUFFICIENT SOURCES FOR MAKING GIFTS. I ALSO FIND FROM THE REC ORDS THAT THE APPELLANT TOGETHER WITH HIS FAMILY MEMBERS SUCH AS SMT URVASH I N SANGHAVI, AND SHRI VIRAL N SANGHAVI HAD RECEIVED GIFTS OF RS 2,00,000/ - EACH DURING THE YEAR UNDER CONSIDERATION, FROM FOUR PERSONS EACH OF AN A MOUNT OF RS 50,000/- EACH. BUT IN ALL THE THREE CASES NONE OF THE BASIC INGREDIENTS AS LAID DOWN BY THE VARIOUS JUDICIAL PRONOUNCEMENTS OF THE COURTS A ND ALSO BY THE APEX COURT SUCH AS RELATION WITH THE DONOR AND THE DONEE, OCCA SION FOR MAKING THE GIFT AND ANY EXISTENCE OF RECIPROCITY ARE EXISTING. THU S BY APPLYING THE TEST OF HUMAN PROBABILITY, I FIND THAT THE ASSESSING OFFICE R WAS FULLY JUSTIFIED IN COMING TO CONCLUSION THAT THE GIFTS RECEIVED ARE IN THE NA TURE OF UNDISCLOSED INCOME INTRODUCED BY THE ASSESSEE IN THE GARB OF GIFT AND BY CREATING DOCUMENTS TO SUPPORT THE SAME. UNBELIEVABLY I ALSO FIND THAT TH E APPELLANT AND HIS OTHER FAMILY MEMBERS SUCH AS SHIR VIRAL N SANGHAVI AND MR S URVASHI SANGHAVI, ARE THE ONLY PERSONS BEING EXCEPTIONALLY FORTUNATE IN R ECEIVING GIFTS FROM THE DONORS WHO ARE NEITHER RELATED NOR THERE BEING ANY SPECIAL OCCASION AND ALSO THERE NOT BEING EXISTENCE OF ANY RECIPROCITY. THIS IS NOT AT ALL POSSIBLE AND CANNOT BE CONSIDERED AS NORMAL HUMAN BEHAVIOUR. IN VIEW OF ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO OF THE LEGAL POSITION, I CONFIRM THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS 2,00,000/- TO THE INCOME OF THE ASSESSEE U/S 68 OF THE INCOME TAX ACT , 1961, AS INCOME FROM OTHER SOURCES. SHRI NALINKANT B SANGHAVI 4 7. AGGRIEVED WITH THE ORDER OF THE CIT (A) THE APPE LLANT IS BEFORE US. THE APPELLANT AT PAGE 1 OF THE PAPER BOOK GAVE DETAILED STATEMENT OF PAN OF THE DONOR, DATE OF GIFT, MODE OF GIFT AND VARIOUS OTHER DETAIL S WITH RESPECT TO THE ISSUE. THE LEARNED COUNSEL ALSO SUBMITTED THE RETURNS ALSO FIL ED BY THE DONORS FOR THE ASSESSMENT YEAR 2003-04. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE IMPUGNED ORDER AS ALSO RECORDS AND WE FIND THAT EXHAUSTIVE DETAILS HAVE BE EN PRODUCED BY THE APPELLANT TO PROVE THAT THE GIFTS WERE GENUINE. THERE ARE FOUR E LEMENTS TO PROVE A GIFT IS (1) THE EXISTENCE OF THE DONOR, (2) FACTUM OF GIFT (3) AFFI RMATION OF THE DONOR HAVING MADE THE GIFT AND (4) THE FINANCIAL CAPACITY OF THE DONO R TO MAKE THE GIFT. ONCE THESE FOUR CONDITIONS ARE SATISFIED, IT MAY NOT BE POSSIBLE TO LEGALLY REJECT A GIFT AS A SHAM MERELY ON ACCOUNT OF SUSPICION AND SURMISES THAT TH E DONORS ARE NOT CLOSELY RELATED WITH THE DONEE OR THERE WAS NO OCCASION FOR MAKING THE GIFT. IN THE INSTANT CASE THE DONORS HAVE BEEN IDENTIFIED AND THEY HAVE CONFIRMED THE GIFT. THE ONLY ISSUE IS WHETHER THEY ARE FINANCIALLY CAPABLE OF MAKING THE GIFT. THE ASSESSEE SUBMITTED THAT ALL THE DONORS ARE INCOME TAX ASSESSEE AND THEY HAV E SUFFICIENT RESOURCES TO MAKE THE GIFT AS PER THEIR BALANCE-SHEET. THIS ASPECT H AS NOT BEEN LOOKED INTO BY THE ASSESSING OFFICER. THEREFORE IN THE INTEREST OF JUS TICE, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THEIR BALAN CE SHEET TO KNOW THE FINANCIAL CAPACITY OF THE DONORS. THE AO SHALL GIVE REASONAB LE OPPORTUNITY TO THE ASSESSEE. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON THE 20TH DAY OF OCTOBER, 2009 SD/- (A L GEHLOT) ACCOUNTANT MEMBER SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER MUMBAI, DATE: 20TH OCTOBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XXX, MUMBAI. 4) THE CIT -7, MUMBAI. SHRI NALINKANT B SANGHAVI 5 5) THE D.R. B BENCH, ITAT, MUMBAI BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI SHRI NALINKANT B SANGHAVI 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 14.10.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 14.10.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER