In case of gift the identity and creditworthiness of the donor and genuineness of the transaction must be proved and in additional evidence CIT must verified that before taking

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
The facts, in brief, are that the assessee who is a Joint Managing Director in M/s Ashapura Shipping Ltd. had received a gift of Rs. 55,00,000/- from Mr. Nilesh shah during the year under consideration. On being asked by the AO to furnish the details in support of the confirmation of the gift, namely a) Name, address & PAN No. of the donor, b) relationship of the donor with the assessee, c) Occasion for giving the gift, d) copy of the bank a/c reflecting the gift amount and e) confirmation of the gift from the donor, the assessee stated that the gift of Rs. 55 lakhs was received from one Mr. NV Shah, residing at 5, F Yamakatsu Bldg, 1-9-3 Misuji, Taitoku Tokyoo – 111 – 0055, on the assessee’s reaching the 60th year of age. In support of his contention, the assessee filed copy of the letter dated 17/09/03 received from the donor Mr. N.V. Shah, which states that, a cheque No. 392227 for Rs. 55 lacs drawn on SBI, dated 17/09/03 enclosed with the letter is a gift due to the long standing family relations which they were enjoying for the last 3 generations. In this letter, the donor also confirmed that his legal heirs will not have any right on the aforesaid money. However, the donor has not stated anything about the occasion of the gift in the said letter. The assessee also filed a copy of the bank statement showing credit of Rs. 55 lacs on 07/10/03. As per the ROI, the date of birth of the assessee is 27/01/43 and his 60th birthday falls only on the 27th of Jan., 03 & not in Sept., 03. Further the assessee vide his letter dated 01/08/06 submitted copies of the passports of the donor, Mr. N.V. Shah & a copy of the credit advice from Commerzbank, Hongkong, of the donors a/c, showing a credit of USD 62498311. The AO noted that on verification of the bank statement received from SBI, Opera House Branch, regarding Mr. N.V. Shah’s a/c, it is seen that his credit balance as on 17/09/03 was Rs. 5602/- only & further credits of Rs. 28,79,737/- & Rs. 28,55,461/- were made on 19/09/-3 & 26/09/03 respectively. A cheque of Rs. 55 lacs was debited from his a/c on 03/10/03 & was credited to the a/c of the assessee on 07/10/03. The AO further noted that the donor, stationed in Japan, had already issued the cheque of Rs. 55 lacs, drawn on SBI in India, on 17/09/03, i.e. about 3 weeks prior to the date on which he had sufficient credits to his a/c. The AO was of the view that from these facts one fails to understand that how the donor can issue a cheque of a sizable amount when there was a negligible credit balance in his a/c. In view of the above, the AO held that the creditworthiness of the donor was not established, therefore, he issued summons u/s 131 of the Act to Mr. NV Shah, on 20/11/06 which was duly served on 21/11/06, to appear before him. However, Mr. Shah neither appeared before the AO nor made any communication in response to the summons. Hence, the assessee was given one more opportunity to give information regarding the credit worthiness of the donor, with supporting documentary evidence. Since no fresh evidence was produced by the assessee regarding the source of income of the donor, whether the donor is paying any taxes in the country of his residence or any other information regarding the donors business/financial activity or status, nor the credit worthiness nor the capacity of the donor to donate the amount to the tune of Rs. 55 lacs is established, the AO held that it is, therefore, established beyond doubt that all the statements made by the assessee were nothing but after thoughts and cooked up stories, particularly when the donor had not made a single statement before him. Accordingly, the AO treated the amount of Rs. 55 lacs is treated as unexplained credit in the books of account of the assessee and added the same to the total income of the assessee u/s 68 of the Act. Aggrieved, the assessee carried the matter in appeal before the CIT(A).

Citation :
Asstt. Commissioner of Income-tax-2(1), … Appellant Aayakar Bhavan, R.No. 561, 5th Floor,M.K. Road, Mumbai – 400 020. Vs. Pradeep K. Vakharia, …Respondent Purav Apartment, Plot No. 30, Malabar Hill, Mumbai – 400 006.(PAN - ABBPV6815E)