ITAT, LUCKNOW BENCH `B’, LUCKNOW
Krishna Mohan Agrawal v ITO , Appeal No.: ITA No. 811/Luc/05, Dated : November 7, 2008
Merely because assessee has been able to file documents showing the form of the transactions such as affidavits, deeds, statements and transactions of gift through banking channels, it cannot be said that in substance, the gifts are acceptable; for a gift to be genuine, surrounding circumstances, human probabilities and reality of human life are to be considered for determining genuineness of the gifts; the realities of human life in which a person would be motivated to give gift to another include the relationship between the donors and the donees, and emotional bondages, reciprocity showing that the two sides, one that of donor and the other that of donee are, in normal course, exchanging gifts of similar amounts on different occasions.
RELEVANT EXTRACTS:
25. We have considered the rival submissions and the material on record. In our considered view, the gifts so received by the assessee or his grandsons could not be said to be genuine. The reasons are that in all these cases, the donors are persons of low income group and do not have any capital or asset. There is no evidence on record to show how they build up capital. Even though identity of the donors is proved, but creditworthiness is not established. Creditworthiness is established by showing the balance sheet and capital account filed by them in the income tax return. It has to be shown how the capital was lying with the donors and what is immediate source of money gifted and after giving gift or loan, how much was left with them. In addition to identity and creditworthiness, the assessee is also required to show relationship, occasion and reciprocity. The three additional elements are discussed by Hon’ble Delhi High Court in the case of ACIT vs Rajeev Tandon (supra) which was affirmed by the Hon’ble Supreme Court subsequent by dismissing the SLP of the assessee. In nutshell, we find following common factors in the cases of all these gifts:
(i) All the donors are ladies. All of them are claiming of doing work of knitting, embroidery, tailoring and tuition,
(ii) All of them have practically filed their return for the assessment years 2000-01 to 2001-02 on nominal income. In the first year income is shown just below taxable limit. In the second year income is shown about Rs.80,000/- plus. In case of genuine people having taxable income, such coincidence is not possible. They are all ladies, doing almost the same work, earning almost the same income and filing the return almost in the same pattern i.e in assessment year 2000-01 in which the income was below taxable limit and in the second year i.e. assessment year 2001-02 at Rs.80,000/- plus and thereafter no return.
(iii) Husbands of all the ladies are doing petty work and earning small salary of Rs.2000-4000 per month and everyone decides to give gift to assessee/grandsons of the assessee and not to anybody else i.e their sons, daughters, their husbands, their brothers, sisters-in-law. Assessee and his grandsons get top most priority over alt other close relatives, their dear sons and daughters and beloved husband. These instances in respect of 14 ladies are not believable to happen. It can happen only when it is designed and planned, clearly for avoiding/evading taxes
(iv) All the ladies seems to have decided to give gift almost in the same period in the month of August and September. Some of them opened bank account with small sum, deposited cash in the bank account and gave gift to the grandsons of the assessee and thereafter the bank account became almost blank.
(v) There is no evidence of any relationship. In fact, no such claim has been made. There is also no evidence of any strong acquaintance which would prompt the ladies to part away their hard earned money if at all it was earned by them to the assessee or to his grandsons. There is no evidence of any bondages, emotional or otherwise which would prompt them to give gifts to the assessee or his grandsons.
(vi) There is no evidence of any occasion wherein assessee or his grandsons might have received gifts from any of their own relations, acquaintances and close friends. There is no reason to believe as to what prompted these ladies to come forward to give gift to the assessee or his grandsons.
(vii) There is also no reciprocity. It is not claimed that assessee or his sons or his grandsons gave any gift to any of the donors or to their family members even though donors are persons of no means and living in comparatively poor conditions. In fact, these gifts are flowing from poor to riches.
26. Thus, a design is apparent when we look at the identity of the donors, their sources of income, their filing of return showing almost similar income, none of them considering to gift the money to their own sons and daughters or their parents or parents-in-law, none of them having creditworthiness of any extent to create semblance of belief that they could give gift.
27. In our considered view, under section 68 what is required to be seen in addition to identity and creditworthiness, the genuineness of the transaction which is a judgment to be arrived at by looking into all the surrounding circumstances and considering the very crucial test whether such transaction could happen in real life. Merely because assessee has been able to file documents showing the form of the transactions such as affidavits, deeds, statements and transactions of gift through banking channels, it cannot be said that in substance, the gifts are acceptable.
35. From the above decisions it is quite clear that for a gift to be genuine, surrounding circumstances, human probabilities and reality of human life are to be considered for determining genuineness of the gifts.; The realities of human life in which a person would be motivated to give gift to another include the relationship between the donors and the donees, and emotional bondages, reciprocity showing that the two sides. One that of donor and the other that of donee are, in normal course exchanging gifts of similar amounts on different occasions. In this context, importance of occasion cannot be undermined when gifts are given. If there is no occasion on which a person could receive gifts from friends and relatives then onus is heavier on the assessee to show as to what prompted the donors to express his affection or love towards donees un-occasionally and why only strangers got prompted to give gift to the donee when close/blood relations of the donee who are apparently much richer chose to sit quietly and did not feel giving gift to the donee ? Why not, in the present case, father of the minors or their grandfather bestowed their love and affection on the minors by giving gifts to their out of their capital? Why capital (in the form of gifts) migrated from capital less persons to capital rich people? These donees or their family had not shown any love and affection towards donors or their family in the past. Accordingly, we are of the view that there is no basis to treat the gifts as genuine but apparently it is a case of procuring gifts by his own accounted money by the assessee. Once gifts are not proved as genuine, the question of holding that minors could lend their money to grandfather is also not believable.
Krishna Mohan Agrawal v ITO , Appeal No.: ITA No. 811/Luc/05, Dated : November 7, 2008
Merely because assessee has been able to file documents showing the form of the transactions such as affidavits, deeds, statements and transactions of gift through banking channels, it cannot be said that in substance, the gifts are acceptable; for a gift to be genuine, surrounding circumstances, human probabilities and reality of human life are to be considered for determining genuineness of the gifts; the realities of human life in which a person would be motivated to give gift to another include the relationship between the donors and the donees, and emotional bondages, reciprocity showing that the two sides, one that of donor and the other that of donee are, in normal course, exchanging gifts of similar amounts on different occasions.
RELEVANT EXTRACTS:
25. We have considered the rival submissions and the material on record. In our considered view, the gifts so received by the assessee or his grandsons could not be said to be genuine. The reasons are that in all these cases, the donors are persons of low income group and do not have any capital or asset. There is no evidence on record to show how they build up capital. Even though identity of the donors is proved, but creditworthiness is not established. Creditworthiness is established by showing the balance sheet and capital account filed by them in the income tax return. It has to be shown how the capital was lying with the donors and what is immediate source of money gifted and after giving gift or loan, how much was left with them. In addition to identity and creditworthiness, the assessee is also required to show relationship, occasion and reciprocity. The three additional elements are discussed by Hon’ble Delhi High Court in the case of ACIT vs Rajeev Tandon (supra) which was affirmed by the Hon’ble Supreme Court subsequent by dismissing the SLP of the assessee. In nutshell, we find following common factors in the cases of all these gifts:
(i) All the donors are ladies. All of them are claiming of doing work of knitting, embroidery, tailoring and tuition,
(ii) All of them have practically filed their return for the assessment years 2000-01 to 2001-02 on nominal income. In the first year income is shown just below taxable limit. In the second year income is shown about Rs.80,000/- plus. In case of genuine people having taxable income, such coincidence is not possible. They are all ladies, doing almost the same work, earning almost the same income and filing the return almost in the same pattern i.e in assessment year 2000-01 in which the income was below taxable limit and in the second year i.e. assessment year 2001-02 at Rs.80,000/- plus and thereafter no return.
(iii) Husbands of all the ladies are doing petty work and earning small salary of Rs.2000-4000 per month and everyone decides to give gift to assessee/grandsons of the assessee and not to anybody else i.e their sons, daughters, their husbands, their brothers, sisters-in-law. Assessee and his grandsons get top most priority over alt other close relatives, their dear sons and daughters and beloved husband. These instances in respect of 14 ladies are not believable to happen. It can happen only when it is designed and planned, clearly for avoiding/evading taxes
(iv) All the ladies seems to have decided to give gift almost in the same period in the month of August and September. Some of them opened bank account with small sum, deposited cash in the bank account and gave gift to the grandsons of the assessee and thereafter the bank account became almost blank.
(v) There is no evidence of any relationship. In fact, no such claim has been made. There is also no evidence of any strong acquaintance which would prompt the ladies to part away their hard earned money if at all it was earned by them to the assessee or to his grandsons. There is no evidence of any bondages, emotional or otherwise which would prompt them to give gifts to the assessee or his grandsons.
(vi) There is no evidence of any occasion wherein assessee or his grandsons might have received gifts from any of their own relations, acquaintances and close friends. There is no reason to believe as to what prompted these ladies to come forward to give gift to the assessee or his grandsons.
(vii) There is also no reciprocity. It is not claimed that assessee or his sons or his grandsons gave any gift to any of the donors or to their family members even though donors are persons of no means and living in comparatively poor conditions. In fact, these gifts are flowing from poor to riches.
26. Thus, a design is apparent when we look at the identity of the donors, their sources of income, their filing of return showing almost similar income, none of them considering to gift the money to their own sons and daughters or their parents or parents-in-law, none of them having creditworthiness of any extent to create semblance of belief that they could give gift.
27. In our considered view, under section 68 what is required to be seen in addition to identity and creditworthiness, the genuineness of the transaction which is a judgment to be arrived at by looking into all the surrounding circumstances and considering the very crucial test whether such transaction could happen in real life. Merely because assessee has been able to file documents showing the form of the transactions such as affidavits, deeds, statements and transactions of gift through banking channels, it cannot be said that in substance, the gifts are acceptable.
35. From the above decisions it is quite clear that for a gift to be genuine, surrounding circumstances, human probabilities and reality of human life are to be considered for determining genuineness of the gifts.; The realities of human life in which a person would be motivated to give gift to another include the relationship between the donors and the donees, and emotional bondages, reciprocity showing that the two sides. One that of donor and the other that of donee are, in normal course exchanging gifts of similar amounts on different occasions. In this context, importance of occasion cannot be undermined when gifts are given. If there is no occasion on which a person could receive gifts from friends and relatives then onus is heavier on the assessee to show as to what prompted the donors to express his affection or love towards donees un-occasionally and why only strangers got prompted to give gift to the donee when close/blood relations of the donee who are apparently much richer chose to sit quietly and did not feel giving gift to the donee ? Why not, in the present case, father of the minors or their grandfather bestowed their love and affection on the minors by giving gifts to their out of their capital? Why capital (in the form of gifts) migrated from capital less persons to capital rich people? These donees or their family had not shown any love and affection towards donors or their family in the past. Accordingly, we are of the view that there is no basis to treat the gifts as genuine but apparently it is a case of procuring gifts by his own accounted money by the assessee. Once gifts are not proved as genuine, the question of holding that minors could lend their money to grandfather is also not believable.
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