Prem Prakash Choudhary, New Delhi vs Assessee

This is an appeal filed by assessee against the order of Ld. CIT(A) dated 31.12.2008. The assessee has taken 8 grounds of appeal against an addition sustained by Ld. CIT(A) with respect to alleged gift of Rs.25 lacs received by assessee. The assessee though has taken legal ground also but during arguments, Ld. A.R. laid his emphasis on ground No..2 and requested the Bench to remit back the case to office of A.O. or CIT(A) as the case may be in view of the fact that necessary opportunity of cross examination to assessee was not provided by A.O.

2. The brief facts of the case are that the assessee had received a gift of Rs.25 lacs from Shri Anil Kumar Gupta in the form of two cheques of Rs.12.50 lacs each. During assessment proceedings, the assessee was 2 ITA No.671/Del/2009

required to prove genuineness and creditworthiness of gift. The assessee submitted that gifts of Rs.12.50 lacs each were received from two persons namely Shri Anil Kumar Gupta and Mrs. Sarita Mehta and filed a copy of gift deed of Rs.12.50 lacs executed by Shri Anil Kumar Gupta. Therefore, vide order sheet entry dated 06.12.2007, the assessee was again asked to file necessary evidences and to produce donors. In response the assessee furnished following replies vide letter dated 07.12.2007:

"That at this stage, while regretting our earlier statement that one of the two gifts were made by Smt. Sarita Mehta, wife of Sh. Ashish Mehta, A-17, Lawrence Road Indl. Area, New Delhi; may be treated as amended as her name was inadvertently mentioned due to sheer absence of mind, as both the gifts have been given by Sh. Anil Kumar Gupta, the only donor.

(ii) That your good self has asked to produce the donor on 7th day of Dec. 2007 at 2.30PM. For certain reasons the donor Sh. Anil Kumar Gupta is not extending his hand of cooperation for the reasons best known to him a/one, even though both the gifts are bona fide and genuine and one of the gift deeds executed by Sh. Anil Kumar Gupta on 20-09- 2001 has been furnished by us with our letter dated 15-11- 2007.

(iii) That the other gift deed even though, duly executed by the donor Sh. Anil Kumar Gupta has unfortunately been misplaced at our end and therefore, we are handicapped in the mater of its production.

However letter of confirmation from Sh. Anil Kumara Gupta is enclosed herewith."

3. From the above reply, the A.O. doubted the genuineness of gifts and held that how a done can forget the name of donor and he further observed that there was difference in signatures on gift deed and on confirmation dated 07.12.2007.

4. The donor was produced on 18.12.2007 and the A.O. recorded statement of the donor which is reproduced in the assessment order. From the recorded statement, the A.O. inferred as under:

3 ITA No.671/Del/2009 "(i) That the donor did not know the name of the person to whom gifts were made. According to him the gifts were made to M/s Rama Krishna Jewellers and not to the assessee.

(ii) That the donor even doesn't know the owners of M/s Rama Krishna Jewellers. In reply to Q. 12 he replied that perhaps Mr. Praveen Malhotra is the owner of M/s Rama Krishna Jewellers.

(iii) That the donor or his family members are not related to the family of the assessee.

(iv) That the donor had deposited equivalent amount of cash before issuing the corresponding cheques. A copy of the relevant bank account number 01050022536 with the bank of Bikaner & Jaipur, Lawrence Road, Delhi the proprietary concern of the donor was also made part of this order as Annexure 'B'.

(v) That the donor is not aware of the source of cash deposited in the bank before issuing cheques.

(vi) That neither the donor nor the donee ever visited the residence of each other."

In the light of the above, it is quite clear that when the donor does not know anything about the assessee and his family, then how could he made a huge gift of Rs.25,00,000/- and that too out of natural love and affection. This is a very strange and unique case of love and affection where the donor without knowing the donee but out of natural love and affection has gifted a sum of Rs.25,00,000/- to the donee. In view of the above statement of Sh. Anil Kumar Gupta (Donor), the creditworthiness of the donor to gift such a huge amount and genuineness of the gift remained unexplained. As the assessee has claimed these gifts as genuine, the onus to prove the same as genuine lies upon the assessee, which he has failed to discharge. In the case of gifts, various courts have constantly held that assessee is required to prove identity and capacity of the donor and genuineness of the gift. In this case there is no relationship between the donor and the donee which made Sh. Anil Kumar Gupta to make such huge gifts to the assessee. Capacity and genuineness of the gift also remained unproved. There was also no occasion to make such gift. In the present case even the name of the donee is not known to the donor."

4 ITA No.671/Del/2009 5. Therefore relying on a number of case laws, the A.O. held that assessee was not able to prove genuineness and creditworthiness of gift. Therefore, he made addition of the same u/s 68 of the Act.

6. Aggrieved, the assessee filed appeal before Ld. CIT(A) and submitted various submissions including his grievance of not getting chance to cross examine the donor. However, Ld. CIT(A) did not agree with the contention of the assessee and confirmed the addition made by A.O. by holding as under:

"From the above statement of the donor, it is evidently clear that Sh. Anil Kumar Gupta has never given any gifts to his close relatives including brothers and sisters, as is evident from his answer to Question No. 9 of his statement. While answering question No. 11, Sh. Anil Kumar Gupta stated that he has made a gift of Rs. 25 lacs to M/s Rama Krishna Jewellers in the year 2001 and he did not know the address of M/s Rama Krishan Jewellers. Further when he was asked to tell the name of the owner of M/s Rama Krishana Jewellers, he replied that he was not aware. He recalled' that there are perhaps Praveen Malhotra. The above statement of Sh. Anil Kumar Gupta clearly shows that Sh. Anil Kumar Gupta was not even aware to whom the gift of Rs. 25 lacs was made. As per his statement he has made gift of Rs. 25 lacs to M/s Rama Krishna Jewellers whose owner is probably Praveen Malhotra. Thus, he has not categorically stated that the gift was given to the appellant Sh. Prem Prakash Choudhary. The gifts are normally given out of love and affection. In this case, the existence of love and affection between donor and donee can be seen from the fact that donor has stated that the gift was given to M/s Rama Krishna Jewellers whose owner perhaps is Mr. Praveen Malhotra. Thus the donor is not even aware about the exact name of the donee i.e. the appellant, Sh. Prem Prakash Choudhary. Thus, there is no indication of the presence of love and affection between the donor and the donee. As pointed out by the AO., the cheques were issued by the donor from the bank account in which amounts were deposited in cash. Though the appellant submitted that the cash was deposited out of withdrawals of cash made on earlier date from the same bank account but the appellant had not adduced any evidence regarding the purpose for which the earlier cash/amounts were withdrawn from the 5 ITA No.671/Del/2009

bank and as to whether the amounts were utilized for that purpose and, if not, why idle cash was kept for a long period in hand. From the details of cash withdrawl and cash deposits, it is also noted that on 25.08.2001, an amount of Rs. 50,000/- was deposited on bank. After 25.08.2001, the appellant had withdrawal only Rs. 4,85,000/- on 06.09.2001. But before issuing cheques for impugned gifts, cash of exact amounts of Rs. 12,50,000/- each were deposited on 12.09.2001 and 20.09.2001. Thus, the appellant failed to prove creditworthiness of the donor to give gifts of huge amount of Rs. 25,00,000/-. Moreover, looking to the aspect of human probabilities, surrounding circumstances, such as, no relationship of the donor with donee, no occasion of making gift, the transactions of gifts of Rs. 25 lacs shown by the appellant from the donor were not genuine. Therefore, the AO. was justified in treating the credit of Rs. 25 lacs as unexplained credit and making addition u/s 68 being the appellant's income from undisclosed sources. Hence, the addition of Rs. 25 lacs is confirmed."

7. Aggrieved, the assessee is in appeal before us.

8. At the outset, Ld. A.R. submitted that Ld. CIT(A) has confirmed the addition on the basis of statement of Shri Anil Kumar Gupta, donor which was recorded at the back of the assessee. Assessee was not confronted and was not allowed to cross examine donor. He submitted that the statement was recorded on 18.12.2007 and the assessment order was passed on 20.12.2007. Therefore, he argued that the action of A.O. in not allowing cross examination of Shri Anil Kumar Gupta is against the principle of natural justice and, therefore, he prayed that the matter may be remitted back and the assessee be provided appropriate opportunity to cross examine the donor. The Ld. A.R. further submitted that at the time of recording statement the AR of the assessee was made to sit outside and A.O. recorded the statement in the absence of assessee/AR of the assessee and therefore, the statement was given by donor under stress which cannot be relied upon for making addition. In this respect, Ld. A.R. invited our attention to the 6 ITA No.671/Del/2009

affidavit of Ld. A.R. and that of the assessee placed at paper book pages 62- 65 and submitted that in the affidavits, the assessee and his counsel have clearly stated that they were made to sit outside when the statement of Shri Anil Kumar Gupta was being recorded. Ld. A.R. also took us to paper book page 70 where copy of statement of donor was placed and submitted that the donor himself had stated that A.O. had behaved in an arrogant manner and had insisted for recording statement without any legal or moral aid. Continuing his arguments Ld. A.R. submitted that all these facts were brought to the notice of Ld. CIT(A) and in this respect, invited our attention to written statements placed at paper book pages 44-57. Regarding merits, Ld. A.R. submitted that the cash was withdrawn from the bank account of the firm wherein the donor was proprietor and thereafter, the same was deposited in the bank account from where the gift cheques were issued and in this respect, he invited our attention to paper book pages 66 where a copy of cash flow statement was placed. Therefore, keeping in view all these facts and circumstances, it was submitted that the case of the assessee needs readjudication.

9. Ld. D.R. on the other hand strongly objected to the prayer of Ld. A.R. for readjudication. He submitted that initially the assessee had claimed that gift of Rs.12.50 lacs each was received from two persons and thereafter, he changed his statement and submitted that gift was received from one person. Inviting our attention to the statement of the donor recorded in the assessment order, Ld. D.R. submitted that the donor was not able to recollect as to whom the gift was made therefore, now after a period of 7 years, how he will recollect about the same. Regarding merits of the case, Ld. D.R. submitted that creditworthiness of the donor was not proved as cash was deposited immediately before issuance of cheques and further, the donor was 7 ITA No.671/Del/2009

not having means as he had incurred losses in his business. Our attention was invited to answer to question No.3 wherein Shri Anil Kumar Gupta had stated that he was engaged in the export business of garments up to 2003 after which the business was closed due to losses. Therefore it was submitted by Ld. D.R. that a person who had incurred losses, how he could make a gift and that too to an unknown person and that too of a huge amount of Rs.25 lacs. He further submitted that business loss cannot be said to have occurred in one year and therefore, losses must be accumulating for a couple of years and that is why he was forced to close its business and therefore, he argued that genuineness of gift was also not proved as a person incurring losses cannot be expected to make gifts and that too to unknown persons. Inviting our attention to answer to Question No.11, Ld. D.R. submitted that gift is always made out of natural love and affection and how it is possible that a person making gift did not know the address of the donee. Moreover it was submitted that the assessee had not made any gift to any of his relatives as per his answer to question No.9 therefore how it is possible that a gift was made to an unknown person. He submitted that even if the case is remitted back, it will not serve any useful purpose as Ld. CIT(A) has also decided the issue on merits.

10. Ld. A.R. in his rejoinder submitted that the assessment was completed u/s 153A and there was certain confusion about names of donors therefore names were wrongly submitted initially but the same were immediately rectified. He submitted that in the bank account of proprietorship firm of donor, there are entries of both cheques and cash which itself indicates that the donor had good business and, therefore, creditworthiness of donor cannot be doubted. As regards relationship of donor and donee, Ld. A.R. submitted that donor happens to be in blood relation with brother's wife of 8 ITA No.671/Del/2009

assessee and in this respect, invited our attention to paper book page 58 where this fact was communicated to Ld. CIT(A) vide letter dated 23.12.2008 and therefore, it was submitted that gift was not to unknown person and before making gifts assessee had sufficient creditworthiness as the entries in bank account indicates. Without prejudice to the above arguments, Ld. A.R. submitted that there were other issues also in this case one of which relates to the fact that the assessment was completed u/s 153A and addition was not based on any incriminating material and therefore, assessment itself was not legal. However for the sake of fair justice, he was only asking for remanding back of his case. Ld. A.R. placed his reliance on a number of case laws which were relied upon before Ld. CIT(A) also as placed in paper book pages 44-57.

11. We have heard rival parties and have gone through the material placed on record. We find that initially, during assessment proceedings, the assessee had submitted that gift of Rs.25 lacs were received from two persons namely Shri Anil Kumar Gupta, R/o East Punjabi Bagh and Smt. Sarita Mehta, resident of Laurence Road, New Delhi. During further assessment proceedings, the assessee vide letter dated 07.12.2007, changed his statement and submitted that gift were not received from M/s. Sarita Mehta and two gifts were received from Shri Anil Kumar Gupta only. During assessment proceedings, the A.O. recorded the statement of donor a part of which finds mention in assessment order and after recording the statement, the A.O. found that gift was not genuine and moreover, he held that creditworthiness of donor was also not proved. Similar view was taken by Ld. CIT(A). Regarding prayer of Ld. A.R. that the case be remanded back to A.O. and we observe that same prayer was also made before Ld. CIT(A) but Ld. CIT(A) has rejected the same on the basis that the assessee could 9 ITA No.671/Del/2009

have requested the A.O. on the date of recording of statement itself for cross examination but he did not do so and he further held that affidavits of counsel and assessee and the donor were self serving documents. He further held that as per order sheet entry dated 18.12.2007, the statement was recorded in the presence of counsel of the assessee and therefore, there was no grievance to the assessee. Besides above findings the Ld. CIT(A) has also decided the issue on merits and has held that genuineness of transaction and creditworthiness of donor was not proved. From the above facts and circumstances, we find that even if the prayer of Ld. A.R. is accepted for readjudication, no fruitful purpose will be served as already a period of more than 12 years has passed after giving the so called gift and it is not possible that donor will recollect all things which he had not been able to answer after a period of 6 years from the date of making gifts. Further, we find that Ld. A.R. during proceedings before lower authorities or before us could not bring to our notice any other additional evidence other than already on record by which he would be able to prove genuineness and creditworthiness of donor. We find from the documents on record creditworthiness of donor and genuineness of gift is not proved because of the following facts:

i) The assessee had no direct relationship with the donor and in the absence of any direct relationship, natural love and affection between the donor and donee was not established and neither any proof was filed before the authorities below or before us to substantiate that parties had extraordinary relationship.

ii) The donor himself has stated that he had been into export business up to 2003 which was closed due to losses. We are aware that a business is closed only after consistent losses in various years and therefore, a person 10 ITA No.671/Del/2009

who had incurred losses cannot be expected to give a gift to an unknown person and that too of a huge amount of Rs.25 lacs.

iii) The donor had not given any gift to his close relatives including his brothers, sisters etc. as is evident form answer to Question No.9 of the statement.

iv) Cheques of gift were issued against cash deposited in the bank account and the cash was stated to be lying at home which is again against human probabilities.

v) Against answer to question No.17, the donor had stated that cash was deposited out of cash lying at home and he had submitted that he does not remember the source of the said cash.

12. Ld. CIT(A) has passed a well reasoned and speaking order wherein we do not find any infirmity and therefore, we uphold the order of Ld. CIT(A).

13. In view of the above, appeal filed by assessee is dismissed.

14. Order pronounced in the open court on 09th Jan., 2015.

Sd./- Sd./- (GEORGE GEORGE K.) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER Date: 09.01.2015 Sp Copy forwarded to:- The appellant The respondent The CIT The CIT (A)-, New Delhi.

The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.

By Order (ITAT, New Delhi).

11 ITA No.671/Del/2009 S.No. Details Date Initials Designation 1 Draft dictated on 6/1 Sr. PS/PS 2 Draft placed before author 7,8,8, Sr. PS/PS Draft proposed & placed before the Second 3 JM/AM Member 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement Sr. PS/PS 7 File sent to Bench Clerk Sr. PS/PS 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order