N.K. SAINI, A.M. M.A. BAKSHI, VICE PRESIDENT VIMAL GANDHI, PRESIDENT (AS THIRD MEMBER) August, 2004 2. In this appeal, assessee has taken following ground : 3 . facts of case in brief are that during course of gift-tax proceedings in case of one Shri Om Parkash Narwania, it was held that gifts made to daughters of assessee were not true and bogus one. Accordingly, proceedings under s. 147/148 were initiated in case of assessee. AO held that claims of receipt of gifts of Rs. 10,100 each in hands of minor daughters of assessee were sham and same were held as unexplained income of assessee. Accordingly, addition of Rs. 20,200 was made. 4 . assessee carried matter to learned CIT(A) and stated that notice issued under s. 148 was not valid notice because all facts were disclosed in return of income filed which was duly processed on 23rd Nov., 1990, under s. 143(1)(a) of IT Act, 1961. It was stated that gifts were received by cheque and were given to M/s Hari Chand Pawan Kumar, commission agent, Kaithal, by cheque. It was further stated that AO never asked Shri Om Parkash Narwania, donor, who was produced before AO either about GT return filed by him or affidavits submitted by him. 5. Learned CIT(A) asked for comments of AO who stated as under : 6. Learned CIT(A), after considering submissions of assessee and comments of AO, observed that objection regarding initiation of proceedings under s. 148/147 was not valid. On merits, learned CIT(A) confirmed action of AO by observing as under : 7 . Learned counsel for assessee reiterated submissions made before authorities below. He vehemently argued that assessee produced donor before AO. gifts were received through cheques and donor was directly related to donees since he is uncle of assessee and made gifts to minor daughters of assessee who used to serve food to him and to his wife. Therefore, gifts were made under love and affection only and not for any consideration. It was further stated that gifts were made on occasion of Karan Bedhan Sanskar. So, there was occasion when gifts were made. He further submitted that gifts were given through account payee cheques and were deposited in bank accounts of minors and then given as loan to M/s Hari Chand Pawan Kumar, commission agent, Kaithal, on interest for benefit of minors. It was argued that no evidence had been brought on record that aforesaid genuine gifts were undisclosed income of assessee. However, additions had been made by AO only on basis of assumptions and learned CIT(A) without applying his own mind and without taking into consideration facts, had confirmed action of AO. He, therefore, prayed to delete addition made by AO and sustained by learned CIT(A). 8 . In his rival submissions, learned Departmental Representative for Revenue strongly supported order of learned CIT(A) and stated that donor had not made any gifts to his sister or to his sons or daughters and it was not believable that he had made gifts to daughters of his nephew. It was emphasised that donor in his statement had stated that he had not made any gifts to anyone. Therefore, gifts were bogus and it was undisclosed income of assessee which had been routed through gifts. He accordingly, relied on order of learned CIT(A). 9 . We have heard both parties and also gone through material available on record. In instant case, it is not in dispute that gifts had been received through cheques. It is not case of AO that undisclosed income of assessee was deposited in account of donor and then he made gifts to daughters of assessee. It is also not in dispute that donor was related to donees and gifts had been made at time of Karan Bedhan Sanskar. So, there was also occasion. It is true that gifts can be made only under natural love and affection and without any consideration. For making gift it is not necessary that there should be blood relation and very very close relationship. In that view of matter, AO was not justified in considering gifts as non-genuine on basis that donor had not made any gifts to his gifts as non-genuine on basis that donor had not made any gifts to his sister or sons or daughters. In instant case, AO had not appreciated fact that neither sisters nor sons or daughters were living with donor. AO in assessment order dt. 5th Oct., 1992, at para 2 had stated that contention of assessee before him was that donor and his wife resided at Kaithal whereas his sons lived outside and in their absence, assessee looked after them and he was happy with services of assessee and, therefore, gifts were made to his minor daughters. AO at p. 3 had pointed out that donor in his statement had stated that no son or brother did any service for him and even assessee, Shri Ashok Kumar Narwania, did not serve him but only his small daughters came and sometime gave tea or water, etc. From above facts, it was clear that minor daughters were serving assessee by giving tea or water, etc. and in those circumstances, it cannot be said that there was no natural love and affection of donor towards minor daughters of assessee. In instant case, from above discussion, it would be clear that donor in his statement before AO had admitted that minor daughters of assessee were serving him by giving tea or water, etc. and gifts had been made through account payee cheques. AO had not brought any material on record that amount deposited in bank account of donor was income earned by assessee. In that view of matter, he was not justified in stating that gifts were undisclosed income of assessee. Considering totality of facts as narrated hereinabove, we are of view that learned CIT(A) was not justified in confirming action of AO without appreciating facts in right perspective. We, therefore, delete addition made by AO and confirmed by learned CIT(A). 10. In result, appeal of assessee is allowed. 23rd Sept., 2004 2 . Though facts have been stated by my learned Brother in proposed order, I would like to reiterate same, in brief, in my own words for sake of easy reference and coherence. 3. One Shri Om Parkash Narwania had filed GT returns claiming to have gifted sum of Rs. 10,100 each to daughters of assessee. In gift-tax proceedings, AO held that claim of gift to minor daughters of assessee was not genuine. AO considering fact that minor daughters of assessee had no independent source of income, initiated proceedings under s. 147 r/w s. 148 in case of assessee as, in his opinion, amount of Rs. 20,200 claimed to have been received as gift by minor daughters was out of undisclosed income of assessee. Assessee had filed confirmation from Shri Om Parkash Narwania as also his affidavit. alleged donor was produced before AO and his statement recorded. He was also cross-examined by counsel of assessee. In his statement, Shri Om Parkash Narwania has categorically stated that his only source of income is income from house property which was hardly sufficient to meet day-to-day expenses and that he had not made any gift even to his sister and that wherefrom he could have made gifts. AO, accordingly, treated alleged gifts as income of assessee from undisclosed sources. 4 . Assessee appealed to CIT(A). Written submissions were furnished before CIT(A) which had been forwarded to AO for his comments. contentions on behalf of assessee and comments of AO have been reproduced by CIT(A) in para 2.1 as under : Meri Bahin Shrimati Maya Devi hai, use bhi kabhi gift nahi di; kahan se deta. 5. It is evident from findings recorded by Revenue authorities that donor was not having any capacity to make gifts to minor daughters of assessee. This finding is based by AO and upheld by CIT(A) mainly on basis of statement of donor. No evidence to contrary has been placed on record of Revenue authorities or before us. Since donor has himself stated that he was having meagre income hardly to meet his household expenses and that he had no capacity to make gifts, addition made by AO of Rs. 20,200 is justified and there is no scope, in my humble view, for deleting same. I am, therefore, of considered view that there is no merit in appeal of assessee. 6. appeal of assessee, as per view expressed by me, is liable to be dismissed. REFERENCE UNDER S. 255(4) OF IT ACT, 1961. 23rd Sept., 2004 26th April, 2005 2 . facts of case, briefly stated, are that one Shri Om Parkash Narwania is stated to have made two gifts of Rs. 10,100 each to minor daughters of assessee, aged between 4-1/2 to 6 years, in period relevant to asst. yr. 1990-91. said Shri Om Parkash Narwania filed GT return in respect of above gifts. In those proceedings, GTO recorded statement of Shri Om Parkash Narwania in which Shri Om Parkash Narwania denied having made any gifts. It was otherwise recorded that said Shri Om Parkash Narwania had no capacity to make any gift. Accordingly, gifts made were not accepted. As minor daughters of assessee had no independent source of income, said gifted amounts were held to be undisclosed income of assessee. 3 . On basis of findings recorded by GTO, reassessment proceedings under s. 147/148 were taken against assessee. In reassessment proceedings, assessee placed reliance on fact that gifts were made through cheques and were supported by affidavits of donor and GT return filed by him. It was established on record that gifts were made out of love and affection which donor had for minor girls. There was, therefore, no question of doubting genuineness of gifts. 4. AO, after considering detailed submissions of assessee and material relied upon by him, held that no gift was made by Shri Om Parkash Narwania and that alleged gifted amounts deposited with M/s Hari Chand Pawan Kumar were assessee s income from undisclosed sources. In arriving at above conclusion, AO relied upon statement of Shri Om Parkash Narwania, extracts whereof are reproduced in assessment order. In said statement, donor clearly stated that he has not made any gift to anybody atleast in last 4-5 years. As per his memory, he does not remember what happened before above period. He did not make gift to even his only sister and he had no money to make such gift. Accordingly, addition of Rs. 20,200 was made in hands of assessee as income from undisclosed sources. 5. above assessment was challenged in appeal before CIT(A) and submissions were advanced which are noted by learned CIT(A) in para 2.1 of his order. learned CIT(A) also obtained remand report from AO on claims made before him by assessee. After considering submissions of assessee, he upheld as valid initiation of reassessment proceedings. learned CIT(A) relied upon finding of GTO that gifts made were not genuine. In light of above finding and also on basis of statement of Shri Om Parkash Narwania, learned CIT(A) maintained that gifts were not acceptable as genuine. He held that assessee was unable to rebut submissions and material brought on record by AO. assessee failed to establish that gifts were actually made to alleged donees. learned CIT(A) accordingly confirmed action of AO. 6. assessee being aggrieved came up in appeal before Tribunal. After considering submissions of both parties, learned AM accepted gifts and deleted addition. He held in his proposed order that in instant case, it was not in dispute that gifts had been received through cheques. It was not case of AO that undisclosed income of assessee w s deposited in account of donor and then gifts to assessee s daughters were made. donor was related to donees and gifts had been made at time of Karan Bedhan Sanskar. So, there was also occasion. For making gift, it was not necessary that there should be blood relation and very very close relationship. In that view of matter, AO was not justified in considering gifts as non-genuine on basis that donor had not made any gifts to his sister or sons or daughters. AO had not appreciated fact that neither sister nor sons or daughters were living with donor. AO in assessment order dt. 5th Oct., 1992, at para 2, had stated that contention of assessee before him was that donor and his wife resided at Kaithal whereas his sons lived outside and in their absence, assessee looked after them and he was happy with services of assessee and, therefore, gifts were made to his minor daughters. Only small daughters of assessee served donor and in those circumstances, it could not be said that assessee served donor and in those circumstances, it could not be said that there was no natural love and affection of donor towards minor daughters of assessee. It was clear that donor in his statement before AO admitted that minor daughters of assessee were serving him by giving tea or water, etc. and gifts had been made through account payee cheques. AO had not brought any material on record to establish that amount deposited in bank account of donor was income earned by assessee. AO was not justified in holding that gifts represented undisclosed income of assessee. Thus, learned AM held that learned CIT(A) was not justified in confirming action of AO without appreciating facts in right perspective. He directed that addition be deleted. 7 . learned JM (the Hon ble Vice President) did not agree with above view. He noted findings of AO and of CIT(A) and quoted extensively from these findings in para 4 of his proposed order and thereafter confirmed action of AO and dismissed appeal as per following observations in his proposed order : 8 . learned counsel for assessee submitted that donor had agricultural income as submitted by assessee and noted by AO at p. 2 in para 3 of assessment order. He argued that there was no justification to reject affidavit of donor and GT return filed by him. As regards statement of donor that he did not make any gift to anybody, learned counsel explained that this remark pertains to any other gifts made in last four years, information which is required to be given as per GT Act and did not relate to gifts in question. learned counsel further argued that AO while examining Shri Om Parkash Narwania should have drawn his attention to affidavit and GT return filed by Shri Om Parkash Narwania. learned counsel accordingly argued that gifts made were established on record to be genuine and there was no justification to make addition in hands of assessee. learned counsel further submitted that addition, if any, should have been made in hands of M/s Hari Chand Pawan Kumar, Kaithal, where amounts in question were deposited as cash credits. learned counsel for assessee supported order of learned AM. 9 . Shri P.S. Punia, learned Departmental Representative, drew my attention to p. 5, para 7 of assessment order. He argued that no source of income of donor was established and claim that he had agricultural income was merely assertion. As recorded by GTO and AO, Shri Om Parkash Narwania had meagre property income just sufficient to meet his both ends :... He had no capacity to make any gift even to his real sister as clearly admitted by Shri Om Parkash Narwania. assessee did not file any rebuttal to evidence and clear findings recorded by Revenue authorities. learned Departmental Representative accordingly supported proposed order of learned Vice President. 10. I have given careful thought to rival submissions of parties. This is very small matter and I am of view that no difference should have arisen between learned Members. Anyhow, as difference has been referred to me, I have no choice but to dispose of matter in accordance with law. In my considered view, arguments advanced on behalf of Revenue are well taken. In gift-tax proceedings, alleged donor had denied having made n y gift to minor daughters of assessee. specific finding was further recorded by GTO that donor had no capacity to make any gift as he was managing himself with meagre income from house property. aforesaid finding may not be binding on assessee as he was not party to proceedings under GT Act, but those were relevant and could be relied upon to initiate action against assessee. purpose of taking action under ss. 147 and 148 of IT Act was to provide opportunity to assessee to rebut whatever was being used against him by Revenue (collected in gift-tax proceedings). assessee was entitled to show that despite statement of Shri Om Parkash Narwania, gifts made to his minor daughters were genuine or gifted amount could not be added as his income from undisclosed sources. onus was clearly on assessee to show that Shri Om Parkash Narwania had capacity and sufficient income to make two gifts in question. assessee could have placed evidence to above effect. However, this onus has not been discharged by assessee in spite of opportunities provided to him. assessee merely asserted that Shri Om Parkash Narwania had agricultural income but placed no evidence to show agricultural or other income from any source of Shri Om Parkash Narwania from which gifts could be made. This was necessary as Shri Om Parkash Narwania had denied having made any gift to children of assessee. He had stated that there was no money with him to make gift to anybody not even to his real sister. Without material to contrary and in light of statement of Shri Om Parkash Narwania, assessee s claim of gifts to his minor daughters could not be accepted as established. Likewise, affidavit of Shri Om Parkash Narwania and GT return are of no help to assessee, as return stood rejected for good reasons and contents of affidavit contradicted in statement on oath. 11. assessee operated accounts on behalf of minor daughters and made investment of alleged gifted amounts in concern, M/s Hari Chand Pawan Kumar, Kaithal, commission agent, Kaithal. minors, admittedly, have no independent source of income. Therefore, on facts and circumstances of case, reasonable inference could be drawn that money utilised for investment with M/s Hari Chand Pawan Kumar, Kaithal, was assessee s money from "undisclosed sources". assessee created smoke screen-adopted device to give this unaccounted money colour of genuine gifts to his daughters. However, device did not work. It is fairly established on record that disputed amount representing undisclosed income of assessee was utilised for making investments. addition made is held to be justified on facts of case. 12. argument that addition should be sustained as cash credit in hands of M/s Hari Chand Pawan Kumar, Kaithal, is of no avail to assessee. amount has been transferred to books of account of above concern by assessee through cheque and, therefore, there is no question of treating amount as income of above concern. 13. In light of above discussion, I agree with proposed order of learned Vice President and uphold assessment. 14. matter should now go back to regular Bench for disposal of appeal in accordance with law. *** ASHOK KUMAR NARWANIA v. INCOME TAX OFFICER