SANDEEP KUMAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Appellant has filed the present appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'Act') challenging the order dated 21st July, 2006 passed by Income Tax Appellate Tribunal(hereinafter referred to as 'Tribunal'), Delhi Bench 'C' in IT(SS) No.6(Del)/1999 for the block period 1st April 1986 to 29th August, 1996.

(2.) The facts of this case are that a search and seizure operation under Section 132 of the Act was conducted at the residence of Karta of the Assessee HUF Sh. Sandeep Kumar. Certain documents/loose papers were seized during the course of search. Proceedings under Section 158 BD were initiated against the Assessee on 7th January, 1998 and the Assessee filed return declaring "nil" undisclosed income on 17th February, 1998. During the course of search,` a set of cheque books and pass books of NRE account of the donors of the alleged gifts to this group were recovered from the business premises of the Karta of the Assessee HUF. From the perusal of the seized documents it was noticed by the Assessing Officer that the Assessee has received a sum of Rs.3,37,000/- and Rs.36,000/- as gifts by cheques on 20th February, 1993 and 5th March, 1993 respectively from one Banshi L.Sawhney, 32 West Springway Lutherville MD-21093, USA. The Assessing Officer asked the Assessee to prove the genuineness of these gifts. The Assessee in its reply stated that since these gifts are received from NRI, the same are genuine. The source from where these gifts have been made by the donor, the details and particulars of bank account from where these gifts have been made and declaration from the donor in support of his financial status, the annual income and total wealth owned by him has been filed. Further, in support of these gifts the Assessee also filed two separate affidavits by the donor before the Assessing Officer affirming the facts that he was a permanent resident of USA having source of income by virtue of being a Professor and that he has NRE account No.47 with OBC, Karol Bagh, New Delhi from where he has forwarded the gifted amount by cheques to the Assessee HUF. Two confirmations on plain paper regarding total income and taxes paid along with the copy of Income Tax return of the donor and certificate regarding the fact that the pass book and cheque book of NRE account No.47 was kept with Gaurav Gambhir for donor's personal convenience and the latter and his family members have no interest in this account. In view of these documentary evidence the onus cast upon the Assessee in respect of the genuineness of these gifts stands discharged.

(3.) However, after considering the submissions of the Assessee and perusing the documents, the Assessing Officer was of the opinion that the Assessee has not been able to discharge its onus of proving the identity, capacity and the credit-worthiness of the donors as well as the genuineness of the gifts due to the reason that the copies of affidavits merely confirm the fact that the money has been transferred from NRE account to the Assessee but it does not give any information regarding the source of funds as well as the source from where funds are alleged to have been given as gifts, came into the NRE account; that the confirmation of the donor regarding the income declared and tax paid along with copy of individual income tax return without any balance-sheet or annexures, does not throw any light on the source of funds utilized for the purpose of alleged gifts; that the financial capacity and the credit-worthiness of the donor does not stand established; that during the course of such proceedings Shri Sandeep Kumar could not even furnish the exact address of the donor; that the Assessee has not brought out any circumstances to show any close relationship with the so called donor; that these gifts are unilateral, time specific and need based and now have been utilized by the Assessee in the business of the group companies in one way or other; that the fact that the bank pass book and cheque books of some of NRE donors were found from the premises of the Assessee which itself shows that these accounts were operated by the Assessee and his family members, including his brother; that the bank cheque books and pass books of the donor in possession of the members of the group in itself show that the Assessee was in fact in control and application of funds; that during the search, the Karta of the Assessee HUF could not even furnish the address of the donor and during the assessment proceedings could not establish the circumstances in which the gifts of such quantum were made i.e., the occasion etc.; that the Assessee could not give any instance of any kind of reciprocal gifts to any of the relatives of the donor or to the donor himself. Thereafter, the Assessing Officer concluded that though the Assessee is able to establish the identity of the donor but has not been able to establish the financial capacity of the donor and genuineness of the gifts. So by invoking Section 68 of the Act a sum of Rs.3,73,000/- received by the Assessee as gift was treated as income of the Assessee from undisclosed source and added to the income of the Assessee.