D. Karunakara Rao, (Accountant Member):— This is the appeal filed by the Revenue against the order of the Commissioner of Income-tax (Appeals)-XV dated March 16, 2007. The grounds in this appeal are as under:

“1. Whether, on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the gift stated to have been received by the assessee and also by his minor sons aggregating to Rs. 46,87,378 were genuine and erred further in holding that no addition should have been made on this point.

2. Whether, on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in totally ignoring the finding of the Assessing Officer that the assessee did not know the family background and the residential address of the donors and also that there was no family or social interaction with the donors.

3. Whether, on the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) overlooked the facts that the assessee did not know the business activity of the donors and also that he did not know correctly even the name of one of the donors, i.e, Vayyat Kizhakethil Sudhakaran Panicker and referred to him in the statement recorded only as Palrecha uncle.”

Briefly stated, the relevant facts of the case are that the assessee is a dealer in yarn and filed the return of income declaring the income at Rs. 28,43,508. The same was scrutinised under section 143(3) and total income was determined at Rs. 75,38,201 after making addition on account of gifts of Rs. 46,87,378 as unexplained cash credits under section 68 of the Income-tax Act, 1961 (“the Act”).

During the assessment proceedings, the Assessing Officer found that the assessee along with two minor sons received gifts of 170,000 (equivalent of Rs. 46,87,370) in the form of “SBI Resurgent India Bonds” (RIBs) during the previous year under consideration. It was noted by the Assessing Officer that the assessee directly received SBI Resurgent India Bonds (RIBs) worth of US$ 30,000 from Sri VKS Panicker, resident of Dubai. Further, the assessee's two minor sons also received gifts of RIBs worth US$ 20,000 each from Mr. Jaspal Singh Oberoi, who is also a non-resident. The Assessing Officer asked the assessee to establish the creditworthiness and genuineness of alleged gifts. The Assessing Officer specifically called for some details, such as, the name of the donors, complete address of the donors, relationship of the assessee with the donors, gift deeds and other details regarding SBI Resurgent India Bonds gifted by the donors. The Assessing Officer also asked the assessee to establish the source of funds invested in the said SBI Resurgent India Bonds and the nature thereof. In response, the assessee filed some details before the Assessing Officer vide letters dated November 11, 2006 and November 21, 2006. The assessee claimed to have filed the following details before the Assessing Officer. They are: (i) Xerox copies of passport of donors, (ii) Details and address of donors who subscribed the bond originally, (iii) Xerox copies of application forms and allotment letters in placement of SBI Resurgent India Bonds, (iv) Xerox copies of transfer letters issued by SBI, NRI Branch, Mumbai address to donees regarding transfer of Resurgent India Bonds (RIBs) and (v) Xerox copies of redemption letters (SBI). (vi) Copies of SBI Resurgent India Bonds certificates issued by SBI, NRI Branch, Mumbai, (vii) Copies of letters addressed to SBI, NRI Branch, Mumbai Nariman Point wherein the factum of gift of SBI Resurgent Bond of India was intimated signed by donors and donees both, (viii) Copies of letters issued by SBI, NRI Branch, Mumbai regarding Redemption of Resurgent India Bonds (RIBs).

The Assessing Officer, after perusal of the details filed by the assessee, was of the opinion that the creditworthiness of the donor and genuineness of the gifts were not established. Further, the Assessing Officer invoked the provisions of section 131 and recorded a statement of the assessee on November 8, 2006. From the statements recorded under section 131, it is an undisputed position that the gifts were not received on any eventful occasions such as celebration of birthday of self or sons, marriage day etc., the assessee never visited abroad the assessee does not know the donors i.e, V.K.S Panicker and Jaspal Singh Oberoi and also that the assessee neither saw the donors nor met any of the donors. The Assessing Officer placed heavy reliance on the statement given by the assessee and held that the creditworthiness of the donor as well as the genuineness of the gifts were not proved by the assessee. It was also finding of the’ Assessing Officer that the donors were not related to the assessee and his minor kids and it was not the case of the assessee that the gift received out of natural love and affection. It was also in consideration of the Assessing Officer that the assessee did not know much about the donors. Finally, the Assessing Officer held that the gifts received by the assessee in his own name as well as in names of his minor sons represent the assessee's own unaccounted money which was ploughed back in the form of gifts.

Aggrieved with the above, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). The assessee submitted before him that he discharged the onus rested on him in respect of gift received by him from V.K.S Panicker and the gifts received by Master Samkit M Shah and Master Shreyans M Shah from Jaspal Singh Oberoi by way of proving the identity of donors, genuineness of the gift and establishing the creditworthiness of the donors. As regards to the identity of the donors, viz., V.K.S Panicker and Jaspal Singh Oberoi, it was stated that the assessee had submitted the xerox copy of passport of donors vide letters dated November 11, 2006 and November 21, 2006 along with their detailed addresses at Dubai before the Assessing Officer. According to the assessee, the copy of passports of donors are the conclusive evidence to prove the identity of a donor. The assessee contended that it is not factually correct that the detailed addresses of the donors were not given to the Assessing Officer as it was very much appearing on the covering letters dated November 11, 2006 and November 21, 2006 filed before the Assessing Officer. To establish the creditworthiness and capacity of the donor Sri V.K.S Panicker, the assessee filed the copy of application form filed for SBI Resurgent India Bond along with documentary evidence of having paid the amount by demand draft being the State Bank of India, NRI Branch, Mumbai as collecting agent. Further, the assessee also produced the copy of certificate of SBI Resurgent India Bond wherein three bonds of US$ 10,000 each were allotted to the donor viz., V.K.S Panicker on October 31, 1998. The assessee stressed on the point that the application form for the said bonds was submitted on August 17, 2008, where the bonds were allotted to the donor on October 1, 1998, and the donor held them for 5 years from 1998 to 2003. It was only on July 3, 2003, when a donor and donee signed together on a letter informed SBI, NRI Branch, Mumbai regarding the factum of the gift. Further, SBI, NRI Branch, Mumbai vide its letters dated July 8, 2003 transferred Resurgent India Bonds to the assessee mentioning the mode of transfer as gift giving various details such as new register folio number as 420214. The argument of the assessee is that the donor acquiring and holding the bonds for a period of five years gifting them to the assessee itself establishes the creditworthiness of the donor and the assessee is no longer under an obligation to explain the source of the amount invested in the bond. Further, regarding the genuineness of the gift, the assessee relied on the document wherein the donor and donee signed together addressed to the SBI, NRI Branch, Mumbai regarding the factum of the gift. It was argued by the assessee that the said document itself is as good as a gift deed. In addition, the assessee further placed reliance on the documentary evidence appearing in form of letter written by the chief manager, incharge of SBI Resurgent Bond, SBI NRI Branch, Mumbai, addressed to the assessee regarding the event of transfer of bond in the name of the assessee. Further, the assessee added that the document relating to redemption of SBI Resurgent Bond in the name of the assessee is a conclusive proof to establish the genuineness of the gift.

Similar documentary evidences were also filed in respect of the gifts given by Mr. Jaspal Singh Oberoi to Master Samkit M Shah and Master Shreyans M Shah as claimed by the assessee. Being similar facts and circumstances in respect of gifts donated by Mr. Jaspal Singh Oberoi to minor sons of the assessee, the arguments placed in respect of gift received by himself were relied upon. In this way, the assessee tried to establish that he has fully discharged the onus resting on him. On the point of the objection raised by the Assessing Officer that the donors were not the close relatives of the assessee, it was argued that the donors were known to his father and they gifted out of natural love and affection. The assessee placed reliance on the following two decisions:

(i) Commissioner Of Income-Tax, Delhi (Central-2) v. Mrs. Sunita Vachani. [1990] 184 ITR 121 (Delhi); and

(ii) Asst. CIT v. Radhey Shyam Bansal in I.T.A No. 4396.Ahd/1992

After considering the above submissions of the assessee, the Commissioner of Income-tax (Appeals) accepted the identity and creditworthiness of the donors in view of the ownership of the SBI Resurgent India Bonds and other documents produced from the banks in this regard. Thus, he rejected the Assessing Officer's finding with regard to the identity and creditworthiness. Regarding the genuineness of the gifts, the Commissioner of Income-tax (Appeals) considered the correspondence between the donors-cum-assessee on one side and the SBI, NRI Branch, Mumbai on the other, i.e, letters dated July 3, 2003 and July 8, 2003, for ascertaining the genuineness of the gifts. Further the Commissioner of Income-tax (Appeals) discussed the apex court judgment in the case of Life Insurance Corporation of India v. CIT [1996] 219 ITR 410 for the proposition that the assessee is not expected to prove the impossible. Finally, the Commissioner of Income-tax (Appeals) accepted the documentary evidence filed by the assessee, sufficient enough to prove the identity, creditworthiness of the donors as well as the genuineness of the gift transaction. Regarding requirement of relationship between the donor and the donee the Commissioner of Income-tax (Appeals) relied on the Delhi High Court judgment in the case of Mrs. Sunita Vachani [1990] 184 ITR 121 for the proposition that the gifts can be received or given involving not only family members, but also the foreigners and strangers. Further, he also relied on the said judgment for the proposition that the gifts originating from the foreign countries and received from banking channels cannot be doubted. Accordingly, Commissioner of Income-tax (Appeals) deleted the said addition.

Aggrieved with the above, the Revenue filed an appeal before the Tribunal. The learned Departmental representative for the Revenue argued stating that the addition of Rs. 46,87,378 is made on account of bogus gift transactions. Gifts are not cash gifts they are in the form of transfer of Resurgent India Bonds. He also underlined the identical amounts of gifts of US$ 20,000 each to the minor children of the assessee. He, further mentioned about the misuse concept of gifting. He further mentioned that this is the case where assessee neither biologically related nor socially connected nor has any knowledge of the donors. Further, the Departmental representative also refuted the information that the assessee's deceased father happened to be aware of the donors and in this regard, argued it is an unascertained information and hence it should be ignored. Further, the Departmental representative relied on the Supreme Court judgment in the case of Commissioner Of Income Tax v. P. Mohanakala [2007] 291 ITR 278. Further, the learned Departmental representative distinguished the decision in the case of Life Insurance Corporation of India [1996] 219 ITR 410 (SC) which is on issue of loan and not on the gifts. He also distinguished other cases delivered by the Delhi High Court mentioned above. Per contra, learned counsel for the assessee filed a paper book, the summary particulars touching upon the identity of the donors, capacity and creditworthiness of the donors, the details of correspondence with the banks etc. From the write-up, we find that there are two donors i.e, V.K.S Panicker who is a resident of UAE aged 55 years who gave gift of US$ 30,000 in Dubai to a Calcutta agent, i.e, SBI vide Draft No. 702022 issued by the Bank of Baroda, Dubai for the issue of Resurgent India Bonds issued by SBI on August 17, 1998, in return SBI allotted three bonds of amounting to US$ 307000 on October 1, 1998. Similarly, another donor named Mr. Jaspal Singh Oberoi, aged 62 years resident of UAE born in Pakistan, Indian resident gave the gifts of US$ 40,000 to Samkit M Shah and Master Shreyans M Shah, the sons of the assessee through the same mechanism and the SBI allotted eight Bonds of US$ 5,000 each on October 1, 1998. Finally the counsel summed up by stating that the gifts in question are genuine and the assessee has fully discharged the onus with regard to identity, creditworthiness and the genuineness of the gifts and therefore, the claim should be fully allowed.

We have heard both the parties and perused the orders of the Revenue authorities as well as the write-ups and the paper books filed before us. Briefly, the case of the assessee is that the identity of the donors is proved in the light of the copies of the passports of them, creditworthiness and genuineness of the gifts are proved in the light of the long holding of the RIBs by the donors and the transactions fully under the aegis of the banks. As per the assessee's counsel, the donor-donee relationships do not assume importance and they need not be intimately connected for giving and taking gifts and gifts can be received or given involving not only family members, but also the foreigners and strangers as held by the Delhi High Court in the case of Mrs. Sunita Vachani [1990] 184 ITR 121. On the other hand, the case of the Revenue is that the assessee and his minor children are the donees and they are neither biologically related nor socially connected to the donors and further, they are geographically separated as the donor stays outside the Indian territory. Further, there is neither any occasion to give gifts nor any necessity to give the same. The donees are neither the celebrities of any kind, i.e, political, spiritual etc. nor there is any love and affection between the donor and donees. In such a situation, donors giving gifts to any donee is an unusual transaction. Further, the case of the Revenue is that the banking transactions does not contribute to the genuineness of the transactions as held in the case of P. Mohanakala [2007] 291 ITR 278 (SC).

The scope of gifts and the existing areas of controversies in regard to them are relevant issues here. Generally, the gifts may involve biological relatives, sociologically connected or unconnected persons, politically or spiritually reverend individuals etc. In the cases, where the gifts involve the biological relatives, the giving gifts are normally conventional, traditional or a social practice and the motive is the expression of love and affection. In such cases, generally there is no issue about the identity and the controversies are source or genuineness-centric. In the other cases, the controversies generally center-around the identity and the creditworthiness of the donor and therefore, the whole transaction is doubted. Among this later group of gifts, the gift transactions involving the unrelated NRI persons as donors are always a matter of dispute between, the Revenue and the assessees. The aspects of identity of the donor, creditworthiness of the donor and the genuineness of the transaction become relevant. This is simply for the reason as to why or what reason an unrelated person or not so well-related person or geographically segregated person makes gifts to an unknown or unfamiliar donee, when there is no scope for love and affection or any other expressions of that kind, which are commonly seen in the transactions of gifts in general and valuable gifts in particular. Therefore, the common sense approach of the Assessing Officer is to investigate into other reasons for such valuable gifts. Such investigations of the Assessing Officer in matters of such transactions of gifts between the unrelated persons revolve around the following. They are : whether there is any occasion; how the donor has come to know of the donee; what are the social obligations to the donor to give gifts running into lakhs of rupees worth to the donee; what is the general conduct of the donor in matters of gifting or the quantum of gifts given or whether such donors believe in cash gifts or otherwise; whether the donor is capable of gifting at all; and whether the donor is capable of gifting without the mediation of the middle man or a commission agent, when the donor is separated by the geographical boundaries and so on. Further, it is a settled position that the onus is on the assessee in these matters as held in the case of Subhash Chander Sekhri v. Deputy CIT [2007] 290 ITR 300 (P&H) and in the case of Jaspal Singh v. CIT [2007] 290 ITR 306 (P&H) and the Assessing Officer can invoke the provisions of section 68 in case of failure to discharge such onus. It is also a view of the Delhi Bench in the case of Rajeev Tandon [2007] 294 ITR (AT) 219 that in cases of gifts from the NRIs, the assessee has higher levels of responsibility in matters discharging of the onus as the Assessing Officer usually has no jurisdiction on them. The assessee must produce every necessary evidence to substantiate the claim of genuine gifts. In the circumstances of such failures, the adverse. opinion of the Assessing Officer about the genuineness of the transaction of the impugned gift in itself constitutes an evidence against the assessee as held by the Supreme Court in the case of P. Mohanakala [2007] 291 ITR 278. Further, the apex court also held that the factum of transactions effected through the banking channels will not come to the rescue of the assessee. Identical finding is discussed in the decision in the case of ITO v. Tirath Ram Gupta [2006] 6 SOT 703 (Chandigarh) that the genuineness of the gift cannot simply be accepted merely banking on the transactions effected through the banking channels. The judgments relied upon by the assessee were distinguished by the Tribunal in the abovementioned decisions.

In the light of the above divergent views of the both the parties as well as the scope of gifts between the unrelated parties, we have examined the facts of the case in relation to the provisions of section 68. Under the provisions of the section 68 what are to be seen are the aspects of the identity, creditworthiness, genuineness of the transaction and the discretion of the Assessing Officer. In the light of the above, we find that the identity of the donors must be undoubted in view of the undisputed nature of the copies of the passports of the donors. In any case, the aspect of identity is no issue in such transactions as NRI donors are organised professionally by commission agents in the gray market. Regarding the creditworthiness, there is information about the business or profession or employment details or their source of income on the records. In such circumstances, we find the subtle distinction between the ownership of the RIBs and his creditworthiness. Ownership must be qualified by the worthiness to acquire the said owned asset. The documents available on records do not indicate basic financial capabilities of donors as there are no elementary particulars about the income particulars of the donors such as annual statements or income-tax assessment particulars etc. This is not the case of the assessee that he is in a position to submit them either. Thus, we are of the considered opinion that the assessee must not be treated to have furnished requisite basic details relating to various aspects of creditworthiness of the donors. Finally, regarding the genuineness of the transaction, we have culled out all the available records and found that donors and donee do not know one another as they never met nor were they aware of their financial positions. Further, it is an admitted position that there were no formal occasions or events for contextualising the alleged gifts. The relationship between the donors and the deceased father of the assessee was not established too. There is neither the confirmation letters nor the gift deeds on records. The assessee's argument of deeming pages 5 to 7 and 17 to 23 of the paper book as the gift deeds or confirmations as the said letters addressed to the SBI, the agent for RIBs, are signed by the donor and donee, we find such argument of the assessee does not hold good for the purposes of the provisions of section 68 of the Act in respect of the alleged gifts by an NRI donor. Further, it is noticed that the said letters are addressed to the agents of the RIBs, SBI and the said letters were to be generated in the context of the transfer of the alleged RIBs to the names of the donees and subsequent redemption on maturity. More so, it is inexplicable as to why the assessee could not manage a gift deed or confirmations. Therefore, in our opinion, these pages at 5 to 7 and 17 to 23 of the paper book cannot be construed as gift deeds. Thus, in overall view of these gift transactions in question, we are of the opinion that the bank transactions should not be treated sacrosanct and should not assume evidentiary significance for the purpose of section 68 of the Income-tax Act.

Having found that the assessee failed to discharge the onus and the assessee's failure to establish the genuineness of the transaction, we have examined the Delhi High Court's judgment in the case of Commissioner Of Income-Tax, Delhi (Central-2) v. Mrs. Sunita Vachani. [1990] 184 ITR 121 which was strongly relied upon by the assessee. It is noticed that the same was delivered in the context of the revision order of the Commissioner of Income-tax under section 263 and the Assessing Officer's failure to conduct enquiries regarding the genuineness of the gifts. Thus the facts of this case are distinguishable. In any case, the Departmental representative has relied on an apex court's decision in the case of P. Mohanakala [2007] 291 ITR 278, a subsequent judgment involving the gifts from the NRIs.

Further, we examined the said Supreme Court judgment in the case of P. Mohanakala [2007] 291 ITR 278, which was relied on by the Departmental representative. While deciding the case against the assessee on the issue of gifts from the NRIs, the apex court, in the context of additions of gifts under section 68, held that the money came “by way of bank cheques and was paid through banking transaction was not by itself of any consequence”. Further, we find, as discussed in page 288 of the ITR, an adverse opinion of the Assessing Officer in itself constitutes a prima facie evidence against the assessee, i.e, against the receipt of money and if the assessee fails to rebut the said evidence, the same can be used against the assessee, relevant paragraphs is reproduced as under (page 288 of 291 ITR):

“It is true that even after rejecting the explanation given by the assessees if found unacceptable, the crucial aspect whether on the facts and circumstances of the case it should be inferred the sums credited in the books of the assessees constituted income of the previous year must receive the consideration of the authorities provided the assessees rebut the evidence and the inference drawn to reject the explanation offered as unsatisfactory. We are required to notice that section 68 of the Act itself provides, where any sum is found credited in the books of the assessees for any previous year the same may be charged to the income-tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is in the opinion of the Assessing Officer not satisfactory. Such opinion formed itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence the same can be used against the assessees by holding that it was a receipt of an income nature. In the case in hand the authorities concurrently found the explanation offered by the assessees unacceptable. The authorities upheld the opinion formed by the Assessing Officer that the explanation offered was not satisfactory. The assessees did not take the plea that even if the explanation is not acceptable the material and attending circumstances available on record do not justify the sum found credited in the books to be treated as a receipt of an income nature. The burden in this regard was on the assessees. No such attempt has been made before any authority. All the decisions cited and referred to hereinabove are required to be appreciated and understood in the light of the law declared by this court in Sumati Dayal [1995] 214 ITR 801 (SC).”

In connection with the higher levels of responsibilities cast on the assessee-donee and his minors donees, the decision of the Delhi Bench of the Tribunal in the case of Rajeev Tandon [2007] 294 ITR (AT) 219 (Delhi) has been analysed. This is the case where the donors are NRI of meagre source. The Tribunal held that in the cases of the gifts from the NRI or foreigners, it is very difficult for the Assessing Officer to reach out the donor for completion of the enquiries and therefore, the assessee has higher levels of responsibilities in discharging the onus by submitting every necessary evidence to substantiate the claim of genuine gifts. Relevant portion is as under:

“Unless the bank statements are supported by any other corroborative evidence to establish the financial capacity of the donors the bank statements do not prove the creditworthiness of the donors for showing that they were financially sound for making such gifts because the bank statements merely indicate the movement of the funds and not the creditworthiness of the account holder. One cannot ignore that in case of NRI donors the Assessing Officer is handicapped in verifying the creditworthiness of the donor in comparison to an Indian donor because in case of Indian donors after examining the donors and questioning them the Assessing Officer can conveniently verify the creditworthiness but in case of foreign donors he cannot do so and has to simply depend upon the documents filed by the assessee. Creditworthiness of a donor can be safely proved by the donor by producing a certified/notarised copy of the return accompanied by balance-sheet indicating his capital base and the assets owned by him. Mere issuance of a cheque from a bank account cannot establish the creditworthiness of a donor … The Commissioner of Income-tax (Appeals) was not justified in presuming that this donor may be having other bank accounts also which were not disclosed before the Assessing Officer by the assessee in the absence of any such evidence before him by holding this donor to be financially sound. The assessee has failed in establishing the creditworthiness of the donors.”

In conclusion, we find that the assessee heavily relied on pages 5 to 7 and 17 to 23 of the paper book as well as on the copy of the passport of the donors to evidence the identity, creditworthiness as well as the genuineness of the gift transactions amounting to Rs. 46,87,378. The counsel's arguments, i.e, five years holding period of the gifts in the hands of the donors together with the gifts transactions through the banking channel establish the creditworthiness and genuineness of gifts, have been considered and rejected in view of the above discussions. Briefly, the facts of involvement of unfamiliar NRI donor, the fact of the assessee's failure to establish that the donors are known to the donees through the deceased father of the assessee, undisputed fact of the gifts is that it is a case of gift without any occasions or an event, the gifts to minors are surprisingly an identical value of US$ 30,500 each, the nature of gifts given to the assessee as well as to his two sons is also identical, i.e, RIBs, goes against the assessee. Further, it is not the case that the donees have also gifted to the impugned donors or to any others during the earlier or current or later year(s). Further, there are no details about the source of income of the donors abroad and the Assessing Officer's adverse views about the creditworthiness and the genuineness of the impugned gift transactions, with which we agree, in itself has become an evidence. The issues such as why the gifts are given and how the relationship between the donor and donees grew to the levels, where the donors have considered to give the identical gifts through an identical transaction during the same year, become relevant and were unanswered either before the Revenue authorities or before us. When the onus is on the assessee in these matters of gifts involving the non-resident Indians as donors, in our opinion, the Assessing Officer is within his jurisdiction in rejecting the assessee's claim of gifts and making additions under section 68 of the Act. In view of the above position of law, we find that the explanation of the assessee with regard to the creditworthiness of the donors and genuineness of the transactions were rightly rejected by the Assessing Officer. Consequently, the arguments put forward by the assessee's counsel are rejected, the order of the Commissioner of Income-tax (Appeals) is reversed and the order of the Assessing Officer is restored. Accordingly, grounds of the Revenue are allowed.

In the result, appeal of the Revenue is allowed.

The order pronounced on the 26th day of February, 2009.