IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER FRIDAY, THE 24TH OCTOBER 2008 / 2ND KARTHIKA 1930 G.T.A.No. 2 of 2008 -------------------------------- ORDER DATED 31.3.2006 IN GTA.5/COCH//2005 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN .................... APPELLANT/RESPONDENT:- ---------------------------------------- THE COMMISSIONER OF GIFT-TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOVERNMENT OF INDIA (TAXES) SRI.GEORGE K. GEORGE, SC FOR IT SRI.JOSE JOSEPH, STANDING COUNSEL FOR INCOME TAX RESPONDENT/APPELLANT: ---------------------------------------- G.RAMESAN, SAMTHRIPTHI, FORT, THIRUVANANTHAPURAM. THIS GIFT TAX APPEAL HAVING COME UP FOR ADMISSION ON 24/10/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: H.L.DATTU, C.J. & A.K.BASHEER, J. ------------------------------------------- G.T.A.No.2 of 2008 ------------------------------------------ Dated, this the 24th day of October, 2008 JUDGMENT H.L.Dattu, C.J. This Gift Tax Appeal is filed by the Revenue, being aggrieved by the orders passed by the Income Tax Appellate Tribunal, Cochin Bench, Cochin in G.T.A.No.5 of 2005 dated 31st March, 2006 for the assessment year 1990-91. (2) The assessing authority had brought to tax under the provisions of the Gift Tax Act, 1958 ('the Act' for short) a total sum of Rs.1,50,000/-, the amount which the assessee had transferred in the name of one Smt.P.Sarada and her two daughters. (3) In the returns filed under the provisions of the Gift Tax Act, the assessee had not declared the aforesaid amount for several years. The assessing officer on coming to know the transfer of the funds made by the assessee, had issued a notice to the assessee under Section 16 of the Act. In response to the said notice, the assessee had filed his reply dated 28.7.1997 and in that had explained that the aforesaid amount was entrusted to him by one Sri.Ramachandra Panicker some time in the year 1988 to be handed over to his daughter on her request. G.T.A.No.2 of 2008 2 (4) Before the assessing officer, Sri.Ramachandra Panicker had also filed a letter supporting the explanation offered by the assessee to the notice issued under Section 16 of the Act. However, the assessing authority has not accepted the explanation offered by the assessee and, therefore, has quantified the tax liability under the provisions of the Act in a sum of Rs.1,50,000/-. (5) The assessee had questioned the aforesaid order passed by the assessing authority before the first appellate authority in Appeal GTA No.3-T/1998-99. The first appellate authority by its order dated 14.12.2004 has rejected the appeal. (6) The assessee had carried the matter before the Income Tax Appellate Tribunal by way of second appeal. The Tribunal after detailed consideration of the case pleaded by the parties and after noticing the definition of the gift under the provisions of the Act, has positively come to the conclusion that by no stretch of imagination the amount transferred by the assessee in favour of Smt.P.Sarada and her two daughters would attract the provisions of the Act. The Tribunal in their order dated 31.3.2006 has stated as under: “Now, we will have to examine the facts of this case as per definition of “gift” given under the Gift-tax Act, G.T.A.No.2 of 2008 3 1958. Section 2(xii) of the Gift-tax Act (hereinafter referred to as the Gift defines gift as under: “gift means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section;” From the definition, it is clear that the AO has to prove the following ingredients to constitute a gift: 1. There must be transfer by one person to another. 2. The transfer must be of any existing movable or immovable property. 3. The transfer must be voluntary. 4. The transfer must be made without consideration in money or money's worth. So far as the facts of the present case are concerned, the Assessee has categorically denied that he has made any gift in respect of the three cheques issued to Smt.P.Sarada and Kum.Darsana and Kum.Sunitha. Moreover, the Assessee had also produced a confirmation letter from his family friend Shri.Ramachandra Panicker, in which Shri.Panicker has confirmed the fact that he has entrusted the said money to the Assessee to be given to his daughter. The first G.T.A.No.2 of 2008 4 ingredient of the gift is that there must be transfer by one person to another of any existing movable or immovable property which means that the property should belong to the Assessee. Merely because the Assessee has transferred the movable or immovable property to somebody else, that will not amount to transfer which is contemplated in the definition of gift. Atleast there must be some interest of the Assessee in the said property. In this case, the assessee has filed the confirmation letter from Shri.Panicker stating that he had entrusted the said cash to the Assessee to be given to his daughter in future in case she requested for the same for construction of a house. So, in sum and substance, the Assessee had denied any interest in the amount which was transferred by him. In fact, the primary burden was on the Assessing officer to prove that the asset which was transferred by the Assessee belonged to him when the assessee had produced the confirmation letter from Shri.Ramachandra Panicker. The Assessing Officer had not even taken pains to examine Shri.Panicker in the light of the confirmation letter issued by him. Moreover, it was also necessary for the Assessing Officer to examine atleast Smt.Sarada. There are instances of family settlements when a person may entrust some responsibility to someone else whom he trusts and the AO should not have any reservation for the same. Another ingredient to constitute a gift is that the transfer should be voluntary. As per the facts before us, Shri. Panicker had entrusted the said money to the Assessee G.T.A.No.2 of 2008 5 with instruction that he should give the same to his daughter Smt.Sarada in future. Another important ingredient that the transfer should be voluntary is also not proved because as per the facts before us on instruction from Sri.Panicker only the Assessee has given the said money to Smt.Sarada and her two daughters. We are not agreeing with the reasoning given by the Assessing Officer which are confirmed by the Commissioner of Income-tax (Appeals) that when Shri.Panicker had entrusted the money with the Assessee in the year 1988, then the Assessee should have given the said money to the daughter and her grand daughters of Shri.Panicker in that year itself. In our opinion, the conclusion of the Assessing Officer is not rational nor logical or supported by any evidence. It is likely that Shri.Panicker being a friend of the Assessee he had given the money to the Assessee to be given to his daughter to help her for construction of her house. There may be some other family reasons for making such arrangements. The conclusion of the Assessing Officer is also not correct that Shri.Panicker in the capacity as a father entrusted the money to a third person like the Assessee to be given to his daughter at uncertain future date fails all the tests of human probabilities. Then the question is why the Assessee has not shown the said amount as his liabilities in the wealth-tax statement? This cannot be a reason for treating the said transfer as a gift. As per facts of this case, the Assessee was holding the said money on behalf of Shri.Panicker and G.T.A.No.2 of 2008 6 hence he might not have shown the same in the wealth-tax return. Moreover, though the Assessee has stated that the Assessee has given the said amount out of love and affection, it is clear from the facts that he had no relation with the person to whom he has given the money. Merely because the Assessee has given the money to the daughter and grand daughters of Shri.Ramachandra Panicker, that cannot be treated as a gift. The primary burden was on the Assessing Officer to prove that prima facie ingredients of gift are fulfilled. Moreover, as we have already expressed, the Assessing Officer has not taken pains to even examine Shri.Ramachandra Panicker who had given the letter confirming the fact that the money was belonging to him. In our considered opinion, on the facts of this case, the money given by the Assessee to Smt.Sarada and her two daughters is not gift within the meaning of section 2(xii) of the Gift-tax Act. We therefore set aside and cancel the assessment made by the Assessing Officer treating the amount of Rs.1,50,000 given by the Assessee to Smt.P.Sarada and her daughters as a gift under the Gift-tax Act.” (7) The Revenue, being aggrieved by the orders passed by the Income Tax Appellate Tribunal is before us in this appeal filed under Section 27A of the Act. (8) The Revenue has raised the following questions for our consideration and decision. They are as under: G.T.A.No.2 of 2008 7 “1. Whether on the facts and in the circumstances of the case the Tribunal was right in cancelling the assessment made by the Assessing Officer treating the amount of Rs.1,50,000/- given by the assessee to Smt.P.Sarada and her daughters as a Gift under the Gift Tax Act by shifting the onus of proof on to the department? 2. In the facts and in the circumstances of the case does not the onus to prove the alternate explanation of other than a gift offered by the assessee for depositing the amount of Rs.1,50,000/- in the names of Smt.P.Sarada, Kumari Darsana and Kumari Sunitha vests with the assessee? 3. Whether on the facts and in the circumstances of the case, did not the Tribunal go wrong in criticizing the Assessing Officer in not examining Ramachandra Panicker, when the onus to prove the alternate explanation of other than gift vests solely with the assessee and not with the Revenue? 4. Whether on the facts and in the circumstances of the case, the filing of confirmation letter dated 8-12-1998 from Shri.Ramachandra Panicker that he had entrusted the money with the assessee is sufficient proof to accept the alternate explanation offered by the assessee? G.T.A.No.2 of 2008 8 5. Whether on the facts and in the circumstances of the case, did the assessee discharge its onus as held by the Honourable Supreme Court in [CIT Vs. Anwar Ali, (1970) 76 ITR 696, 701 (SC); [CIT v. Joseph John (1986) 67 ITR 74]; A.Raghavamma Vs. A.Chenchamma, AIR 1964 SC 136, 143, to prove the altenate explanation of other than gift offered by him? 6. Whether on the facts and in the circumstances of the case, the assessee having failed to discharge the onus to prove the alternate explanation of gift, was not the Assessing Officer right in assessing the amount deposited in the names of Smt.P.Sarada, Kumari Darsana and Kumari Sunitha as gift?” (9) We have heard Sri.Jose Joseph, learned counsel appearing for the Revenue. (10) Firstly, we have gone through the questions of law framed by the Revenue. Nowhere the Revenue has stated that the finding of facts by the Tribunal is a perverse finding. (11) The Supreme Court in several cases has observed, that, if for any reason a finding of fact is to be questioned as a perverse finding, specific question of law requires to be raised by the assessee or Revenue. Such a question of law by the Revenue is not forthcoming in this appeal filed before this Court G.T.A.No.2 of 2008 9 (12) Even otherwise also, on facts, the Tribunal has come to the conclusion that one Sri.Ramachandra Panicker had handed over a sum of Rs.1,50,000/- to the assessee some time in the year 1988 with a specific understanding that the aforesaid amount requires to be handed over to his daughter as and when a demand is made. Sri.Ramachandra Panicker has also given a letter to the assessing officer, inter alia, stating that in the year 1988 he had handed over the aforesaid amount to the assessee. For reasons best known, the assessing officer has not even examined Sri.Ramachandra Panicker, nor his daughter Smt.P.Sarada. If for any reason, the assessing officer had examined those people, he would have been in a better position to come to a conclusion that the amount that was handed over to Sri.Ramachandra Panicker was for the purpose of handing it over to his daughter or not. Keeping this factual matrix, the Tribunal, in our opinion, has rightly rejected the Revenue's appeal and has set aside the orders passed by the first appellate authority as well as the assessing officer. (13) Since the order passed by the Tribunal is purely based on the facts pleaded by the parties, in our opinion, no question of law would arise for our consideration and decision. G.T.A.No.2 of 2008 10 (14) We do not find any error in the orders passed by the Tribunal. Therefore, while answering the questions of law framed by the Revenue against the Revenue and in favour of the assessee, we reject this Gift Tax Appeal. Ordered accordingly. (H.L.DATTU) CHIEF JUSTICE (A.K.BASHEER) JUDGE vns