2014 (3) TMI 1023 - HC - Income Tax

Addition under Section 68 - ingenuity of gift - Held that - There is contradiction in respect of mode of receipt or payment. Though the payment was received by demand draft, she deposed that it is received by cheque. She was unaware about the business / profession of the donor. She stated that the money received was utilised for purchase of flat in Sripati Arcade , Nana Chowk, Mumbai which flat was valued at ₹ 2.73 crores. The Assessee, therefore, could not give a satisfactory explanation. It could not be said to be a simple case of gift and born out of natural love and affection. The Assessing officer has noted that the husband of the assessee is in the business of metal import and amount claimed to have been received as a gift has been remitted by M/s.Sun Metals Casting LLC, which is a company in metal trading in Sharjha (UAE). Therefore, this was the business relation with the husband and as a result of that the remittance came. In such circumstances, this would not be a case of genuine gift. It is in that context that all the three Authorities have concurrently found that the Appellant assessee has failed to establish the essential ingredients of gift. They have not probed the gift or the aspect of natural love and affection as contended by the learned Counsel. While examining the details and scrutinising the necessary documents which have been given by the Assessee that the Authirities have concurrently found that the whole transaction was camouflage of business relation between assessee s husband and the alleged donor - Decided against assessee

Summary

Issues:
Determining the applicability of Section 68 of the Income Tax Act regarding the addition of a specific amount in the hands of the appellant.

Analysis:
The primary issue in this case revolves around the interpretation of Section 68 of the Income Tax Act concerning the addition of a significant amount in the hands of the appellant. The appellant contended that the Tribunal erred in upholding the addition of Rs. 50,00,000 under Section 68. The appellant argued that despite not proving the exact details of a gift, the case did not fall within the purview of this section. The appellant cited precedents from the Delhi High Court and Rajasthan High Court to support their position, claiming that these courts held similar circumstances to be covered by Section 68. However, the Tribunal found discrepancies in the appellant's explanation regarding the alleged gift, including lack of knowledge about the donor, contradictory statements about the mode of payment, and the use of the gift amount for a property purchase. The Assessing Officer also noted a business relationship between the appellant's husband and the donor's company, indicating a non-genuine nature of the transaction. Consequently, the Tribunal, Commissioner of Income Tax (Appeals), and the High Court rejected the appellant's arguments, emphasizing the failure to establish the essential elements of a genuine gift.

The second issue pertains to the comparison with judgments from the Delhi High Court and Rajasthan High Court. The appellant sought to draw parallels between their case and the decisions in the mentioned courts, where the courts ruled in favor of the appellants based on the evidence provided to prove the genuineness of the gifts. However, the High Court distinguished the present case from the precedents, highlighting the specific factual contexts in which those judgments were made. The High Court noted that in the Delhi High Court case, the appellant successfully demonstrated the authenticity of the gifts through various supporting documents, unlike the situation in the current appeal. Similarly, in the Rajasthan High Court case, the court emphasized the presence of gift deeds and donor affidavits to validate the gifts, a contrast to the lack of such evidence in the appellant's case. Therefore, the High Court concluded that the judgments from the Delhi and Rajasthan High Courts did not align with the circumstances of the present appeal, leading to the dismissal of the appellant's arguments.

In the final analysis, the High Court concluded that no substantial question of law arose from the concurrent findings of the three authorities involved in the case. The court found that the appellant failed to establish the genuineness of the gift and that the explanations provided were insufficient to warrant a different interpretation of Section 68. Consequently, the High Court dismissed the appeal, affirming the decisions of the lower authorities and emphasizing the lack of merit in the appellant's contentions.