2011 (2) TMI 151 - HC - Income Tax

Addition - Bogus gift - NRE gift and premium paid for arranging the said gift - Income escaping assessment - Assessing Officer and the CIT (A) were justified in holding that the gift in question was bogus and the Tribunal committed patent error in accepting the gift as genuine. Admittedly, the donor had no relationship with the assessee. He had no occasion to give the gift. He was not produced. His financial capacity was not established. His bank statement was not produced. The Tribunal failed to appreciate these facts. It, thus, committed patent error of law in holding that the assessee discharged onus on him to prove the genuineness of the gift. - It is well settled that mere identification of donor and showing the movement of gift amount through banking channel is not enough to prove genuineness of the gift - NRI gift could not be accepted as genuine unless the assessee was able to prove natural love and affection and financial capacity of the donor. - Decided against the assessee

Summary

Issues:
1. Whether the Tribunal was right in deleting the addition of Rs.2,20,000 made by the Assessing Officer on account of a bogus NRE gift?
2. Whether the assessee failed to prove the genuineness of the alleged gift?
3. Whether the alleged gift can be accepted as genuine without proof of the donor's capacity?

Analysis:

Issue 1:
The appeal was filed by the revenue under Section 260A of the Income Tax Act against the Tribunal's order deleting the addition of Rs.2,20,000 made by the Assessing Officer. The Tribunal had allowed the appeal and removed the addition, leading to the revenue's present appeal. The facts revealed that the gift was proven to be bogus, and the Assessing Officer treated it as undisclosed income under Section 68 of the Act. The CIT(A) affirmed the addition, but the Tribunal overturned it.

Issue 2:
The main point for consideration was whether the alleged gift received by the assessee from a Non-resident Indian was genuine. The Court referred to a previous judgment where the assessee failed to prove the genuineness of the gift by not producing the donor or his bank statement to establish the financial capacity. The donor had no relationship with the assessee, and his financial capacity was not proven. The Tribunal erred in accepting the gift as genuine without proper evidence, leading to the conclusion that the gift was bogus.

Issue 3:
The Court emphasized the importance of proving natural love and affection and the financial capacity of the donor to establish the genuineness of a gift. In this case, the donor's relationship with the assessee and his financial capacity were not established. The Tribunal's finding was deemed unsustainable, and the questions of law were answered in favor of the revenue. Consequently, the appeal was allowed.

This detailed analysis highlights the critical issues addressed in the judgment, focusing on the genuineness of the alleged gift and the burden of proof on the assessee to establish the legitimacy of the transaction.