2010 (8) TMI 532 - HC - Income Tax

Genuineness of the gift - Burden of proof - If these averments made in the affidavit are correct and the transaction in question is supported by the bank statement as mentioned , there cannot be any doubt about the capacity of the donor to give a gift of a paltry sum of US 15,000 to the appellant - Held that - therefore, of the opinion that subject to the appellant furnishing the affidavit duly sworn by the officer of the High Commission of India in Canada, the aforesaid addition made by the Assessing Officer in the return filed by the appellant for the assessment year 2001-02 should be deleted - The appellant shall produce the affidavit with the aforesaid compliance within two months - The question, thus, stands, answered accordingly.

Summary

Issues:
- Acceptance of the genuineness of a gift without proper examination of evidence
- Addition of gift amount as income under section 68 of the Income-tax Act
- Rejection of appeal by the Income-tax Appellate Tribunal based on technical grounds

Analysis:

The High Court considered the issue of whether the Income-tax Appellate Tribunal (ITAT) was correct in not accepting the genuineness of a gift without proper examination of evidence. The appellant had received a gift of US$ 15,000 from a relative residing in Canada, supported by various documents. The Assessing Officer accepted the identity of the donor but added the amount as income under section 68 of the Income-tax Act due to alleged lack of proof of genuineness and creditworthiness of the donor. The CIT(A) upheld this addition. The Tribunal rejected the appeal, citing technical reasons related to the affidavit and bank statement. The High Court criticized the Tribunal's hyper-technical approach, noting that the donor's affidavit was notarized and contained detailed information about her financial capacity. The Court emphasized that the donor's capacity to give the gift was evident from the supporting bank statement and the content of the affidavit. The Court directed the appellant to produce an affidavit duly sworn by the officer of the High Commission of India in Canada to address the technicality raised by the Tribunal. Upon compliance with this requirement, the Court ordered the deletion of the addition made by the Assessing Officer for the relevant assessment year.

In another issue, the High Court addressed the addition of the gift amount as income under section 68 of the Income-tax Act. Despite establishing the identity of the donor and the familial relationship between the donor and the appellant, the authorities added the gift amount to the appellant's income due to alleged lack of proof regarding the genuineness and creditworthiness of the donor. The Court found that the donor's financial capacity was adequately demonstrated through the affidavit and supporting bank statement. The Court concluded that the addition made by the Assessing Officer should be deleted upon the appellant furnishing an affidavit duly sworn by the officer of the High Commission of India in Canada, thereby resolving this issue in favor of the appellant.

Furthermore, the High Court examined the rejection of the appellant's appeal by the Income-tax Appellate Tribunal based on technical grounds. The Tribunal's decision was criticized for overlooking the notarized affidavit of the donor and the details provided therein regarding her financial standing. The Court emphasized that the donor's capacity to give the gift was evident from the information presented in the affidavit and the supporting bank statement. The Court directed the appellant to fulfill a specific compliance requirement related to the affidavit, following which the addition made by the Assessing Officer was to be deleted. This resolution addressed the Tribunal's rejection of the appeal and highlighted the importance of considering the substance of evidence over hyper-technical formalities in such matters.