2010 (6) TMI 550 - AT - Income Tax

Genuine or nongenuine gift Addition of income of Rs. 30,00,000 - It is relevant to mention here that Mrs. Chandra Hingorani is not in any way connected to the assessee or to her family - Accordingly, the amount of gift of Rs.30,00,000/- is added to the income of the assessee as undisclosed income of the assessee and penalty proceedings for concealment of income are initiated separately - Gift, Its nature is credit in the hands of the donee because donee credited gift amount his/her capital account and being treated as own money/capital - The assessee is required to prove three important conditions, namely, (i) the identity of the creditor, (ii) the capacity of the creditor to advance the money, and (iii) the genuineness of the transaction - Apex Court in the case of CIT v Durga Prasad More (1971 -TMI - 6269 - SUPREME Court) and in the case of Commissioner of Income-tax v. P Mohanakala (22007 -TMI - 6558 - SUPREME Court) Two elements are essential in the gift, giving and taking - In the case under consideration gift is not given to relative, therefore, the burden is on the assessee to prove some element of bounty - In the result the Appeal of assessee is dismissed

Summary

Issues Involved:
1. Genuineness of the gift of Rs. 30,00,000/- received by the assessee.
2. Relationship between the donor and the donee.
3. The capacity of the donor to make the gift.
4. The occasion and motive behind the gift.
5. Applicability of Section 68 of the Income Tax Act.
6. Burden of proof on the assessee to establish the genuineness of the gift.

Issue-wise Detailed Analysis:

1. Genuineness of the Gift:
The primary issue revolves around whether the gift of Rs. 30,00,000/- received by the assessee from Mrs. Chandra Hingorani is genuine. The Assessing Officer (AO) scrutinized the gift by examining various documents and the statements of the assessee. The AO noted that the assessee had no significant relationship with the donor, had never visited her house, and had no social interactions with her family. The AO concluded that the gift was not genuine and added the amount to the assessee's income as undisclosed income under Section 68 of the Income Tax Act.

2. Relationship Between the Donor and the Donee:
The AO's investigation revealed that the assessee and the donor were not closely connected. The assessee admitted to not knowing the donor's family details, having no social interactions, and not attending any family functions. The AO observed that the lack of a close relationship and the absence of any social or familial link undermined the claim of the gift being given out of natural love and affection.

3. The Capacity of the Donor to Make the Gift:
The donor, Mrs. Chandra Hingorani, was an 83-year-old lady who claimed to be unable to attend the proceedings due to her age. However, she filed her Income Tax returns declaring significant income from interest, dividends, and gains on sales of investments, indicating her capacity to make the gift. Despite this, the AO found her non-attendance suspicious and indicative of avoiding the truth.

4. The Occasion and Motive Behind the Gift:
The assessee claimed that the gift was made on the occasion of the birth of her second baby and was motivated by the donor's desire to fulfill her late husband's last wish. However, the AO found this explanation unconvincing, given the lack of a close relationship and the absence of any prior gifts or social interactions between the families.

5. Applicability of Section 68 of the Income Tax Act:
Section 68 allows the AO to enquire into the nature and source of any sum credited in the books of the assessee. The AO concluded that the gift was not genuine based on the assessee's inability to prove the necessary conditions of identity, capacity, and genuineness of the transaction. The AO's decision to add the amount as undisclosed income was upheld by the CIT(A) and supported by the judgments of the Hon'ble Supreme Court in CIT vs. P. Mohanakala and the Hon'ble Punjab & Haryana High Court in Jaspal Singh vs. CIT.

6. Burden of Proof on the Assessee:
The burden of proof to establish the genuineness of the gift lies with the assessee. The assessee provided various documents, including the gift deed, confirmation, and bank statements, to support her claim. However, the AO and CIT(A) found these insufficient to prove the genuineness of the gift, given the lack of a close relationship and the absence of any substantial evidence of love and affection.

Conclusion:
The Tribunal upheld the AO's decision to treat the gift as nongenuine and add the amount to the assessee's income under Section 68. The Tribunal emphasized that the assessee failed to prove the genuineness of the gift, the close relationship with the donor, and the motive behind the gift. The Tribunal also noted that mere identification of the donor and movement of the gift amount through banking channels were not sufficient to establish the genuineness of the gift. The appeal of the assessee was dismissed, and the order was pronounced in open court on 4th June 2010.