2007 (7) TMI 40 - HC - Income Tax

Income from undisclosed sources - AO contented that gifts were given to the assessee by persons who were not related to him in any manner and accordingly included gift amount in assessee income - Held that AO contention was correct and allowed

Summary

Issues:
1. Assessment of gifts received from abroad.
2. Dismissal of appeal by Commissioner of Income Tax (Appeals) and Tribunal.
3. Application of case law on the subject.
4. Evaluation of the explanation provided by the Assessee.
5. Comparison with a recent Supreme Court judgment.

Analysis:
1. The Assessee received two gifts from abroad, one from Mr. P.B. Bhardwaj and the other from Mr. Surender Khoka. The Assessing Officer deemed the gifts as bogus, alleging that the Assessee used them to increase capital for buying a house. The donors were unrelated to the Assessee and provided the gifts without any specific reason other than to assist him in purchasing a house.

2. The Assessee's appeal before the Commissioner of Income Tax (Appeals) and the Tribunal was unsuccessful. Both authorities dismissed the appeal, leading to the case being brought under Section 260A of the Income Tax Act, 1961 for further consideration.

3. The High Court examined various case laws, including Commissioner of Income Tax v. Durga Prasad More and Sajan Dass and Sons v. Commissioner of Income-tax, to determine the legitimacy of the gifts. These cases highlighted the importance of establishing the identity of the donor, their capacity to gift, and the actual nature of the amount received.

4. The court found the explanation provided by the Assessee regarding the gifts to be unreasonable and unacceptable. It was noted that the donors' lack of connection with the Assessee and the unusual circumstances surrounding the gifts raised doubts about their authenticity.

5. Referring to a recent Supreme Court judgment in Commissioner of Income-tax v. P. Mohanakala, the court emphasized the necessity for the Assessee to offer a satisfactory explanation regarding any credited amounts. The Supreme Court's interpretation of "the assessee offers no explanation" was considered, leading to the affirmation of the Tribunal's decision in the present case due to the Assessee's inadequate explanation.