2014 (5) TMI 968 - HC - Income Tax

Genuineness of foreign gifts Financial capability, identity, relation and occasion not proved - Held that - Following Commissioner of Income Tax Versus M/s Udham Singh & Sons, Gor 2014 (3) TMI 467 - PUNJAB AND HARYANA HIGH COURT - NRI gift from a stranger was neither genuine nor valid - mere identification of donor and showing the movement of gift amount through banking channel is not enough to prove genuineness of the gift - The assessee was required to establish that the donor had the means and the gift was genuine, for natural love and affection - there being neither any relationship nor there being any circumstance to show natural love and affection of the donor for the donee nor there being any occasion to make such gifts to the assessee - the assesse was unable to show that there was any occasion or relationship to make the gift Decided in favour of Revenue.

Summary

Issues:
- Appeal under Section 260-A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal, Chandigarh Bench in respect of assessment year 1995-96.
- Question of law regarding the genuineness of foreign gifts received by the assessee.
- Assessing Officer's addition of unexplained gifts and silver jewellery to the assessee's income.
- CIT(A) rejecting the appeal against the addition of unexplained gifts but allowing the appeal against the addition of unexplained silver jewellery.
- Judicial interpretation of the genuineness of foreign gifts from non-residents without any relationship or occasion.

Analysis:
1. The appeal before the High Court was made by the revenue under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Chandigarh Bench, regarding the assessment year 1995-96. The primary question of law raised was the genuineness of foreign gifts totaling Rs. 2.60 lakhs received by the assessee, which the Assessing Officer doubted and added to the assessee's income from undisclosed sources, along with an amount for unexplained silver jewellery.

2. The Assessing Officer's decision to add the amounts to the assessee's income was based on the lack of proof regarding the financial capability of the donors, their relation with the assessee, and the occasion for the gifts. The donors were non-relatives, raising suspicion about the genuineness of the gifts. Previous judicial decisions, such as Lal Chand Kalra Versus CIT, highlighted that gifts from strangers, especially non-residents, without established relationships or natural affection, were considered not genuine.

3. The High Court referred to various judgments, including Commissioner of Income Tax v. R.S. Sibal, to emphasize that the genuineness of foreign gifts from non-relatives must be proven with evidence of natural love and affection, financial capacity of the donor, and a valid occasion for the gift. In cases where these elements were lacking, courts consistently held that such gifts could not be accepted as genuine.

4. Considering the precedents and the lack of evidence establishing a relationship or occasion for the foreign gifts received by the assessee, the High Court upheld the revenue's appeal. The court concluded that the assessee failed to demonstrate the genuineness of the gifts, leading to the allowance of the appeal in favor of the revenue.

5. The judgment reaffirmed the principle that foreign gifts from non-relatives must be supported by evidence of natural love and affection, financial capacity of the donor, and a valid occasion for the gift to be considered genuine. In this case, the lack of such evidence resulted in the court ruling in favor of the revenue and disallowing the claimed foreign gifts in the assessee's income for the assessment year 1995-96.