2014 (8) TMI 680 - HC - Income Tax

Foreign gifts received - Whether the Tribunal was correct in law in deleting the additions allegedly received by the assessees as foreign gifts Held that - Narinder Kumar Sekhri had received foreign gifts from one S. P. Amar with whom he had no relation while the other donor Mohinder Handa was his brother s brother-in-law - the donee, Chaman Lal Sekhri, received foreign remittance from Mohinder Handa who is his son-in-law while Subhash Chander Sekhri is brother-in-law of Mohinder Handa - search and seizure operation was conducted on the firms of the assessees, but at the same time the AO took into account the fact that the assessee still kept on investing in land year after year the family had adopted a modus operandi of creation of capital by the NRI gifts without there being any occasion, the gifts cannot be held to be genuine transaction - Relying upon CIT v. Udham Singh and Sons, decided on December 20, 2013, 2014 (3) TMI 467 - PUNJAB AND HARYANA HIGH COURT 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 The order of the Tribunal set aside - Decided in favour of Revenue.

Summary

Issues:
1. Determination of the correctness of deleting additions of foreign gifts received by the assessees.
2. Validity of the Tribunal's decision regarding the genuineness of foreign gifts.

Issue 1: Determination of the correctness of deleting additions of foreign gifts received by the assessees

Analysis:
The High Court was tasked with deciding whether the Tribunal was correct in law in deleting the additions of foreign gifts received by the assessees. The case involved multiple appeals related to the same assessment year 1996-97, where the Revenue raised a common question of law. The Tribunal had found the foreign gifts claimed by the assessees as genuine and ordered their deletion, contrary to the initial doubts raised by the Assessing Officer and the Commissioner of Income-tax (Appeals).

In the specific cases of the assessees, various amounts claimed as foreign gifts were in dispute. The Tribunal's decision to delete these additions was based on the genuineness of the gifts, as per the evidence provided by the assessees. However, the Assessing Officer and the Commissioner of Income-tax (Appeals) had raised concerns regarding the source and validity of these gifts, leading to the additions in the income of the assessees.

Issue 2: Validity of the Tribunal's decision regarding the genuineness of foreign gifts

Analysis:
The High Court examined the Tribunal's reasoning for deeming the foreign gifts as genuine. It was noted that the Tribunal considered the search and seizure operation conducted on the assessees as a crucial factor in the relatives residing abroad extending financial help to them. The Tribunal found the explanation provided by the assessees valid and highlighted the lack of adverse comments by the Assessing Officer on the evidence proving the genuineness of the gifts.

However, the Assessing Officer and the Commissioner of Income-tax (Appeals) had doubted the frequent transfer of money by the donors to the assessees without any apparent occasion, leading them to treat the gifts as bogus rerouted foreign remittances. The High Court referenced previous judgments where gifts from non-residents without any relationship or natural love and affection were deemed invalid. Ultimately, the High Court upheld the Revenue's appeal, concluding that the findings of the Tribunal and Commissioner of Income-tax (Appeals) regarding the deletion of the additions were not sustainable, and therefore, the appeals were allowed in favor of the Revenue.

This detailed analysis of the judgment highlights the issues surrounding the correctness of deleting additions of foreign gifts and the validity of the Tribunal's decision on the genuineness of these gifts. The High Court's thorough examination of the facts and legal precedents resulted in a decision favoring the Revenue's position in the case.