2014 (10) TMI 69 - HC - Income Tax

Unexplained investment Held that - There was not even an indication as to the suppression of income, she voluntarily filed revised returns for as many as 7 assessment years - She reflected two sources of income - The first is through money lending business and the second is in the form of gifts received by her - the Tribunal has undertaken extensive discussion with reference to each and every ground - it is not a case where the appellant came forward with the revised returns, on being issued notice by an authority under the Act - As regards the source to commence the money lending business, the plea of the appellant was that she has savings through agricultural income - There cannot be a better instance of stretching a totally unrelated fact to the extent of straining it assessee has shown the income through agriculture - it had accrued to her free from any obligation and she has every right to put the amount to the use of her choice - It was nobodys case that the income earned by the appellant through agriculture was spent for social obligations - the Tribunal has permitted its imagination to cross all barriers of propriety and reasonableness. The law does not indicate that a gift must emanate only from a known person - it is difficult to describe let alone define, as to when a person can be said to be related to another, in the context of making gifts - A small gesture of affection may result in presentation of quite a fabulous gift and, even where stupendous service is rendered, it may not fetch even an act of gratitude - Much would depend upon the thinking of the concerned persons as well as their financial conditions the order of the Tribunal is set aside Decided in favour of assessee.

Summary

Issues:
Assessment of income from money lending business and gifts, validity of revised returns, burden of proof on assessee, acceptance of gifts from unrelated donors, legal interpretation of gifts.

Analysis:
The appellant, an assessee from a reputed family, filed revised returns disclosing additional income from money lending business and gifts. The Assessing Officer treated the entire amount mentioned in the revised returns as unexplained investment. The Commissioner (Appeals) accepted the income from money lending business but rejected the plea regarding gifts for certain assessment years. Subsequently, the Tribunal allowed the department's appeals and dismissed the appellant's appeals. The appellant argued that she had adequate sources for the money lending business and that the Tribunal undertook excessive verification. The respondent contended that the appellant failed to show the sources of income for the money lending business and gifts. The Tribunal's decision was based on minute verification and reference to prior cases, concluding no substantial question of law arose.

The appellant voluntarily filed revised returns for 7 assessment years, reflecting income from money lending business and gifts. The Assessing Officer examined borrowers of the money lending business, finding discrepancies only with the father-in-law's statement. The Commissioners (Appeals) considered the appellant's financial capacity and family background, accepting the money lending business income but rejecting the gifts. The Tribunal's decision was based on the original returns not mentioning the money lending business and questioning the source of funds for it.

Regarding gifts, the Tribunal required donors to be closely related to the appellant, redefining the concept of gifts. The court disagreed, stating the law does not mandate gifts only from known persons and that defining relationships for gift-giving is subjective. The court allowed the appeals, setting aside the Assessing Authority's orders and accepting the appellant's claims from revised returns. No costs were awarded, and pending miscellaneous petitions were disposed of.