2014 (12) TMI 306 - HC - Income Tax

Validity of Tribunal s order - Genuineness of gift Gift of ₹ 1 lac received by minor daughter Income of assessee and minor clubbed Held that - The Tribunal has not specifically referred to Section 68 of the Act, but AO has specifically recorded that the addition of ₹ 1 lac was being made as the assessee had not been able to prove and establish the source of the income/deposit of the minor Aushi Aggarwal - it is not necessary for the Revenue to show and prove how the assessee in this case through a conduit had transferred and brought into books of account, undisclosed income u/s 68 - this section casts a burden on the assessee to show genuineness of the transaction by establishing identity of the person from whom the payment was received, the source of payment, which necessarily need not be confined only to the details of the bank account from which payment was made but also corroborating and surrounding circumstances - income/cash credits which are not satisfactorily explained might be assessed as income - where any amount was found credited in the books of the assessed in the previous year and the assessed offered no explanation about the nature and source or the explanation offered was in the opinion of the AO not satisfactory, the sums so credited could be charged to taxed as income of the assessed for the relevant previous year - creditworthiness of the donor would depend upon the income and earning of the donor and whether and did he have necessary funds - Rarely one finds a poor man giving gifts to a rich and powerful, out of natural love and affection The test of perversity is whether a reasonable person conversant with the legal provisions would have reached to the conclusion or finding under challenge - the reasoning and the finding of the tribunal is plausible, thus, the order of the Tribunal is upheld Decided against assessee.

Summary

Issues Involved:
1. Application for stay.
2. Genuineness of the gift of Rs. 1 lac received by the assessee's minor daughter.
3. Perverse finding by the Income Tax Appellate Tribunal (ITAT).
4. Applicability of Section 5(1)(ii)(b) of the Gift Tax Act, 1958.
5. Burden of proof under Section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Application for Stay:
The appellant-assessee's senior counsel stated that the stay application was not being pressed. Consequently, the application for stay was dismissed as not pressed.

2. Genuineness of the Gift:
The core issue was the genuineness of a Rs. 1 lac gift received by the assessee's minor daughter, Aushi Aggarwal, from Bhupinder Kumar, a non-resident Indian. The Assessing Officer (AO) questioned the source of the deposit and treated the purported gift as the assessee's own income from undisclosed sources. The appellant relied on a declaration of gift and bank statements to prove the genuineness of the gift. However, the AO did not accept this explanation due to various reasons, including the lack of a relationship between the donor and donee and the inability to prove the donor's capacity to make the gift.

3. Perverse Finding by ITAT:
The appellant contended that the ITAT's reversal of the Commissioner of Income Tax (Appeals) [CIT(A)] order was perverse. The CIT(A) had deleted the addition made by the AO, accepting the documents provided by the assessee as proof of the gift. The ITAT, however, found that the gift was not genuine, noting that the donor and donee were strangers and that gifts are typically exchanged between known circles. The ITAT concluded that the assessee had created evidence to cloak his own undisclosed funds as a gift.

4. Applicability of Section 5(1)(ii)(b) of the Gift Tax Act, 1958:
The appellant argued that under Section 5(1)(ii)(b) of the Gift Tax Act, 1958, it was not necessary to establish a relationship between the donor and donee for gifts made by non-resident Indians. The court found this argument unconvincing, stating that the Gift Tax Act is a separate enactment and irrelevant to proving the genuineness of the transaction under the Income Tax Act. The court emphasized that the genuineness of the transaction must be established through corroborating and surrounding circumstances, not just documentary evidence.

5. Burden of Proof under Section 68 of the Income Tax Act, 1961:
The court highlighted that under Section 68 of the Income Tax Act, the burden is on the assessee to prove the genuineness of the transaction, including the identity of the person from whom the payment was received and the source of the payment. The court noted that the AO had specifically recorded that the addition was made because the assessee failed to prove the source of the income/deposit. The court supported the ITAT's finding that the assessee had not satisfactorily explained the transaction and that the gift was a conduit for funnelling undisclosed money.

Conclusion:
The court concluded that the ITAT's order was not perverse and that a reasonable person conversant with legal provisions would have reached the same conclusion. Therefore, the question of law was answered in favor of the respondent-Revenue, and the appeal was disposed of without costs.