2015 (2) TMI 591 - HC - Income Tax

Genuineness of gift received from an NRE account - whether the assessee had discharged onus and proved genuineness of the gift? - Held that - Referring to the facts of the present case, we find the order passed by the Tribunal is justified and correct. They were right in holding that the assessed has not been able to prove genuineness of the gift and also the factum that the transaction was out of love and affection, a sine qua non to establish a genuine gift. - Decided against assessee

Summary

Issues Involved:
1. Whether the finding arrived at by the Tribunal is perverse in view of the material placed before the Tribunal and the lower authorities?
2. Whether the assessee had discharged the onus and proved the genuineness of the gift of Rs. 2,60,000?

Detailed Analysis:

Issue 1: Tribunal's Finding and Material Evidence
The core issue is whether the Tribunal's finding is perverse given the material evidence presented. The Tribunal, in its impugned order dated 5th December 2002, concluded that the assessee failed to establish a close relationship with the donor and the circumstances under which the gift was made. The Tribunal emphasized that the donor was a stranger to the donee and the mere fact that the money originated from a foreign bank account was insufficient to prove the genuineness of the gift. It highlighted that one of the essential ingredients of a gift is that it should be impelled by love and affection and should be without consideration, which was missing in this case.

Issue 2: Onus to Prove Genuineness of the Gift
The assessee had shown a credit of Rs. 2,60,000 in the capital account under the narration "Gift". The Assessing Officer disbelieved the claim, citing the inability of the assessee to establish the genuineness of the gift. The assessee provided a letter from Chhatrapalsinh Jadeja, a resident of Mumbai, stating he had made the gift from his bank account with the Standard Chartered Bank, Dubai, along with a copy of his passport. However, the Assessing Officer was not satisfied and demanded further evidence to prove Jadeja's capacity and creditworthiness. The assessee's failure to attend subsequent hearings and provide additional evidence led the Assessing Officer to add the amount to the income declared.

In the first appeal, the Commissioner of Income Tax (Appeals) accepted the additional evidence provided by the assessee, including Jadeja's employment details and bank account statement, and deleted the addition. However, the Tribunal reversed this decision, emphasizing the lack of evidence showing a close relationship between the donor and the donee and the absence of circumstances justifying the gift.

The Tribunal's decision was based on the principle that the onus was on the assessee to establish the identity, capacity, or creditworthiness of the donor, and the genuineness of the transaction. It held that the degree of proof required in cases of gifts is substantially higher, and the donor and donee should have a close association.

Additional Considerations:
The assessee's counsel argued that the Assessing Officer had not specifically asked to prove the genuineness of the gift initially but later demanded it. The Tribunal noted that the assessee's reluctance to provide clear evidence and the evasive responses justified an adverse assumption against the assessee. The Tribunal also found that the affidavit and letter provided later did not suffice to prove a close relationship or the genuineness of the gift and that introducing new evidence at this stage would be inappropriate.

Legal Precedents:
The Tribunal referred to several legal precedents, emphasizing that mere identification of the donor and payment through banking channels is insufficient to prove the genuineness of the gift. The assessee must provide a lucid, reasonable, and acceptable explanation, considering the surrounding circumstances and the relationship between the donor and the donee.

Conclusion:
The Tribunal's decision to reject the assessee's claim of a genuine gift was justified based on the evidence and legal principles. The assessee failed to prove the genuineness of the gift and the relationship with the donor, leading to the conclusion that the transaction was not impelled by love and affection. The question of law was answered against the appellant assessee and in favor of the respondent Revenue, with no order as to costs.