2015 (3) TMI 571 - HC - Income Tax

Genuineness of the gift - Tribunal deleted addition - revenue seeking another opportunity under Rule 46A - Held that - Admittedly the Assessing Officer could not examine the donors but during the course of appellate proceedings, the Commissioner of Income Tax (Appeals) had called for a remand report from the Assessing Officer and, in these remand proceedings, all the donors were examined by the Inspector in which the donors admitted having given the gift to the son of the assessee. The Tribunal has found that there was no defect in the inquiry conducted by the Assessing Officer in the remand proceedings with regard to the genuineness of the financial position of the donors. Thus no reason to interfere in the order of the Tribunal. The contention of the appellant that the Assessing Officer was to be given an opportunity under Rule 46A of the Rules of 1962 is patently misplaced and not applicable, inasmuch as the first appellate authority had forwarded all the additional evidence to the Assessing Officer to examine the genuineness and submit a remand report. When the Assessing Officer has himself examined all the evidence, the question of giving another opportunity under Rule 46A of the Rules of 1962 does not arise. - Decided against revenue.

Summary

Issues:
Assessment of gift in the hands of a minor son under Section 68 of the Income Tax Act, 1961 - Admissibility of additional evidence under Rule 46A of the Income Tax Rules, 1962 - Genuineness of the gift transaction - Opportunity to examine additional evidence.

Analysis:

The judgment by the High Court of Allahabad pertains to a case where the assessee, a proprietor of a trading company, declared a gift of Rs. 31,40,000 in the name of his minor son for the assessment year 2001-02. The Assessing Officer, upon noting the deposits in the minor son's account, directed the assessee to verify the nature of the deposits. Despite the assessee providing details like bank accounts and returns, the Assessing Officer added the entire amount under Section 68 of the Income Tax Act, 1961, as the genuineness of the gift was questioned. The assessee appealed to the Commissioner of Income Tax (Appeals) and submitted additional evidence under Rule 46A of the Income Tax Rules, 1962, seeking to prove the authenticity of the gift.

During the appellate proceedings, the Commissioner of Income Tax (Appeals) called for a remand report from the Assessing Officer, who examined the donors. The donors confirmed the gift transaction to the son of the assessee, and the transactions were found to be conducted through banking channels. Based on the remand report, the first appellate authority accepted the genuineness of the transaction and deleted the addition. The revenue challenged this decision before the Tribunal, which upheld the first appellate authority's order.

The High Court, in its analysis, emphasized that the Assessing Officer had examined all the evidence during the remand proceedings, including the donors, and found no defect in the inquiry regarding the genuineness of the financial position of the donors. The Court rejected the contention that an opportunity should have been given to the Assessing Officer under Rule 46A of the Income Tax Rules, 1962, as all additional evidence had been forwarded for examination. Since the Assessing Officer had already scrutinized the evidence, the Court concluded that there was no need for further opportunity under Rule 46A.

Ultimately, the High Court found no substantial question of law warranting consideration, leading to the dismissal of the appeal filed by the revenue. The judgment underscores the importance of thorough examination of evidence in tax matters and upholds the decision based on the findings of the Assessing Officer during the remand proceedings, thereby affirming the genuineness of the gift transaction in question.