1998 (3) TMI 703 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 2,36,838 made by the Assessing Officer on account of alleged foreign gifts.
2. Genuineness of the foreign gifts.
3. Capacity of the donors to give gifts.
4. Occasion for receiving the gifts.
5. Treatment of gifts received by the assessee's wife.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 2,36,838:
The primary issue in this appeal is whether the learned CIT(A) erred in deleting the addition of Rs. 2,36,838 made by the Assessing Officer. The Assessing Officer had treated the foreign gifts received by the assessee as non-genuine and added them to the income of the assessee. The CIT(A) deleted this addition, which led to the Revenue's appeal.

2. Genuineness of the Foreign Gifts:
The Assessing Officer questioned the genuineness of the foreign gifts received by the assessee, totaling Rs. 1,92,861, and an additional Rs. 43,977 received by the assessee's wife. The Assessing Officer observed that the gifts were received from individuals who were not in direct relation to the assessee and his wife, and there was no adequate consideration for such huge amounts. The CIT(A), however, found that the amounts were received through banking channels and were supported by confirmations from the donors. The CIT(A) concluded that the gifts were genuine based on the deposition of the assessee and his wife and the absence of any rebuttal by the ITO.

3. Capacity of the Donors to Give Gifts:
The Assessing Officer doubted the financial capacity of the donors to give such large gifts. The CIT(A) found that the capacity of the donors was established by the assessee and his wife, and there was no evidence to the contrary presented by the Revenue. The CIT(A) relied on the confirmations from the donors and the fact that all the near relations of the donors were in the USA to support the genuineness of the gifts.

4. Occasion for Receiving the Gifts:
The assessee claimed that the gifts were received to fund his son's admission to Dayanand Medical College, Ludhiana, under the donation category. The Assessing Officer found this explanation unconvincing, as the amounts were not used for the stated purpose but were instead deposited with local firms. The CIT(A) accepted the assessee's explanation, noting that the amounts were received before the son appeared in the CET test in 1989 and were temporarily deposited with local firms. However, the Tribunal found this explanation implausible, noting that the gifts were received in 1988, while the son appeared for the entrance exam in 1989, and no application for admission under the donation category was made.

5. Treatment of Gifts Received by the Assessee's Wife:
The Assessing Officer included the gifts received by the assessee's wife in the assessee's income, as the amounts were credited to the assessee's account. The Tribunal upheld this treatment, stating that the assessee was responsible for proving the genuineness of the transactions, including those involving his wife. The Tribunal found that the gifts received by the wife were also not genuine and were rightly treated as unexplained investments.

Conclusion:
The Tribunal allowed the appeal of the Revenue, concluding that the foreign gifts were not genuine, the donors' capacity was not proven, and the alleged occasion for the gifts was not substantiated. The additions made by the Assessing Officer were thus upheld.