1979 (9) TMI 93 - AT - Income Tax

Summary

Issues:
1. Whether the amount received as compensation by the assessee should be considered a gift under the Gift Tax Act?
2. Whether the failure of the assessee to include his half share of compensation in his wealth tax return constitutes a gift?
3. Whether the AAC's decision to cancel the assessment was correct in the given circumstances?

Detailed Analysis:
1. The issue in this case revolved around the classification of the amount received by the assessee as compensation from the government. The Gift Tax Officer (GTO) contended that the failure of the assessee to include his half share of the compensation in his wealth tax return amounted to a gift under the Gift Tax Act. The GTO proceeded to reopen the assessment to tax the amount of the alleged gift. However, the assessee argued that there was no intention to make a gift, as the amount was retained by his son to pay various taxes on behalf of the assessee.

2. The assessee further contended that his son had made payments towards taxes on behalf of the assessee, which exceeded the assessee's half share of the compensation amount. The Appellate Assistant Commissioner (AAC) noted that the son had indeed made substantial tax payments on behalf of the assessee, leading to the omission of the half share in the wealth tax return. The AAC held that this omission did not constitute a gift, as there was no positive transfer of cash from the assessee to his son. The AAC ruled in favor of the assessee, canceling the assessment.

3. The Department challenged the AAC's decision, leading to the appeal before the Appellate Tribunal. The Tribunal examined the affidavits filed by the assessee and his son, which stated that there was no intention to make a gift by relinquishing the half share of compensation. The Tribunal also considered the revised wealth tax returns filed by the assessee for subsequent years, which were accepted by the Department. The Tribunal concurred with the AAC's decision, concluding that no gift was involved in the case. The Tribunal upheld the cancellation of the assessment, dismissing the Department's appeal.