2003 (1) TMI 245 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of additions on account of gifts received by the assessee and his wife.
2. Deletion of addition on account of low household expenses.

Issue-wise Detailed Analysis:

1. Deletion of Additions on Account of Gifts Received by the Assessee and His Wife:

The Revenue appealed against the deletion of additions made by the AO concerning gifts of Rs. 6,00,000 received by the assessee and Rs. 12,00,000 received by his wife from Shri Gurmit Singh. Despite repeated notices, the assessee did not appear, leading to an ex parte decision based on the AO's order.

The AO's investigation revealed that the gifts were credited from an NRI account opened by Shri Gurmit Singh at Indian Overseas Bank, New Delhi. The AO questioned the legitimacy of these gifts, noting that the funds were transferred via TTs/DDs purchased in cash by a walk-in-customer named Mr. T.P. Anand in Singapore, not directly by Gurmit Singh. The AO added the amounts to the assessee's income, citing the case of Lall Chand Kalra vs. CIT, where the genuineness of similar gifts was rejected.

Before CIT(A), the assessee argued that Gurmit Singh was a close family friend and the gifts were genuine, supported by the statutory declaration and passport copies. The CIT(A) found the gifts genuine, distinguishing the case from Lall Chand Kalra, and deleted the additions.

The Departmental Representative contended that the CIT(A) erred in deleting the additions, emphasizing the lack of proof of the donor's financial capacity and the suspicious nature of the transactions. The Tribunal upheld the AO's decision, highlighting that the assessee failed to prove the identity, capacity, and genuineness of the gifts. The Tribunal noted that the transactions were not sufficiently substantiated, and the possibility of money being arranged through Hawala could not be ruled out. Consequently, the Tribunal restored the AO's additions, treating the gifts as income from undisclosed sources.

2. Deletion of Addition on Account of Low Household Expenses:

The AO added Rs. 60,300 to the assessee's income, estimating monthly household expenses at Rs. 12,000, based on the presence of seven domestic servants during a search. The CIT(A) deleted the addition, observing that the withdrawals of Rs. 83,700 were reasonable and there was no evidence of higher expenses. The Tribunal found no merit in the Revenue's ground, noting the lack of evidence to prove that household expenses exceeded the declared withdrawals. Thus, the deletion of the addition by the CIT(A) was upheld.

Conclusion:

The Tribunal partly allowed the appeal, restoring the AO's additions concerning the gifts received by the assessee and his wife, while upholding the deletion of the addition on account of low household expenses.