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Issues Involved:
1. Treatment of Rs. 21 lakhs received by the assessee from his employers. 2. Classification of the amount as income from other sources or as a gift. 3. Validity of the statement recorded under section 131 by the ITO, Ward IV(4). Detailed Analysis: 1. Treatment of Rs. 21 Lakhs Received by the Assessee from His Employers: The primary issue in this case is whether the sum of Rs. 21 lakhs received by the assessee from his employers, Shri K.P. Gupta and Shri M.P. Gupta, should be treated as income from other sources or as a gift. The assessee argued that the amount was a gift given out of natural love and affection due to a long-standing familial relationship and services rendered over six decades by his forefathers. The Assessing Officer, however, treated it as compensation in the nature of commission for services rendered in helping the employers secure enhanced compensation for their land acquired by the government. 2. Classification of the Amount as Income from Other Sources or as a Gift: The Tribunal examined whether the amount could be categorized as income from other sources under Section 56 of the Income-tax Act. The Tribunal referenced several legal precedents, including the Supreme Court's rulings in Mahesh Anantrai Pattani v. CIT and Parimisetti Seetharamamma v. CIT, which established that voluntary payments made out of personal esteem and not as remuneration for services rendered do not constitute taxable income. The Tribunal noted that the amount was given by the employers in their individual capacities and not by their HUFs. The Tribunal concluded that the amount did not fulfill the criteria to be considered income, as there was no contractual or legal obligation to pay the amount, nor was there an expectation or effort by the assessee to earn it. 3. Validity of the Statement Recorded Under Section 131 by the ITO, Ward IV(4): The Tribunal also addressed the validity of a statement recorded under section 131 by the ITO, Ward IV(4), which the Assessing Officer used to support his findings. The Tribunal noted that the statement was not supplied to the assessee, which is against the principles of natural justice. Additionally, the ITO, Ward IV(4), did not have jurisdiction to record such a statement. Therefore, the Tribunal deemed the statement to have no value in concluding that the payment was in relation to services rendered. Conclusion: The Tribunal concluded that the amount received by the assessee was a gift given out of appreciation for personal qualities, abilities, and long-standing familial association, rather than as income from other sources. The Tribunal set aside the order of the CIT (Appeals) and directed the Assessing Officer to delete the addition of Rs. 21 lakhs as income from other sources. The appeal was allowed in favor of the assessee.
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