2015 (4) TMI 553 - HC - Income Tax

Unaccounted gifts - whether the two donors had the financial capacity to make the gift(s) in favour of the assessees herein? - ITAT deleted the addition - Held that - In the light of the decision of the Supreme Court in the case of P.R.Ganapathy (2012 (9) TMI 482 - SUPREME COURT), wherein held that the burden is on the assessees to show that the amount received by purported gift(s) from the two donors was a gift in the legal sense. Assessees have not led evidence to show whether the alleged donors had adequate funds in their respective accounts to make these purported gift(s) in Singapore Dollars, which is almost running into more than five lakhs, we have no hesitation to set aside the order of the Tribunal. Accordingly, the order of the Tribunal stands set aside and the matter is remanded back to the Tribunal to decide the issue along with the case of P.R.Ganapathy on this issue. - Decided in favour of revenue for statistical purposes.

Issues:
1. Block assessment for the period 1986-87 to 1996-97 - Treatment of investment as income.
2. Reliance on previous Tribunal decision.
3. Apex Court remand regarding donor financial capacity.
4. Burden of proof on the assessee for gifts.
5. Setting aside Tribunal decision and remanding the matter.

Issue 1: Block assessment for the period 1986-87 to 1996-97 - Treatment of investment as income:
The case involved a block assessment period from 1986-87 to 1996-97 where the assessee had made an investment of Rs. 20.00 lakhs towards share capital in a company. The Assessing Officer treated this amount as income in the hands of the assessee, leading to additions in the block assessment. The Tribunal, relying on previous decisions, found merit in the assessee's case, prompting the Department to challenge the matter before the High Court.

Issue 2: Reliance on previous Tribunal decision:
The Tribunal, in this case, relied on a previous decision in the matter of P.R.Ganapathy and Smt.T.Kannaki, where the bonafides of the donor were established. However, the Department contested this reliance before the High Court, leading to a detailed examination of the legal aspects involved.

Issue 3: Apex Court remand regarding donor financial capacity:
The Apex Court remanded a similar case involving purported gifts from NRIs due to the lack of evidence regarding the donors' financial capacity. The Court emphasized the burden on the assessees to prove that the amounts received were indeed gifts in the legal sense, highlighting the importance of providing evidence in such cases.

Issue 4: Burden of proof on the assessee for gifts:
The Apex Court's decision reiterated the burden on assessees to demonstrate that the alleged donors had sufficient funds to make the gifts. Failure to provide such evidence could lead to the dismissal of the claims, as seen in the remanded case. The Court emphasized the need for assessees to present relevant evidence to support their case.

Issue 5: Setting aside Tribunal decision and remanding the matter:
In light of the Apex Court's decision and the lack of evidence regarding the donors' financial capacity, the High Court set aside the Tribunal's order and remanded the matter back for further examination. The High Court directed the Tribunal to reconsider the issue in line with the Supreme Court's directives, emphasizing the importance of producing relevant evidence in such cases.

This detailed analysis of the judgment highlights the complexities involved in block assessments, the burden of proof on assessees for gifts, and the significance of providing evidence to support claims in tax matters.

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