2016 (2) TMI 630 - HC - Income Tax

Genuity of gift - whether gifts represent the income of the assessee? - Held that - The Tribunal has held that there is no evidence or material to link Varinder Sharma to the assessee and that findings have been recorded on mere suspicion, conjectures and surmises. The Tribunal has also held that the assessee, who accepted the gift for and on behalf of his daughters, was not privy to any information regarding the source of funds with Mr. B.P.Bhardwaj. One cannot be oblivious to the fact that such a large gift received from a foreign country is bound to raise suspicion but can not disregard the fact that suspicion and doubt cannot replace proof or translate into reasons, much less reasons for invoking a deeming provision to hold that gifts represent the income of the assessee, particularly in the absence of relevant facts. A further perusal of orders passed by the Assessing Officer reveals that he proceeded as if the entire onus lay upon the assessee, ignored the material received from the Central Board of Direct Taxes from the Inland Revenue Service, Great Britain and failed to follow the matter any further with respect to Shri Varinder Sharma and on the basis of suspicion, held that gifts are not genuine. Having already held that it was for the revenue to proceed to investigate the matter further, I find no error in the opinion recorded by the Tribunal, which has been reproduced in detail in preceding paragraphs or that in the facts and circumstances of the case, a different opinion could be recorded. Consequently, the substantial question of law is answered against the revenue. Also Tribunal has rightly opined that the gift could not be treated as a deemed income of the assessee. Consequently, the substantial questions of law are answered against the revenue

Summary

Issues Involved:
1. Whether the assessee had discharged the onus of establishing that gifts of $200,000 made in favor of Ms. Monica Oswal and Ms. Ruchika Oswal through him by Shri O.S. Gill and Shri B.P. Bhardwaj were valid?
2. Whether the amounts gifted by Shri O.S. Gill and Shri B.P. Bhardwaj to Ms. Monica Oswal and Ms. Ruchika Oswal are to be treated as the income of the assessee under section 69A of the Income Tax Act?

Issue-wise Detailed Analysis:

1. Onus of Establishing the Validity of Gifts:
The primary issue was whether the assessee had discharged the onus of proving the genuineness of the gifts received for his daughters. The Tribunal noted that the Assessing Officer (AO) was initially required to raise a doubt about the genuineness of the gifts based on available material. Once this doubt was raised, the onus shifted to the assessee to prove the genuineness of the gifts. If the assessee provided credible evidence, the onus reverted to the revenue to disprove the assessee's claims.

For the gift from Dr. O.S. Gill, the assessee provided several documents, including a memorandum of gift, bank account details, and a declaration of inward remittance. Dr. Gill also appeared before the AO, confirming the gift and his financial capacity. Despite some vague answers from Dr. Gill, the Tribunal found his overall testimony and the supporting documents credible.

For the gift from Shri B.P. Bhardwaj, the Tribunal noted that similar documents were provided, but Bhardwaj did not appear before the AO. The AO's suspicion was based on Bhardwaj's statement that the money was given to him by one Shri Varinder Sharma. The Tribunal held that the AO failed to pursue this lead further and did not provide any evidence linking Varinder Sharma to the assessee.

2. Treatment of Gifts as Deemed Income under Section 69A:
The Tribunal emphasized that suspicion and doubt could not replace concrete evidence, especially when dealing with a deeming provision like Section 69A. The AO must collect relevant facts and confront the assessee, who then must provide a credible explanation. If the assessee does so, the onus shifts back to the revenue to disprove the explanation.

For Dr. Gill's gift, the Tribunal found that the AO's inference was primarily based on the large amount of the gift and Dr. Gill's inability to recall his bank account number, which was already known to the revenue. The Tribunal held that these factors were insufficient to deem the gift as the assessee's income.

For Bhardwaj's gift, the Tribunal noted that the AO did not investigate further into the connection between Varinder Sharma and the assessee. The Tribunal found no evidence linking Sharma to the assessee and held that the AO's inference was based on mere suspicion.

Conclusion:
The Tribunal concluded that the assessee had discharged the onus of proving the genuineness of the gifts from both Dr. Gill and Shri Bhardwaj. The Tribunal held that the AO's findings were based on suspicion and not on concrete evidence. Consequently, the gifts could not be treated as the deemed income of the assessee under Section 69A. The substantial questions of law were answered against the revenue, and the appeals were disposed of accordingly.