2015 (1) TMI 286 - HC - Income Tax

Court overturns Tribunal decision on foreign gift, stresses proof of genuine relationship and financial capacity

The Court ruled in favor of the revenue, overturning the Tribunal's decision to delete the addition of Rs. 3,16,570 as a foreign gift received by the ... Additions u/s 68 and 69 - genuineness of foreign gift - Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the addition of ₹ 3,16,570/- allegedly received by the assessee as foreign gift - Held that:- cash entries by way of two different foreign cheques amounting to ₹ 3,16,570/- made by one Y.P. Wadhera in favour of the assessee is in dispute. The veracity of the said entry was doubted by the Assessing Officer on the ground that there was no relationship between donor and the donee. It has come on record that both of them were having no blood relations between them. It is a NRI gift from a stranger and it cannot be said to be genuine or valid nor out of love and affection. - here a person residing abroad had sent a gift to a stranger. It has come on record that the donor made contradictory versions about his relationship with the donee. But the sum and substance of his version leads to the fact that there existed no blood relationship between them. It has also been admitted by the donor that he had not gifted any amount to any other person. In this scenario, there was no occasion for him to make the gift and this amount could not have been deleted. - Following decision of Commissioner of Income Tax Versus M/s Udham Singh & Sons, Goraya [2014 (3) TMI 467 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of Revenue. Issues:Challenge to Tribunal's order under Section 260-A of the Income Tax Act for assessment year 1989-90. Determination of whether the addition of Rs. 3,16,570 allegedly received as a foreign gift was correct in law.Analysis:The case involved a dispute over the addition of Rs. 3,16,570 as a foreign gift received by the assessee for assessment year 1989-90. The Assessing Officer initially added this amount to the assessee's income from undisclosed sources, considering it a bogus gift re-routed as a foreign remittance. The Commissioner of Income Tax (Appeals) later deleted this addition but confirmed another Rs. 20,000 addition. Subsequent appeals led to the Tribunal ordering the deletion of the Rs. 3,16,570 addition but maintaining the Rs. 20,000 addition.The Tribunal found that the gift of 12,000 pounds equivalent to Rs. 3,16,570 received from Y.P. Wadhera was made through proper banking channels, and the assessee had provided sufficient explanation and evidence to prove the gift's genuineness. However, the Assessing Officer doubted the veracity of the entry due to the lack of a relationship between the donor and the donee, concluding that it was not a genuine gift.In a detailed analysis, the Court referred to previous judgments emphasizing that gifts from non-resident Indians to strangers are generally considered invalid unless the natural love and affection of the donor and their financial capacity are adequately proven. The Court highlighted that the donor and donee in this case had no blood relationship, and the donor's contradictory statements further cast doubt on the genuineness of the gift. Therefore, the Court held that the Tribunal's decision to delete the Rs. 3,16,570 addition was not sustainable, ultimately ruling in favor of the revenue and allowing the appeal.In conclusion, the Court's decision centered on the genuineness of the foreign gift received by the assessee, highlighting the importance of establishing a valid relationship, natural love and affection, and the financial capacity of the donor in such cases. The judgment underscored the need for concrete evidence to support the legitimacy of gifts, especially when received from non-relatives residing abroad.