Characterisation of gifts versus income: revenue must prove receipts are taxable; circumstantial gaps do not suffice to treat gifts as remuneration.

The article addresses whether transfers of cash and jewellery were taxable income or gifts, clarifying that where an assessee asserts a receipt is not income, the revenue bears the burden of proving the receipt falls within the taxing provision; mere failure by the assessee to produce all possible documents cannot convert admitted receipts into taxable income absent other admissible evidence. The commentary finds the circumstantial material relied upon (family background, incidental third party references, uncorroborated ex parte information, and minor role in disbursements) insufficient to establish remuneration, so the receipts were held non assessable.

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Issues: (i) Whether the amounts and jewellery received by the assessee from Sita Devi in the relevant years were assessable to tax as income or were gifts not chargeable to tax.

Analysis: The appellant admitted receipt of jewellery and cash from Sita Devi and contended these were gifts made out of love and affection and not income. The department treated the receipts as remuneration and relied on circumstantial material and limited admissions including that the appellant acted as a local agent and a stray memo describing her as private secretary. The Court analysed (a) the proper allocation of evidential burden where an assessee asserts a receipt is not taxable income, (b) prior authorities relied upon by the High Court and the Tribunal, and (c) the sufficiency and weight of the material on record to establish that the receipts were remuneration. The Court held that where the case is that a receipt is not income chargeable to tax (as opposed to being income but exempt under a statutory provision), it is for the department to establish that the receipt falls within the taxing provision; the mere failure of the assessee to produce all possible documents does not permit treating admitted receipts as taxable income unless other admissible evidence establishes their assessable character. The circumstances relied upon by the Tribunal and High Court (including family background, occasional descriptions in third party papers, uncorroborated ex parte information and the appellant's role in disbursing small salaries) were insufficient to establish that the substantial gifts were remuneration for services.

Conclusion: The amounts and jewellery received by the appellant from Sita Devi in the relevant years were not assessable to tax. The appeals are allowed in favour of the assessee.

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