Bank transfer gift not taxable as unexplained income when donor evidence and direct credit establish a valid gift.

A bank-transferred gift from a Nepal resident was held not taxable as income from undisclosed sources under section 68 because the assessee produced the donor's sworn declarations, bank draft particulars and assessment record, and the transfer was credited directly to the assessee's bank account rather than to any books of account maintained by her. A valid gift of movable property was treated as complete on transfer and acceptance under section 122 of the Transfer of Property Act, 1882. The allegation that the arrangement was collusive or colourable was rejected for lack of cogent evidence, and the unexplained-income addition was deleted.

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Issues: Whether the sum of Rs. 1 lakh received through banking channels as a gift from a resident of Nepal could be assessed as income from undisclosed sources under section 68 of the Income-tax Act, 1961.

Analysis: The assessee produced the donor's sworn declarations, bank draft details and the donor's tax assessment record to show that the amount was gifted out of love and affection and was actually transferred to the assessee. A valid gift of movable property is complete on transfer by the donor and acceptance by the donee under section 122 of the Transfer of Property Act, 1882. The amount was credited directly to the assessee's bank account and not to any books of account maintained by her, so section 68 could not be invoked on those facts. The finding that the transaction was a collusive or colourable device was unsupported by cogent evidence.

Conclusion: The addition of Rs. 1 lakh as unexplained income was unsustainable and was deleted.

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