1999 (2) TMI 95 - AT - Income Tax

Tribunal overturns Rs. 76 lakhs gift & Rs. 19,15,920 land purchase additions due to lack of evidence.

The Tribunal deleted additions of Rs. 76 lakhs for gifts and Rs. 19,15,920 for land purchase due to lack of evidence and procedural lapses by the AO. ... Block Assessment, Search And Seizure Issues Involved:1. Validity of Gifts Received by the Assessee2. Addition on Account of Purchase of Land3. Addition on Account of School FeesSummary:1. Validity of Gifts Received by the Assessee:The assessee received gifts amounting to Rs. 26 lakhs from Shri H.S. Bhangu, Rs. 5 lakhs from Shri Manmohan Singh Virdi, and Rs. 45 lakhs from Shri Navtej Singh Bains. The AO observed deposits in the assessee's bank account and concluded that these were not genuine gifts but compensatory payments. The AO relied on the statement of Shri Bhangu, who mentioned being offered a joint venture project share and assured of adequate compensation equivalent to the gift amount. The AO added these amounts as income from undisclosed sources. The Tribunal, however, found that the AO's conclusions were based on assumptions without concrete evidence of compensatory payments. The Tribunal emphasized that the affidavits from the donors and the running NRE accounts indicated genuine gifts, and the AO failed to provide material proof of the alleged repayment by the assessee to the donors. Consequently, the Tribunal deleted the addition of Rs. 76 lakhs.2. Addition on Account of Purchase of Land:The AO made an addition of Rs. 19,15,920 based on seized documents indicating that the assessee paid amounts over and above the registered value for land purchases. The AO's conclusion was primarily based on a document seized from another individual's residence, which was not confronted to the assessee. The Tribunal noted that the AO did not follow the mandatory provisions u/s 69, which require the AO to provide a satisfactory explanation. The Tribunal also observed that the sellers of the land denied receiving any additional payments. As the AO did not provide sufficient evidence or follow due process, the Tribunal deleted the addition of Rs. 19,15,920.3. Addition on Account of School Fees:The AO added Rs. 25,938 as undisclosed income based on a seized document detailing school fees for the assessee's son, Nikhil Syal. The AO noted that the household expenses shown were insufficient to cover these fees. The Tribunal found that while the document indicated expenses, the AO did not question the assessee specifically about these entries. The Tribunal concluded that the onus was on the assessee to explain the entries, which was not satisfactorily discharged. Therefore, the Tribunal sustained the addition of Rs. 25,938.Conclusion:The Tribunal deleted the additions related to the gifts and land purchase due to lack of evidence and procedural lapses by the AO but sustained the addition related to school fees due to inadequate explanation by the assessee.