Genuine NRI gifts through banking trail cannot be treated as taxable income when identity and capacity are proved.

Gifts received from an NRI donor were accepted as genuine and not taxable in India where the assessees proved the donor's identity, relationship with the donees, financial capacity, and the banking trail through confirmation letters and bank records. The transfers were made through authorised banking channels from the donor's own account, and the absence of a special occasion did not undermine the gift. Subsequent conduct of one donee in another year was held insufficient to discredit the present transactions. The applicable circular also supported overseas gifts received by post at the assessee's request, and the additions were deleted.

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Issues: Whether the gifts received from an NRI donor were genuine and not liable to be treated as taxable income in the hands of the assessees.

Analysis: The assessees established the donor's identity, relationship with the donees, and financial capacity through confirmation letters and supporting bank documents. The gifts were remitted through authorised banking channels from the donor's own bank account, and no special occasion was required for making a gift. The subsequent conduct of one donee in another year could not, by itself, discredit the present gifts. The applicable circular also supported the treatment of overseas gifts received by post at the assessee's request.

Conclusion: The gifts were held to be genuine and not taxable in India, and the additions were rightly deleted.

Ratio Decidendi: Where the donor's identity, relationship, financial capacity, and the banking trail are proved, an NRI gift received through authorised channels cannot be treated as bogus merely on suspicion or on the basis of unrelated subsequent conduct.

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