2024 (11) TMI 572 - HC - Income Tax

HC overturns ITAT ruling on cash gifts from Privy Purse after finding clear bank evidence

The Punjab and Haryana HC ruled in favor of the appellant-assessee regarding the nature of cash gifts received. The Commissioner of Gift Tax had ... Nature of gifts received - Commissioner of Gift Tax has held that the cash gifts were made out of Privy Purse - Since the appellant-Assessee did not produce the proof relating to the source of cash and cheques having come from Privy Purse, the ITAT cannot be said to be committed any illegality in not treating the same to be from the Privy Purse - HELD THAT:- The statement of account of the Privy Purse of a particular Bank Account No.956 of State Bank of India, Patiala was available before the concerned Commissioner Gift Tax and it clearly reflected that from the account relating to Mohinder Kaur Trust Privy Purse, cheques and cash were released in favour of the said Trust amounting to Rs. 6,00,000/- and to Amarinder Singh Trust of Rs. 4,00,000/- in all on various dates which would further require adjudication. We, therefore, find that the order passed by the ITAT hinges on perversity and does not take into account the record which was available with them as the case had been travelled from the Commissioner Gift Tax. The answer to question No.(a) is, therefore, accordingly found to be in favour of the appellant-Assessee and it is held that the gift amount was made out of Privy Purse. Issues:1. Appeal against the order of the Income Tax Appellate Tribunal regarding the nature of the gift and tax liability.2. Interpretation of the provisions of the Gift Tax Act, 1958 and the Hindu Succession Act, 1956.3. Examination of whether the cash gifts were made out of the Privy Purse.Analysis:The appeal was filed by the Assessee against the order of the Income Tax Appellate Tribunal (ITAT) concerning the nature of the gift and tax liability. The Supreme Court directed the ITAT to reconsider the matter, focusing on two key issues. Firstly, whether the gift amount of Rs. 10,00,000 was made out of the Privy Purse. Secondly, whether the transfer of agricultural lands was subject to tax under the Gift Tax Act, 1958, after the enactment of the Hindu Succession Act, 1956. The ITAT examined the contentions raised by the Assessee regarding the source of the cash gifts and cheques from the Privy Purse. However, due to the lack of relevant material on record, the ITAT could not establish whether the cash gifts were indeed from the Privy Purse.The Senior counsel for the Assessee argued that the ITAT should have relied on the findings of fact by the Commissioner of Gift Tax and not required additional proof from the Assessee. The counsel also emphasized the importance of considering the effect of the Hindu Succession Act, 1956 on the nature of the gift. On the other hand, the counsel for the Income Tax Department contended that the Assessee should have provided independent proof to the ITAT, beyond what was presented to the Commissioner of Gift Tax. The ITAT's decision was based on the lack of evidence regarding the source of the cash and cheques from the Privy Purse.The Court considered the submissions of both parties and reviewed the orders passed. It noted that the Supreme Court had already determined that the ITAT needed to provide a finding on whether the gift amount was from the Privy Purse. The Commissioner of Gift Tax had highlighted various cheques and cash transactions from the Privy Purse, which should have been considered by the ITAT. The Court quoted the Commissioner's order, which supported the Assessee's claim that the gifts were made from the Privy Purse. Consequently, the Court found in favor of the Assessee, stating that the gift amount was indeed made out of the Privy Purse. The appeal was disposed of based on these observations, and all pending applications were also resolved accordingly.