1997 (12) TMI 651 - AT - Income Tax

Summary

Issues Involved:
1. Validity of gifts received by the assessee.
2. Burden of proof regarding the genuineness of the gifts.
3. Compliance with procedural requirements by the Income Tax Officer (ITO).

Summary:

1. Validity of Gifts Received by the Assessee:
The assessee, a Hindu Undivided Family (HUF), filed a return for the assessment year 1981-82, disclosing an income of Rs. 37,920, which included gifts totaling Rs. 60,000 from nine parties. The ITO disbelieved the gifts and considered the amount as income from undisclosed sources, completing the assessment on a total income of Rs. 97,920. The Appellate Assistant Commissioner (AAC) accepted gifts worth Rs. 30,000 from three donors but remanded the case for re-examination of the remaining Rs. 30,000 from six donors. Upon re-examination, the ITO accepted gifts worth Rs. 10,000 from two donors but rejected the remaining Rs. 25,000 from five donors, leading to the current appeal.

2. Burden of Proof Regarding the Genuineness of the Gifts:
The Tribunal examined the evidence for each of the five disputed gifts. For Mrs. P.C. Udani, despite her bank statement showing a cash deposit immediately before the gift, her statement on oath and lack of contrary evidence led to the acceptance of her gift. For Rajiv S. Tipnis, his appearance and statement under section 131, despite the absence of a bank statement, were deemed sufficient to accept his gift. For the remaining three donors (Deomal T. Talreja, Pahlaj L. Chawla, and Poonam D. Ahuja), their non-appearance despite summons did not negate the validity of their gifts, as the assessee provided plausible evidence of their identity and the account-payee cheques issued.

3. Compliance with Procedural Requirements by the ITO:
The Tribunal noted that the ITO failed to gather any material evidence to prove that the gifts were arranged or fictitious, contravening the AAC's directions. The ITO's findings were deemed unsupported by evidence and arbitrary. The Tribunal emphasized that the burden of proof shifts to the department once the assessee provides plausible evidence of the donors' identity and credit-worthiness. The department's failure to provide contrary evidence led to the acceptance of the gifts.

Conclusion:
The Tribunal allowed the appeal, holding that the total gifted amounts from the five disputed donors could not be added as the assessee's undisclosed income. The appeal was thus allowed in favor of the assessee.