2004 (1) TMI 343 - AT - Income Tax

Addition on account of gift from NRI - minor son of the assessee received a gift - capacity and genuineness of the gift - Four gifts received from the near relatives. HELD THAT - In the instant case it is not disputed that the donor Shri Gurvinderpal Singh is an NRI and a man of means because the AO had not questioned the creditworthiness of the donor. It is also not disputed that the amount was received by the minor son of the assessee from NRE account of the donor. It is true that no deposits can be made in the NRE account except the realisation from the foreign country. In other words only foreign exchange can be deposited in the NRE account. It is not the case of the AO that the assessee went to Thailand and gave his money to the NRI for depositing in his NRE account maintained in India or NRI received the money back from the assessee after giving the cheque to his minor son. In fact the AO was not justified in observing that the gift was an arranged gift. The AO treated the gift as bogus on the basis that the assessee had not given any gift to the children of the donor in the past. In our opinion this observation of the AO is against the provisions of law because the amount can be treated as gift if it is given without any consideration and under the natural love and affection. Similarly the observation of the AO that there was no blood relation and occasion to receive the gift is also not acceptable because for making the gift it is not necessary that there should be some blood relation or the gift should be made only to the relatives and not to the friends. It is not disputed that the gift was made by a person from abroad and there was nothing on record except suspicion that the money from NRE account represented the income of the assessee. Thus we are of the firm view that the CIT(A) was fully justified in deleting the addition since the assessee filed all the documents i.e. gift-deed from the donor copy of the gift-deed fax message from the donor photocopy of the passport affidavit of the donor visiting card of the donor a letter from the CitiBank confirming that Shri Gurvinderpal Singh holds non-resident external savings account and had given cheque to the minor son of the assessee out of NRE account. The aforesaid documents had not been proved by the AO as false or untrue. Therefore we do not see any merit in this ground of appeal filed by the Department. Four gifts received from the near relatives - In the instant case it is noticed that all the donors were assessed to income-tax. Their identity was not in doubt. All of them were having financial capacity to give gifts. The transactions were through banking channel which shows that the AO made the additions merely on the basis of presumption and assumption which is not tenable in the eyes of law. The only requirement of the law was that the assessee was required to prove the identity creditworthiness and genuineness of the transactions which had duly been proved by the assessee. In that view of the matter the CIT(A) was fully justified in deleting the addition made by the AO. In the result both the appeals by the Department and the cross-objections by the assessee are dismissed.

Summary

Issues Involved:
1. Deletion of addition on account of gift from NRI.
2. Deletion of addition on account of gifts from near relatives.
3. Adoption of cost of agricultural land as on 1st April, 1981.

Summary:

1. Deletion of Addition on Account of Gift from NRI:
The Department's appeal contested the deletion of an addition of Rs. 1,51,000 made by the AO on account of a gift from an NRI. The AO treated the gift as bogus due to lack of blood relation and absence of reciprocal gifts. The CIT(A) found that the identity, capacity, and genuineness of the gift were proven, and the transaction was through a banking channel. The CIT(A) held that the AO's reliance on the absence of occasion and blood relation was not sufficient to treat the gift as non-genuine. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide tangible evidence to dispute the genuineness of the gift.

2. Deletion of Addition on Account of Gifts from Near Relatives:
The AO disallowed gifts totaling Rs. 1,20,000 received from the assessee's near relatives, citing lack of financial capacity and absence of reciprocal gifts. The CIT(A) observed that the donors were existing assessees with sufficient financial capacity and that the transactions were through banking channels. The CIT(A) concluded that the AO's addition was based on presumption and not on concrete evidence. The Tribunal agreed with the CIT(A), emphasizing that the identity, creditworthiness, and genuineness of the transactions were duly proven by the assessee.

3. Adoption of Cost of Agricultural Land as on 1st April, 1981:
The AO adopted the cost of agricultural land at Rs. 27,000 per bigha based on an Inspector's report, while the assessee claimed Rs. 37,000 per bigha. The CIT(A) directed the AO to adopt Rs. 33,000 per bigha, noting that this value was accepted by the Department for the asst. yr. 1996-97. The Tribunal upheld the CIT(A)'s decision, stating that the Inspector's report was not confronted to the assessee and that the value of Rs. 33,000 per bigha was reasonable and consistent with the Department's previous acceptance.

Conclusion:
Both the Department's appeals and the assessee's cross-objections were dismissed, upholding the CIT(A)'s decisions on all issues.