Non Resident Indian Gift from a Stranger Neither Genuine or Valid

By | January 9, 2015
In ‘Lall Chand Kalra V. Commissioner of Income Tax’ – (1981) 22 CTR 135 (P&H) it was held that nonresident Indian gift from a stranger was neither genuine nor valid.

In ITA No. 498 of 2005 decided by High Court, Delhi in ‘Commissioner of Income-Tax, Karnal Versus Sh. Puneet Chugh 2011 (2) TMI 532 – PUNJAB AND HARYANA HIGH COURT’ on 07.02.2011 the High Court held that the Assessing Officer and the Commissioner of Income Tax were justified in holding that the gift in question was bogus and the Tribunal committed patent error in accepting the gift as genuine. The donor had no relationship with the assessee. His financial capacity was not established. His bank statement was not produced. The Tribunal failed to appreciate these facts.  Nonresident Indian gift could not be accepted as genuine unless the assessee was able to prove natural love and affection and financial capacity of the donor.

In ‘Jaspal Singh V. Commissioner of Income Tax’ – 2006 (9) TMI 143 – PUNJAB AND HARYANA High Court  it was held that it is well settled that mere identification of donor and showing to prove genuineness of the gift.  The assessee was required to establish that the donor had the means and the gift was genuine, for natural love and affection.

In ‘Commissioner of Income Tax V. Kailash Kumar’ – 2015 (1) TMI 286 – PUNJAB & HARYANA HIGH COURT for the assessment year 1989-90, the assessee filed the return on 15.11.1989 showing his income to be ₹ 21,330/-. The Assessing Officer called upon the assessee to give explanation in respect of ₹ 12,000 pounds shown by the assessee as foreign gift and about the investment of ₹ 20,000/- made by him in M/s Mohan Lal and Co. The assessee informed that he had received the said amount from Y.P. Wadhera who is residing in U.K.  The Assessing Officer added the amount to the income on the ground that there is no relationship with the donor and the done. He held that the said income was from undisclosed sources, as it was bogus gift re-routed as a foreign remittance. The Assessing Officer also gave directions for initiating penalty proceedings as prescribed under Section 271 (1)(C) of the Income Tax Act.  The Commissioner (Appeals) upheld the addition. The Tribunal deleted the addition on the appeal filed by the assessee.  The Tribunal held that it was through proper banking channel and the Assessing Officer had made addition without rebutting the assessee’s explanation and evidence produced on record.  The Tribunal held that the gift was genuine.

The Revenue filed appeal before the High Court against the order of the Tribunal.

The High Court found that a person residing abroad  had sent a gift to a stranger. It has come on record that the donor made contradictory versions about his relationships with the done. But the sum and substance of his version leads to the fact that there existed no blood relationship between them.  It has also been admitted by the donor that he had not gifted any amount to any other person. In this scenario, there was no occasion for him to make the gift and this amount could not have been deleted.

In ‘Commissioner of Income Tax V. Sandeep Goyal’ – 2015 (1) TMI 287 – PUNJAB & HARYANA HIGH COURT the assessee filed a return declaring an income of ₹ 304990. The assessee was called upon to explain about the foreign remittances as below:

Rs.1,82,835 from Jagdish Vijh, USA:
Rs.5,00,000 from Pritam Singh, NRE Account;
Rs.3,93,924 from Parmod Tandon, USA;
Rs.1,91,000 from Gurpreet Kaur, Pensylvania;
Rs.1,91,000 from Manpreet K. Sehdev, Jew Jersey

The assessee contended that the donors were family friends and came forwarded to help him to put a MRI scan unit in India proposed to be run under the name and style of M/s Apollo Imaging and Diagnostics Centre Private Limited.  The same was not accepted by the Assessing Officer. He found that no occasion for the donors who had no relations with the assessee to part with such a hefty amount.  Thus he added the said amount to the income of the assessee.

The assessee filed appeal before Commissioner (Appeals). The Commissioner ordered the deletion of ₹ 1,82,835/- relied on the report of the Assessing Officer  in which he found that donor had good family relations with the done and he was financially well and the amount was not big for the donor and the gift was through the banking channel.

The Commissioner (Appeals), in respect of gift ₹ 1,91,000/- received from Gurpreet Kaur and ₹ 1,91,000/- received from Manpreet K. Sehdev, deleted the addition.  The Assessing Officer in his report admitted that the factum of gift by both the donors stood proved but doubted their capacity to gift. The Commissioner (Appeals) taking into account that the amounts were received through proper banking channel coupled with the affidavits of the donors, relied upon the bank statements and held these gifts as genuine and ordered their deletion from the income of the assessee.

In respect of the amount ₹ 3,93,924/- the Commissioner (Appeals) taking into account the fact that Pramod Tandon was a friend of Jagdish Vijh and on the asking of the later had gifted the amount to the assessee.  Therefore the gift was genuine and the amount was ordered to be deleted.

In respect of ₹ 5,00,000/- the Commissioner (Appeals) found that the gift made by Pritam Singh was leading a retired life in India and had no close relationship with the assessee and the assessee himself was not aware bout the antecedents of Pritam Singh. The Commissioner (Appeals) confirmed the order of assessing officer in adding the said amount to the income of the assessee.

Dissatisfied with the order Commissioner (Appeals) the Revenue filed appeal before the Tribunal which dismissed the appeal filed by the Revenue. The Revenue filed appeal before High Court in respect of gifts which were allowed to be deleted by the Commissioner (Appeals) and confirmed by the Tribunal. The High Court found that the assessee was not having blood relations with any of the donors.  The plea taken by the assessee was that they were his family friends and had come to forward to help to set up a MRI Scan Centre.  It was found that there was no occasion to make the gifts either by close relations or strangers.  The High Court found that it was found unbelievable that instead of giving any gift or monetary help to some charitable organization, a large number of strangers had chosen the assessee to make alleged cash gift running in lakhs of rupees.  It was found that there was no occasion to make the gifts either by close relations or strangers.  Dr. Jagjit Singh, father of the donors, Gurpreet Kaur and Manpreet K. Sahdev, admitted that he had received cash gift from his daughters. It was found unbelievable that instead of giving any gift or monetary help to some charitable organization, a large number of strangers had chosen the assessee to make alleged cash gift running in lakhs of rupees.  The transactions in dispute were not doubted but the fact remains that the done was not having blood relations with the donors.  The High Court, therefore, held that the alleged foreign gifts in favor of the assessee by persons are not genuine and allowed the appeal of the Revenue.

From the above case laws it is clear that nonresident Indian gift could not be accepted as genuine unless the assessee was able to prove natural love and affection and financial capacity of the donor.

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