Mere Fact That Gifts Were Received Through Banking Channels Won’t Establish Genuineness of Transaction | HC

Case Details: Mohit Agarwal V CIT - [2024] 162 taxmann.com 550 (Allahabad)

Judiciary and Counsel Details

• • Saumitra Dayal Singh & Donadi Ramesh, JJ.
  • S.K. Garg, Ashish Bansal & Krishna Agarawal for the Appellant.
  • Praveen Kumar, S.C. for the Respondent.

Facts of the Case

The assessee, an individual, received gifts from six individuals, aggregating to Rs. 14,50,000. During the assessment proceedings, the Assessing Officer (AO) asked the assessee to furnish the details of the gift and the donor. In response, the assessee furnished the confirmation from the donors along with their PAN, acknowledgement of having filed the return of income, and the bank statement showing the gift amount credited to the assessee’s bank account.

Unsatisfied with the explanation, the AO treated the gift as unexplained income under section 68. On appeal, the Tribunal upheld the order of AO and confirmed his addition. Aggrieved by the order, the assessee filed an appeal before the Allahabad High Court.

High Court Held

The High Court held that the assessee was well-to-do, whereas the donors were persons of modest means. In the absence of any relationship shown or basis disclosed for the generation of the gift, the Tribunal disbelieved the explanation furnished by the assessee on the preponderance of probability emerging from the evidence led by the parties.

Insofar as the assessment of the income tax is purely a civil proceeding, the test of preponderance of probability applied by the Tribunal cannot be faulted. In the context of the gift set up by the assessee, merely because the assessee may have been able to establish such gift was received through the bank channel and merely because the donors may not have disputed the gift made may never have been enough to establish the genuineness of the transaction.

The High Court held that slight differences in test may continue to exist in cases involving gift, and deposits that are to be repaid by the recipient. Insofar as the gift claimed by the petitioner amounted to a change of title in the money, the High Court did not find any defect in the course adopted by the Tribunal in disbelieving the claim based on holistic consideration of the material before the Tribunal.

List of Cases Reviewed

• • Order of ITAT Allahabad Bench, Allahabad, dated 22-12-2006 in Mohit Agarwal v. CIT, IT Appeal No. 282 of 2006 (All.) affirmed.