While deleting an addition made in respect of undisclosed income, the Delhi bench of the ITAT held that the gift received by the assessee cannot be treated as non-genuine merely for the reason that the family members of the assessee had received bogus gifts during the same year.
In the instant case, the Assessing Officer re-opened assessment against the assessee on the basis of the Assessment order passed against the family members of the assessee wherein the department found that bogus gifts were received by the family. The Assessing Officer observed that during assessment year 2002-03, assessee has shown gift of Rs. 28,70,126/- from Shri Rajiv Gupta through various cheque amounts and since the gift received by other family members of the assessee were held to be non-genuine and were treated as undisclosed income, therefore, he has ‘reason to believe’ that the gift received from the above person is also non-genuine and to the extent of gift amount income chargeable to tax has escaped assessment within the meaning of section 147. He was of the opinion that the assessee and his family members have used colourable device to garb their income from undisclosed sources as the donor is neither related to the assessee or to any other family members of the assessee.
The bench noted that there were no findings in the earlier assessment order that the donor from whom the assessee received the gift was also one of the donors in that case. It noted that in the present case, the assessment proceedings of M/s Ashok Mahindru & Sons, which is the material relied upon by the Assessing Officer in his ‘reasons recorded’, there is no reference or whisper about the donor in the case of the assessee, i.e., Shri Rajiv Gupta or there is any mention about the assessee.
“The ‘reason to believe’ thus, falls in the realm of suspicion and howsoever strong suspicion may be but it cannot be reckoned as tangible material having live link nexus with income escaping assessment.”
The bench ruled that “Hence we are of the considered opinion that in the present case there is no rational and intelligible nexus between the said material as referred by the Assessing Officer in the ‘reasons recorded’ for the formation of ‘reason to believe’ for income escaping assessment. It appears that reopening has been done simply as a pretence to make further enquiry about the genuineness of the gift and such pretence for making roving and fishing enquiry cannot clothe the Assessing Officer with the jurisdiction to reopen assessment in terms of section 147 of the Income Tax Act. Thus, we hold that there is no live-link nexus between the material referred to by the Assessing Officer and the formation of his belief that simply because gift has been received from an un-related person, it automatically becomes bogus or non-genuine.”
Read the full text of the Order below.
