In a recent ruling, the Madras High Court has upheld an addition of bogus gifts considering the fact that the nature of the relationship with donors was not established with evidence under the provisions of the Income Tax Act, 1961.
The appellant, Mr. P R Ganapathy contended that the nature of payment with regard to gifts was established through affidavits filed by donors and therefore, duty is cast upon the respondent to prove the onus.
Justice S. Vaidyanathan rejected the plea holding that the same cannot be accepted for the simple reason that the Assessee had received gifts from 29 persons hailing from Kerala and there was no acceptable explanation as to the nature of relationship he had with those persons in the course of business transaction.
Overruling the contentions of the assessee, the Court observed that the plea raised by the appellant that the nature of payment with regard to gifts was established through affidavits filed by donors and therefore, duty is cast upon the respondent to prove the onus, cannot be accepted for the simple reason that the Assessee had received gifts from 29 persons hailing from Kerala and there was no acceptable explanation as to the nature of relationship he had with those persons in the course of business transaction.
“Had the appellant given a convincing and believable explanation/reply to the respondent, the question ofcharging additional tax would not have arisen. That apart, no gifts would be extended to a person after receipt of commission by the donors and the exchange of gifts must be warmhearted and not out of compulsion or demand,” the Court said.
Analysing the definitions of “gift” and “commission,” the Court held that the receipt of gifts does not fall in anyone of the category mentioned above and as such, the burden is automatically shifted to the assessee to rebut the same, as held by the Supreme Court in the case of CIT vs. P. Mohanakala, which was relied upon by the respondent before the Tribunal.
“That apart, as per the exact dictionary meaning of the word ‘gift’ is, something voluntarily transferred by one person to another without compensation. A literal meaning of ‘commission’ is, ‘money that one gets for selling something’. On enquiry with two donors, namely, P.I. Joy and David Mathew, by the respondent, the former had deposed about the arrangement of gifts to the assessee on receipt of commission, whereas the latter had stated that no gift was proffered by him to the assessee. Thus, it is very obvious that the purported gifts received by the assessee are not at all gifts in its real sense. Hence, we are of the view that the order of the Tribunal is perfectly valid and is liable to be upheld,” the Court held.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
