If you receive a gift from any of your relatives or friends for Christmas or New Year or Pongal or any festival, worth more than Rs. 50000, as per income tax laws, it may be taxable income on your hands in certain situations.

In the present case, the evidence in the form of confirmatory letters, deed of gifts etc. were found during the course of search. The authorities on examination of the confirmatory letters and surrounding circumstances reached a prima facie view that the gifts were not genuine. A notice dated 27.06.1996 under Section 158BC of the Act was accordingly issued.

Gifts! Corporate Gifts have over the years proved to be an effective marketing tool for organizations across products and services. Organizations understand the importance of building and maintaining long term relationships with clients, prospective clients, business associates, employees and other agencies involved in the growth of the organization. However, corporate gifting should be used very judiciously as they can sometimes back fire.

The burden is on the assessees to show that the amount received by purported gift(s) from the two donors was a gift in the legal sense. Assessees have not led evidence to show whether the alleged donors had adequate funds in their respective accounts to make these purported gift(s) in Singapore Dollars, which is almost running into more than five lakhs.

There is also force in the submissions of the counsel for the assessee that prior to introduction of S. 56(2)(vii) by the Finance Act, 2009, w.e.f. 1st Oct., 2009, gifts in kind were outside the purview of s. 56(2)(v) or (vi).

The assessee’s argument of having established his bona fides in view of the money being deposited in his regular bank account would also be to no avail. Does the assessee mean to imply that he has some other unaccounted bank accounts as well, in which the amount could have been deposited? To pay the tax, legitimately due, and to recover the same, is the bounded duty of the citizen and the State respectively. In view of the foregoing, the application of section 69A is confirmed in the instant case by the revenue and, accordingly, the assessee’s ground is dismissed.

On going through the records, we find that an important query was raised by the Department as to whether these two donors had the financial capacity to make the gift(s) in favour of the assessees herein. This query has not at all been answered by the Income Tax Appellate Tribunal ['ITAT', for short].

Section 56(2) of the Income Tax Act, 1961 inter alia deals with receipts without consideration. Since most of such receipts tantamount to gifts, the provisions are popularly known for gifts and deemed gifts. Till 30 09 2009 only sum of money received without consideration was gift if the recipient is either an individual or a HUF. By the Finance No.2 Act, 2009 with effect from 01 10 2009 the provisions were so much expanded that they even included cases of immovable properties received for inadequate consideration as compared to stamp valuation. The expanded provisions also include receipt of specified movable properties either without consideration or at inadequate consideration as compared to fair market value.

In regard to jewellery found on person and in the bedroom of Smt. S.H. Khorakiwala, it was stated before the Assessing Officer that the same was received at the time of her marriage. The Assessing Officer accepted the confirmation of mother but the confirmation of NRI gifts from relatives was not accepted. He observed that whether they had purchased the jewellery abroad and gifted to Smt. Samina H. Khorakiwala in which case the customs clearance receipt should have been filed.

The issue for consideration before is whether the gift received by the assessee is genuine or not? As per the AO, gift of such a substantial amount was not justified to a nonrelative/ no blood relation and the creditworthiness of the donor is not adequate. The CIT(A) held that, in fact, the Assessing Officer has in his remand report clearly stated that “The donor has confirmed in his statement the fact of giving gift to the appellant during the year under consideration.