In case of gift burden is on assessee to prove financial capacity of Donor -SC

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]. The ITAT merely states that the two donors were assessed to tax at Singapore. Being assessed at Singapore, does not answer the query raised by the Department. In this case, the Department has invoked Section 68 of the Income Tax Act, 1961. 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.

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 4653-4655 OF 2007

Commissioner of Income Tax

Versus

P.R. Ganapathy & Anr.  

With Civil Appeal No. 5528 of 2007

O R D E R

Civil Appeal Nos. 4653-4655 of 2007 Heard learned counsel on both sides.

These civil appeals filed by the Department concern Assessment Years 1994-1995 and 1995- 1996.

P.R. Ganapathy, Respondent No. 1, claims to have received purported gift from two NRIs, viz., T. Chandra and Pushpa Rani in the sum of Singapore Dollars 2,14,000/- and 1,70,000/- respectively. Respondent No. 2 – T. Kannaki, received purported gift in the sum of Singapore Dollars 1,70,000/-.