Order
Civil Appeals Nos. 4653-55 of 2007
1. Heard the learned counsel on both sides. These civil appeals filed by the Department concern Assessment Years 1994–1995 and 1995–1996.
2. P.R Ganapathy, Respondent 1, claims to have received purported gift from two NRIs viz. T. Chandra and Pushpa Rani in the sum of Singapore $2,14,000 and $1,70,000 respectively. Respondent 2, T. Kannaki, received purported gift in the sum of Singapore $1,70,000.
3. 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). 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.
4. 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. The 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. This question has also not been considered by the High Court Tax Case No. 926 of 2004, which has summarily dismissed the appeal. However, it is contended by the learned counsel for the assessees that no opportunity was given to prove their case.
5. In the circumstances, we set aside the impugned orders of the High Court Tax Case No. 926 of 2004 and ITAT. We direct ITAT to examine this question in the light of what is stated above. It would be open to the assessees to produce relevant evidence in the light of the judgment of this Court in CIT v. P. Mohanakala (2007) 6 SCC 21. Accordingly, the civil appeals filed by the Department are allowed with no order as to costs.
Civil Appeal No. 5528 of 2007
6. In terms of the aforestated order passed in Civil Appeals Nos. 4653-55 of 2007, this civil appeal filed by the Department is allowed with no order as to costs.