If certain amount received by assessee as a gift from NRI then such transaction shall be considered as genuine if gift deed and bank certificate is produced. In such cases, the amount of gift shall not be added to the income of the receiver of such gift. The High Court gave a ruling regarding this in Smt. Neelamben Gopaldas Agrawal vs. Income Tax Officer.   

Facts:

The assessee being an individual received gift from NRI. The NRI gave a cheque of Rs. 2lakhs from his Non Resident External Account. In the assessment proceedings, the AO stated that as the financial capacity of the donor was not proved under section 68, Rs. 2 lakhs be added as unexplained cash credit.

On this, assessee appealed to the Commissioner (Appeals). CIT (A) allowed the appeal and set aside the additions made by AO. When Revenue appealed to the Tribunal, it allowed the appeal stating that if section 68 does not apply then Section 69 shall apply. In any case, creditworthiness of the donor shall be proved. Tribunal also cleared that mere bank account shall not be sufficient to prove the creditworthiness.

Being aggrieved by the order, assessee appealed to the High Court.

Held:

The assessee appealed that the gift amount was given from NRE Account of the donor. In addition, the payment was through cheque and a gift deed executed by the donor was attached as a proof. Thus, all evidence was provided to prove the genuineness of the transaction. On the other side, revenue urged that the assessee failed to prove the three ingredients viz. identity, genuineness and creditworthiness of the donor under sections 68 & 69 of the Act.

After considering all the facts, the Court highlighted that the gift was given through a cheque from his Non Resident External Account to the assessee. The amount of gift was credited in the account of the assessee. Deed of Gift executed by the donor was produced as a evidence. The Court stated that all the evidence produced by assessee proves the complete details of the identity of the donor. Moreover, Gift Tax Act nowhere provides that a gift by somebody who is not creditworthy is not a gift.

Thus, the Court opined that assessee received a gift for which assessee produced the bank certificate and gift deed. Also noted that gift was given by way of a cheque. The revenue does not dispute any of these facts and thus, no additions shall be made to the income of assessee. Hence, Gift Deed and Bank Certificate produced shall certify the genuineness of gift.

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