January 2023

There need not be any "occasion" for receipt of gift by the assessee from his relative.

Jagdish Punjabi, Chartered Accountant
Devendra Jain, Advocate

51. ITO vs. Dr. Satish Natwarlal Shah
ITA No. 379/Ahd./2020 (Ahemadabad-Trib.)
A.Y.: 2012-13
Date of order: 19th October, 2022
Section: 56(2)(v)

There need not be any “occasion” for receipt of gift by the assessee from his relative.


A doctor by profession, the assessee filed his return of income for A.Y. 2012-13, declaring a total income of Rs. 16,34,278. In the course of assessment proceedings, the (AO) noticed that the assessee had received a gift of Rs. 3,12,24,009, of which Rs. 2,61,82,207 were shares of various companies, and the balance was a monetary gift. The assessee had also gifted Rs. 1,06,65,848 to his relatives. The AO sought an explanation from the assessee regarding the gifts received and given.

The assessee replied that the gift, in the form of shares and debentures of Rs. 2,61,82,207 was received by him on 4th October, 2011 from his brother Sanjay N. Shah, residing in the U.S.A. Also, the amount of Rs. 44,00,000; Rs. 13,436 and Rs. 1,736 were received by him on 25th November, 2011, 2nd January, 2012 and 4th January, 2012, respectively from his brother Sanjay N. Shah. To substantiate this, he filed a declaration of the gift from his brother that they had been made out of natural love and affection.

The AO noticed that the assessee had gifted Rs. 53,71,016 to Seema S. Shah; Rs. 26,71,238 to Shailja S. Shah and Rs. 7,53,138 to Sapna S. Shah, the three daughters of his brother Sanjay Shah.

The AO disbelieved the above gifts received by the assessee from his brother and also the gifts by the assessee to his nieces. The AO held that the assessee had failed to prove the source of investment into shares by his NRI brother, which the assessee eventually got in the form of a gift, and a gift to nieces has no logic. He further held that even if this transaction of gifting is to be believed, it appears to be a kind of family arrangement for equalisation of wealth amongst the family members. The AO treated the above gift as unexplained and added Rs. 3,06,13,009 as income of the assessee.

Aggrieved, the assessee preferred an appeal to the CIT(A), who held that though the AO cannot ask for the source of source, the assessee has properly explained the same during assessment proceedings itself. The CIT(A) held that the AO accepted the purchase of shares by the assessee’s brother under the NRI quota, and the funds which were paid through the assessee’s brother’s NRE bank account. He observed that the AO was satisfied about the genuineness of the gift. However, the AO had doubted the “occasion of the gift” in the absence of any family function, namely marriage, etc.

The CIT(A) relying upon decisions of Vishakhapatnam Tribunal in Dr. Vempala Bala Manohar vs. ITO [68 taxmann.com 410]; Rajasthan High Court in Arun Kumar Kothari [31 taxmann.com 258] and Andhra Pradesh High Court in Pendurthi Chandrasekhar [91 taxmann.c


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