Under Section 56(2)(x) Gifts from persons other than those covered in the definition of relatives are taxable under the Head Income from other sources. Now a question arises that is it sufficient to offer a Gift from a person other than relatives as Income from Other Sources and pay tax ? In my humble opinion it is not sufficient. During the course of assessment proceedings the Assessing Officer can still ask for all the details and can enquire about genuineness of transaction and genuineness of gift. All the supporting documents of donor shall be required like, Bank statement, Gift Deed, Copy of Income Tax Return, Computation of Total Income, Balance Sheet & Profit & Loss Account and also capital account showing withdrawal of the amount given as gift to donee. Even if all these supporting documents are produced and genuineness of the transaction is established, to verify the genuineness of gift there remains one more requirement i.e. test of human probabilities. In today’s world a person is not able to feed his own family how it is possible that he will gift a part of his earning to a friend. Considering all the surrounding circumstances it is very difficult. In the following case laws test of human probabilities are discussed in detail.
1. CIT v. Durga Prasad More 82 ITR 540 (SC)
It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
Now coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas in others, it may be nominal. There is nothing rigid about it. Herein the assessee was receiving some income. He says that it is not his income but his wife’s income. His wife is supposed to have had two lakhs of rupees neither deposited in banks nor advanced to others but safely kept in father’s safe. Assessee is unable to say from what source she built up that amount. Two lakhs before the year 1940 was undoubtedly a big sum It was said that the said amount was just left in the hands of the father-in-1aw of the assessee. The Tribunal disbelieved the story, which is prima facie a fantastic story. It is a story that does not accord with human probabilities. It is strange that the High Court found fault with the Tribunal for not swallowing that story. If that story is found to unbelievable, as the Tribunal has found, and in our opinion rightly, then the position remains that the consideration for the sale proceeded from the assessee and therefore it must be assumed to be his money.
2. Sumati Dayal v. CIT 214 ITR 801 (SC)
The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that “fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice” ignores the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972 whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc. was withdrawn. Similarly the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant’s claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence. In the circumstances, no case is made out for interference with the order passed by the settlement commission the appeals therefore fail and are accordingly dismissed with costs.
In case the assessee is not able to pass the test of human probabilities then the said gift shall be deemed as undisclosed income under section 68 and income tax shall be charged under section 115BBE plus surcharge and education cess. The said section is applicable even when assessee has included the amount received as gift as income from other sources.