2009 (9) TMI 748 - AT - Income Tax

Summary

Issues Involved:
1. Sustaining the addition of Rs. 3,00,000.
2. Sustaining the addition of Rs. 3,92,672.
3. Confirmation of additions made under section 68 of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Sustaining the Addition of Rs. 3,00,000
The assessee claimed that Rs. 3,00,000 was a gift received from Shri J. B. Malik. The Assessing Officer (AO) found discrepancies in the bank documents provided by the assessee and noted that the assessee could not establish any relationship or reason for the gift. The AO also highlighted inconsistencies in the assessee's statements during the search and subsequent explanations. The Commissioner of Income-tax (Appeals) (CIT(A)) upheld the AO's decision, citing the lack of evidence regarding the donor's identity and capacity, and the absence of a plausible reason for the gift. The Tribunal agreed with the AO and CIT(A), emphasizing that mere movement of funds through banking channels does not prove the genuineness of the gift. The Tribunal concluded that the assessee failed to discharge the burden of proving the donor's capacity and the genuineness of the gift.

Issue 2: Sustaining the Addition of Rs. 3,92,672
The assessee claimed this amount as a gift from Shri Y. P. Malik, a British citizen. The AO noted that the assessee had admitted during the search that foreign gifts were arranged against cash payments. The CIT(A) upheld the addition, pointing out the lack of evidence regarding the donor's capacity and the absence of any relationship or reason for the gift. The Tribunal concurred, noting that the assessee failed to prove the genuineness of the gift and the donor's capacity. The Tribunal also emphasized that the assessee's retraction of his statement made during the search was not supported by any evidence of coercion or duress.

Issue 3: Confirmation of Additions Made Under Section 68
The assessee argued that the amounts were credited in his bank account and not in his books of account, thus section 68 should not apply. The Tribunal, however, stated that the nature and source of the credits must still be explained. The Tribunal held that the assessee failed to provide a satisfactory explanation for the credits, and thus, the amounts could be treated as income from undisclosed sources. The Tribunal also noted that the AO's mention of section 68 was not crucial; what mattered was the unexplained nature of the credits, which justified the additions.

Conclusion:
The Tribunal dismissed the appeal, holding that the assessee failed to prove the capacity of the donors and the genuineness of the gifts. The Tribunal emphasized that mere identification of the donor and movement of funds through banking channels are insufficient to establish the genuineness of a gift. The Tribunal upheld the additions made by the AO and CIT(A), concluding that the amounts represented income from undisclosed sources.