2013 (4) TMI 776 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of Long Term Capital Gains (LTCG) as unexplained credit u/s 68.
2. Treatment of gifts received by the assessees as unexplained credit u/s 68.

Summary:

Issue 1: Treatment of LTCG as unexplained credit u/s 68

At the outset, the counsel for the assessees argued that the appeals by the Revenue are covered in favor of the assessee by the Tribunal's order in the case of Shri Pinakin L. Shah, where similar additions were made and subsequently deleted by the Tribunal. The Tribunal's decision was confirmed by the Hon'ble High Court. However, the Revenue's counsel contended that the additions are based on findings of fact and that the High Court's dismissal of the Revenue's appeal was not on merits but only in limine.

The Tribunal examined the issue independently, noting that the matter is factual and requires an appreciation of the facts and circumstances of the case. The Tribunal found that the CIT(A) relied on the decision in the case of Mukesh R. Marolia vs. Addl. CIT, but the ratio decidendi of that decision was not referred to during the hearing. The Tribunal concluded that the order in the case of Shri Pinakin L. Shah could not be compared with that of Mukesh R. Marolia due to differences in facts and circumstances. The Tribunal decided to restore the matter back to the file of the CIT(A) for fresh adjudication in accordance with law, issuing definite findings of fact after hearing both sides.

Issue 2: Treatment of gifts received as unexplained credit u/s 68

The Tribunal noted that the CIT(A) had relied on the Tribunal's decision in the case of Shri Pinakin L. Shah, where specific findings of fact were rendered. The CIT(A) clarified that the facts of the instant cases were identical to those in the case of Shri Pinakin L. Shah. However, the Tribunal found that the only common donor in both cases was Sh. Sitaram Bhat, covering one transaction out of the five impugned. The Tribunal emphasized that proving a credit under law requires establishing the identity, creditworthiness of the creditor, and the genuineness of the transaction. The Tribunal found that the CIT(A)'s finding of identity of facts was without basis and contrary to the facts on record.

The Tribunal highlighted the necessity of proving the creditworthiness of the donor and the genuineness of the transaction. It noted that the AO had stated that the creditworthiness of the donors was not proved. The Tribunal decided to restore the matter back to the file of the CIT(A) for fresh adjudication in accordance with law, issuing definite findings of fact after hearing both sides. The CIT(A) was directed to issue findings regarding the capacity of the donors and the genuineness of the credits, with the admission of additional evidence governed by the terms of law.

Conclusion:

In the result, the appeals by the Revenue are allowed for statistical purposes.