2011 (9) TMI 564 - HC - Income Tax

Taxability of Gifts - Cash gifts received from father-in-law - Commissioner (A) allowed the claim as donor has admitted that he has gifted the amount to the assessee - creditworthiness of the donor - Held That - When total withdrawls from 98-04 were Rs 7,50,900 it cannot be believed that he had kept the said amount with him, so as to give it to his daughter and son in law in the year 2004. If all cash withdrawals were gifted by the donor than how he met his household expenses ? Even when Donor contends that he had other source of income to meet his household liabilities this stand also cannot hold good as donor went on withdrawing the cash from bank and kept the money with him for assessee for five years. Dedcided against assessee.

Summary

Issues:
- Appeal against the order of Income Tax Appellate Tribunal regarding addition of Rs. 8 lakhs in the income of the assessee claimed as a gift from father-in-law.
- Contention of the assessee regarding the source of the gifted amount.
- Decision of CIT(A) setting aside the addition of Rs. 8 lakhs.
- Tribunal's consideration of the genuineness of the transaction and refusal to recognize the gift.
- Argument by the appellant regarding the obligation to prove the source of funds of the donor.
- Analysis of the evidence presented by the assessee and the father-in-law.
- Evaluation of the creditworthiness of the donor and the genuineness of the transaction.
- Discussion on the burden of proof regarding the source of funds in the hands of the donor.
- Examination of the donor's bank account transactions and their relation to the claimed gift.
- Consideration of legal precedents regarding disclosure of the identity of the donor and the burden of proof on the assessee.
- Conclusion and dismissal of the appeal.

Analysis:
The judgment pertains to an appeal against the Income Tax Appellate Tribunal's order regarding the addition of Rs. 8 lakhs in the assessee's income, claimed as a gift from the father-in-law. The assessee contended that the amount was received in cash on different dates from the father-in-law. The Assessing Officer rejected the claim, deeming it as bogus, but the CIT(A) set aside the addition, stating that the donor had admitted to gifting the amount. However, the Tribunal found the transaction's genuineness not proved and refused to recognize the gift.

The appellant argued that it was not their duty to prove the source of the donor's funds and that adverse inferences were drawn without giving them a fair opportunity to address the issues raised. The Court examined the evidence, emphasizing the need to establish the creditworthiness of the donor and the genuineness of the transaction. It was highlighted that the donor's admission alone could not be binding if the evidence suggested lack of creditworthiness.

The Tribunal scrutinized the donor's bank transactions, revealing discrepancies in the claimed gift amount and cash withdrawals. The Court reasoned that the donor's explanation contradicted the claimed gift source. Legal precedents were cited to distinguish between disclosing the donor's identity and proving their creditworthiness, emphasizing the Assessing Officer's duty to assess the transaction's genuineness.

Ultimately, the appeal was dismissed based on the findings that the transaction lacked genuineness and the donor's creditworthiness was not established. The Court upheld the Assessing Officer's decision, emphasizing the need for credible evidence to support claims of gifts or transactions to avoid tax implications.