2012 (3) TMI 133 - AT - Income Tax

Genuineness of Gifts - Grandfather owner of 34 bighas of land cultivating wheat paddy - Cash gifts on account of Natural love - Held That - No evidence to show agriculture land is well irrigated. There is an element of overstating 34 bighas of land. Other relatives of assessee also at village entire saving from agriculture without produce at no doubt. AO should have summoned the above facts from donour no such effort made it would bu suffice to sustain addition of Rs 307562 after giving relief of Rs 4, 00, 000. Cash Credit - Confirmation letters of creditor were filed - AO identity not sufficient creditworthiness to be proved - Held That - creditors are relatives of the assessee and have mentioned their relationship with the assessee in the confirmation letters filed before the AO the absence of any material to doubt the genuineness of the transaction assessee has discharged its initial onus. Addition of Rs.77, 800/- is deleted.

Summary

Issues:
1. Validity of assessment order due to limitation of time for notice under section 143(2).
2. Addition of Rs.11,58,912 made by ACIT:
a. Gift from grand father.
b. Unexplained cash credit.
c. Disallowance under section 40A(3).
3. Penalty imposed under section 271(1)(c) for unexplained gift and cash credits.

Issue 1: Validity of Assessment Order
The Tribunal dismissed the appeal related to the validity of the assessment order, as it had already been decided in the first round of litigation before the Tribunal. The issue was restored back to the file of CIT(A) by the Tribunal, and therefore, required no further adjudication.

Issue 2: Addition of Rs.11,58,912
a. Gift from Grandfather: The Tribunal partially allowed relief to the assessee by reducing the addition to Rs.3,07,562. While the identity of the donor (grandfather) was confirmed, doubts were raised regarding the claimed agriculture income and the possibility of overstating it. The Tribunal considered the lack of collaborative evidence and reduced the addition based on the preponderance of probabilities.
b. Unexplained Cash Credit: The Tribunal deleted the addition of Rs.77,800 as the assessee proved the identity, credit-worthiness, and genuineness of the cash credits received from relatives through confirmation letters and other supporting documents.
c. Disallowance under Section 40A(3): The Tribunal observed that no further disallowance was warranted under Section 40A(3) as a flat rate of net profit had been applied in accordance with Section 44AD. The disallowance was restricted by the CIT(A) to Rs.2,15,870, providing relief to the assessee.

Issue 3: Penalty under Section 271(1)(c)
The Tribunal allowed the appeal against the penalty imposed under Section 271(1)(c) for unexplained gift and cash credits. The penalty was cancelled as the Tribunal had partly confirmed the addition related to the unproved gift from the grandfather on an estimate basis, considering the assessee's disclosure of relevant facts and the bona fide nature of the explanation provided.

In conclusion, the Tribunal partly allowed the appeal related to the addition of Rs.11,58,912 by reducing the amount in the case of gift from the grandfather and deleting the addition for unexplained cash credits. The penalty imposed under Section 271(1)(c) was cancelled, providing relief to the assessee.