2012 (4) TMI 361 - AT - Income Tax

Addition u/s 69 - Assessing Officer noticed that as per Annexure-B of audit report fresh loan of Rs. 58,42,320/- has been shown which included loan from Sona Traders Rs. 18,24,950 - the bank account and other details were not furnished, the Assessing Officer made addition of Rs. 18,24,950/-as unexplained cash credit under section 68 of the Act - The admitted facts of the issue is that there was opening balance in the account of Sona Traders for a credit balance as evident from the copies of account reproduced by the Assessing Officer in his order - Held that there is no contrary material or facts available on record nor the Ld. Departmental Representative pointed out any such contrary material to the finding of the CIT(A), in the light of the facts, order of the CIT(A) is confirmed - Appeal is dismissed Regarding addition of Rs. 15,40,000/- made under section 68 - Assessing Officer was of the view that under the circumstances the amount of Rs. 15,40,000/- could not be treated as explained credit entry - In the case under consideration the issue is in respect of gift of Rs. 15,40,000/- from younger sister of the assessee - It appears from reading of section 68 of the Act that whenever a sum is found credited in the books of account of the assessee then, irrespective of the colour or the nature of the sum received which is sought to be given by the assessee, the Income-tax Officer has the jurisdiction to enquire from the assessee the nature and source of the said amount - Held that The assessee has also failed to furnish the complete circle of all these transactions that wherefrom original money came to the account of Smt. Anjali Consul which was invested in units as well as in banks in the form of fixed deposits and others - Decided against the assessee

Summary

Issues Involved:
1. Deletion of addition of Rs. 18,24,950/- on account of loan to M/s. Sona Traders under section 69 of the Income Tax Act, 1961.
2. Addition of Rs. 15,40,000/- made under section 68 of the Income Tax Act, 1961 in respect of the gift received from Smt. Anjali Consul.

Issue 1: Deletion of Addition of Rs. 18,24,950/- on Account of Loan to M/s. Sona Traders

The Revenue challenged the deletion of an addition of Rs. 18,24,950/- made by the Assessing Officer (AO) under section 69 of the Income Tax Act, 1961. The AO observed discrepancies in the audit report and the books of accounts of the assessee, specifically regarding a loan from M/s. Sona Traders. The AO noted that the assessee failed to produce the bank account details of Sona Traders, thus questioning the creditworthiness of the party and treating the amount as unexplained cash credit under section 68.

The CIT(A) deleted the addition, explaining that the confusion arose due to the different accounting systems used by the assessee and Sona Traders and an error in the auditor's report. The CIT(A) clarified that the transaction was related to the sale of ghee in the previous year, and the amount received was against the outstanding sale consideration.

Upon review, it was confirmed that there was an opening balance of Rs. 18,24,950/- in the account of Sona Traders, which was squared up during the year. The confusion was attributed to the auditor's mistake, which was later rectified. The Tribunal upheld the CIT(A)'s order, confirming that there was no contrary material to challenge the CIT(A)'s findings.

Issue 2: Addition of Rs. 15,40,000/- Made Under Section 68 in Respect of Gift from Smt. Anjali Consul

The assessee contested the addition of Rs. 15,40,000/- made by the AO under section 68, claiming it was a gift from his real sister, Smt. Anjali Consul, a resident of Singapore. The AO found that the assessee failed to provide satisfactory evidence of the gift, including the creditworthiness of the donor, as Smt. Anjali Consul's income was limited to interest income of Rs. 36,564/- on FDRs. The AO added the amount as unexplained credit.

The CIT(A) upheld the AO's addition, noting that the assessee did not provide a reasonable explanation or evidence during the assessment proceedings. The CIT(A) also observed that the gift was not reflected in the returns of either the assessee or the donor, raising doubts about its genuineness.

The Tribunal examined the legal principles surrounding gifts and unexplained credits, emphasizing the need for the assessee to prove the identity, capacity, and genuineness of the transaction. Despite the assessee providing some documents, discrepancies in the bank account entries and the lack of a complete chain of funds led to the conclusion that the gift was not genuine. The Tribunal noted that the gift from a younger sister to an elder brother was against social customs and lacked credibility. The Tribunal upheld the addition under section 68, concluding that the assessee failed to provide a proper, reasonable, and acceptable explanation.

Conclusion:
Both appeals, ITA No.49/Agr/2011 filed by the Revenue and ITA No.39/Agr/2011 filed by the assessee, were dismissed. The Tribunal confirmed the CIT(A)'s deletion of the addition regarding the loan to M/s. Sona Traders and upheld the addition of Rs. 15,40,000/- under section 68 in respect of the gift from Smt. Anjali Consul.