2012 (9) TMI 84 - AT - Income Tax

Addition u/s 68 - unexplained cash credits - gifts received from NRIs and persons other than NRIs - Held that - In respect of gifts given by the non-NRI donors the same has been duly proved by the assessee by producing the donors before the AO along with all relevant evidence viz confirmation letter/affidavit, acknowledgement of return, balance sheet and capital account. Further when the donors were examined by the Assessing Officer on oath and they conformed the transaction of gift through banking channel and by cheques, than there is no scope of any doubt of identity and creditworthiness of the donor. However, as regards the gift given by few NRI donors, the matter is remanded to the record of the AO and the assessee is directed to produce the statement of bank account of the these donors or the donors in person for verification and examination - Decided partly in favor of assessee

Issues Involved:
1. Deletion of addition of Rs. 19,46,681/- by treating the gifts received by the assessee as unexplained cash credits under Section 68 of the Income Tax Act.
2. Verification of identity, creditworthiness, and genuineness of the transactions concerning the gifts received.

Detailed Analysis:

Issue 1: Deletion of Addition as Unexplained Cash Credits
The primary contention of the revenue was that the Commissioner of Income Tax (Appeals) erred in deleting the addition of Rs. 19,46,681/- made by the Assessing Officer (A.O.) by treating the gifts received by the assessee as unexplained cash credits under Section 68 of the Income Tax Act. The A.O. argued that there was no mutual love and affection between the donors and the assessee, questioning the genuineness and creditworthiness of the transactions. The A.O. relied on several judicial precedents, including CIT vs. Durgaprasad More, Sumati Dayal vs. CIT, ACIT vs. Rajiv Tandon, and Commissioner of Income-tax vs. P. Mohanakala, to support the claim that the gifts were not genuine and should be treated as the assessee's income.

Issue 2: Verification of Identity, Creditworthiness, and Genuineness
The A.O. examined the details of the gifts received by the assessee, which included 22 gifts, and summoned 8 donors for verification. The assessee provided confirmations, affidavits, passport copies, and bank records to establish the identity, creditworthiness, and genuineness of the transactions. The A.O. rejected the claims on the grounds that there was no natural love and affection between the donors and the assessee, no relationship, and no occasion for giving the gifts. The A.O. also noted that the affidavits were identically worded and questioned the lack of gifts to the donors' family members.

In contrast, the assessee argued that all gifts were given through banking channels, and the creditworthiness of the donors was established. The assessee emphasized that the donors were devotees, and the gifts were given out of spiritual reverence. The assessee also provided affidavits, passport copies, and bank account details for NRI donors.

Tribunal's Findings:
1. Non-NRI Donors: The Tribunal found that for non-NRI donors, the identity and creditworthiness were established through confirmation letters, affidavits, acknowledgment of income returns, balance sheets, and capital accounts. The A.O. had examined and recorded the statements of these donors, confirming the genuineness of the gifts. Therefore, the Tribunal upheld the Commissioner of Income Tax (Appeals) order in accepting the gifts from non-NRI donors.

2. NRI Donors: For NRI donors, the Tribunal noted that only confirmation letters, affidavits, and passport copies were provided, except for Mr. Devanand Patel, where only an affidavit was filed. The Tribunal remanded the matter back to the A.O. for further verification. The assessee was directed to produce the bank statements of these donors or the donors in person for verification and examination.

Conclusion:
The appeal by the revenue was partly allowed. The Tribunal upheld the deletion of the addition for non-NRI donors but remanded the case for NRI donors back to the A.O. for further verification. The Tribunal emphasized the need for establishing the identity, creditworthiness, and genuineness of the gifts, particularly for NRI donors, by providing bank statements or personal verification.

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