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2012 (12) TMI 443 - AT - Income TaxAddition u/s 68 Assessee had accepted loans in preceding years from husband and sister-in-law Held that - As the CIT(A) gone into each credit entry along with the history of each donor and lender along with their capacity, which according to us also, cannot be questioned. From the facts of the case loan taken in the preceding years could not be added u/s 68A. - Apropos the three limbs to invite the mischief of Sec. 68, i.e. creditworthiness, capacity and genuineness of the transactions, cannot be questioned, because the transaction is within the family and no outsider is involved and who have substantial capacity and creditworthiness to give gifts and/or loans. Appeal decides in favour of assessee
Issues Involved:
1. Deletion of addition made by the AO under section 68 of the I.T. Act amounting to Rs. 26,83,750/-. 2. Assessment of the genuineness of gifts and loans claimed by the assessee. 3. Evaluation of the evidence provided by the assessee to substantiate the transactions. 4. Examination of the CIT(A)'s findings and their validity. Detailed Analysis: 1. Deletion of Addition Made by the AO under Section 68: The department challenged the deletion of the addition made by the AO under section 68 of the I.T. Act, amounting to Rs. 26,83,750/-. The AO had added this amount as unexplained cash credits, rejecting the explanations and evidence provided by the assessee. 2. Assessment of the Genuineness of Gifts and Loans: The assessee claimed that the amounts in question were either gifts or loans from close family members. The AO rejected these claims, citing insufficient evidence, such as the lack of PAN numbers on confirmation letters and the non-production of original documents. The CIT(A), however, examined each transaction in detail and found that the gifts and loans were genuine. The transactions were conducted through banking channels, and gift deeds were executed on stamp papers. 3. Evaluation of the Evidence Provided by the Assessee: The CIT(A) reviewed various pieces of evidence, including: - Gift deeds executed on stamp papers. - Bank statements showing transactions through banking channels. - Income tax returns, balance sheets, and profit & loss accounts of the donors. - Affidavits and fresh confirmations with PAN numbers from the donors. For instance, Smt. Ambica Sonthalia's gift of Rs. 9,00,000/- was supported by a gift deed, bank passbook, and her balance sheet showing sufficient funds. Similarly, Smt. Anita Sonthalia's gift of Rs. 9,00,000/- and loan of Rs. 2,42,000/- were substantiated by similar documents. The CIT(A) found that the initial burden of proof was discharged by the assessee, and the AO's rejection was arbitrary. 4. Examination of the CIT(A)'s Findings and Their Validity: The CIT(A) concluded that the transactions were genuine and fully verifiable, noting that the mistakes in classifying gifts as loans were probable and understandable given the family context. The CIT(A) also pointed out that the AO's objections, such as the absence of PAN numbers and the signing of confirmation letters by accountants, were insignificant. The CIT(A) reduced the addition to Rs. 1,61,750/-, which the assessee had already admitted as interest payable. The ITAT examined the CIT(A)'s detailed order and found that the CIT(A) had meticulously reviewed each credit entry and the history and capacity of each donor. The ITAT agreed with the CIT(A) that the transactions were within the family and involved parties with substantial capacity and creditworthiness. The ITAT endorsed the CIT(A)'s decision and rejected the department's appeal. Conclusion: The ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 26,83,750/- made by the AO under section 68 of the I.T. Act. The CIT(A)'s findings that the gifts and loans were genuine and fully verifiable were confirmed, and the department's appeal was rejected.
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