2013 (12) TMI 198 - HC - Income Tax

Gift from brother - Creditworthiness and genuineness of donor - Held that - The assessee could not produce the statement of cash flow to show that the gift was genuine one - The assessee had not placed any material before the Authority to substantiate the receipt of Rs.7,50,000/- as gift from his brother - In the absence of any compelling reason and materials to show as regards the genuineness of the gift - The addition was made u/s 68 - Decided against assessee.

Summary

Issues:
1. Proof of genuineness of gift received by the assessee.
2. Invocation of Section 68 of the Income Tax Act.
3. Demand for proving the credit worthiness of the donor.
4. Shifting of burden of proof regarding the genuineness of the gift.
5. Possibility of double taxation due to addition under Section 68 of the Income Tax Act.

Analysis:

1. The case involves the admission of a Tax Case (Appeal) where the assessee received a gift of Rs.7,50,000 from his brother during the assessment year 2008-2009. The Assessing Officer raised questions regarding the genuineness of the gift, the capacity of the donor, and the need for a cash flow statement to prove the legitimacy of the transaction. The assessee failed to produce the necessary evidence, leading to the amount being assessed under Section 68 of the Income Tax Act, 1961.

2. The issue of invoking Section 68 of the Income Tax Act arose due to doubts regarding the donor's capacity to make the gift. The Assessing Officer questioned the legitimacy of the transaction based on the donor's financial standing and liabilities. The burden of proof regarding the capacity and credit worthiness of the donor fell on the assessee, who failed to provide satisfactory documentation, resulting in the assessment under Section 68.

3. Despite the donor being an assessee with the gift being allowed in the donor's assessment, the Department demanded proof of the donor's credit worthiness. The absence of compelling evidence regarding the donor's financial position and the genuineness of the gift led to the assessment under Section 68, highlighting the importance of substantiating such transactions to avoid tax implications.

4. The Assessing Officer shifted the burden of proving the gift's genuineness to the assessee after establishing the existence of the gift. The failure to produce essential documents such as cash flow statements and financial records of the donor resulted in the confirmation of the assessment under Section 68, emphasizing the significance of providing comprehensive evidence in such cases.

5. Concerns regarding potential double taxation were raised due to the addition under Section 68 in the hands of the assessee. The possibility of taxing the same income twice was noted, especially when the gift was made from the donor's already taxed income. However, the Tribunal confirmed the assessment under Section 68, leading to the dismissal of the Tax Case (Appeal) at the admission stage without finding any substantial question of law for consideration.