2013 (12) TMI 1310 - HC - Income Tax

Addition on gift - creditworthiness and genuineness - Onus to prove - financial capability of the donor - Word creditworthy . HELD THAT - Once genuineness of return is not in dispute then there appears to be no reason to disbelieve that the amount was paid by Dr. Chitranjan Jain. The CIT Appeal after considering the evidence on the ground had noted that Dr. Chitranjan Jain and Nisha Jain are NRI and they have been settled in the United States of America and their income in the assessment year was 1, 16, 680 . Once the income of the donor i.e. Dr. Chitranjan Jain and Mrs. Nisha Jain has not been disbelieved by the Assessing Authority then payment of meager amount of Rs. 10, 00000/- by Dr. Chitranjan Jain should not be doubted. Merely because the entire transcript of NRE account was not furnished shall not make out a case to disbelieve the amount paid by Dr. Chitranjan Jain to the assessee. It may be noted that Assessing Authority was concerned only to verify the genuineness of amount paid by Dr. Chitranjan Jain and once the income tax return filed by Dr. Chitrajan Jain was found to be genuine then there was no occasion for the assessing authority to proceed further asking to supply the entire transcript of the account of Dr. Chitrajan Jain who is not residing in India but in the United States of America. Assessing authority was not seized with the case of Dr. Chitranjan Jain to assess his income under the Income Tax Act. He was only to verify the genuineness of transaction and creditworthiness. Thus a finding recorded by the CIT Appeal and Tribunal does not seem to suffer from any impropriety or illegality. The appeal is devoid of merit. Dismissed. Question answered in favour of assessee against the revenue. No order as to costs.

Summary

The High Court of Allahabad considered an appeal under Section 260-A of the Income Tax Act, 1961, concerning the genuineness of a gift of Rs. 10,00,000 made to the appellant by his brother, Dr. Chittranjan Jain. The core legal question revolved around whether the appellant had sufficiently proven the genuineness of the gift and the creditworthiness of the donor. The case pertained to the Assessment year 1996-97.The Assessing Authority initially disbelieved the evidence provided by the appellant regarding the gift, leading to the addition of Rs. 10,00,000 as income from other sources. However, the CIT (Appeal) reversed this decision, finding the evidence submitted by the appellant, including the income tax return of the donor and extracts of the NRE account, to be sufficient to establish the creditworthiness of Dr. Chittranjan Jain. The CIT (Appeal) and the ITAT both concluded that the gift was genuine based on the evidence provided.The appellant's representative argued that the incomplete transcript of the NRE account raised doubts about the transaction, emphasizing the burden on the appellant to prove creditworthiness. In contrast, the respondent's counsel supported the findings of the CIT (Appeal) and the ITAT, asserting the absence of perversity or illegality in their decisions.The Division Bench judgment cited by the appellant's representative highlighted the burden on the assessee to prove the nature and source of any credited amount, including the identity, genuineness of the transaction, and creditworthiness of the donor. The Court acknowledged this legal principle and emphasized the importance of establishing creditworthiness in such cases.The Court examined Section 68 of the Income Tax Act, which places the onus on the assessee to explain any sum found credited in their books. The explanation provided must satisfy the Assessing Officer regarding the nature and source of the credit, as well as the genuineness of the transaction. The Court referred to legal definitions of "creditworthy" to underscore the financial soundness required for a lender to extend credit to a borrower.Ultimately, the Court found that the evidence presented by the appellant, including the income tax returns of the donor and other supporting documents, sufficiently demonstrated the creditworthiness of Dr. Chitranjan Jain. The Assessing Authority's satisfaction should be based on a judicious assessment of the evidence, and in this case, the Court concluded that the appellant had met the burden of proof regarding the gift's genuineness and the donor's creditworthiness.In light of the above analysis, the Court dismissed the appeal, ruling in favor of the assessee against the revenue, with no order as to costs. The core legal issue of proving the genuineness of the gift and the creditworthiness of the donor was resolved in favor of the appellant based on the evidence presented and the applicable legal principles.