2014 (2) TMI 75 - HC - Income Tax

Addition u/s 68 - Held that - The tribunal has appreciated the facts of the case correctly - the donors were not related to the assessee, they were mainly stated to be belonged to the same community and there was no occasion for the donors to give such sizable gifts to the assessee - The donors didnot have the creditworthiness to advance such huge money to assessee - Relying upon the decision in CIT v. P. Mohanakala 2007 (5) TMI 192 - SUPREME Court - In cases where explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory, there is prima facie, evidence against the assessee - The burden is on the assessee to rebut the same and if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature - Even if money came by bank cheques and were credited through banking transactions by itself was not of any significance - The assessee failed to render an explanation for such sizable cash credits in the accounts - Decided against assessee.

Summary

Issues:
1. Challenge to addition of Rs. 8,76,000 under section 68 of the Income Tax Act.
2. Requirement to prove the source and capacity of donors for gifts received.

Analysis:
1. The assessee challenged the addition of Rs. 8,76,000 under section 68 of the Income Tax Act, claiming to have proved the creditworthiness of the depositor and genuineness of the gifts. The Assessing Officer added the amount to the income of the assessee due to lack of explanation for the deposits. The Appellate Authority partially accepted the case based on donor details but rejected some gifts due to mismatched signatures. The Tribunal upheld the addition, noting that while the donors were identified, genuineness and creditworthiness were not established, as evidenced by discrepancies in income tax returns and the capacity to gift.

2. The Tribunal scrutinized the donors' income tax returns and found inconsistencies. For instance, one donor's gift exceeded their reported income, while another donor failed to disclose the gift in their return. The Tribunal concluded that the gifts were disproportionate to the donors' resources, indicating lack of capacity to make such sizable gifts. The Tribunal emphasized the need for a genuine relationship between donors and donees to justify substantial gifts, which was not proven in this case. The Tribunal's decision aligned with legal precedents, emphasizing that unsatisfactory explanations for cash credits could lead to treating them as income if not rebutted by the assessee.

3. The Tribunal's decision was supported by the Apex Court's ruling in CIT v. P. Mohanakala, where unexplained credits were treated as income. The Court highlighted that mere banking transactions were insufficient to prove the genuineness of gifts if the explanation provided was unsatisfactory. Similarly, in this case, the Tribunal found the assessee's explanations lacking, leading to the dismissal of the appeals. The Tribunal's factual analysis was deemed appropriate, and no legal question arose, resulting in the dismissal of the Tax Appeals.