2015 (11) TMI 734 - AT - Income Tax

Unexplained cash credits u/s. 68 - AO rejected the gift plea for want of creditworthiness - Held that - neither the assessee produced his son having very good relations with the donor nor the donor himself for necessary deposition right from scrutiny till date. It goes without any gainsaying that what is left only the donee s statement or assertion hereinabove in support of the gift and donor s confirmation received from abroad not even naming the asseessee s son. We put specific query to the assessee in the course of hearing as to why the donor was not produced. He replied that the Assessing Officer did not ask him to do so. We are not impressed with this stand. Once the assessee had claimed a specific relation alike that of Kanha and Nand between donor and himself, it was for him to discharge at least initial onus. He has failed to do so. We deem it appropriate to observe at this stage that these income tax proceedings do not involve strict rules of evidence law. At the same time, there has to be some reasonable element in an explanation offered by the concerned assessee so as to shift the onus in the Revenue s court. This case does not involve any such shifting of onus much less than the burden. Coupled with this fact that the donor in question is not in any way related to the assessee. And also there is no corresponding channel in the gift instrument linking assessee s amount credit to that of donor s account. We take into consideration all these facts and hold that the assessee has failed to prove the execution of a valid gift in question. - Decided against assessee.

Issues Involved:
1. Whether the Assessing Officer was justified in treating the gift of Rs. 15 lacs as unexplained cash credit under Section 68 of the Income Tax Act, 1961.
2. Whether the CIT(A) was correct in deleting the addition made by the Assessing Officer.
3. Whether the relationship and the occasion for the gift were adequately established.
4. Whether the creditworthiness and genuineness of the gift were sufficiently proven by the assessee.

Detailed Analysis:

1. Justification of Treating the Gift as Unexplained Cash Credit:
The Revenue's sole substantive grievance was the deletion of additions of Rs. 15 lacs each made by the Assessing Officer in the hands of both assessees as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The Assessing Officer noticed that the assessee received a gift of Rs. 15 lacs from an individual based in Dubai and questioned the genuineness of this gift due to the lack of a relationship between the donor and donee, absence of reciprocity, and insufficient evidence of the donor's financial capacity. The Assessing Officer concluded that the sum was the assessee's unexplained money routed through the donor, invoking Section 68 to add the amount as unexplained cash credits.

2. Deletion of Addition by CIT(A):
The CIT(A) rejected the legal plea challenging the Section 153A proceedings but accepted the assessee's argument on merits. The CIT(A) found that the assessee had provided sufficient evidence regarding the identity, genuineness, and creditworthiness of the donor, including a gift declaration, affidavit, and details of the donor's financial status. The CIT(A) cited the Delhi ITAT's decision in Ms. Mayawati vs. DCIT, which held that the relationship between the donor and donee and the occasion for the gift are not essential conditions for a valid gift. The CIT(A) concluded that the Assessing Officer's addition was based on surmises and deleted the addition.

3. Relationship and Occasion for the Gift:
The assessee argued that the donor, a friend of his son, treated him like a father, akin to the relationship between "Kanha and Nand." The assessee claimed that the gift was intended to help him purchase property for rental income in old age. However, the Assessing Officer found no evidence of a close relationship or any specific occasion for the gift. The Tribunal noted that the assessee did not produce his son or the donor to support his claim, and the donor's affidavit did not mention the assessee's son. The Tribunal found the assessee's explanation lacking in credibility and reasonableness.

4. Proving Creditworthiness and Genuineness:
The Tribunal observed that the assessee had only proven the identity of the donor and his capacity to gift the amount but failed to establish the genuineness of the gift. The donor's affidavit and financial documents were not sufficient to prove the relationship or the reason for the gift. The Tribunal emphasized that tax proceedings do not require strict rules of evidence but must have a reasonable element in the explanation offered by the assessee. The Tribunal concluded that the assessee failed to discharge the initial onus of proving the gift's genuineness and creditworthiness.

Conclusion:
The Tribunal held that the assessee did not prove the execution of a valid gift and the explanation lacked creditworthiness. The case law cited by the assessee was distinguished based on the facts, and the Tribunal decided in favor of the Revenue, reversing the CIT(A)'s order. The Tribunal allowed both Revenue's appeals, concluding that the Assessing Officer was justified in treating the gift as unexplained cash credit under Section 68.

Order:
Both Revenue's appeals were allowed, and the addition of Rs. 15 lacs as unexplained cash credits was upheld. The order was pronounced in the open court on 30-09-2015.

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