2015 (12) TMI 1129 - HC - Income Tax

Unexplained cash credit u/s 68 - gifts received from NRI - ITAT reversing the order of CIT (A) of deleting the addition - Held that - It is not possible to state that the impugned order passed by the Tribunal is based on conjectures or surmises. The Tribunal, on the contrary, has considered all the relevant material and based its conclusions on the findings recorded by it after appreciating the material on record. From the findings recorded by the Tribunal, there is nothing to indicate that it has considered any irrelevant material or that any relevant material has been ignored, nor can it be said that the conclusions arrived at by the Tribunal are in any manner unreasonable or perverse to the record of the case, so as to warrant interference. Tribunal, after duly appreciating the material on record, has recorded findings of fact for the purpose of coming to the conclusion that the gifts in question are not genuine. In the present case, the returns of income filed by the Indian donors have been placed on record, which clearly reveal that the donors did not have the financial capacity to gift such huge sums of money. Clearly therefore, the assessee has failed to prove the creditworthiness of the donors. Even the donors who appeared before the Assessing Officer clearly did not have the capacity to make such gifts. In relation to the gifts received from the NRI donors, except for the fact that such amount was received from banking channel and their confirmations were filed, no other supporting material had been produced by the assessee to prove the identity of the donors, the genuineness of the gifts and the creditworthiness of the parties Insofar as the submission advanced by the learned counsel for the assessee that in the light of the finding recorded by the Tribunal that the original passports of the NRI donors had not been produced, the matter is required to be restored to the file of the Tribunal, in the opinion of this court, in the absence of any cogent material having been brought on record by the assessee to prove the financial capacity of the NRI donors or the genuineness of the gifts, no case has been made out for restoring the matter to the file of the Tribunal. - Decided in favour of the revenue and against the assessee

Summary

Issues Involved:
1. Whether the Income Tax Appellate Tribunal was right in law in reversing the order of CIT (A) that deleted the addition of Rs. 7,02,000/- as unexplained cash credit under section 68 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Tribunal's Reversal of CIT (A)'s Order:
The Tribunal reversed the CIT (A)'s order, which had deleted the addition of Rs. 7,02,000/- made by the Assessing Officer (AO) as unexplained cash credit under section 68 of the Act. The AO had found that the gifts received by the assessee were not genuine, as the donors lacked the financial capacity to make such gifts. The Tribunal's decision was based on a detailed analysis of the evidence, including the statements of the donors and the assessee.

2. Assessment of Donors' Creditworthiness and Genuineness of Gifts:
The AO scrutinized the financial capacity of the donors, noting that they had deposited cash in their bank accounts shortly before issuing the gifts, which raised suspicions. The AO concluded that the donors did not have the capacity to make such gifts and that the gifts were not genuine. The CIT (A), however, accepted the gifts as genuine based on confirmation letters, PAN numbers, and bank statements, without adequately addressing the AO's concerns about the donors' financial capacity.

3. Tribunal's Findings on Specific Donors:
- Piraram Chelaram Rabari: The Tribunal found that Rabari, a watchman with a meager income, could not have made a gift of Rs. 50,000/-. His statement did not support the claim of financial capacity.
- Niranjan Chhotalal Kshatriya: An accountant earning Rs. 5,500/- per month, Kshatriya's financial capacity to gift Rs. 1,00,000/- was questioned. His statements were inconsistent and did not establish a relationship involving natural love and affection with the assessee.
- NRI Donors (Ramesh Keshkani and Vinod Manghnani): The Tribunal noted that the NRI donors were not produced before the AO, and there was a lack of supporting documents like original passports to establish their identity and financial capacity.

4. Legal Precedents and Burden of Proof:
The Tribunal cited various legal precedents, including the Supreme Court's decision in Commissioner of Income Tax v. P. Mohanakala, which emphasized that the burden of proof lies on the assessee to provide a satisfactory explanation for the sums credited in their books. The Tribunal found that the assessee failed to discharge this burden.

5. Tribunal's Conclusion:
The Tribunal concluded that the gifts were not genuine and that the assessee failed to prove the creditworthiness of the donors. The Tribunal's findings were based on a detailed analysis of the evidence and were not based on conjectures or surmises. The Tribunal's decision to reverse the CIT (A)'s order was upheld as it was based on proper appreciation of the material on record.

6. High Court's Decision:
The High Court affirmed the Tribunal's decision, holding that the Tribunal had not ignored any relevant material or considered any irrelevant material. The High Court found that the Tribunal's conclusions were reasonable and supported by the evidence on record. The appeal was dismissed, and the question of law was answered in favor of the revenue and against the assessee.