2012 (5) TMI 790 - AT - Income Tax

Summary

Issues Involved:

1. Deletion of Rs. 10,80,000/- as unexplained cash credit u/s 68 of the Income-tax Act.
2. Acceptance of the assessee's submission without supporting evidence.
3. Opportunity for the Assessing Officer (A.O.) to examine findings relied upon by CIT (A).
4. Applicability of VDIS immunity to third parties.

Summary:

Issue 1: Deletion of Rs. 10,80,000/- as unexplained cash credit u/s 68 of the Income-tax Act

The assessee received a gift of Rs. 10,80,000/- from his mother, Smt. Mohinder Wati, who had declared the source as the sale of jewelry under VDIS, 1997. The A.O. added this amount as unexplained cash credit u/s 68, doubting the genuineness of the sale and the creditworthiness of the donor. However, CIT (A) deleted the addition, holding that the assessee had discharged his onus by proving the identity, genuineness, and creditworthiness of the donor. CIT (A) noted that the A.O. failed to establish any nexus to contradict the source of the gift and did not conduct further investigations. The reassessment of Smt. Mohinder Wati confirmed the sale of jewelry and the validity of the gift.

Issue 2: Acceptance of the assessee's submission without supporting evidence

The revenue argued that the A.O. found the jewellers non-existent at the provided addresses, raising doubts about the genuineness of the transactions. The A.O. suspected that the assessee's own unaccounted money was being converted into accounted money. The DR highlighted the impossibility of the donor, an 88-90-year-old lady suffering from senile dementia, remembering and conducting such detailed transactions. The assessee countered that the donor's reassessment confirmed the sale of jewelry and the gift, and that the A.O. did not provide evidence to contradict this.

Issue 3: Opportunity for the A.O. to examine findings relied upon by CIT (A)

The revenue contended that the A.O. was not given an opportunity to examine the findings relied upon by CIT (A). The CIT (A) held that the A.O. had not made further investigations to establish any nexus contradicting the source of the gift.

Issue 4: Applicability of VDIS immunity to third parties

The revenue argued that VDIS immunity applies only to the declarant and cannot benefit third parties. The CIT (A) held that the source of the gift was explained and assessed in the hands of the donor, thus it could not be taxed again in the hands of the assessee.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding CIT (A)'s decision to delete the addition of Rs. 10,80,000/- u/s 68. The Tribunal found that the assessee had adequately explained the source of the gift, and the revenue failed to provide evidence to the contrary. The donor's reassessment confirmed the sale of jewelry and the gift, supporting the assessee's claim.