2012 (4) TMI 748 - AT - Income Tax

Summary

Issues Involved:
1. Whether the CIT(A) erred in directing the AO to delete the addition of Rs. 98,56,827/- related to the alleged gift of IMD.
2. Applicability of Section 56(2)(v) of the Act to the gift of IMDs.
3. Genuineness of the gift and applicability of Section 68 of the Act.

Summary:

1. Deletion of Addition by CIT(A):
The Revenue challenged the CIT(A)'s decision to direct the AO to delete the addition of Rs. 98,56,827/- related to the alleged gift of IMD. The AO had added this amount to the assessee's income, treating the gift as in-genuine and invoking the provisions of Section 68 of the Act. The CIT(A) found that the assessee had provided sufficient documentary evidence to establish the genuineness of the gift, which the AO did not dispute. The CIT(A) noted that no evidence was found during the search proceedings to prove the gift was not genuine.

2. Applicability of Section 56(2)(v):
The AO equated the IMDs to bank fixed deposits and treated them as money, invoking Section 56(2)(v) of the Act. The CIT(A) disagreed, stating that IMDs, due to their restrictions on transferability, cannot be treated as money but at best as something convertible into money. The CIT(A) referenced the Finance Act 2009, which brought gifts in kind within the tax purview prospectively from 01-10-2009, and cited the Tribunal's decision in the case of Shri Anuj Agarwal, which held that gifts of IMDs are outside the purview of Section 56(2)(v).

3. Genuineness of the Gift and Section 68:
The CIT(A) observed that the assessee had provided documentary evidence and the donor's husband's statement corroborated the genuineness of the gift. The AO did not invoke Section 68, and no material evidence was found during the search to dispute the genuineness of the gift. The Tribunal upheld the CIT(A)'s decision, noting that similar cases had been decided in favor of the assessee, and the AO had not disputed the documentary evidence provided.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 98,56,827/- on account of the gift of IMDs, as the gift was found genuine and outside the purview of Section 56(2)(v) of the Act. The Tribunal also noted that the AO did not make any addition u/s 68, further supporting the CIT(A)'s decision.