2017 (7) TMI 1311 - AT - Income Tax

Addition being the gift said to be received from her mother - genuineness of transaction and capacity of the assessee s mother to gift - assessee s mother appears to be housewife - HELD THAT - For the purpose of proving a cash credit, the assessee has to necessarily establish the identity, creditworthiness of creditors and genuineness of transaction. In this case, the identity of the creditor is not in dispute. The genuineness of transaction was also established by filing an affidavit from the donor, namely, the assessee s mother. At the best, the AO can doubt the creditworthiness of creditor. The assessee s mother claims that gift was given from her past savings. The Assessing Officer disbelieved the gift because she has no independent source of income and she was not assessed to tax. The assessee s mother appears to be housewife. She has to take care of household expenses. Whenever received money from husband or son for household expenses, Indian ladies use to save part of the money and whenever the husband or son urgently needs some money, the ladies use to give the same out of their savings. This saving habit of housewives in this country, more particularly, in southern part of country, cannot be ignored by the AO. When the assessee s mother claims that she saved money given for household expenses and filed an affidavit before the Assessing Officer, this Tribunal is of the considered opinion that the claim of the assessee s mother cannot be brushed aside so lightly without examining it. The assessment year under consideration is 2013-14. Even a mason or construction worker is receiving salary of ₹ 400 to 500 per day. In this economic situation, there is no reason to doubt the capacity of the assessee s mother to give ₹ 5,05,000/- to the assessee. Tribunal is of the considered opinion that all the ingredients which are necessary for proving the gift were established by the assessee. Therefore, the CIT(Appeals) is not justified in confirming the addition. TDS u/s 194C - Disallowance of freight charges paid to the contractors - assessee contends that the payment was a composite one for purchase of iron ore and transportation, therefore, not liable for deduction of tax - HELD THAT - The fact remains that the Permanent Account Number was furnished by the assessee except in respect of payment made to the extent of ₹ 44,30,887/-. Moreover, it is not in dispute that the payment made by the assessee is composite one for iron ore and transport of the same. Therefore, the CIT(Appeals) has rightly restricted the disallowance at ₹ 44,30,887/-. Hence, the same is confirmed. Addition on account of closing stock - CIT(Appeals) after considering the alternate working filed by the assessee, allowed the claim without giving any opportunity to the Assessing Officer - HELD THAT - Rule 46A of the Income-tax Rules, 1962 clearly says that whenever additional evidence is filed by the assessee, an opportunity shall be given to the Assessing Officer to contradict the same. Since such an opportunity was not given, this Tribunal is of the considered opinion that the Assessing Officer has to reconsider the entire issue. Accordingly, the orders of the lower authorities are set aside and the issue of closing stock is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue in the light of the material that may be filed by the assessee before him, in accordance with law, after giving a reasonable opportunity to the assessee. Addition being the investment made in Multi Commodity Exchange - CIT(Appeals) deleted the addition without any material - HELD THAT - When the transaction was not ascertainable in Multi Commodity Exchange by citing Permanent Account Number, it is not known how the assessee claims that someone has used her Permanent Account Number. If really PAN was misused by someone, then we have to examine who has invested the money in Multi Commodity Exchange and who enjoyed the profit of the transaction made. Therefore, the CIT(Appeals) is not justified in deleting the addition on the ground that the addition was made on surmise. Hence, the matter needs to be reconsidered. Accordingly, the orders of the lower authorities are set aside and the addition of ₹ 5 lakhs is remitted back to the file of the AO - AO shall re-examine the issue in the light of the material that may be filed by the assessee and thereafter decide the same in accordance with law, after giving a reasonable opportunity to the assessee.

Issues:
1. Addition of gift received from mother
2. Disallowance of freight charges paid to contractors
3. Addition on account of closing stock
4. Addition of investment in Multi Commodity Exchange

Analysis:

1. Addition of Gift Received from Mother:
The assessee received a gift of ?5,05,000 from her mother, which was disallowed by the Assessing Officer and confirmed by the CIT(Appeals). The mother confirmed the gift through an affidavit, but the Assessing Officer doubted her capacity to gift due to lack of independent income. The Tribunal noted that the mother, a housewife, saved money from household expenses to gift the amount. Considering the economic situation and saving habits of housewives, the Tribunal found the gift genuine. The addition made by the Assessing Officer was deleted as all necessary elements to prove the gift were established.

2. Disallowance of Freight Charges Paid to Contractors:
The Assessing Officer disallowed ?3,26,15,735 as freight charges, citing lack of details and PANs of contractors. The CIT(Appeals) restricted the disallowance to ?44,30,887, stating that tax deduction was not applicable under Section 40(a)(ia) for certain payments. The Tribunal upheld the CIT(Appeals) decision, noting that the payment was composite for iron ore purchase and transportation, and tax need not be deducted for contractors with PANs. The disallowance was confirmed at ?44,30,887.

3. Addition on Account of Closing Stock:
An addition of ?32,63,677 to closing stock was made by the Assessing Officer, which the CIT(Appeals) allowed based on additional evidence without giving the Assessing Officer a chance to counter. The Tribunal found a violation of Rule 46A and remitted the issue back to the Assessing Officer for reconsideration after allowing both parties to present their case.

4. Addition of Investment in Multi Commodity Exchange:
The Assessing Officer added ?5 lakhs for alleged investment in Multi Commodity Exchange, which the CIT(Appeals) deleted without substantial evidence. The Tribunal found discrepancies in the claim that someone else used the assessee's PAN for the investment. The matter was remitted back to the Assessing Officer for further examination based on the material provided by the assessee.

In conclusion, the assessee's appeal regarding the gift received from the mother was allowed, while the Revenue's appeal on freight charges was partly allowed for statistical purposes. The issues related to closing stock and investment in Multi Commodity Exchange were remitted back to the Assessing Officer for reconsideration.

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