2016 (3) TMI 750 - AT - Income Tax

Addition u/s 68 - ingenuity of gift - gifts from parents - Held that - As the mother was not keeping well, she could not be produced before the A.O. Nevertheless, the assessee had vide letter dt. 5.7.2011 requested the A.O. to depute a Departmental Officer to the residence, so that the statement of Smt.Chandervati could be recorded. This was not done. Thus, to make an addition on the ground that she was not produced is wrong. Smt. Chandervati Devi filed various documents to substantiate the sources from where she had given a gift to her son. The A.O. has not conducted any independent investigation nor brought any evidence on record, to lead us to a conclusion that the evidence produced by the assessee is not reliable. Smt.Chandervati Devi had filed a return of income for the A.Y. 2008-09. There is no basis to doubt the will written by Smt.Ramkali who is the mother of Smt.Chandravati Devi. Registration of will is not mandatory. The will was notarised will and has two witnesses. If the A.O. chose to dispute the will, he could have examined the witnesses. He failed to do. The affidavits from various persons filed by the assessee have wrongly been dismissed as fabrications. No inquiry was made by the A.O. nor was any material gathered to come to such a conclusion. The evidence was dismissed based on surmises and conjectures. Hence for all these reasons, we are of the considered opinion that the gift of ₹ 15 lakhs given by the assessee s mother Smt.Chandravati Devi is a genuine gift and cannot be added u/s 68 of the Act. Coming to the gift received from the father Shri Prem Dutt Sharma, we find that he has been examined on oath and he has confirmed the same. The source of funds were explained as amount received from Sh.Ram Kumar Sharma on the execution of an agreement to sell. Mr.Ram Kumar Sharma confirmed this agreement on oath. The AO has not an iota of evidence to disbelieve these evidences or these statements recorded of oath. The A.O. rejected the evidence filed by the assessee based on surmises and conjectures. If the source of funds cannot be proved by the father or by Mr.Ram Kumar Sharma, the course of action should have been to make an addition in their hands. Sh.Sharma has filed his return of income for the A.Y. 2008-09. Thus in our view, the assessee discharged the burden of proof that lay on him and had proved the genuineness of these gifts. - Decided in fovour of assessee

Summary

Issues:
Reopening of assessment u/s 147 of the Act and addition made u/s 68 of the Act on gift received.

Reopening of Assessment:
The appeal challenged both the reopening of the assessment u/s 147 of the Act and the addition made u/s 68 of the Act on gift received by the assessee from his mother and father. The assessee argued that the reopening was bad in law due to non-application of mind and lack of nexus between the facts found and the belief that income had escaped assessment. The assessee contended that the A.O. had all the information before December 2009, yet issued a notice u/s 148 after 18 months. The A.O. completed the assessment u/s 143(3) on 30.9.2011, making additions based on unexplained cash deposits. The assessee challenged the reopening based on case laws and argued that no fresh information justified the notice u/s 148. The Sr.D.R. opposed, citing tangible material and nexus between the information and belief of escapement. The Tribunal held that the reopening was unjustified due to lack of fresh information and upheld the appeal.

Addition Made u/s 68 of the Act:
On the merits, the A.O. disbelieved the gifts received by the assessee from his mother and father, making additions u/s 68 of the Act. The Tribunal found that the assessee provided sufficient evidence to prove the genuineness of the gifts. Both parents confirmed giving the gifts, filed affidavits, and executed gift deeds. The mother's ill health prevented her appearance, but the assessee requested her examination, which the A.O. neglected. The A.O. failed to conduct independent investigations or disprove the evidence provided. The Tribunal deemed the gifts genuine and deleted the addition. Regarding the gift from the father, evidence was confirmed on oath, and the source of funds was explained. The A.O. rejected the evidence without basis, leading to the Tribunal's decision to delete the addition. The Tribunal also noted that the bank pass book entries could not be considered as entries in the books of accounts, following relevant case law. Consequently, the Tribunal allowed the appeal, deleting the addition made u/s 68 of the Act.

This comprehensive analysis of the legal judgment highlights the issues of reopening of assessment and addition made u/s 68 of the Act, providing detailed insights into the arguments presented, authorities' positions, and the Tribunal's final decision on each issue.