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2016 (11) TMI 742 - AT - Income TaxAddition u/s 68 - genuineness of the gifts - Held that - CIT(A) while deleting the addition has noted that the persons who have advanced the amount to the assessee are assessed to tax and their PANs were furnished to the AO during the assessment proceedings the advances have been received through banking channels copy of the income tax returns of the Director were also furnished along with copy of foreign inward remittance in support of the gifts received were filed. Ld.CIT(A) has held that the aforesaid documents establishes the identity creditworthiness and genuineness of the transactions. He has further noted that Director who had advanced to the assessee are assessed to tax the gifts received have been declared in the return of income. He has further noted that if the AO doubted the genuineness of the gifts the same could have been examined in the individuals hands but no such exercise was undertaken by AO. The ld.CIT(A) has thus given a finding that assessee has discharged the onus cast upon the assessee as per the requirement of section 68 of the Act. Before us Revenue has not placed any material on record to controvert the findings of the ld.CIT(A). - Decided in favour of assessee
Issues Involved:
1. Addition under Section 68 of the Income Tax Act for AY 2003-04. 2. Addition under Section 41(1) of the Income Tax Act for AY 2008-09. Issue-wise Detailed Analysis: 1. Addition under Section 68 of the Income Tax Act for AY 2003-04: The Revenue appealed against the deletion of an addition of ?1,78,56,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act. The AO had added this amount as undisclosed income, citing that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions related to share application money and unsecured loans received from four individuals. The AO suspected underbilling in exports and alleged hawala transactions. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, noting that the assessee provided substantial evidence, including: - Ledger accounts, bank statements, and PAN details of the parties. - Income tax returns of the directors and their family members. - Certificates of foreign inward remittance supporting the gifts received. The CIT(A) concluded that these documents sufficiently established the identity, genuineness, and creditworthiness of the transactions. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue failed to provide contrary evidence. Thus, the appeal for AY 2003-04 was dismissed. 2. Addition under Section 41(1) of the Income Tax Act for AY 2008-09: The Revenue appealed against the deletion of an addition of ?1,89,11,800/- made by the AO under Section 41(1) of the Income Tax Act. The AO had treated this amount as cessation of trading liability, arguing that the assessee could not enforce the payment from the creditor, Supreme General Trading Company, due to the account becoming a Non-Performing Asset (NPA). The CIT(A) deleted the addition, explaining that: - The amount was shown as an advance in the balance sheet, not as a trading liability. - There was no evidence of the assessee deriving any benefit from this liability. - The conditions for invoking Section 41(1) were not met, as there was no remission or cessation of liability. The Tribunal upheld the CIT(A)'s decision, referencing the Gujarat High Court's ruling in CIT vs. Bhogilal Ramjibhai Atara, which emphasized that Section 41(1) applies only if there is remission or cessation of liability during the relevant assessment year. The Revenue's appeal for AY 2008-09 was thus dismissed. Conclusion: Both appeals by the Revenue were dismissed. The Tribunal affirmed the CIT(A)'s findings that the assessee had adequately substantiated the identity, creditworthiness, and genuineness of the transactions for AY 2003-04 and that the conditions for invoking Section 41(1) were not met for AY 2008-09.
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