2016 (11) TMI 1039 - AT - Income Tax

Undisclosed gifts - Held that - We are of the view that in the absence of anything to show that the transaction was by way of money laundering, additions could not be made towards gifts when the assessee has discharged his burden by proving the identity, genuineness and capacity of the donor. We further opined that gifts are normally made by relatives through natural love and affection and do not necessarily require any particular occasion. In the present case on hand, the assessee has discharged his burden by furnishing necessary details before the Assessing Officer. The Assessing Officer has summoned the donor and the donor has personally appeared before the Assessing Officer and admitted that he had given gifts to his brother. Under these circumstances, we are of the view that the Assessing Officer was not correct in coming to the conclusion that the assessee has not discharged genuineness of the transactions and capacity of the donor. Therefore, we direct the Assessing Officer to delete the additions made towards alleged gifts of ₹ 15 lakhs for the assessment year 2009-10, ₹ 22,90,000 for the assessment year 2010-11 and ₹ 43,00,789 for the assessment year 2011-12. In respect of the remaining amount of ₹ 21,16,611 for the assessment year 2011-12, we deem it appropriate to send the issue to the file of the Assessing Officer and direct the Assessing Officer to verify the claims made by the assessee with regard to sources of ₹ 21,16,611 and take appropriate decision in accordance with law.

Issues Involved:
1. Validity of additions made by the Assessing Officer (AO) towards alleged gifts as unexplained credits.
2. Genuineness and capacity of the donor to give gifts.
3. Correlation of bank entries with the alleged gifts.
4. Application of legal precedents regarding the burden of proof in gift transactions.

Issue-wise Detailed Analysis:

1. Validity of Additions Made by the AO Towards Alleged Gifts as Unexplained Credits:
The AO made additions towards alleged gifts received by the assessee from his brother, citing failure to prove the genuineness and capacity of the donor. The AO noted that the gifts were periodic and lacked a specific occasion, thus treating them as unexplained credits under sections 68 and 69A of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) (CIT(A)) partially upheld these additions, confirming the amounts for assessment years 2009-10 and 2010-11, and allowing partial relief for 2011-12.

2. Genuineness and Capacity of the Donor to Give Gifts:
The assessee argued that the gifts were genuine and received out of natural love and affection. The assessee provided bank statements, transfer vouchers, and proof of the donor’s income. The donor appeared before the AO, confirming the gifts and providing evidence of his financial capacity. Despite this, the AO and CIT(A) doubted the donor's capacity and the necessity of the gifts, leading to the confirmation of some additions.

3. Correlation of Bank Entries with the Alleged Gifts:
The assessee correlated each credit entry in his bank account with corresponding debits in the donor's account, supported by transfer vouchers from Habib Qatar International Exchange Ltd. The CIT(A) acknowledged some correlations but still confirmed part of the additions due to perceived inadequacies in proving the donor's capacity for certain amounts.

4. Application of Legal Precedents Regarding the Burden of Proof in Gift Transactions:
The assessee cited the case of CIT v. Jawahar Lal Oswal, where the Punjab and Haryana High Court held that once the identity and relationship between donor and donee are established, the Revenue cannot draw inferences based on suspicion. The Delhi High Court in CIT v. Sudhir Budhraja also supported that the assessee’s burden is discharged upon proving the donor's identity and capacity, shifting the onus back to the Revenue to disprove the claims.

Tribunal's Findings:
The Tribunal found that the assessee had sufficiently proved the identity, genuineness, and capacity of the donor for most of the gifts. The Tribunal noted that gifts between relatives do not require a specific occasion and can be given out of love and affection. The Tribunal directed the AO to delete the additions for the assessment years 2009-10 and 2010-11 and a significant portion for 2011-12, except for an amount of ?21,16,611, which was remanded for further verification.

Conclusion:
The Tribunal allowed the appeals for the assessment years 2009-10 and 2010-11, and partially for 2011-12, directing the AO to verify the remaining disputed amount. The Revenue’s appeal was dismissed, and the stay petitions filed by the assessee were deemed infructuous due to the disposal of the main appeals. The order was pronounced on August 12, 2016.

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