2017 (11) TMI 1610 - HC - Income Tax

Addition u/s 68 - failure to discharge the burden of explaining the gift - Held that - Referring to Assessing authority as well as the impugned order of the Tribunal and we find that there is no illegality in coming to the conclusion that the present case is fully covered within the parameter of Section 68 of the Act. The assessee has failed in establishing the creditworthiness of the donors, occasion for making the gifts and why and donors who were strangers and not men of means gifted such huge amounts to the assessee HUF out of love and affection. - Decided against assessee.

Summary

Issues:
1. Admissibility of appeal on specific questions raised
2. Validity of gifts received by the appellant

Analysis:
1. The appellant filed an appeal against the ITAT order for the assessment year 2001-02, which was initially defective but later restored. The appeal was admitted on specific questions regarding the burden of proof in explaining gifts and the treatment of gifts as income in the hands of the appellant HUF. The questions raised focused on the Tribunal's disregard of findings by the First Appellate Court, the donors' identity proof, and the acceptance of donors' income tax returns by the Assessing Officer.

2. The case involved the appellant showing receipts of gifts totaling Rs. 19,02,000 in the statement of incoming and outgoing details. The assessing authority found discrepancies in the gifts received, particularly questioning the creditworthiness of the donors. For instance, Smt. Dropati Devi's gift of Rs. 10 lacs was deposited in her bank account shortly before being gifted to the appellant, raising suspicions. Notices sent to alleged donors like Veerpal Singh and Sundar Sahai were returned as "not known," casting doubt on the authenticity of the gifts. The assessing authority concluded that the gifts were not genuine and added the amount as cash credits under Section 68 of the Income Tax Act.

3. The CIT (Appeals) allowed the appeal and deleted the addition made by the assessing authority under Section 68. However, the ITAT partially allowed the department's appeal, emphasizing the appellant's failure to establish the creditworthiness of the donors and the reasons behind the substantial gifts received. The ITAT set aside the CIT (Appeals) order and upheld the assessing officer's addition of Rs. 19,02,000 as gifts. The High Court, after reviewing the orders and arguments, found no error in the ITAT's decision and declined to interfere, ultimately dismissing the appeal.