2021 (8) TMI 758 - AT - Income Tax

Addition u/s 68 - assessee received gifts from his brother-in-law - assessee filed gift deed and evidence of land holding in support of donor s agricultural income - HELD THAT - We find that the mother of the assessee has declared income of ₹ 1.78 Lacs during the year as miscellaneous income. However, upon perusal of her Balance Sheet as on 31/03/2014, as placed on record, it could be seen that she has capital balance of ₹ 1287.32 Lacs which has been invested in various forms. This capital balance is arrived at after reducing Gifts of ₹ 4.94 Lacs and withdrawals of ₹ 10.47 Lacs. The source of gift, in our opinion, could not solely be the current year s income particularly in view of the fact that the mother of the assessee was on old lady and living in a joint family. There is no adverse material to disprove the gifts. Therefore, the conclusion drawn by Ld. CIT(A) could not be sustained and we are inclined to delete the addition. So far as the two other donors are concerned, we find that both of them are agriculturist which is supported by their land holdings. The amounts of gifts are less than ₹ 1 Lacs in each of the cases which was below exemption limit of ₹ 2 Lacs. Therefore, there would be no obligation on the donors to file the return of income. The gifts are duly supported by the affidavits of the donors. The details of agricultural land have been well enumerated in their respective affidavits. Regarding allegation of immediate cash deposit, the donors being agriculturist working in remote village would receive the proceeds of agriculture in cash. The cash deposit need not match with harvesting season since there is no such requirement under law. Therefore, these two additions would stand deleted. Low Household Drawings - HELD THAT - Drawings made by the mother as well as gifts given by her are duly supported by her Balance Sheet as on 31/03/2014. It could be seen that she has capital balance of ₹ 1287.32 Lacs which has been invested in various forms. This capital balance is arrived at after reducing Gifts of ₹ 4.94 Lacs and withdrawals of ₹ 10.47 Lacs. The assessee s drawings in all the earlier years are less than ₹ 2 Lacs which is evident from detail of household expenses as placed on record for various years. This being the case, this addition is not sustainable and hence, we delete the same. Interest on Unsecured Loans - HELD THAT - Upon perusal of appellate order for AY 2013-14 as placed on record, we find that the adjudication of this addition has been held to be academic in nature in view of the fact that the assessee s legal ground was allowed. The department could not prefer any further appeal due to low tax effect. Thus, there are no concrete findings on the issue of quantum additions of unsecured loans. Since, this issue has attained finality in AY 2013-14 in assessee s favor, the consequential addition of interest, as made in this year, stand deleted. This ground stand allowed. Sundry Creditors - assessee submitted that the sundry creditors were for the business covered u/s 44AD, therefore, the assessee was not required to maintain books of accounts and the name, address PAN of the creditors was not available - HELD THAT - We find that in terms of Sec.44AD, the income is computed on presumptive basis and there is no need to maintain books of accounts. Therefore, the impugned addition, as made u/s 41(1), in our considered opinion, could not be sustained in the eyes of law. By deleting the same, we allow this ground of appeal

Summary

Issues Involved:
1. Addition of gifts received by the assessee.
2. Addition of low household drawings.
3. Disallowance of interest on unsecured loans.
4. Addition of sundry creditors.

Analysis:

1. Addition of Gifts Received by the Assessee:
The assessee received gifts from family members, and the Assessing Officer added them to the income as unexplained cash credits under section 68. The assessee provided additional evidence during appellate proceedings, including bank statements and affidavits, to support the gifts. However, the authorities concluded that the gifts were bogus and added them to the income. Upon review, the Tribunal found that the mother's capital balance and investments supported the gifts, leading to the deletion of the addition of one gift. For the other gifts, supported by agricultural income and below the exemption limit, the additions were deleted.

2. Addition of Low Household Drawings:
The Assessing Officer estimated higher yearly drawings for the family, considering the overall drawings to be insufficient to support the family's expenses. The Tribunal noted that the mother's capital balance and withdrawals supported the low withdrawals, leading to the deletion of the additional income added by the Assessing Officer.

3. Disallowance of Interest on Unsecured Loans:
Interest paid on an unsecured loan was disallowed and added back to the income since the loan was previously added back to the income. However, as the issue had been resolved in the assessee's favor in a previous assessment year, the Tribunal deleted the consequential addition of interest for the current year.

4. Addition of Sundry Creditors:
The Assessing Officer added year-end sundry creditors to the income, which was contested by the assessee, citing provisions of Sec. 44AD. The Tribunal held that under Sec. 44AD, where income is computed on a presumptive basis, the addition of sundry creditors under Sec. 41(1) could not be sustained, leading to the deletion of this addition.

In a comprehensive analysis, the Tribunal allowed both appeals, overturning the additions made by the Assessing Officer and confirmed by the CIT(A). The Tribunal's detailed examination of the evidence and legal provisions led to the deletion of various additions, providing relief to the assessee in multiple aspects of the assessment.