2023 (2) TMI 24 - AT - Income Tax

Unexplained cash credit - Unexplained gifts received from a person covered by the definition of relative under Explanation (e) to section 56(2) - assessee has not filed return of income or bank statement of the donor, in the absence of which the genuineness and capacity, i.e., creditworthiness of the donor is not proved - HELD THAT - As assessee has received gift from Smt Bhanuben B. Patel and Smt Champaben Sojitra by submitting the bank statements, gift deed and other evidences in support of the receipts of the above said gifts which is placed in Paper Book. As relying on Ushaben H. Ghadia case 2022 (3) TMI 1487 - ITAT MUMBAI we are inclined to direct the Assessing Officer delete the additions made in this case. Accordingly, ground raised by the assessee is allowed.

Summary

Issues:
Appeal against order of CIT(A) for A.Y. 2014-15 regarding disallowance of gifts received by the assessee under section 56(2) of the Income-tax Act, 1961.

Analysis:
1. The assessee received gifts from two individuals covered under the definition of "relative" as per the Act. The Assessing Officer disallowed and added back the gifts as unexplained cash credits due to lack of proof of the donor's creditworthiness. The assessee contended that the AO cannot inquire into the source of source to determine the genuineness of the credit. The appellant cited legal precedents to support this argument, emphasizing that providing gift deeds, ITR filings, bank statements, and other details should suffice to establish genuineness.

2. The Ld.CIT(A) dismissed the appeal, stating that the donors were not assessed to tax and their source of income was not proven, as their bank account details were not provided. The assessee then appealed to ITAT, arguing that the CIT(A) erred in upholding the additions under section 68 of the Act, emphasizing that the source of source should not be questioned. The appellant provided additional evidence to establish the genuineness and creditworthiness of the gifts received.

3. During the hearing, the assessee's representative reiterated that all relevant details were submitted, including gift deeds and affidavits from the donors. The representative pointed out that similar cases were decided in favor of the assessee by the Coordinate Bench. The ITAT noted the evidence provided by the assessee and referred to a previous case where a similar addition was set aside due to lack of proper enquiry and presumption about agricultural income holders' capacity to gift.

4. Considering the evidence and precedents, ITAT directed the Assessing Officer to delete the additions made, following the principle that mere presumption without proper enquiry is not sustainable in law. The ITAT allowed the appeal filed by the assessee, emphasizing the importance of proper verification before making such additions.

In conclusion, the ITAT ruled in favor of the assessee, directing the deletion of the additions made by the Assessing Officer, highlighting the necessity of thorough verification and proper enquiry before disallowing gifts received by the assessee.