2023 (8) TMI 151 - AT - Income Tax

Addition u/s 68 - treating gift received as unexplained cash credit - assessee had failed to prove creditworthiness of donor to advance the money as Gift - gifts, have been received in the form of foreign remittances, through the HSBC account of assessee s son - HELD THAT - AO failed to take note of the fact that donor assessee son is NRI since long he only had some receipt interest income and STCG and LTCG on investments made in India which were declared in the return filed for the AY 2014-15. Income declared by the assessee's son in India is not only his income and his major income is from abroad in the capacity of NRI, hence genuineness of the transaction should not be doubted. We find that in the instant the case, the assessee has adduced sufficient evidences to explain the gifts as valid by proving the identity and creditworthiness of the donor and genuineness of the transaction. As decided many times where the assessee by way of documentary evidence satisfactorily established the identity and creditworthiness of the donor and genuineness of the transaction, there is no justification to treat the credit / gift as unexplained or non-genuine. Therefore, it is abundantly clear that where the assessee had produced enough evidence to prove identity of donor, his creditworthiness and also genuineness of gift, addition on account of such gifts could not be sustained. Appeal of the Revenue are dismissed.

Issues Involved:
1. Deletion of additions made under Section 68 of the Income Tax Act on account of treating a gift as unexplained cash credit.
2. Reliance on documents furnished by the assessee to prove the creditworthiness of the donor.
3. Consistency of findings with the material on record.
4. Whether the Assessing Officer's order should be upheld or the CIT(A)'s order should be restored.

Summary:

Issue 1: Deletion of Additions under Section 68
The Revenue challenged the deletion of additions amounting to Rs. 1,60,66,513/- made by the Assessing Officer under Section 68 of the Income Tax Act, treating the gift received from Shri Dhwanil P. Shah as unexplained cash credit. The Assessing Officer doubted the creditworthiness of the donor due to his low returned income of Rs. 9,515/- for the year and insufficient documentation provided by the assessee.

Issue 2: Reliance on Documents by CIT(A)
The CIT(A) relied on various documents submitted by the assessee, including a gift deed, bank statements, and a certificate from Hong Kong auditors, to establish the creditworthiness of the donor. The CIT(A) concluded that the gifts were made without consideration and were accepted by the donee, thus meeting the necessary ingredients of a valid gift under Section 122 of the Transfer of Property Act.

Issue 3: Consistency with Material on Record
The CIT(A) found that the Assessing Officer failed to prove any consideration passed between the assessee and the donor, thus validating the gifts as genuine. The CIT(A) noted that the assessee provided sufficient documentary evidence to establish the identity, creditworthiness, and genuineness of the transaction, including bank statements and confirmation from Ankit Gems Hong Kong Ltd.

Issue 4: Upholding CIT(A)'s Order
The Tribunal agreed with the CIT(A)'s findings, noting that the assessee had satisfactorily discharged the onus of proving the identity, creditworthiness, and genuineness of the gift transaction. The Tribunal also cited various judicial precedents supporting the assessee's case, emphasizing that the addition under Section 68 could not be sustained when sufficient evidence was provided.

Conclusion:
The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal and confirming the deletion of the additions made under Section 68. The Tribunal concluded that the assessee had adequately proved the creditworthiness of the donor and the genuineness of the gift transaction.

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