2007 (1) TMI 208 - AT - Income Tax

Additions made u/s 68 - Cash Credits - non maintenance of books of account - creditworthiness of the donors and genuineness of gifts - HELD THAT - The finding of ITAT Ahmedabad in the case of ITO v. Dr. Jagdish J. Kansangara 1997 (9) TMI 134 - ITAT AHMEDABAD-A , squarely applies. It is apt to note that a man may lies but the circumstances do not . No meters are available for examining the truth and correctness of statement made but the surrounding circumstances and the relevant fact will throw light on the genuineness or otherwise of any transaction. It is true that even stranger can give gifts and it is also held in some cases that there is no need for any occasion to give gifts. However, when all the circumstances like absence of relation, absence of occasion, no counter gifts, gifts from persons of no means to the so-called wealthy and influential persons etc., all put together lead to one and only conclusion that gifts are not genuine. A person who is speaking true will not shirk his responsibility as well as liability to say the same before any examining authority. In some cases a person may not be available instantly but why and in what circumstances he will not come forward to tell the truth should be demonstrated. None of the donors has stated any reason as to why they are not available for examination. The assessee has not been able to produce any such reason. Thus all the circumstances put together lead us to hold that the gifts are not genuine. It is seen that the assessee has prepared his statement of affairs. A statement of affairs is nothing but a balance-sheet of a person as on a particular date. Such statement can be prepared only from the books of account. Thus firstly it is incorrect on the part of the assessee to contend that he is not maintaining any books of account. The statement of affairs prepared is testimony of the same. Such statement also includes the receipt of gift. Thus once it is found that the gifts are not genuine and such gifts explain assets held by the assessee, the amount has to be treated as undisclosed income of the assessee and liable to be added as income. Thus, we hold that the assessee failed to prove the creditworthiness of the donors and genuineness of gifts. Accordingly the addition in respect of alleged gifts is to be upheld. In the result, all the appeal is dismissed.

Summary

Issues Involved:
1. Addition to income from gifts.
2. Levy of interest under sections 234A and 234B of the Income Tax Act.
3. Reassessment under Section 147 (dismissed for want of prosecution).

Detailed Analysis:

1. Addition to Income from Gifts:

The assessee challenged the addition of income from gifts received from various donors. The assessing officer questioned the genuineness of these gifts due to the lack of original gift deeds, the financial incapacity of the donors, and the absence of any relationship or occasion justifying such large gifts. The officer's discrete inquiries revealed that the donors were not financially capable of making such gifts, and the assessee failed to produce the donors for verification. The learned Commissioner (Appeals) upheld the assessing officer's findings, noting that the donors had meager incomes and no significant transactions in their bank accounts, suggesting that the gifts were not genuine.

The counsel for the assessee argued that the addition under Section 68 was invalid as the assessee did not maintain books of account. He cited case laws asserting that gifts should be considered genuine based on the donors' income tax assessments and affidavits. The learned DR countered that the statement of affairs prepared by the assessee implied the maintenance of books of account, thus justifying the addition under Section 68 or alternatively under Section 69. The Tribunal concluded that the gifts were not genuine due to the lack of relationship, occasion, and the financial incapacity of the donors, and upheld the addition as undisclosed income.

2. Levy of Interest under Sections 234A and 234B:

The assessee contested the levy of interest under Sections 234A and 234B of the Income Tax Act. The Tribunal held that the interest was mandatory and compensatory in nature, as the assessee failed to file the return of income or pay advance tax. Therefore, the levy of interest was upheld as per the provisions of the law.

3. Reassessment under Section 147:

The ground relating to reassessment under Section 147 was not pressed before the Tribunal and was dismissed for want of prosecution.

Conclusion:

The Tribunal dismissed all the appeals, upholding the addition of income from gifts as undisclosed income and the levy of interest under Sections 234A and 234B. The reassessment under Section 147 was dismissed for want of prosecution.