2006 (4) TMI 198 - AT - Income Tax

Addition under s. 68 in respect of gifts received from the close relatives and family friends - HELD THAT - There is no dispute to the well settled legal proposition that not only identity and genuineness of the gifts is required to be proved, but the creditworthiness of the donor is also required to be established. In the instant case, we found that in respect of all these three donors, not only identity and genuineness was established, but also the creditworthiness to advance the impugned amount of gifts. Since the gifts were given by the close relatives, the essential ingredient of valid gift, that it should be out of natural love and affection has also been fulfilled. We, therefore, do not find any infirmity in the order of CIT(A) for deleting addition in respect of gifts and loan amount which were undisputedly not received during the year under consideration but was received in other years and also the three gifts received from the close relatives whose statements were recorded and were found to be persons of sufficient means by CIT(A). We also found that on the basis of information furnished before the lower authorities, Ishwar Dass who has given a gift was elder brother-in-law of assessee, who was found to be man of sufficient means for advancing gift. We, therefore, do not find any reason to interfere with the findings recorded by the CIT(A) for deleting the impugned addition. In the result, appeal of both the assessee and Revenue are dismissed.

Summary

Issues involved: Cross-appeals filed by Revenue and assessee against CIT(A)'s order for asst. yr. 1995-96 u/s 143(3) r/w s. 148.

Details of the Judgment:

Issue 1: Addition under s. 68 for gifts and loans:
The AO added Rs. 90,000 under s. 68 for gifts received, while deleting Rs. 4,10,000 for alleged gifts and Rs. 76,000 for a loan. The AO questioned the genuineness of gifts and loans based on donors' income levels. The CIT(A) deleted the addition of Rs. 3,66,000 received in earlier years, and upheld Rs. 90,000 for gifts in the relevant year. The CIT(A) found gifts from close relatives genuine and deleted additions for some donors.

Issue 2: Disputed gifts and loans:
The CIT(A) deleted part of the gifts received in earlier years, confirming Rs. 90,000 for gifts in the relevant year. The assessee argued that primary onus regarding donors' identity and genuineness was met. The Revenue contended that gifts were unproven due to absent donors. The Tribunal noted detailed cash flow statements and affidavits provided by the assessee. The CIT(A) correctly deleted additions not related to the relevant year and upheld gifts from close relatives based on their capacity to give.

Conclusion:
The Tribunal dismissed both the assessee and Revenue's appeals, upholding the CIT(A)'s decision regarding the disputed gifts and loans. The Tribunal found no reason to interfere with the findings that gifts from close relatives were genuine and adequately explained, leading to the deletion of the impugned additions.