2024 (4) TMI 1028 - AT - Income Tax

Unexplained Cash Credit u/s 68 - Authenticity of the Will - sale consideration claimed to have been received by the appellant from sale of gold ornament and diamonds, which were given to him by his late grandmother by way of a will - onus to prove with regard to creditworthiness and genuineness of the transactions - AO observed that the source of increase in capital of the assessee through the sale of jewellery and diamonds is not verified and explained - THELD THAT - It is clear from a bare reading of the Will that there are several inconsistencies and contradictions in it. Firstly, the age of the testator is stated to be 75 years in para 1 whereas it is over 70 years in para 2. The testator unlikely to make such glaring mistake when she states that she was mentally fit and healthy and that she has not executed any other will or testament - Though she had 4 sons and 2 daughters, she has not given anything to her 3 sons and 2 daughters in this Will by stating that she had earlier given to all other daughters and sons (except father of the assessee) whatever she and her husband wanted during their hard times as well as on various occasions and festivals. However, no details regarding the gifted assets or their values to other children have been specified, unlike the case of the appellant. She has gifted all her shares and other properties at Sl. Nos.1 and 2 of the Will to her son Sevantilal. The value of assets given to the father of assessee is also not high. She has ,however, gifted gold ornament weighing about 738 grams and 187 carats of diamonds to her grandson, Milan Sevantilal Seth (appellant herewith). It is beyond the realm of human probability that she gifted/ gave away such high value gold jewellery and diamonds to her grandson but there is no evidence of any such gift to her own children (3 sons 2 daughters). There are also no supporting documents to prove the source of the aforesaid assets, since she is a housewife with no regular source of income. Also, there is no independent evidence apart from the Will which can prove that she was in possession of the impugned assets at the time of creation of the will. It is also not clear as to why the receipt of gold jewellery and diamonds of such high value was never shown either in the Income-tax returns or the Wealth-tax returns of the assessee for a very long period of 17 years upto AY 2017-18. Neither any evidence of these valuables in the income-tax details of the grandmother has been produced before us. The reasons for not showing such high value of the assets could not be satisfactorily explained by the Ld. AR. No corroborative evidence has been furnished by the Ld. AR to support the case of the appellant. Shares have also been gifted but no details regarding the quantity and value of shares is mentioned. No DMAT account or any evidence from Stock Exchange was produced to support the Will . Another very important fact is absence of probated will in this case. On a specific question by the Bench, the Ld. AR fairly admitted that there is no probate in the present case. Probate is a legal process of proving a will in a Court and confirming its validity. In absence of the probate and existence of overwhelming surrounding circumstances discussed above, the explanation of the appellant regarding the nature and source of the impugned gold jewellery and diamonds is not prima facie satisfactory. In view of the facts discussed above, we agree with the concurrent findings of the AO and Ld. CIT(A) that the said will deed is concocted and cannot be relied upon. A bare reading of section 68 of the Act reposes in the AO the jurisdiction to enquire from the assessee the nature and source of the sum credited in his books of account. If the explanation given by the assessee is found not to be satisfactory, further inquiries can be made by the AO himself, both in regard to the nature and source of the income credited by the assessee in the books of account. The section accords statutory recognition to the principle that cash credits which are not satisfactorily explained, or not at all explained, might be assessed to be tax as income of the assessee. It is well established that identity of the creditor, creditworthiness or capacity of the creditor to advance the money and genuineness of the transactions are the three ingredients which are required to be cumulatively satisfied by the assessee to escape the mischief, the provisions of section 68 of the Act. The assessee has not been able to properly explain and satisfy the aforesaid conditions so as to discharge the onus cast on it. The creditworthiness of the will maker and genuineness of the transaction has not been proved for the reasons that assessee s grandmother was a housewife with no regular sources of income. No evidences have been produced to show that she was in possession of so many assets to give to the appellant and her six children. The Will deed appears to be a concocted story as no specific details/quantification is mentioned in it of the assets given to other children. Shares have also been gifted but no details regarding the quantity and value of shares is mentioned. No DMAT account or any evidence from Stock Exchange was produced to support the Will. There is also inordinate and intentional delay in submission of the details. As the Will was made in January, 1999 but no Income-tax or Wealth-tax details were furnished for 17 years long upto 2017-18 or for the prior period to prove the existence of the gold jewellery and diamonds. The officially authenticated copy of a probated will is not available with the appellant. Thus we hold that the onus with regard to creditworthiness and genuineness of the transactions has not been discharged satisfactorily as mandated in section 68 of the Act. Therefore, the addition made by the AO and upheld by the Ld. CIT(A) is sustained and the grounds are dismissed.

Summary

Issues Involved:
1. Unexplained Cash Credit u/s 68 of the Income-tax Act, 1961.
2. Validity and authenticity of the "Will" as a source of acquisition of jewellery and diamonds.

Summary:

Issue 1: Unexplained Cash Credit
The appellant filed an appeal against the order u/s 250 of the Income-tax Act, 1961, passed by the CIT (A), NFAC, Delhi, for AY 2017-18. The AO added the entire sale consideration of Rs. 85,60,125/- shown in the computation of capital gain as unexplained cash credit u/s 68 of the Act. The AO observed that the source of increase in capital through the sale of jewellery and diamonds was not verified and explained. The AO rejected the explanation provided by the assessee, noting inconsistencies in the "Will" and the lack of supporting evidence for the possession of high-value jewellery and diamonds by the testator, who was a housewife with no visible source of income. The AO also cited information from the ADIT (Investigation), Mumbai, indicating that the purchases were not authenticated, leading to the conclusion that the sale bill was bogus. The CIT(A) upheld the AO's decision, stating that the appellant could not rebut the findings during the appellate proceedings.

Issue 2: Validity and Authenticity of the "Will"
The appellant claimed that the jewellery and diamonds were inherited from his grandmother as per a "Will" dated 15.01.1999. The AO found several inconsistencies in the "Will," such as the testator's age being mentioned as both 75 and 70 years. The AO also questioned the plausibility of a housewife possessing such high-value assets without any visible source of income. The CIT(A) observed that the appellant did not provide any independent evidence to support the "Will" and its content. The Tribunal also found the "Will" to be concocted and unreliable, noting the absence of a probated will and the lack of corroborative evidence to prove the existence of the assets mentioned in the "Will." The Tribunal upheld the AO's and CIT(A)'s findings, stating that the appellant failed to satisfactorily explain the nature and source of the jewellery and diamonds.

Conclusion:
The Tribunal dismissed the appeal, agreeing with the lower authorities that the appellant failed to prove the genuineness of the "Will" and the source of the jewellery and diamonds. The addition of Rs. 85,60,125/- as unexplained cash credit u/s 68 of the Act was upheld. The Tribunal emphasized the importance of corroborative evidence and the application of the theory of human probability in determining the taxability of an event.