2012 (7) TMI 216 - AT - Income Tax

Additions made by AO u/s 68 - CIT(A) deleted the additions - Held that - The donor was real sister of donee and she received the amount from her NRI son who was doing business in Hong Kong with a proper license of business and the assessee not only established identity, creditworthiness of the donor but also established her source of funds showing her genuine capacity to donate Rs. 10 lakh to the donee assessee - thus establishing genuineness of gift it cannot be treated to be from undisclosed sources u/s 68 - in favour of assessee.

Summary

Issues Involved:
Appeal against deletion of addition under section 68 of the Income Tax Act for AY 2007-08 based on gift received from a sister and her NRI son.

Detailed Analysis:

1. Issue 1: Deletion of Addition under Section 68
- The Assessing Officer (AO) added Rs. 10,00,000 to the income of the assessee under section 68 of the Income Tax Act for the Assessment Year 2007-08 due to a lack of satisfactory explanation regarding the source of funds.
- The CIT(A) deleted the addition after the appellant provided evidence of the gift received from his sister, including bank statements, gift deed, and documents related to the NRI son who transferred the funds.
- The CIT(A) held that the appellant had proven the movement of funds from the NRI son to the sister and then to the appellant, discharging the onus placed upon him.
- The CIT(A) emphasized that the appellant was not required to prove the source of the source, and the addition made by the AO was unjustified based on the evidence presented.

2. Issue 2: Legal Precedents and Interpretation
- The AO relied on the judgment in the case of Sajjan Das & Sons vs CIT, which highlighted the importance of establishing the genuineness of gifts beyond mere identification and banking transactions.
- The appellant distinguished the present case from Sajjan Das & Sons, emphasizing the familial relationship between the donor and the donee, along with the documented proof of the source of funds.
- Reference was also made to the Supreme Court judgment in P. Mohankala vs CIT, which outlined the requirements for invoking section 68 of the Income Tax Act and the burden of proof on the assessee to provide a satisfactory explanation for credits in their books.

3. Conclusion and Decision
- The Appellate Tribunal upheld the CIT(A)'s decision to delete the addition, noting that the appellant had successfully demonstrated the genuineness of the transaction and the creditworthiness of the donor.
- The Tribunal found no merit in the Revenue's appeal and dismissed it, citing the lack of infirmity or perversity in the CIT(A)'s order.
- The judgment emphasized the specific facts of the case, including the familial relationship between the donor and donee, as crucial in determining the validity of the addition under section 68.

This comprehensive analysis highlights the legal nuances and factual considerations that led to the Tribunal's decision to dismiss the Revenue's appeal against the deletion of the addition under section 68 of the Income Tax Act.