2012 (12) TMI 445 - AT - Income Tax

Unexplained gifts u/s 68 Gifts given to the minor child of the assessee - Assessee had furnished gift declaration, copies of ITR s along with computation of income in respect of donor - AO considered that gift as unexplained as result of the failure to produce the concerned donors in order to establish their creditworthiness and genuineness Held that - As the said documentary evidence was sufficient to discharge the primary onus, which was shifted to the AO and in the absence of any adverse material brought on record by the AO to doubt or dispute the genuineness of the relevant gifts, the said gifts cannot be treated as unexplained cash credits u/s.68 merely because the donors were not produced by the assessee. No enquiry whatsoever was made by the AO either with the concerned donors or even with their AO in order to ascertain the genuineness of gifts. Issue decides in favour of assessee Addition on account of low withdrawal of house-hold expense Held that - As the AO has estimated the household expenses of the assessee at Rs. 25,000/- per month after taking into consideration all the relevant facts and same has been accepted by the assessee also. Issue decides in favour of revenue

Summary

Issues:
1. Treatment of unexplained gifts received by the assessee's minor children.
2. Addition of low withdrawals for personal and household expenses.

Analysis:
Issue 1: Treatment of Unexplained Gifts
The appellant, an individual assessed to tax, was found to have minor children who received gifts totaling Rs. 15,90,000 from various persons. Despite providing gift deeds and income tax returns of the donors, the AO treated the gifts as unexplained due to the failure to produce the donors to establish their creditworthiness and genuineness. The Ld. CIT (A) upheld the addition citing lack of love and affection between donors and recipients, uniformity in gift declarations, and donors' low income status. The appellant argued that the documentary evidence submitted was sufficient to discharge the onus of explaining the gifts under sec. 68. The Tribunal agreed, noting that the evidence contained donor details and no adverse material was presented to doubt the gifts' genuineness. As the AO did not conduct any inquiry with donors or their assessing officers, the Tribunal held that the gifts cannot be treated as unexplained cash credits under sec. 68. Consequently, the addition made by the AO was deleted, and ground no. 3 of the appeal was allowed.

Issue 2: Addition of Low Withdrawals
The AO estimated household expenses at Rs. 25,000 per month, which the appellant accepted. However, the appellant only showed a withdrawal of Rs. 1,13,849 for household expenses, leading to an addition of Rs. 1,86,151 as low withdrawal. The Ld. CIT (A) confirmed this addition, stating that the estimate was justified based on discussions during assessment proceedings. The Tribunal found the addition appropriate, upholding the Ld. CIT (A)'s decision. Ground no. 4 of the appeal was dismissed. Overall, the appeal was partly allowed by the Tribunal, with the addition on low withdrawals upheld and the addition on unexplained gifts deleted.