2013 (8) TMI 731 - AT - Income Tax

Income from undisclosed sources - Gift received through NRE account - Onus to prove the genuineness of gift - CIT sustained addition - Held that - A gift normally connotes a transaction where a person parts his own property to another without consideration and for love and affection. It is rare to come across a person who makes a gift of money to another out of the borrowed funds - merely because a gift has come through banking channels and from identifiable sources would not be sufficient to discharge the burden of the assessee in respect of cash credit shown to be a gift, unless inter-alia, the credit-worthiness of the donor was also proven. In the present case, the alleged donor, Smt. Amarjit Kaur, is certainly not shown to be credit worthy since she had no indepdent sources of income and even the allowance received from the UK Govt. was not sufficient to cover the alleged gifts. The claim of taking a loan from Sh. Jatinder Kumar Sidhu is doubtful since the transaction was admittedly in cash and the claim has also been made at a very late stage. The transaction is also not verifiable. Further, as noted earlier, the claim of making gift out of the borrowed money is against normal human probability. The contention that the assessee had no other source of income is not relevant as far as addition u/s 68 of the Act is concernd, since this is a deeming provision which treats unexplained cash credit as the assessee s income - Following decision of Yash Pal Goel v. CIT 2009 (1) TMI 58 - PUNJAB AND HARYANA HIGH COURT - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs.4,69,000/- treating gifts received as income from undisclosed sources.
2. Creditworthiness of the donor and genuineness of the transaction.
3. Arbitrary, illegal, illogical, and unwarranted addition without considering the facts and circumstances.

Issue-wise Detailed Analysis:

1. Addition of Rs.4,69,000/- treating gifts received as income from undisclosed sources:
The appeal concerns the confirmation of Rs.4,69,000/- added as income from undisclosed sources. The assessee received gifts of Rs.2,34,000/- and Rs.2,35,000/- from his sister-in-law, Smt. Amarjit Kaur, settled in the UK. The gifts were credited to the assessee's capital account in M/s. Gupta Brothers. The Assessing Officer (AO) reopened the assessment under Section 147, suspecting the genuineness of these gifts. Despite the submission of income tax computation sheets and confirmations, the AO was not convinced of the creditworthiness of Smt. Amarjit Kaur, noting inconsistencies in her statements and the lack of evidence regarding the source of funds.

2. Creditworthiness of the donor and genuineness of the transaction:
The AO noted that Smt. Amarjit Kaur had limited income from the UK government and no other independent source of income. During the assessment, she could not provide details of her bank accounts or the amounts deposited. The AO observed that the gifts were facilitated by her husband, Sh. Ram Gopal, and involved funds allegedly borrowed from Sh. Jatinder Kumar Sidhu, which was not substantiated with credible evidence. The AO concluded that the assessee failed to prove the donor's capacity and the genuineness of the gifts, citing relevant case laws to support the decision.

3. Arbitrary, illegal, illogical, and unwarranted addition without considering the facts and circumstances:
The assessee argued that the addition was arbitrary and did not consider the facts. However, the CIT(A) and the Tribunal found no infirmity in the AO's decision. The Tribunal emphasized that a genuine gift involves parting with one's property without consideration, which was not the case here. The donor's lack of substantial means and the involvement of borrowed funds raised doubts about the genuineness of the gifts. The Tribunal upheld the AO's findings, noting that the creditworthiness of the donor was not proven, and the transactions appeared to be business considerations rather than genuine gifts.

Conclusion:
The Tribunal dismissed the appeal, affirming the CIT(A)'s order and the AO's decision to treat the gifts as income from undisclosed sources. The judgment emphasized the importance of proving the donor's creditworthiness and the genuineness of the transaction, which the assessee failed to do. The appeal was dismissed based on the detailed analysis and relevant legal precedents.