2013 (11) TMI 176 - AT - Income Tax

Unexplained cash credit u/s 68 of the Income Tax Act Onus of proof on the assessee to explain the case credit Held that - Appellant did not receive the gift amounts through banking channel as claimed by the learned counsel for the appellant in the first written submissions. The gift amounts have been received by the appellant by way of DDs and no nexus has been established between the source of funds for procuring these DDs by the donor and his earnings in the NRE bank account - Whether the above amounts received were applied for the purpose of making gift to the appellant, is not established as relevant bank account has not been furnished and no nexus between the receipt of above amounts and procurement of DDs for making gifts to the appellant has been established - No Balance Sheet or financial statement or cash flow statement of the donor has been placed on record to indicate exhaustive resources of funds of the donor and the corresponding investments - Authenticity of the certificate given by the M/s Palm General Trading LLC(a firm of assessee s brother, who is the donor) has not been established by the assessee - In the absence of supporting documents, the said certificate can only be considered as a self serving and bald certificate. Further the donor has failed to establish the nexus between the funds, if any, received by him from M/s Palm General Trading LLC and the impugned gifts Decided against the Assessee. Addition of Rs.2.00 lakhs made to cover up the deficiencies noticed in the books of account relating to the contract business Held that - It was also an admitted position that substantial expenses were not supported by independent cross verifiable vouchers and therefore, the disallowance out of the same was justified for the reason that the appellant failed to establish genuineness of all expenses and establish identity of payees - Assessing Officer was justified in making the disallowance which was also reasonable considering the total claim of the appellant - Assessee failed to furnish any material or explanation to contradict the findings of the tax authorities Decided against the Assessee.

Summary

Issues Involved:
1. Addition of claim of gift receipts - Rs. 35.00 lakhs.
2. Addition towards unverifiable nature of expenses - Rs. 2.00 lakhs.

Issue-wise Detailed Analysis:

1. Addition of Claim of Gift Receipts - Rs. 35.00 Lakhs:

The assessee, engaged in civil contract works, received a gift of Rs. 35.00 lakhs from his brother. During scrutiny, the Assessing Officer (AO) added this amount to the assessee's income due to lack of details such as the occasion for the gift and the creditworthiness of the donor. The AO noted that the donor was involved in business in UAE but did not provide sufficient evidence to support the gift.

The assessee argued that he had discharged his burden of proof under Section 68 of the Income Tax Act by proving the identity, creditworthiness, and genuineness of the transaction. He provided a confirmation letter, an affidavit from the donor, and a certificate from M/s Palm General Trading LLC. The assessee contended that these documents proved the donor's identity and creditworthiness, and the gift was received through banking channels.

However, the AO and the CIT(A) found that the gifts were received via demand drafts, not directly from the donor's bank account, and no nexus was established between the funds and the demand drafts. The CIT(A) also noted that the donor's financial statements or bank accounts were not provided to substantiate the claim. The certificate from M/s Palm General Trading LLC was deemed insufficient and self-serving without supporting documents.

The Tribunal upheld the CIT(A)'s decision, concluding that the assessee failed to establish the genuineness of the transaction and the creditworthiness of the donor. The addition of Rs. 35.00 lakhs was confirmed.

2. Addition Towards Unverifiable Nature of Expenses - Rs. 2.00 Lakhs:

The AO disallowed Rs. 2.00 lakhs from the assessee's expenses due to deficiencies in the books of account. The AO noted that purchases were not supported by proper bills and wages/labour charges were backed only by self-made vouchers. The closing work in progress was estimated, raising suspicion of inflated expenses.

The CIT(A) confirmed the addition, stating that the assessee carried forward substantial work in progress and claimed various expenses, including a net loss. The disallowance of Rs. 2.00 lakhs was deemed reasonable considering the lack of independent verifiable vouchers for substantial expenses.

The Tribunal found no reason to interfere with the CIT(A)'s decision, as the assessee failed to provide any material or explanation to contradict the findings. The addition of Rs. 2.00 lakhs was upheld.

Conclusion:

The Tribunal dismissed the appeal, confirming the additions of Rs. 35.00 lakhs for the gift receipts and Rs. 2.00 lakhs for unverifiable expenses, as the assessee failed to provide sufficient evidence to support his claims.