2013 (12) TMI 1310 - HC - Income Tax

Genuineness of gift - Held that - response the assessee had submitted a part of transcript of NRE account of Dr. Chitranjan Jain with the City Bank Delhi. As a proof with regard to creditworthiness of Dr. Chitranjan Jain, a copy of income tax return filed in USA was also enclosed - The brother and his wife has income of 1,16,680 in previous assessment year - When the income of the donor has not been disbelieved by the Assessing Authority then payment of meager amount of Rs. 10,00000/- should not be doubted - Merely because the entire transcript of NRE account was not furnished shall not make out a case to disbelieve the amount paid - Assessing authority was not seized with the case of donor to assess his income under the Income Tax Act - He was only to verify the genuineness of transaction and creditworthiness - Decided against Revenue.

Summary

Issues:
Challenge to deletion of addition of Rs. 10,00,000 as gift in income tax assessment for Assessment Year 1996-97.

Analysis:
The case involved an appeal under Section 260-A of the Income Tax Act, 1961, regarding the genuineness of a gift of Rs. 10,00,000 made to the assessee by his brother. The Assessing Authority initially added the amount as income from other sources due to lack of sufficient evidence regarding the creditworthiness of the donor and the genuineness of the gift. However, the CIT (Appeal) reversed this decision, accepting the income tax return filed by the assessee as proof of creditworthiness. The CIT Appeal also noted that the donor had substantial funds in his NRE account and had filed genuine income tax returns in the USA. The ITAT upheld this decision, emphasizing the creditworthiness and genuineness of the transaction.

The appellant challenged the concurrent findings of the CIT Appeal and ITAT, arguing that only a partial transcript of the N.R.E account was provided, raising doubts about the transaction. The appellant contended that the burden of proof regarding creditworthiness lay with the assessee, requiring comprehensive evidence.

In response, the respondents reiterated the findings of the CIT Appeal and ITAT, asserting the absence of perversity or illegality in their decisions. The respondents emphasized the sufficiency of the evidence presented to establish creditworthiness and genuineness.

The Division Bench referred to a previous judgment emphasizing that under Section 68 of the Income Tax Act, the burden lies on the assessee to prove the nature, source, identity, genuineness, and creditworthiness of any credited amount. The Court highlighted the importance of proving creditworthiness in such cases.

The Court analyzed the definition of "creditworthy" from legal dictionaries, emphasizing the financial soundness required for a lender to extend credit. The Assessing Authority was tasked with determining the creditworthiness of the donor based on the evidence presented, without arbitrary or mechanical judgment.

Ultimately, the Court upheld the decisions of the CIT Appeal and ITAT, concluding that the evidence provided, including genuine income tax returns of the donor, sufficiently established the creditworthiness and genuineness of the gift transaction. The Court dismissed the appeal, ruling in favor of the assessee against the revenue, with no order as to costs.