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2014 (10) TMI 179 - AT - Income TaxUnexplained gifts - Whether the CIT(A) has erred in deleting the addition made by the AO on account of unexplained gift without appreciating the facts of the case and deficiencies pointed out by the AO - Held that - The AO has demonstratively narrated the inconsistencies, contradictions in the statements and improbabilities in the transaction of gifts - The AO found that bank accounts reflected that the gifts were immediately preceded by depositing the amount in donors respective accounts - Mere identity of donors and paper trail cannot be the conclusive factor while accepting the gifts as genuine following the decision in Subhash Chand Verma vs. CIT 2007 (7) TMI 289 - PUNJAB AND HARYANA HIGH COURT - the assessee failed to discharge the onus to explain the genuineness of the gifts which the AO had right/power to objectively examine and it cannot be substituted merely by a paper trail the gift transactions are riddled with improbabilities and defy logic of normal human nature and conduct - Thus the gifts in question suffer from improbabilities which cannot be held as normal human conduct and the AO had rightly held the gifts to be non-genuine and taxed as income thus, the order of the CIT(A) is set aside Decided in favour of revenue.
Issues Involved:
1. Deletion of addition of Rs. 9,25,000/- made by the Assessing Officer (AO) on account of unexplained gifts. Issue-wise Detailed Analysis: 1. Deletion of Addition of Rs. 9,25,000/- on Account of Unexplained Gifts: Facts of the Case: The assessee, a proprietress dealing in cotton cloth manufacturing and refined lubricating oil, received gifts totaling Rs. 9,25,000/- from four donors. The AO questioned the relationship, genuineness, and creditworthiness of the donors. The donors were produced, and their statements were recorded, revealing contradictions and inconsistencies. AO's Observations: - The bank accounts showed amounts deposited just before the gifts. - Donors were creditors of the assessee, earning interest from loans, and the gifts were made after receiving loans back. - The interest income was a major source of income for the donors. - No satisfactory explanation was provided for gifting their entire capital. - Gift declarations lacked witness signatures, making them invalid. - No significant occasion or ceremony justified the gifts to a wealthy donee. - Gifts were not made voluntarily; they were influenced by the wishes of others or expectations of reciprocal gifts. - Donors failed to provide corroborative evidence of their creditworthiness. CIT(A)'s Findings: - The AO unnecessarily emphasized creditworthiness. - The AO's adverse inferences about the source, household expenses, and intimacy between donor and donee were not conclusive. - The assessee discharged her onus by providing bank statements, income tax records, and gift declarations. - Reliance was placed on the case of CIT vs. Padam Singh Chouhan, where blood relation was not required to establish the genuineness of gifts. - The CIT(A) deleted the addition, concluding that the assessee submitted sufficient documentary evidence. Revenue's Argument: - The case involved reverse gifts where poor donors gifted a wealthy donee. - The AO's observations demonstrated the lack of a warm relationship and the improbability of the gifts. - The donors failed to provide evidence of their creditworthiness. - Reliance was placed on Sumati Dayal vs. CIT and CIT vs. P. Mohankala, emphasizing the burden on the assessee to prove the genuineness of gifts. Assessee's Argument: - Relied on the case of CIT vs. Padam Singh Chouhan, arguing that close relationship was not necessary for genuine gifts. - Cited the case of CIT vs. Bhanwar Lal Sharma, where the Tribunal accepted the genuineness of gifts based on documentary evidence. Tribunal's Findings: - The AO's observations and inconsistencies in the statements were valid. - Mere identification of donors and paper trails were insufficient to prove the genuineness of gifts. - The assessee failed to discharge the onus of proving the genuineness of the gifts. - The gifts defied normal human conduct and were riddled with improbabilities. Conclusion: The Tribunal reversed the CIT(A)'s order and upheld the AO's decision to add the amount of Rs. 9,25,000/- to the assessee's income, concluding that the gifts were non-genuine. Result: The appeal of the Revenue was allowed, and the order was pronounced in the open Court on 26-09-2014.
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