2016 (11) TMI 1160 - AT - Income Tax

Unexplained cash credit - addition u/s 68 - income from other sources - Held that - We have observed that the ld CIT(A) while disposing the appeal of the assessee, instead of examining the gift from the angel of section 68 of the Act, examined the same under section 56 of the Act. The ld CIT(A) concluded that cousin sister did not fall under the category of relative as per explanation attached with section 56(2) (v) and therefore the impugned gift is liable to be taxed under this section. As per our opinion the case of the assessee may fall under clause (vi) instead of clause (v) of sub section (2) of secion56. Since ld CIT(A) examined the case of assessee under section 56(2) (v) of the Act, without confronting the assessee hence we deem it appropriate to restore this part of ground to the file of ld CIT(A) to consider it afresh after giving the opportunity to the assessee and pass order in accordance with law. So far as, the cash deposit in United Bank of India & in HDFC Bank are concerned, the Revenue authority has not disputed the withdrawal of cash from her bank on earlier dates. The objection of Revenue is only that cash deposit varies at different occasions and frequent cash deposit itself establishing non-genuine character of the explanation offered. However, the contention of the assessee throughout the assessment proceedings and appellate stage was that, amount was withdrawn for the expenses to be incurred for marriage of her son. We think that there cannot be any evidence about the re-schedule of marriage, though there may be evidence of solemnisation of the marriage. Further, the objection of the Revenue is that if the amount was not utilized, whole amount of withdrawal should have been deposited immediately. Neither the AO nor the CIT (A) worked out the difference of amount withdrawn and the subsequent deposit. The grounds of addition on account of unexplained cash credit when the assessee has categorically pleaded that the cash was withdrawn for specific utilization and the same was deposited is based only on hypothetication of the Revenue authorities. Thus, the addition on account of cash credit is deleted.

Summary

Issues:
Appeal against CIT(A) order for AY 2006-07 - Disallowance of gift and unexplained cash credit.

Analysis:
1. The appeal was directed against the CIT(A) order for AY 2006-07 where the AO disallowed a gift of ?11,00,000 and added unexplained cash credit of ?5,49,500. The assessee received a gift of ?10,00,000 from the brother, supported by bank statements and donor's bank details from Dubai. Another ?1,00,000 was received from the son for which proof was provided. The AO questioned the genuineness of the transactions.

2. The AO required the assessee to prove creditworthiness, genuineness, and relationships with donors. The assessee provided explanations and documents, but the AO remained unconvinced. The CIT(A) upheld the AO's decision, citing lack of evidence regarding the marriage purpose for cash withdrawals and deposits.

3. The ITAT observed that the identities of the donors were not disputed, and the creditworthiness was established. Documents like bank certificates and confirmations supported the genuineness of the transactions. The addition of ?1,00,000 was deleted due to lack of grounds for rejection. The ITAT disagreed with the CIT(A)'s classification under section 56(2)(v) and suggested a review under section 56(2)(vi) instead.

4. Regarding cash deposits, the Revenue's objection was based on variations in deposits and lack of immediate re-deposits. The ITAT found the explanations for cash withdrawals for the son's marriage expenses reasonable and deleted the addition of ?5,49,500. The appeal was allowed, and the gift of ?10,00,000 was sent back to CIT(A) for fresh consideration, while the additions for the gift of ?1,00,000 and cash credit were deleted.