2016 (12) TMI 113 - AT - Income Tax

Unexplained investment made in recurring deposits and interest thereon - Held that - Revenue is not denying the fact that the recurring deposit account is in the name of both the assessee and his wife and the deposit is only of ₹ 67,500/-. The assessee has shown withdrawals of ₹ 1,08,835/-. Even if we consider that this amount is entirely used for the house hold expenses still deposit could have been presumed to be made out of the income of the assessee s wife who earned income of ₹ 2,63,930/- and taxable income of ₹ 73,930/- during the current year which is more than the investment of ₹ 67,500/- made in recurring deposits. Hence, we hold that the assessee has sufficient source of income for the deposits of ₹ 67,500/- made in the recurring deposits account jointly held with his wife. Hence, we delete the addition - Decided in favour of assessee Adition towards unexplained cash credit - Held that - We are of the view that the assessee has not substantiated his claim with evidences before the lower authorities or even before us. Hence, we sustain the orders of the lowers authorities - Decided against assessee Addition of gift received by assessee from his father - genuity of gift - Held that - It is not denied by the revenue that the parents of the assessee are owning agricultural land to the extent of 10 acre (39 hectors without water facilities 12 hectors with water facility). Therefore, it cannot be completely brushed aside that there is no creditworthiness to the donor to give the gift. We agree with the assessee that the gift deed declaration of gift made by his mother cannot be treated as non genuine since the contention of the assessee that this gift was given by his father as his last wish and the cash was not proved to be false. Coming to the creditworthiness of the creditor /donor since donor is having sufficient wet land and dry land it cannot be doubted earning of agricultural income. The creditworthiness cannot be doubted. Both the parents of the assessee are passed away and therefore the assessee may not be in a position to establish the fact of the parents cultivating the land when they were alive. Therefore, taking the totality of facts and circumstances into consideration and in view of the smallness of the gift we cannot hold that the gift is not genuine. In the circumstance, we hold that the gift is genuine and addition on account of gift is deleted. - Decided in favour of assessee

Summary

Issues Involved:
1. Sustaining the addition of ?82,849/- as unexplained investment.
2. Sustaining the addition of ?26,931/- towards unexplained cash credit.
3. Sustaining the addition of ?4 lakhs received as a gift from the assessee's father.

Issue 1: Sustaining the Addition of ?82,849/- as Unexplained Investment:

The assessee, an individual deriving income from salary and consultancy charges, filed a return of income declaring ?1,84,360/-. The assessment was completed, determining the income at ?8,43,782/-. The AO added ?82,849/- as unexplained investment, representing ?67,500/- in recurring deposits and ?15,349/- interest thereon. The assessee claimed the investment was from past savings and withdrawals. However, the AO rejected this, noting the absence of an opening cash balance in the cash flow statement, insufficient balance for household expenses, and no supporting evidence for the wife's contribution to the recurring deposits. The CIT(A) upheld the addition, citing a lack of evidence linking the wife's income to the deposits and insufficient withdrawals to cover both household expenses and the investment.

Upon review, it was determined that the recurring deposit account was jointly held by the assessee and his wife, who had a taxable income of ?73,930/- and total income of ?2,63,930/-. Given these facts, it was concluded that the assessee had sufficient source of income for the deposits. Therefore, the addition of ?82,849/- was deleted, and this ground of appeal was allowed.

Issue 2: Sustaining the Addition of ?26,931/- towards Unexplained Cash Credit:

The AO made an addition of ?26,931/- as unexplained cash credit, comprising ?12,000/- from excess cash deposited in petty cash and ?14,931/- from the difference in new and old car loan amounts from HDFC. The assessee claimed the amounts were credited partly in the SB account and partly received in cash. However, the AO and CIT(A) rejected these claims due to a lack of documentary evidence.

Upon review, it was found that the assessee failed to substantiate the claims with evidence. Therefore, the addition of ?26,931/- was sustained, and this ground of appeal was rejected.

Issue 3: Sustaining the Addition of ?4 Lakhs Received as a Gift from the Assessee's Father:

The AO noticed a credit of ?4 lakhs in the assessee's capital account, claimed as a gift from his father. The assessee provided a gift declaration from his mother, but the AO noted discrepancies, such as the gift deed being dated after the father's death and the lack of details proving the transaction's genuineness and the donor's creditworthiness. The CIT(A) upheld the addition, agreeing with the AO's observations.

Upon review, it was noted that the assessee's parents owned significant agricultural land, providing a plausible source for the gift. The initial burden of proving the genuineness, creditworthiness, and identity of the donor was discharged by the assessee through the gift deed and 7/12 extract of the land. Given the circumstances and the smallness of the gift, it was concluded that the gift was genuine. Therefore, the addition of ?4 lakhs was deleted, and this ground of appeal was allowed.

Conclusion:

The appeal filed by the assessee was partly allowed, with the deletion of additions related to the unexplained investment of ?82,849/- and the gift of ?4 lakhs, while the addition of ?26,931/- towards unexplained cash credit was sustained.