2017 (3) TMI 1470 - AT - Income Tax

Addition u/s. 68 - gifts received by the assessee - Held that - The bank accounts from which the stated gifts have been given are NRE accounts. All deposits in the said accounts can be made only out of the earnings made outside the country. In any case, no cash deposits have been found in the said accounts. Further there are enough deposits in the said accounts to make the impugned gifts. When the availability of funds has been adequately proved, the capacity of the donors to make the gifts also stands proved. By asking the assessee to file copies of the Income Tax Returns and also their bank statements in their country of residence, the Revenue is indulging in the exercise of verifying the source of the source which is settled law, cannot be done in this case. The onus to explain the credit being on the assessee, reflects the general rule of law of evidence codified in section 106 of the Evidence Act, 1872, as per which the source of income is a matter with the exclusive knowledge of the assessee which he has to prove and demonstrate. It is for this reason only that the source of source, which is not within the knowledge of the assessee at all, is not required to be proved by the assessee. The addition we find has been made merely on the basis of suspicion, without any iota of evidence to even lead to the fact that the amount received as gifts were actually the assessees income only. This cannot be the basis of making an addition under a deeming provision, section 68 in the present case. We reject the contention of the learned D.R. that the assessee has failed to prove the capacity and genuineness of the transaction by not filing the copies of income tax returns as also copies of bank statements of the donors in their countries of residences. In view of the above, we hold that the assessee has adequately discharged its onus of proving identity of the donor, capacity of the donor as also the genuineness of the transaction being in the nature of gift received from brothers and, therefore, there is no reason to make any addition under section 68 on account of unexplained credit. The addition so made of ₹ 45,00,000/-, is therefore, deleted. - Decided in favour of assessee.

Issues Involved:
1. Addition of ?45,00,000 under Section 68 of the Income Tax Act, 1961.
2. Justification of the genuineness of the gifts received.
3. Proof of the relationship between the donor and the assessee.
4. Capacity of the donor to give the gift.
5. Requirement of documentary evidence to substantiate the transaction.

Issue-wise Detailed Analysis:

1. Addition of ?45,00,000 under Section 68 of the Income Tax Act, 1961:
The primary issue in the appeal was the addition of ?45,00,000 to the assessee's income under Section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) treated the gifts received by the assessee from her brothers as unexplained money, leading to the addition. The AO's decision was based on the lack of documentary evidence provided by the assessee to substantiate the gifts.

2. Justification of the genuineness of the gifts received:
The assessee argued that she had discharged her onus of explaining the gifts received by filing confirmations from the donors, bank statements, copies of passports, and confirmation letters from the bank. The assessee contended that the gifts were genuine and received from her real brothers. The CIT (Appeals) rejected this contention, stating that there was no evidence of any past gifts, no occasion for the gifts, and no reciprocal gifts from the assessee to her brothers. The CIT (Appeals) concluded that the genuineness of the gifts was not established.

3. Proof of the relationship between the donor and the assessee:
The relationship between the assessee and the donors was a critical factor in the case. The assessee provided copies of the donors' passports, which showed the names of their parents, thus proving the relationship. The CIT (Appeals) doubted the relationship, stating that there was no evidence to substantiate it. However, the Tribunal found that the relationship was adequately proved by the identical names of the parents in the passports and the confirmations from the donors.

4. Capacity of the donor to give the gift:
The capacity of the donors to give the gifts was another crucial aspect. The assessee provided bank statements showing sufficient balances in the donors' NRE accounts to make the gifts. The CIT (Appeals) and the AO required further evidence, such as copies of the donors' income tax returns and bank statements from their countries of residence. The Tribunal found that the balances in the NRE accounts were sufficient to establish the donors' capacity to make the gifts. The Tribunal also noted that the gifts were made from the opening balances in the NRE accounts, negating any link to the assessee's income for the current year.

5. Requirement of documentary evidence to substantiate the transaction:
The AO and the CIT (Appeals) required additional documentary evidence, including income tax returns and foreign bank statements of the donors. The Tribunal held that the assessee had adequately discharged her onus by providing the necessary documents, such as passports, NRE account statements, and bank confirmations. The Tribunal emphasized that the requirement to prove the source of the source was not applicable in this case, as the NRE accounts' balances were sufficient to establish the capacity and genuineness of the gifts.

Conclusion:
The Tribunal concluded that the assessee had adequately proved the identity of the donors, their relationship with the assessee, the genuineness of the gifts, and the capacity of the donors to make the gifts. The Tribunal found no tangible material with the Revenue to cast doubt on the genuineness of the gifts. Consequently, the addition of ?45,00,000 under Section 68 was deleted, and the appeal of the assessee was allowed.

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