2018 (11) TMI 1321 - AT - Income Tax

Addition of unexplained gift -assessee was not able to place on record any material evidence to establish the genuineness of the aforesaid cash gift - AR contends that the aforesaid gift from father to the assessee cannot be taxed in the hands of the assessee in terms of Sec. 56(2)(viic) - Held that - On a careful perusal of Sec. 56(2)(viic) and the proviso thereto, it of the view that the provisions thereof would not apply as the assessee has failed to prove with material evidence that he had actually received a cash gift of ₹ 10.50 lakhs from his father (i.e. relative); apart from the claim made to that effect. While it is true a gift deed dt.25.9.2017 was filed in this regard before the AO, the same is only a self serving documents bereft of corroboration by any material evidence to establish both the credit worthiness and capacity of the father to give a cash gift of ₹ 10.50 lakhs and in the absence of any corroborative material evidence in this regard, I am of the considered view and hold that the impugned orders of the authorities below on this issue are upheld and the assessee s claims, being bereft of any merit, are to be rejected. - Decided in favour of revenue

Summary

Issues:
Assessment of unexplained gift from father for taxability under Income Tax Act, 1961.

Analysis:

Issue 1:
The primary issue in this case revolves around the addition of a cash gift of ?10,50,000 received by the assessee from his father, which was deemed unexplained by the Assessing Officer and subsequently upheld by the CIT (Appeals).

Analysis:
The assessee, an individual engaged in business, declared a total income of ?24,06,300 for the Assessment Year 2015-16. The Assessing Officer concluded the assessment under Section 143(3) of the Income Tax Act, determining the assessee's income at ?34,56,300. This adjustment was made as the Assessing Officer found the assessee unable to establish the credit worthiness and capacity of his father to give the cash gift, thus bringing the unexplained gift to tax in the assessee's hands.

Issue 2:
The appeal before the Appellate Tribunal challenges the order of the CIT (Appeals) dismissing the assessee's appeal against the addition of the cash gift from the father.

Analysis:
The grounds raised in the appeal contest the CIT (Appeals) decision, arguing that the addition of ?10,50,000 as a gift from the aged father was erroneous and lacked legal basis. The assessee contended that the father, being a senior citizen with income below the taxable limit, gifted the amount due to old age and ill health. The AO and CIT (Appeals) were criticized for not considering crucial factors such as the relationship between the donor and donee, the donor's age, and the circumstances under which the gift was made.

Issue 3:
The Tribunal had to assess whether the assessee provided sufficient evidence to establish the genuineness of the cash gift from the father and whether the addition made by the authorities was justified under the Income Tax Act.

Analysis:
The Tribunal found that the assessee failed to substantiate the genuineness of the cash gift and establish the credit worthiness and capacity of the father to provide such a substantial amount. Despite the submission of a gift deed, the absence of corroborative material evidence led to the rejection of the claim. The Tribunal upheld the decisions of the lower authorities, emphasizing the lack of merit in the assessee's arguments and dismissing the appeal for the Assessment Year 2015-16.

Overall, the Tribunal's judgment focused on the burden of proof on the assessee to establish the legitimacy of the cash gift, emphasizing the importance of supporting evidence and the credibility of the transaction under the provisions of the Income Tax Act, 1961.