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2019 (9) TMI 401 - AT - Income TaxAddition of cash gift u/s 68 - donors non-appearance before the A.O due to poor health - HELD THAT - She was mother in law of the assessee having sufficient cash in hand as on 31/03/2011. For this effect, the assessee has also filed statement showing availability of cash on the date of gift. The donor was aged about 71 years at that time. However, due to poor health, she could not appear before the A.O. Mere non-appearance before the A.O. could not be made reason to disbelieve the genuineness of gift when other documentary evidences so filed support the fact of gift. From the record we found that the confirmation from the donor, copy of acknowledgment of return of income and computation of income were submitted to the AO during the course of the assessment proceedings. We restore the matter back to the file of the A.O. for deciding the issue afresh in terms of our above direction. Disallowance of interest on the plea that interest bearing funds have been diverted for non-business purposes - HELD THAT - From the record, we found that before the A.O. the assessee has submitted statement of interest free fund available with the assessee in the form of his capital to the tune of ₹ 26,08,598/- and also interest free unsecured loan. Thus, the interest free funds available with the assessee was much more than the interest free amount given by him - no disallowance of interest is warranted - decided in favour of assessee
Issues involved:
1. Addition of cash gift under section 68 of the Income Tax Act, 1961. 2. Disallowance of interest paid on unsecured loans. Analysis: Issue 1: Addition of cash gift under section 68 of the Income Tax Act, 1961 The case involved an appeal by the assessee against the order of the ld.CIT(A) regarding the addition of a cash gift of ?4,00,000 made under section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) added the gift as undisclosed income based on various observations, including the discrepancy in dates and the donor's income. The AO did not accept the explanation provided by the assessee regarding the gift received from his mother-in-law. The ld. CIT(A) upheld the AO's decision, leading to the appeal before the ITAT. Upon considering the contentions, the ITAT found that the gift was received from the mother-in-law, who had sufficient cash at the time of giving the gift. The Gift Deed date discrepancy was explained as an oversight, supported by a sworn Affidavit from the assessee. The ITAT referred to legal precedents emphasizing the importance of Affidavits as evidence. Additionally, the income and age of the donor were considered, along with documentary evidence submitted during assessment proceedings. The ITAT concluded that the matter should be reconsidered by the AO based on the directions provided. Issue 2: Disallowance of interest paid on unsecured loans The AO had disallowed interest of ?1,56,538 on the grounds of diverting interest-bearing funds for non-business purposes. However, the ITAT noted that the assessee had interest-free funds available, including capital and unsecured loans, exceeding the interest amount paid. Therefore, the ITAT determined that no disallowance of interest was justified and directed accordingly. As a result, the appeal of the assessee was allowed in part, with the matter remanded back to the AO for fresh consideration based on the ITAT's directions. In conclusion, the ITAT's judgment addressed the issues of the cash gift addition and interest disallowance, providing detailed analysis and legal references to support its decision, ultimately partially allowing the appeal of the assessee.
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