2020 (8) TMI 257 - AT - Income Tax

Addition of gifts u/s. 68 - genuineness of the gifts - HELD THAT - AO has given ample opportunities to produce the donors and file evidences supporting the claim of the assessee. But the assessee was unable to produce the donor and other relevant evidences for substantiating the claim. Credits appearing in the books of the assessee cannot be accepted as gift because this gift is against human probability for such large sum of money gifted to the strangers. The assessee was unable to produce evidences to counter the requirement and to prove the genuineness of the transaction. The document produced by the assessee that is bank statement, ITR, Gift deed, bank accounts established that the gift received by the assessee is not genuine and is only to circulate his own money in the garb of gift and to evade the tax which is highly unlikely and against the human probability. Assessee has failed to prove the genuineness of the gifts in dispute by not producing sufficient evidences before the Revenue authorities. Therefore, the addition in dispute made by AO u/s 68 is as per law and no interference is called for in the impugned order passed by the Learned First Appellate Authority, because the same has been passed after examining the provisions of law as well as documentary evidences filed by the assessee along with various case laws mentioned in the impugned orders. Appeal of the assessee is hereby dismissed.

Summary

Issues Involved:
1. Legality of the addition made under Section 68 of the Income Tax Act, 1961.
2. Genuineness and creditworthiness of the gifts received by the assessee.
3. Applicability of Section 68 when the assessee does not maintain books of accounts.

Detailed Analysis:

1. Legality of the Addition Made Under Section 68 of the Income Tax Act, 1961:
The primary legal issue revolved around whether the addition of ?3,00,000/- under Section 68 of the Income Tax Act was justified. The assessee argued that since no books of accounts were maintained, Section 68 should not apply. The Tribunal referred to the decision of the ITAT, Delhi Bench, and the Hon'ble Bombay High Court in CIT Vs. Bhaichand N. Gandhi, which held that even if the assessee does not maintain books of accounts, deposits in bank accounts can be considered under Section 68. The Tribunal concluded that the legal issue had already been adjudicated in favor of the Revenue, affirming the applicability of Section 68 even when no books of accounts are maintained by the assessee.

2. Genuineness and Creditworthiness of the Gifts Received by the Assessee:
The assessees claimed to have received gifts amounting to ?3,00,000/- from three individuals, none of whom were family members or relatives. The Assessing Officer (AO) found the gifts to be suspicious due to the lack of any significant relationship between the donors and the assessee and the low financial status of the donors. Despite providing gift deeds, affidavits, and bank statements, the assessees failed to produce the donors for verification. The AO's summons to the donors were returned unserved, further raising doubts about the genuineness of the gifts. The Tribunal upheld the AO's findings, emphasizing that the assessees failed to establish the natural love and affection necessary to prove the genuineness of the gifts. The Tribunal also noted that the donors' financial capacity to make such gifts was not adequately demonstrated.

3. Applicability of Section 68 When the Assessee Does Not Maintain Books of Accounts:
The assessees contended that Section 68 should not apply as they did not maintain books of accounts. The Tribunal referred to the ITAT, Delhi Bench's order and the Hon'ble Bombay High Court's judgment, which clarified that deposits in bank accounts could still be considered under Section 68. The Tribunal also cited the definition of "books or books of accounts" under Section 2(12A) of the Act, which includes passbooks maintained by the bank. The Tribunal concluded that the provisions of Section 68 apply regardless of whether the books of accounts are maintained by the assessee, as long as the deposits in the bank account remain unexplained.

Conclusion:
The Tribunal dismissed all four appeals, upholding the addition made under Section 68 of the Income Tax Act. The Tribunal concluded that the assessees failed to prove the genuineness and creditworthiness of the gifts received and that Section 68 applies even if the assessee does not maintain books of accounts. The decision was pronounced on 3rd February 2020.