2020 (11) TMI 298 - AT - Income Tax

Gifts received by the assessee from his parents - routing of the funds to the firm - withdrawals made by the parents from the partnership firm - HELD THAT - The perusal of the dates on which the cash is withdrawn from the firm as extracted earlier, when considered with the dates on which the amounts have been deposited in the assessee s bank account which clearly shows that the deposits are much after the dates of withdrawals. Even as far as the assessment order, the Assessing Officer does recognize that the withdrawals are recorded. It is the evidence of the physical movement of funds that is being questioned by the AO. The fact that the amounts have been withdrawn and nothing has been found to show that these funds which had been withdrawn had been used for any other purpose, the claim of the assessee that these funds have been gifted to him from his parents cannot be doubted - The gifts of ₹ 5 lakhs each received by the assessee from his parents are actually the withdrawals made by the parents from the partnership firm M/s. Vedic Partners. Addition as made by the Assessing Officer and sustained by the Ld.CIT(A) stands deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against addition of gifts received by the assessee from parents.

Analysis:
The appeal involved the addition of ?10 lakhs representing gifts received by the assessee from his parents, with the only issue being the action of the Commissioner of Income Tax (Appeals) in confirming the addition. The assessee and his parents were partners in a real estate business, and the gifts were recorded in the capital accounts of the partnership firm. The assessee deposited the amount in his bank account on different dates, which corresponded with withdrawals from the partnership firm's account. The Assessing Officer disbelieved the claim, and the CIT(A) upheld the addition, stating the gift was against human probabilities. However, the withdrawals and deposits were well-documented, leading to the Tribunal's decision to delete the addition.

The Departmental Representative argued that there was no correlation between the withdrawal dates and cash payments, no entries in the firm's cash book, and no evidence proving the actual receipt of gifts by the assessee. The Department contended that the ?10 lakhs were unexplained cash rightfully added by the Assessing Officer and confirmed by the CIT(A).

Upon review, the Tribunal found contradictions in the assessment order regarding the nature of payments and the movement of funds. The withdrawals from the firm were made before the deposits into the assessee's account, indicating a clear trail of the funds. Despite the Assessing Officer questioning the physical movement of funds, the Tribunal concluded that the gifts received by the assessee were actually withdrawals made by his parents from the partnership firm. Consequently, the addition was deleted, and the appeal of the assessee was allowed.

In conclusion, the Tribunal's detailed analysis highlighted the discrepancies in the assessment order, emphasizing the clear trail of funds from the partnership firm to the assessee's account. The decision to delete the addition was based on the documented evidence of withdrawals and deposits, ultimately resolving the issue in favor of the assessee.