2022 (11) TMI 68 - AT - Income Tax

Addition of sum received as Gift by the assessee from his father - assessee failed to produce the donor on the designated date, AO held that genuineness of the gift is doubtful and brought the gift amount to tax - HELD THAT - As find the identity of the donor who is the father of the assessee has been established through the ITR, Passport and permanent residency card of Hong Kong. The creditworthiness is proved by the fact that the donor is having enough sources to the tune of Rs. 119 Cr. as per the ITR, and also received an amount on sale of shares as reflected in the ITR and an established hotelier. The donor is about 85 years old and the amount has been gifted to his own son through a gift deed proves the genuineness of the transactions. The addition has been made solely on the basis of failure of the assessee to produce his father (donor) who is 85 years old, staying at Hong Kong before the authorities within a span of 13 hours. Since, all ingredients of identity, genuineness and creditworthiness have been proved beyond doubt, we hereby hold that no addition on account of the gift received by the assessee is called for. Appeal of the assessee is allowed.

Summary

Issues Involved:
Appeal against addition of gift amount under section 68 of the Income Tax Act based on failure to produce donor for verification.

Analysis:
The appeal revolves around the addition of Rs. 8,53,89,440/- received as a gift by the assessee from his father, Sh. Radhe Shyam Saraf, on 29-10-2015. The Assessing Officer questioned the genuineness of the gift due to the assessee's failure to produce the donor for verification. The Assessing Officer considered the gift amount as taxable due to doubts regarding its authenticity.

The assessee contended that the lower authorities erred in confirming the assessment order under section 143(3) as it violated the principles of natural justice and the provisions of the Income Tax Act. Additionally, the assessee argued that the addition of Rs. 8,53,89,440/- under section 68 was unjustified as the gift received from the father was genuine, supported by relevant documentation.

The Assessing Officer issued a notice to the assessee to produce the donor for verification. Despite providing evidence such as bank statements, gift declarations, and identity proofs of the donor, the Assessing Officer deemed the gift as unexplained due to the non-production of the donor within a short timeframe.

The Tribunal analyzed the evidence presented, including bank statements, gift declarations, and the donor's identity documents. The donor, an established hotelier with substantial income and assets, was proven to have gifted the amount to his son out of natural love and affection. The Tribunal concluded that the genuineness and creditworthiness of the gift were established beyond doubt, despite the failure to produce the donor within the limited timeframe set by the Assessing Officer.

Ultimately, the Tribunal held that no addition on account of the gift received was warranted, as all aspects of identity, genuineness, and creditworthiness were adequately substantiated. Consequently, the appeal of the assessee was allowed, overturning the lower authorities' decision to tax the gift amount.

In conclusion, the Tribunal's judgment emphasized the importance of establishing the genuineness and creditworthiness of transactions, even in cases where procedural lapses occur, to prevent unwarranted tax liabilities on legitimate gifts.