2023 (12) TMI 583 - AT - Income Tax

Addition u/s 68 - Gift received from the brother treated as undisclosed income - creditworthiness for the gift was not proved based on financial capacity of the donor - assessee in response to such gift has filed the copy of PAN of his brother, copy of computation of income and freshly made gift letters - AO found that the income of the brother is not sufficient to grant such a huge amount of gift to the assessee - HELD THAT - We note that the assessee has furnished details such as copy of gift letter, capital account, bank statement, PAN and return of income of the donor and cash book and bank statement of the assessee which are available on record. On perusal of the cash book of the assessee, we note that there was sufficient cash available with the assessee which was arising out of withdrawal from the bank account. Thus, it can be safely concluded that there was sufficient cash available with the assessee to advance the gift to his brother. This fact has also not been disputed by the authorities below. It is equally important to note that the assessee first has received part of the gift before giving any gift to his brother in cash but what we find is this that there was sufficient fund available in the bank account of the brother and therefore it cannot be said that such gift could be given to the assessee out of unaccounted income. Admittedly, the cross transaction between the brothers can create a suspicious but that doubt cannot be treated as gospel truth . As such, it is the onus upon the revenue to prove the allegation framed by it against the assessee. But, from the preceding discussion, we note that the assessee has furnished the necessary evidence, discussed above, to justify the gift received from the brother, therefore, no addition in the given case is warranted. We direct the AO to delete the addition made by him. Ground of appeal of the assessee is allowed.

Summary

Issues:
The appeal against the order of the Learned Commissioner of Income Tax (Appeals) was filed regarding the addition made for a gift received from the brother, treated as undisclosed income.

Details of the Judgment:

Issue 1: Addition of Gift as Undisclosed Income
The assessee received a gift of Rs. 67,00,000 from his brother, supported by documents like PAN, computation of income, and gift letters. However, the Assessing Officer (AO) considered the gift as bogus due to the donor's alleged lack of financial capacity. The assessee argued that the gift was covered by the amount given to the brother and the donor's financial capacity should be judged based on his financial statements. The assessee also contended that the gifts were given in different installments. The AO's remand report highlighted discrepancies in the cash entries between the brothers. The assessee claimed to have informed the AO about the gift to justify the donor's creditworthiness. The Assessing Officer did not consider the information provided by the assessee.

Issue 2: Appeal to CIT(A) and Subsequent Proceedings
The assessee appealed to the CIT(A), providing additional evidence, but the CIT(A) rejected the contentions. The CIT(A) observed that the assessee did not claim to have given gifts to the donor during the assessment stage. The CIT(A) found contradictions in the assessee's claims and rejected the appeal, confirming the addition of the gift as undisclosed income. The assessee then appealed to the ITAT.

Issue 3: ITAT Decision
The ITAT noted that the assessee had sufficient funds to give the gift to his brother, as evidenced by bank statements and cash book entries. The ITAT found that the gift received was from genuine sources and set aside the CIT(A)'s findings. The ITAT directed the AO to delete the addition made, allowing the assessee's appeal.

The ITAT pronounced the order in favor of the assessee on 06/12/2023 at Ahmedabad.