The Agra ITAT ruled that when the taxpayer from his side had furnished all the requisite documents to establish the three ingredients of section 68 of the Income Tax Act, viz identity of the donor, creditworthiness of the donor, and genuineness of transactions, which are routed through banking channels and stood duly confirmed by the donor, the genuineness of such transactions cannot be doubted.
The Tribunal therefore deleted the additions made under Section 68 in the hands of a brother on account of cash gifts received from his real sister, which was premised on account of treating the said gifts as unexplained cash credit. When the bank statements of the donor, being a real sister of the appellant, had been furnished, wherein the transfer of funds from the available bank balance is proved beyond a reasonable doubt, there is no reason to doubt the transaction.
M. Balaganesh (Accountant Member) observed that when the factum of the sister giving a gift to the brother is supported by confirmation, the source of the donor is established. Further, whether the sister had duly paid capital gains tax or not for the sale of property, whose proceeds she has given to her brother, i.e., the appellant, is no reason to disbelieve the gift and doubt the creditworthiness of the sister.
The scrutiny of returns of the donor is not in the hands of the donee, and that job is left to the wisdom of the income tax department. The donee, i.e., the appellant, cannot be faulted for an act which is not in his control. Hence, there is no reason to disbelieve the creditworthiness of who has given a cash gift of Rs 10.94 lacs, and accordingly, the same is to be treated as explained.
Briefly, in this case, pursuant to the appellant filing his ITR declaring an income of Rs. 10.80 lacs, the AO notices a claim of an increase of Rs. 1.83 crores in his capital. In response, the appellant claimed to have introduced a capital of Rs 3.67 lacs and Rs 1.80 crores in his proprietorship concerns, the source of which was explained by the appellant to be the gift of Rs 2.74 crores received from one of her sisters. The appellant also claimed to have received gifts of Rs 6.25 lacs among other parties.
The AO considered a part of the gifts as genuine and disbelieved the factum of cash gifts received from her sisters for want of supporting documents. The AO accordingly treated the said sums represented as gifts as a colourable device to avoid taxation and added the same as unexplained cash credit under section 68 of the Income Tax Act. On appeal, the CIT(A) upheld the addition made by the AO by treating the gift of Rs 10.94 lacs received from the sister as unexplained cash credit, for not proving the creditworthiness of the donor.
Appearances:
CA Ashok Vijaywargiya, for the Appellant/ Taxpayer
Anil Kumar, for the Respondent/ Revenue
