2016 (5) TMI 1378 - HC - Income Tax

Addition of gift receipt from the NRI brother - addition u/s 68 - Held that - The conditions which are required to be proved by the assessee are the identity of the creditor the capacity of the creditor to advance the money and the genuineness of the transaction. In so far as this case is concerned the identity of the creditor has been established by the assessee. However in so far as the creditworthiness of the donor is concerned according to us the Tribunal has on facts rightly held that the assessee has failed to discharge the burden. Similar is the case with the genuineness of the transactions also. The assessee has not produced the balance sheet or financial statement or cash flow statement of the donor. Similarly there was also no material to show that the sums gifted were the sums received by the donor on his requirement from the firm of which he was a partner. That apart it was also found that the donor had received his retirement benefits from the firm in the previous assessment year and in the previous year also the assessee had received substantial sums from the donor. The authenticity of the certificate of disbursement of sums to the donor issued by the firm also was rightly declined to be accepted for non production of supporting documents. Therefore we concur with the view of the Tribunal that the creditworthiness of the donor was not established. In so far as the genuineness of the transaction is concerned it could have been established by the assessee by producing materials to show that the money gifted were from the own funds of the donor. On this aspect also there was total dearth of materials. We agree with the Tribunal that the assessee failed to discharge the burden under section 68 of the Act and therefore the addition was rightly upheld. - Decided against assessee. Addition to cover up the deficiencies noticed in the books of accounts relating to contract business - Held that - The addition of Rs. 2 lakhs was sustained by the Tribunal for absence of independent cross-verifiable vouchers and other documents. Here again this factual finding cannot be said to be wrong in any manner. In such circumstances we uphold the factual conclusion of the Tribunal and according to us the order of the Tribunal does not give rise to any question of law for consideration of this Court.

Summary

Issues involved:
1. Addition of gift receipt of Rs. 35 lakhs from the appellant's brother.
2. Addition of Rs. 2 lakhs towards unverifiable nature of expenses.

Analysis:

Issue 1: Addition of gift receipt of Rs. 35 lakhs from the appellant's brother
The appellant contested the addition of the gift receipt of Rs. 35 lakhs from his brother, an NRI, under section 68 of the Income Tax Act. The appellant argued that the identity of the donor was established, and the donor's capacity to gift the amount was proven through retirement benefits received. However, the Tribunal upheld the addition, stating that the appellant failed to prove the creditworthiness of the donor and the genuineness of the transaction. The Tribunal found that the appellant did not provide sufficient evidence, such as the donor's financial statements or proof of the source of the gifted amount. Consequently, the Court agreed with the Tribunal's decision, emphasizing the appellant's failure to discharge the burden under section 68.

Issue 2: Addition of Rs. 2 lakhs towards unverifiable nature of expenses
The Tribunal also confirmed the addition of Rs. 2 lakhs towards unverifiable expenses due to the absence of independent cross-verifiable vouchers and documents. The Court concurred with the Tribunal's decision, stating that the factual findings regarding the lack of supporting documentation were valid. Consequently, the Court upheld the Tribunal's decision on this issue as well.

In conclusion, the Court dismissed the appeal, affirming the Tribunal's decisions on both issues. The Court found that the appellant failed to provide adequate evidence to support the gift receipt and the expenses, leading to the rejection of the appellant's claims.