TMI Blog2014 (1) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... the allegation that the gift is not genuine cannot make addition u/s 68 of the Act - there is no material before the department to show that the donor was either compensated by the assessee or assessee’s money was routed back to him by way of gift through the donor - the addition made by treating the gift of Rs. 45 lakhs as unexplained cash credit is without any basis and cannot be sustained – order of the CIT(A) set aside – Decided in favour of Assessee. Disallowance of interest payment either u/s.37(1) or u/s. 57(iii) of the Act – Held that:- The assessee has not been able to establish as to how and in what manner the interest free advance of borrowed fund to Smt. Inderjit Kaur Bagga has benefitted to the assessee- That besides, the assessee has not established the fact that interest payment is directly related to or has any nexus with the interest income earned by the assessee - Hence, the deduction claimed by the assessee cannot be allowed considering the facts and circumstances of the case – Decided against Assessee. - ITA No.50/Hyd/2012 - - - Dated:- 12-7-2013 - Chandra Poojari And Saktijit Dey, JJ. For the Appellant : Shri S Rama Rao For the Respondent : Smt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the AO has added the gift of Rs. 45 lakhs received by the assessee from Sri Gurmeet Ajit Singh Rajpal U/s.68 on the ground that the assessee did not produce any other evidence like the bank account of the donor and the circumstances under which the donor made the gift etc., except stating that the donor had the financial capacity to give a gift to the assessee. The AO has also relied on the decisions of the various authorities, which are as under: 1) Shantidevi Jain Vs. Director of Enforcement (1996) 89 Taxman 198 2) CIT Vs. P. Mohanakala (2007) 291 ITR 278 (SC) 3) Sumati Dayal 249 ITR 801 (SC) 4) ITO Vs. Dr. Jagdish J. Kansagara (1998) 66 ITD 381 (Ahm.) 5) Subashchander Sikri 290 ITR 300 (P H) 6) Jaspal Singh 290 ITR 306 (P H) 7) Rajiv Tandon 108 ITD 560 (Del.) 8) Tirath Ram Gupta 6 SOT 703( Chandigarh) 6. In the assessment order, the AO has made disallowance of interest claim of Rs. 4.2 lakhs on the ground that the assessee advanced Interest bearing funds to one of the family members without charging interest which has been claimed under the head 'Income from other sources', which is not in accordance with the provisions of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to the confirmation letter issued by the donor and the copy of the demand draft, which was submitted in the paper book. The learned AR also referring to the audited financial statements of the donor Sri Gurmeet Ajit Singh Rajpal and the investments made by him in various deposits in different banks overseas submitted that the donor had substantial means to gift the amount of Rs. 45 lakhs to the assessee. The learned AR referring to the order passed by the coordinate bench of this Tribunal in case of another assessee of the same group i.e. Sri Satpalsingh Bagga in ITA No. 697/Hyd/2005 for the AY 2001-02 (page 24 of the paper book) submitted that the Tribunal after considering evidences and materials on record has held the gifts made by the aforesaid donor to be genuine as the donor has substantial means to make the gift. 11. The learned DR, on the other hand, submitted that just because one gift is accepted all gifts cannot be accepted. It was further submitted that the assessee has failed to prove all the ingredients of cash credit by not establishing the genuineness of the transaction. It was submitted that the donor is a distant relative and the gifts made by him in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such huge gifts that too not at one go but in two tranches does not stand the test of human probability. v) Sri Gurmeet Ajit Singh Rajpal was born on 29/11/1978 and his first passport was issued at Bombay on 29/05/95 at the age of 16 /12 years and the passport was renewed at Dubai on 25/09/2001. Therefore, it is not possible for him to subscribe to Resurgent India Bonds of Rs. 10 crores in such a young age and within such short period. 14. It will be pertinent to mention here that as per the observations of the CIT(A), the Assessing Officer had not made the addition not because the donor has no capacity to give but because the genuineness of the transaction was not established. Thus, from the aforesaid observation of the CIT(A) it could be concluded that so far as the identity of the donor i.e. Sri Gurmeet Ajit Singh Rajpal and his creditworthiness is concerned, the Assessing Officer does not dispute the same. Even otherwise also, the materials on record such as audited financial statements as well as investments made by Sri Gurmeet Ajit Singh Rajpal, which have been submitted in the paper book by the assessee clearly establishes the fact that the donor Sri Gurmeet Ajit Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applies when the assessee's explanation regarding a cash credit is rejected as being unsatisfactory or when the assessee does not render any explanation. Section 68 provides that the assessing officer may bring to charge a sum as income of the previous year if (i) the sum is found credited in the books of the assessee for any previous year and (ii) the assessee offers no explanation about the nature of source of that sum; or (iii) the explanation is not in the opinion of the assessing officer satisfactory, whether the sum so credited may be in the assessee's name or in the name of the third party.... It is well established by the decisions of the Supreme Court and High Courts that the burden of proving that a cash credit entry appearing in the assessee's account books does not represent income of the assessee is on the assessee. Where any sum is found credited in the books of the assessee the initial onus is on the assessee to offer an explanation of the nature and source of cash credit. If the explanation is not found satisfactory or reasonable, the assessing officer can treat such money as the assessee's income from undisclosed source. It is not necessary for the assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid decision would reveal the fact that in case of P. Mohankala there were material before department to show that the donor was compensated by the recipient of gifts, therefore, on considering such fact, the Hon ble Supreme Court held that the action of the Assessing Officer in assessing gift as unexplained cash credit was justified. However, in the facts of the present case, there is no material before the department to show that the donor was either compensated by the assessee or assessee s money was routed back to him by way of gift through the donor. Therefore, considering the totality of the facts and circumstances of the case, we are of the view that the addition made by treating the gift of Rs. 45 lakhs as unexplained cash credit is without any basis and, therefore, cannot be sustained. We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the same. Accordingly, the ground of the assessee is allowed. 16. The next issue raised in ground NO. 3 relates to disallowance of interest payment of Rs. 4.20 lakhs. 17. Briefly the facts are, during the assessment proceeding, the Assessing Officer noticed that the assessee declared Rs. 10 l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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