Tribunal overturns tax addition due to lack of books, accepts donor explanations.

The Tribunal allowed the appeal filed by the assessee, deleting the addition of Rs. 8,68,000 made under section 68 of the Income-tax Act, as the assessee did not maintain books of account, and the donors provided explanations and confirmations regarding the sources of the gifts. The Tribunal concluded that the addition was not sustainable, overturning the decisions of the Assessing Officer and the Commissioner of Income-tax (Appeals).

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Issues Involved:
1. Whether the Commissioner of Income-tax (Appeals) was justified in confirming the addition made by the Assessing Officer on account of cash gifts as unexplained cash credit under section 68 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Confirmation of Addition Made by the Assessing Officer:
- The primary issue in this appeal is whether the Commissioner of Income-tax (Appeals) was justified in confirming the addition of Rs. 8,68,000 made by the Assessing Officer as unexplained cash credit under section 68 of the Income-tax Act.
- The assessee, engaged in civil contract work, filed a return of income declaring Rs. 2,70,590. The Assessing Officer assessed the total income at Rs. 11,38,590, including an addition of Rs. 8,68,000 on account of cash credit under section 68.
- The assessee contended that the cash gifts of Rs. 5 lakh each from her father-in-law and mother-in-law were lawful and made out of natural love and affection. However, the Commissioner of Income-tax (Appeals) upheld the Assessing Officer's findings, stating that the assessee failed to provide sufficient evidence to support the claim of the gifts.

2. Examination of Evidence Provided by the Assessee:
- The Commissioner of Income-tax (Appeals) noted that the assessee received gifts of Rs. 5 lakh each from her father-in-law and mother-in-law. The Assessing Officer found that the father-in-law had no known source of funds to support his claim of the gift, and only Rs. 1,32,000 out of the Rs. 5 lakh from the mother-in-law was substantiated.
- The Assessing Officer disproved the claim of the gifts through statements of the donors and third-party enquiries, concluding that there was no basis to support the claim of investments in Sahara India, which were purportedly redeemed to make the gifts.

3. Legal Provisions and Precedents:
- The assessee argued that under section 44AD of the Income-tax Act, she was not required to maintain books of account as her gross receipts were below the prescribed limit, and the profit was offered at 8% of the gross receipts.
- The assessee cited several legal precedents, including Anand Ram Raitani v. CIT and CIT v. Taj Borewells, to argue that section 68 applies only when sums are found credited in the books maintained by the assessee. Since she did not maintain any books, the addition under section 68 was not applicable.

4. Tribunal's Observations and Decision:
- The Tribunal observed that the Assessing Officer accepted the profit at 8% as offered by the assessee under section 44AD and did not dispute the non-maintenance of books.
- Citing the decisions in Yadwinder Singh v. ITO and ITO v. Kamal Kumar Mishra, the Tribunal held that section 68 operates only where books are maintained by an assessee and a sum is found credited therein. Since the assessee did not maintain any books, the addition under section 68 was not sustainable.
- The Tribunal also noted that the assessee provided the identity and creditworthiness of the donors, and the Assessing Officer had examined the donors under oath. The donors had explained the sources of the gifts, which included retirement benefits and investments in Sahara India, although they could not provide documentary evidence of the investments.
- Based on the explanations and confirmations provided by the assessee, the Tribunal concluded that the addition made by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) was liable to be deleted.

Conclusion:
- The Tribunal allowed the appeal filed by the assessee, deleting the addition of Rs. 8,68,000 made under section 68 of the Income-tax Act, and pronounced the order in the open court on August 24, 2018.

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