2020 (9) TMI 1040 - AT - Income Tax

Tribunal rules in favor of Assessee, overturning addition under section 68 of Income Tax Act

The Tribunal allowed the Assessee's appeal, overturning the addition under section 68 of the Income Tax Act. The Tribunal relied on evidence from a ... Addition u/s 68 - CIT(A) upheld the order of the AO observing that the Assessee failed to establish the credit worthiness of his son in law and mere furnishing of confirmation letters and copy of gift deed was not sufficient to discharge the onus that lies on the Assessee - HELD THAT:- In the light of the order of assessment for AY: 2012-13 passed in the case of the Assessee accepting the genuineness of the loan given by the Assessee’s son-in-law to the Assessee, the source, capacity and genuineness of the gift of the very same sum in the AY: 2015-16 stands established. The only reason assigned by the revenue authorities for rejecting the plea of the Assessee in AY: 2015-16 is that the credit worthiness and source of income of Assessee’s son-in-law has not been established. The gift by the Assessee’s son-in-law has never been disputed nor disbelieved. Since the AO has accepted the credit worthiness of the Assessee’s son-in-law in Assessee’s assessment for AY: 201-13, we are of the view that the sum in question which was added as unexplained u/s 68 of the Act for AY: 2015-16 has to be deleted - Decided in favour of assessee. Issues: Justification of addition u/s 68 of the Income Tax Act for an increase in the capital account of the Assessee by a specific amount.Detailed Analysis:1. Background: The appeal was filed by the Assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14, challenging the addition of a specific amount under section 68 of the Income Tax Act, 1961.2. Facts: The Assessee, an individual, witnessed an increase in the capital account by a significant sum during the relevant year. The source of this increase was explained as a loan from the Assessee's son-in-law, later gifted to the Assessee out of love and affection.3. AO's View: The Assessing Officer (AO) contended that the Assessee failed to substantiate the source of income and creditworthiness of the son-in-law, leading to the addition of the said amount under section 68 of the Act.4. CIT(A) Decision: The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the lack of proof regarding the son-in-law's creditworthiness despite the submission of confirmation letters and a gift deed.5. Tribunal's Ruling: The Assessee appealed to the Tribunal, presenting evidence from the assessment year 2012-13 where a notice was issued but subsequently accepted, establishing the genuineness of the loan from the son-in-law. The Tribunal noted the acceptance of the loan in a prior assessment, thereby confirming the source, capacity, and genuineness of the gift in the relevant assessment year.6. Decision Justification: The Tribunal concluded that since the creditworthiness of the son-in-law was acknowledged in the earlier assessment, the addition made under section 68 for the current assessment year lacked merit. The Tribunal directed the deletion of the sum added as unexplained income, ruling in favor of the Assessee.7. Final Verdict: The Tribunal allowed the Assessee's appeal, emphasizing the established genuineness of the transaction based on previous assessments and supporting documentation, thereby overturning the addition made under section 68 of the Income Tax Act.This comprehensive analysis highlights the progression of the case, the arguments presented, and the ultimate decision rendered by the Tribunal, providing a detailed understanding of the judgment's key aspects and legal implications.