2022 (8) TMI 742 - AT - Income Tax

Assessee's Appeal Allowed: Tribunal Overturns Additions, Emphasizes Transaction Verification

The appeal filed by the assessee was allowed. The Tribunal set aside the additions made by the Assessing Officer and sustained by the Commissioner of ... Gifts from relative exempt from tax - identification and creditworthiness of donor - genuineness of transaction under section 68 - presentation/clearance date variance not fatal to genuineness - share of profit from partnership exempt under section 10(2A)Gifts from relative exempt from tax - identification and creditworthiness of donor - genuineness of transaction under section 68 - presentation/clearance date variance not fatal to genuineness - Addition of Rs.1,00,00,000 treated as unexplained cash credit/gift held to be not sustainable. - HELD THAT: - The Tribunal found that the assessee established the identity and creditworthiness of the donor (mother in law) by furnishing the gift deed, cheque details and the donor's returns and PAN. The Assessing Officer's and CIT(A)'s doubts based on variance between dates in the gift deed and bank clearance were held to be attributable to delay in presentation of cheques and not sufficient to reject the transaction. Once the three ingredients required under the law for accepting the credit/gift - identity of donor, capacity/creditworthiness and genuineness of transaction - were satisfied, the sum could not be treated as taxable. It was also held that the subsequent remittance or use of the gifted amount by the assessee is immaterial to the question of the genuineness of the gift. [Paras 11]Addition of Rs.1,00,00,000 made on account of the alleged gift is set aside.Share of profit from partnership exempt under section 10(2A) - Addition of Rs.1,00,419 being share of profit from partnership sustainment set aside. - HELD THAT: - The Tribunal held that share of profit received by the assessee from the partnership firm is exempt under the statutory provision applicable to partnership profits. The learned CIT(A) sustained the addition without adequate reasoning; on legal view the amount constitutes exempt share of profit and cannot be included in the taxable total income. [Paras 12]Addition of Rs.1,00,419 being share of profit from the partnership firm is deleted.Final Conclusion: The appeal is allowed: the additions of Rs.1,00,00,000 (gift from mother in law) and Rs.1,00,419 (share of partnership profit) are set aside for A.Y.2016 17 and the Assessing Officer is directed to delete these additions. Issues Involved:1. Addition of Rs. 1,00,00,000/- as gift received from mother-in-law.2. Addition of Rs. 1,00,419/- as share of profit from partnership firm.Issue-wise Detailed Analysis:1. Addition of Rs. 1,00,00,000/- as Gift Received from Mother-in-Law:The assessee, a Non-Resident Indian, filed her return of income for A.Y. 2016-17 declaring an income of Rs. 1,27,330/- and claimed exempt income of Rs. 1,01,00,419/-. The case was selected for scrutiny, and the Assessing Officer (AO) issued statutory notices under section 143(2), but received no response from the assessee. Consequently, the AO completed the assessment under section 144, adding the claimed exempt income to the total income.The assessee contended before the CIT (A) that the exempt income included Rs. 1 crore received as a gift from her mother-in-law, Smt. Nirmala Jayanarayan Rathi, and Rs. 1,00,419/- as share of profit from a partnership firm. The CIT (A) called for a remand report and, after considering the reports and additional submissions, dismissed the appeal. The CIT (A) doubted the genuineness of the gift, citing discrepancies in the dates mentioned in the gift deed and bank statements, and the immediate transfer of the gifted amount to another individual without explaining the purpose.The Tribunal found merit in the assessee's argument that the identity and creditworthiness of the donor were established, and the gift deed was duly furnished. The Tribunal noted that minor discrepancies in dates due to delays in cheque presentation should not invalidate the gift. The Tribunal emphasized that once the gift is established as genuine, the subsequent use of the money is immaterial. Therefore, the addition of Rs. 1 crore by the AO and sustained by the CIT (A) was not justified and was set aside.2. Addition of Rs. 1,00,419/- as Share of Profit from Partnership Firm:The assessee also claimed Rs. 1,00,419/- as exempt income being her share of profit from the partnership firm, Shree Packaging Corporation. The CIT (A) sustained the addition made by the AO without assigning specific reasons, merely stating the transaction was contrived.The Tribunal held that the share of profit from a partnership firm is exempt under section 10(2A) of the I.T. Act. Since this income is statutorily exempt, it cannot be added to the total income of the assessee. Therefore, the addition of Rs. 1,00,419/- was not in accordance with the law and was directed to be deleted.Conclusion:The appeal filed by the assessee was allowed. The Tribunal set aside the additions made by the AO and sustained by the CIT (A) regarding both the Rs. 1 crore gift and the Rs. 1,00,419/- share of profit from the partnership firm. The judgment emphasized the importance of establishing the identity, creditworthiness, and genuineness of transactions, and upheld the statutory exemptions provided under the I.T. Act.