ITAT directs deletion of additions on gift disallowance under Income-tax Act, emphasizing the need for thorough verification.

The ITAT ruled in favor of the assessee, directing the deletion of the additions made by the Assessing Officer regarding the disallowance of gifts received under section 56(2) of the Income-tax Act, 1961 for A.Y. 2014-15. The ITAT emphasized the importance of proper verification and thorough enquiry before disallowing such gifts, stating that mere presumption without proper investigation is not sustainable in law.

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Issues:
Appeal against order of CIT(A) for A.Y. 2014-15 regarding disallowance of gifts received by the assessee under section 56(2) of the Income-tax Act, 1961.

Analysis:
1. The assessee received gifts from two individuals covered under the definition of "relative" as per the Act. The Assessing Officer disallowed and added back the gifts as unexplained cash credits due to lack of proof of the donor's creditworthiness. The assessee contended that the AO cannot inquire into the source of source to determine the genuineness of the credit. The appellant cited legal precedents to support this argument, emphasizing that providing gift deeds, ITR filings, bank statements, and other details should suffice to establish genuineness.

2. The Ld.CIT(A) dismissed the appeal, stating that the donors were not assessed to tax and their source of income was not proven, as their bank account details were not provided. The assessee then appealed to ITAT, arguing that the CIT(A) erred in upholding the additions under section 68 of the Act, emphasizing that the source of source should not be questioned. The appellant provided additional evidence to establish the genuineness and creditworthiness of the gifts received.

3. During the hearing, the assessee's representative reiterated that all relevant details were submitted, including gift deeds and affidavits from the donors. The representative pointed out that similar cases were decided in favor of the assessee by the Coordinate Bench. The ITAT noted the evidence provided by the assessee and referred to a previous case where a similar addition was set aside due to lack of proper enquiry and presumption about agricultural income holders' capacity to gift.

4. Considering the evidence and precedents, ITAT directed the Assessing Officer to delete the additions made, following the principle that mere presumption without proper enquiry is not sustainable in law. The ITAT allowed the appeal filed by the assessee, emphasizing the importance of proper verification before making such additions.

In conclusion, the ITAT ruled in favor of the assessee, directing the deletion of the additions made by the Assessing Officer, highlighting the necessity of thorough verification and proper enquiry before disallowing gifts received by the assessee.

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