ITAT Delhi allows Rs. 6.87 crore gift from UK donor with comprehensive documentary evidence

The ITAT Delhi held that no addition was warranted for alleged unexplained investments claimed as gifts. The assessee provided comprehensive documentary evidence including donor's UK passport, confirmation letter, bank statements showing NRE account receipt, proof of UK citizenship for both parties, donor's PAN details, evidence of donor's Rs. 2150 crore investment sale in Bharti Airtel (2005), relationship proof through mother's passport, colleague AO's acceptance of donor's investment sale in AY 2007-08, and donor's ITRs showing substantial income. The tribunal found the gift of Rs. 6.87 crores genuine against donor's proven creditworthiness.

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Issues Involved:
1. Validity of reassessment proceedings under section 147.
2. Issuance and validity of notice under section 148.
3. Provision of reasons for reopening to the assessee.
4. Authenticity and veracity of reasons and approval for reopening.
5. Addition under section 69 for unexplained investment.
6. Discrepancy in proposed and actual addition.
7. Treatment of investment as unexplained under section 69.
8. Lack of show cause notice for addition under section 69.
9. Allegation of non-submission of bank statement by the assessee.
10. Adequacy of opportunity of being heard.
11. Levy of interest under section 234A.
12. Initiation of penalty proceedings under sections 270A and 271F.

Summary:

1. Validity of reassessment proceedings under section 147:
The assessee challenged the reassessment proceedings initiated under section 147, arguing that they were barred by limitation and the amendment to section 144C(15) was prospective and not retrospective.

2. Issuance and validity of notice under section 148:
The assessee contended that the issuance of notice under section 148 for mere verification was illegal and invalid, meriting quashing of the reopening proceedings.

3. Provision of reasons for reopening to the assessee:
The assessee argued that the AO failed to provide reasons for reopening along with the notice under section 148 or within a reasonable period, rendering the reassessment proceedings illegal and invalid.

4. Authenticity and veracity of reasons and approval for reopening:
The assessee claimed that the reasons recorded for reopening and the approval obtained were not electronically dated or digitally signed, questioning their authenticity and veracity. The DRP did not adjudicate on this issue.

5. Addition under section 69 for unexplained investment:
The AO made an addition under section 69, doubting the source of funds used for investment, despite the assessee providing evidence of the source being a gift received in a previous year. The DRP and AO ignored the documentary evidence submitted by the assessee.

6. Discrepancy in proposed and actual addition:
The AO proposed an addition of Rs. 3,06,00,000 in the draft assessment order but made an addition of Rs. 3,38,50,000 in the final order, which was contested by the assessee.

7. Treatment of investment as unexplained under section 69:
The AO treated the investment of Rs. 3,06,00,000 as unexplained under section 69, ignoring the documentary evidence submitted by the assessee and the fact that the AO was aware of the investments prior to reopening the assessment.

8. Lack of show cause notice for addition under section 69:
The AO made an addition under section 69 without providing a show cause notice, violating the provisions of the Act and the intent of the legislature.

9. Allegation of non-submission of bank statement by the assessee:
The AO alleged that the assessee did not submit the bank statement showing receipt of Rs. 6,87,22,815, whereas the assessee had duly submitted the relevant bank statement showing the receipt of the gift on 22.12.2015.

10. Adequacy of opportunity of being heard:
The assessee argued that the AO and DRP did not provide adequate opportunity of being heard, violating the principles of natural justice and rendering the reassessment proceedings illegal and invalid.

11. Levy of interest under section 234A:
The AO levied interest under section 234A, despite the assessee having duly filed his return of income.

12. Initiation of penalty proceedings under sections 270A and 271F:
The AO initiated penalty proceedings under sections 270A and 271F, which was contested by the assessee.

Conclusion:
The Tribunal considered the evidence provided by the assessee, including the bank statements, documentary evidence of the donor's identity and creditworthiness, and the relationship between the donor and the assessee. The Tribunal found that the assessee had sufficient funds to justify the investments and that the documentary evidence was adequate to substantiate the genuineness of the transaction. Consequently, the Tribunal held that no addition was warranted and allowed the appeal of the assessee, concluding that the reassessment proceedings were invalid and the additions made were unjustified. The appeal was allowed, and the order was pronounced in the open court on 21/12/2023.

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