2024 (1) TMI 914 - AT - Income Tax

Revenue's appeal dismissed as Rs. 10.93 crore gift from Belgian brother through NRE account proved genuine under section 68

The DCIT, Circle-1 (3), Surat Versus Chunibhai Haribhai Gajera

The ITAT Surat dismissed the Revenue's appeal against deletion of addition u/s 68. The assessee received a gift of Rs. 10.93 crore from a Belgian national ... Addition u/s 68 - No verifiable address of donor, Belgian National given - addition made as assessee was unable to produce evidences to counter the requirement and prove the genuineness of the transaction and no verifiable address of the Donor is available - HELD THAT:- We note that the address in bank statement of the donor is a PO box. In foreign countries, it is very common to give PO Box address to banks and institutions for official communications so that home address is not unnecessarily shared for correspondence purposes. Identity of the donor - CIT(A) observed, on perusal of the details submitted by the assessee, during assessment and assessee proceedings, it is seen that doner in this case, is a Belgian National who has taken an Emirati Residency. In fact, the assessee vide letter has given the Dubai Address of the donor along with electricity and water bills to the AO - The above facts have been not brought on record by the assessing officer and has merely stated that the identity of the doner is not established and there is no verifiable address of the done. AO has failed to make any correspondence on the given address but has taken a mere stand that the address of the donor is not verifiable. Apart from this the assessee has submitted the confirmations from the doner that he has given gift to the assessee. Furthermore, in the instant case, there is a notarized gift deed wherein donor gifted to his brother - This establishes the Identity of the donor. Creditworthiness of donor - CIT(A) noted that the AO in the assessment order has stated that there is a poor capital in balance sheet of Donor as taken by looking at the Indian Balance Sheet and Indian Tax Return filed by - On perusal of the details submitted by the assessee it is seen that the donor in this case is neither an Indian Citizen nor an Indian Resident. Most of his assets are situated outside India. In foreign Balance Sheet of a company 100% owned by donor Capital balance works out to Rs. 86.12 crore as on 31-12-2016. On 31.12.2016 had a profit of Rs. 114.48 Crore (USD 16,874,148) and after payment of dividend to him of USD 4.2 Million had a closing capital balance of USD 12,674,346 (approx. Rs. 86.12 crore). As such, creditworthiness when read with foreign Balance Sheet, clearly establishes capacity of the donor in foreign country. This capital balance establishes the creditworthiness of the donor. Genuineness of the transaction - CIT(A) observed that the Officer has made a finding that there was no occasion or reason for the gift. However, this logic of the assessing officer is not correct as the gifts can be made at any time. It is not necessary for gifts only to be on birthdays, anniversaries and Diwali. In the instant case, vide notarized gift deed donor gifted Rs. 10,93,00,000/- to his brother. The Gift is given into assessee's savings bank account maintained with Axis Bank. On perusal of the submissions made by the assessee, it is seen that the this Gift is given from donor's NRE bank account maintained with Axis Bank. It entails particulars of cheque number, date of giving of gift, donee, amount gifted. Source of gift of amount in rupee terms immediately credited before giving gift on credit side of the bank statement where amount in US $ are stated in narration in the bank statement. Assessee has also stated that the source of amount in USD flowing into NRE bank accounts of India from overseas foreign bank account maintained with Emirates NBD Bank, Dubai. Further the assessee stated that the source of amount in USD flowing into his NBD Bank, Dubai is primarily from Amazone Gems DMCC where Donor is 100% shareholder. Amount credited into donors account has been out of Remuneration and dividend which have been offset against loan given by Amazone Gems DMCC-a 100%, owned company - For the reasons mentioned above, the genuiness of the transaction is also established. In addition to the above, CIT(A) relied on the judgment of Smt. Neelemaben Gopaldas Agrawal [2015 (6) TMI 135 - GUJARAT HIGH COURT] wherein the similar issues were came before the Hon'ble High Court of Gujarat. The Hon`ble Court held that where assessee received certain amount as gift from NRI through cheque and they produced bank certificate and gift deed regarding same, addition as unexplained income under section 68, was not justified. Based on these facts, ld CIT(A) allowed the assessee`s appeal for statistical purposes. On a careful reading of the order of ld CIT(A) and the findings thereon, we do not find any valid reason to interfere with the decision and findings of the CIT(A), therefore grounds raised by the Revenue are dismissed. Issues Involved:1. Admission of additional evidence by CIT(A) without providing an opportunity to the Assessing Officer.2. Deletion of addition of Rs. 10,93,00,000/- made on account of unexplained credits in the guise of gifts under section 68 of the Income Tax Act, 1961.3. Failure of the assessee to prove the identity, creditworthiness, and capacity of the donor, and the genuineness of the transaction.Summary:1. Admission of Additional Evidence:The Revenue contended that the CIT(A) violated the principles of natural justice by admitting additional evidence without providing an opportunity for the Assessing Officer to be heard, as required under section 250(2) of the Income Tax Act and Rule 46A(3) of the Income Tax Rules.2. Deletion of Addition of Rs. 10,93,00,000/-:The Assessing Officer had made an addition of Rs. 10,93,00,000/- as unexplained credits under section 68 of the Act, claiming the amount was received as a gift from Mr. Girdharbhai Gajera, an NRI. The AO argued that the assessee failed to establish the creditworthiness of the donor and the genuineness of the transaction. The CIT(A) deleted this addition, observing that the source of the amount was from the donor's 100% owned company, Amazone Gems DMCC, and the funds were transferred through proper banking channels, establishing the genuineness, creditworthiness, and identity of the transaction.3. Proof of Identity, Creditworthiness, and Genuineness:The CIT(A) found that the donor's identity was established through various documents, including a notarized gift deed and bank statements. The creditworthiness was demonstrated by the donor's substantial capital in his foreign company, Amazone Gems DMCC, which had a capital balance of Rs. 86.12 crore as on 31-12-2016. The genuineness of the transaction was supported by the flow of funds through the donor's NRE bank account in India, sourced from his overseas bank account in Dubai, and corroborated by audited books of Amazone Gems DMCC.Final Decision:The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. It was concluded that the CIT(A) had appropriately addressed the issues of identity, creditworthiness, and genuineness of the transaction, and there was no valid reason to interfere with the findings. The appeal filed by the Revenue was dismissed.Order Pronounced:The order was pronounced on 17/01/2024 in the open court.