TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 612
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 22,67,220. In the assessment completed u/s. 143(3), the AO had made the following additions to the income returned and thereby arrived at the taxable income of Rs. 46,71,870: 1. Unexplained cash credits : Rs. 17,60,000 2. Disallowance of intraocular care expenses : Rs. 74,791 3. Addition u/s. 40A(2)(b) : Rs. 6,47,883 4. Unaccounted income as per TDS Certificates : Rs. 33,000 4. Against all the above additions, the assessee went in appeal before the CIT(A). However, before the CIT(A), the assessee not pressed the ground relating to disallowance of intraocular care expenses at Rs. 74,791 and unaccounted income as per TDS Certificates of Rs. 33,000. Accordingly, these grounds are dismissed by the CIT(A). 5. Addition of unexplained cash credits of Rs. 17,60,000. This addition is made treating the gifts received from parents of the assessee as unexplained. The assessee has shown certain credits in to his books during the year and among them an amount of Rs. 14,60,000 has represented the gifts from Smt. C. Subbayamma, mother of the assessee and Rs. 3,00,000 from Dr. C. Sri Rama Murthy, father of the assessee. The AO disbelieved the gifts for the following main reasons and tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g No. R380415 and the details of individual gifts executed along with dates and amounts are as under: 14.04.2008 - Rs. 1,50,000 14.04.2008 - Rs. 1,10,000 30.09.2008 - Rs. 1,00,000 03.12.2008 - Rs. 3,65,000 10.12.2008 - Rs. 4,00,000 15.12.2008 - Rs. 2,00,000 11.01.2009 - Rs. 35,000 19.01.2009 - Rs. 1,00,000 8. As could be seen from the above, some of the gifts, indicated date-wise in the case of Mrs. C. Subbayamma, and both the gifts in case of Dr. Sri Rama Murthy are subsequent to the date of execution of the gift deeds dated 12.12.2008. Further, the reason for disbelieving was the enquiry conducted by the A.O. on the correctness of the information on the stamp papers used for executing the gift deeds. As per AO, the stamp papers used for both the gift deeds are not matched with the information collected from Registrar of Stamps. Hence, the AO presumed that the gifts are not genuine and only to legitimise the same, the gift deeds on stamp papers, were utilised. The summary of the reasons given by the AO for disbelieving the gifts are; (a) Authenticity of stamp papers. (b) The non-production of stamp paper purchasers who purchased in favour of donors and not provi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a, mother of assessee, the sources were shown as interest income. However, the return of income was filed only for AY 2009-10 and there is no proof for having filed the returns of income for earlier years. Hence, the sources for the money circulated for the money lending activity and sale proceeds of land that was stated to have received through her brother are much in theory, than on the substance. As per the return of income for AY 2009-10, which was filed belatedly, the total income of the donor (Mrs. C. Subbayamma) is around Rs. 3.00 lakhs, under the head business income of money lending from which income shown as interest. There is no concrete information for the rest of the explanations offered by the donor, Mrs. Subbayamma, for explaining her sources for making gifts to her son, the assessee, to the total extent of Rs. 14,60,000/-. 12. The CIT(A) referred to the provisions of Sec. 68 which deal with the cash credits since gifts also fall in the ambit of cash credit. Sec. 68 of IT Act provides for addition to income, if any sum found credited in the books of account, maintained for any previous year, and assessee offers no explanation about the nature and sources of such cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s as unexplained, after allowing credits for the amounts of Rs. 4,60,000/- for which the sources are ascertainable. Against this, the assessee is in appeal before us by way of ground No. 1. 14. We have heard both the parties and perused the material on record. In this case, an amount of Rs. 14,60,000 was taken by the assessee from his mother Smt. Subbayamma. The CIT(A) accepted only Rs. 3 lakhs as the assessee filed the return of income for the year under consideration and another amount of Rs. 1,60,000 as it is carried forward from earlier year but not accepted Rs. 10 lakhs. The assessee drew our attention to the copy of Balance Sheet as on 31.3.2009 and also capital account of Smt. Subbayamma. The Balance Sheet and capital account are reproduced for ready reference:- 15. As seen from the above Balance Sheet and capital account, an amount of Rs. 14,60,000 is reflected in assessee's capital account. For giving gift of Rs. 14,60,000 there is enough balance in the capital account of Smt. Subbayamma. Smt. Subbayamma raised the above fund by way of withdrawal from chits which is duly reflected in the Balance Sheet. In our opinion, the mother of the assessee made such gift to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so argued by the assessee that the interest calculation should be confined to the current year debit balances, by excluding the opening balances, which was put at Rs. 21,99,038/-. It was also argued by the assessee that though the AO mentioned about charging interest @13 p.a. in assessment order, it was charged at 18% p.a. 18. The CIT(A) observed that the assessee being a doctor by profession borrowed certain interest bearing loans from banks, but a portion of such funds found diverted to the account of Mrs. Annapurna, his wife, also a doctor. Since, the amounts were borrowed on interest, the amounts diverted for the purposes other than what it is borrowed for, deserved to be charged with interest. Assessee failed to charge interest in this regard, but the AO disallowed proportionate interest on such debit balance, since, the assessee found claiming expenses under the head 'interest' to the extent of Rs. 7,18,000/-. The disallowance worked out by the AO is quantified at Rs. 6,47,883/-. Since there is no further explanation on the part of the assessee for not charging interest on such debit balances the CIT(A) in principle upheld the disallowance of interest on proportionate basis,....