TaxTMI 
TaxTMI 
2025 (9) TMI 434
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.... the case, the Ld.CIT(A) erred in deleting the total addition of Rs. 89,00,000/- u/s.68 of the Act when the creditworthiness of the donors have not been established, as the donors, who are not otherwise having funds at their disposal, receives repayment of loan from the assessee and immediately gifts the same funds back to the assessee. 2. On the facts and circumstances of the case and in law, the ld.CIT (A) erred in failing to observe that different courts have held that the transactions should stand the test of human probability." 2. The brief facts of the case are that the assessee, an individual, filed his return of income for the Assessment Year 2018-19 declaring a total income of Rs. 98,70,370/-. The case was selected for scrutiny, and in the course of assessment proceedings, the Assessing Officer noticed that the assessee had introduced fresh capital in his books during the year. On further enquiry, the assessee explained that a substantial part of such capital introduction represented gifts received from certain close relatives. These donors were not outsiders but immediate family members, whose relationship with the assessee stood clearly established and, indee....
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....third parties, repayments of which, according to the assessee, constituted the immediate source for making the impugned gifts. g) Capital accounts and balance sheets of the donors for the preceding five years, evidencing the fact that loans had indeed been advanced in earlier years and that repayment of such loans provided the liquidity for the gifts. The thrust of these voluminous evidence was to prove that the assessee has not only established the statutory triad of identity, genuineness, and creditworthiness, but also went step further to trace the origin of funds in the hands of each donor. 4. The Assessing Officer, however, after scrutinising the above materials, proceeded to record certain adverse observations with respect to each of the donors. His analysis was predominantly focused on doubting the creditworthiness of the donors, emphasising that their declared incomes were meagre and that the funds used for making the gifts were received only a few days prior from third parties. In his view, this proximate nexus between inflow and outflow suggested that the donors lacked independent financial strength, and therefore the gifts were not genuine. On this reasoni....
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....from bank statement submitted that the amount was transferred from some another person's account and the same was gifted to the assessee. And there is only few days bandwidth within which money was received and it was relayed as gift. Upon enquiry no justification was provided as to why such amount got transferred in a specific date. * Previous 8 years submissions also show that at no time such large amount could have been part of justification was provided as to why they obtained all the money at one go. * The sources of the amount that was transferred in the account of the donor is not clear. From perusal of the income shown in the return of income it is seen that a person of so low income can hardly save so much amount. Thus the creditworthiness of the donor is not proved. (iii) The assessee has taken gift of Rs. 10,00,000/- from Smt. Pushpa Vashumal Bhathija. The assessee submitted bank account statement, computation of income, copy of gift deed, copy of PAN and Aadhar as identity proof and copy of acknowledgement of filing of return of income and also furnish reply which is reproduced as under:- * The donor is showing very meager income of R....
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....nd balance sheets, summary of details of business carried out by them etc. All the transactions are routed through the bank accounts of the donors and the assessee. The assessing officer made the addition mainly on the basis of the creditworthiness of the donors. Let us examine all three conditions as required by section 68 of the Income Tax Act of each donor one by one in the following paragraphs based on the submissions made by the assessee before the assessing officer and the undersigned. 1. Smt. Muskan Karira (Rs. 15,00,000) This donor has been regularly filing the returns of income. From the returns of income it is also seen that this donor has shown income under the head of business and other sources 5 lakhs every year on an average for the past eight years. The assessee submitted before the assessing officer that the gift given by this donor to the assessee was out of the repayment of loan of 23,98,781 on 20/03/2018 from M/s Mohit Liquor. The assessee further submitted before the Assessing Officer that this donor has advanced loan to M/s Mohit liquor earlier and the interest received on this loan was regularly offered every year by this donor in his return ....
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....from this amount has transferred to the bank account of the assessee on 19/01/2018 of 27 lakhs. Here, assessee has gone one step further and even explained the source of the funds in the hands of this donor. Hence, in the case of this gift transaction, all three conditions such as identity of the creditor, genuineness of the transaction and the creditworthiness of the creditor are already proved by the assessee before the Assessing Officer. Despite these evidences, Assessing Officer in the case of this donor also ignored and gave a finding that creditworthiness is not proved just by saying that the meagre amounts of income is offered in the return of income by the donor Ms. Vashumal Bathija. The same documents produced before the Assessing Officer is also submitted before me and from these documents, I don't find any reason to justify the action of the Assessing Officer in making addition of this amount of Rs. 27,00,000/- u/s 68 and hence this addition is deleted. 3. Pushpa Bathija: Rs. 10,00,000/- It is seen that Smt. Pushpa Bathija is regularly filing the returns of income. The assessee submitted before the assessing officer that the gift given by this ....
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.... officer of the bank account of this donor. From the bank statement it is seen that the donor has received amounts of Rs. 10,28,946/- and Rs. 14,82,957/- on 14/03/2018 and from this amount has transferred to the bank account of the assessee on 15/03/2018 of Rs. 22 lakhs. Here, assessee has gone one step further and even explained the source of the funds in the hands of this donor. Hence, in the case of this gift transaction also, all three conditions such as identity of the creditor, genuineness of the transaction and the creditworthiness of the creditor are already proved by the assessee before the Assessing Officer. Despite these evidences, Assessing Officer in the case of this donor also ignored and gave a finding that creditworthiness is not proved just by saying that the meagre amounts of income is offered in the return of income by the donor Shri. Ramchand Lund. The same documents produced before the Assessing Officer is also submitted before me and from these documents, I don't find any reason to justify the action of the Assessing Officer in making addition of this amount of Rs. 22,00,000/- u/s 68 and hence this addition is deleted. 5. Purshottam Ramkr....
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....his loan amount.' The Assessing Officer however has not brought any material to impeach the source of credit but only made addition just by commenting that the donors are offering meagre income in their returns of income and not actually proved that these donors do not have sufficient source. On the other hand, the assessee has proved the source of the donors also before the Assessing Officer, which the AO has not commented or examined. 7. Similarly, Hon'ble jurisdictional Bombay High Court in the case of Pr. CIT v. Veedhata Towers (P.) Ltd. [2018] 403 ITR 415 (Bom), has held that assessee is only required to explain the source of the credit. In the present case, the assessee submitted the explanation for the source of the credit and offered substantial evidence in the form of documents like bank statements of the donors to explain the source of the gifts received from them. Infact in this case, assessee had one step further and explained source of source, which in fact actually is not necessary as per this decision of Hon'ble High Court 7. Conclusion: It is seen that the assessee Shri. Chander Arjandas Manwani has sufficiently discharged his onu....
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....f Capital Account and Balance sheet from FY 2012-13 to FY 2016-17 41-45 h) Copy of Notice issued to donor u/s 133(6) and submission made along with acknowledgement of submission 46-51 4. Documentary evidences in respect of gift received from Purshotam Ramrakhiyani a) Copy of bank statement of Donor reflecting the Transaction 52 b) Computation of Total income of the Donor for AY 2018-19 53-54 c) Copy of Gift Deed executed in this respect 55-60 d) Copy of acknowledgement of Return filed by the donor 61 e) Copy of acknowledgement of Return filed by the Purshottam Ramrakhiyani HUF 62 f) Summary giving details of nature of business carried out by the Donor along with summary of her past earning for 8 years 63-64 g) Copy of Notice issued to donor u/s 133(6) and submission made along with acknowledgement of submission made 65-70 5. Documentary evidences in respect of gift received from Ramchand Lund a Copy of bank statement of Donor reflecting the Transaction 71 b) Copy of Computation of Total income of the Donor for AY 2018-19 72-73 ....
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....e issued to donor u/s 133(6) and submission made along with acknowledgement of submission 198-203 8. The paper book placed before us contains extensive documentation that collectively establishes the identity of the donors, the genuineness of the transactions, and the creditworthiness of the donors. These materials include: * Copies of PAN, Aadhaar, and residential details of each donor, thereby establishing their undisputed identity; * Duly executed gift deeds, evidencing both the voluntary nature of the transfers and the familial relationship with the assessee; * Bank statements of the donors, reflecting the inflow of funds by way of repayment of loans earlier advanced by them and the immediate outflow of corresponding amounts by way of gifts to the assessee; * Computation of income and acknowledgements of income-tax returns filed by the donors for AY 2018-19, demonstrating that they are regular assessees within the tax net; * Form 26AS statements for AYs 2013-14 to 2017-18, evidencing recurring interest income from loans advanced by the donors, repayment of which formed the very source of the impugned gifts; * Capital a....