A Gift amount can’t be doubted just because donor’s returned income is insufficient to justify it: ITAT

Case Details: Kushal Virendra Tandon v. ACIT - [2022] 134 taxmann.com 268 (Mumbai - Trib.)

Judiciary and Counsel Details

• • S. Rifaur Rahman, Accountant Member and Ravish Sood, Judicial Member
  • Vimal Punmiya, A.R. for the Appellant.
  •  Gurbinder Singh, D.R. for the Respondent.

Facts of the Case

The assessee was a film actor & model by profession. During the relevant year, the assessee was unable to meet the expenses required to be incurred by him for a decent survival in the industry. Thus, his father gifted an amount of Rs. 30 lakhs to him.

The Assessing Officer (AO) noticed that the assessee’s father had disclosed only a paltry income of Rs. 4,12,960/- for the year under consideration. Thus he treated the Gift received as an unexplained cash credit under section 68. On appeal, the CIT(A) upheld the view taken by AO. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Mumbai Tribunal held that the assessee submitted the gift deed during the assessment proceedings, which his father executed. Such gift deed had clearly stated that the assessee was given an irrevocable cash gift of Rs. 30 lacs to him out of his past accumulated savings.

AO had not attempted to disprove the genuineness and integrity of gift transaction. If the assessee’s father had claimed that the gift amount was from his accumulated saving, it was for AO to have verified such fact. He was required to verify whether such accumulated funds had been generated over the years and whether funds were from his duly explained sources that had already suffered taxes.

AO, merely going by the fact that the father’s returned income was insufficient to justify the gift amount, had summarily discarded the gift transaction. AO could reach a logical conclusion by exercising his powers, i.e. summoning his father and examining the gift transaction.

However, based on premature observations, he rejected the assessee’s explanation and stamped the gift amount as an ‘Unexplained cash credit’ within the meaning of Sec. 68. Accordingly, the very basis of the addition was devoid of any merit, and therefore, the same couldn’t be sustained & was vacated.

Case Review

• • CIT v. Chotatingrai Tea [2003] 126 Taxman 399/[2002] 258 ITR 529 (SC) (para 7)
  • National Leather Cloth Mfg. Co. v. Indian Council of Agricultural Research [2000] 110 Taxman 511/241 ITR 428 (Bom.) (para 7)
  • Pooja Hardware (P.) Ltd. v. Asstt. CIT [IT Appeal No. 3712 (Mum.) of 2018, dated 28-10-2019]
  • CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 (SC) (para 23) followed.

List of Cases Referred to

• • CIT v. Chotatingrai Tea [2003] 126 Taxman 399/[2002] 258 ITR 529 (SC) (para 7)
  • National Leather Cloth Mfg. Co. v. Indian Council of Agricultural Research [2000] 110 Taxman 511/241 ITR 428 (Bom.) (para 7)
  • Pooja Hardware (P.) Ltd. v. Asstt. CIT [IT Appeal No. 3712 (Mum.) of 2018, dated 28-10-2019] (para 7)
  • Animesh Sadhu v. ACIT [IT Appeal No. 11 (Kol.) of 2013, dated 12-11-2014] (para 11)
  • ACIT v. Modi Rubber Ltd. [IT Appeal No. 1952 (Delhi of 2014, dated 15-5-2018] (para 11)
  • Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 (SC) (para 19)
  • Khandelwal Constructions v. CIT [1997] 227 ITR 900 (Gauhati) (para 20)
  • CIT v. Metachem Industries [2001] 116 Taxman 572/[2000] 245 ITR 160 (MP.) (para 21)
  • CIT v. Anjum M.H. Ghaswala [2001] 252 ITR 1 (SC) (para 23).