SHRI JAGDISH RAI KARNANI,KOLKATA vs. ITO, WARD - 35(3), KOLKATA, KOLKATA

The assessee in the present case is an individual, who is engaged in the business of trading in chemicals. The return of income for the year under consideration was filed by him on 12.11.2014 declaring total income of Rs.19,14,600/-. In the balance-sheet filed along with the said return, a sum of Rs.11,00,000/- received from Smt. Kusum Karnani was shown as advance by the assessee in the liability side. In this regard, a Assessment Year: 2014-2015 copy of balance-sheet of Smt. Kusum Karnani for the relevant year was filed by the assessee during the course of assessment proceedings before the Assessing Officer. From the perusal of the said balance-sheet, the Assessing Officer noticed that a sum of Rs.11,00,000/- was reduced from the capital account of Smt. Kusum Karnani indicating it as a gift given to the assessee. He, therefore, required the assessee to explain the different treatment given to him to the said amount of gift as advance receipt. In this regard, it was claimed by the assessee that there was a typing error in indicating the amount of gift as advance receipt in his balance-sheet. The assessee also filed relevant documentary evidence in the form of Bank statement of Smt. Kusum Karnani as well as the relevant gift deeds to establish the identity and capacity of the donor as well as the genuineness of the gift transactions. From the perusal of the Bank statement of Smt. Kusum Karnani, the Assessing Officer noticed that she had received a cheque amounting to Rs.11,00,000/- on 19.03.2014 from Rohit Service Pvt. Limited and the said amount was utilized for giving gift to the assessee on the same date. He held that the gift in question thus was not given by Smt. Kusum Karnani from her accumulated funds. He also held that the amount of gift exceeding Rs.50,000/- received by the assessee was liable to be added to his total lincome under section 56(2) of the Act. Accordingly an addition of Rs.11,00,000/- was made by the Assessing Officer to the total income of the assessee in the assessment completed under section 143(3) vide an order dated 28.12.2016.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) and the following submissions were made on behalf of the assessee before the ld. CIT(Appeals) in support of his case that the addition of Rs.11,00,000/- made by the Assessing Officer on account of gift was not sustainable:- “(a) That Smt. Karnani was the wife of the appellant and was 71 years of age and assessed to income tax since long. Copy of PAN Card, Aadhar Card, ITR, P/L & B/s & Assessment Year: 2014-2015 Bank Statement of Smt. Kusum Karnani were also submitted.

The ld. CIT(Appeals) did not find merit in the submissions made by the assessee. According to him, the onus was on the assessee to establish not only the identity and capacity of the donor to make such gift but also to prove the genuineness of the gift. He held that keeping in view the surrounding circumstances as well as the prevailing practice/customs of the society, the gift claimed to be received by the assessee could not be treated as a genuine gift as there was no such occasion for the donor to give such huge amount of gift to the assessee. He held that section 68 thus was clearly attracted and confirmed the addition made by the Assessing Officer by treating the amount of gift in question received by the assessee as unexplained cash credit. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the gift in Assessment Year: 2014-2015 question was received by the assessee from his wife Smt. Kusum Karnani and the provisions of section 50(2) of the Act invoked by the Assessing Officer were not applicable. Moreover, the relevant documentary evidence in the form of balance-sheet of Smt. Kusum Karnani, her Bank statement as well as Income Tax return for the relevant year, was filed by the assessee and the fact that the gift of Rs.11,00,000/- given by her to the assessee duly reflected in the relevant balance-sheet was accepted by the Assessing Officer. Identity and capacity of the donor thus was duly established by the assessee by filing the relevant documentary evidence. Even the genuineness of the gift was duly established by the assessee by filing the gift deed, wherein it was clearly declared by Smt. Kusum Karnani that the amount of Rs.11,00,000/- was given by her to the assessee out of the natural love and affection. Keeping in view this cogent evidence produced by the assessee I am of the view that the ld. CIT(Appeals) was not justified in doubting the genuineness of the gift merely on the ground that there was no such occasion for giving the gift by the donor to the assessee. I, therefore, set aside his impugned order on this issue and direct the Assessing Officer to delete the addition of Rs.11,00,000/- on account of gift by treating the same as unexplained cash credit under section 68.