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Facts
The assessee, a Gynaecologist running a hospital, received a cash gift of Rs. 35,00,000 from her mother and brother for investment in the hospital. The Assessing Officer (AO) treated this as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The assessee provided details of donors, their PAN, addresses, and income tax returns, along with sale agreements of agricultural land from which the donors allegedly received advances.
Held
The Tribunal noted that the assessee had provided evidence of the donors' identity, source of income, and PAN, along with their income tax returns and details of sale agreements for agricultural land. The Tribunal also observed that the amendment to Section 68 regarding 'source of source' was effective from assessment year 2022-23. Therefore, the addition made under Section 68 for the impugned assessment year 2018-19 could not be sustained.
Key Issues
Whether the cash gifts received by the assessee from her mother and brother for hospital investment are to be treated as unexplained cash credits under Section 68 of the Income Tax Act, 1961.
Sections Cited
Section 68, Section 115BBE, Section 234A, Section 234B, Section 234C, Section 133A
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K, HON’BLE & SHRI S.R. RAGHUNATHA, HON’BLE
आदेश /O R D E R
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Chennai-20, dated 30.04.2024 and pertains to assessment year 2018-19.
:-2-: ITA. No: 1732/Chny/2024 2. The grounds of appeal raised by the assessee are as under: “1. For that the Order of the Commissioner of Income tax (Appeals) is without jurisdiction, is contrary to law, facts and circumstances of the case and in any case is opposed to the principles of equity, natural justice and fair play.
2. For that the Commissioner of Income tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction.
3. For that CIT (A) has confirmed the assessment completed u/s 143(3) is bad in law.
4. For that Commissioner of Income tax (Appeals) in confirming the Order of the Assessing Officer in treating source for investments made in the property as unexplained under Section 68 of the Act
5. For that the Commissioner of Income tax (Appeals) has failed to appreciate that the Investment in property was made by the appellant is one of the sources from the gift received from her mother and brother.
6. For that Commissioner of Income tax (Appeals) failed to appreciate Sec.68 are not invocable in the case of the appellant in the facts and circumstances of the case.
7. For that Commissioner of Income tax (Appeals) failed to appreciate Sec 115BBE are not invocable in the case of the appellant in the facts and circumstances of the case.
8. For that the Commissioner of Income tax (Appeals) erred in confirming the above additions merely out of conjectures, surmises and suspicions.
9. For that the appellant objects to the levy of interest u/s 234A, 2348 and 234C.
10. The above grounds are taken without prejudice to one another. For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that this Hon'ble Income Tax Appellate Tribunal may be pleased to i. Quash the order of assessment and/or
:-3-: ITA. No: 1732/Chny/2024 ii. Delete the addition made under the Section 68 of the Income Tax Act, 1961 of Rs.35,00,000/- and /or iii. Pass such other order as this Hon'ble Income Tax Appellate Tribunal may deem fit. iv. To give opportunity through personal hearing before deciding the case.”
The brief facts of the case are that, the assessee is an individual and a Gynaecologist, running a multi specialty hospital M/s. Vijaya Multispecialty Hospital in Dharamapuri. A survey was conducted u/s. 133A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 21.03.2018 at the premises of assessee and noticed that the assessee has been generating income by renting out a medical shop for Rs.5,000/- per month and canteen for Rs.7,000/- per month and the same was not offered to tax from June, 2017 onwards. In the sworn statement dated 22.05.2018, the assessee has agreed to offer the rental income. When the assessee was asked to explain the source for an amount invested in construction of hospital, the assessee explained that one of the source of investment was Rs.35,00,000/- received from her mother and brother as cash gift. Later, the assessee filed her return of income on 29.12.2018, declaring income of Rs.2,45,96,150/- for the assessment year 2018-19. The case was selected for scrutiny
:-4-: ITA. No: 1732/Chny/2024 and statutory notices were issued. During the assessment proceedings the Assessing Officer found that Rs.1,20,000/- rental income received by the assessee from the medical shop and canteen runned by the hospital had not been declared as income is agreed in the sworn statement dated 22.05.2018 by the assessee and made an addition of the same. Further, the Assessing Officer found that the assessee’s claim of cash gift received from her mother and brother to the tune of Rs.25,00,000/- and Rs.10,00,000/- respectively has not been supported by proper evidences of the source and made an addition of Rs.35,00,000/- as unexplained cash credits u/s 68 of the Act. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A)-20, Chennai.
Before the ld.CIT(A), the assessee stated that the Assessing Officer has erred in taxing the gift received in the hands of the assessee even though the assessee had submitted sufficient evidences to prove the source. During the assessment proceedings, the assessee had furnished the details of donor, their address, PAN, occupation and source of income who gave gift to the assessee. Further, the assessee had explained by furnishing the documents in relation to agreement
:-5-: ITA. No: 1732/Chny/2024 of sale entered by the donors along with the assessee dated 15.03.2017 for Rs.12,40,000/- and 24.02.2017 for Rs.13,54,450/- for sale of agricultural land owned by them and for having received an amount from the prospective buyer. The assessee submitted that the allegation of the Assessing Officer that the assessee has not furnished the bank statements of the donors who demonstrated the withdrawal of money to give the cash gift of Rs.35,00,000/- was not correct, since the donors have received money as advance for sale of agricultural land by way of cash and hence, the question of demonstrating the cash withdrawal from the bank does not arise. Further, the assessee submitted that source of source cannot be asked by the Assessing Officer once the assessee has explained the nature and source of the deposit and has discharged the burden by relying on various judicial precedents. On perusal of the submissions made by the assessee, the ld.CIT(A) was not convinced and confirmed the additions made by the Assessing Officer by holding as under: “7.12 Therefore it can be concluded that documents filed by appellant has prima facie '( not discharged onus of proving creditworthiness of Donor as 1. They do not explain sources for gift in hands of donors 2. Documents filed are in contradiction to sources explained by donors in their confirmation letters 3., No evidence has been filed in support of source for Gift claimed by Donors in their confirmation letters.
:-6-: ITA. No: 1732/Chny/2024 7.13 It is noticed that no evidence could be furnished by appellant in support of cash payment of gifts to prove genuineness of transaction. However, when credit worthiness is not proved in case of cash gifts, genuineness of Gift is consequently not proved. The facts of present case, no where show that AO has doubted genuineness of Gift since appellant failed to establish source for source as claimed by the appellant in her written submission filed during appeal proceedings. In the present case, financial capacity of donor on date of gift to make the gift itself could not be established prima facie by appellant. Onus can't be said to be discharged the moment some documents are filed before the Assessing Officer which do not sufficiently explain financial capacity of donor to gift & onus has shifted to Assessing Officer to make further enquiry. In the present case, the appellant failed to discharge primary onus of proving creditworthiness and genuineness of transaction. Therefore, I am of considered view that AO has rightly made addition of cash gifts u/s 68 of IT Act. Consequently, Grounds of appeal of appellant are Dismissed . 7.14 Though submissions are made w.r.t non-granting of standard deduction while computing income from house property, no ground has been raised by appellant to adjudicate the issue. Similarly, no ground has been raised challenging applicability of provisions of section 115BBE, hence not adjudicated.
8. As a result, appeal of Appellant is dismissed.”
Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us.
The ld.AR for the assessee submitted that the assessee has filed evidences for source of the funds of Rs.35,00,000/- received from her mother and brother by identifying the person with their PAN, address during the assessment proceedings as well as before the ld.CIT(A). Further, the assessee also had furnished the return of income of the donors Smt. Vijaykumari,
:-7-: ITA. No: 1732/Chny/2024 mother of the assessee from assessment years 2011-12 to 2018-19 (page no 1 to 7 of paper book III) along with return of income of her brother Shri. K. Vijay from assessment years 2012-13 to 2018-19 (page no. 8 to 13 of paper book III) to prove that the donors had regular source of income. The ld.AR drew our attention to the documents which have been filed before the lower authorities in relation to the advances received by the donors from the prospective buyers for the sale of agricultural land by entering into a sale agreement as detailed below (page no. 37 to 45 of paper book I): Sl.No Date of sale Name of the Sale Advance agreement buyer consideration received in cash 1 30.01.2017 Sambathraji 12,25,000 10,25,000 2 24.02.2017 Pushpavathy 13,54,450 11,54,450 3 15.03.2017 G. Padmanabhan 12,40,000 10,40,000
The ld.AR further stated that the mother and the brother of the assessee had enough source of funds to give gift to the assessee to develop her hospital and hence, the assessee has explained the source of Rs.35,00,000/- received during the year. Further, the ld.AR drew our attention to the amendment of explaining the source of source u/s. 68 of the Act is came into effect from 01.04.2023 ie., assessment year 2023-24 and therefore, the relevant assessment year of the assessee is :-8-: ITA. No: 1732/Chny/2024 2018-19. The explanation of the source has already been made by the assessee before the lower authorities and addition is not sustainable under the law. In light of the above, the ld.AR summed up his arguments stating that the assessee has explained both the nature and source for Rs.35,00,000/- along with the identity of the persons and hence, the addition made u/s. 68 of the Act is not justified and prayed for deleting the same.
Per contra, the ld.DR stated that the assessee’s explanation is not justified because the income declared by the mother of the assessee is very less in her return of income and further, the sale agreement furnished by the assessee for the purpose of source of the mother and brother are unregistered documents. Further, the unregistered sale agreement of the agricultural properties have not been registered even till date in favour of the purchaser and hence, the advance received from the same cannot be considered as source for the gift given by them. Therefore, the additions made u/s. 68 of the Act to the tune of Rs.35,00,000/- may please be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities
:-9-: ITA. No: 1732/Chny/2024 below. It is an admitted fact that the assessee is a Doctor having a hospital and declaring an income from profession/business from running the hospital. It is also an admitted fact that her mother was also a Doctor and practiced for many years in the line of medicine and assessee’s brother is a software engineer working as an employee, both have filed their return of income regularly. During the impugned assessment year 2018-19, the assessee was surveyed u/s.133A of the Act and subsequently, the assessment was completed by making an addition of Rs.35,00,000/- i.e., Rs.25,00,000/- gift received from Smt. Vijayakumari (PAN No. AABPV-9356-M) and Rs.10,00,000/- from Shri. K. Vijay (PAN No. ADDPV-2204-K) as unexplained cash credits in the books and made an addition u/s. 68 r.w.s. 115BBE of the Act. During the assessment proceedings, the assessee explained that her mother is aged about 65 years, who was a practicing Doctor for more than 35 years in the medical profession and had filed income tax returns up to the date of the impugned assessment year declaring income regularly. Further, the assessee also had stated that her brother Mr. K. Vijay is also a professional software engineer working from past 12 years and filed his return of income up to the assessment year 2018-19, declaring income of more than
:-10-: ITA. No: 1732/Chny/2024 Rs.12,00,000/- p.a.. Apart from the regular source of income from their respective profession and employment, the mother and the brother along with the assessee had entered into three sale agreements with prospective buyers and had agreed to sell the agricultural property owned by them at Bhimakulam village, Tamilnadu for Rs.38,19,450/- and received an advance of Rs.32,19,450/-, as per the details given in para 5, supra.
We also note that the assessee had furnished the identity, source and PAN of the persons who had given gift to the assessee during the impugned assessment year 2018-19 along with the copies of income tax returns for assessment years 2011-12 to 2018-19 in the case of Smt. Vijaya Kumari, mother of the assessee and also for assessment years 2012-13 to 2018-19 of Mr. K.Vijay brother of the assessee. In this factual conspectus, we are of the considered view that the assessee had proved the source of cash credits to the tune of Rs.35,00,000/- i.e., Rs.25,00,000/- from Smt.Vijay Kumari and Rs.10,00,000/- from Mr. K. Vijay for having received as gift by furnishing the evidence by way of identity, source and nature of receipts. Further, we also observed that the amendment to section 68 of the Act, has been brought into effect only from :-11-: ITA. No: 1732/Chny/2024 assessment year 2022-23 with regard to explaining the source of the source and hence, the additions made by the Assessing Officer u/s. 68 of the Act as unexplained cash credits which was confirmed by the ld.CIT(A) for the impugned assessment year 2018-19 cannot be sustained under the provisions of the Act. Therefore, we are of the considered view that the additions made u/s. 68 of the Act cannot be countenanced and hence, we delete the same by allowing the grounds of appeal raised by the assessee.