Huge Amount cannot be given to anybody for “Free”: ITAT upholds Addition of Gift [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the addition of a gift, stating that a huge amount cannot be given to anybody for free.

The assessee also filed confirmation from Mr. Srinivasan Mahesh on payment of Rs.1,55,64,500/- in which it has been stated that loan is interest free and it is still outstanding. After considering the entire submissions of the assessee, the AO noted in respect of cash jewelry purchase of Rs.14.34 lakhs there is contradictory statement of assessee at one place that she was not aware of the transaction and PAN of assessee has been misused by somebody else without her knowledge, while later she submitted that jewellery of Rs.14.34 lakhs was purchased by her relative Puttarangaiah for a function as he did not have PAN during purchase and filed a confirmation letter on a simple paper from P. Venkatachalaiah, S/o. Puttarangaiah.

The AO did not accept this argument and noted that there is no bank details, bills of jewellery and confirmation is only on simple plain paper. Accordingly it was treated as undisclosed investment under Section 69 of the Income Tax Act.

Mr. Suman Lunkar, representing the assessee submitted that the property was purchased in the joint name of assessee and Srinivasan Mahesh with 50% share and the entire amount has been paid by Srinivasan Mahesh residing outside India.

The assessee was daughter of Mr. Ramaiah who was closest friend of Srinivasan Mahesh for many years and the amount of assessee's share is interest free loan which is outstanding as on date. In this regard, confirmation from Srinivasan Mahesh is filed.

She submitted that both the parties agreed that loan is outstanding and source is explained and there is no doubt regarding source of payment made by Srinivasan Mahesh. The CIT (Appeals) has accepted that it does not come under Section 69 since source was disclosed and the assessee filed a bank statement of Srinivasan Mahesh from which the purchase price of immovable property was paid.

On the other hand, Ms. Shamala D.D relied on the order of lower authorities and submitted that as per Form 26AS and invoice copy and PAN, name of assessee was appearing and it was in the knowledge of assessee. It was not acceptable that PAN of assessee has been utilised by somebody else. Even if the purchase Puttarangaiah is a relative of the assessee, then the assessee should have produced the financial creditworthiness of the jewellery buyer.

The bench noted that the assessee has carried out substantial transactions during the year and she did not file her return of income. After receiving notice under Section 148, return was filed. In regard to purchase of jewellery by Mr. Puttarangaiah, the assessee could not substantiate with credible evidence of agricultural income or savings of jewellery buyer in regard to cash purchase and the confirmation is from Mr. P. Venkatachaliah, his son. Further submitted the death certificate of Mr. Puttarangaiah. It was pertinent to mention here that the onus to prove the genuineness of the transaction, creditworthiness and identity lies with the assessee and it was to be discharged with reasonable explanation which has not been put forward unequivocally by the assessee . The bill is also in the name of assessee. Considering the totality of the facts, further concur with the order of the CIT (Appeals). Accordingly CESTAT rejected this ground of the assessee.

The two member bench of the ITAT comprising George George K ( Vice President ) and Laxmi Prasad Sahu ( Accountant member )  rejected the argument of the  AR that loan was  still outstanding and it was liability of the assessee, since it was not substantiated with cogent evidence. Accordingly ITAT dismissed the grounds of assessee.

To Read the full text of the Order CLICK HERE

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