Case Law Details
Lokadri Naidu Vs ITO (ITAT Hyderabad)
The issue under consideration is whether the Ration Card can be considered as a source of determining financial status of assessee and whether gift from person holding Ration Card of Low Economic class can betreated as unexplained Credit under section 68 of Income Tax Act, 1961 ?
In the present case, AO observed that the assessee has disclosed gift received from his father and brother respectively. On query, the Ld. AR furnished confirmation letters from the father and brother of the assessee. However, the Ld. AO opined that since the assessee could not furnish other details like date of gift, nature of gift and the amount available to the donors to offer gifts, the gift transactions cannot be relied upon. Therefore, the Ld. AO treated the amount as the unexplained credit U/s. 68 of the Act and added to the income of the assessee.
ITAT states that they do not find much merit in the orders of the Ld. Revenue Authorities. It is an undisputed fact that both assessee’s father and brother own substantial areas of agricultural land. Therefore, the agricultural income disclosed by them cannot be disputed unless some facts emerged that they have not carried on agricultural activities or have suffered losses in the agricultural activities. Normally farmers do not rely on the banking channel for conducting their day to day activities and do accumulate cash balance. Further, by the class of ration card possessed by the individuals one cannot determine such individuals to belong to people of poor means. It is a generally known fact that on many instances even wealthy farmers possess ration cards of low economic class. Therefore, the Ld. CIT (A)’s observation to hold that the quantum of savings of the assessee’s father and brother cannot be relied upon is not appropriate. Considering the extent of land owned by the assessee’s father and brother, their creditworthiness for accumulating the fund of Rs. 4,50,000/- and Rs. 2,50,000/- respectively cannot be doubted and can be treated as reasonable. Further, the assessee’s father and brother have also confirmed the transaction by furnishing their confirmation statements. In this situation, the addition made in the hands of the assessee being the gift received from his father and brother is not justifiable. Therefore, ITAT hereby set aside the order of the Ld. CIT and further direct the Ld. AO to delete the above stated addition made in the hands of the assessee U/s. 68.
FULL TEXT OF THE ITAT JUDGEMENT
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