Case Law Details

Case Name : Padmalatha Tama Vs Income-tax Officer (ITAT Hyderabad)
Appeal Number : ITA No. 81/Hyd/2017
Date of Judgement/Order : 23/05/2018
Related Assessment Year : 2010-11
Courts : All ITAT (7639) ITAT Hyderabad (387)

Padmalatha Tama Vs ITO (ITAT Hyderabad)

The assessee has received gift from her daughter. The AO has verified the details of this transaction by asking the assessee to file the bank statement and confirmation from her. The same was filed before the AO. The transaction was done by T. Veena only through banking channel. Ms. T. Veena also filed the sources for the funds received by her i.e. she had taken loan from Mr. P. Srinu Babu and P. Rajendra. As far as, assessee is concerned, the identity, creditworthiness and genuineness were proved. The AO and CIT(A) have doubted the creditworthiness of assessee’s daughter. It is irrelevant for the assessee to prove as the assessee has brought on record not only the source but source of source also. It is for the revenue to initiate proceedings in the case of T. Veena, if they are not satisfied with the submission of Ms. T. Veena. As far as the assessee is concerned, she had received the gift from her daughter through banking channel, hence, she has proved identity and genuineness of the transaction and for creditworthiness, she had brought on record the bank statement & PAN of her daughter. Therefore, assessee has discharged her part of duty.

FULL TEXT OF THE ITAT JUDGMENT 

This appeal filed by the assessee is directed against the order dated 10/10/2016 of CIT(A) – 6, Hyderabad for AY 2010-11.

2. Briefly the facts of the case are, assessee who derives income from ‘house property’ and ‘income from other sources, filed her return of income for the AY 2010-11 on 27/07/2010 declaring an income of Rs. 17,75,810/-. Subsequently, the case was selected for scrutiny under CASS and accordingly notice u/s 143(2) dated 25/08/2011 was issued and served on the assessee on 06/09/2011. In response to the said notice, the assessee furnished the information called for.

2.1 During the course of assessment proceedings, the AO observed that on verification of assessee’s bank account with HDFC Bank, there were credits on different dates totalling to Rs. 17,00,000/- as follows:

S.No. Date Amount
1. 29/07/2009 5,00,000/-
2. 05/08/2009 5,00,000/-
3. 29/09/2009 5,00,000/-
4. 08/10/2009 2,00,000/-
Total 17,00,000/-

2.2 Assessee stated that she had received gifts from her daughter, Smt. T. Veena and also filed confirmation from her daughter to that effect. On enquiry, AO noticed that Smt. T. Veena had not filed her return of income for AY 2010-11 as she did not have taxable income. A perusal of her bank account with HDFC Bank, Banjara Hills branch, revealed that deposits were made on following dates:

S.No. Date Amount
1. 28/07/2009 5,00,000/-
2. 03/08/2009 5,00,000/-
3. 24/09/2009 4,00,000/-
4. 25/09/2009 49,000/-
4. 03/10/2009 2,00,000/-
Total 16,49,000/-

2.3 The AO observed that after depositing the above amounts, immediately followed the gifts to the mother i.e. assessee. It was stated that the amounts were received by the daughter as loans from different parties for which confirmations were filed. The AO observed that confirmations did not contain any income tax details of the loan creditors and found that the act of taking loans for gifting to the assessee to be strange and quite unusual. According to the AO, as the credits were from family members, the onus was on the assessee to discharge the onus about the creditworthiness and genuineness of the transaction. AO noted that as the assessee had substantial income of her own, there was no necessity for the assessee to take gift from her daughter who had no taxable income and who had in turn borrowed the sum to give the gift. He, therefore, held that the assessee had failed to prove the financial capacity of the donor and the genuineness of the transaction and added the amount of Rs. 17 lakhs as unexplained credit in the bank account.

3. When the assessee carried the matter in appeal before the CIT(A) against the assessment order, the CIT(A) confirmed the order of AO by holding that though the identity stands proved, the creditworthiness and genuineness of the transaction remains doubtful and it does not stand to reason that a person gives gift when she herself has to borrow money for it.

4. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:

1. The order of the ld. CIT(A) is erroneous both on facts and in law.

2. The ld. CIT(A) erred in confirming the addition of Rs. 17,00,000/- made by the AO u/s 68 of the Act without properly considering the facts placed before the CIT(A).

3. Any other ground or grounds that may be urged at the time of hearing.”

5. Ld. AR submitted that the AO erred in making an addition of Rs. 17,00,000/- towards gifts received from the assessee’s daughter through electronic transfer of funds directly to her account even though the source of gifts and also the source has been explained. Further, he submitted that the assessee has submitted all the information to establish the identity, relationship, financial capacity of the donor and the genuineness of the gifts received from her daughter out of natural love and affection. He submitted that the assessee has submitted the PAN copy of the donor i.e. daughter to establish the identity of the donor. He submitted that the assessee has established the genuineness and creditworthiness of gifts by submitting the bank account of the donor Ms. Veena maintained at HDFC bank account No. 05211000012378 show the transfer of amounts to the assessee of Rs. 5,00,000/- on 29/07/2009, Rs. 5,00,000/- on 05/08/2009, Rs. 5,00,000/- on 29/09/2009 and Rs. 2,00,000/- on 08/10/2009, aggregating to Rs. 17,00,000/- to the effect that the gifts have been given through electronic transfer to her mother’s account and also confirmation from daughter has been submitted. The ld. AR has also submitted that the confirmation letters of source of source i.e. confirmations from the creditors of donor which are reflected in her bank account i.e. Rs. 350000 and Rs. 1,50,000 received from Naveen Associates on 28.07.2009 by cheque nos. 0220346 and 0220347 respectively, Rs. 5,00,000 on 03.08.2009 and 4,00,000 on 24.09.2009 received from Mr. Srinu Babu by cheque nos. 0370264 and 0346824 respectively and Rs. 2,00,000 from Mr. P. Rajendra by cheque no. 0217422 and Rs. 1,00,000/- out of the rent received from house property aggregating to Rs. 17,00,000/-. Accordingly, the source of source also was submitted along with the confirmations from them even though the same was not necessary or the same was not the part of the assessee to submit. Finally, he submitted that the assessee had discharged the onus of proving the identity, credit worthiness and genuineness of the gifts and accordingly the gifts received from daughter out of natural love and affection cannot be added to the income as unexplained credits under section 68 of the Income Tax Act, 1961, which may please be deleted.

6. Ld. DR, on the other hand, relied on the orders of revenue authorities.

7. Considered the rival submissions and perused the material on record. The assessee has received gift from her daughter. The AO has verified the details of this transaction by asking the assessee to file the bank statement and confirmation from her. The same was filed before the AO. The transaction was done by T. Veena only through banking channel. Ms. T. Veena also filed the sources for the funds received by her i.e. she had taken loan from Mr. P. Srinu Babu and P. Rajendra. As far as, assessee is concerned, the identity, creditworthiness and genuineness were proved. The AO and CIT(A) have doubted the creditworthiness of assessee’s daughter. It is irrelevant for the assessee to prove as the assessee has brought on record not only the source but source of source also. It is for the revenue to initiate proceedings in the case of T. Veena, if they are not satisfied with the submission of Ms. T. Veena. As far as the assessee is concerned, she had received the gift from her daughter through banking channel, hence, she has proved identity and genuineness of the transaction and for creditworthiness, she had brought on record the bank statement & PAN of her daughter. Therefore, assessee has discharged her part of duty. In the case of CIT Vs. Dr. Kodela Siva Prasada Rao, [2013] 29 Taxmann.com 18, on which reliance placed by the assessee, the Hon’ble High Court of AP has held that the sum received as gift from a close relative who was man of means and who had also confirmed the said transaction, could not be added as cash credit. In view of the above observations and following the ratio laid down in the said case, we delete the addition made by the AO u/s 68 of the Act.

8. In the result, appeal of the assessee is allowed. Pronounced in the open Court on 23rdMay, 2018.

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