IN THE ITAT COCHIN BENCH
Rajesh Kumar
V/s.
Assistant Commissioner of Income-tax
IT Appeal No. 434 (Coch.) of 2010
[Assessment year 2007-08]
July 5, 2012
ORDER
B.R. Baskaran, Accountant Member
The appeal of the assessee is directed against the order dated 21-04-2010 passed by the Ld. CIT(A)-IV, Kochi and it relates to the assessment year 2007-08.
2. The assessee is assailing the decision of the Ld. CIT(A) in holding that the gift of Rs. 75.00 lakhs received by the assessee is in the nature of remission of liability and hence taxable u/s. 41(1) of the Act.
3. The facts relating to the issue are stated in brief. The assessee is engaged in the business of retail trade in textiles under the trade name M/s. Seemati. During the course of assessment proceedings, the Assessing Officer noticed that there was considerable increase in the capital of the assessee. On further analysis, it was noticed that the assessee has received a sum of Rs. 75 lakhs as gift from his maternal uncle named Shri V. Thiruvenkitam. The Assessing Officer noticed that the assessee has received this gift by way of book entry, i.e., by crediting his capital account and debiting the business account of donor M/s. Veeriah Reddiar (Dist.), i.e. the proprietary concern of the donor. Prior to passing the gift entry, the assessee owed a sum of Rs. 72.55 lakhs to the above said concern. Though the assessee filed a letter from his uncle, Shri V. Thiruvenkitam, in which he had confirmed the payment of gift, yet the Assessing Officer opined that the gift received by the assessee is required to be treated as cessation/remission of trading liability as stated in sec. 41(1) of the Act. Accordingly, he added the sum of Rs. 75 lakhs referred above u/s. 41(1) of the Act. The assessee carried the matter in appeal before the Ld. CIT(A) but could not succeed. Aggrieved, the assessee is in appeal before us.
