INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Unexplained credit - Identity and creditworthiness of creditors being established

AO observed that assessee disclosed two amounts as gift received from his father and brother. On query, the assessee furnished confirmation letters from his father and brother. However, the AO opined that since the assessee could not furnish other details like date of gifts, nature of gifts and the amount available to the donors to offer gifts, the gift transactions could not be relied upon. Therefore, the AO treated such amounts as unexplained credit under section 68. Further, CIT (A) confirmed such addition. He alleged that the assessee's father and brother was having ration card of BPL category and thus, they both belong to below poverty line and of lowest economic strata. Held: It was undisputed that both assessee's father and brother owned substantial areas of agricultural land, therefore, the agricultural income disclosed by them could not be disputed. Further, by the class of ration card possessed by the individuals, one could not determine such individuals belong to people of poor means and even the wealthy farmers possess ration cards of low economic class. Therefore, the CIT (A)'s observation to hold that the quantum of savings of the assessee's father and brother could not be relied upon, was not appropriate. Further, considering the extent of land owned by the assessee's father and brother, their creditworthiness for accumulating the funds that was given by them to the assessee, could not be doubted and could be treated as reasonable. Further, the assessee's father and brother also confirmed the transaction by furnishing their confirmation statements. Hence, the addition made under section 68 was unsustainable.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 68

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