The Income Tax Appellate Tribunal, Bangalore bench recently ruled that if the gift is invalid then no addition can be done in respect of the same under the provisions of the Income Tax Act since assessee is not even owner of any property.
The bench comprising of judicial member Shri.Goerge Goerge .K and accountant member Shri.Arun Kumar Garodia upheld that addition cannot made in such situation.
In instant case the assessee was contested the appeal against the order of CIT Bangalore for Assessment Year 2009-10.
The AO showed his objection during the assessment proceedings that the assessee produced only a declaration by the father of the assesse regarding receipt of the gift by the assessee from him and the AO did not consider it sufficient. As per the remand report AO reported that the assessee had produced the sale deed, which explains the place of property purchased by his father along with the co-owner. The sale deed did not specifically mention the proportion of ownership between the joint owners and therefore, the ownership should be considered in the ratio of 50:50 and the property still continued to be owned by these two joint owners and as per the records, the gift deed is not registered.
The assessee has shown in capital account that the assessee has received a site at Thogur as gift from the father of the assessee of Rs. 1 crore and the same was added to capital account. The addition was made by the AO regarding the gift received, the source, credit worthiness and genuineness of the transaction remains unverified.
The counsel of revenue contended that the opinion of assessee on account of amount credited in capital account regarding land purchase of his father was not correct and therefore, the addition made by the AO should be upheld.
The bench while considering the rival contention opinioned that according to AO, was correct that in the absence of registered gift deed, receipt of an immovable property by way of gift was not acceptable but in spite of this, addition was not justified because this was not the case of the AO that any property apart from the alleged to be property received by way of gift without valid gift deed received by the assessee for which the assessee was not able to explain the source.
The tribunal further noted that “In our considered opinion, whether the gift is valid or not, addition is not justified on this account because if the gift is valid then it cannot be said that the assessee has made unexplained investment and even if the purchase by the donor is explained by the donor, it has to be added in the hands of the donor in the year of purchase of the property by the donor. If the gift is invalid then the assessee is not even owner of any property and therefore, no question arises for making addition in the hands of the assessee in respect of that property which is not even owned by the assessee and in that case also, addition if any may be made in the hands of the donor if the donor is not able to explain the source of investment.”
In view of the above findings, the court held that the addition made by the AO and confirmed by the CIT (A) of Rs. 1 crore was not justified and the same should be deleted.
Read the full text of the Order Below
