Facts of the Case

The assessee received a sum of money as a gift through banking channels from an identifiable donor. During assessment proceedings, the Assessing Officer treated the amount as unexplained cash credit under Section 68 on suspicion that the transaction represented an accommodation entry.The donor was produced before the Assessing Officer, her statement was recorded on oath, and she confirmed having given the gift. Details such as PAN, address, income sources, bank account, and tax returns were furnished. Despite this, the Assessing Officer made the addition, which was upheld by the CIT(A). The assessee appealed before the ITAT.

Issues Involved

  1. Whether a gift received through banking channels can be treated as unexplained cash credit under Section 68 despite confirmation by the donor.
  2. Whether production of the donor and documentary evidence satisfies the requirements of Section 68.
  3. Burden of proof regarding identity, creditworthiness, and genuineness of the transaction.

Petitioner’s Arguments (Assessee)

  • The donor personally appeared before the Assessing Officer and confirmed the gift.
  • Identity of the donor was established through PAN and address.
  • Creditworthiness was proved through income details and financial statements.
  • The transaction was carried out through banking channels.
  • All documentary evidence including gift declaration, affidavit, and tax returns of the donor were furnished.
  • Therefore, the statutory requirements under Section 68 were fully satisfied.

 Respondent’s Arguments (Revenue)

  • Although identity of the donor was established, creditworthiness was allegedly not satisfactorily proved.
  • The transaction was suspected to be an accommodation entry.
  • The Assessing Officer and CIT(A) were justified in treating the amount as unexplained income.

 Court Order / Findings (ITAT)

  • The donor appeared before the Assessing Officer and confirmed the gift on oath.
  • The donor was assessed to tax and had disclosed sources of income.
  • The gift was made through banking channels.
  • Documentary evidence such as income-tax returns, capital position, PAN details, and affidavit were available.

Important Clarification

  • Section 68 requires proof of identity, creditworthiness, and genuineness — not proof beyond doubt.
  • Personal appearance of the donor with supporting documents carries strong evidentiary value.
  • Additions cannot be sustained merely on suspicion or general investigation findings.
  • Once the assessee discharges the initial burden, the onus shifts to the Department.
  • Gifts through banking channels with documented sources are not automatically bogus.

Link to download the order –

https://itat.gov.in/public/files/upload/1630578653-shanti%20devi.pdf

Disclaimer     

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.