S. 68 — Cash credit — Loan amount received in earlier year converted into gift — Valid gift.

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    Haresh A. Dhanani v. ACIT

ITAT ‘SMC’ Bench, Mumbai

Before A. L. Gehlot (AM)

ITA No. 5850/M/2008

A.Y. : 2002-03. Decided on : 22-5-2009

Counsel for assessee/revenue : R. Ajay Singh/

Malati Sridharan

S. 68 — Cash credit — Loan amount received in earlier year
converted into gift — Valid gift.

Facts :

During the year under appeal the assessee had claimed to
have received gift of Rs.2.5 lacs from his uncle on the occasion of his
marriage anniversary. As per the facts noted, the said amount had been shown
by the assessee in his balance sheet as loan from his uncle up to 31-3-2001.
During the year under consideration, the said loan was converted into gift
vide gift deed dated 6-1-2002. The assessee passed necessary journal entry and
the amount was transferred to his capital account from the loan account.
According to the AO since the gift was not received by actual delivery of
cash/cheque, it cannot be considered as valid gift and he treated the said
amount as unexplained cash credit in the hands of the assessee u/s.68 of the
Act. The CIT(A) on appeal relied on the decision of the Apex Court in the case
of Dr. R. S. Gupta and upheld the order of the AO.

Held :

According to the Tribunal, the case relied on by the CIT(A)
was distinguishable on the facts. In the case of Dr. R. S. Gupta, the amount
was deposited with a third person while in the case of the assessee, the loan
amount was with him only which was converted as gift. Further, it observed
that even if the gift was not considered as genuine gift, the addition of
Rs.2.5 lacs was not warranted u/s.68 because the credit entry as loan was
there as on 31-3-2001 with the assessee himself and there was no fresh cash
credit during the year.

Case referred to :

CIT v. Dr. R. S. Gupta, 165 ITR 36 (SC)