Top Stories Failure to Prove Genuineness of Cash Gift of Rs. 42 Lakhs: SC Upholds Income Tax Addition [Read Order] The Supreme Court upheld the order set aside the deletion of Income Tax on Failure to Prove Genuineness By Yogitha S. Yogesh – On February 5, 2024 1:13 pm – 2 mins read The Supreme Court of India upheld the order of the Allahabad High Court (HC) by which the set aside the deletion of  the Income Tax Addition. The HC upheld the addition of Rs.42 Lakhs cash received as a Gift under the Income Tax Act as the assessee failed to Prove Genuineness. Virendra Behari Aggarwal (dead), the petitioner filed the Special Leave Petition(SLP) against the final judgment and order passed by the High Court Of Allahabad. The department appealed under Section 260-A of the Income Tax Act, 1961 against the judgement and order passed by the Income Tax Appellate Tribunal(ITAT). The assessee is the partner in the Firm namely M/s Agrawal Fashion, another partner was the brother of the assessee namely, Shri Surendra Behari Agrawal.

The assessee has two minor sons namely, Rajat Agrawal and Rohit Agrawal.  While doing the scrutiny, the Assessing Officer (AO) observed that the assessee has taken a loan of Rs. 21,00,000/- each from his minor sons through their mother namely, Smt. Meenu Agrawal, wife of the assessee. The A.O. in its order, observed that the amount was given to Shri Surendra Bihari Agrawal, brother of the assessee on his retirement from the firm, out of which a cheque of Rs. 53 lacs was given to him. It is alleged that a sum of Rs. 11 lacs was given to each minor child of the assessee by their uncle Shri Surendra Bihari Agrawal. The minor children have given gifts to the father through the mother.  Thus, the total loan of Rs. 42 lacs was received by the assessee from his minor children. The A.O. found the said gifts were bogus and made the addition of Rs. 42,00,000/-, which was confirmed by the First Appellate Authority. However, the Tribunal has accepted the gifts as genuine and deleted the addition. The Department submitted that Shri Surendra Bihari Agrawal made the statement before the A.O. on 30 December 2003 in response to the notice under Section 131 of the Income Tax Act.

It was found that there was a dispute between the brothers and Shri Surendra Bihari Agrawal who had filed a suit against the assessee on 16.02.2003, where he claimed the outstanding debt due. Further in his statement, he has categorically stated that no cheque was received from the firm and he has not given any gifts to anybody. Regarding the cross-examination, the assessee has not availed the opportunity as stated by the learned A.O. The High Court held that the Tribunal had wrongly deleted the addition, and the same is not desirable in the circumstances of the case. The money is routed indirectly from the firm to the assessee’s account under the garb of the gifts.

The Court set aside the impugned order passed by the Tribunal about two gifts amounting to Rs. 42 lacs and restored the order passed by the A.O. A two-judge bench of Justice Pamidighantam Sri Narasimha and Justice Aravind Kumar refused to interfere with the impugned judgment and order passed by the High Court. The Supreme Court upheld the same while dismissing the Special Leave Petition.