Additions made on the basis of surmises and conjectures is not sustainable: Delhi HC
Delhi High Court in the case of Rohit Gandhi (ITA 957/2018) set aside the ITAT’s decision and allowed assessee’s appeal, concluding that the additions made by the AO were unsustainable and that the assessee had established the genuineness of the gifts received. Delhi HC has concluded that the additions made on the basis of surmises and conjectures is not sustainable.
Let us have a Short Overview of the case:
Key Issue
Addition of ₹34,67,900/-:
The main issue is whether the ITAT was justified in sustaining the addition of ₹34,67,900/- for AY 2008-09, despite the assessee discharging the onus to prove the gifts received by him.
Prefatory Facts:
Rohit Gandhi is an individual and Director of M/s Cue Apparel Private Limited and a partner in M/s R&R Arts, which deals with works of art.
A search and seizure operation under section 132 of the Act was carried out at his residential premises. The AO assessed his income at ₹ 1,44,62,994/- against the declared income of ₹18,40,524/-. The addition included ₹1,00,00,000/- on account of undisclosed investments in works of art (paintings) which Rohit Gandhi claimed were gifted to him.
Tribunal’s Findings
The AO accepted the identity of the donors but did not accept their creditworthiness or the genuineness of the gifts. The CIT(A) reduced the addition to ₹58,00,100/- but upheld the AO’s decision regarding the genuineness of the gifts. The ITAT did not interfere with the CIT(A)’s decision, reasoning that the relationship between the donor and donee was not proved beyond doubt.
High Court’s Decision:
The High Court found that the quantum of addition made by the AO and upheld by the CIT(A) was not based on any valuation or cogent evidence.
The High Court noted that the assessee had produced letters of confirmation from the artists and in one case, from the daughter of a deceased artist. The High Court held that the additions made by the AO and upheld by other authorities were unsustainable as they were based on surmises and conjectures.
The High Court concluded that the assessee had established the identity, creditworthiness, and genuineness of the gifts. The High Court allowed the appeal, answering the question of law in favor of the assessee and against the revenue and directed that the additions be removed.
The copy of the order is as under:
