Since efforts were not made to recover an advance given would be treated as gift u/s 56?

Nilesh Janardan Thakur vs. ITO (ITAT Mumbai) - 2 Dec 2017

Some of the important pointers of the case (for easy reference):

1- It was discussed that "In this case, if you look into the transactions, the impugned amount cannot be brought to tax under any of the provisions discussed by the AO as the assessee has proved with necessary evidence that it is merely an advance received for procurement of land. Even assuming, but not accepting for the moment, the impugned amount cannot be taxed under section 68, as the assesse has proved the three ingredients provided u/s 68, i.e. identity, genuineness of transactions and creditworthiness of the parties,

2- It was further discussed that " To tax a particular receipt as his income, it should be in the nature of income referred to under the provisions of section 56(2) or 68 or 28(iv) of the Act as discussed by the AO. The AO has taxed impugned amount on conjecture ad surmise, despite furnishing of evidences to prove that the impugned amount is merely an advance received and there is no element of income in such advances,

3- Learned court further discussed that "We do not find any merit in the findings of the A.O. for the reason that merely because the person, who paid the amount does not initiate any action for recovery of money should not be not a reason for making addition towards amount received as assessee’s income. The AO has to prove beyond doubt a particular receipt is taxable in the given circumstances within the meaning of the said provision,

It was broadly concluded that even the amount is not asked for repayment will not constitue as gift under section 56.

For reading full text of the case law please refer link - http://itatonline.org/archives/nilesh-janardan-thakur-vs-ito-itat-mumbai-taxability-of-gifts-u-s-562vi-a-receipt-cannot-be-taxed-u-s-562vi-merely-on-conjecture-or-surmises-the-ao-has-to-prove-beyond-doubt-that-a-particula/nilesh-thakur-562vi-gifts/