The Income Tax Appellate Tribunal ( ITAT ) Chennai Bench ruled in favor of the appellant, setting aside the Rs. 35 lakh addition made under Section 68 of the Income Tax Act, 1961. The tribunal held that the assessing officer had wrongly classified gifts received from her mother and brother as unexplained cash credits without considering the supporting evidence provided by the assessee.
Dr. Karunamoorthi Kavitha ,the appellant, a gynecologist and owner of Vijaya Multispeciality Hospital in Dharmapuri, was subjected to a survey under Section 133A on March 21, 2018. The Income Tax Department found that she had not disclosed rental income from a medical shop and canteen in her tax returns.
Additionally, during the assessment for the financial year 2017-18, the officer questioned the source of funds used for hospital construction.
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Assessee explained that she had received Rs.25 lakh from her mother and Rs.10 lakh from her brother as a cash gift. However, the Assessing Officer ( AO ) rejected this explanation, citing insufficient documentary evidence to establish the donors’ financial capacity.
The AO treated the amount as unexplained cash credit under Section 68 and made an addition to the taxable income.
The ITAT ruled that Dr. Kavitha had provided sufficient evidence to prove the genuineness of the gifts received from her mother and brother. She submitted their identity, PAN details, and income tax returns, which confirmed their financial capacity to give the gifts. She also provided documents related to the sale of agricultural land, which was the source of funds for her family members.
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The tribunal stated that there was no legal requirement to explain the source of the source in this case.
The amendment to Section 68, which mandates disclosing the source of the donor’s funds, came into effect only from Assessment Year 2022-23. Since Dr. Kavitha’s case pertained to Assessment Year 2018-19, the Assessing Officer ( AO ) could not demand such an explanation.
The tribunal found that the transactions were genuine. The donors were income-tax assessees with regular sources of income, and their financial records supported the claim. The tribunal also noted that the AO’s rejection was based on mere suspicion rather than solid evidence. There was no material on record to contradict Dr. Kavitha’s explanation.
Based on these findings, the ITAT deleted the Rs.35 lakh addition under Section 68, ruling that the assessment was unjustified.
A Two Member Bench composed of George George K ( Vice-President ) and S.R. Raghunatha ( Accountant Member ) allowed the appeal filed by assessee.
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