No Addition on Unexplained Income received as Gift from Family Members: ITAT directs Re-Adjudication

The Indore bench of Income Tax Appellate Tribunal (ITAT) held that no addition can be made on unexplained income which was received as gift from the family members for personal use.

Hemant Pandya, the appellant assessee was an individual who filed his return of income of  declaring the total income  earned from salary, profession and other sources.

The revenue took an assessment based on return of income and the assessing officer was not satisfied with the report filed by the assessee that the unexplained income was a gift from the family members which used for the personal use. Thus the assessing officer made an addition on unexplained income under Section 69A of Income Tax Act, 1961.

The Commissioner of Income Tax(Appeals) confirmed the addition made by the assessing officer. Thus the assessee appealed against the order passed by the commissioner.

V.N. Dubey and Ibrahim Kannodwala, the counsel for the assessee contended that the unexplained income was received from his father,mother and grandmother as gift by the way of cash and an affidavit duly sworn by assessee on stamp paper along-with a copy of bank pass-book from which the aforesaid withdrawal was made, and was also filed to assessing officer in support of this.

Ashish Porwal, the counsel for the department made strong contentions emphasizing the same line of reasoning as observed by lower-authorities. It was also submitted that the gift received from family members was by the way of cash and it was not included in the return of income.

The two member bench comprising of Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) held that gift received from family members, namely father and mother for personal use which do not required any special occasion like birthday, marriage, etc and the affidavit given by donors, being father and mother, themselves explained that they made gifts to assessee for “personal use”.

The bench directed the assessing officer to re-adjudicate to delete the addition made under Section 69A of Income Tax Act, 1961 while allowing the appeal filed by the assessee.

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