The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of ₹30.65 lakh, deposited during demonetization and claimed as a gift from the deceased grandmother, under Section 69A of Income Tax Act,1961.

Priyanka,appellant-assessee,filed her income tax return for the assessment year 2017-18 on 31.10.2017, declaring a total income of Rs. 3,23,910/-. Her case was selected for scrutiny due to unusually high cash deposits during the demonetization period and substantial cash receipts from third parties.

During FY 2016-17, she deposited Rs. 30,65,000/- in her Punjab National Bank account, claiming it was a gift from her deceased grandmother. The Assessing Officer(AO) rejected this explanation and treated the amount as unexplained cash under section 69A, completing the assessment on 26.12.2019 at Rs. 33,88,910/- and taxing it at 60% under section 115BBE.

The First Appellate Authority confirmed the addition, following which the assessee appealed to the Tribunal.

A single member bench of Mahavir Singh (Vice President) examined the matter after hearing both sides and reviewing the records. It noted that the key issue was the source of the cash deposits, which the assessee claimed to be a gift from the deceased grandmother, Smt. Bhagwati Hermrajani.

The late grandmother had earned rental income by letting out her property at Old Rajinder Nagar, New Delhi, to Shri Anil Paul, who paid the rent in cash. This rental income had been disclosed in her income tax returns for the relevant years.

The Investigation Directorate in Delhi had verified the matter, and Shri Anil Paul confirmed that he had paid rent in cash to Late Smt. Bhagwanti Hermrajani. The Tribunal observed that, although there was no written rental agreement, Shri Anil Paul’s confirmation email and bank statements showed regular cash withdrawals for rent payments during assessment years 2012-13 to 2016-17, which were not disputed by the tax authorities.

It also noted that, due to old age and health issues, Late Smt. Bhagwanti Hermrajani preferred to receive rent in cash and saved the amount over the years.

Based on these facts, the tribunal found the gift to be genuine and supported by sufficient evidence, establishing the creditworthiness and source of the cash deposits. It, therefore, deleted the addition of Rs. 30,65,000 made under Section 69A of the Act.

Regarding the assessment under Section 115BBE, the appellate tribunal referred to the Madras High Court ruling in SMILE Microfinance Ltd. vs. ACIT (W.P. Nos. 2078 & 1742 of 2020, dated 19.11.2024), which held that the provision applied only to transactions on or after April 1, 2017.

Accordingly the appeal was allowed.

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