Gift From Mother out of FD Maturity Cannot Be Treated As Unexplained Investment: ITAT Deletes ₹1.75 Cr Addition u/s 69 [Read Order]
ITAT Mumbai held that gifts received from a mother’s FD maturity cannot be taxed as unexplained investment.
The Mumbai Bench of the Income Tax Appellate Tribunal has held that the amount received as a gift from the mother from the maturity of fixed deposits cannot be regarded as unexplained investment under Section 69 of the Income-tax Act, 1961. The Tribunal, thus, deleted the addition of ₹1.75 crore holding that the assessee had satisfactorily explained the source of funds.
The assessee in the present case was subject to reassessment proceedings when it was noted by the Assessing Officer (AO) that Nevin H. Bharwani had made investment in fixed deposits in DCB Bank to the tune of ₹1.75 crore. The AO noted this as unexplained investment under section 69 as the assessee had failed to establish the source of investment.
The assessee explained that this amount had been received as a gift from her mother, who had sufficient funds from the maturity of the fixed deposits from the same bank. During the proceedings before the Dispute Resolution Panel (DRP), the assessee had provided the details of the bank statements, details of the fixed deposit maturity, and details of the transfer of the funds from her mother's account.
Despite this, the DRP allowed the inclusion, opining that the assessee could not prove the identity, creditworthiness of the donor, and the genuineness of the transaction in a conclusive manner.
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Before the ITAT, the assessee had submitted that since the status of the donor (mother) was not in dispute, and since her creditworthiness was established from bank statements showing the maturity of fixed deposits, and that all transactions were fully done through the banking channel, genuineness had been established.
The Revenue contended that mere submission of bank statements was insufficient and that the assessee had not discharged the burden cast under Section 69 to explain the investment satisfactorily.
Allowing the appeal the ITAT held that since the AO, in his remand report had verified and accepted that the fixed deposits of mother had matured and similar amounts were transferred to both daughters once the source of the funds donor’s capacity, and genuineness of the transaction were established no addition under Section 69 could be made.
The Bench comprising Justice Kavitha Rajagopal [Judicial Member] Prabhash Shankar, [Accountant Member] held that the authorities below erred in ignoring verified bank records and concluded that the ₹1.75 crore investment was fully explained. Accordingly, the addition under Section 69 was deleted. However the Tribunal sustained a separate addition relating to amounts received from the assessee’s sister due to lack of supporting evidence.
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