ITAT Allows Gifts from Sisters, Rules Tax Dept Can't Reject Them Merely for 'Lack of Scrutiny' on Donors [Read Order]
The tribunal held that the assessee had satisfactorily discharged his initial burden by providing documents that established three crucial aspects: the identity of the donors, their creditworthiness, and the genuineness of the transactions.
The Agra Bench of the Income Tax Appellate Tribunal (ITAT) set aside additions made on account of gifts received by an assessee from his sisters, holding that the tax department cannot reject such transactions merely because the donors were not subjected to scrutiny assessments.
The Tribunal found that the assessee had produced sufficient documentary evidence to establish the identity, creditworthiness and genuineness of the gifts. Sharad Maheshwari, who had received cash gifts totaling Rs. 10,94,000 from one sister, Shashi Bansal, and a cheque gift of Rs. 6,25,000 from another sister, Manju Agarwal. The Assessing Officer (AO) and the Commissioner of Income-Tax(Appeals) had treated these amounts as unexplained cash credits under section 68 of the Income-tax Act. The lower authorities had doubted the creditworthiness of the donor sisters, with the CIT(A) specifically noting that Shashi Bansal had not been subjected to a scrutiny assessment by the department.
Before the ITAT, Maheshwari’s representative argued that all necessary evidence had been submitted to prove the genuineness of the transactions. For the gifts from Smt. Shashi Bansal, the assessee produced sale deeds demonstrating that she had received cash from the sale of properties, which was then gifted to her brother. It was also confirmed that she had paid the requisite capital gains tax on these property sales. For the gift from Manju Agarwal, the assessee furnished a gift declaration, a confirmation letter, and the donor’s bank statement showing sufficient funds before issuing the cheque.
The ITAT found the department's stance untenable. The bench strongly countered the CIT(A)'s reasoning, stating that an assessee cannot be penalized for the department's own inaction. It is not the responsibility of a taxpayer to ensure that the income tax department selects a donor's file for scrutiny; that duty lies solely with the tax authorities.
The tribunal held that the assessee had satisfactorily discharged his initial burden by providing documents that established three crucial aspects: the identity of the donors, their creditworthiness, and the genuineness of the transactions.
Since the gifts were between siblings, supported by confirmations, and the sources of the funds were explained with property sale documents and bank statements, the ITAT saw no reason to disbelieve them. The bench emphasized that when a taxpayer provides all requisite proof, the onus shifts to the AO to conduct further inquiries if doubt persists, which was not done in this case.
Single Member Bench comprising Accountant Member M. Balaganesh, allowed the assessee’s appeal and deleted the combined addition of over Rs. 17 lakh, providing a clear win for the taxpayer and reiterating the principles governing the taxation of gifts from relatives.
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