Mere Affidavits of Siblings cannot Substantiate Family Property Settlement Claim : ITAT Grants Final Chance to Justify Deposits [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT), while partly allowing the appeal with regards to the cash deposits, observed that mere affidavits of siblings, without a proper documentary evidence or deed, cannot substantiate family property settlement claims.

The appeal was filed by Ms. Fehmida Begum. The facts is that the Assessing Officer (AO) treated aggregate bank credits of ₹28.97 lakh, including cash deposits of ₹17.81 lakh, as unexplained money under Section 69A of the Income Tax Act, 1961, since the assessee failed to file a return or respond to notices issued under Section 142(1).

The AO, depending on bank statements obtained from SBI, completed the assessment ex parte under Section 144, which was later confirmed by the Commissioner of Income tax (appeals)[CIT(A)].

The assessee contended that a major portion of the deposits, amounting to ₹13.62 lakh, represented money received from her brothers in connection with a family property settlement, wherein ₹14 lakh was earmarked for distribution among female members of the family.

She argued that she received the amount on behalf of her sisters and mother, deposited it in her account, and later refunded their shares, retaining ₹2.5 lakh as her entitlement. In support, she filed affidavits from family members.

The petitioner appeared through Mohd. Afzal, Advocate submitted that another deposit of ₹14 lakh was explainable as premature encashment of a fixed deposit (FDR) originally created just three days earlier, which was corroborated by her bank records.

The income tax department, however, contested her explanation, observing that no family settlement deed or relinquishment documents were filed, nor any evidence of cash availability in the hands of her brothers.

The bench Vijay Pal Rao and Madhusudan Sawdia agreed in part that, while it accepted the explanation regarding the ₹14 lakh FDR deposit as fully supported by documents and directed deletion of this addition, it found the claim of family settlement unsubstantiated.

The appellate tribunal stated that mere affidavits, without a valid deed or proof of property rights and cash source, were insufficient to discharge the assessee’s burden of proof.

Further, the Bench observed that the assessee expressed willingness to furnish proper evidence if given another chance. Therefore, it remanded the issue of ₹13.62 lakh cash deposit, as well as the balance credits of ₹1.34 lakh, back to the AO with directions to conduct a fresh adjudication after affording reasonable opportunity.

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