Rs. 3.5 Lakh Gift from Daughter Treated as Unexplained Cash by AO: ITAT Deletes Addition, Accepts Source as Genuine [Read Order]
The tribunal noted that the daughter had sufficient funds, maintained regular bank deposits, and the gift was made out of love and affection
The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the Assessing Officer (AO)’s addition of Rs. 3.5 lakh, holding that the amount received as a gift from the assessee’s daughter was genuine and not unexplained cash under section 68 of Income Tax Act,1961.
Rupam Dubey,appellant-assessee, had filed her original return of income on 01.09.2018, declaring a total income of Rs. 7,40,370/-. During assessment proceedings, the AO noted from the Insight Portal that substantial cash deposits were made in her savings bank account. The case was reopened under section 147, and a notice under section 148 was issued on 30.03.2022.
In response, filed on 16.01.2023, she declared the same income and explained that she had received Rs. 3,50,000/- as a gift from her daughter for purchasing immovable property, supporting this with the bank statement, passport, cash flow statement, and a gift declaration, while stating that she had not filed a return earlier due to income being below the taxable limit.
The AO examined the submissions but held that the daughter lacked the financial capacity to make such a gift and treated Rs. 3,50,000/- as unexplained cash credit under section 68, completing the assessment under section 147. The assessee appealed to the Commissioner of Income Tax (Appeals)[CIT(A)], who, in the order dated 18.03.2025, upheld the AO’s addition.
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The CIT(A) noted that the cash deposits, totaling Rs. 4 lakhs, did not reflect the donor’s limited bank balance and that the withdrawal-deposit pattern suggested irregular cash handling. He concluded that the assessee was financially sound while the daughter had limited means, and the assessee failed to prove the daughter’s capacity to gift Rs. 3,50,000/-. The assessee subsequently appealed before the tribunal.
The assessee counsel stated that the assessee was an individual and a teacher who also ran tuition classes during the year. The main grievance was that the AO added Rs. 3,50,000/- under section 68 as a gift from her daughter, without properly considering the documents and explanations submitted.
It was noted that the daughter produced deposit slips showing cash deposits in small denominations, reflecting her regular practice of keeping cash and depositing or withdrawing it frequently. The demonetization of Rs. 500 and Rs. 1000 notes did not affect her small savings. The daughter, being 25 years old, was capable of managing her account and gifting money to her mother from her savings. The source of the gift was not disputed.
A single member bench of Mahavir Singh (Vice President) held that the assessee had satisfactorily explained that the amount in question was a gift from her daughter out of love and affection, and that the daughter had sufficient funds in her account at the time of the gift. Accordingly, the addition made by the lower authorities was not justified. The tribunal deleted the addition and set aside their orders.
Accordingly the appeal was allowed.
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