Gift from Mother-in-Law Out of Encashed FDs Cannot Be Brushed Aside on Suspicion: ITAT Agra

Ashish Bhatt Vs ITO (ITAT Agra)

Gift from Mother-in-Law Out of Encashed FDs Cannot Be Brushed Aside on Suspicion—ITAT Deletes Section 69 Addition

Summary: The Agra Bench of the Income Tax Appellate Tribunal has held that where the assessee established the complete movement of funds through banking channels and demonstrated that the amount gifted by his mother-in-law originated from the encashment of her fixed deposits, the investment could not be treated as unexplained merely because the donor had a comparatively low returned income or because the funds were credited shortly before the gift was made.

The assessee had purchased an immovable property for ₹51,67,000 during the financial year relevant to A.Y. 2016-17. The payment consisted of ₹32 lakh financed through a housing loan from Axis Bank, ₹6.80 lakh paid from the assessee’s own funds, and ₹12.35 lakh contributed by his wife, Smt. Binatee Bhatt. The Assessing Officer accepted the housing loan and the assessee’s own contribution. However, out of the amount contributed by the wife, only ₹2 lakh was accepted as being sourced from her past savings. Consequently, the balance amount of ₹10.87 lakh was added as unexplained investment under section 69.

Before the CIT(A), the assessee explained that his wife had received a gift of ₹12 lakh from her mother, Smt. Kamla Ramesh Chhugani, who was a retired pensioner and a regular income-tax return filer. The gift was transferred through RTGS, and the assessee furnished the bank statements of the donor and the recipient, the donor’s confirmation, her return of income and other supporting evidence.