Gift from Mother Cannot Be Treated as Unexplained Investment: ITAT Hyderabad

Manikanta Prudhvi Prabhakar Jonnala Vs ITO (ITAT Hyderabad)

Hyderabad ITAT: Gift from Mother Cannot Be Treated as Unexplained Investment When Donor’s Identity, Capacity and Source Are Established

Summary: The Hyderabad ITAT condoned a delay of 30 days in filing the appeal after accepting the assessee’s explanation that he was residing in Canada, depended on his Chartered Accountant for handling tax matters, and filed the appeal promptly after becoming aware of the order through a recovery notice. On merits, the dispute concerned an addition of ₹5,71,944 under Section 69 of the Income-tax Act, treated by the Assessing Officer as unexplained investment in relation to the purchase of an immovable property. The assessee contended that the amount was a gift from his mother and produced a confirmation letter and her bank statements showing a credit of ₹8,42,000 on 08.01.2020, followed by a cash withdrawal of ₹8,00,000 on 10.01.2020, from which ₹5,71,944 was gifted to him. The Tribunal noted that the donor’s identity and relationship with the assessee were undisputed and that the bank statements demonstrated sufficient funds with the donor immediately before the gift. As the Revenue did not produce any material to controvert the evidence, the Tribunal held that the source of the amount stood satisfactorily explained and directed the Assessing Officer to delete the addition of ₹5,71,944. The appeal was allowed.

The Hyderabad ITAT deleted an addition of ₹5.72 lakh made under section 69, holding that the assessee had satisfactorily explained the source of investment in a residential property to the extent of the amount received as a gift from his mother. The Tribunal noted that the assessee had furnished a gift confirmation, and the donor’s bank statement established that she had received a credit of ₹8.42 lakh, followed by a cash withdrawal of ₹8 lakh immediately before making the gift. Since the identity of the donor, the mother-son relationship, the availability of sufficient funds, and the genuineness of the transaction stood established, the initial burden cast upon the assessee stood discharged. As the Revenue failed to bring any material on record to discredit these evidences, the Tribunal held that the addition under section 69 was unsustainable and directed the Assessing Officer to delete the addition. The Tribunal also condoned a 30-day delay in filing the appeal, observing that the assessee, who was residing in Canada, had shown sufficient cause for the delay.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

This appeal is filed by Shri Manikanta Prudhvi Prabhakar Jonnala (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 17.07.2025 for the A.Y. 2020-21.

2. At the outset, we find that there is a delay of 30 days in filing the present appeal before the Tribunal. The assessee has filed a petition for condonation of delay along with an affidavit explaining the reasons for the delay. The Learned Authorized Representative (“Ld. AR”) submitted that during the relevant period, the assessee was residing in Canada and all his income-tax matters were being looked after by his Chartered Accountant at Hyderabad. It was submitted that the order of the Ld. CIT(A) was uploaded on the Income-tax portal and the same escaped the attention of both the assessee as well as his Chartered Accountant. The Ld. AR further submitted that during the relevant period, the Chartered Accountant of the assessee was heavily preoccupied with income-tax return filing activities for Assessment Year 2025-26 and therefore the verification of the Income-tax portal could not be carried out on a regular basis. It was further submitted that only upon receipt of a notice for recovery of demand on 08.10.2025, the Income-tax portal was verified by the Chartered Accountant and the assessee was informed about the necessity of filing an appeal before the Tribunal. Thereafter, the assessee immediately took steps for filing the appeal and the same was filed on 30.10.2025. Accordingly, it was contended that the delay was neither deliberate nor intentional but occurred due to bona fide circumstances beyond the control of the assessee. Therefore, the Ld. AR prayed for condonation of the delay and admission of the appeal for adjudication on merits.

3. Per contra, the Learned Departmental Representative (“Ld. DR”) did not raise any serious objection to the condonation of delay.

4. We have considered the rival submissions and perused the material available on record. We find that the assessee has explained the reasons for the delay by way of a duly sworn affidavit. The explanation furnished shows that the assessee was residing outside India and was dependent upon his Chartered Accountant for handling his income-tax matters. We further find that immediately upon becoming aware of the order and the consequential recovery proceedings, the assessee took prompt steps for filing the appeal before the Tribunal. Considering the reasons explained by the assessee in the condonation petition and affidavit, the short duration of delay of 30 days, and in the absence of any serious objection from the Revenue, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period. Accordingly, in the interest of substantial justice, the delay of 30 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

5. The assessee has raised the following grounds of appeal:

“1) The order of the learned CIT (A) is erroneous both on facts and in law;

2) The order of assessment is not validly made as the notice u/s 148A(b), order u/s 148A(d) and the notice u/s 148 of the I.T.Act are not issued by the appropriate authority;

3) The learned CIT (A) erred in confirming the action of the Assessing Officer in treating the gift received by him from his mother of Rs.5,71,944/- as the income assessable u/s 69 of the I.T.Act;

4) The learned CIT (A) ought to have seen that his mother has substantial sources and has confirmed the fact that she has provided the funds to her son and that, therefore, the learned CIT (A) ought to have allowed the gift received from his mother of Rs. 5,71,944/ -.

5) Any other ground/grounds that may be urged at the time of hearing”

6. The brief facts of the case are that the assessee is an individual who had not filed any return of income for Assessment Year 2020-21. From the information available on record, the Learned Assessing Officer (“Ld. AO”) came to know that during the relevant previous year the assessee had purchased an immovable property for a total consideration of Z1,05,00,000. Accordingly, the Ld. AO initiated reassessment proceedings under section 147 of the Income-tax Act, 1961 (“the Act”) and issued notice under section 148 of the Act on 15.03.2024. During the reassessment proceedings, the Ld. AO observed that the assessee had purchased a residential flat for a consideration of Z1,05,00,000 and had also incurred registration and related expenses of 26,30,000. Thus, the total investment in the property was worked out at Z1,11,30,000. The Ld. AO called upon the assessee to explain the source of such investment. After considering the submissions of the assessee, the Ld. AO was not satisfied with the explanation regarding a sum of 25,71,944 claimed to have been received by the assessee as a gift from his mother. The Ld. AO treated the said amount as unexplained investment under section 69 of the Act and added the same to the income of the assessee. Accordingly, the assessment was completed by the Ld. AO under section 147 read with sections 144 and 144B of the Act on 26.02.2025 assessing the total income of the assessee at 25,71,944.

7. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) confirmed the addition made by the Ld. AO and dismissed the appeal of the assessee.

8. Aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before the Tribunal. The Ld. AR invited our attention to the confirmation letter of gift executed by the mother of the assessee placed at page no. 24 of the paper book and submitted that the mother of the assessee had categorically confirmed having gifted a sum of 25,71,944 to the assessee. It was submitted that the said confirmation was filed before both the lower authorities. The Ld. AR further invited our attention to the bank statements of the mother of the assessee placed at page nos. 7 to 10 of the paper book. It was submitted that there was a credit of 28,42,000 in the bank account of the mother of the assessee on 08.01.2020 otherwise than by way of cash deposit. Thereafter, on 10.01.2020, she withdrew cash of 28,00,000 from the said bank account. Out of the said withdrawal, a sum of 25,71,944 was gifted to the assessee. It was therefore submitted that the identity of the donor, her creditworthiness and the genuineness of the gift stand duly established. Accordingly, the Ld. AR prayed that the addition made by the Ld. AO and sustained by the Ld. CIT(A) be deleted.

9. Per contra, the Ld. DR submitted that the bank statements of the mother of the assessee were not filed before the lower authorities and have been furnished for the first time before the Tribunal. Therefore, the source of credit in the hands of the mother of the assessee could not be verified by the lower authorities. Accordingly, the Ld. DR prayed that in case the Tribunal considers the said bank statements relevant, the matter may be restored to the file of the Ld. AO for verification of the same.

10. We have heard the rival submissions and perused the material available on record. The solitary dispute involved in the present appeal relates to the addition of 25,71,944 made by the Ld. AO under section 69 of the Act on account of alleged unexplained investment. The assessee has explained that the impugned amount represented a gift received from his mother. In support thereof, the assessee has submitted a confirmation letter from his mother placed at page no. 24 of the paper book, confirming the gift of 25,71,944. We further note that the assessee has also produced the bank statements of his mother placed at page nos. 7 to 10 of the paper book. Although the Ld. DR submitted that the bank statements were not filed before the lower authorities, the assessee has specifically certified that the said bank statements had already been furnished before both the lower authorities. Be that as it may, we have gone through the bank statements and on perusal of the same, we find that there was a credit of 28,42,000 in the bank account of the mother of the assessee on 08.01.2020 otherwise than through cash deposit. We further find that on 10.01.2020, cash of 28,00,000 was withdrawn from the said bank account. The contention of the assessee is that out of the aforesaid withdrawal of 28,00,000, a sum of 25,71,944 was gifted by his mother to the assessee. The bank statement thus evidences the immediate availability of sufficient funds with the donor for making the gift. The identity of the donor is not in dispute. The relationship between the donor and the donee is also undisputed. Further, the source of funds in the hands of the donor stands corroborated by the bank statement placed on record. In our considered opinion, once the assessee has furnished the confirmation of the donor and the bank statement demonstrating availability of sufficient funds with the donor immediately prior to the gift, the source of the impugned amount stands satisfactorily explained. The Revenue has not brought any material on record to controvert the evidences furnished by the assessee. Accordingly, we hold that the addition of 25,71,944 made by the Ld. AO and sustained by the Ld. CIT(A) is unsustainable. The Ld. AO is directed to delete the addition of 25,71,944/-.

11. In the result, the appeal of the assessee is allowed.

Order pronounced in the Open Court on 8th July, 2026.