Kalpana Misra Vs ITO (ITAT Delhi)
Husband’s Bank Transfers Explain Wife’s Fixed Deposits; Interest on Gifted Funds Is Clubbed with Husband: Delhi ITAT
A fixed deposit cannot be treated as unexplained merely because it appears in a housewife’s bank account when the investment is traceable to documented transfers from her husband. If those transfers are gifts, however, the income earned from the gifted funds attracts the clubbing provision. The Delhi ITAT applied both principles in Kalpana Misra v. ITO, ITA No. 5270/Del/2026, for AY 2019–20, pronounced on 29 September 2026.
The case also highlights a separate accounting problem: in a flexi savings account, money may move repeatedly between the savings balance and linked deposits. Adding up deposit entries without examining their reversals can overstate the amount actually invested.
Why the Assessment Was Reopened
The assessee was a housewife who had not filed a return of income for AY 2019–20. Information available to the AO through the Insight portal indicated time deposits of ₹35,70,000 with Axis Bank and interest income of ₹68,078. The AO treated these amounts as income that had escaped assessment and issued a notice under Section 148 on 30 March 2023.
No return was filed in response to that notice. The reassessment was completed on a best judgment basis, adding ₹35,70,000 as unexplained investment and ₹68,078 as interest income in the assessee’s hands. The CIT(A) upheld the assessment.
The assessee maintained that the deposits were funded by her husband, Anurag Mishra, through online bank transfers. She placed his bank statement, return acknowledgement and Form 16 on record, along with her own bank statements. His gross salary for the year was shown as ₹38,14,521. The issue before the Tribunal was whether this material explained the source of the deposits and where the resulting interest should be taxed.
Bank Statements Established the Source
The ITAT examined the bank statements of both spouses. They showed periodic online transfers from the husband’s account to the assessee. The Tribunal worked out the net amount received from the husband during FY 2018–19 as ₹29,67,406, after taking account of transfers of ₹45,62,000 and ₹15,94,594 in the opposite direction. Out of the net funds received, the assessee invested ₹27,01,300 in fixed deposits.
On this evidence, the source of the investments was identified. The transfers were visible in the banking records, and the husband’s return and Form 16 supported his financial capacity. The Tribunal held that no part of the fixed deposit investment could be added as unexplained in the assessee’s hands.
Flexi Deposits Were Counted as ₹35.70 Lakh
The Tribunal also found that the AO’s figure of ₹35,70,000 did not represent the amount actually invested. The assessee held a flexi savings account. Surplus funds were periodically placed in linked fixed deposits, and deposits were matured when money was required in the savings account.
The ITAT’s examination of the complete bank statement showed investment of ₹27,01,300, rather than fresh deposits totalling ₹35,70,000. The difference matters because entries generated by transfers within a flexi account need to be read as part of the whole cash flow. A maturity credit followed by another deposit does not necessarily represent fresh money introduced by the account holder.
The addition of ₹35,70,000 for unexplained investment was therefore deleted. The conclusion rested on two findings together: the AO had overstated the investment, and the investment actually made was explained by the husband’s documented transfers.
Who Is Taxable on the Interest?
The assessee accepted that the funds received from her husband were gifts, not loans. That distinction determined the treatment of the interest. Under the clubbing rule in Section 64(1)(iv), income arising to an individual from assets transferred by a spouse without adequate consideration is included in the transferor spouse’s income, subject to the provision’s conditions.
The Tribunal held that the interest earned from these gifted funds should be clubbed in the husband’s hands and deleted from the assessee’s assessment. It directed the AO to take the amount into account in Anurag Mishra’s case.
The order contains a small numerical inconsistency that should be checked before using it in a submission: it repeatedly identifies the interest as ₹68,078, but the operative direction in paragraph 6 refers to ₹68,038. The underlying bank and interest records would settle the correct figure.
Author’s Comment
This decision illustrates why source of investment and taxability of income from that investment must be examined separately. The gift from the husband explained how the wife acquired the money and defeated the unexplained investment addition. It did not mean that interest generated from the gifted funds escaped tax. On the Tribunal’s findings, that interest belonged in the husband’s computation by operation of Section 64(1)(iv).
The case is also a reminder to reconcile flexi deposit entries before treating their gross total as fresh investment. The useful evidence here was the complete pair of bank statements, supported by the husband’s income documents—not merely an assertion that the money came from a family member. Where deposits are repeatedly created and matured, a transaction-wise reconciliation can prevent the same funds from being counted more than once.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. The appeal in ITA No.5270/Del/2026 for AY 2019-20, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 13.03.2026 against the order of assessment passed u/s 147 r.w.s. 144 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.03.2024 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’).
2. The only effective issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the addition of Rs. 35,70,000 on account of unexplained investment in time deposits and interest income of Rs. 68,078 in the facts and circumstances of the instance case.
3. I have heard the rival submissions and perused the materials available on the chart. The assessee is a housewife. The ld AO based on the information available in the insight portal, sought to reopen the case of the assessee on the ground that there were certain time deposits made with the Axis Bank Limited by the assessee to the tune of Rs. 35,70,000 and interest income earned by the assessee to the tune of Rs. 68,078. Since no return of income was filed by the assessee, the ld AO concluded that the income of the assessee had escaped assessment because the aforesaid escaped income was much above the maximum amount not chargeable to income tax. After following the due procedure, notice u/s 148 of the Act stood issued to the assessee on 30.03.2023. In response thereto, no return of income was filed by the assessee. Thereafter, notice u/s 142(1) of the Act stood issued to the assessee and reassessment was completed on 20.03.2024 u/s 147 r.w.s. 144 r.w.s. 144B of the Act determining total income of the assessee at Rs. 36,38,078 comprising of the following additions:-
| a. | unexplained investment in time deposits | 35,70,000 |
| b. | interest on time deposits | 68,078 |
| Total | 36,38,078 |
4. This action of the ld AO was upheld by the ld CIT(A).
5. The assessee before the ld CIT(A) submitted that entire monies for making investment in fixed deposits were received by the assessee from her husband, Mr. Anurag Mishra, through bank transfers. The bank statement of husband was also placed on record. It was submitted that husband of the assessee was employed with Axis Bank Limited in a big position drawing substantial amount of salary drawn to the tune of Rs. 38,14,521 (gross salary). These contentions and explanations with documentary evidences were not appreciated by the ld CIT(A). I find that assessee had placed on record the copy of income tax return acknowledgement of her husband, Mr. Anurag Mishra together with copy of Form No. 16 of Mr. Anurag Mishra and bank statements of Mr. Anurag Mishra. The bank statements of the assessee which is also held with Axis Bank were also placed on record. From the perusal of the bank statements of both Mr. Anurag Mishra and the assessee, it is very clear that the husband of the assessee had made periodic fund transfers by online mode to the assessee. The net amount received from husband during the FY 2018-19 was Rs. 29,67,406 (45,62,000 -15,94,594) and out of this, a sum of Rs. 27,01,300 was invested by the assessee in fixed deposits. First of all, there is no investment made by the assessee to the tune of Rs. 35,70,000 as stated by the ld AO in the assessment order. The assessee maintains flexi savings bank account wherein the surplus funds are periodically invested in fixed deposits and as and when there is a requirement for the assessee for effecting certain payments from the said flexi savings bank account, the fixed deposits are matured periodically and the proceeds credited in the savings bank account. On perusal of the entire bank statements of the assessee, it is very clear that no deposits to the tune of Rs. 35,70,000 was made by the assessee at all. Instead, the assessee had made deposits only to the tune of Rs. 27,01,300 which is sourced from monies received from husband by way of online transfer out of husband’s salary account. Hence, the entire source of making investment in fixed deposits stand properly established and explained and no part of it could be treated as unexplained warranting any addition in the hands of the assessee. Hence, the addition made on account of unexplained investment in fixed deposits to the tune of Rs. 35,70,000 is hereby deleted for the above mentioned reasons.
6. With regard to interest income of Rs. 68,078, the said interest had emanated out of funds received by the assessee from her husband as gift and not as loan. This fact is not disputed by the assessee before me. Hence, the interest income earned which were sourced out of monies received from husband need to be clubbed in the hands of husband in terms of Section 64 of the Act, which was not done in the instant case. Hence, in the interest of justice and fair play, I direct the ld AO to assess the sum of Rs. 68,038 on account of interest income to be clubbed and added in the hands of husband Mr. Anurag Mishra and delete the same in the hands of the assessee herein. Accordingly, the grounds raised by the assessee in that regard are allowed.
7. In the result, the appeal of the assessee is allowed in the above mentioned terms.
Order pronounced in the open court on 29-Sep-2026.
