ITAT Allows Gifts from Sisters; Tax Addition Cannot Be Based on Donor’s Non-Scrutiny

The Income Tax Appellate Tribunal (ITAT), Agra bench, in the case of Sharad Maheshwar Vs Income Tax Officer (ITO), allowed the appeal of the assessee, Sharad Maheshwar, and deleted the addition of ₹17,19,000 (₹10,94,000 + ₹6,25,000) made by the Assessing Officer (AO) under Section 68 of the Income-tax Act, 1961. The dispute centred on the genuineness and creditworthiness of the donors of gifts received by the assessee from his two sisters during the Assessment Year (A.Y.) 2016-17.

Background and Additions

Sharad Maheshwar filed his return of income for A.Y. 2016-17, declaring an increase in capital, which he attributed partly to substantial gifts received from two of his sisters: Smt. Shashi Bansal and Smt. Manju Agarwal. The total claimed gift from Smt. Shashi Bansal was over ₹2.74 crore, of which the AO accepted a part but rejected two specific cash gift amounts: ₹5,00,000 (dated April 15, 2015) and ₹5,94,000 (dated May 15, 2015), totaling ₹10,94,000. The AO also rejected a gift of ₹6,25,000 received from Smt. Manju Agarwal. The AO treated these sums as unexplained cash credit under Section 68, concluding they were a “colourable device to avoid taxation” due to a perceived lack of supporting documents for the donors’ creditworthiness.