ITO Vs Sarla Murli Teckchandani (ITAT Mumbai)
In a case between the Income Tax Officer (ITO) and Sarla Murli Teckchandani, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has upheld a decision to delete an addition of over Rs. 4.24 crore made under Section 68 of the Income Tax Act, 1961. The appeal, filed by the Revenue, challenged the order of the National Faceless Appeal Centre (NFAC), which had ruled in favor of the assessee, Sarla Murli Teckchandani. The ITAT’s decision affirmed that the assessee had provided a satisfactory explanation for the funds credited to her bank account, dismissing the appeal.
Factual Background and Assessment Proceedings
The case pertains to the assessment year 2015-16. The assessee, Sarla Murli Teckchandani, filed her return of income declaring a total income of Rs. 9,85,850. During the scrutiny of her return, the Assessing Officer (AO) discovered a credit of Rs. 4,24,97,520 in her bank account, which had been transferred from her brother, Shri Gul. The AO initiated proceedings under Section 68 of the Income Tax Act, which deals with unexplained cash credits, to determine the source of these funds.
In her defense, the assessee claimed that the amount was received as consideration for relinquishing her undivided 1/4th share in an ancestral property in favor of her brother. To substantiate this claim, she submitted several key documents:
- A remittance advice from Standard Chartered Bank dated November 19, 2014, which listed the purpose of the transfer as “inheritance.”
- A Memorandum of Transfer on a share certificate dated December 8, 2014, showing the deletion of her name from the property’s records.
- A notarized Memorandum of Family Arrangement dated January 5, 2015, signed by all four siblings, explicitly stating that the assessee received the amount from her brother in exchange for her share.
- A Release Deed dated January 10, 2015, which, however, stated that she had relinquished her share without any consideration.
The AO rejected the assessee’s explanation on two main grounds. First, the assessee had failed to provide a confirmation letter from her brother, Shri Gul, at the time of the assessment. Second, the Release Deed explicitly contradicted the assessee’s claim by stating that the relinquishment was without consideration. Based on these points, the AO concluded that the assessee had likely routed her own undisclosed income through her brother’s bank account to purchase a property and therefore made the addition under Section 68.
