Case Law Details
ITO Vs Dr. M.N. Kumaresan (ITAT Chennai)
Introduction: A recent decision by the Income Tax Appellate Tribunal (ITAT) Chennai in the case of “ITO vs. Dr. M.N. Kumaresan” for the Assessment Year 2013-14 has drawn attention to the classification of advances received by taxpayers. The key issue revolved around whether these advances should be considered as gifts or loans, which has significant implications for tax penalties under section 271D of the Income Tax Act.
Detailed Analysis: The case pertains to an appeal by the Income Tax Department against a penalty levied by the Assessing Officer (AO) under section 271D. Dr. M.N. Kumaresan, a practicing Doctor in Plastic Surgery, had declared income in his return, but the AO raised concerns about cash deposits in the bank account amounting to Rs.1,50,61,250.
Dr. Kumaresan explained that this amount was received from his aunt, Smt. M.K. Pattammal, as a gift during the relevant financial year. However, the AO contended that such a receipt should be treated as an advance and not a gift, leading to the invocation of section 271D for penal action.
In response, Dr. Kumaresan presented evidence, including a confirmation letter from his aunt, where she had stated that the amount was an interest-free advance. Later, she clarified in another letter that the amount was indeed a gift and not intended for repayment.
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