2025 (4) TMI 213 - AT - Income Tax

Addition of unexplained cash deposit u/s 69A r.w.s 115BBE - AR submitted that the assessee has received the gift from her relatives and family members HELD THAT - The assessee has submitted the details of the donors along with the cash amounts received on various occasions to prove that are the exempted gifts were provided to the assessee. In India it is customary to give the gift on the occasion of the marriage anniversary Diwali birthday and other festival etc. The assessee claimed the cash which have received on various dates and have been deposited on various dates in cash amounts below Rs 50, 000/- except the entry of Rs 3, 50, 000/- which was deposited by Shri Sandeep Sharma in her account are customary exempted gifts. Assessee has failed to explain why the amount of Rs. 3, 50, 000/- was deposited by Sh. Sandeep Sharma in her bank account. If the assessee has received customary gifts on the birthday festivals and family functions then such cash amounts would have been deposited by the assessee every year. Assessee has failed to explain that all amount deposited in her bank account was the customary exempted gift given by her relatives. We accept the contention of the assessee to the extent the half amount which was deposited in her bank account as customary exempted gift given by her relatives. The half amount of the addition made by AO is deserves to be deleted by treated as customary exempted gift and in terms of above appeal of the assessee deserves to be partly allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the addition of Rs. 8,51,000/- as unexplained cash deposit under Section 69A read with Section 115BBE of the Income Tax Act, 1961, was justified in the absence of incriminating material.

2. Whether the cash deposits claimed as gifts from relatives are exempt from taxation under Section 56(2)(vii) of the Income Tax Act, 1961.

3. Whether the assessment order was validly passed with the necessary approval under Section 153D of the Income Tax Act, 1961.

ISSUE-WISE DETAILED ANALYSIS

1. Addition of Rs. 8,51,000/- as Unexplained Cash Deposit

Relevant legal framework and precedents: The addition was made under Section 69A of the Income Tax Act, which pertains to unexplained money, and Section 115BBE, which provides for tax on income referred to in Section 68, 69, 69A, 69B, 69C, or 69D. The appellant argued that no incriminating material was found during the search to justify such an addition, relying on the precedent set in Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell (P.) Ltd.

Court's interpretation and reasoning: The Tribunal noted that the appellant claimed the cash deposits were gifts from relatives, which are exempt under Section 56(2)(vii). However, the Tribunal found inconsistencies in the appellant's explanation, particularly regarding a deposit of Rs. 3,50,000/- by an individual named Sandeep Sharma.

Key evidence and findings: The appellant provided details of donors and occasions for the gifts. However, the Tribunal found that the appellant failed to satisfactorily explain the deposit of Rs. 3,50,000/- and why such deposits were not a regular occurrence if they were indeed customary gifts.

Application of law to facts: The Tribunal accepted the appellant's claim to the extent that half of the amount could be considered customary exempted gifts, but the remaining half, particularly the Rs. 3,50,000/- deposit, was not satisfactorily explained.

Treatment of competing arguments: The Tribunal balanced the appellant's claim of customary gifts against the lack of consistent evidence for such claims. The Tribunal partially allowed the appeal, recognizing customary gifts while disallowing unexplained portions.

2. Exemption of Gifts under Section 56(2)(vii)

Relevant legal framework and precedents: Section 56(2)(vii) exempts gifts from relatives from being taxed as income. The definition of "relative" includes various familial relations.

Court's interpretation and reasoning: The Tribunal acknowledged the customary nature of gifts in Indian culture but required consistent evidence of such practices over time.

Key evidence and findings: The appellant submitted details of gifts and occasions but could not provide consistent evidence for all amounts, particularly for the larger deposit.

Application of law to facts: The Tribunal applied the exemption provision to half of the claimed amount, recognizing the cultural context but requiring more consistent evidence for larger deposits.

3. Validity of Assessment Order under Section 153D

Relevant legal framework and precedents: Section 153D requires prior approval for assessment orders. The appellant challenged the validity of such approval.

Court's interpretation and reasoning: The Tribunal found that the assessment order was passed with the necessary approval from the Additional Commissioner of Income Tax, Central Range-4, New Delhi, and thus was valid.

Key evidence and findings: The Tribunal reviewed the approval process and found it compliant with Section 153D requirements.

Application of law to facts: The Tribunal upheld the validity of the assessment order, finding no procedural irregularities.

SIGNIFICANT HOLDINGS

The Tribunal held that:

- Half of the unexplained cash deposits could be treated as customary exempted gifts, partially allowing the appellant's claim.

- The remaining half, particularly the Rs. 3,50,000/- deposit, was not satisfactorily explained and thus upheld as an addition under Section 69A.

- The assessment order was validly passed with the necessary approval under Section 153D.

The Tribunal's decision reflects a balance between recognizing cultural practices and requiring consistent evidence for tax exemptions. The appeal was partly allowed for statistical purposes, acknowledging customary gifts while maintaining the addition for unexplained deposits. The order was pronounced in open court on 02.04.2025.

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