Cash Gifts Received From Relatives For Health Treatment Cannot Be Treated As “Unexplained” : Income Tax Appellate Tribunal

Income Tax Appellate Tribunal

NEW DELHI: In Ms. Ritu Jain Versus Income Tax Officer, Income Tax Appellate Tribunal held that the cash received from close relatives for the treatment of a person cannot be treated as Unexplained.

The Bench headed by Anil Chaturvedi observed that the assessee discharged her responsibility by proving the identity, creditworthiness, and genuineness of the transactions. Therefore, the AO cannot insist on the assessee proving the source of the source.

The assessee is an individual stated to be carrying on business as a retail trader of women’s suits and other clothing for the past several years. Since the income is below the tax limit prescribed under section 139 of the Income Tax Act, 1961 she did not file the return of income.

She deposited Rs. 12,29,500 in Corporation Bank and Federal Bank during the demonization back in 2016-17. Therefore, the AO issued a notice under section 142(1) of the Income Tax Act, 1961, electronically and manually, asking the assessee to file her return of income for the assessment year.

There was no compliance on the part of the assessee. Further AO received directions from JCIT, Rohtak under section 144A. The AO issued an electronic notice and manually through the postal service under section 142(1) along with a questionnaire.

The assessee filed her reply, claiming that she and her husband had joint accounts with Federal Bank, Corporation Bank, Punjab, and National Bank and that because her husband has blood cancer, she deposited a sum of Rs. 12,29,500 in the bank to meet his medical expenses.

On asking about the source of the said amount they informed that it’s the rental income of her husband from the property, amounts pertaining to her husband, income from a clothing business, and a sum of relatives.

The AO noted that the assessee failed to file the ITRs of both the relatives, namely Rakesh Jain and Kamlesh Devi, for the alleged gifted amounts. The AO noted that the assessee failed to prove the creditworthiness of the donors and the genuineness of the transaction. The AO treated the deposits as unexplained and added them to the income of the assessee as unexplained money under section 69A.

The assessee appealed against the order of the AO before the CIT(A). The CIT(A) confirmed the order of AO.

The assessee submitted that since the husband of the assessee was suffering from cancer, Mr. Rakesh Jain, the brother of the assessee, and Kamlesh Devi, the sister of the assessee, had gifted the amount. In view of the ill health of the assessee’s husband, the assessee’s sister had gifted the amount out of her family savings, which is generally kept by any household to meet an emergency. The giving of gifts has been confirmed in the affidavit of the donor.

The ITAT held that in times of medical emergencies, the near and dear ones of the family, close friends, and relatives generally pool their resources to help the family in need.

The ITAT directed the deletion of the addition made by the AO and allowed the appeal of the assessee.

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