Gift from Daughter through Banking Channel can’t be treated as Unexplained: ITAT [Read Order]

In Padmalatha Tama vs. Income Tax Officer, the Hyderabad Bench of the Income Tax appellate tribunal (ITAT) held that gift from daughter through banking channel can’t be treated as unexplained.

The assessee derives income from ‘house property’ and ‘income from other sources. She filed her income returns and was selected for scrutiny under CASS. During the assessment, the Assessing Officer (A.O.) observed that on various dates credits were made to the bank account of the assessee, totaling Rs.17 lacs. The assessee stated that such credit was a gift from her daughter and she filed a confirmation from her daughter. The AO observed that confirmations did not contain any income tax details of the loan creditors and found that the act of taking loans for gifting to the assessee to be strange and quite unusual.

According to the AO, as the credits were from family members, the onus was on the assessee to discharge the onus about the creditworthiness and genuineness of the transaction. AO noted that as the assessee had substantial income of her own, there was no necessity for the assessee to take gift from her daughter who had no taxable income and who had in turn borrowed the sum to give the gift. He, therefore, held that the assessee had failed to prove the financial capacity of the donor and the genuineness of the transaction and added the amount of Rs. 17 lakhs as unexplained credit in the bank account. The Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the order of the A.O. Thereafter, appeal was filed before the ITAT.

The Authorized Representative (A.R.) of the assessee the AO erred in making an addition of Rs.17 lacs towards gifts received from the assessee’s daughter through electronic transfer of funds directly to her account even though the source of gifts and also the source has been explained. He submitted that the assessee had discharged the onus of proving the identity, creditworthiness and genuineness of the gifts and accordingly the gifts received from daughter out of natural love and affection cannot be added to the income as unexplained credits under section 68 of the Income Tax Act, 1961,

The bench comprising of Judicial Member P. Madhavi Devi and Accountant Member S. Rifaur Rahman observed “As far as the assessee is concerned, she had received the gift from her daughter through banking channel, hence, she has proved identity and genuineness of the transaction and for creditworthiness, she had brought on record the bank statement & PAN of her daughter. Therefore, assessee has discharged her part of duty.”