Gifts Received by Relatives Not Taxable u/s 56(2) (vii): ITAT Upholds CIT(A)’s Order

The Income Tax Appellate Tribunal (ITAT), Kolkata, upheld the CIT(A) order in a case involving the receipt of cash gifts from a brother-in-law. The Tribunal upheld that cash gifts received from relatives are not taxable under section 56(2)(vii) of the Income Tax Act.

The assessee, Mira Bibi, received two gifts in cash from each of her two brothers-in-law. The gift of Rs 75 lakh was received from Mojibur Rahaman Biswas, and Rs 46 lakh was received from Latifuddin. Since the gifts were received in cash and no gift deed was submitted by the assessee, the AO treated Rs 1,21,00,000 as unexplained cash credits under section 68 read with section 115BBE of the Income Tax Act.

However, during the assessment proceeding, the assessee provided full details of both donors. She submitted their confirmations, PAN, income tax returns (ITR), financial statements, and balance sheets reflecting such gifts to the assessee.

The CIT(A), after considering these submissions of the assessee, recorded a finding that the donors had sufficient income and financial capacity to give the gifts. The CIT(A) observed that gifts received from “relatives“ (as per section 56(2)(vii) of the Act) are exempt in the hands of the assessee under Section 56(2)(vii) of the Income Tax Act. Therefore, the CIT(A) deleted the addition made by the assessing officer.

The Tribunal agreed with this view. It upheld the findings of CIT(A) and rejected the revenue’s appeal. As a result, the addition of Rs 1.21 crore was deleted.