When the tax department questioned a series of large financial receipts, the taxpayer turned to a previous court victory to defend their foreign gift, but hit a wall when it came to undocumented firm income.

Facts of the case

The legal heir of the late Rohitbhai Patel appealed against a tax order for the 2012-13 assessment year, which had unfairly added Rs. 91,24,142 to the deceased’s taxable income as “unexplained” money under Section 68 of the Income Tax Act. This total was comprised of Rs. 40,000 from partnership firms and a Rs. 51,24,142 foreign gift from the father-in-law, Shri Babubhai A. Patel. Because a tribunal had already ruled in favor of the assessee’s wife regarding this exact same gift in a previous order dated February 4, 2026, and the tax department could not challenge this precedent, the assessee successfully contested the addition.

Issue of the case

Whether the assessment and subsequent addition of Rs. 91,24,142 under Section 68 of the Income Tax Act, 1961, are legally sustainable, given the procedural irregularities involving the assessment of a deceased individual, the scope of the reopening inquiry, and the binding precedent set by a prior Tribunal order regarding the inclusion of the gifted sum?

Decision of  the Tribunal

The Tribunal ruled partly in favor of the assessee, ordering the removal of the Rs. 51,24,142 addition regarding the foreign gift because it followed a binding precedent that confirmed the transaction was a legitimate, bank-verified gift between relatives. However, the Tribunal upheld the addition of Rs. 40,000 related to the partnership firms, as the assessee failed to provide the necessary documentation to prove the source and legitimacy of those specific funds.