Are Cash Gifts Received by a Widow from her Late Husband Liable to Tax? ITAT Clarifies:

Nowadays, a common question is arising in the minds of numerous taxpayers: Are gifts received by a widow in cash from her late husband liable to tax? A case relating to a similar matter has been recently heard by the ITAT Pune, where the Assessing Officer (AO) had found Rs 75 lakh in the widow's bank account; thereafter, 60 lakh from that amount was treated as unexplained credits and made an addition to the widow's income.

Ms Parve (widow in this case), a resident of Pune, had not filed her income tax return (ITR) for the relevant assessment year. The Assessing Officer (AO) selected the case for scrutiny and noted that during the concerned year, the widow had made cash deposits amounting to Rs 60.07 lakh in her bank account and had not filed any ITR for the same year.

Thereafter, Ms Parve was served a show cause notice (SCN) dated January 17, 2023, under Section 148A(b) of the Income Tax Act, 1961. However, no response was received from her side. She was further served notices seeking evidence explaining the source of these cash credits. However, the AO did not receive any response. Thereafter, she was sent another show cause notice, asking her the reason why reassessment proceedings should not be initiated against her.

In response to this notice, she furnished her ITR for the year under consideration, declaring an aggregate income amounting to Rs 12,000. Along with this furnishing, she further submitted that the cash credits in question are a gift received from her deceased husband, and this was the reason why she failed to collect the necessary evidence/documents on the source of these credits. The AO did not consider this explanation relevant and treated the entire cash deposits of Rs 60 lakh as unexplained under Section 69A and made an addition of the same to Ms Parve's income.

Ms Parve claimed that her husband died on March 17, 2023. After his death, she deposited the entire cash into her bank account as a gift to her and her minor daughters. Ms Parve further claimed that she is a housewife and had never filed an ITR in her life, as she did not have any independent source of income; her husband was the earner. In support of her claims, she also submitted certain documents including Form 26AS, an affidavit, the husband’s death certificate, computation sheet, and bank statements between 24.08.2015 and 30.09.2015.

When the case was taken to the Income Tax Appellate Tribunal (ITAT), Pune, the tribunal had noted that Ms Parve had discharged the initial burden cast on her by proving the identity of the donor, her relationship with the donor, PAN, and confirmation by two daughters regarding the gift.

The tribunal held that Ms Parve had submitted enough evidence to prove the donor's identity and relationship between them, and the tax department also could not prove that the documents were false. Consequently, the tribunal concluded and directed the AO to delete the impugned addition of unexplained cash credits of Rs 60 lakh.