ITAT: Household Funds Received From Husband Not Taxable as unexplained cash credits

Ms. Deepali Kapoor filed her return for AY 2022-23 declaring nil income. During scrutiny, the Assessing Officer noticed a total credit of Rs. 2.80 crore in her capital account, stated to be received from her husband. On verification, only Rs. 2.62 crore was traced back, resulting in a difference of Rs. 17.80 lakh. The AO added this amount under section 68. A further Rs. 8,49,650 received from her husband for household expenses was also treated as unexplained cash credit as no supporting evidence was filed.

The CIT(A) upheld both additions. Aggrieved, the assessee appealed before the tribunal.

Main Issue: Whether household support received from a spouse constitutes a “credit” attracting section 68, and the capital account difference of Rs. 17.80 lakh was rightly taxed as unexplained cash credit.

HC’s Decision: The Tribunal held that household contributions received by a wife from her husband for day-to-day living are neither income nor a credit of the type contemplated under section 68. Such family support, the Tribunal observed, is a normal and accepted arrangement within a household. Since the husband’s capacity was not in doubt and the amount was not in the nature of a loan or income-bearing receipt, section 68 had no application. The addition of Rs. 8,49,650 was therefore deleted.

The Tribunal noted that the assessee gave three inconsistent explanations, and as the linkage between bank deposits and the capital credit required factual verification, the matter was remanded to the Assessing Officer for a fresh examination after granting adequate opportunity. Thus, the appeal was partly allowed.

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