ITAT Partially Upholds Cash Gift Additions, Deletes Credit Card and Agricultural Land Sale Additions

The ITAT Delhi, in a recent case, has partially favoured the tax department’s appeal filed against a taxpayer by upholding cash gift additions but deleting credit card expenses and agricultural land sale advance additions.

The Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘A’, has delivered its judgement on an appeal filed by the Income Tax Department against a taxpayer named Shri Varun Manchanda, challenging an order dated February 11, 2025, passed by the CIT(A), NFAC Delhi, under Section 250 of the Income Tax Act, 1961. The case pertains to Assessment Year 2021-22. In the present appeal, the income tax authorities have raised three key issues, i.e., cash gifts, credit card payments, and exemption on the sale of agricultural land.

The assessee had filed its income tax return (ITR) for the year in consideration, declaring total income at Rs. 5.26 lakh. The return got selected for examination of large exempt income. The Assessing Officer (AO) completed the assessment after making three additions of Rs. 10.43 lakh, Rs. 29.54 lakh, and Rs. 1.51 crore on three different grounds.

The first issue was related to cash gifts of Rs. 10.43 lakh that the assessee claimed to have received from family members on his 10th wedding anniversary. According to the AO, the assessee had not provided relevant details such as the names, PANs, and relationships of the donors during the assessment of the return. Considering the aforesaid finding, the tribunal upheld AO’s denial of the assessee’s claim of exemption under section 56(2)(x) of the Income Tax Act and sustained the impugned addition.

The second issue related to credit card payments of Rs. 29.54 lakh made by Lightstone Developers India Pvt. Ltd. on behalf of the assessee. The AO had made the impugned addition by treating the credit card payments as unexplained expenditure under section 69C. However, when the tribunal heard arguments from both sides, it agreed with the assessee’s explanation that he was placed as a director of the company and the payments were reimbursed expenses. Accordingly, deleted the impugned addition.

The third issue concerned an advance of Rs. 1.51 crore received for the sale of agricultural land. The assessing officer treated it as taxable income from other sources, arguing it belonged to a previous year. However, when the tribunal analysed the facts of the ground, it noted that the land was not a capital asset under section 2(14)(iii)(b), and the transaction qualified for exemption under agricultural income provisions. Therefore, deleted the impugned addition.

In conclusion, the tribunal partly allowed the revenue’s appeal.