TaxTMI 
TaxTMI 
2026 (9) TMI 1963
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....and accordingly statutory notices were issued to the assessee. The AO found that during the impugned assessment year, the assessee had huge cash deposits in his bank account. In that connection, the assessee was asked to furnish cash book, cash flow statement and sources for cash deposits made in the bank account. In response, the assessee filed details stating that some amounts were received as gift from his wife, paternal uncle, maternal uncle, sister's husband and father's estate along with own earnings during the year. Further, the assessee stated that he has received a cash advance for sale of land and building at Perur to the tune of Rs. 1.85 crores on various dates from19.07.2016 to 07.09.2016. In support of the same, he furnished confirmation letter from Mr.Alexander Rajadurai along with the copy of sale agreement dated 12.09.2016. Further, in respect of cash gifts received, the assessee furnished copy of gift deeds, return of income for the AY 2017-18 and statement of accounts in respect of all the parties. On perusal of the submissions and the documents filed during the assessment proceedings, the AO was not convinced and stated that the source in the hands of the persons....
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....ions made by the assessee along with the case laws relied on, the ld.CIT(A) was not convinced and hence confirmed the addition of Rs. 85,30,000/- on account of gifts received and passed an order dated 29.12.2025 by holding as under:- "6.3. I have perused the assessment order and the submissions made by the appellant. On perusal of the same, it is noted that the AO did not dispute the existence of family members and relatives, whereas, he had not accepted only the creditworthiness of the family members who had claimed to have made gifts in cash to the appellant on the basis of ITRs filed by them for the AY 2017-18 and the finding in the assessment made in the case of Mrs. Nalini Selvaraj (appellant's mother) and Shri D. Gnanaraj (appellant's uncle). It is also noted that the AO was not satisfied with the explanation furnished by the appellant and the confirmations submitted by the said relatives for the reason that the said relatives' Income Tax Return had failed to prove their creditworthiness/ capability to make gifts to the appellant. In this regard, I have also examined the details furnished by the appellant in the course of appeal proceedings and the return....
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....Rs. 9,30,000/- to the appellant in the year under consideration. iv. Mrs. Merlyn Jemimah is appellant's wife, has confirmed that she had signed the gift deed submitted by the appellant and claimed to have gifted Rs. 29,00,000/- to the appellant in the year under consideration. However, on perusal of the return of income filed by Mrs. Merlyn Jemimah, it is observed that the only major source of her income was gross salary received from M/s Rajam Hotels Pvt Ltd for the year under consideration and her balance sheet as on 31.03.2017 does not indicate sufficient amount of capital/other funds to support her claim that she is capable of making gift of Rs. 29,00,000/- by cash. In these facts and circumstances, it is held that Mrs. Merlyn Jemimah does not have sufficient creditworthiness/capability to make cash gift of Rs. 29,00,000/- to the appellant in the year under consideration. v. Mr. J Alexandra Rajadurai is appellant's maternal uncle, has confirmed that he had signed the gift deed submitted by the appellant and claimed to have gifted of income filed by Mr. Joel Raja, it is observed that he had offered only Rs. 7,38,310/- from his prayer offerings and worsh....
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....tels Pvt Ltd for the year under consideration and her balance sheet as on 31.03.2017 does not indicate sufficient amount of capital/other funds to support her claim that she is capable of making gift of Rs. 29,00,000/- by cash. In these facts and circumstances, it is held that Mrs. Merlyn Jemimah does not have sufficient creditworthiness/capability to make cash gift of Rs. 29,00,000/- to the appellant in the year under consideration. v. Mr. J Alexandra Rajadurai is appellant's maternal uncle, has confirmed that he had signed the gift deed submitted by the appellant and claimed to have gifted appellant. 6.6. The decision of the Hon'ble ITAT, Chennai in the case of Karunamoorthi Kavitha vs. ACIT (ITA No.1732/Chny/2024) relied on by the appellant is also distinguishable on facts. In the said case, without conducting any enquiries, the AO had simply rejected the creditworthiness of the parties from whom gift was received. Further, the Hon'ble ITAT had noted that the assessee had received cash gift of Rs. 35,00,000/- from her mother, who was a practicing doctor for more than 35 years and cash gift of Rs. 10,00,000/- from her brother who was a professional s....
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....inserted by Finance Act 2012 w.e.f 1-4-2013. As on 1- 4-2016 the financial year in which the subject seizures occurred Section 155BBE provided for 30% tax on income referred to in Sections 68, 69, 69A, 69B, 69C and 69D. The same was amended by the 2nd Amendment Act; w.e.f. 1-4-2017, enhancing the rate to 60%. Hence there was no new liability created and the rate of tax merely stood enhanced which is applicable to the assessments carried on in that year. The enhanced rate applies from the commencement of the assessment year, which relates to the previous financial year." Further, by relying on the above judgment of the Hon'ble High Court of Kerala, the Hon'ble ITAT, Chennai in a recent decision in the case of Karthick Natarajan v. DCIT (ITA No. 382/Chny/2023) has held as under: "10.2 We noted from the taxation law, Second Amendment Act, 2016 that the Income-tax payable shall be the aggregate of the amount of income-tax calculated on the income referred to clause (a) and clause (b) of section 115BBE(1) of the Act at the rate of 60% w.e.f. 1-4-2017 that means from assessment year 2017-18 relevant to financial year 2016-17 rate of tax will be at sixty percent.....
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....enuineness, identity and creditworthiness of the donors. In support of the same, the ld.AR filed a paper book of 212 pages consisting of written submissions filed before the ld.CIT(A), return of income, statement of income and financials of the assessee for the AYs 2017-18 and 2016-17, gift deeds executed by the relatives, return of income, statement of income and financials of Mr.J.Alexander Rajadurai, Mrs.Merilyn Jemimah, Mr.D.Victor, Mr.D.Gnanaraj and Mr.Joel Raja. 6. The ld.AR further drew our attention to the financials of the donors in page Nos.101, 119, 125, 133, 140 of the paper book and submitted that all the five donors have recorded the 'gifts given' during the impugned assessment year to the assessee in their respective financials. Further, the ld.AR stated that all the five donors have been assessed to income tax regularly and also filed return of income for the impugned assessment year 2017-18 by declaring the income as detailed below:- (i) Mr.J.Alexander Rajadurai Rs. 9,79,409/- (ii) Mrs.Merilyn Jemimah Rs.25,38,639/ - (iii) Mr.D.Victor Rs.22,41,814/- (iv) Mr.D.Gnanaraj Rs.21,29,338/- (v) Mr.Joel Raja Rs. 5,25,442/- ....
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....ases of certain donors, namely Mr. D. Gnanaraj and Mr. D. Victor, the very source of funds claimed by them had already been held to be non-genuine in their respective assessments. It was further submitted that mere filing of income-tax returns or confirmation letters would not establish creditworthiness when the financial capacity of the donors remained unproved. The ld.DR also distinguished the judicial precedents relied upon by the assessee on facts and submitted that the ld.CIT(A) had rightly held that the decision of the Chennai Bench in Karunamoorthi Kavitha v. ACIT was inapplicable to the present case, as the AO herein had conducted detailed enquiries before rejecting the claim. With regard to the levy of tax u/s. 115BBE of the Act, the ld.DR submitted that the enhanced rate of tax was rightly applied by following the judgment of the Hon'ble Kerala High Court in Maruthi Babu Rao Jadav v. ACIT and the subsequent decision of the Chennai Bench of the Tribunal in Karthick Natarajan v. DCIT, wherein it has been held that the amended provisions are applicable to AY 2017-18. Accordingly, the ld.DR prayed that the addition made u/s. 68 r.w.s 115BBE of the Act, as confirmed by the....
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....egarding the actual source of funds available with the respective donors, it was incumbent upon the Revenue to undertake appropriate enquiry in the assessments of such donors. The addition in the hands of the recipient cannot be sustained merely because the AO entertains suspicion regarding the source available with the donors, particularly when the identity of the donors and the genuineness of the transactions have not been disputed. 14. We further find considerable force in the contention of the ld.AR that the Revenue has virtually proceeded to examine the "source of the source". The settled position of law is that, except where the statute specifically mandates otherwise, an assessee cannot ordinarily be called upon to establish the source of funds in the hands of the creditor once the identity of the creditor, genuineness of the transaction and the basic creditworthiness have been established. The Hon'ble Bombay High Court in PCIT v. Ami Industries (India) Pvt. Ltd. (424 ITR 219), the Hon'ble Delhi High Court in CIT v. Suresh Kumar Kakar (324 ITR 231) and CIT v. R.S. Sibal (269 ITR 429), the Hon'ble Kerala High Court in CIT v. T.B. Kunhimahin Haji (415 ITR 491), ....