Son gets major relief from Income Tax notice due to mother's gift deed

The Jaipur Income Tax Appellate Tribunal (ITAT) has delivered a significant judgment, quashing the Income Tax Department's decision to treat cash deposited in a bank account, based on a gift from a mother, as unexplained income. In this case, an individual named Shri Ram had received a tax notice for unexplained property investment of ₹20.23 lakh and unexplained cash deposit of ₹13.04 lakh, but he ultimately won the case.

According to a report by the business newspaper 'The Economic Times', the dispute began when Ram purchased a property and deposited a large amount of cash in his bank account, but had not filed any Income Tax Return (ITR). The Assessing Officer (AO) had information that Ram had purchased property worth ₹20.23 lakh and deposited ₹13.04 lakh in cash. Based on this information, the AO issued a notice to Ram to file an ITR.

In response to the notice, Ram filed an ITR declaring an income of ₹2.14 lakh. However, after reviewing Ram's ITR, the AO declared the case suspicious and initiated proceedings against him by declaring both the property investment and the cash deposit as unexplained income. Dissatisfied with this decision, Ram appealed to the Commissioner of Appeals (CIT A).

CIT (A) provided partial relief to Ram. He quashed the tax notice regarding the unexplained property investment of ₹20.33 lakh, but upheld the tax notice regarding the unexplained cash of ₹13.04 lakh. Consequently, Ram appealed again to the ITAT Jaipur regarding the issue of unexplained cash. Ultimately, on October 6, 2026, Ram won the case, and the tax notices regarding both the unexplained cash and the unexplained property have now been quashed.

According to a statement given to 'ET Wealth Online' by Chartered Accountant Varun Singhal, Ram won this case because he was able to present a notarized gift deed. This document, which included two witnesses, showed that his mother had given him ₹16 lakh on February 2, 2012, and he had deposited this amount into his bank account. This deposit was made during February-March 2012.

This amount was obtained by his mother by selling her old gold jewellery, the value of which had been assessed at ₹18.36 lakh by a registered valuer on March 31, 2011. The ITAT Jaipur noted that under Section 2(41) of the Income Tax Act, a mother is a relative, and gifts received from relatives are not taxable.

During the case, Ram's representative, Chartered Accountant Nikilesh Kataria, argued that Ram's mother had given ₹16 lakh in cash to Ram on February 3, 2012, by selling old jewellery. However, the AO rejected this as there were no supporting documents showing the specifics of the gold items. Kataria argued that it is common in the jewellery trade that when old jewellery is sold, the invoice only shows the total weight and does not provide specific details.

The AO also alleged that the weight of the sold jewellery was much less than the total gold weight mentioned in the valuation report. In response, Kataria clarified that Ram's mother had sold only 642.300 grams of gold for ₹16.1 lakh and gave ₹16 lakh to Ram as a gift. He presented a notarized gift deed with witnesses' signatures as evidence.

On behalf of the Income Tax Department, ACIT Mrs. Aarti Rawte supported the orders of the lower authorities and requested the addition of the unexplained income amount. However, the ITAT Jaipur, while delivering the judgment, stated that the gift deed clearly specifies that the gift was given to Ram on February 4, 2012, and based on that, he deposited the cash in the bank.

The tribunal stated in its judgment, "This gift is from the mother, who falls under the definition of relatives under Section 2(41). Furthermore, the taxpayer's mother gave a part of the amount received from the sale of gold jewellery in her old age as a gift, which cannot be doubted, as it is supported by a valid notarized gift deed with two witnesses and the value of the jewellery was determined by a registered valuer. Therefore, the addition made by the AO is liable to be quashed."

According to Chartered Accountant Varun Singhal, to avoid such problems in the future, the donor should maintain proof of the source of funds. Documents from the time of the transaction, such as the deed, valuation, and jeweler's invoice, should be kept. The deposited amount should be close to the date of the gift, and if possible, the donor's bank records should also be maintained.

Separately, central tax revenue has seen an annual increase of 5% in the month of September, but a decline has been observed in the collection of Income Tax, Excise, and Custom Duty. According to a report by Business Standard, after a decline in August, there has been an improvement in collections in September.