ITAT Restricts Sec. 69A Additions as It Was Impossible for NRI to Furnish Evidence for Cash Gifts Received on Marriage

Case Details: Karthick Natarajan v. Deputy Commissioner of Income-tax, International Taxation - [2023] 154 taxmann.com 136 (Chennai-Trib.)

Judiciary and Counsel Details

• • Mahavir Singh, Vice President & Manoj Kumar Aggarwal, Accountant Member
  • T. Vasudevan, Adv. for the Appellant.
  • D. Hema Bhupal, JCIT for the Respondent.

Facts of the Case

Assessee- NRI, made a cash deposit of Rs. 1 crore in his bank account during the demonetization period. On being enquired by the Assessing Officer (AO), the assessee claimed that the amount was received in connection with his marriage celebrated on 7-12-2015 and claimed the same as exempt being gifts received during marriage under the proviso to section 56(1)(vii)(c).

The AO noted that the assessee had not furnished any material evidence to substantiate that he had received the gift of Rs. 1 crore during his wedding other than the wedding invitation card to prove the genuineness of his claim. Accordingly, AO made the addition of Rs. 1 crore as unexplained money as per the provisions of section 69A.

On appeal, CIT(A) held that the assessee was an NRI, and it was nearly impossible for him to prove gifts received on the occasion of marriage. Thus, CIT(A) restricted additions to Rs. 70 lakh. The assessee filed a further appeal before the Chennai Tribunal.

ITAT Held

The Tribunal held that the assessee himself deposited cash in his bank account and tried to explain the sources through the cash gifts received during the occasion of marriage in December 2015. However, it rejected assessee’s contention that cash deposits made in the accounts can’t be treated as not income because he made such deposit during the demonetization period. The deeming provisions of section 69A are clearly applicable.

The assessee argued that a reasonable deduction on the basis of reasonable estimation should be made, but he could not produce any sort of evidence to substantiate his claim, either the names or their address or anything relating to the gift received in cash.

There was no direct evidence available from the assessee to substantiate his claim, but going through the customary system in Indian society, the observations of CIT(A) that no economic transaction can be divorced from the underlying social-cultural factors is to be agreed with. It is customary in Indian society and according to status that one receives gifts in marriage.

Hence, a further estimation was made, and Rs. 20 Lakhs was deleted and subsequently, Rs. 50 Lakhs was treated as unexplained money under section 69A.

List of Cases Reviewed

• • Karimtharuvi Tea Estates Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) (para 10.1) distinguished.

List of Cases Referred to

• • CIT v. Smt. P.K. Noorjahan [1999] 103 Taxman 382/237 ITR 570 (SC) (para 5)
  • Karimtharuvi Tea Estates Ltd. v. State of Kerala [1966] 60 ITR 262 (SC) (para 8)
  • Mercantile Credit Corpn. Ltd. v. CIT [2000] 108 Taxman 210/245 ITR 245 (Mad.) (para 8)
  • DCIT v. Punjab Retail (P.) Ltd. [IT Appeal No. 677 (Ind.) of 2019, dated 8-10-2021] (para 8)
  • Maruthi Babu Rao Jadav v. Asstt. CIT [2021] 430 ITR 504 (Ker.) (para 9)
  • Ahmedabad Mfg. and Calico Printing Co. Ltd. v. S.G. Mehta, ITO [1963] 48 ITR 154 (SC) (para 10.2)
  • Bhagavathy Tea Estates Ltd. v. State of Kerala [1990] 50 Taxman 180/[1989] 179 ITR 508 (Ker.) (para 10.3).