Brother got Rs 10 lakh cash from two sisters, tax dept had doubt and sent notice; he fought back and won case in ITAT Agra
Oct 17, 2025
Synopsis
An Agra man successfully appealed a tax ruling that deemed gifts from his sisters as unexplained cash. The Income Tax Appellate Tribunal ruled that the gifts were genuine and properly documented. The tribunal emphasized that the tax department's failure to scrutinize the donors should not penalize the assessee. The appeal was allowed, treating the gifts as explained income.
Mr. Maheshwari from Agra said he got Rs 2.74 crore (2,74,33,250) from one of his sisters, who lives in Delhi, as well as Rs 6.25 lakh from another sister. Both these sisters are married. He invested this money into his business and filed his income tax return (ITR) for AY 2016-17, reporting an income of Rs 10 lakh (10,80,770).
However, his ITR was selected for scrutiny when he got a notice under Section 143(2) on September 19, 2017. The income tax assessing officer (AO) mentioned in paragraph 1 of the assessment order that he had furnished details showing that he earns income from profits of a firm where he is a partner. The tax officer noted that he had claimed an increase of Rs 1.8 crore (1,83,77,061) in his capital for the year under consideration (AY 2016-17).
In his reply, he claimed to have introduced a capital of Rs 3.67 lakh and Rs 1.8 crore into his proprietorship firms. He explained that the source of his capital was a gift of Rs 2.74 crore ( 2,74,33,250) received from sister in New Delhi, who also this in her income tax return (ITR).
He also claimed to have received gifts from another sister amounting to Rs 6,25,000, among others . He submitted documents to show the creditworthiness of these people from whom he received these gifts. The tax officer accepted some of the gifts received from the mentioned individuals as genuine but doubted the gifts from his Delhi sister, specifically Rs 5,00,000 received on April 15, 2015 and another Rs 5,00,000 on May 15, 2015, and the Rs 6,25,000 received from another sister, due to lack of supporting documents.
Accordingly, the tax officer these amounts claimed as gifts as a colourable device to avoid taxation under the Income Tax Act and classified them as unexplained cash credit under Section 68 of the Act in the assessment.
The man from Agra filed an appeal against this order with the Commissioner of Appeals (CIT A).
The CIT A, upheld the tax officer’s decision to treat the gift of Rs 10,94,000 from the Delhi sister as unexplained cash credit under Section 68 due to lack of proof regarding the donor’s creditworthiness . Upset with this ruling, the man filed an appeal in the Income Tax Appellate Tribunal Agra bench. On September 30, 2025 he won the case at ITAT Agra.
Chartered Accountant (Dr.) Suresh Surana, said to ET Wealth Online: The case No. 316/AGR/2024 before the Income Tax Appellate Tribunal (ITAT), Agra Bench involved Mr. Maheshwari (the assessee), who received monetary gifts from his two sisters, Smt. Bansal and Smt. Agarwal, during the financial year 2015–16. The Assessing Officer (AO) treated these gifts, amounting to Rs 10,94,000 and Rs 6,25,000 respectively, as unexplained cash credits under Section 68 of the Income-tax Act, 1961 , on the grounds that the assessee had failed to prove the genuineness and creditworthiness of the donors.
Surana said that the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s view, observing that the cash receipts were not reflected in the sale deed and that the donor (Smt. Shashi Bansal) had not undergone a scrutiny assessment. Aggrieved by the same, the assessee appealed before the ITAT.
The Tribunal examined the documents furnished by the assessee, which included:
Gift declarations and confirmations from both sisters;
Sale deeds evidencing receipt of sale proceeds by Smt. Shashi Bansal;
Bank statements of the donors showing availability and transfer of funds; and
The assessee’s own bank statements corroborating the receipts.
Surana says that upon review, the Tribunal noted that both donors were real sisters of the assessee, thereby establishing a close familial relationship consistent with the nature of a gift. It was further held that the source of funds for the cash gifts from Smt. Bansal was duly explained i.e. being part of the sale proceeds of her property. Importantly, the Tribunal clarified that the mere fact that her return was not subjected to scrutiny under Section 143(3) cannot be a ground to doubt her creditworthiness, as that aspect lies within the purview of the Income Tax Department, not the assessee.
Surana explains that similarly, in the case of Smt. Agarwal, the Tribunal found that the gift was made through banking channels, supported by her bank statement and gift confirmation. Since the Assessing Officer had not conducted any further inquiry with the donor despite having full particulars, the Tribunal concluded that the assessee had sufficiently discharged his onus under Section 68 by proving all three essential aspects i.e. identity of the donor, creditworthiness of the donor, and genuineness of the transaction.
Reason for the Brother’s Victory:
The main reason the brother (assessee) won the case was that he successfully established the genuineness of the gifts and the creditworthiness of both donors through documentary evidence. The Tribunal held that:
The donors were real sisters, making the gift transaction plausible and consistent with natural love and affection.
The source of funds of both sisters was clearly demonstrated, one through property sale proceeds and the other through her own bank account.
The transactions were duly confirmed and, in one case, routed through banking channels.
The Assessing Officer failed to conduct independent verification despite having all details, which meant the assessee could not be faulted for any perceived inadequacy of enquiry.
Accordingly, the ITAT Agra ruled that the additions made under Section 68 were unjustified, allowing the appeal in favour of the assessee and treating the gifts as explained and genuine.
ITAT Agra said this
ITAT Agra in its judgement (ITA No. 316/AGR/2024) dated September 30, 2025, said that his lawyers drew their attention to the sale deed wherein the Delhi sister had received sale consideration from sale of a property in cash and had given that cash from the property deal as cash gift to him. It is not in dispute that she is his real sister.
ITAT Agra said: “The factum of a sister giving a gift to brother is also supported by confirmation. Hence in my considered opinion, the source of the donor is also established by the assessee herein in the instant case.”
ITAT said that he further submitted that the Delhi sister had duly paid capital gains tax for the sale of property.
ITAT Agra said that they found that the CIT (A) stated that Delhi Sister has not been subjected to scrutiny assessment under Section 143(3).
ITAT Agra said: “This cannot be a reason to disbelieve the gift and doubt the creditworthiness of her. Income Tax is not in the assessee's (brother) hands as to get her returns scrutinized. That job is left to the wisdom of the income tax department. The assessee cannot be faulted for an act which is not in his control. Hence there is no reason to disbelieve her creditworthiness to have given a cash gift of Rs 10,94,000 to the assessee (brother) and accordingly the same is to be treated as explained.”
ITAT Agra judgement
ITAT Agra said that with regard to the gift received from another sister of the assessee (brother), it is to be noted that the same has been received by way of cheque out of funds available in the bank account of the donor.
The assessee (brother) on his part had furnished the gift declaration and confirmation from the donor, duly explaining the source of the donor and it is enclosed in Page 1 of the Paper Book.
ITAT Agra said that the bank statements of the donor were also furnished by the assessee (brother) to prove the creditworthiness. If at all, the tax officer entertains any suspicion thereon, nothing prevented him from making enquiries with the other sister. This was admittedly not done by the Learned AO in this case.
ITAT Agra said: “In these circumstances, no fault could be attributed on the assessee for the failure on the part of the Learned AO to make suitable enquiries. The assessee from his side had furnished all the requisite documents to establish the three ingredients of Section 68 of the Act viz identity of the donor, creditworthiness of the donor and genuineness of transactions.”
ITAT Agra said that the transactions are routed through banking channels and stood duly confirmed by the donor. Hence genuineness of transactions stands established. The name and address of the donor, being the real sister of the assessee, had been duly given and hence the identity of the donor had been established.
ITAT Agra said that the bank statements of the donor had been furnished wherein the transfer of funds from the available bank balance was proved beyond reasonable doubt. Hence the creditworthiness of the donor is also established by the assessee. Hence there is no reason to disbelieve the creditworthiness of the other sister to have given a gift of Rs 9,50,000 to the assessee (brother) and accordingly the same is to be treated as explained.
Judgement: “In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 30/09/2025.”
[The Economic Times]
