INCOME TAX OFFICER, WARD-2, NELLORE vs. BATHINA SRILAKSHMI , NELLORE

ITA 83/HYD/2019Status: DisposedITAT Hyderabad16 May 2025AY 2014-1524 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) erred in deleting the addition of Rs. 1.83 crores made under Section 68. The Tribunal found the assessee's claim of receiving the gift from Smt. D. Rajeswaramma on March 5, 2014, to be a colorable device and an afterthought. This contradicted her earlier submission to the AO that the gifts were from 'others' on various occasions and offered to tax, and that the amount was liable to be brought to tax under Section 56(2)(vii)(a). The Tribunal noted that Smt. D. Rajeswaramma's firm, M/s R.R. Estates & Projects, had not filed its return of income for AY 2014-15, and her capital account showed a negative balance after the claimed withdrawal, casting doubt on the source of the gift. The Tribunal concluded that the Rs. 1.83 crores was sourced from unexplained sources under Section 68. Consequently, the CIT(A)'s order on this issue was set aside, and the AO's addition was confirmed. The Tribunal also set aside the CIT(A)'s deletion of the Rs. 1,82,34,150/- addition for cash deficit, restoring the AO's addition as it was independent of the gift issue and resurfaced due to the reversal of the CIT(A)'s finding on the gift's genuineness. Grounds of appeal 1-6 and 7 were allowed.

What were the facts?

The Revenue appealed the CIT(A)'s order deleting an addition of Rs. 1.83 crores made under Section 68 of the Income Tax Act, 1961, and an addition of Rs. 1,82,34,150/- for cash deficit. The assessee initially declared income of Rs. 2,48,490/- for AY 2014-15. The AO observed a negative cash balance of Rs. 1,82,34,150/- on March 26, 2014, due to cash payments exceeding available balance. The AO also noted a claimed cash gift of Rs. 1.83 crores on March 31, 2014, which the assessee offered to tax as income from other sources. The AO treated the gift as an unexplained cash credit under Section 68, deeming it a device to cover the negative cash balance. The assessee appealed to the CIT(A), claiming the gift was from her husband's grandmother, Smt. D. Rajeswaramma, on March 5, 2014, and thus exempt under Section 56(2)(vii). The CIT(A) called for a remand report.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition of Rs. 1.83 crores made under Section 68 of the Income Tax Act, 1961, by holding that the identity, creditworthiness of the donor, and genuineness of the gift transaction were established. 2. Whether the CIT(A) erred in ignoring that the donor and the firm in which she was a partner were not assessed to income-tax and did not file returns, and that the firm's books were unaudited. 3. Whether the CIT(A) erred in ignoring that the gift declaration document was a 'dumb document' without mentioning the relationship between the donor and donee. 4. Whether the CIT(A) erred in ignoring the assessee's initial submission to the AO that the Rs. 1.83 crores was received as cash gifts from 'others' on various occasions and offered to tax, contradicting her later claim of a single gift from a relative exempt under Section 56(2)(vii). 5. Whether the CIT(A) erred in holding the gift exempt under Section 56(2)(vii) when the assessee admitted it as income from other sources. 6. Whether the CIT(A) erred in deleting the addition of Rs. 1,82,34,150/- towards the cash deficit in the cash book. 7. Whether the CIT(A) erred in holding that the cash gift being genuine meant there was no cash deficit. Assessee's contentions (as presented in appeal proceedings): The subject cash gift of Rs. 1,83,00,000/- was received on March 5, 2014, from Smt. D. Rajeswaramma, grandmother of her husband. As it was received from a relative, it was wrongly disclosed as income from other sources and no addition was called for under Section 56(2)(vii)(a). The gift was wrongly posted on March 31, 2014, and its earlier receipt on March 5, 2014, meant sufficient cash was available for payments made on that date, negating the cash deficit addition. Revenue's contentions: The CIT(A) erred in deleting the addition as the identity, creditworthiness, and genuineness were not established. The donor and her firm were not assessed to tax. The gift declaration was inadequate. The assessee's claims were contradictory, shifting from 'others' to a specific relative and from offering to tax to claiming exemption. The CIT(A) ignored these facts and the assessee's admission of the sum as income from other sources. The deletion of the cash deficit addition was also erroneous.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 143(1),Section 143(2),Section 56(2)(vii)(a)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad

For Appellant: Shri S.Rama Rao, AR
Hearing: 07/05/2025Pronounced: 16/05/2025

Ufa <dizI Ya, 4.WH./PER RAVISH SOOD, J.M.

The present appeal filed by the Revenue is directed against

the order passed by the Commissioner of Income Tax (Appeals),

[“CIT(A)”], Tirupati dated 26.11.2018, which in turn arises from the assessment order passed by the Assessing Officer (“the AO”) Bathina Srilakshmi ==

u/s 143(3) of the Income Tax Act, 1961 (“the Act”) dated

30.12.

2016. 2. The Revenue has assailed the impugned order on the following grounds of appeal before us:

1.

CIT(A) err

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →