Gift From Brother-in-Law Falls Within Definition of ‘Relative’; ₹80 Lakh Addition Deleted Under Section 56: ITAT Kolkata
Pranav B Prem
The Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has held that a monetary gift received by an assessee from his brother-in-law is exempt from taxation under Section 56(2)(vii) of the Income Tax Act, 1961, as the donor qualifies as a “relative” under the statutory definition. The Bench comprising George Mathan (Judicial Member) and Rakesh Mishra (Accountant Member) deleted an addition of ₹80 lakh made as “unexplained income,” noting that the funds were transferred through proper banking channels from an NRE account and were supported by identification and confirmation from the donor.
The case arose from reassessment proceedings initiated under Section 148, wherein the Assessing Officer treated funds received in the assessee Deb Prasanna Choudhury’s bank account during AY 2012–13 as unexplained income taxable under Section 56. The assessee explained that the amount was a genuine gift from his brother-in-law, Mr. Sajal Kundu, who transferred the funds from his NRE account maintained with SBI. The transfer was supported by bank statements and the donor’s identification documents.
The Commissioner of Income Tax (Appeals) upheld the addition in part, questioning the genuineness of the gift on the ground that the gift declaration was notarized in California several years after the transaction. The CIT(A) also observed that while part of the donor’s funds could be explained as internal transfers, the source of a portion allegedly arising out of mutual fund liquidation was “unsubstantiated.”
Before the Tribunal, the assessee argued that Section 56(2)(vii) contains a clear legislative exception for gifts received from “relatives,” and Explanation (e) expressly includes the spouse of one’s sister. Once the relationship is undisputed, no separate gift deed is mandated under the Act. The assessee submitted that the funds were transferred through normal banking channels, and any enquiry into the donor’s source of funds should fall within the donor’s assessment, not that of the recipient. It was further argued that with the abolition of the Gift Tax Act in 1998, there is no statutory requirement of a contemporaneous gift deed.
The Tribunal agreed with the assessee’s submissions, observing that the lower authorities erred in questioning the genuineness of the gift solely because the gift declaration was executed abroad at a later date. It held that the existence of a valid and recognized familial relationship, coupled with bank-verified evidence of the transfer, was sufficient to establish the bona fides of the gift. The Bench emphasized that there is no requirement under Section 56 for a gift deed when the transaction is otherwise supported by documentary evidence and the relationship between the parties is admitted.
The Tribunal reiterated that if the Revenue had any doubts regarding the source of the donor’s funds, such enquiry must be conducted in the donor’s assessment proceedings. It held that the addition made by the Assessing Officer was devoid of merit and that the CIT(A)’s reasoning was legally untenable.
Allowing the appeal in full, the Tribunal directed deletion of the ₹80 lakh addition. The Bench held that “since the necessary documentary evidence supports that the amount was received from a relative through banking channels, there was no occasion to insist on a gift deed for excluding the amount received from the brother-in-law.”
Appearance
Counsel For Appellant: D. Saha, AR and K.K. Ghorai, AR.
Counsel For Respondent: Sallong Yaden, Addl. CIT(DR)
Cause Title: Deb Prasanna Choudhury Versus ADIT/DCIT
Case No: I.T.A. No.: 2199/KOL/2024
Coram: George Mathan (Judicial Member), Rakesh Mishra (Accountant Member)
