Background of the Case
Smt. Yamini Kapoor, a Non-Resident Indian (NRI) residing at C-4, 6 Aurangzeb Road, Central Delhi-110001, with PAN CPDPK7608J, contested the CIT(A)’s decision affirming an addition of Rs. 8,51,000 as unexplained cash deposits under Section 69A read with Section 115BBE of the Income Tax Act, 1961 (the Act). The respondent was the Deputy Commissioner of Income Tax, Central Circle-19, New Delhi. The appeal stemmed from an assessment conducted under Section 153A read with Section 143(3) of the Act, initiated following a search and seizure operation on the “Deepak Talwar Group” on June 22, 2016, during which documents linked to the assessee were seized.
Grounds of Appeal
The appellant raised the following grounds before the ITAT:
- Erroneous Confirmation by CIT(A):That the Ld. Commissioner of Income Tax Appeals(hereinafter referred as “CIT(A)’) has erred in law and factsof the case while partly confirming the assessment orderpassed w/s 153A r.w.s 143(3) of the Income Tax Act,1961 (hereinafter referred as “the act’) dated 31.12.2018
- Unjust Addition of Rs. 8,51,000:That the L.d. CIT(A) has erred in law and facts whileconfirming the addition of Rs. 8,51,000/-on account ofunexplained cash deposit u/s 69A r.w.s 115BBE of theact, while the appellant left no stone unturned to give thelawful evidence of receipt of such amount during theappeal proceedings and no incriminating material tosubstantiate the confirmation of impugned addition werefound by the Ld. CIT(A), hence the confirming the additionfor Rs. 8,51,000/-without appreciating the evidencefurnished and without producing any incriminatingmaterial been found in this regard is bad in law and mayplease be deleted.
- Non-Recognition of Exempt Gifts:That the Ld. CIT(A) has erred in law and facts whileconfirming the addition of/Rs. 8,51,000/-on account ofunexplained cash deposit u/s 69A r.w.s 115BBE of theact, while not appreciating that the appellant has receivedthe impugned amount as a gift in her bank account fromher relatives and as per provisions laid in Sec 56(2)(vii) ofthe act the gifts received from relatives is not taxable in thehand of the recipient, hence the confirming such additionfor Rs. 8.51,000/- is bad in law and may please bedeleted.
- Flexibility in Grounds: The assessee reserved the right to add, alter, delete, modify, or withdraw grounds during the hearing.
Additionally, an application was moved to raise an additional ground regarding the validity of approval under Section 153D of the Act.
Facts of the case
The case originated from a search operation on June 22, 2016, targeting the Deepak Talwar Group, which uncovered documents related to Yamini Kapoor. Consequently, a notice under Section 153A was issued on November 20, 2018, prompting the assessee to file a return of income declaring Rs. 1,13,770. Subsequent notices under Sections 143(2) and 142(1) were issued, and the assessee’s authorized representative participated in the proceedings. The AO completed the assessment on December 31, 2018, making two additions:
- Rs. 8,51,000 as unexplained cash deposits under Section 69A read with Section 115BBE.
- Rs. 84,00,000 as unexplained money credited under the same provisions.
Aggrieved, the assessee appealed to the CIT(A), who, on January 11, 2021, partly allowed the appeal by deleting the Rs. 84,00,000 addition but upheld the Rs. 8,51,000 addition, leading to the present appeal before the ITAT.
Proceedings Before ITAT
Additional Ground on Section 153D Approval
The appellant’s counsel, Shri Sanjay Agarwal, CA, sought to introduce an additional ground asserting that no valid approval under Section 153D was obtained for the assessment order. Citing National Thermal Power Co. Ltd. vs. CIT (299 ITR 383), the counsel argued that this legal question, based on existing facts, could be raised at any stage. The tribunal admitted the ground, noting the Supreme Court’s ruling that such questions are permissible to ensure correct tax liability assessment. However, upon review, the tribunal found that the AO had obtained prior approval from the Additional Commissioner of Income Tax, Central Range-4, New Delhi, rendering the ground untenable, and it was decided against the assessee.
Main Grounds of Appeal
The appellant’s counsel argued that no incriminating material was found during the search to justify the Rs. 8,51,000 addition, relying on Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell (P.) Ltd. (149 taxmann.com 399, SC). He contended that the amount represented gifts from relatives on occasions like birthdays, Raksha Bandhan, Diwali, and family marriages-exempt under Section 56(2)(vii) of the Act. He emphasized that such gifts are customary in India, not taxable, and that suspicion cannot substitute proof, citing Umacharan Shaw & Bros vs. CIT (37 ITR 271, SC). The Income Tax Return (ITR) form, he noted, lacks a column to declare exempt gifts.
The assessee submitted details of donors and cash amounts, claiming deposits below Rs. 50,000 on various dates were exempt, except for a Rs. 3,50,000 deposit by Shri Sandeep Sharma, which remained unexplained. The counsel argued that consistent annual deposits would support the customary gift claim, but the assessee failed to fully substantiate this for the entire amount.
The respondent’s representative, Shri Sunil Yadav, CIT DR, defended the CIT(A)’s order, arguing that the assessee’s evidence was insufficient to overturn the addition.
Legal Framework: Section 56(2)(vii)
Section 56(2)(vii) taxes sums exceeding Rs. 50,000 received without consideration, unless exempted. Exemptions include gifts from “relatives” (defined as spouse, siblings, siblings of spouse, siblings of parents, lineal ascendants or descendants, and their spouses) or received on marriage, under a will, or from specified entities. The assessee relied on this provision to claim the deposits as exempt gifts from relatives.
Tribunal’s Findings and Decision
The tribunal noted that the assessee deposited Rs. 8,51,000 in cash, claiming it as exempt gifts from relatives on customary occasions. While the assessee provided donor details, the significant Rs. 3,50,000 deposit by Sandeep Sharma lacked explanation, and the pattern of deposits did not consistently align with annual customary gifting. However, recognizing Indian customs of gifting on festivals and family events, the tribunal partially accepted the assessee’s contention.
Balancing the evidence and legal provisions, the ITAT concluded that half of the Rs. 8,51,000 (i.e., Rs. 4,25,500) could reasonably be treated as customary exempt gifts under Section 56(2)(vii). The remaining half was upheld as unexplained, given the assessee’s failure to fully justify the entire amount, particularly the Rs. 3,50,000 deposit. Thus, the tribunal partly allowed the appeal, deleting Rs. 4,25,500 of the addition for statistical purposes.
Conclusion
The ITAT’s ruling reflects a pragmatic approach, acknowledging cultural practices while upholding tax law rigor. Smt. Yamini Kapoor’s appeal highlights the challenges NRIs face in proving exempt income sources, especially post-search assessments. The partial relief granted underscores the need for robust documentation to substantiate claims under Section 56(2)(vii). The order, pronounced in open court on April 2, 2025, marks a balanced resolution to this tax dispute, with copies forwarded to all relevant parties.
This decision may guide similar cases involving customary gifts, emphasizing the interplay between statutory exemptions and evidentiary burden.
Citation: Smt. Yamini Kapoor vs Deputy Commissioner ofincome tax Central Circle -19 New DelhiITA No.172/Del/2021, Assessment Year: 2015-16
