Income Tax department doubts Rs 10 lakh gift – brother gets tax notice for cash received from sisters; how he appealed & won the case

The brother’s success in the case stemmed from providing comprehensive documentary proof. (AI image)

Gifts received from relatives and friends can sometimes land you in the income tax net. One such case was of a Mr. Maheshwari from Agra, who had to prove the genuineness of Rs 10 lakh received as cash from his sisters.According to an ET report, a businessman from Agra, Mr. Maheshwari, said he received Rs 2.74 crore (2,74,33,250) as a gift from his Delhi-based sister, along with Rs 6.25 lakh from another sister. Both sisters were married, and he utilised these funds in his business ventures. He subsequently filed his income tax return (ITR) for AY 2016-17, declaring an income of Rs 10 lakh (10,80,770).His ITR faced scrutiny after receiving a notice under Section 143(2) on September 19, 2017. The income tax assessing officer (AO) documented in the assessment order that Mr. Maheshwari earned income as a firm partner. The officer observed a capital increase of Rs 1.8 crore (1,83,77,061) during AY 2016-17.During the investigation, Mr. Maheshwari clarified that he had introduced capital of Rs 3.67 lakh and Rs 1.8 crore into his proprietorship firms. He attributed this to his Delhi-based sister’s gift of Rs 2.74 crore (2,74,33,250), which she had declared in her ITR.He additionally reported receiving Rs 6,25,000 in gifts from his other sister. Whilst he provided documentation to demonstrate the donors’ financial capability, the tax officer questioned certain transactions. These included two Rs 5,00,000 gifts received on April 15, 2015, and May 15, 2015, from his Delhi sister, plus the Rs 6,25,000 from his other sister, citing insufficient documentation.Also Read | PPF rules: Why Kerala High Court ordered a mother to return extra interest earned in children’s Public Provident Fund accounts – explainedThe tax official deemed these gift amounts as a deliberate arrangement to evade taxation under the Income Tax Act and categorised them as unexplained cash credit under Section 68 during assessment, the ET report said.The Agra resident challenged this decision by filing an appeal with the Commissioner of Appeals (CIT A).The CIT A confirmed the tax official’s classification of the Rs 10,94,000 gift from the Delhi-based sister as unexplained cash credit under Section 68, citing insufficient evidence of the donor’s financial capacity. Dissatisfied with this decision, the individual approached the Income Tax Appellate Tribunal Agra bench. On September 30, 2025, the ITAT Agra ruled in his favour, the report said.

Cash gifts under tax net: What helped prove the genuineness?

The brother’s success in the case stemmed from providing comprehensive documentary proof that validated both the authenticity of the gifts and the financial capacity of the donors.According to the ET report, the Tribunal’s findings were:

Also Read | Six years after receiving salary arrears, retired employees were told to repay the entire amount – until this Supreme Court ruling changed everythingThe ITAT Agra ruled that the Section 68 additions were unwarranted, deciding in the assessee’s favour by accepting the gifts as legitimate and properly explained.ITAT Agra’s judgement (ITA No. 316/AGR/2024) dated September 30, 2025, acknowledged that the assessee’s lawyers highlighted a sale deed showing his Delhi-based sister had received cash from a property sale, which she subsequently gifted to him. The tribunal noted that their sibling relationship was undisputed.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.”The tribunal noted that the assessee confirmed his sister had properly paid capital gains tax on the property sale.ITAT Agra observed that the CIT (A) had pointed out the Delhi Sister’s returns weren’t scrutinised under Section 143(3).ITAT Agra declared: “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.“

The documentation reviewed by the Tribunal included:

Chartered Accountant (Dr.) Suresh Surana told ET that the Tribunal’s assessment confirmed that both donors were the assessee’s biological sisters, validating the familial bond appropriate for such gifts. The source of Smt. Bansal’s cash gifts was adequately substantiated through property sale proceeds. The Tribunal specified that the absence of scrutiny of her return under Section 143(3) was not sufficient grounds to question her creditworthiness, as this responsibility falls under the Income Tax Department’s jurisdiction rather than the assessee’s.Surana notes that regarding Smt. Agarwal’s case, the Tribunal determined that the gift transfer occurred through proper banking channels, supported by bank records and gift confirmation. The Tribunal concluded that the assessee had adequately fulfilled obligations under Section 68, demonstrating the donor’s identity, creditworthiness, and transaction authenticity, particularly since the Assessing Officer did not pursue additional donor investigations despite having complete information.