In a recent case Income Tax Appellate Tribunal (ITAT), Ahmedabad bench has held that there is no prohibition on NRI in accepting cash gifts from the family members and the addition cannot be made by the income tax department alleging that such practice is ‘unusual’.
The facts, in brief, are that the assessee in the present case is an individual and claimed to be NRI being a resident of Auckland, New Zealand since 2003. There were cash deposits in the bank account of the assessee amounting to ₹ 11,44,000.00, the source of which was not explained. Therefore the AO treated the same as unexplained cash credit under section 68 of the Act and made the addition to the total income of the assessee.
The aggrieved assessee preferred an appeal to the learned CIT-A. The assessee before the learned CIT-A submitted that he has accepted gifts of ₹ 6.44 lakhs and 5 lakhs from his father and his brother which were used for purchasing the residential property in Vadodara. According to the assessee, the father and the brother were engaged in the agricultural activity on the land held by them in their personal capacity as well as on the land of other parties. As per the assessee, the father and the brother were able to generate an annual agricultural income of ₹23 lakhs approximately. The assessee in support of his contention has filed the cash book, profit and loss account, 7/12 extract, and gift deed. the CIT-A confirmed the addition by observing that it is very unusual that a wealthy NRI is accepting gifts from his father and his brother who are claimed to be agriculturists. In other words, the donors of the gift do not have sufficient resources and the capacity to gift the wealthy assessee. Likewise, there was a contradiction in the gift deed submitted by the assessee.
A bench of Shri Waseem Ahmed, Accountant Member, and Shri Siddharatha Nautiyal, Judicial Member after hearing the rival contentions of both the parties and persuading the materials available on record observed that the amount of cash was deposited in 2 installments. There was mismatch of the time in the amount of cash deposits in the bank out of the gift received by the assessee. Therefore it was doubted by the revenue that the amount of cash deposits is not out of the amount of gift received by the assessee.
Tribunal said that however, we note that the assessee has discharged his onus by submitting the details (including revised gift deed) that the cash was deposited out of the gift amount. Now the onus shifts upon the Revenue to disprove the contention of the assessee based on the documentary evidence. But we find that there was no contrary evidence brought on record by the revenue suggesting that the amount of cash deposit is not out of the gift amount.
Admittedly, it is very unusual that a wealthy NRI is accepting the gift from his father and the brother. Generally, the practice is different in the society. As such the NRI make gift to the relatives. But we find that there is no prohibition for the NRI for accepting the gifts from the relatives. In the absence of any prohibition, no adverse inference can be drawn against the assessee based on the prevailing system in the society.