On September 18, 2026, the Income Tax Appellate Tribunal (ITAT) Chennai overturned an addition of Rs 85.03 lakh levied against a resident who had received cash gifts from close relatives. The taxpayer had deposited the money after formalising the gifts through deeds, and the amount was flagged by a bank‑reported SFT.
The bank, following Section 44AB, reported the 85‑lakh deposit to the Income Tax Department, prompting an enquiry into its source. The department sent notices to the donor relatives – the man’s wife, paternal uncles, maternal uncle and sister‑in‑law – who confirmed the gifts were made between April and September 2016 and provided copies of their ITRs and financial statements.
Despite the donors’ documentation, the Assessing Officer questioned their capacity to give such large sums, comparing declared incomes with the gift amounts and finding a mismatch. He treated the cash as unexplained, adding the 85.03 lakh to the taxpayer’s liability.
The taxpayer appealed to the Commissioner of Appeals (CIT A), but the appellate authority upheld the addition on December 29, 2025, citing the officer’s doubts about the donors’ financial standing as sufficient justification.
ITAT Chennai, in its September 2026 ruling, held that once the donor’s identity and the genuineness of the transaction were established, the taxpayer need not prove the source of funds. The tribunal noted the officer had compared declared incomes without considering overall assets, withdrawals, or cash balances, and therefore the addition could not stand.
The decision clears the taxpayer of the addition, setting a precedent that gifts from relatives, properly documented, need not be scrutinised for source once authenticity is proven. The ruling is expected to be cited in future gift‑related tax disputes across India.