Son gets income tax notice for Rs 33.23 lakh in property investment and cash; he gets relief in ITAT Jaipur for this reason

Mr Ram from Mandi Road got entangled in a dispute with the Income Tax Department after he bought a property, deposited a large amount of cash in his bank account but did not file any income tax return. However, the Income Tax Assessing Officer (AO) from Jaipur already had information from his sources that Ram had purchased a property for Rs 20.23 lakh and deposited Rs 13.04 lakh cash in his bank account. This is why the AO sent him an income tax notice asking to file ITR.

In response to the income tax notice, Mr Ram declared Rs 2.14 lakh income and filed the ITR. When the AO saw Ram's ITR he classified the case as suspicious and eventually declared the property investment and cash deposit both as unexplained and started the proceedings against Ram. To reiterate, Ram was charged with evading tax on Rs 20.23 lakh unexplained property investment and Rs 13.04 lakh unexplained cash deposit.

Feeling aggrieved, Ram filed an appeal with the commissioner of appeals (CIT A). The CIT (A) decided to give Ram part relief by deleting the tax notice for Rs 20.33 lakh unexplained property but sustained the Rs 13.04 lakh unexplained cash tax notice. So Ram filed another appeal with ITAT Jaipur for the unexplained cash issue. On October 6, 2026 Ram won this case and now both the unexplained cash (ITAT Jaipur) and unexplained property (CIT A) tax notice was cancelled.

How did Ram win this case?

Chartered Accountant Varun Singhal said to ET Wealth Online that Ram won the case because he produced a notarised gift deed, with two witnesses, showing his mother gave him Rs 16 lakh on February 2, 2012 and this money was deposited by him in his bank account. Deposits in his bank account followed in February-March 2012. The mother's money came from selling her old gold jewellery, which a registered valuer had valued at Rs 18.36 lakh as on March 31, 2011. The ITAT Jaipur also noted that a mother is a relative under Section 2(41) of the Income Tax law and gift from relatives are not taxed.

According to Singhal, you should take the following precautions:

1. Prove where the donor got the money, not just that a gift was made.
2. Keep papers from the time of the transaction (deed, valuation, jeweller's invoice).
3. Keep the deposit close to the gift date, with matching amounts.
4. Keep the donor's bank records too, if available.

ITAT Jaipur discussion

Chartered Accountant Nikhilesh Kataria representing Ram argued before ITAT Delhi that Ram’s mother sold her old jewellery (valued at Rs 18.36 lakh by a registered valuer in 2011) and gave Rs 16 lakh cash to Ram on February 3, 2012. However, the AO disbelieved this story as there were no supporting documents specifying the specifications of the gold items. CA Nikhilesh Kataria also argued that it is customary in the jewellery trade that when selling old jewellery only total weight shown and no separate specification of items are given in the invoice.

The other contention of the AO is that the weight of jewellery sold is much less than the total weight of gold mentioned in the valuation report. To this contention, CA Nikhilesh Kataria replied that Ram’s mother only sold 642.300 grams for Rs 16.1 lakh and gifted Rs 16 lakh to Ram. Moreover, CA Nikhilesh Kataria supported his argument with evidence namely Ram’s mother’s duly notarised gift deed which also has witnesses.

Mrs. Arti Rawat, ACIT appearing for the Income Tax Department supported the orders passed by the lower authorities and requested to confirm the addition of the unexplained incomes to Ram’s ITR.

ITAT Jaipur heard the arguments and said that the Gift Deed clearly mentions that the Gift given to Ram on February 4, 2012 and on this basis Ram deposited the said cash in his bank account.

ITAT Jaipur ruled: “This gift is from the mother only which is within the relatives as defined in Section 2(41). Further the assesee’s (Ram) mother in her old age gifted part of the amount from sale of her gold jewellery given as gift to the assessee, which cannot be doubted, since the same is supported by valid notarised Gift Deed with two witnesses and value of the jewels were determined by Registered Valuer. Thus the addition made by the AO is liable to be deleted.”