Is a cash gift received from the late husband taxable in the hands of the widow? Recently, ITAT Pune pronounced its order in a similar case where the assessing officer found “unexplained credits” of Rs 75 lakh in a widow’s bank account and treated a Rs 60 lakh cash deposit as unexplained.
Pune-based Ms Parve hadn’t even filed the income tax return for the assessment year concerned. She contested the income addition in the Income Tax Appellate Tribunal, Pune, where the AO was directed to delete the addition of Rs 60,00,000.
The case highlights the importance of keeping the paperwork. Advocate Shourya Garg, Founder of Garg & Garg Tax Associates, told ET Wealth Online that a clear explanation on record backed with papers is what helped the widow in this case.
Here’s what happened, and how the lady won the case in ITAT, Pune.
Rs 60 lakh cash deposit in widow’s account
The Income Tax Department came to know that Mr Parve has made a cash deposit of Rs 60,07,500 in her bank account during the financial year 2015-16. She hadn’t filed her ITR for the relevant assessment year.
So, the Assessing Officer (AO) issued a show cause notice under Section 148A(b) of the Income Tax Act, 1961 dated 17.01.2023. There was no compliance from Ms Parve’s side, so the AO passed an order on 13.03.2023.
Further notices were issued to the lady seeking information regarding the cash deposits. In the absence of any documentary evidence, the AO issued another show cause notice asking Ms Parve to explain as to why the assessment should not be completed based on the material available on record.
In response to this, she filed her ITR on 27.02.2024 declaring total income of Rs 12,000. With this, she also submitted a reply revealing that the Rs 60 lakh in her account pertains to a gift received from her deceased spouse, which is why she was unable to gather the necessary documents.
Ms Parve shared that her husband passed away on 17.03.2023. He had deposited the amount in her account as a gift to her and their two minor daughters.
Will a cash gift from late husband to wife and minor daughters be taxable?
Ms Parve submitted that the Rs 60 lakh in her account was out of a gift from her deceased spouse for the entire family and should not be taxed in her hands.
However, the AO noted that the assessee had unexplained credits of Rs 75 lakh in her account – Rs 60 lakh cash deposit and Rs 15 lakh clearing cheque credits. Since Ms Parve did not submit any proof explaining the source of the cash deposit and in the absence of any explanation, the AO made the addition of Rs 60 lakh invoking Section 69A.
Ms Parve’s counsel argued in ITAT Pune that she is a housewife and never filed her ITR as she had no independent source of income. To support her claims, Ms Parve also filed Form 26AS, an affidavit, the husband’s death certificate, computation sheet, bank statements between 24.08.2015 and 30.09.2015.
What did the ITAT rule?
The tax tribunal took note of the fact that the late husband, who had gifted Rs 60 lakh to the assessee and two minor daughters, is no more to give confirmation or affidavit or explanation. Ms Parve has discharged the initial burden cast on her by proving the identity of the donor, her relationship with the donor, PAN, confirmation by two daughters regarding the gift etc.
The tribunal accepted that the Rs 60 lakh cash deposit was a gift by Ms Parve’s late husband to her and their 2 daughters, meaning no addition under section 69A is warranted. ITAT Pune directed the AO to delete the Rs 60 lakh addition.
What helped the widow in this case?
As mentioned above, Ms Parve won as she showed who gave the money and how they were related. She filed her late husband’s death certificate and PAN along with her affidavit and confirmations from both daughters.
“The Tribunal said she had done enough to prove the donor’s identity and the relationship, and the department had not shown her documents to be false. It also did not accept that section 69A means an automatic addition,” explained Garg.
Since her husband was no longer there to confirm anything himself, the tribunal accepted the money as a gift from him and deleted the addition.
If a family member who gave you money or managed your finances passes away, what should you do about records?
Start gathering papers early while memories and documents are still easy to find. Keep the death certificate and a legal heir certificate handy. Collect bank statements and passbooks and fixed deposit receipts and any old income tax returns and PAN details, Garg pointed out.
If the person ever gave you money or gifts, write it down with dates and amounts. A simple signed gift letter and written confirmations from other family members can make a big difference later. Do this even for transfers within the family, because the department only sees a deposit and not the relationship behind it.
Also register as a legal heir on the income tax portal so you can see the deceased person’s filings. For future gifts, prefer bank transfers over cash.
“Share what you have and explain honestly why the rest is missing and ask for time. Partial proof with a sincere explanation is far better than silence. Also watch the appeal timeline. A first appeal is normally due within thirty days of the order,” he stated.
