Mumbai Man Declares ₹6.3 Lakh Income, Pays ₹27.65 Lakh Credit Card Bills; Comes Under Income Tax Scanner
Mumbai Man Declares ₹6.3 Lakh Income, Pays ₹27.65 Lakh Credit Card Bills; Comes Under Income Tax Scanner
The Income Tax Appellate Tribunal granted relief of ₹9.25 lakh after examining family gift claims, but upheld part of the tax addition due to insufficient evidence.
A Mumbai taxpayer who reported an annual income of ₹6.30 lakh landed under the Income Tax Department’s scanner after authorities found that he had paid credit card bills worth ₹27.65 lakh during the financial year, including ₹13.95 lakh in cash.
The case was selected for scrutiny after tax officials questioned how such large credit card payments could be made despite the relatively low income declared in the taxpayer’s return. The department treated the cash payments as unexplained money under Section 69A of the Income Tax Act and added the entire ₹13.95 lakh to his taxable income.
According to the tribunal order in the case of Shrenik Manish Mehta versus the Income Tax Officer, the taxpayer explained that the cash used for paying the credit card bills had been received as gifts from close family members. He claimed that his father had given him ₹8 lakh, his mother ₹4.5 lakh and his wife ₹3 lakh, taking the total family support to ₹15.5 lakh.
To support his claim, Mehta submitted affidavits from all three family members. He stated that his father was engaged in the agarbatti business, his mother earned through tuition classes and homemade food sales, while his wife worked as a consultant.
However, the Assessing Officer rejected the explanation, stating that affidavits alone were insufficient to prove the source of funds or the financial capacity of the donors. The Commissioner of Income Tax (Appeals) also upheld the addition, leading the taxpayer to approach the Income Tax Appellate Tribunal (ITAT).
Before the tribunal, the taxpayer produced additional documents, including income tax returns, bank statements, confirmations and financial records of the family members. After reviewing the evidence, the ITAT accepted the entire ₹3 lakh gift from the wife, noting that she had declared professional income and maintained a clear banking trail.
The tribunal partly accepted the gifts claimed from the parents. It granted relief of ₹2.25 lakh out of the ₹4.5 lakh claimed from the mother and ₹4 lakh out of the ₹8 lakh claimed from the father, observing that while both appeared to have genuine income sources, the evidence did not fully justify the entire amounts claimed.
As a result, the tribunal deleted additions totalling ₹9.25 lakh and sustained the remaining ₹4.70 lakh. The appeal was therefore partly allowed.
The ruling highlights the importance of maintaining proper documentation for gifts and cash transactions. Tax authorities generally examine three key factors in such cases — the identity of the donor, the donor’s financial capacity to make the gift, and the genuineness of the transaction. Even when gifts are received from close family members, taxpayers may be required to provide supporting documents such as bank records, tax returns and proof of income if the transactions come under scrutiny.
Disclaimer: This article is for informational purposes only and should not be considered tax or legal advice. Taxpayers should consult qualified professionals regarding their individual circumstances.
