[Opinion] Gift From Brother-in-Law? Bank Proof is Enough

Meenakshi Subramaniam – [2025] 180 taxmann.com 743 (Article)

One friend said to another:

” Do you know, my brother-in-law gave me a gift of several lakhs of rupees ?”

The other friend sighed:

“Ah, I also got an unexpected present. They said my brother-in-law was the gift.”

Recently, the Kolkata Tribunal in a far-reaching judgement held that a substantial sum of money, amounting to Rs. 80 lakhs given as gift by the brother-in-law is exempt from tax and, what’s more, a gift deed is also not necessary.

[2025] 180 taxmann.com 265 (Kolkata-Trib)
Deb Prasanna Choudhury
v.
Adit/Dcit (It) – 1(1), Kolkata

The assessee, an individual received gift through NRE account from the spouse of his sister i.e. his brother-in-law. But, the Assessing Officer assessed the Total Income at Rs. 1,00,28,740/- as against declared Income of Rs. 20,28,740/- only.

The assessee in appeal before the Tribunal raised the following grounds of appeal:

“1. The Ld. CIT(Appeal)-22, Kolkata has erred in law and in facts in confirming the Assessment Order passed by the Ld. Assessing Officer assessing the Total Income at Rs. 1,00,28,740/- as against declared Income of Rs. 20,28,740/- only.

2. On facts and circumstances of the case, the CIT (Appeal) was wrong in holding that the amount of Rs. 80,00,000.00 (Eighty Lakhs) is liable to be taxed U/s 56(2)(vii) of Income Tax Act 1961. without appreciating the exception enshrined in the above referred Section as “Gift from Relative”.

3. On facts and circumstances of the case, Commissioner of Income Tax (Appeal) was wrong in holding that the amount of Rs. 80,00,000.00 (Eighty Lakhs) only is liable to be taxed u/s 56(2) (vii) of Income Tax Act 1961, without appreciating the identity, creditworthiness and genuineness of the Doner when the transaction was executed through the normal banking channels.

The assessee had filed return of income u/s 139(4) showing total income of Rs. 20,28,740/- with payment of tax of Rs. 5,50,570/-. Summons were issued u/s 131 of the Act by ADIT(Inv.), Asansol for clarification of large value transactions. The notice u/s 133(6) of the Act was responded to by the assessee with supporting documents. The case was selected for re-assessment u/s 148 of the Act and income tax return was filed thereafter. The notices u/s 142(1)of the Act were issued to which the assessee responded. Accordingly, the Assessing Officer passed the assessment order u/s 143(3) r.w.s. 147 of the Act.

The total income of the assessee was assessed at Rs. 1,50,28,740/- and demand of Rs. 69,82,460/- was also issued. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who examined the material at hand, the impugned orders, the submissions of assessee and decisions relied upon by assessee and partly allowed the appeal of assessee after dismissing Ground no. 2 relating to gift deed amounting to Rs. 55 Lakh.

The Ld. CIT(A) deleted the addition of Rs. 50 Lakh as the same related to transfer from one account to another however, as regards the gift received from the relative, he has mentioned in Ground no. 2 as under while deciding this issue:

“In the instant case, the gift deed is not even made in India but in USA and the deed also does not bear the signature of the recipient. It is also made 9 years after the transaction took place which raises the question of genuineness and validity of the gift deed.”

This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-passed u/s 250 of the Income Tax Act, 1961 for AY 2012-13 dated 13.05.2024, which has been passed against the assessment order u/s 143(3) r.w.s. 147 of the Act, dated 23.12.2019.

The assessee contended that the gift deed was made outside India in the USA and as per the Transfer of Property Act, the gift deed is not required in case of movable property. The transaction was executed through normal banking channel from one bank to another.

The Ld. AO questioned the source of the money received from the sister’s husband and the response was duly filed. It was stated that since the amount was received from the relative through banking channel, the same was not liable to be assessed as income from other sources in view of the exemption provided to the relatives as mentioned therein.

The Findings

The Kolkata Tribunal said that it had considered the submissions made.

Relative is not assessable u/s 56 of the Act. The term “relative” is defined in Section 56 of the Act, which is as under:

“relative” means:

In case of an individual:

(A) Spouse of the individual;

(B) Brother or sister of the individual;

(C) brother or sister of the spouse of the individual;

(D) brother or sister of either of the parents of the individual;

(E) any lineal ascendant or descendant of the individual;

(F) any lineal ascendant or descendant of the spouse of the individual;

(G) spouse of the person referred to in items (B) to (F);

Thus, the spouse of the sister of the assessee is also covered as relative and since the assessee has filed the copy of bank account evidencing the source of gift, the same is not liable to be added in the income of the assessee. For the purpose of section 56 of the Act, there is no need or requirement of any gift deed and the Gift Tax Act is not in operation with effect from 01.10.1998.

The Ld. AO primarily was of the view that since no proper gift deed was made, therefore, the amount was liable to be assessed as ‘income from other sources’ and not exempt u/s 56 of the Act. However, section 56 of the Act for exemption from assessing any sum received which exceeds €50,000/-, does not require a valid gift deed but it is provided in the section itself that if the amount is received from a relative as defined therein, the same is not liable to be assessed u/s 56 of the Act. That being so, the source of the amount being from the relative not being in question, the amount is not liable to be included in the total income of the assessee. The Ld. AO did not make any comment in the remand report when the documents were forwarded to him by the Ld. CIT(A) vide letters dated 17.11.2022 and 03.05.2023.

It is observed that the Ld. AO questioned the validity of the gift deed made in USA without examining whether the source of the amount received from the relative was validly explained or not. The Ld. CIT(A) also decided the appeal by relying upon the fact that the gift deed was not made in India but in USA and the deed also does not bear the signature of the recipient. However, from perusal of SBI NRE bank statement it is seen that there are two entries of deposit on 14.12.2011 and 20.12.2011of amount of Rs. 23,41,630/-and Rs. 55 Lakh, respectively.

The assessee had submitted before the CIT (A) the gift deed as under:

“4. The Gift Deed was made on 4th August 2020 which was authenticated and Notarized by California Notary, USA for the purpose of clarification of Fund wherein of Rs. 80,00,000/- was directly received/Credited into his Kotak Mahindra Bank account no. 1111146441 from his Brother-in-Law’s, Mr Sajal Kundu SBI account no.10457689697, Relative as per U/s 56(2)(ii) (vii) through normal banking channels.”

That Ld. Assessing officer has passed the Remand Report while ignoring the following documents submitted on 01/12/2022 (Annexure 2A) and 04/01/2023 (Annexure 28] in Remand proceeding namely:

• Copy of Gift Deed
• Evidence of Relatives
• SBI Bank statement of Mr Sajal Kundu
• Passport of Mr Deb Prasanna Choudhury
• Passport of Mr Sajal Kundu

The above referred documents were completely ignored and bypassed while passing the Remand Report in spite of being documented in Remand Report No. F.NO.DCIT(IT)1(1)/Kolkata/Appeal/2022-23/24 dated 10/01/2023

That on 12/03/2012 an Fixed Deposit was prematurely closed amounting to Rs. 22,94,931 only and subsequently on the same date Vide RTGS SBIH12072341357 an amount of Rs. 50,00,055 only was debited his SBI savings Bank account no. 11107941129 [Annexure-3A] while crediting the ICICI savings Bank account no 089501501366 for Rs. 50,00,00 only [Annexure-38] being Inter Bank Transfer both accounts belonging to Appellant only.

The assessee also relied upon the judicial pronouncement in Atul H. Patel v. ITO [2022] 138 taxmann.com 454/195 ITD 297 (Ahd. – Trib.) and several other decisions in support of the claim that the amount received from the relative was exempt. Since the necessary documentary evidence in support of the claim that the amount was received from the relative, there was no occasion to insist on a gift deed for excluding the amount received from the brother-in-law. The money has been received through banking channel. The addition, if any, should be made in the hands of the relative and the exemption for the purpose of section 56(2)(x) of the Act does not require any gift deed but only the sum being received from any relative which has not been disputed in the order. Therefore, the appeal is allowed and the addition upheld by the Ld. CIT(A) is hereby deleted. Accordingly, the grounds taken by the assessee in his appeal are allowed.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on 4th November, 2025.

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