The Story
A Delhi school teacher got into trouble with the Income Tax Department after she deposited ₹3.5 lakh in cash into her bank account.
This money wasn’t her income – it was a gift from her daughter. But the tax department thought otherwise and issued her a notice, claiming the money was “unexplained” and should be taxed.
She fought the case, and finally, the Income Tax Appellate Tribunal (ITAT), Delhi ruled in her favour.
What Was the Issue?
The tax department reopened her old return under Section 148 of the Income Tax Act.
They argued that the cash deposit was undisclosed income and could be taxed under Section 68.
The teacher had already filed her return that year, showing income of around ₹7.4 lakh, but the department was not convinced about this cash gift.
How She Defended Herself
The teacher explained that:
The ₹3.5 lakh came as a gift from her daughter.
She provided proof of her relationship with the daughter.
She showed evidence of the daughter’s financial capacity (that the daughter had sufficient funds).
She demonstrated that the money trail was genuine.
What the Tribunal Said
The ITAT agreed with her explanation. The key points were:
Gifts from relatives are not taxable. Under the Income Tax Act, gifts from specified relatives (like children, parents, siblings) are fully exempt, regardless of the amount.
Burden of proof was satisfied. She had proved her daughter’s identity, their relationship, and the source of money.
Re-opening was not justified. The department had no strong evidence to treat the money as hidden income.
Result: The addition made by the tax officer was deleted, and the teacher won the case.
Why This Matters to You
Many people receive gifts in cash or by transfer from family members. Here’s what you should remember:
✅ Gifts from relatives (like parents, children, siblings, spouse) are fully exempt from tax.
❌ Gifts from non-relatives above ₹50,000 in a year become taxable.
📑 Always keep proof – bank statements, gift deed, and evidence of donor’s income.
💡 Prefer bank transfers instead of large cash gifts to avoid scrutiny.
📝 Even if exempt, it’s better to disclose gifts in your Income Tax Return under “Exempt Income”.
Key Takeaway
This case shows that the tax department can question even genuine gifts, but if you have proper evidence and documentation, you can successfully defend yourself.
👉 Moral of the story: If you’re receiving gifts from family, keep it transparent, keep documents ready, and don’t panic if you get a notice. The law is on your side.
