Last Updated:
Manubhai ran into trouble with the tax department after receiving cash gifts ahead of his son’s wedding.
Authorities claimed the money was part of undisclosed income. (Representative Image)
In India, cash gifts during weddings are a common tradition. But for Manubhai, receiving Rs 4.31 lakh as cash gifts before his son’s wedding led to a long tax dispute. The Income Tax Department claimed this was “unexplained income” since the money was received almost a month before the wedding, not on or after the ceremony.
Despite showing proof, including the marriage certificate, the invitation card, and even a full list of guests who gave the gifts, the tax officer was not convinced. He added the wedding gifts along with contract income, declaring a total of Rs 18.51 lakh as unexplained income.
Manubhai challenged the ruling at different levels, eventually taking the matter to the Income Tax Appellate Tribunal (ITAT), Ahmedabad. On August 12, this year, the tribunal ruled in his favour, giving him relief in the case.
How the tax dispute began
The issue started when Manubhai filed his income tax return on April 11, 2018, declaring Rs 4.61 lakh as income, which included salary and presumptive taxation income under Section 44AD from contract work. During scrutiny, the Assessing Officer noticed large cash deposits, Rs 14.2 lakh in SBI and Rs 15 lakh in HDFC Bank.
When questioned, Manubhai explained the deposits came from different sources: Rs 14.2 lakh from contract work, Rs 9 lakh from selling agricultural land, Rs 1 lakh from his wife’s account, and about Rs 5 lakh from his son’s wedding gifts and savings. However, the officer rejected his explanation for both the contract income and the cash gifts, adding them as unexplained income.
Why did the ITAT Ahmedabad rule in favour of the father?
The two-member bench of ITAT Ahmedabad, comprising Dr. BRR Kumar (Vice-President) and Siddhartha Nautiyal (Judicial Member), found no strong grounds in the tax department’s arguments. They noted that Manubhai had already offered his contract income to tax under Section 44AD and had provided full details of the parties involved. The officer, however, made no independent effort to verify those claims.
On the issue of wedding gifts, ITAT observed that Manubhai submitted a complete list of people who gave cash. The tribunal said the fact that the gifts were received before the wedding date did not automatically make them invalid.
Importantly, the Assessing Officer did not highlight any specific problems in the evidence provided. Based on this, the tribunal decided that the addition of Rs 4.31 lakh as unexplained income was not justified.
What the experts say about marriage gifts and tax rules
Mihir Tanna, Associate Director at S.K. Patodia LLP, explained that two provisions were under discussion here, presumptive taxation and wedding gifts. “As per the income tax provisions, if the assessee has opted for presumptive taxation under Section 44AD, the assessee is not required to maintain the books of account as well as the details of purchases made. The assessee is required to maintain sales only,” he was quoted as saying by The Economic Times.
On wedding gift rules, he added that gifts received in excess of Rs 50,000 are generally treated as taxable income. However, gifts received on the occasion of an individual’s marriage are exempt.
The law, though, specifies that this applies only to the marriage of the taxpayer himself, not for the weddings of children or relatives. In Manubhai’s case, the main dispute was about the source of cash deposits, not the identity of the people giving gifts.
What taxpayers should learn from this ruling
Tax experts say the case highlights the importance of proper documentation.
As quoted by The Economic Times, Dr. Suresh Surana, Chartered Accountant, explained: “This judgment highlights the importance of maintaining clear and substantiated documentation for wedding gifts, especially when questioned by the tax authorities.”
To avoid such disputes, taxpayers should keep a record of all gift-givers with names, amounts, and dates, along with the wedding invitation card and certificate.
Even though wedding gifts are exempt, it is safer to declare them under “Exempt Income” while filing returns. This ensures transparency and helps avoid unnecessary litigation.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
- Location :
Delhi, India, India
Read More
