A Jaipur man who received ₹16 lakh from his mother after she sold her gold jewellery has won relief from the Income Tax Appellate Tribunal (ITAT), which deleted a ₹13.04 lakh addition made by the tax department over unexplained cash deposits.
The Jaipur bench of the ITAT, in Jhutha Ram v. ITO, ITA No. 1365/JPR/2025, relating to assessment year 2012-13, ruled on 6 October 2026 that the cash gift could not be doubted when it was supported by a notarised gift deed, witnesses and a registered valuer’s report.
Why did the Income Tax Department question the ₹16 lakh gift?
The dispute began when the Income Tax Department received information that Jhutha Ram had invested ₹20,23,778 in immovable property, including stamp duty and registration charges, and deposited ₹13,04,900 in his bank account during the relevant financial year.
The taxpayer had not originally filed his income tax return for assessment year 2012-13. Consequently, the tax department reopened his assessment by issuing a notice under Section 148 of the Income-tax Act on 29 March 2019.
In response, the taxpayer filed his return on 3 December 2019, declaring an income of ₹2,14,997. However, the assessing officer was not satisfied with the explanation for the transactions.
The officer made two additions to the taxpayer’s income: ₹20,23,778 towards unexplained investment in property and ₹13,04,900 towards unexplained cash deposits. The taxpayer challenged the additions before the Commissioner of Income Tax (Appeals).
While the appellate authority deleted the addition relating to the property purchase, it upheld the ₹13.04 lakh addition concerning cash deposits.
The taxpayer subsequently approached the ITAT.
Mother sold 642 grams of gold jewellery to gift money to son
During the tribunal proceedings, the taxpayer explained that he had received a cash gift of ₹16 lakh from his mother on 2 February 2012.
According to the taxpayer, his mother had sold 642.300 grams of old gold jewellery for ₹16,10,567 and gifted ₹16 lakh from the proceeds to him. The jewellery had earlier been valued at ₹18,36,230 as of 31 March 2011 by a registered valuer.
To substantiate the transaction, the taxpayer submitted a notarised gift deed, supported by two witnesses, along with the jewellery valuation report. However, the assessing officer questioned the explanation on several grounds.
One objection was that the sale invoice mentioned the total weight of the jewellery without providing an item-wise description of the ornaments sold.
The department also questioned why the sale proceeds had not first been deposited into the mother’s bank account. Another concern was that the quantity of jewellery sold was lower than the total weight recorded in the valuation report.
The taxpayer’s counsel argued that it was customary in the jewellery trade for invoices involving old jewellery to mention the total weight without providing separate descriptions of every ornament.
The counsel also explained that the mother had sold only part of her jewellery holdings, accounting for the difference between the quantity sold and the quantity mentioned in the valuation report.
ITAT accepts gift deed and jewellery valuation, deletes tax addition
After examining the documents, the Jaipur ITAT found merit in the taxpayer’s explanation.
The tribunal noted that the gift deed clearly recorded the transfer of ₹16 lakh from the mother to her son on 2 February 2012. It also observed that the taxpayer had deposited ₹16,05,000 in his bank account between 4 February and 31 March 2012.
The bench considered the family relationship, the notarised gift deed supported by two witnesses, and the valuation of the jewellery by a registered valuer.
The tribunal observed that the mother had gifted part of the proceeds from selling her gold jewellery and that the transaction was supported by documentary evidence. It consequently held that the addition made by the assessing officer was liable to be deleted.
The bench comprising Accountant Member Annapurna Gupta and Judicial Member T.R. Senthil Kumar allowed the taxpayer’s appeal.
Are cash gifts received from parents taxable?
Under Section 56(2)(x) of the Income-tax Act, 1961, monetary gifts received from specified relatives, including parents, are generally exempt from income tax, irrespective of the amount. However, exemption from tax does not automatically prevent scrutiny of the transaction.
Tax authorities may examine the identity of the person making the gift, the source of funds and the supporting documents when substantial amounts are deposited in a bank account.
In cases involving proceeds from selling gold jewellery, taxpayers should preserve relevant records, including sale invoices, valuation reports, gift deeds and documents establishing the source of funds.
It is also important to distinguish between the tax treatment of the gift received by the son and any capital gains tax implications arising from the mother’s sale of jewellery.
