ITAT Sustains Agricultural Land Exemption but Reinstates Addition for Undocumented Marriage Anniversary Cash Gifts

1. Core Dispute & Findings

The Revenue challenged the order of the CIT(A) which had deleted three major additions made by the Assessing Officer (AO). The ITAT analyzed each ground based on documentary evidence and statutory provisions.

I. Addition of Cash Gifts u/s 56(2) [Ground No. 1]

The assessee claimed to have received ₹10,43,998/- as cash gifts (ranging from ₹2100 to ₹11,000) from relatives on his 10th marriage anniversary.

• AO’s Stand: The assessee failed to provide names, PANs, or relationships of the donors.

• Assessee’s Stand: It is customary to receive gifts on anniversaries; providing specific details for every guest is impossible.

• ITAT Ruling: Against Assessee. While Section 56(2)(x) exempts gifts from relatives, the burden of proof lies on the assessee to establish that the donors actually fall within the “relative” definition. In the absence of even basic names or a breakdown, the addition was upheld.

II. Credit Card Bill Payments [Ground No. 2]

The AO added ₹29,54,493/- as unexplained expenditure u/s 69C, noting that the assessee’s credit card bills were paid by a company, M/s Lightstone Developers India Pvt. Ltd.

• CIT(A) Findings: The assessee is a Director in said company. The payments were in the nature of an “Imprest Account”—the Director spent money for the company, and the company reimbursed the credit card directly.

• ITAT Ruling: In Favor of Assessee. The source of payment was duly explained through the company’s ledger and reimbursement policy. The addition was deleted.

III. Sale of Agricultural Land – Advance Money [Ground No. 3]

The assessee received ₹1,51,00,000/- as an advance for the sale of land in Punjab. The AO treated this as “Income from Other Sources.”

• The Legal Test: The land was situated 20 km away from the sub-district headquarters (Abohar), placing it outside the definition of a “Capital Asset” u/s 2(14)(iii)(b).

• ITAT Ruling: In Favor of Assessee. Since the land is rural agricultural land, it is not a capital asset. Therefore, any gain or advance received from its transfer is outside the purview of Capital Gains and is not taxable.

2. Final Verdict & Key Takeaways

• Verdict: The Revenue’s appeal was Partly Allowed. The ITAT restored the addition for cash gifts but upheld the deletion of additions related to credit card payments and agricultural land.

• Key Lesson for Taxpayers: * Gift Documentation: Even for social occasions, keep a list of donors and their relationships to the family if the amount is substantial. General claims of “customary gifts” do not override the requirement for financial traceability.

  • Agricultural Land: Location is everything. Always verify the distance of the land from the nearest municipality to determine its status as a non-capital asset.