If a husband has already disclosed income and paid tax on it, can the tax department later treat the same money as unexplained income in the wife’s hands after he gives it to her?
The Pune bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the same amount cannot be taxed again when its source has already been explained.
The ruling came in the cases of Jayendra Navale and his wife Gauri Navale for assessment year (AY) 2016-17, as reported by TaxGuru. The ITAT, in an order pronounced on 14 August, deleted additions of ₹71.56 lakh made in the hands of both husband and wife.
What was the case about?
The dispute relates to financial year (FY) 2015-16, when ₹71.56 lakh was deposited in Gauri’s bank account, according to the TaxGuru report.
Gauri explained that the cash was a gift from her husband. However, the Assessing Officer (AO) was not satisfied with the explanation and treated the entire ₹71.56 lakh as unexplained money under Section 69A.
The AO noted that the source claimed for the cash was commission income earned by Jayendra from Samruddha Jeevan Multistate Multipurpose Co-operative Society Ltd.
However, the society had not deducted tax at source (TDS) under Section 194H, which applies to commission or brokerage payments. Therefore, the AO concluded that the source of the cash deposit had not been satisfactorily established.
The addition was subsequently upheld by the CIT(A)/NFAC, prompting Gauri to appeal before the ITAT.
Why did ITAT accept wife’s explanation?
The Tribunal considered the husband’s stance while deciding Gauri’s appeal.
As reported by TaxGuru, Jayendra had already disclosed income for AY 2016-17. His Profit & Loss Account for the year ended 31 March 2016 showed ₹91.74 lakh under “Sales”, which he explained represented commission income from the society.
He had declared a total income of around ₹93.67 lakh after deductions. His financial records also showed the commission receipts and the subsequent gift to his wife.
Importantly, Jayendra himself admitted that he had deposited the money into Gauri’s bank account out of his income. The ITAT found that his opening capital and current-year income were sufficient to make the gift.
The Tribunal held that once the husband’s income and capacity to make the gift had been accepted, there was no justification for treating the same ₹71.56 lakh as unexplained money in Gauri’s hands.
The Tribunal observed that doing so would amount to double taxation of the same income, as reported by TaxGuru.
Jayendra had separately faced a ₹71.56 lakh Section 69A addition, made on a protective basis, because the tax department questioned whether the commission income had actually been received.
The ITAT also deleted that addition, holding that the commission income had already been disclosed and taxed and that the absence of TDS or confirmation from the payer could not justify taxing the same amount again.
What does Section 69A mean?
Section 69A covers money, bullion, or other valuable assets where the taxpayer cannot satisfactorily explain the source. Such unexplained money may be treated as income.
In Gauri’s case, the ITAT found that the source had been sufficiently explained through her husband’s disclosed income.
The ruling reinforces that the same income cannot be taxed twice merely because the money subsequently moved from one family member to another.
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.