Cash receipt from land sale deposited in wife's a/c-implicat

This query is : Resolved

anant (Querist)
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02 March 2014 Respected Sirs,
Assessee received hard cash of Rs 772000(as per sale deed) in instalments as consideration for land sale from sep 2010 to feb 2011 and deposited 700000 straight away in his wife's bank a/c. Land was transferred/ registered in june 2011. Assessee intended the deposit as a gift to his wife but for fy 2010-11 wife did not file IT Returns as income after trading losses was under exemption limit. Now wife has received a no filers notice (no section mentioned) for fy 2010-11 mentioning the information about cash deposit of Rs 7 lac.
KINDLY GUIDE HOW TO RESPOND TO THE IT LETTER.AS returns for FY2010-11 is time barred. How to show that cash deposit was gift to spouse?Is is valid?

CA Sanjeev Kr Jain

CA Sanjeev Kr Jain (Expert)
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03 March 2014 check if the assessee disclosed this transaction in his ITR

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anant

anant (Querist)
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03 March 2014 Dear Sanjeev Sir,
No the assesse did not mention in his ITR that he gifted Rs 700000/- to his wife by depositing the sale receipt in hard cash in his wife's account. But he did mention the receipt of Rs 7 lac as well as transfer to wife in cash in his books of account and sought exemption of the entire amount u/s 54F against purchase of res flat.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 Responding to the Income Tax (IT) notice regarding the cash deposit of Rs. 7 lakh in your wife's bank account for FY 2010-11 requires careful consideration and documentation. Here’s a structured approach to address the situation:

### 1. Clarifying the Nature of the Transaction:

- **Gift Declaration:** Since the cash deposit was intended as a gift to your wife, you need to establish this fact clearly. Even though the income tax returns for FY 2010-11 are time-barred, you can still respond to the notice with the explanation.

- **Documentation:** Gather any supporting documents that can substantiate your claim that the deposit was a gift. This might include:
- **Gift Deed:** If there was a formal declaration or gift deed executed at the time of the cash deposit, include a copy of this document.
- **Bank Statements:** Provide the bank statement showing the deposit from your account into your wife's account. This will help establish the transaction trail.
- **Books of Accounts:** If your books of accounts clearly mention the receipt of Rs. 7 lakh as well as its subsequent transfer to your wife, provide these records as evidence.

### 2. Responding to the IT Notice:

- **Letter of Response:** Draft a concise response to the IT notice. Mention that the cash deposit of Rs. 7 lakh was a gift made to your wife, supported by the relevant documents mentioned above.

- **Explanation:** Explain that although your wife did not file IT returns for FY 2010-11 due to income being below the exemption limit, you acknowledge the cash deposit and its nature as a gift.

- **Section 54F Exemption:** Mention that the entire amount of Rs. 7 lakh was declared in your books of accounts and was subsequently used to claim exemption under Section 54F against the purchase of a residential flat.

### 3. Legal and Validity Aspects:

- **Validity of Gift:** Under Indian tax laws, gifts to relatives, including spouses, are generally not taxable in the hands of the recipient. However, it's crucial to properly document and disclose such transactions, especially when responding to an IT notice.

- **Time-Barring of Returns:** Even though the returns for FY 2010-11 are time-barred, providing the necessary clarification and documentation to the IT department is still advisable to avoid any further queries or penalties.

### 4. Seeking Professional Advice:

- **Consult a Tax Advisor:** Given the complexity and potential implications, it’s recommended to consult a tax advisor or a chartered accountant who can provide personalized guidance based on your specific situation and the latest tax regulations.

By following these steps and providing comprehensive documentation, you can effectively respond to the IT notice regarding the cash deposit as a gift to your wife and clarify any queries raised by the tax authorities. This approach will help ensure transparency and compliance with tax laws.