ITAT Deletes Rs 69.56 Lakh Tax Addition On LIC Policies Bought For Doctor’s Son

The tax department scrutinized a Tamil Nadu government doctor’s investment in two LIC policies after finding that their combined premiums amounted to Rs 85.96 lakh, far above the Rs 21.80 lakh income he reported for assessment year 2017-18.

The Assessing Officer (AO) treated Rs 69.56 lakh of the investment as unexplained under Section 69 of the Income Tax Act. The Commissioner of Income Tax (Appeals) upheld the addition, and the Income Tax Appellate Tribunal (ITAT), Chennai, initially dismissed the doctor’s appeal in September 2025.

That was not the final outcome. The tribunal recalled its order in December 2025 after finding that it had not addressed some of the doctor’s grounds. In a fresh decision on April 27, 2026, it deleted the Rs 69.56 lakh addition. It also removed a separate Rs 2.20 lakh addition for professional receipts.

Why The Investment Was Questioned

The doctor, who also ran a private clinic, had taken the policies in his son’s name. He told the tax authorities that the money came from his own savings and drawings, contributions from his wife, and gifts from relatives. He explained that Rs 29.68 lakh came from retained earnings and cash balance, Rs 16.95 lakh from his wife, and Rs 19.22 lakh as gifts from relatives, according to a recent report by Financial Express.

The AO did not accept the explanation for the full amount. The tax department had proposed treating the entire Rs 85.96 lakh as unexplained, but the final assessment added Rs 69.56 lakh to the doctor’s income. The CIT(A) confirmed that addition.

In its September 2025 order, the ITAT had upheld the lower authority’s decision. But the doctor sought a review, saying the tribunal had not decided all the grounds he had raised, including whether the investment could be taxed in his hands when the policies were in his son’s name. The tribunal recalled its earlier order and heard the appeal again.

Tribunal Focuses On Who Owned The Policies

The fresh ruling noted that the policies were in the son’s name and that he was an adult when they were taken out. The tribunal said the entire investment could not automatically be treated as the father’s unexplained investment. At most, he could be asked to explain the portion he himself contributed.

The doctor had also submitted records to support the sources of money, including details of cash balances and drawings, along with affidavits and income-tax returns from family members who had contributed. The tribunal found that the lower authorities had not adequately examined the distinction between the doctor’s contribution and money provided by other identifiable people.

It held that Section 69 requires the tax department to establish that the investment belongs to the taxpayer being assessed and that the explanation for its source is unsatisfactory. On the facts before it, the tribunal deleted the Rs 69.56 lakh addition from the doctor’s income.

Receipts Were Already Included In Professional Income

The doctor had also challenged a Rs 2.20 lakh addition linked to payments from pharmaceutical companies, which appeared in his Form 26AS. He said the amount was already part of the Rs 16.52 lakh in gross professional receipts declared under the presumptive taxation scheme in Section 44ADA.

The tribunal accepted that the receipts shown in Form 26AS were included in the declared gross receipts. It said taxing them again would count the same income twice, and deleted the addition.

The ruling turns on the facts and documents in this case. For taxpayers funding a large investment with money from several people, records showing each person’s contribution, financial capacity, and transfer of funds can help explain the source. The case does not mean that a family relationship alone establishes the source of money.

FAQs

Why did the tax department question the doctor’s LIC investment?
He reported income of Rs 21.80 lakh but had invested Rs 85.96 lakh in policies for his adult son. The department treated Rs 69.56 lakh as unexplained.

Why did the ITAT delete the Rs 69.56 lakh addition?
The tribunal found that the policies belonged to the doctor’s adult son and that the father’s contribution had to be distinguished from amounts provided by other family members.

What records can help explain a large investment funded by relatives?
Keep documents showing each person’s contribution and financial capacity, such as bank statements, tax returns, gift or loan confirmations, and transfer records.