2016 (4) TMI 669 - AT - Income Tax

Receipt by the assessee from the HUF of which the assessee was the member - term relative under the provisions of section 56(2) of the I.T. Act - treatment to gift received - Held that - the relative explained in Explanation to s. 56(2)(vi) of the Act includes relatives and as the assessee received gift from his HUF , which is a group of relatives , the gift received by the assessee from the HUF should be interpreted to mean that the gift was received from the relatives therefore the same is not taxable under s. 56(2)(vi). Facts of the case before us are similar as in the assessee s husband s case for the very same assessment year, we are inclined to follow the decision of the Coordinate Bench of this Tribunal and direct the A.O. to treat the gift from Biravelli Bhasker (HUF) as a gift under section 56(2) of the I.T. Act. Accordingly, this ground of appeal is treated as allowed in favour of assessee

Summary

Issues:
1. Addition under section 56(2)(vi) of the I.T. Act on account of cash gift received from HUF.
2. Addition under section 143(3) on account of unexplained investment in M/s. Mahadevi Industries.

Analysis:
1. The appeal was filed against the Ld. CIT(A)'s order confirming the additions made by the A.O. The first addition of Rs. 1 lakh under section 56(2)(vi) was challenged, which was the amount received as a cash gift from HUF. The A.O. disallowed the claim of gift as HUF was not considered a relative. The Tribunal referred to a previous case where it was held that HUF can be treated as a relative. Thus, the Tribunal directed the A.O. to treat the gift from HUF as exempt under section 56(2), deleting the addition.

2. The second addition of Rs. 50,000 made by the A.O. without proper interpretation of the accounts was also challenged. The assessee explained the source of the investment, but the Ld. CIT(A) did not address this issue. The Tribunal remitted this issue back to the Ld. CIT(A) for reconsideration based on the explanation and evidence provided by the assessee. This ground was set aside for further review.

3. The Tribunal's decision was based on the interpretation of the term 'relative' under section 56(2) of the I.T. Act. The Tribunal held that HUF can be considered a relative for the purpose of exemption under this section. The decision in a similar case was followed, leading to the deletion of the addition related to the cash gift from HUF. The issue of unexplained investment was sent back to the Ld. CIT(A) for proper consideration based on the assessee's explanation and evidence.

4. Overall, the appeal of the assessee was partly allowed for statistical purposes, with one addition being deleted and the other issue being remitted for reconsideration. The Tribunal's decision was based on the interpretation of the term 'relative' and the proper consideration of the explanations and evidence provided by the assessee.