2020 (6) TMI 337 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Addition u/s 56(2)(v) - gifts received by the assessee from the HUF interpreted as the gift from the relatives - HELD THAT - AO called for the details with regard to gifts received by the assessee - assessee was asked to furnish the bank account details, books of accounts etc. and also called for some more information and the assessee submitted the confirmation letter from HUF and confirmed the gift to Shri K.Ramachandraiah, individual for a sum of ₹ 10 lakhs. Both Shri K.Ramachandraiah, HUF and Shri K.Ramachandriah, individual are assessed to tax. After duly verifying the information furnished by the assessee, the assessment was completed by an order u/s 143(3) dated 23.05.2011, thus the source of credit was explained by the assessee in the original assessment. There is no failure on the part of the assessee and no fresh information was received by the AO for reopening the assessment. The information was already made available in the assessment, hence, reopening the assessment on the same issue which was already considered by the AO and taken a view amounts to difference of opinion and on difference of opinion, reopening of assessment is not permissible. We have called for the reasons recorded for reopening the assessment. After giving couple of opportunities, the Ld.DR submitted that the reasons could not be traced since the assessment pertained to A.Y.2009-10 which was very old. In the absence of production of reasons, we are of the view that no reasons were recorded by the AO for reopening the assessment. Since reopening of assessment is not permissible on difference of opinion and the fact that the department failed to furnish the reasons recorded for reopening the assessment, we hold that the issue of notice/s 148 is bad in law and the same is quashed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice u/s 148 for reopening assessment
2. Interpretation of term 'relative' under sec. 56(2)(vi) of the Act

Issue 1: Validity of notice u/s 148 for reopening assessment:
The appeal was filed by the revenue against the CIT(A)'s order for the AY 2009-10, challenging the addition made by the AO u/s 56(2)(vi) of the Income Tax Act, 1961. The AO had reopened the assessment u/s 147, questioning gifts received by the assessee from HUF. The AO contended that gifts from HUF are taxable u/s 56(2)(vi) as HUF is considered a separate entity. The CIT(A) disagreed, stating that gifts from HUF should be seen as gifts from relatives and hence not taxable. The revenue appealed this decision, arguing that the term 'relative' under sec. 56(2)(vi) does not include HUF. The ITAT examined the validity of the notice u/s 148 for reopening the assessment. It was observed that the AO had already considered the gifts received from HUF during the original assessment, and no new information was presented for reopening. The reasons for reopening were not provided, leading the ITAT to conclude that the notice u/s 148 was invalid and quashed it.

Issue 2: Interpretation of term 'relative' under sec. 56(2)(vi) of the Act:
The crux of the matter was the interpretation of the term 'relative' under sec. 56(2)(vi) of the Act in the context of gifts received from HUF. The AO treated gifts from HUF as taxable under this section, citing HUF's separate entity status. In contrast, the CIT(A) viewed gifts from HUF as gifts from relatives, hence not taxable under sec. 56(2)(vi). The revenue challenged this interpretation, asserting that the term 'relative' as per the Explanation to sec. 56(2)(vi) does not include HUF. However, the ITAT did not delve into the merits of this issue as the notice u/s 148 was deemed invalid and quashed. Consequently, the ITAT dismissed the revenue's appeal and partly allowed the assessee's cross objections.

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