2024 (11) TMI 87 - HC - Income Tax

Reopening of assessment - Addition u/s 56(2)(vii) - receipt of immovable property as gifted to the petitioner who was the brother of the petitioner s father - According to the assessing officer, a nephew was not a relative within a meaning of explanation (e) to proviso to Section 56(2)(vii) of the Act, the said gift would be taxable - Scope of definition of expression relatives under explanation (e) to proviso to Section 56(2)(vii) HELD THAT - It is clear from the plain language of explanation (e) to proviso to Section 56(2)(vii) of the Act that a relative would also include a brother or sister of either of the parents of the individual. In this case, the donor is the brother of the petitioner s father and therefore, is covered under the said clause. The fact that the word nephew has not been mentioned cannot be a reason for proceeding on the basis that uncle or nephew are not relatives within the meaning of explanation (e) to proviso to Section 56(2)(vii) of the Act. The impugned order as well as the notice is set aside.

Summary

Issues:
Challenge to order under Section 148A(d) of the Income Tax Act, 1961 and notice under Section 148 for Assessment Year 2018-19.

Analysis:
The petitioner contested an order dated 31.08.2024 and a notice issued under Section 148A(d) and Section 148 of the Income Tax Act, 1961, regarding an alleged escaped assessment of income for the Assessment Year 2018-19. The issue arose from the receipt of a gift of an immovable property worth Rs. 97,00,000 from the brother of the petitioner's father, Mr. Harish Kumar. The assessing officer contended that as a nephew was not considered a relative under the Act, the gift was taxable. The petitioner argued that the donor, being the brother of the petitioner's father, should be considered a relative, thus exempting the gift from taxation. The assessing officer rejected this argument, citing the definition of 'relative' under explanation (e) to proviso to Section 56(2)(vii) of the Act, which did not explicitly mention 'nephew'.

The assessing officer maintained that as per the Act, a relative includes the brother or sister of either parent of the individual, covering the donor in this case. The absence of the term 'nephew' in the definition was not sufficient to exclude the uncle or nephew from being considered relatives. Consequently, the assessing officer concluded that the gift was taxable in the hands of the donee. The assessing officer also noted that the undisclosed income of Rs. 97,00,000 fell under the provisions of Section 149(1)(b) of the Act, justifying the issuance of a notice under Section 148 for the Assessment Year 2018-19. However, the court disagreed with this interpretation, emphasizing that the donor, being the brother of the petitioner's father, was covered under the definition of 'relative' as per the Act.

Therefore, the court set aside the impugned order and notice, ruling in favor of the petitioner. The judgment highlighted that the plain language of the Act encompassed the donor as a relative, despite the specific mention of 'nephew' in the definition. The decision clarified that the absence of 'nephew' in the definition did not preclude the donor or donee from being considered relatives under the Act, leading to the dismissal of the assessing officer's interpretation and the consequent order and notice.