2017 (9) TMI 1597 - AT - Income Tax

Tax Tribunal emphasizes transparency and fairness in income assessment under section 56(2)(vi)

The case involved the assessment of an individual declaring income of Rs. 3.23 lakhs, but assessed at Rs. 73.23 lakhs due to a loan of Rs. 70 lakhs ... Treating loan as gift u/s. 56 (2)(vi) - Held that:- We find that the assessee had claimed to have received a loan of ₹ 70 lakhs from NTK, that the AO had rejected the claim made by her, that he had recorded the statements of assessee and the creditor, that he held that the amount in question was to be taxed as per provisions of section 56(2)(vi) of the Act, that the FAA has passed a very cryptic and non speaking order. We find that at para 5. 3. 10. 1 to 5. 3. 10. 6 he had simply copied the order of the AO. He had not given any reasons as to why he was not convinced by the submissions made during the appellate proceedings. In our opinion being FAA, the CIT(A) should pass a reasoned and speaking order. The size of the order may not be of material importance, but what is important is reasoning for accepting/rejecting the arguments/submissions of the AO/assessee. It is right of AO as well as assessee to get a reasoned and speaking order. Considering the facts and circumstances of the case, we are of the opinion that in the interest of justice matter should be sent back to the file of FAA and he is directed to pass a reasoned and speaking order after considering the submissions of the assessee and case laws relied upon by the assessee. Effective Ground of appeal , raised by the assessee is allowed her favour in part. Issues:1. Treatment of loan as gift u/s. 56(2)(vi) of the Income Tax Act.2. Validity of the order passed by the First Appellate Authority (FAA).Issue 1: Treatment of loan as gift u/s. 56(2)(vi) of the Income Tax Act:The case involved the assessment of an individual who declared a total income of Rs. 3.23 lakhs but was assessed by the Assessing Officer (AO) at Rs. 73.23 lakhs. The primary issue revolved around the treatment of a loan of Rs. 70 lakhs as a gift under section 56(2)(vi) of the Act. The AO raised doubts about the genuineness of the loan, citing repayment terms, the borrower's income, and the relationship between the parties. The AO concluded that the borrower was a benamidar of the property funded by the lender and treated the loan amount as a receipt in the borrower's hands. The First Appellate Authority upheld the AO's decision without providing detailed reasons, prompting the Appellate Tribunal to direct a reasoned and speaking order from the FAA after considering the submissions and case laws presented by the assessee. The Tribunal partially allowed the appeal in favor of the assessee, emphasizing the importance of a reasoned order in such matters.Issue 2: Validity of the order passed by the First Appellate Authority (FAA):The Appellate Tribunal found fault with the order passed by the First Appellate Authority, noting that it lacked detailed reasoning and failed to address the submissions made during the appellate proceedings. The Tribunal stressed the importance of a reasoned and speaking order from the FAA to ensure fairness and clarity in the decision-making process. Consequently, the Tribunal directed the matter to be sent back to the FAA for a fresh decision, emphasizing the need for a thorough consideration of the assessee's submissions and relevant case laws. The Tribunal's decision highlighted the right of both the Assessing Officer and the assessee to receive a well-reasoned order, underscoring the significance of transparency and justification in tax assessment matters.In conclusion, the judgment addressed the contentious issue of treating a loan as a gift under the Income Tax Act, emphasizing the need for a comprehensive and reasoned approach in tax assessments and appellate decisions. The Tribunal's directive for a detailed order from the First Appellate Authority underscored the importance of clarity and fairness in tax dispute resolution, ensuring that all parties involved receive due consideration and justification in the legal process.