2019 (2) TMI 233 - AT - Income Tax

Tribunal confirms gift's genuineness & relative's tax exemption, dismisses revenue's appeals.

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 5,00,00,000 to the assessee's income, confirming the genuineness of the gift, the ... Addition made on account of gift - Gift received by the assessee from his brother-in-law - claim of exemption u/s 56 - Held that:- As donor starting from PAN number, capital gain statement, bank statement and others is annexed to the paper book, which was duly placed before the authorities below. It appears that when Shri Narottam Sekhkaria was not brought to the AO by the assessee no further enquiry was conducted by him, no record against the assessee was also brought. The creditworthiness and/or genuineness of the transaction though doubted by the AO, the same has not been proved by any cogent document in favour of the revenue. AO acted beyond his jurisdiction by raising doubts regarding the relationship of the assessee and the donor ignoring the statutory provision in this regard as already been highlighted by the assessee before him in his written reply dated 04.02.2015. Without rebutting the submission made by the assessee the order of addition was made by the AO. Whether the gift so received by the assessee from his brother-in-law is exempted from tax under section 56 of the Act has been considered on a wrong notion. Instead of relative as provided by the statute “blood relative” has been considered by the Learned AO and as a result whereof addition was made which is absolutely erroneous as rightly pointed out by the Learned CIT(A) as it reflects from the order impugned. Thus, in the absence of any infirmity in the order passed by the Learned CIT(A) we decline to interfere with the same. Hence, the Revenue’s appeal is dismissed. Issues Involved:1. Deletion of addition made by the Assessing Officer (AO) on account of a gift of Rs. 5,00,00,000.2. Verification of the relationship between the donor and the assessee under Section 56(ii) and (vii) of the Income Tax Act.3. Genuineness of the gift transaction.4. Applicability of tax exemption for the gift under Income Tax Act provisions.Issue-Wise Analysis:1. Deletion of Addition by AO:The AO added Rs. 5,00,00,000 to the assessee's income, questioning the genuineness of the gift received. The CIT(A) deleted this addition, noting that the assessee had provided substantial evidence, including the donor's PAN card, capital account statements, bank statements, and assessment orders, to prove the identity and creditworthiness of the donor. The Tribunal upheld the CIT(A)'s decision, stating that the AO had not conducted further inquiries or provided contrary evidence.2. Verification of Relationship:The AO questioned the relationship between the donor (the husband of the assessee's sister) and the assessee, arguing that the donor did not qualify as a 'relative' under Section 56(ii) and (vii) of the Act. The CIT(A) clarified that the donor, being the brother-in-law of the assessee, fell within the definition of 'relative' as per the Income Tax Act. The Tribunal agreed, emphasizing that the term 'relative' in the Act does not require a blood relationship.3. Genuineness of the Gift Transaction:The AO doubted the genuineness of the gift due to the lack of a specific reason for the gift and the unusual nature of the transaction. The CIT(A) found that the assessee had satisfactorily explained the genuineness of the gift, supported by the donor's financial capacity and regular tax assessments. The Tribunal noted that the AO had not provided any adverse material to counter the evidence presented by the assessee.4. Tax Exemption Applicability:The AO argued that the gift was taxable as it did not fall under the exemption provided for gifts from relatives. The CIT(A) and the Tribunal held that the gift from the brother-in-law was exempt under Section 56(2)(vi) of the Act, as the donor qualified as a 'relative.' The Tribunal emphasized that the AO's interpretation of 'relative' as 'blood relative' was incorrect.Conclusion:The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 5,00,00,000, confirming that the gift was genuine, the donor's relationship with the assessee qualified for tax exemption, and the AO's interpretation of the provisions was erroneous. Both revenue's appeals were dismissed.