TaxTMI 
TaxTMI 
2018 (2) TMI 100
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....as it is prejudicial to the interest of revenue. 2. That in any case and in any view of the matter, action of Ld. Pr. CIT in assuming jurisdiction u/s 263 and passing the impugned order under this section is bad in law and against the facts and circumstances of the case. 3. That having regard to facts & circumstances of the case, Ld. Pr. CIT has erred in law and on facts in holding that the gift received by the appellant is covered u/s 56(2)(vii) and taxable. 4. That in any case and in any view of the matter, action of Ld. Pr.CIT in bringing to tax the gift as taxable in the hands of appellant is bad in law and against the facts and circumstances of the case. 5. That having regard to facts & circumstances of the case, Ld. Pr. CIT has erred in law and on facts in taking the valuation of shares @ Rs. 2375.95/- u/s 56(2)(vii) r.w.s. 2(22B) instead of fair market value @ Rs. 234.82/- per share under rule 11UA as claimed and that too by recording incorrect facts and findings and without observing the principles of natural justice. 6. That in any case and in any view of the matter, action of Pr.CIT in adoptin....
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....ition of shares with distinctive numbers by the assessee is enclosed (ii) Copy of the house tax receipt is enclosed. (iii) Shares were submitted for D mat vide letter dated 26.11.2012 to M/s RCMC share registry. The copy of the letter is enclosed. 3. In this submission you have simply submitted the mode and manner of acquisition of shares. There is no inquiry made by the AO as regards the applicability of section 56(2)(vii) therefore your case would fall u/s 263(1) explanation 2. Vide letter dated 01.12.2016 you have accepted that you have received 75,000 equity shares from Mrs. Sneh Gupta who is the mother of Karta of HUF. You have also made your further submission that your case is not covered u/s 56(2)(vii). You have attempted to say that the gift is from relative only. You have also referred to the definition of relative made by the Finance Act 2012 w.e.f. 01.10.2009. You have presumed that the amendment is only to enlarge the definition of relative in so as it relates to HUF and not to restrict its definition. You have also referred to notes of clauses of Finance Bill 2012. It has been specifically mentioned that the relative of HUF wou....
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....elative by the Finance Act 2012 with retrospective effect 01.10.2009 and specifically provided that in the case of HUF only member would be the relative. 6. The Hon'ble Supreme Court in the case of Tarulata Shyam vs. CIT, 108ITR 345 has referred to a decision of Brandy Syndicate vs. Inland Revenue Commissioner (1921) 1 Kb 64 wherein it was held as under:- Once it is shown that the case of the assessee comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind to be. " 7. Similarly the definition of relative has to be seen with reference to what has been mentioned in the Act. We have to look only fair to the language used. There is no scope of presumption of enlargement of definition as mentioned by you in your reply. 8. The Hon'ble ITAT, Delhi in the case of DCIT vs. Frontline Capital Services Limited, 96 TTJ 201 has also referred to the decision of the Hon 'ble Supreme Court in the case ofTarulata Shyam(supra). The portion of the para 12 is reproduced below:- "12. It is well-settled position in law that rules of interpretation can be put into service only where the langua....
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....-settled principles or doctrine which applies only to the construction of ambiguous language in old statutes It is not applicable to modern statutes." 9. In the case of Housing and Urban Development Corporation Limited vs. JCIT, 102 TTJ 936 the Hon'ble IT A T Delhi referred to a decision of apex court in the case of Suresh Lohiya vs. State of Maharashtra(l966) 10 SCO 379 wherein it held that once a word has been defined in the statute, the court cannot look elsewhere for its meaning. The Hon 'ble ITAT further referred to the judgement of the Hon'ble Supreme Court in the case of P. Kasilingam vs. PSG College of Technology (1995) Supp 2 SCC 348 and other case laws. The relevant portion of the para 12 is reproduced below:- "12. In our opinion, the word 'means' can only have one meaning, that is, it is an exclusive definition vide P. Kasilingam vs. P.S.G. College of Technology (1995) Supp 2 SCC 348. When we say that a word has a certain meaning then by implication we mean that it has no other meaning vide Punjab Land Development & Reclamation Corpn. Ltd. vs. Presiding Officer, Labour Court (1990) 77 FJR 17 (SC) : (1990) 3 SCC 682. However, when cert....
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....undivided family. According to the assessee above gift was not covered under section 56 (2) (vii) of the act as gift is from mother of the karta of assessee and thus 'relative'. Notice issued by the ld PCIT deliberated that mother is not a member of an HUF and therefore is not covered in the definition of 'relative' as it applies in case of assessee. 7. The assessee submitted its reply in response to the notice on 20/3/2017, which is placed at page No. 178 - 184 of the paper book. It was stated by the assessee that the above gift is from 'relative' and thus exempt receipt under section 56 of the Income Tax Act. With respect to the valuation, it was submitted that valuation is required to be made as per rule 11 UA of the Income Tax Act. 8. After considering the reply of the assessee, The Ld. PCIT passed order under section 263 of the Income Tax Act as under :- "6. I have carefully considered the submissions of the assessee. The reply of the assessee is considered point by point and not found satisfactory rather it is repetitive in nature to the extent that it reiterates the points of interpretation of the term 'relative' and applicability of section 263. These....
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....interest of revenue. A gist of the case laws is given as under:- i. CIT vs. Goetze (INDIA) Limited, 361ITR 505(HC): The Hon'ble Delhi High Court urns referred the following question of law:- " Whether the Income Tax Appellate Tribunal was right in setting aside the order passed by the Commissioner of Income Tax under Section 263 of the Income Tax Act, 1961?" The Hon'ble Delhi High Court discussed in detail the various case laws like CTT vs. Nagesh Knitwears Pvt. Ltd., 345 ITR 135; Malabar Industrial Company Ltd vs. CTT, 243 ITR 83(SC); Nabha Investments Pvt. Ltd. vs. Union of India, 246 TTR 41(Delhi); TTO vs. DG Housing Projects Ltd., 343 TTR 329(Delhi); Rampyari Devi Saraogi vs. CIT, 67 TTR 84(SC); CIT vs. CTT vs. Sunbeam Auto Ltd., 332 ITR 167. In the case of CTT vs. Nagesh Knitwears Pvt. Ltd.(supra) the Hon'ble Delhi High held as under:- "The Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, ....
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....ITA No. 2370/Del/ 2013(ITAT):The (INDIA) Limited(supra) and also the decision of the Hon'ble Delhi High Court in the case of CIT vs. Nagesh Knitwears Pvt. Ltd/supra). iii. Bharti Hexacom Ltd. vs. CTT, ITA No. 2576/Del/2011: The Hon'ble Delhi Tribunal has referred to the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprise vs. ACIT, 99 ITR 375 as under:- "7.5 Furthermore, we find that Hon'ble Jurisdictional High Court in Gee Vee Enterprise vs. Asst. CIT [1975] 99 ITR 375 has held that the Ed. Commissioner of Income Tax can regard the ITO's order as erroneous on the ground that in the circumstances of the case the ITO should have made further enquiries before accepting the statements made by the assessee in his return. We find that this case law is also applicable on the facts of this case Assessing Officer in this regard has not made any enquiry and has accepted the statements made by the assessee in his return." iv. Thomson Press (India) Ltd. vs. CTT, 94 CCH 42(DelHC): In this case also the Hon'ble Delhi High Court has discussed various case laws pronounced on section 263. The observations of the....
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....authority. It is a special provision. The revisional jurisdiction is vested in the Commissioner. An order thereunder can be passed if it is found that the order of assessment is prejudicial to the Revenue. In such a proceeding, he may not only pass an appropriate order in exercise of the said jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf. An order of assessment is subject to exercise of an order of a revisional jurisdiction under section 263 of the Act. The doctrine of merger in such a case will have no application." 10. The sum received by M/S Subodh Gupta HUF from a person other than the relative would be covered u/s 56(2)(vii)(c)(i) as the assessee has not paid any consideration while receiving as gift the 75000 shares of M/s Triveni Polymers Pvt. Ltd. The AO failed to invoke the plain section i.e. 56(2)(vii)(c) read with definition of 'relative' therefore it also becomes a mistake of law. In view of this the AO omitted to add a sum of Rs. 17,81,98,500/- i.e. the fair market value of 75000 shares at the rate of Rs. 2375.95 per share. Hence, in the considered opinion of the u....
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.... Rs. 17612038/- and not Rs. 178198500/- as stated by your honour." 13. Assessee HUF received 75000 equity shares M/s Triveni Polymers Pvt .Ltd without any consideration as gift from non-member via gift deed dated 14/09/2012. Therefore, the section 56(2)(vii)(c)(i) becomes squarely applicable which reads as follows: 56(2). In any particular, and without prejudice to the generality of the provisions of the sub section (1), the following incomes shall be chargeable to income tax under the head income from other sources: (vii) Where an individual or HUF receives, in any previous year, from any person or persons. (c) any property, other than immovable property- (i) without consideration, the aggregate fair market value of which exceeds Rs. 50,000/- , the whole of the aggregate fair market value, (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand Rupees, the aggregate fair market value of such property as exceeds such consideration. 14. The same is chargeable to tax at the aggregate of the fair market value....
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....rning potential in such transection, * at a mutually and voluntarily agreed upon price which is market clearing as the willingness to pay of the buyer matches the price at which seller is willing to part with the underlying property (equity shares here). 18. Vide the share purchase agreement dated 17 December, 2012, the buyer company has purchased the 15,79,815 shares of Triveni polymers. Out of these, 1.55.0 shares have been sold by the assessee HUF for a total sale consideration of Rs. 36,82,76,900/- @ Rs. 2375.82/- per share. 19. Of the total of 1,55,000 shares sold in December 2012 by the assessee HUF, 75.0 shares had been received as gift in the month of September 2012. AR has claimed the fair market value of these shares received as per the valuation made under rule 11UA works out as Rs. 234.82 per share. Thus, fair market value of these shares as Rs. 1,76,12,038/-. 20. It is relevant here to quote a landmark judgement of Hon'ble Allahabad high court in case of Amrit Banaspati co. Ltd., 256 ITR 337. In this case the appeal was filed by the assessee against the decision of ITAT, Delhi which had upheld the wealth tax ....
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.... the value calculated as per rules, is not to be taken. The ratio of the Hon'ble Supreme Court's judgement is applicable as the Hon'ble Supreme Court has upheld the higher value i.e. fair market value. In the case of the assessee also, the fair market value is much higher than the value determined as per rules. It may be mentioned that it is not mandatory, in this case, to determine the value as per rule 11U/11UA because as per section 2(22B) the fair market value is ascertainable. 22. The value suggested by the AR is unacceptable in light of the clear application of section 2(22B) of income tax act. And as per the section the fair market value is to the price which this capital asset would fetch in open market. The case law of Medplus Health Services (p) Ltd. vs. ITO zvard 16(1) Hyderabad (2016) 68 Taxman.com 29 (Hyd. Tri.) is also not applicable in the case at hand as in the appellate proceedings neither has the application of section 2(22B) being made nor has it been deliberated or adjudicated upon. Moreover, the issue is covered by the ratio of the decision of the Hon'ble Supreme Court in the case of Amrit Banaspati (supra) as no rule would be applicabl....
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....ssessee has simply stated that certain shares have been received as gift. No further application of mind was made by the AO as regards the application of section 56(2)(vii). The AO did not look into the bare definition of section 2(22B). The AO did not enquire into the applicability of the rule 11U and 11UA. It is very clear on the face of it that no inquiry was made as regards section 56(2)(vii) r.w.s. 2(22B) by the AO. And thus there is no change of opinion as no opinion has been expressed by the AO, being no inquiry has been made. The case is fully covered by explanation 2 to section 263. 27. In the result, it is held that the assessee HUF is liable to pay taxes on the receipt of gift of shares without any consideration. The AO is directed to modify the order passed by the AO vide order dated 18.03.2016 to the extent that the market value of 75000 shares received from the mother are treated as income u/s 56(2Hviib which the AO failed to bring to tax. The income of the assessee HUF is therefore, enhanced by (75000x Rs. 2375.95) Rs. 17,81,98,500/- above and over the assessed income for the present A.Y. 2013-14. The AO is directed to give effect to this order and raise dem....
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....e interest of Revenue. PB 46 is the list of shareholders as on 23.09.2012 showing that on 14.09.2012, Mrs. Sneh Gupta transferred 75,000 shares of TPPL to the assessee. PB 133-148 is assessee's reply dared 12.10.2015 to the Ld. Assessing Officer giving details and documentary evidences with regard to acquisition of shares by the assessee and also filing the Gift Deed of these shares. PB 134 is a complete break up about year wise acquisition of shares including 75,000 shares received by way of gift from Mrs. Sneh Gupta (Mother). PB 147 & 148 is the Gift Deed showing that Mrs. Sneh Gupta gave shares jointly to following persons: 1. Sh. Subodh Gupta (Karta) 2. Mrs. Sonal Gupta (wife of the Sh. Subodh Gupta) 3. Ms. Stuti Gupta (daughter of Subodh Gupta) 4. Ms. Sachi Gupta (daughter of Subodh Gupta) 5. Mr. Shreyansh Gupta (Son of Subodh Gupta) 2. Not only this, issue about the acquisition of shares of M/s Triveni Polymers P Ltd (TPPL) & taxability of capital gain resulting from the transfer of shares including the shares received from the moth....
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.... acquisition of shares and value of capital gain arising on these shares. This fact was brought to the knowledge of the Ld. Assessing Officer that 75,000 shares of TPPL were received by way of gift from Mrs. Sneh Gupta (mother of Sh. Subodh Gupta). The Ld. Assessing Officer after making detailed examination took a view and accepted the claim of the assessee as to the non taxability of the impugned gift. This view taken by the Ld. Assessing Officer is a legal view carried as per law and fact i.e. definition of the possible view as allowable with the law. Therefore, in view of these facts and circumstances, Ld. CIT had no justification to press into service provisions of Section 263 to contradict the view taken by the Ld. Assessing Officer who in any case is taken to have considered all the facets of an issue i.e. gift in the present case as the gift was explained to Ld. AO and further that it was received from the mother of Mr. Subodh Gupta. Since section 56(2)(vii) contains exception that if gift is received from 'relative', it is not taxable, AO took this view and passed the impugned order. 4. Therefore, the revision order passed by Ld. CIT....
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....essee had placed entire relevant material and Assessing Officer on examination of such material decided and allowed claim of assessee, it cannot be said that order of Assessing Officer is erroneous or prejudicial to interest of revenue merely because in order, elaborate discussion is not made on certain points - Held, yes Infosys Technologies Ltd. vs. JCIT ITA No. 222/Bang/2011 dated 07.05.2012 Order prejudicial to interests of Revenue-Assessing Officer examining and considering issue but not mentioning in assessment order -Order not erroneous. (c) It is a well-known fact that Assessment Order does not contain positive findings on the issue(s) where the Assessing Officer is satisfied. Only adverse observations are given in the assessment order. CIT vs. Ashish Rajpal 320 ITR 674 (Delhi) (CLC Pg. 1-13) Proceedings u/s 263 cannot be initiated for inadequate enquiry, but only for lack of enquiry, which is distinct from inadequate enquiry. CIT vs. Sunbeam Auto Ltd. 332 ITR DIT vs. Jyoti Foundation 357 ITR 388 (Del) (CLC Pg. 37-43) CIT vs. Sunbeam Auto Ltd. 332 ITR 167 (Del) (CLC Pg. ....
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....ely because a different view can be taken is not enough to hold assessment order as erroneous or prejudicial to the interest of the revenue. Reliance is placed on the following judgment: CIT Vs. Sohna Woolen Mills 207 CTR 178 (P&H) (CLC Pg. 106-109) AO taking possible view. Mere because of an audit objection, and merely because a different view can be taken are not enough to hold that the order of the AO is erroneous or prejudicial to the interest of the revenue Ground No. 3 & 4: These grounds deal with the issue of taxation of gift of shares received by the Assessee u/s 56(2)(vii)(c) of the Act. The assessee has received gift from Mrs. Sneh Gupta who happens to be mother of Sh. Subodh Gupta, Karta. According to the Ld. AO, mother (Mrs. Sneh Gupta) does not fall within definition of the term 'relative' for the appellant HUF. In this regard, our respectful submissions are as under: I) The perusal of the Gift Deed enclosed at PB 147 to 148 would show that as per para 2 of the Gift Deed, the shares of TPPL were gifted by Mrs. Sneh Gupta in the following manner: "2. That out of natu....
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....: 1. Vineet Kumar Raghavjibhai Bhalodia vs. ITO 12 ITR(T) 616/ 140 TTJ 58 (CLC Pg. 118-126) In this case, the assessee had received gift from HUF. The revenue took stand that HUF would not come within the definition of the term "Relative" and more so when HUF is not an "Individual". The Hon'ble Rajkot bench analysed the provision in this regard as contained in Hindu Law and under Income Tax law and held that HUF is group of relatives. Therefore, any amount received from father's HUF would be as good as amount received from relatives. Relevant observation as contended in Para 11.1 are reproduced here under for the sake of ready: 11.1 A Hindu Undivided Family is a person within the meaning of section 2(31) of the Income-tax Act and is a distinctively assessable unit under the Act. The Income-tax Act does not define expression 'Hindu Undivided Family". It is well defined area under the Hindu Law which has received recognition throughout. Therefore, the expression "Hindu Undivided Family" must be construed in the sense in which it is understood under the Hindu Law as has been in the case of Surjit Lal Chhabda. v. CIT [1973] 1....
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....p; In this case, the facts were that the benefit of exemption u/s 54C of the IT Act, 1961 which was allowable to individual assessee was claimed by HUF assessee. It was held that family members of Hindu constitute HUF and each of them would be individual, therefore benefit of exemption 54(C) would be available to HUF also. 4. Surjit Lai Chhabda vs. CIT 101 ITR 776 (SC) (CLC Pg. 133-147) In this case it has been held that income tax act does not define expression HUF whereas, it is well defined area under Hindu Law. Therefore, the expression HUF must be construed under the Income Tax law in the sense in which it is understood under the Hindu Law. 5. K. Govindan & Sons vs. CIT 247 ITR 192 (SC) (CLC Pg. 148-155) In this judgment Hon'ble Supreme Court held that an interpretation of statutory provisions which will result into an absurd situation cannot be accepted. 6. DCIT vs. Ateev V. Gala (ITA No. 1906/ Mum/2014) (CLC Pg. 156-166) 7. Harshad Bhai Dahyalal vs. ITO (Ahd) In this case, Hon'ble bench has followed the judgment of Hon'ble Rajkot Bench and the same view has taken....
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.... must be construed in the sense in which it is understood under the Hindu Law, as has been decided in the case of Surjit Lai Chhabra vs. CIT (1975) 101 ITR 776 (SC), wherein it has been held that the expression 'HUF' in the IT. Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the l.T. Act does not indicate that an HUF as an assessable entity must consist of at least two male members. It means actually a Hindu undivided family constitutes all persons lineally ascendant or descendant from a common ancestor and includes their mothers, wives or widows and unmarried daughters. All these persons fall under the definition of 'relative' as provided in Explanation to proviso to clause (v) of sec. 56(2) of the Act. Even otherwise, to appreciate the controversy in this issue, it is apposite to reproduce the essential part of sec. 5(l)(viii) of erstwhile Gift Tax Act (now repealed), which is relevant for this purpose. " Finally, after analyzing the concept of HUF under Hindu Succession Act and Hindu L....
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....vidual & HUF are donees. Interpretation which is quite possible interpretation is that 'relative' has to be seen qua Individual & HUF when such Individual & HUF are donor. If such interpretation is taken, donor Mother in the instant case being Individual would encompass son, grandson, granddaughter etc within the meaning of 'Relative' and that being so gift from the mother to son and other members of son's family were 'relative' in relation to the mother & thus there is no question of gift being taxable. (b) Section 56(2)(vii) is anti abuse provision as reiterated by CBDT in its circular No. 5/2010 dated 3.6.2010 para 24.2 and CBDT Circular no. 1/2011 dated 6.4.2011 in para 13.2. Therefore, interpretation of any anti abuse provision has to be made in the context of its objective. CIT vs. South Arcot District Cooperative Marketing Society Ltd. 176 ITR 117 (SC) The Supreme Court in the case of CIT vs. South Arcot District Co-operative Marketing Society Ltd. (supra) dealt with the concept of liberal construction for granting deduction under s. 80P of the Act. It held that a liberal interpretation should be given to the language ....
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....reted liberally Object of section 56(2)(vii) was to tax the money received by a stranger from other stranger received as subterfuge of gift. However, exceptions were carved out to save the genuine situations having regard to social considerations and practices. One such exception was that gift between close relatives would not be hit by the taxability of section 56(2)(vii). Object of exception given in section 56(2)(vii) is to be seen and that is that gifts received from close relatives are probable human conduct and are not source of any money hindering in contrast to the gift between the unrelated parties and thus gift to relative should not be hit by taxability under section 56(2)(vii). Seen in this backdrop, gift from mother to son and son's family should not be hit by section 56(2)(vii) and should be saved by the exception of 'relative'. (c) Exception is benevolence which needs to be interpreted liberally. Mangalaya Trading & investment Ltd. ITA 4696 of 1997 (Mum) dated 9.2.1999 Fashion Power vs. DCIT 2 SOT 817 (Mum) (d) In any case, two views are possible and in such a case, view favourable to the....
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....Del) Thus, without prejudice to our submission made in Ground No. 1 to 4 above, the order of Ld. CIT is prima facie illegal on the face of it and deserves to be modified to this extent accordingly." 11. Ld. departmental representative vehemently submitted that no requisite enquiries were made by the ld AO and therefore by virtue of explanation 2 inserted with effect from 1/6/2105 u/s 263 of the Act, the order is erroneous and prejudicial to the interest of revenue. On the issue of merit, he submitted that assessee is an HUF and mother of the karta of HUF has given gift to the assessee HUF. She is not a member of the assessee HUF. Hence, the gift is chargeable to tax in the hands of HUF. On valuation, he supported the order of the Ld PCIT. He submitted as under:- "In this regard, it is humbly submitted that Explanation 2 has been inserted in Section 263 of I.T.Act by Finance Act 2015 w.e.f 01.06.2015 which is reproduced below: Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if,....
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....undivided family, who filed its return of income on 31/07/2013 declaring income of Rs. 579720/-. Assessment under section 143 (3) of the income tax act was passed on the returned income on 18/3/2016. Subsequently, the Ld. PCIT passed an order under section 263 on 01/05/2017. He held that the order passed by the Ld. Assessing Officer dated 18/3/2016 passed under section 143 (3) of the Income Tax Act was erroneous and prejudicial to the interest of the revenue. For holding so he stated that ld AO has not examined the complete details and taxation, arising out of receipt of Gift of 75,000 equity shares of Triveni polymers private limited from Mrs. Sneh Gupta, who is mother of the Karta of HUF, not a member of the HUF of Mr. Subodh Gupta. Subsequently those shares were sold to one German-based company by the assessee. Therefore, notice under section 263 of the income tax act was issued on 9/2/2017, which is placed at page No. 175 - 177 of the paper book. The assessee replied to that notice which is placed at page No. 178 - 184 of the paper book stating that there is no error in the order of the Ld. assessing officer and the complete details was disclosed before the Ld. Assessing office....
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....details before the Ld. assessing officer during assessment proceedings. Ld AO has applied his mind on the issue. Therefore, the order passed by the Ld. assessing officer is neither erroneous nor not prejudicial to the interest of the revenue as capital gain resulting from the transfer of shares including the shares received from the mother was extensively examined. According to the Ld. authorized representative there is a presumption that assessment order has been passed after the complete application of the mind. Thus, the revision under section 263 of such assessment order would be bad in law. He further stated that merely because the order passed by the Ld. assessing officer is brief; it would not be concluded by this fact alone that the assessment order was passed without making requisite enquiries. He further stated that as the Ld. assessing officer has not made any positive finding on this issue and only adverse observations are given in the assessment order, which is missing in this assessment order. Therefore, the Ld. assessing officer has accepted the claim of the assessee that the gift received from the mother of the karta of assessee is not chargeable to tax in the hands....
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....tted that the action under section 263 of the Income Tax Act of the PCIT is not sustainable. 14. The Ld. departmental representative relied upon the amendment to the section 263 of The Income Tax Act. He submitted that w.e.f. 1/6/2015 explanation (2) has been inserted, which provides that an order passed by the Ld. assessing officer shall be erroneous insofar as it is prejudicial to the interest of the revenue , if the impugned order is passed without making enquiries, verification which should have been made. He submitted that the order has been passed without making any enquiries about the taxability of the gift received by the assessee HUF. 15. We have carefully considered the contention of the Ld. authorized representative as well as the Ld. departmental representative and also perused the explanation (2) added to the provisions of section 263 of the Income Tax Act by The Finance Act 2015 w.e.f. 01/06/2015. That explanation provides that any order passed without making enquiries verification, which should have been made, makes the order erroneous and prejudicial to the interest of the revenue. From that angle, it needs to be examined if the ld AO has made certain inquirie....
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....the mother of the Karta of assessee. Furthermore, merely notice has been issued under section 154 of the Income Tax Act on the same issue but later on, no rectification order has been passed by the Ld. assessing officer does not help the case of the assessee. The provisions of section 154 operate when there is an apparent mistake from the records. The Ld. assessing officer might have thought that the provisions of section 154 of the income tax act are not the appropriate tool available to him. As apparently, the error required to be redressed by the ld assessing officer requires detailed examination of the chargeability of income taxable in the hands of the assessee as well as quantification thereof, hence not apparent from record. Furthermore, it is clear that section 154 and section 263 operate in different circumstances. Therefore, we concur with the views of the ld PCIT that order passed by the Ld. assessing officer is erroneous as well as prejudicial to the assessee interest of the revenue as it is passed without making enquiries verification, which should have been made by the Ld. assessing officer. As the above explanation is a deeming fiction which provides that such orders....
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....ti Gupta, Sachi Gupta and Shreyans Gupta jointly forming Subodh Gupta HUF, she has given 75,000 equity shares of the Triveni polymers private limited. Therefore It is apparent from the declaration that assessee HUF consist of Sri Subodh Gupta, his wife and 3 children only. Therefore, as per the declaration furnished it is crystal even assessee as well as the donor do not consider that Mrs. Sneh Gupta is the member of assessee HUF. The contention of the assessee that the above gift deed would show that the shares have been gifted to the above said persons collectively and each of them would clearly fall within the definition of term 'relative' as per the provisions of section 56 (2) (vii), therefore the gift is not chargeable to tax. It was further stated that clause defining 'relatives' with respect to HUF was only for the reason to enable the HUF assessees to claim exemption of the gift as would be clear from the 'notes on clauses' to the amendment made by The Finance Bill, 2012, wherein it has been mentioned that the definition of 'relative' shall also include any sum or property received by a Hindu undivided family from its members apart from the persons referred to in explanati....
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....such HUF. We are afraid that is not the language as well as the intention of the legislature. Even otherwise, When the language of the law is clear, support of the 'notes on clauses' to the amendment does not help the assessee. Further, the contention of the Ld. authorized representative that where all the members of the HUF are individuals related to the donor , then they very much also fall within the definition of the term 'relative' on collective basis also deserves to be rejected reason being that here the assessee is an HUF and not to those individual members of HUF. HUF is a distinct assessable entity and section 2 (31) defines the 'person' where Hindu undivided family is a separate taxable entity from its members who are 'individual'. Further, the ld AR has relied up on the plethora of judicial precedents. We deal with each of them turn by turn. The decisions relied upon by the Ld. authorized representative on Vinitkumar Raghavji Bhalodia V ITO 140 TTJ 58, Harshadbhai Dayalal V ITO and in ITA number 1906/MUM/2014 in DCIT versus Ateev V Gala. We have perused them and find that they do not help the case of the assessee because in those particular cases, the gift was given by ....
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....ion Hindu undivided family must be construed under the income tax law, in the sense in which it is understood under the Hindu law. Here it is not the issue that what constitutes Hindu undivided family, but whether the property received from a non-member is exempt when the law itself provides that sum or property received from member of an HUF only is not chargeable to tax.in that cae Hon Supreme court was concerned under the Income-tax Act with the question whether the assesse's wife and unmarried daughter can with him be members of a Hindu undivided family and not of a coparcenary. The assessee further relied on the decision of the Hon'ble Supreme Court in 247 ITR 192 wherein it has been held that an interpretation of statutory provisions, which will result into an absurd situation, cannot be accepted. Before us, The Ld. authorized representative could not show that exclusion provided in respect of an 'individual' separately and in respect of a 'Hindu undivided family' results into any absurdity. We also do not see any such absurdity in those provisions. The next argument of the Ld. authorized representative was that Mrs. Sneh Gupta (donor) being mother of Sh. Subodh Gupta is ....