TaxTMI 
TaxTMI 
2025 (12) TMI 268
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...., the assessee was unsuccessful on the basis of the following findings: (i) For the amount of Rs. 96,000/- the assessee supplied a list of persons (with affidavits) to show that gifts were received from them. However, the Ld. CIT(A) did not accept this explanation as it was, purportedly, new evidence which was submitted without any application under Rule 46A of the I.T. Rules. (ii) Regarding the issue of "gift" received from HUF, the Ld. CIT(A)'s findings are extracted: "After a careful consideration of aforesaid decisions relied on by the appellant, I find that those are distinguishable on facts and cannot be applied to the case in hand. I further find that the instant case is squarely covered by a more recent decision of the Hon'ble ITAT, Ahmedabad Bench-D rendered on 21.02.2018 in favour of the Revenue in the case of Gyanchand M. Bardia vs. ITO, Ward 1(2) (2), Ahmedabad reported in [2018] 93 taxmann.com 144 wherein it is held that the legislature substituted clause (e) to Explanation in Section 56(2)(vii) defining the term of "relative" to be applicable in case of an individual assessee as well as HUF; with retrospective effect from 01.10 2009. The....
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.... that principles of literal interpretation in respect of the relevant context vis-à-vis the legislation intention have to be applied here as there is no ambiguity in definition of a "relative" in respect to an individual donee in the above definition clause. Coupled with this, the legislature itself has accepted an HUF to be a donee in clause (ii) of the "relatives" definition. We apply necessary implication principle to conclude in these facts that the legislative intent is very clear that an HUF is not to be taken as a donor in case of an individual recipient (para 7). The appellant has taken an alternative plea that the amount, so received from the HUF is otherwise, capital receipt not chargeable to tax under section 10(2) of the Act as the appellant is a member of the said HUF. As per section 10(2), amount received out of family income, or in case of impartible estate, amount received out of income of family estate by any member of such HUF is exempt from tax. The question whether a person is or is not a member of a Hindu undivided family is primarily a question of fact, as was held by the Hon'ble Allahabad High Court in the case of Makhan Lal Ram Sarup [192....
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....or counter party brokers, margin of commodity derivative traded, creditworthiness of the payers etc. Not a single piece of credible and reliable evidence whatsoever is placed by the appellant before me to prove genuineness of so called 'off market' transactions and it is a settled principle of law that mere an entry in books or payment through banking channel or having a PAN or filing of ITR as emphasized by the appellant in this case, none is sacrosanct to prove genuineness of transactions in terms of section 68 of the Act. Thus, the theory of 'off market' transactions as advocated by the appellant is simply an afterthought being a cooked up story placed before me. Furnishing of bogus contract notes during assessment is definitely a fraud or an attempt of fraud done knowingly to deprive the revenue and appellant's act and conduct proves for itself. Such fraudulent conduct cannot be substituted by a baseless or evidence less idea of 'off market" transactions. Further, in the submission, the appellant is totally silent about the PAN quoted in the contract notes. The Ld. AO had categorically given the finding that the contract notes did not contain th....
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....garding the addition of Rs. 96,000/- that in any case the assessee had offered to tax the impugned amount as income from other sources and the affidavits were filed to merely strengthen the argument that several small gifts were received from friends and relatives which were offered to tax in any case. It was submitted that to strengthen the case vis-à-vis the Ld. AO's allegation of the impugned amount being non-genuine, the assessee had filed details of donees which was refused to be entertained on the technical ground that an application under Rule 46A was not filed. It was further submitted that there was denial of opportunity to the assessee in case there was any doubt about the bonafides of such receipts. 3.1 Regarding the issue of "gift" from HUF, the Ld. AR assailed the decision in the case of Gyanchand M. Bardia (reported in 93 taxmann.com 144 (Ahmd), AY 2012-13], as this decision has been relied upon by the Ld. CIT(A) to hold that in Explanation to section 56(2)(vii) of the Act "relative" has been clearly defined and HUF is not specifically mentioned thereby as a donor, rather only as a donee. It was argued that in the case of this very same assessee, for AY 2014....
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....n the case if individual under explanation to section 56(2)(vii) of the Act. Before further deliberating on this question, we deem it necessary to first discuss as to what constitute 'HUF (Hindu Undivided Family). The 'HUF has been included within the meaning of word 'person' in section 2(31) of the Income Tax Act, 1961 as a separate taxable entity but 'HUF has not been defined in the Income Tax Act, whereby, it means that the expression 'HUF in the Act is used in the sense in which a 'Hindu Joint Family' or a 'Hindu Undivided Family ('HUF') is understood in the personal laws of Hindus. A Hindu joint or undivided family is not created for any business purposes, rather, it is a normal condition of Hindu society and prevalent throughout India based on the social necessity. Subject to the subsequent amendments in Hindu Succession Act, as per the Hindu Law and Usage, a 'Hindu Joint Family consists of male members descended lineally from a common male ancestor, together with their mothers, wives or widows and unmarried daughters bound together by the fundamental principle of 'sapindaship' or family relationship which is th....
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....apital as well as in the profits of the firm. A member of the firm subject to the terms of the agreement/partnership deed may deposit or withdraw his capital but that is not so in the case of a 'HUF. Neither there is any definite share of any of the members in the estate of the 'HUF' nor any member is entitled to any share in the profits if the 'HUF' is engaged in any business. The income of the 'HUF' goes to the common kitty. The property and the income of the 'HUF' is managed by 'Karta' or Manager of the 'HUF who generally is a senior most male member of the family. The powers of the 'Karta' of management to the properties of the 'HUF' are wide and he is not liable to give day to day accounts of the properties to the members of the 'HUF. Since the property of the 'HUF' does not belong solely to an individual member and the shares of the members are not determined, hence, the 'HUF is made a taxable entity in itself. As per the provisions of section 10(2) of the I. T. Act, any sum received by an individual, as a member of 'HUF', which has been paid out of the income of the family or out of the i....
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....er has a pre- existing right and interest in the property and can demand partition also, however, the other members of the 'HUF have right to be maintain out of the 'HUF' property. On division, the share in the estate / capital of the 'HUF cannot be treated as income of the recipient, rather, the same will be a capital receipt in his hands. However, in the case of a partnership firm, if a member receives an amount which is more than his share in the capital or in the profits of the firm, the amount received in excess of the share can be treated as a gift by the firm or by other partners to that individual which will be exigible to income tax. However, in the case of an 'HUF', since there is not any determined share of any member in the family property, any amount received by a member of a 'HUF' from property of 'HUF cannot be said to be more than his share in the property, rather, the same is given to him in the normal course of management of family affairs as is deemed fit or prudent by manager/karta' of the 'HUF and it cannot be said that such an amount received by a member of 'HUF is the income of the said member. It is received ou....
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.... in case of HUF, members of the HUF find mention in the definition of 'relative' for the purpose of the said section. In view of the abave discussion, the amount received by the assessee from the 'HUF, being its member, is a capital receipt in his hands and is not exigible to income tax" We have also gone through the order passed by the Co-ordinate Bench of Rajkot in the case of Vineet Kumar Raghavji Bhai Bhalodia vs. ITO reported in [2011] 140 TTJ 58 (Rajkot) wherein it has been held as under: "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 vs. CIT 101 ITR 776 (SC). Actually a Hindu Undivided family constitutes all persons lineally descended from a common ancestor and includes their mothers, wives or widows and unmarried daughters. All these persons fall in the definition of relative as provided in Explanation to clause (vi) of Section 56(2) of the Act. The observation of the Ld. CIT(A) that HUF is as good as a body of individuals and cannot be termed as relative is not acceptable 10. Going over the facts of the case as well as ci....
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....ve gone through the documents before us, including the cases relied upon by the Ld. AR. Regarding the so-called gifts amounting to Rs. 96,000/- it is seen that the assessee has herself offered the same to tax as income from other sources. Even if no evidence was to be considered regarding the source of funds in this case, it appears that treating the said amount u/s 68 of the Act does not overtly result in any significant revenue gain since the rate of tax prevailing for this assessment year was 30% u/s 115BBE of the Act. This rate was enhanced to 60% from AY 2017-18 only. While the issue of taxation would at best be a secondary consideration in deciding the merit of the case, it does have a certain persuasive value considering that the impugned amount has already been offered to tax. It is felt that no useful purpose would be served in remanding this matter back to the Ld.AO for verifying the unadmitted evidence. Suffice it to say, the assessee succeeds on this issue, as the said amount is already offered to tax. 5.1 Regarding the gift from HUF, in which the husband of the assessee is the Karta, it is seen that though there is a Coordinate Bench decision in a connected case (su....
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.... (vi) any lineal ascendant or descendant of the spouse of the individual; (vii) spouse of the person referred to in clauses (ii) to (vi);] (vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 [but before the 1st day of October, 2009], the whole of the aggregate value of such sum: Provided that this clause shall not apply to any sum of money received- (a) from any relative; or (b) on the occasion of the marriage of the individual6a; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) from any trust or institution registered under section 12AA. Explanat....
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....refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections : Provided further that this clause shall not apply to any sum of money or any property received- (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer or donor, as the case may be; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or (g) from any trust or institution registered under section 12AA. Explanation.-For the purposes of this clause,- (a) "assessable" shall have the meaning assigned to it in the Explanation 2 to sub-section (2....
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....ia) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47. Explanation.-For the purposes of this clause, "fair market value" of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);] (viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.-For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in acc....
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....ft claim as received from the HUF amounting to Rs. 1,02,00,000/- coming through banking channel. Both the lower authorities are of the view that an HUF does not come under the specified category of a relative in Section 56(2)(vii) as applicable w.e.f. 01.10.2009. The assessee's main reliance is on this tribunal's Rajkot bench decision in Vineetkumar Raghavjibhai Bhalodia (supra) accepting a similar gift claim of individual assessee from HUF. The Revenue has preferred Tax Appeal No. 1326/2011 against the same before the hon'ble jurisdictional high court. The same stood admitted on 23.10.2012 for final adjudication. The fact however remains that much water has flown down the stream since the above co-ordinate bench decision. The assessment year therein is 2005-06. Relevant statutory provision at that point of time was Section 56(2)(v) of the Act. This followed clause (vi) in Section 56(2) increasing the amount of Rs. 50,000/- from earlier limit of Rs. 25,000/- as applicable upto 01.10.2009. Then came clause (vii) w.e.f. 01.10.2009 specifying the same to be applicable both in case of an individual as well as HUF recipients. The legislature substituted clause (e) to Explana....
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.... understanding "relative" within the meaning of Explanation to section 56(2)(vii) of the Act. Clearly "relative" and "HUF" are sought to be used inter-changeably even in the face of the fact that the HUF as a donee was only later inserted through the Finance Act, 2012. Had it been the intention of legislature to include the HUF as a donor, it would have clearly mentioned as such. At this stage, it is also essential to remind ourselves that the definition of "person" as per section 2(31) of the Act, recognizes the "HUF" as a distinct entity from "an individual". Thus, the Gyanchand M. Bardia case of AY 2012-13 (supra) has greater persuasive value for this adjudication than the cases relied upon by the Ld. AR. Accordingly, we support the action of Ld. CIT(A), in principle, on this issue. However, the alternative argument of the Ld. AR that the impugned amount would be exempt u/s 10(2) of the Act, has some value. It is seen that all along the assessee has been asking for exemption u/s 56(2) of the Act only, which, as has been discussed earlier, is not allowable, but a plain reading of section 10(2) of the Act shows that it could come to the rescue of the assessee in case the facts ....