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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आदेश /O R D E R
Per Shri D.S.Sunder Singh, Accountant Member :
This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-2, Visakhapatnam in dated 17.05.2019 for the Assessment Year (A.Y.)2009-10 and the cross objections are filed by the assessee.
Al the grounds are related to the addition made by the Assessing Officer (AO) u/s 56(2)(v) of the Income Tax Act, 1961 (in short ‘Act’).
Brief facts of the case are that the assessee is an individual earning interest income and filed his return of income for the A.Y.2009-10 on 15.10.2009 admitting total income of Rs.4,09,510/-. The assessment was completed u/s 143(3) of the Act by order dated 23.05.2011 on total income of Rs.2,49,910/- apart from agricultural income of Rs.1,59,600/- Subsequently, the Assessing Officer (AO) reopened the assessment u/s 147 by issue of notice u/s 148 for escapement of income in respect of the gifts received by the assessee from HUF. The AO called for explanation as to why the gifts received from HUF should not be brought to tax u/s 56(2)(vi) of the Act. The assessee objected for proposed addition stating that section CO No.136/Viz/2019 A.Y.2009-10 Katepalle Ramachandraiah, Visakhapatnam 56 has no application to the transaction for withdrawals made from HUF. The assessee being member in HUF, argued that the assessee is permitted to withdraw amounts from HUF, the same should neither be treated as gift nor to be brought to tax u/s 56(2)(vi) of the Act. The assessee also relied on the decision of coordinate bench of ITAT Rajkot in the case of Vineet Kumar Rahavjibhai Bhalodia Vs. ITO 140 TTJ 0058(2011). The AO considered the decision and viewed that the decision is not applicable in the case of the assessee since the taxability of the gift received by Karta from HUF is not the issue decided in the case law relied upon by the assessee. The AO found that the Karta of HUF is neither permitted to gift nor alienate the property as the HUF is treated as separate entity for the purpose of assessment and HUF has separate identity as artificial person which is managed and controlled by Karta and coparceners and the exemption is available u/s 56(2) only to individuals and not to HUF. He further observed that HUF is an artificial person, neither the members nor the other members can be relative of HUF. Therefore, held that the gift received by the assessee from HUF is taxable u/s 56(2)(vi) of the Act, accordingly, brought the sum of Rs.10 lakhs as income from other sources.
CO No.136/Viz/2019 A.Y.2009-10 Katepalle Ramachandraiah, Visakhapatnam
Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and challenged the validity of issue of notice u/s 148 as well as the case on merits. The Ld.CIT(A) did not adjudicate the issue of validity of notice u/s 148 and disposed off the ground as general in nature. On merits, the Ld.CIT(A) held that HUF consists of co parceners and the members of HUF are the lineal ascendant or descendents, hence, viewed that the gifts received by the assessee from the HUF needs to be interpreted as the gift from the relatives and thus held that the same is not taxable u/s 56(2)(vi) of the Act. Accordingly, the Ld.CIT(A) deleted the addition made by the AO and allowed the appeal of the assessee.
Against the order of the Ld.CIT(A), the department filed the appeal and raised the following grounds : 1) The order of the Ld.CIT(A) is erroneous both on facts and in law. 2) The Ld.CIT(A) is erred in interpreting the term 'relative' to include HUF when Explanation to sec.56(2)(vi) which defines the term 'relative' did not include HUF. 3) As the definition of 'relative' contained in Explanation to Sec.56(2)(vi) is conclusive definition and cannot be extended to other categories, CIT(A) ought not to have resorted to legal interpretation of the term 'relative'. 4) The appellant craves leave to add or delete or substitute or amend any ground of appeal before and / or at the time of hearing of the appeal. 5) The appellant submits that though the tax effect is below the CO No.136/Viz/2019 A.Y.2009-10 Katepalle Ramachandraiah, Visakhapatnam
monetary limit prescribed by the CBDT for filing Revenue Appeal to the ITAT, the case is covered by one of the exceptions, clause-10(C) of the Board's Circular 3/2018 viz, the issue in question arose consequent to Revenue Audit objection. For these and other grounds that may be urged at the time of hearing of the appeal, it is prayed that the addition made by the Assessing Officer be restored.
The assessee filed cross objections as under :
1. 1. The learned Commissioner of Income Tax (Appeals) ought to have quashed the reopening as not in accordance with law.
2. The learned Commissioner of Income Tax (Appeal) is justified in deleting the addition of Rs.10,00,000/- made by the assessing officer u/s 56(2)(vi) of the Act towards gift received by appellant from his HUF.
3. Any other ground of cross objection that may be raised at the time of hearing. 5.1. During the appeal hearing, the Ld.Counsel of the assessee argued that the first ground in cross objections is related to the validity of reopening the assessment which was not adjudicated by the Ld.CIT(A), therefore, requested to take up the legal ground, i.e. validity of reopening of assessment. The Ld.AR submitted that in the instant case, the assessment was completed u/s 143(3) by an order dated 23.05.2011. During the course of original assessment proceedings, the AO called for the details including the issue with regard to the gift received from HUF which was placed before the AO and the assessment was completed after duly
CO No.136/Viz/2019 A.Y.2009-10 Katepalle Ramachandraiah, Visakhapatnam considering the submissions made by the assessee and the confirmation letter with regard to gift received from HUF. Therefore, argued that the reopening of assessment is invalid.
On the other hand, the Ld.DR supported the order of the Ld.AO.
We have heard both the parties and perused the material placed on record. The issue with regard to validity of reopening of assessment was raised by the assessee before the CIT(A) and the Ld.CIT(A) has not decided the issue with regard to validity of issue of notice u/s 148. Validity of notice u/s 148 goes to the root of assessment, hence, the issue needs to be adjudicated upon. Therefore, firstly, we take up the issue of validity of reopening of assessment and decide the same. In the instant case, the assessment was completed u/s 143(3) vide order dated 23.05.2011. During the course of assessment proceedings, the AO called for the details with regard to gifts received by the assessee. As per paper book page No.5, the assessee was asked to furnish the bank account details, books of accounts etc. As per page No.6 of the paper book, the AO has also called for some more information and as per page No.7 of the paper book, the assessee submitted the confirmation letter from HUF and confirmed the gift to Shri K.Ramachandraiah, individual for a sum of Rs.10 lakhs. Both
CO No.136/Viz/2019 A.Y.2009-10 Katepalle Ramachandraiah, Visakhapatnam Shri K.Ramachandraiah, HUF and Shri K.Ramachandriah, individual are assessed to tax. After duly verifying the information furnished by the assessee, the assessment was completed by an order u/s 143(3) dated 23.05.2011, thus the source of credit was explained by the assessee in the original assessment. Therefore, there is no failure on the part of the assessee and no fresh information was received by the AO for reopening the assessment. The information was already made available in the assessment, hence, reopening the assessment on the same issue which was already considered by the AO and taken a view amounts to difference of opinion and on difference of opinion, reopening of assessment is not permissible. We have called for the reasons recorded for reopening the assessment. After giving couple of opportunities, the Ld.DR submitted that the reasons could not be traced since the assessment pertained to A.Y.2009-10 which was very old. In the absence of production of reasons, we are of the view that no reasons were recorded by the AO for reopening the assessment. Since reopening of assessment is not permissible on difference of opinion and the fact that the department failed to furnish the reasons recorded for reopening the assessment, we hold that the issue of notice/s 148 is bad in law and the same is quashed.
CO No.136/Viz/2019 A.Y.2009-10 Katepalle Ramachandraiah, Visakhapatnam
Since we, have quashed the notice issued u/s 148 we, consider it not necessary to adjudicate the issue on merits and other grounds raised by the revenue and the assessee in cross objection.
In the result, appeal of the revenue is dismissed and the cross objections of the assessee are partly allowed. Order pronounced on 5th June, 2020.