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Facts
The appeals concern the dismissal of grounds by the CIT(A) related to speculation loss and additions under Section 68 of the Income Tax Act. The assessee had earned commodity income, but the AO treated it as bogus, as it was not reflected in CIB transactions.
Held
The Tribunal held that commodity income cannot be treated as bogus simply because off-market transactions are not reported to the exchange. It also considered issues related to gifts from HUF and other sources, directing the deletion of additions made by the AO and upheld by the CIT(A).
Key Issues
Whether commodity income from off-market transactions can be treated as bogus and unexplained cash credit. Whether gifts received from HUF and other relatives are taxable under Section 56(2) or are capital receipts.
Sections Cited
132, 143(2), 142(1), 68, 115BBE, 56(2), 250, 56(2)(vii), 10(2), 56(2)(vi), 161, 166
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Income Tax Appellate Tribunal, “D” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: These are the appeals preferred by the assessee against the separate orders of Commissioner of Income Tax (Appeals), -21, Kolkata (hereinafter referred to as the Ld. CIT(A)] for AY 2013-14, 2014-15 & 2015-16, respectively. Since most of the issues are common in all the appeals, hence taken up together for disposal, by taking AY 2015-16 as a lead case.
3 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors.
Brief facts of the case of the assessee are that a search and seizure operation u/s 132 of the Act was conducted on 17.12.2014 and 18.12.2014 at various premises of Adhunik Group. Search warrant was executed in the name of appellant. The case was selected for compulsory scrutiny assessment. Consequently, a notice u/s 143(2) of the Act was issued for AY 2015-16. The assessee filed his return of income on 30.08.2015 showing a total income of Rs. 7,37,330/-. Subsequently, notices u/s 142(1) of the Act was issued and duly served on the appellant. In response to the said notices, the AR of the assessee appeared from time of time and filed various details and documents and explained the return of income. During the course of assessment proceedings, the Ld. AO observed that the appellant had shown receipts of Rs. 7,99,820/- as profit from commodity trading. The Ld. A.O asked the assessee to submit the evidence of profit from commodity trading. In response to the same, the Ld. A.R of the assessee submitted copies of contract notes from M/s Ankit Commodities Pvt. Ltd. showing transaction using the platform of Multi Commodity Exchange of India Ltd. (MCX). The Ld. A.O treated the said income as bogus as there was no reflection in the CIB transaction. The Ld. A.O rejected the amount of Rs. 7,99,820/- and treated as unexplained cash credit u/s 68 of the Act as income from undisclosed sources. The aforesaid amount of Rs. 7,99,820/- is taxed @ 30% u/s 115BBE of the act. Further Ld. A.O observed from the ITS data that the appellant was maintaining credit card with HDFC Bank Ltd. and had made payment of Rs. 3,85,514/-, however, the amount of drawings was Rs. 1,86,605/- only and appellant was in no way related to M/s Adhunik Infrastructures Pvt. Ltd.. Accordingly, the Ld. AO asked the AR of the appellant to explain the same. In response to the said query, the AR stated that the appellant held the credit card for business purpose of M/s Adhunik Infrastructure Pvt. Ltd. In support of his contention the AR submitted the ledger copy of credit card expenses in the books of M/s Adhunik Infrastructure pvt. Ltd. evidencing the recording of said expenditure and the payment thereof by the said company. Moreover, it was stated that the appellant was family member of the director of the said company and expenses was made as incurred in last financial year when the appellant was earning supervisory income. After considering
4 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. the entire explanation the ld. AO was of the view that the amount paid (Rs. 3,85,514/-) as concealed income u/s 56(2) as received from the group company and not recorded in the computation.
Aggrieved by the said order, the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been partly allowed.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. A.R challenges very impugned order in all these appeals on the following grounds:
IT(S.S)A NO. 13/Kol/2025 i) That the order passed u/s 250 is bad in law as well as on the facts of the case. ii) That the Hon’ble CIT(A) erred in law and on facts by confirming the addition of Rs. 4,96,568/- made by the Ld. Assessing officer under Section 56(2) of the Income Tax Act, treating the amount received from M/s Satyam Sureka Educational Trust as a gift taxable under section 56(2)(vii) as income from other sources. iii) That the Hon’ble CIT(A) erred in law and on facts in confirming Rs. 6,31,000/- as unexplained money u/s 68 of the Act despite the said amount having already been considered in the total income of the appellant, and further erred in upholding the application of section 115BBE by the Ld. Assessing officer. iv) That the Hon’ble CIT(A) erred in law as well as on facts of the case by confirming the addition made by the Ld. Assessing officer.
IT(S.S)A No. 14/Kol/2025 i) That the order passed u/s 250 is bad in law as well as on facts of the case.
5 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. ii) The Hon’ble CIT(A) erred in law and on facts by upholding the addition made by the Ld. Assessing officer without providing an adequate opportunity of hearing. iii) The Hon’ble CIT(A) erred in law and on facts by upholding the addition made by the Ld. Assessing Officer of Rs. 42,192/- estimating the Appellant’s drawings for day to day expenses and wrongly treating the same as funded from undisclosed income. iv) The Hon’ble CIT(A) erred in law and on facts by upholding the treatment of a miscellaneous receipt of Rs. 2,75,570/- which had already been considered in the total income, as unexplained cash credit u/s 68 of the Act and further subjecting it to tax u/s 115BBE of the Act, as done by the Ld. AO. v) The Hon’ble CIT(A) erred in law and on facts by upholding the decision of the Ld. AO in rejecting the commodity profit of Rs. 3,98,480/- which was already credited in the books of accounts, and treating the same as unexplained cash credit u/s 68 of the Act thereby subjecting it to tax u/s 115BBE of the Act. vi) That the appellant craves to leave, add, amend or adduce any of the grounds of appeal during the course of appellate proceedings.
IT(S.S)A No. 15/Kol/2025 i) That the order passed u/s 250 is bad in law as well as on facts of the case. ii) That the Hon’ble CIT(A) erred in law and on fact by upholding the addition made by the learned AO without relying on any credible evidence or providing reliable documents to substantiate the addition. iii) That the Hon’ble CIT(A) erred in law and on facts by upholding the addition made by the learned AO treating the gift amount of Rs. 4,21,900/- received from the assessee’s husband’s HUF as income from other sources u/s 56(2) of the Act, without properly appreciating the facts and legal position of the case.
6 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. iv) That the Hon’ble CIT(A) erred in law and on facts in confirming Rs. 2,80,000/- as unexplained cash credit u/s 68 of the Act despite the said amount having already been considered in the total income of the appellant and further erred in upholding the application of section 115BBE by the Ld. AO. v) That the appellant craves to leave, add, amend or adduce any of the grounds of appeal during the course of appellate proceedings. i) That the order passed u/s 250 is bad in law as well as on facts of the case. ii) The Hon’ble CIT(A) erred in law and on facts by upholding the decision of the ld. AO in rejecting the commodity profit of Rs. 7,99,820/- which was already credited in the books of accounts, and treating the same as unexplained cash credit u/s 68 of the Act thereby subjecting it to tax u/s 115BBE of the Act. iii) That the Hon’ble CIT(A) erred in law and facts in confirming the addition made by the Ld. AO by treating the expenditure incurred through a credit card for diesel (Rs. 84,200/- ) air tickets and travel expenses for the WBHDCL Highway Project (Rs. 44,430/-) travelling & Conveyance (41,000/-) on behalf of the group company subsequently reimbursed- as income. The Ld. AO further erred in adding the reimbursement to the total income of the appellant u/s 56(2) of the Act. iv) That the appellant craves to leave, add, amend or adduce any of the grounds of appeal during the course of appellate proceedings.
The Ld. AR in by pressing the aforesaid grounds has submitted that the ground of addition of commodity profit u/s 68 of the Act read with Section 115BBE, addition of amount of receipt from a benefit trust as unexplained cash credit u/s 56 and addition of exempt gift received from HUF as income u/s 56 are totally covered with the judgment passed by the ITAT in the case of Aaksh Sureka and Ors. In IT(S.S)A Nos. 27,28 & 29/Kol/2024. The AR further submits that the assessee did not press ground of 7 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. addition based on estimation on account of drawings and addition u/s 56 of the Act in respect of payment made by the company towards credit cash expenses of the assessee. The Ld. A.R placed an order passed by the Co-ordinate Bench of ITAT, Kolkata in the case of Aakash Sureka & Ors. (supra).
Contrary to that the Ld. D.R supports the impugned order.
Upon hearing the submission of the counsel of the respective parties as well as going over the grounds raised by the assessee following issues are involved in four appeals: a) Addition of commodity profit, which was duly disclosed in the return of income, as unexplained cash credit u/s 68 of the Act read with Section 115BBE of the Act. b) Addition of amount received from a Benefit Trust as unexplained cash credit u/s 56 of the Act. c) Addition of exempt gift received from HUF as income u/s 56 of the Act. d) Estimation based addition on account of drawings. (not pressed) e) Addition of gifts received from non-relatives, which were duly disclosed in the return of income, as income u/s 68 read with Section 115BBE of the Act. f) Addition u/s 56 of the Act in respect of payments made by the company towards the credit card expenses of the appellant. (not pressed) g) The Learned Authorities below have holding that the commodity profit and the non- relative gift constitute income of group entities if that is so, then the same income cannot be held to be that of the Appellant.
It is important to mention here that the AR did not press the ground no. d and f so both the grounds are hereby dismissed as not pressed. Now we shall take ground nos. a to c first as it has been submitted by the Ld. A.R that these grounds are totally covered
8 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. by the order passed by the Co-ordinate Bench in the case of Aakash Sureka (supra). We have gone through the order passed by the Co-ordinate Bench in the above case and the relevant portion of the above said order is as follows:
“7. So far, the other issues are concerned, we find that the Ld. CIT(A) has dismissed the grounds of assessee on speculation loss and addition u/s 68 of the Act by treating that the transaction was bogus, so we take up both the issues together. In the present case, during the FY 2013-14 the assessee had earned commodity income of Rs. 21,96,328/- through its broker namely M/s Sairam Commodities Trade Pvt. Ltd. At the time of assessment proceedings, the AO issued notice u/s 133(6) to exchange but the exchange confirmed that the transaction was not carried out through their platform. Considering the above information, the AO treated the commodity income earned by the assessee as bogus. It is pertinent to mention here that the assessee submitted copies of contract notes from M/s Sairam Commodities Trade Pvt. Ltd. showing transaction using the platform of Indian Commodity Exchange of India Limited (ICEX). The assessee has set off his earlier speculation loss of Rs. 14,03,951/- for AY 2011-12. The AO has himself given a finding in its order that the exchange has informed that such transaction has not been carried out on their platform. Coming to the section 43(5) explanation 2 of the Act that deals: -e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognized association shall not be deemed to be speculative transaction. It is further important to mention here that all the transaction through the broker were duly recorded in the books of the assessee. The broker has also declared in its books of account and offered for taxation. The AO did not find any defects in the evidences submitted by the assessee. It is also important to mention here that AO did not find any material that goes to say that broker of the assessee is involved any suspicious activities. Now going over the cited decision of the assessee, we find that the Hon’ble Gujarat High Court in CIT vs. Prudent Finance Pvt. Ltd. (supra) has held thus: “Business Loss- Allowability Genuineness of loss on off market transactions- Assessee company found to be treated in off market share transactions with its related group of persons as well as with unrelated groups of persons. AO disallowed losses on impugned transactions by simple purchase bills or sales bill ignoring market rates. This done to avoid tax. Moreover, neither any amount was paid nor any shares were transferred in the name of purchasers, only account entries were made. Held: Necessary entries were made in the account books of both sides i.e. purchaser and seller and delivery receipts were also passed demonstrating contemporaneous sale and purchase of the shares. It was not even the case of the Revenue that such off market transactions were not permissible. When off market transactions were permitted in law, and there was no evidence to suggest that artificially they were sold at rates lower than the prevailing market rates and AO could not bring on record any material to show that the transactions were not genuine, the findings of Ld. CIT(A) as well as Tribunal that impugned transactions were genuine, called for no interference.” Further the Hon’ble ITAT, Kolkata in the case of M/s R. K. Commercial Ltd. (supra) has held thus: “9. To conclude: When the transaction which has been concluded within four corners of Law cannot be treated as colorable device unless the revenue brings any material to prove such an allegation. In this case, as will appear from the aforesaid details and documents filed, the price at which the shares were sold had not been not only intimated to the SEBI but even to Calcutta Stock Exchange both by the Acquirer and seller. It is an accepted fact that whenever share in the Stock Exchange are sold as off market transaction, it is sold at the intrinsic value of shares and that is what has happened in this assessee’s case under consideration. When purchase and sale of shares were supported by proper contract notes, deliveries of shares were received, the shares were purchased and sold through recognized broker and the sale considerations were received by account payee cheques, the transactions cannot be treated as bogus.”
9 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors.
8. In view of the discussion made above as well as going over the cited decision, we can be said that commodity income made by the assessee cannot be treated as a bogus as there is no rules, regulations which states that the off market transaction needs to be reported to the exchange. As a result of, the order passed by the AO confirmed by the Ld. CIT(A) on speculation loss as well as addition u/s 68 of the Act cannot be said to be legal. Accordingly, the same is hereby directed to be deleted.
9. The next point with regard to the addition of Rs. 13,02,000/- made u/s 56(2) of the Act is concerned we find that during the year under consideration the assessee received gift of the above amount from M/s Anand Akash Sureka, being the father and a member of Hindu undivided family. The AO disallowed by upholding that the father did not come under the definition of relatives. The submission of the assessee is that family was HUF and each of HUF family members have a separate legal status so the father should be considered as a relative. In this aspect we have gone through the cited decision filed by the assessee passed in ITAT, Ahmedabad Bench in Gyanchand M. Bardia vs. ITO (supra) and the relevant portion of this order is herein below: “11.1 Further, we find that the decision of the ITAT Chandigarh Bench in the case of Pankil Garg (supra) has dealt with the issue in a totally different perspective, from the standpoint of the different aspects of Hindu Undivided Family and has held that as per the Hindu Law every member of HUF has a pre-existing right in the property of the HUF and any amount given to a member therefore from the HUF property tantamounts to only giving him what actually belonged to him and there is no question therefore of the same being any amount given for no consideration or in the nature of gift, which are covered in the scope of Section 56(2)(vii) of the Act. The relevant findings of the ITAT in the said case are as under: " 8.Now coming to the findings of the Ld. PCIT that as per the provisions of section 56 (2)(vii) of the Act, though the members of the 'HUF' are to be taken relatives of the 'HUF' for the purpose of the said section, however, the converse is not true that is to say that 'HUF' is not a relative of the individual Shri Gyanchand M. Bardia vs. ITO member as per meaning of relative given in 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 the essence and distinguishing feature of the institution. It is purely a creation of law and cannot be created by an act of parties except in the case of adoption or a marriage, only when a stranger can become a 'HUF' member. An undivided family is a normal condition of a Hindu society which is ordinarily joint not only in estate but also in food and worship. The cord that knits of the family together is not property but relationship. There is no presumption that a family is joint because it is possessed of joint property. If the persons in the family live together and are joint in food and worship, irrespective of the fact that there is joint property of the family, it constitutes 'HUF'. It is a fluctuating body, its size increases with birth of a member in the family and decreases on death of a member in the family. Females go and come into the 'HUF' on marriage. A 'coparcenary' is a narrower body than a joint family and consists of only persons who take by birth an interest in the joint family property and can enforce a partition whenever they like. Though, members of 'HUF' are entitled to be maintained out of the joint family funds, however, the members of the narrower body within 'HUF' called 'Coparcenary' have birth rights in the joint family property. Hindu Law does not recognize an 'HUF' as an entity separate from the members of the family. In an 'HUF', the members collectively own it. The interest and share of the members in the estate of the family is undivided and undetermined. All the members collectively own and enjoy the property without determination of their shares until the same is partitioned. There is community of interest and unity of possession between all the members and upon the death of any of them, the others take by survivorship and not by succession. An 'HUF' though treated as a separate entity for taxation purposes, it differs in several respects from a 'corporation' and from a 'partnership firm' as the 10 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. later entities can be formed by an act of parties and strangers can be their members, however, 'HUF' is a creation of law and the members having natural relationship and a stranger cannot become its A.Y. 2014-15 Page No 10 Shri Gyanchand M. Bardia vs. ITO member except by adoption or marriage. Apart from that, in a partnership firm, each of the members of the partnership firm has a definite and determined share in capital 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 income of the estate of the family is not exigible to taxation. The said exemption has been given on the pattern of a partnership firm to avoid double taxation of the same amount. In the case of partnership firm, when the partnership firm has been assessed to income tax separately, then, the share of profit received by an individual person is not taxable. If a member does not opt to receive his share out of the profits of the firm and opts that the same be added towards his capital in the firm, even then, when the said partner either on dissolution of the firm or otherwise receives back his capital, the said capital is not taxable as an income of the partner, rather, the same is taken as a capital receipt. However, in the case of 'HUF', or to say in the strict sense in case of 'coparcenary', the individual members receive their share on partition. However, during the subsisting coparcenary or to say broadly 'HUF', no member is entitled to receive any definite share out of the income of the 'HUF'. It is left to the prudence and wisdom of the manager who has to manage the affairs of the 'HUF', he may spend the money or property of the 'HUF' in the case of a need of a member, such as on the marriage of a unmarried female member or in case of certain treatment of any disease of the member or in case of educational needs of any children in the 'HUF'. The amount spent may be more than that the member may have gotten on the partition of the 'HUF'. The Karta of the 'HUF', even can gift of the 'HUF' property for pious purpose and even he can contract a debt for the legal necessity and for family purposes and can bind the other members to the extent of their interest in the family property. In the above scenario, the property of the 'HUF' neither cannot be said to belong to a third person nor can be said to be in 'corporate entity', rather, the same is the property of the members of the family. It is because that the share of each of the individual member in the property or income of the 'HUF' is not determinate, hence, the family, as such, is treated as separate entity A.Y. 2014- 15 Page No 11 Shri Gyanchand M. Bardia vs. ITO for taxation purposes. 'HUF' otherwise is not recognized as a separate juristic person distinct from the members who constitute it. A member of the 'HUF' has a pre-existing right in the family properties. A Coparcener 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 out of the common kitty in which such a member has also a joint interest along with other family members. All the ancestral property belong to the family managed by the head of the family and once income of the family is assessed or subjected to tax as per the provisions of the Income Tax Act, then, the distribution / payment out of the joint family property to any member of the family cannot be said to be income of such a member. The justification of the payment or the quantum of amount paid to any member by the 'Karta' / manager of the 'HUF' is though subject to challenge by other members of the HUF, if found to be not genuine or not for family good, however, a third person cannot question it. Family income flows into a common pool from which resources are drawn to meet needs of all the members which are regulated by the head of the family. In such circumstances, any amount received by a member of the 'HUF', even out of the capital or estate of the 'HUF' cannot be said to be income of the member exigible to taxation. Since such a member himself has a pre-existing right in the property of the 'HUF', hence, it cannot be said to be a gift without consideration by the 'HUF' or by the other members of the 'HUF' to that recipient member. In such circumstances, the provisions of section 11 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. 56(2)(vii) are not attracted in case an individual member receives any sum either during the subsistence of the 'HUF' for his needs or on partition of the 'HUF' in lieu of his share in the joint family property. However, the converse is not true i. e. to say in case an individual member throws his self-acquired property into common pool of 'HUF'. The 'HUF' or other members of the 'HUF' do not have any pre- existing right in the self- acquired property of a member. If such an individual member throws his own/self- earned or self-acquired property in common pool, it will be an income of the 'HUF', however, the same will be exempt from taxation as the A.Y. 2014-15 Page No 12 Shri Gyanchand M. Bardia vs. ITO individual members of an 'HUF' have been included in the meaning of 'relative' as provided in the explanation to section 56(2 )(vii) of the Act. It is because of this salient feature of the HUF that in case of individual, the HUF has not been included in the definition of relative in explanation to section 56(2) (vii) as it was not so required whereas 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 above 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.”
Going over the facts of the case as well as cited decision of the assessee we find force in the argument of the Ld. Counsel of the assessee that the assessee is entitled to claim deduction u/s 56(2) of the Act even the gift received from the father. Accordingly, the order passed by the AO confirmed by the Ld. CIT(A) is set aside and addition made under the same section is hereby directed to be deleted. Accordingly, the appeal of the assessee is hereby partly allowed as one of the issue has not been challenged by the Assessee as discussed above..
Now we shall adjudicate in IT(S.S)A No. 28/Kol/2024 for AY 2014-15. Brief facts of the case of the assessee is that search was taken at various premises of the Adhunik group of the case, income tax return for AY 2015-16 filed in compliance with the notice by the assessee. The AO after hearing the assessee has decided three issues against the assessee which are as under: “1. AO observed that the appellant had shown drawings of Rs. 31,947/- during the year under consideration whereas he had reported drawings of Rs. 1.6 Lakh in AY 2010-11. The AO estimated drawings @ Rs. 5,000/- per month and added Rs. 28,000/-.
2. The appellant had shown commodity derivative profit of Rs. 3,04,711/-. The AO carried out investigation and found that the appellant did not carry out the transactions in commodity derivatives in the ICEX platform and therefore, it was not a genuine profit to be assessed as business income. The AO forwarded the investigation result to the appellant and sought his explanation but the appellant did not comply. The AO added the amount of Rs. 3,04,711/- u/s 68 of the Act as unexplained cash credit. 3.The AO finally observed that the appellant received a sum of Rs. 17,74,878/- from a trust namely Aakash Sureka Educational Trust created by his mother. He considered the same as income of the appellant u/s 56(2) of the Act by observing that the trust is not a relative within the meaning of section 56(2) and it was not registered u/s 12A or 12AA of the Act.”
12 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. 12. Aggrieved by the said order the assessee preferred an appeal before the Ld. CIT(A) wherein the appeal of the assessee has been dismissed. Being aggrieved and dissatisfied the assessee preferred an appeal before us on the following grounds:
1. That the order passed u/s 250 is bad in law as well as on facts of the case.
2. That the Hon’ble CIT(A) erred in law as well as in facts by confirming the action of the Ld. Assessing officer by treating the amount of commodity profit of Rs. 3,04,711/- as unexplained cash credit u/s 68 of the Act.
3. That the Hon’ble CIT(A) erred in law as well as in facts by confirming the action of the Ld. Assessing officer in making an addition of Rs. 17,74,878/- received from M/s Aakash Sureka Educational Trust u/s 56(2) of the Act.
4. That the appellant craves to leave, add or amend any of the grounds during the course of appellate proceedings.
13. The Ld. A.R submitted that the Ld. CIT(A) erred in law as well as in the facts by confirming the action of the AO by treating the amount of commodity profit of Rs. 3,04,711/- as unexplained cash credit u/s 68 of the Act. His further submission is that the Ld. CIT(A) erred in law by making addition of Rs. 17,74,878/- received from M/s Aakash Sureka Educational Trust u/s 56(2) of the Act.
14. The ld. D.R supports the impugned order.
15. As it appears from the grounds of appeal raised by the assessee only two grounds have been taken in the appeal. He did not raise any objection against the amount of Rs. 28,000/- added by the AO being estimating the amount of drawings related to day to day expenses. Hence this ground is hereby taken not pressed.
16. So far the second grounds addition of commodity profit is concerned we have already discussed in adjudicating this issue in IT(S.S)A No. 27/Kol/2024 for AY 2014-15, so need not required to adjudicate afresh. The amount of commodity profit as added by the AO confirmed by the Ld. CIT(A) is directed to be deleted in view of the above discussion.
17. The second issue of taking an amount from Aakash Sureka Educational Trust u/s 56(2) is concerned, we find that following facts from the submission of the assessee which is as under: “a) It is a discretionary trust created for the benefit of appellant beneficiary by appellant’s mother, being a relative within the meaning of Section 56. b) Without admitting utilization of fund for non-educational purpose, it is contended that even in that circumstance, amount so received by the appellant cannot be assessed u/s 56(2). c) Amount transferred to the appellant beneficiary was already taxed in the hands of trustees and so, there cannot be double taxation (CIT vs. Managing Trustee, Nagore Daraha 57 ITR 321) d) As per Section 161 of the Act, Trust can be assessed in its own name and section 166 provides for assessment of income in the hands of beneficiary (Saran Nayak vs. DCIT [2022] 45 taxmann.com 117 (Karnataka) e) Amount received in pursuance of dissolution of the trust cannot be termed to be an amount received by the beneficiary without consideration to be assessed u/s 56(2) [Ashok C Pratap vs. Addl. CIT, (ITAT, Mumbai)]”
13 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors.
Going over the facts of the case, we find that the deed of trust was made on 11.12.2010 by assessee’s mother Sudha Sureka creating a trust namely Aakash Sureka Educational Trust. There were two trustees i.e. Anand Sureka and Jyoti Sureka. We have gone through the decision cited by the assessee passed by the Co-ordinate Bench of Mumbai in the case of ACIT vs. Mrs. Sandhya A Pratap in 2017 (2) TMI 1013 (ITAT-Mum) and the Hon’ble Bench has held thus: “Addition on account of the receipts on dissolution of trusts under section 56(2)(vi) as income from other sources-Held that:- The facts and circumstances are exactly identical in assessee’s husband case. Respectfully following and taking consistent view as taken by co-ordinate Bench in assessee’s husband Shri Ashok C Pratap case [2012] (7) TMI 701 -ITAT Mumbai wherein held the assessee has received this amount on dissolution of trust in the capacity of beneficiaries as already been accepted by the Commissioner (Appeals), therefore, the amount received by the trust is in pursuance of dissolution of trust. The amount received in pursuance of dissolution of trust cannot be termed to be an amount received by the beneficiaries without consideration. The fact that the trust had borne the tax at maximum marginal rate on its income has also not been controverted. Therefore, the addition cannot be upheld on the applicability of clause (vi) of Sub-section (2) of Section 56 as the money received by the assessee is not without consideration, we confirm the order of Ld. CIT(A) deleting the addition- decided against revenue.”
The present facts of the case are concerned trust had duly filed its return of income and he paid taxes. The amount transferred to the beneficiary had already subjected to the taxation. The trust was formed as per the provision of Indian Trust Act. Once trust has paid taxes was earned in earlier years it means beneficiary has paid the said taxes and therefore, the addition made in the present case is liable to be deleted. Keeping in view, the above discussion the addition made by the AO confirmed by the Ld. CIT(A) is hereby deleted.
Now we shall take in IT(S.S)A No. 29/Kol/2024 for AY 2015-16 The issue raised in this appeal is similar to one as decided by us in IT(SS)A No. 27/Kol/2024 for AY 2014-15. Therefore, our decision in IT(SS)A No. 27/Kol/2024 for AY 2014-15 would, mutatis mutandis, apply to this appeal as well. Accordingly, the appeal of the assessee is allowed.”
Going over the facts of the case as well as issue involved in the appeals before us and keeping in view the order passed by the Co-ordinate Bench of the Kolkata in the above said case , we find force in the argument of the Ld. Counsel of the assessee that the addition made on commodity profit, addition of amount received from a benefit trust and addition made by the AO confirmed by the Ld. CIT(A) on account of exempt gift received from HFU are bad in law and accordingly directed to be deleted.
Now the grounds no. e i.e. Addition of gift received from non-relative which were duly disclosed in the return of income u/s 68 of the act read with Section 115BBE of the Act is concerned. we find that it is an undisputed rather an admitted fact that the said cash gift was duly disclosed in the return of income and properly offered to tax under head income from other sources. The amount is clearly reflected in the computation of the total income forming part of the assessee’s self-assessment. So, in 14 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. our view, there is no concealment or suppression of income. It is further pertinent to mention here that the details of gift were placed before the AO as well as Ld. CIT(A) and income already offered to tax in the return cannot be subjective to taxation under deeming provision. The Ld. AR has placed his reliance of the Hon’ble Delhi High Court passed in CIT v. Kailash Jewellery House (ITA No. 613/2010), and Hon’ble Delhi High court has held thus:
It is not in dispute that the sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. It is in these circumstances that the Tribunal observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same.
In the light of the above discussion made above and judicial pronouncements, we are in this view that the addition made u/s 68 in respect of disclosed gift are bad in law accordingly, directed to be deleted.
In the result, all the appeals of the different assessees are partly allowed.
Order is pronounced in the open court on 2nd July, 2025
Sd/- Sd/- (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 2nd July, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- i) Satyam Sureka ii) Sudha Sureka iii) Seema Sureka All are residing at 5A, Rajhans Apartment, 6, Hastings Park Road, Alipore, Kolkata-700027 2. Respondent – DCIT, Central Circle-3(3), Kolkata
15 IT(S.S)A Nos. 13,14 & 15/Kol/2 Assessment Years: 2013-14, 2014-15&2015-16 Satyam Sureka & Ors. 3. Ld. CIT(A)- 21, Kolkata 4. Ld. PCIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)