B. Dhanalaxmi, Karimnagar, Karimnagar V. ITO, Ward-4, Karimnagar

ITA 897/HYD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6011 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 18-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: P RAVI SESHAGIRI RAO
• Keywords: Unexplained investment; Gift
• Section: 143(3); 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.897/HYD/2012 ASSESSMENT YEAR 2008-2009 SMT. BIRAVELLI DHANALAXMI, PEDDAPALLI 505 172 KARIMNAGAR DIST., PAN AHWPB9865D VS. THE INCOME TAX OFFICER WARD-4 KARIMNAGAR. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. P. RAVISESHAGIRI RAO FOR REVENUE : MR. B. KURMI NAIDU DATE OF HEARING : 1 8 .02.2016 DATE OF PRONOUNCEMENT : 24 .02.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITIONS MADE BY THE A.O. THE TWO ADDITIONS CHALLENGED BY THE ASS ESSEE ARE (1) RS.1 LAKH UNDER SECTION 56(2)(VI) OF THE I.T. ACT ON ACCOUNT OF RECEIPT BY THE ASSESSEE FROM THE HUF OF WHICH THE ASSESSEE WAS THE MEMBER; AND (2) RS.50,000 WHICH WAS MADE BY THE A.O. WITHOUT PROPERLY INTERPRETING THE ACCOUNTS OF THE ASSESSEE UNDER SECTION 143(3) ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN M/S. MAHADEVI INDUSTRIES. 2 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, DERIVED INCOME FROM SHARES AND INTEREST FROM FIRMS AND OTHER SOURCES. SHE FILED HER RETURN OF IN COME FOR THE A.Y. 2008-09 ON 25.03.2009 ADMITTING TOTAL INCO ME OF RS.1,49,830. DURING THE ASSESSMENT PROCEEDINGS UNDE R SECTION 143(3) OF THE I.T. ACT, THE A.O. NOTICED TH AT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.1 LAKH AS CAS H GIFT FROM MR. BIRAVELLI BHASKAR (HUF). THE A.O. NOTICED THAT AS PER THE PROVISIONS OF SECTION 56(2), IF ANY SUM OR MONEY EXCEEDING RS.50,000 IS RECEIVED WITHOUT CONSIDERATION FROM ANY PERSON, THE AGGREGATE VALUE OF SUCH SUM IS TAXABLE AS INCOME OF THE RECIPIENT. HE OBSERVED THAT THERE ARE SOME EXCEPTIONS PROVIDED TO THIS CLAUSE WHEREIN THE SUM RECEIVED FROM A RELATIVE IS EXEMPTED FROM THE APPLICATION OF THIS SECTION. HE OBSERVED THAT HUF DOES NOT FALL WITHIN THE LIST OF RELATIVES AND THEREFORE, HE DISALLOWED THE CLAIM OF GIFT AND BROUGHT IT TO TAX. FURTHER, HE ALSO NOTICED THAT THE ASSESS EE HAS INTRODUCED FRESH CASH OF RS.50,000 IN M/S. MAHADEVI INDUSTRIES, POOSALA. ON ENQUIRY, THE ASSESSEE STATE D THAT THE SOURCE OF THE INVESTMENT WAS ACCUMULATED SALES AND CURRENT YEARS INCOME. THE A.O. HOWEVER, WAS NOT SA TISFIED WITH THIS EXPLANATION AND HELD THAT THE ASSESSEE DI D NOT SHOW ANY SUBSTANTIAL WITHDRAWALS FROM HER CAPITAL ACCOUNT TO MAKE A FRESH INVESTMENT. HE THEREFORE, DISALLOWED THE SAME AND BROUGHT IT TO TAX. AGGRIEVE D, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ADDITION MADE BY THE A.O. AS FAR AS R S.1 LAKH IS CONCERNED AND FAILED TO DEAL WITH GROUND NO .2. 3 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US RAIS ING GROUNDS OF APPEAL AGAINST BOTH THE ADDITIONS. 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ISSUE WHETHER A HUF IS A RELATIVE UNDER SECTION 56(2) OF THE I.T. ACT HAS BE EN CONSIDERED BY THE SMC BENCH OF THIS TRIBUNAL IN THE CASE OF ASSESSEES HUSBAND MR. BIRAVELLI BHASKAR IN ITA.NO.398/HYD/2015 FOR THE VERY SAME A.Y. 2008-09 AND THAT THE TRIBUNAL HAS HELD THAT HUF CAN BE TREA TED AS A RELATIVE. HE HAS FILED A COPY OF THE ORDER BEF ORE US. 3.1. AS REGARDS THE OTHER ISSUE I.E., INVESTMENT O F RS.50,000 AND THE SOURCES THEREFOR, IS CONCERNED, H E HAS SUBMITTED THAT THOUGH THE ASSESSEE HAD RAISED THE GROUND OF APPEAL AND GIVE AN EXPLANATION ABOUT THE SOURCE OF INVESTMENT, THE LD. CIT(A) HAS NOT DEALT WITH THE SAME. 4. THE LD. D.R. HOWEVER, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE SMC BENCH OF THIS TRIBUNAL IN THE CASE OF ASSESSEES HUSBAND IN ITA.NO.398/HYD/2015 VIDE ORDER DATED 17.06.2015 HAS DEALT WITH THE DEFINITION OF THE TERM RELATIVE UN DER THE PROVISIONS OF SECTION 56(2) OF THE I.T. ACT AND AT PARAS 3 AND 4 OF ITS ORDER, THE TRIBUNAL HAS HELD AS UNDER : 4 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., 3. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUBMITTED THAT THE ISSUE OF HUF BEING TREATE D AS RELATIVE SO AS TO GET EXEMPTION AS PER THE PROVISIONS OF SECTION 50(2)(VI) HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF RAJKOT BENCH IN THE CASE OF VINEETKUMAR RAGHAVJIBHAI BHALODIA VS. ITO (2011) 46 SOT 97 (RAJKOT) WHEREIN SIMILAR ISSUE WAS CONSIDERED. THE COORDINATE BENCH WHILE CONSIDERING WHETHER HUF CAN BE CONSIDERED AS RELATIVE UNDER THE PROVISIONS OF SECTION 56(2) HAS HELD AS UNDER : 11.1. AN HUF IS A PERSON WITHIN THE MEANING OF S. 2(31) OF THE IT ACT AND IS A DISTINCTIVELY ASSESSABLE UNIT UNDER THE ACT. THE IT ACT DOES NOT DEFINE EXPRESSION 'HUF'. IT IS WELL DEFINED AREA UNDER THE HINDU LAW WHICH HAS RECEIVED RECOGNITION THROUGHOUT. THEREFORE, THE EXPRESSION 'HUF' 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 1976 CTR (SC) 140 : (1975) 101 ITR 776 (SC). ACTUALLY AN 'HUF' 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 CL. (VI) OF S. 56(2) OF THE ACT. THE OBSERVATION OF THE CIT(A) THAT HUF IS AS GOOD AS A BOI AND CANNOT BE TERMED AS 'RELATIVE' IS NOT ACCEPTABLE. RATHER, AN HUF IS A GROUP OF RELATIVES. NOW HAVING FOUND THAT AN HUF IS A GROUP OF RELATIVES, THE QUESTION NOW ARISES AS TO WHETHER WOULD ONLY THE GIFT GIVEN BY THE INDIVIDUAL RELATIVE FROM THE HUF BE EXEMPT FROM TAXATION AND WOULD, IF A GIFT COLLECTIVELY GIVEN BY THE GROUP OF RELATIVES FROM THE HUF NOT EXEMPT FROM TAXATION. TO BETTER APPRECIATE AND UNDERSTAND THE SITUATION, IT WOULD BE APPROPRIATE TO ILLUSTRATE AN EXAMPLE, THUSAN EMPLOYEE AMONGST THE STAFF MEMBERS OF AN OFFICE RETIRES AND IN TOKEN OF THEIR AFFECTION AND AFFINITY TOWARDS HIM, THE SECRETARY OF THE STAFF 5 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., CLUB ON BEHALF OF THE MEMBERS OF THE CLUB PRESENTS THE RETIRING EMPLOYEE WITH A GIFT; COULD THAT GIFT PRESENTED BY THE SECRETARY OF THE STAFF CLUB ON BEHALF OF THE STAFF CLUB BE TERMED AS A GIFT FROM THE SECRETARY OF THE STAFF CLUB ALONE AND NOT FROM ALL THE MEMBERS OF THE CLUB, AS SUCH ? IN OUR OPINION ANSWER TO THIS QUOTED EXAMPLE WOULD BE THAT THE GIFT PRESENTED BY THE SECRETARY OF THE CLUB REPRESENTS THE GIFT GIVEN BY HIM ON BEHALF OF THE MEMBERS OF THE STAFF CLUB AND IT IS THE COLLECTIVE GIFT FROM ALL THE MEMBERS OF THE CLUB AND NOT THE SECRETARY IN HIS INDIVIDUAL CAPACITY. AND IF IT IS HELD OTHERWISE, IT WILL LEAD TO AN ABSURDITY OF INTERPRETATION WHICH IS NOT ACCEPTABLE IN INTERPRETATION OF STATUTES AS HAS BEEN HELD BY THE HONBLE APEX COURT IN THE CASE OF K. GOVINDAN & SONS VS. CIT (SUPRA). 11.2. FURTHER, FROM A PLAIN READING OF S. 56(2)(VI) ALONG WITH THE EXPLANATION TO THAT SECTION AND ON UNDERSTANDING THE INTENTION OF THE LEGISLATURE FROM THE SECTION, WE FIND THAT A GIFT RECEIVED FROM 'RELATIVE', IRRESPECTIVE OF WHETHER IT IS FROM AN INDIVIDUAL RELATIVE OR FROM A GROUP OF RELATIVES IS EXEMPT FROM TAX UNDER THE PROVISIONS OF S. 56(2)(VI) OF THE ACT AS A GROUP OF RELATIVES ALSO FALLS WITHIN THE EXPLANATION TO S. 56(2)(VI) OF THE ACT. IT IS NOT EXPRESSLY DEFINED IN THE EXPLANATION THAT THE WORD 'RELATIVE' REPRESENTS A SINGLE PERSON. AND IT IS NOT ALWAYS NECESSARY THAT SINGULAR REMAINS SINGULAR. SOMETIMES A SINGULAR CAN MEAN MORE THAN ONE, AS IN THE CASE BEFORE US. IN THE CASE BEFORE US THE ASSESSEE RECEIVED GIFT FROM HIS HUF. THE WORD 'HUF', THOUGH SOUNDS SINGULAR UNIT IN ITS FORM AND ASSESSED AS SUCH FOR INCOME- TAX PURPOSES, FINALLY AT THE END A 'HUF' IS MADE UP OF 'A GROUP OF RELATIVES'. THUS, IN OUR OPINION, A SINGULAR WORD/WORDS COULD BE READ AS PLURAL ALSO, ACCORDING TO THE CIRCUMSTANCE/SITUATION. TO QUOTE AN EXAMPLE, THE PHRASE 'A LOT'. HERE, THE 6 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., PHRASE 'A LOT' REMAINS AS SUCH, I.E. PLURAL, IN ALL CIRCUMSTANCES AND SITUATIONS, WHERE IN THE CASE OF 'ONE OF THE FRIENDS' OR 'ONE OF THE RELATIVES', THE PHRASE REMAINS SINGULAR ONLY AS THE PHRASE STATES SO THAT ONE AMONGST THE RELATIVES AND AT NO STRETCH OF IMAGINATION IT COULD MEAN AS PLURAL WHEREAS IN THE PHRASE 'A LOT' THE WORDS 'A' AND 'LOT' ARE INSEPARABLE AND IF SPLIT APART BOTH GIVE DISTINCTIVE NUMBERS, I.E. 'A' SINGULAR AND 'LOT' PLURAL AND WHEREAS WHEN READ TOGETHER, IT CAN ONLY READ AS PLURAL IN NUMBER UNLIKE IN THE CASE OF 'ONE OF THE RELATIVES' WHERE 'ONE' IS ALWAYS SINGULAR IN NUMBER WHEREAS 'RELATIVES' IS ALWAYS PLURAL IN NUMBER, BUT WHEN READ TOGETHER IT COULD READ AS SINGULAR IN NUMBER. APPLYING THIS DESCRIPTION WITH THE CASE ON HAND, WE HAVE ALREADY FOUND THAT THOUGH FOR TAXATION PURPOSE, AN HUF IS CONSIDERED AS A SINGLE UNIT, RATHER, AN HUF IS 'A GROUP OF RELATIVES' AS IT IS FORMED BY THE RELATIVES. THEREFORE, IN OUR CONSIDERED VIEW, THE 'RELATIVE' EXPLAINED IN EXPLANATION TO S. 56(2)(VI) OF THE ACT INCLUDES 'RELATIVES' AND AS THE ASSESSEE RECEIVED GIFT FROM HIS 'HUF', WHICH IS 'A GROUP OF RELATIVES', THE GIFT RECEIVED BY THE ASSESSEE FROM THE HUF SHOULD BE INTERPRETED TO MEAN THAT THE GIFT WAS RECEIVED FROM THE 'RELATIVES' THEREFORE THE SAME IS NOT TAXABLE UNDER S. 56(2)(VI) OF THE ACT, WE HOLD ACCORDINGLY. 4. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT HUF CAN BE TREATED AS A RELATIVE UNDER THE PROVISIONS OF SECTION 56( 2) SO AS TO EXCLUDE THE AMOUNT RECEIVED FROM HUF BY THE ASSESSEE-INDIVIDUAL. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND A.O. ON THIS ISSUE AND DIRECT THE A.O. TO TREAT THE AMOUNT OF RS.2,25,000 RECEIVED FROM THE HUF AS AN AMOUNT EXEMPTED UNDER SECTION 56(2). THE ADDITION IS ACCORDINGLY DELETED. 7 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., 6. SINCE THE FACTS OF THE CASE BEFORE US ARE SIMILAR AS IN THE ASSESSEES HUSBANDS CASE FOR THE VERY SAME ASSESSMENT YEAR, WE ARE INCLINED TO FOLLOW THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL ( CITED SUPRA) AND DIRECT THE A.O. TO TREAT THE GIFT FROM B IRAVELLI BHASKER (HUF) AS A GIFT UNDER SECTION 56(2) OF THE I.T. ACT. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS AL LOWED. 7. AS REGARDS GROUND NO.2, WE FIND THAT IN THE STATEMENT OF FACTS AND GROUNDS OF APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HAS EXPLAINED THE SOURCES FOR MAKING INVESTMENT OF RS.50,000 IN M/S. MAHADEVI INDUSTRIES . BUT THE LD. CIT(A) HAS FAILED TO CONSIDER AND ADJUDICAT E THE SAID GROUND OF APPEAL. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE TO THE FILE OF THE LD . CIT(A) FOR RECONSIDERATION OF THE SAME IN THE LIGHT OF THE EXPLANATION AND EVIDENCE FILED BY THE ASSESSEE BEFO RE HIM/HER. ACCORDINGLY, THIS GROUND IS SET ASIDE TO T HE FILE OF CIT(A). 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.02.2016. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 24 TH FEBRUARY, 2016 VBP/- 8 ITA.NO.897/HYD/2012 SMT. BIRAVELLI DHANALXMI, SULTANABAD, KARIMNAGAR DIST., COPY TO : 1. SMT. BIRAVELLI DHANALAXMI, SULTANABAD. C/O. MSV RAMANA MURTHY, CHARTERED ACCOUNTANT, C/O. MR. T. RAVINDAR, INCOME TAX PRACTITIONER, H.NO.1-2-59, PRAGATHINAGAR, PEDDAPALLI 505 172. KARIMNAGAR DISTRICT. 2. THE INCOME TAX OFFICER, WARD - 4, KARIMNAGAR 3. CIT(A) - III, HYDERABAD. 4. CIT - II, HYDERABAD. 5. D.R. ITAT B BENCH, HYDERABAD. 6 . GUARD FILE