Income Tax Officer, Ward-I (1), Pollachi v. Against The Order Dated 28.5.2013 Made In It.appeal

In the High Court of Judicature at Madras Dated: 26.11.2014 Coram The Honourable Mr.JUSTICE R.SUDHAKARand The Honourable Mr.JUSTICE R.KARUPPIAH Tax Case (Appeal) No.778 of 2014& M.P.Nos.1 and 2 of 2014 M.Veluswamy Income Tax Officer,Ward-I (1), Pollachi. .... Appellant Vs..... Respondent APPEAL under Section 260A of the Income Tax Act against theorder dated 12.03.2014 made in ITA No.1539/Mds.2013 on the file ofthe Income Tax Appellate Tribunal, Chennai Bench 'B'. against the order dated 28.5.2013 made in IT.Appeal No.137/10-11 on the file of the Income Tax (Appeals)II, Coimbatore to theAssessment year (AY) 2008-2009 and against the order dated 21.12.2010 made in PAN/GI.No. on the file of the Income Tax Officer. Ward I(1) Pollachi. For Appellant : Mr.R.Sivaraman For Respondent: Mr.M.SwaminathanStanding counsel for Income Tax J U D G M E N T (Delivered by R.SUDHAKAR,J.) This Tax Case (Appeal) is filed at the instance of theassessee as against the order of the Income Tax Appellate Tribunalraising the following substantial questions of law: "1. Whether on the facts and in the circumstancesof the case, the Appellate Tribunal was right in law inholding that the cash gifts received in cheque in thename of individual from his close relatives andthereafter blended with the account of HUF would attractsection 56 of the Act and not section 64(2) of the Act?https://hcservices.ecourts.gov.in/hcservices/ 2. Whether on the facts and circumstances of thecase, the Appellate Tribunal is right in law inpresuming that the cash gifts were directly received bythe appellant-HUF even though the said cash giftsthrough cheques were received in the individual nameonly and thereafter blended with the HUF account,ignoring the affidavits filed by the donors before theassessing officer itself? 3. Whether on the facts and in the circumstancesof the case, the Appellate Tribunal was right in law inholding that Section 56(2)(vi) clause (vii) is notapplicable to the present assessment year even thoughthe amendment is merely clarificatory in nature? 4. Whether on the facts and in the circumstancesof the case, the Appellate Tribunal is right in law innot even citing the coordinate bench of the Tribunal inthe case of Vineetkumar Raghavijibhai Bhalodia which hadheld that a gift received from relatives is not taxableunder Section 56(2) of the Act after taking into accountthe amendment made to the Act?" 2. The assessment in this case relates to the assessment year2008-09. The appellant/assessee, during the birthday celebration onattaining the age of 60, received gifts from his son, wife, motherand daughter amounting to Rs.13,17,300/-. All the amounts werereceived through cheques in the name of the individual and the samehad been subsequently deposited in the HUF account. The cheques,which were drawn in the name of the individual became blended withthe property of HUF by way of journal entry. 3. The Assessing Officer doubted the genuineness of thetransaction, however, stated that the gifts received by theindividual were duly accounted in HUF account and therefore addedin the amount in the name of the HUF. The Assessing Officerinvoked Explanation to Proviso to Section 56(2)(vi) of the IncomeTax Act and held that the HUF would not come within the definitionof relative. Aggrieved by the said order of the Assessing Officer,the assessee filed an appeal before the Commissioner of Income Tax(Appeals) specifically raising grounds, viz., 2 to 5 and contendingthat the transaction in this case will be covered by Section 64(2)and not Section 56 of the Income Tax Act. The Commissioner ofIncome Tax (Appeals), however, did not consider the plea of theassessee and dismissed the appeal, which forced the appellant toprefer further appeal before the Tribunal. 4. Before the Tribunal, the assessee raised a specific groundstating that Section 64(2) of the Income Tax Act alone will applyto the transaction, as he has received the amount as an individualhttps://hcservices.ecourts.gov.in/hcservices/ and transferred it to the HUF. This argument was not considered bythe Tribunal as well. The Tribunal upheld the order of theAssessing Officer who placed reliance on 56(2)(vi) by reading intothe amendment to Section 56(2) by virtue of clause (vii), whichcame into effect from 01.10.2009. Accordingly, the Tribunaldismissed the appeal. Aggrieved by the same, the assessee isbefore this Court. 5. Heard Mr.R.Sivaraman, learned counsel appearing for theassessee and Mr.M.Swaminathan, learned Standing Counsel appearingfor the Revenue and perused the materials placed before this Court. 6. The primary plea of the appellant/assessee consistentlybefore the Commissioner of Income Tax (Appeals) and before theTribunal that Section 64 (2) of the Income Tax Act alone would getattracted to the facts of the present case and not Section 56(2) ofthe Income Tax Act was not considered by the Tribunal and thereforethe legal plea raised by the assessee has been totally ignored bythe Commissioner of Income Tax (Appeals) as well as by the Tribunalwhich gives rise to the filing of the present appeal. 7. For better clarity, Section 56(2) and Section 64(2) of theIncome Tax Act is set out hereunder:Income from other sources.56. (1) ........(2) In particular, and without prejudice to thegenerality of the provisions of sub-section (10, thefollowing incomes, shall be chargeable to income-taxunder the head "Income from other sources", namely :-(i).....(ia)......(ib)......(ic)......(id)......(ii).....(iii).....(iv)....(v).... (vi) Where any sum of money, the aggregate valueof which exceeds fifty thousand rupees, is receivedwithout consideration, by an individual or a Hinduundivided family, in any previous year from any personor persons on or after the 1st day of April, 2006 butbefore the 1st day of October, 2009, the whole of theaggregate value of such sum:Provided that this clause shall not apply to anysum of money 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 https://hcservices.ecourts.gov.in/hcservices/ (d) in contemplation of death of the payer; or(e) from any local authority as defined in theExplanation to clause (2) of section 10; or (f) from any fund or foundation or university or othereducational institution or hospital or other medicalinstitution or any trust or institution referred to inclause (23C) of Section 10; or (g) from any trust or institution registered undersection 12AA. Explanation - For the purpose of this clause"relative" means _ (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of theindividual;(iv) brother or sister of either of the parents of theindividual;(vi) any lineal ascendant or descendant of theindividual;(vi) any lineal ascendant or descendant of the spouseof the individual;(vii) spouse of the person referred to in clause (iito (vi); (vii) where an individual or a Hindu undivided familyreceives, in any previous year, from any person orpersons on or after the 1st day of October, 2009 - (a)...... (b) any immovable property without consideration, thestamp duty value of which exceeds fifty thousandrupees, the stamp duty value of such property;(emphasis supplied)(clause vii) Inserted by the Finance (No.2) Act, 2009 w.e.f.1.10.2009. Income of individual to include income of spouse,minor child etc.64. (1) In computing the total income of anyindividual, there shall be included all such income asarises directly or indirectly - ........ (vii) where an individual or a Hindu undivided familyreceives, in any previous year, from any person orpersons on or after the 1st day of October, 2009 - (a)...... (b) any immovable property without consideration, thestamp duty value of which exceeds fifty thousandrupees, the stamp duty value of such property;(emphasis supplied)(clause vii) Inserted by the Finance (No.2) Act, 2009 w.e.f.1.10.2009. Income of individual to include income of spouse,minor child etc.64. (1) In computing the total income of anyindividual, there shall be included all such income asarises directly or indirectly - ........ (2) Where, in the case of an individual being amember of a Hindu undivided family, any propertyhaving been the separate property of the individualhas, at any time after the 31st day of December, 1969,been converted by the individual into propertybelonging to the family through the act of impressingsuch separate property with the character of propertybelonging to the family or throwing it into the commonstock of the family or been transferred by the https://hcservices.ecourts.gov.in/hcservices/ individual, directly or indirectly, to the familyotherwise than for adequate consideration (theproperty so converted or transferred being hereinafterreferred to as the converted property)], then,notwithstanding anything contained in any otherprovision of this Act or in any other law for the timebeing in force, for the purpose of computation of thetotal income of the individual under this Act for anyassessment year commencing on or after the 1st day ofApril, 1971 - (a) the individual shall be deemed to havetransferred the converted property, through thefamily, to the members of the family for being held bythem jointly;(b) the income derived from the convertedproperty or any part thereof shall be deemed to ariseto the individual and not to the family; (c)..... "(emphasis supplied) 8. The consistent plea of the appellant before the Tribunal aswell as before the Commissioner of Income Tax (Appeals) is that thetransaction in question would get attracted in terms of Section 64(2) of the Income Tax Act. That argument was not considered atall. On the contrary, the Authorities proceeded on the basis thatthe reliance placed by the Original Authority on Section 56(2)would be correct for the transaction in question. 9. We find that the appellant has invoked Section 64(2) of theAct, which has been totally ignored by the Commissioner of IncomeTax (Appeals) and the Tribunal. This clearly goes to show that theTribunal has not considered the legal plea so raised and thereforeprejudice is caused to the appellant in not considering this legalplea. Further, the issue as to the applicability of Section 64(2)of the Income Tax Act, as contended, should have been considered bythe Tribunal in the manner in which the assessee justifies thetransaction in question. Hence, to that effect we find the order ofthe Tribunal requires to be interfered. 10. Since the issue raised by the appellant requires an in-depth analysis of both the provisions, viz., Section 56(2)(vii) andSection 64(2) of the Income Tax Act, as rightly pointed out by thelearned Standing Counsel appearing for the Revenue, the matterrequires to be considered by the Assessing Officer by way of denovo proceedings. 11. In the light of the above, the order of the Tribunalstands set aside and the matter is remanded back to the AssessingOfficer for de novo consideration of the entire issue. This Taxhttps://hcservices.ecourts.gov.in/hcservices/ Case (Appeal) stands allowed by way of remand. No costs.Consequently, M.P.Nos.1 and 2 of 2014 are closed. Sd/- Asst.Registrar (CS II ) 10. Since the issue raised by the appellant requires an in-depth analysis of both the provisions, viz., Section 56(2)(vii) andSection 64(2) of the Income Tax Act, as rightly pointed out by thelearned Standing Counsel appearing for the Revenue, the matterrequires to be considered by the Assessing Officer by way of denovo proceedings. 11. In the light of the above, the order of the Tribunalstands set aside and the matter is remanded back to the AssessingOfficer for de novo consideration of the entire issue. This Taxhttps://hcservices.ecourts.gov.in/hcservices/ Case (Appeal) stands allowed by way of remand. No costs.Consequently, M.P.Nos.1 and 2 of 2014 are closed. Sd/- Asst.Registrar (CS II ) /true copy/ Sub Asst. RegistrarslTo1. The Income Tax Appellate Tribunal, Chennai Bench 'B'.2. The Commissioner of Income Tax (Appeals)-II, Coimbatore. 3. The Income Tax Officer, Ward - I(1), Pollachi.1 cc to Mr.R. Sivaraman, advocate, Sr. 577381 cc to M/s.M. Swaminathan, Advocate, Sr. 57103T.C.(A) No.778 of 2014GP (CO)kk 15/12