ITO Vs Ratna Aggarwal (ITAT Delhi)
The ITAT Delhi dismissed the Revenue’s appeal and upheld the CIT(A)’s deletion of addition, holding that immovable property received pursuant to a genuine family settlement is not taxable u/s 56(2), even if the transfer is documented through a registered gift deed.
The Tribunal noted that although the assessee had initially, under wrong advice, offered the value of the property as income from other sources in the return filed in response to notice u/s 148, she corrected the claim during reassessment proceedings, asserting that the property was received under a family settlement to honour the dying wish of a family elder. The AO completely ignored this revised stand and mechanically adopted the income as originally declared, without examining the merits of the family arrangement.
The ITAT observed that the family settlement was pleaded before the AO with full background, including antecedent rights and family relations, yet no adverse finding was recorded by the AO. Having failed to dispute the factual or legal validity of the family settlement at the assessment stage, the Revenue could not later challenge it in appeal.
The Tribunal affirmed that:
- a family settlement is not a “transfer” u/s 2(47),
- execution of a gift deed in such cases is merely a mode to perfect legal title, and
- section 56(2)(vii)(b) does not apply where the transaction is between members of a family/HUF pursuant to a bona fide family arrangement, falling within the statutory exceptions.
Once the transaction was accepted as a family settlement, both the charging provision u/s 56(2) and the Revenue’s allegation of a taxable gift collapsed.
Accordingly, the Revenue appeal was dismissed, and the order of the CIT(A) granting relief to the assessee was sustained.
FULL TEXT OF THE ORDER OF ITAT DELHI
