Tax cannot be levied on Gift Received From Brother-In-Law

DCIT Vs Shri Arvind N. Nopany (ITAT Ahmedabad)

Conclusion :- Once the identity, creditworthiness and genuineness of the transaction has been proved, gift received from the brother-in-law is exempted in terms of provisions of section 56.

Facts :-

Assessee received gift of an amount of INR 16 Crore from his brother-in-law.

AO asked the assessee to provide evidence with regard to the identity, creditworthiness and genuineness of the transaction.

Assessee duly submitted details of donor like PAN number, bank statement, capital gain statement and confirmation of donor which clearly and doubtlessly proved identity, creditworthiness and genuineness of the transaction.

Held :-

Brother-in-law is covered within the meaning of ‘relative’ provided in the explanation to section 56 and thus not taxable under income tax.

FULL TEXT OF THE ITAT JUDGEMENT

These two instant appeals filed by the revenue are against the order dated 28.01.2016 passed by the Commissioner of Income Tax (Appeals) – 12, Ahmedabad [Ld.CIT(A) in short] for Assessment Year (AY) 2008-09 & 2009-10 arising out of the order u/s. 153A r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 27.02.2015 passed by the DCIT Central Circle -2, Baroda with the following grounds in IT(SS)A No.128/Ahd/2016:

[1] “On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of gift of Rs.5,00,00,000/-, by ignoring the facts that relation of donor (sister’s husband) with the assessee is not falling u/s 56(ii) and (vii) of the Act and gift was given without any reason and occasion.

[2] On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO on account of gift of Rs.5,00,00,000/- , by ignoring the facts that in spite of ample opportunity the assessee has never produced donor before AO for further verification.

[3] On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.

[4] It is, therefore, prayed that the order of the CIT (A) may be set aside and that of Assessing Officer may be restored to the above extent.”

The issues involved in these cases are identical and thus the same are heard analogously and are being disposed of by a common order. ITA No.128/Ahd/2016 is taken as the lead case.

2. A search was conducted u/s 132 of the Act on 29.09.2011 in the Nopany Group cases at Baroda including the case of the assessee. Accordingly, u/s 153A(a) of the Act a notice was issued to the assessee on 07.02.2012 directing him to furnish the return of income within 45 days thereof. In compliance to the same, the assessee filed his return of income on 27.07.2012 declaring total income at Rs.10,22,830/- same as declared in the original return of income filed u/s 139(1) of the Act on 19.06.2008. A notice u/s 143(2) of the Act was issued on 30.07.2012 followed by a further notice u/s 142(1) of the Act along with a detailed questionnaire on 14.01.2013. It is relevant to mention that the assessee during the year under consideration shown income from companies in which he was director, house property, business or profession, capital gain and income from other sources. The documents which were received from the residents as well as the factory premises of companies in which assessee was a director during search proceeding revealed following amounts were received by the assessee as gift: