In a recent ruling, the Surat bench of the Income Tax Appellate Tribunal ( ITAT ) set aside the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] and remanded the case for fresh adjudication.
The assessee, Sachi Desai, received a gift from her HUF, of which she was a member. The Assessing Officer (AO), while conducting scrutiny under Section 143(3) read with Section 147, treated this gift as “income from other sources”, arguing that a HUF is not included in the definition of “relative” under the Income Tax Act. The AO relied on the Ahmedabad ITAT’s decision in Gyanchand M. Bardiya v. ITO ( 2022 TAXSCAN (ITAT) 116 ) and added the gift amount to her taxable income.
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Aggrieved by the AO’s decision, the assessee challenged the order before the CIT(A), NFAC. The CIT(A) upheld the AO’s order, and the appeal was dismissed ex parte because she failed to respond to notices sent via mail.
The assessed forwarded an appeal to the ITAT challenging the order of the CIT(A), and the authorised representative of the assessee argued that the gift was wrongly classified as income since she was a member of the HUF. The AR relied on Chandigarh ITAT’s ruling in Pankil Garg v. PCIT (2019), where it had already been clarified that gifts from a HUF to its members should not be taxed as income. Regarding the non-compliance with the notices sent to the assessee, the AR contended that the assessee had been unaware of electronic notice procedures, leading to her non-compliance.
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The department representative argued that the CIT(A) had given multiple opportunities to the assessee and that the assessee had failed to comply. The DR further argued that the AO’s interpretation of the law was consistent with previous tribunal decisions.
After observing both parties’ arguments, the tribunal noted that since the assessee missed electronic notices due to unfamiliarity with the process, a fresh hearing should be granted. The ITAT further pointed out that the Chandigarh Tribunal ruling supporting gifts from HUF should have been examined before making a decision.
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The ITAT Bench, comprising Pawan Singh (Judicial Member) and Bijayananda Pruseth (Accountant Member), sent the matter back to the CIT(A) files for reconsideration, directing the tax authorities to consider relevant case laws. As a result, the assessee’s appeal was allowed.
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