Minor’s Income Already Clubbed in Mother’s Return Cannot Be Re-opened in Father’s Hands: ITAT Quashes Proceedings [Read Order]

The Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) quashed the income tax reassessment proceedings initiated against a father after finding that the minor son’s income had already been clubbed in the mother’s income tax return. If there is a need for reopening, then it should have been the Mother’s not father’s.

The assessee, i.e., the father of the minor, Mr.  Yogesh Mafatlal Bhansali had originally filed his income tax return declaring a total income of ₹2,71,630, which was accepted after a limited scrutiny assessment under Section 143(3). However, the assessment was later reopened on the grounds that an investment in immovable property had not been disclosed.

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The assessing officer (AO) initiated reassessment proceedings, alleging that the minor son, Varun Yogesh Bhansali, had acquired land jointly with two others and that the differential value between the stamp duty valuation and the purchase price, amounting to ₹44,66,666 (the minor’s one-third share), should be taxed under Section 56(2)(vii)(b)(ii) in the father’s hands.

The assessee, however, argued that under clause (a) of the Explanation to Section 64 of the Income tax Act, 1961, the minor’s income had already been clubbed with the mother’s income, as reflected in her income tax return. He submitted documentary evidence, including the mother’s return, bank statements, and the sale agreement, showing that the purchase was financed through a loan from the child’s uncle. Despite these submissions, the AO rejected the explanation, asserting that the sale agreement listed the father as the natural guardian.

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On appeal, the CIT(A) confirmed the addition, and the assessee submitted an appeal before the ITAT.

The senior counsel for the assessee, argued that there was no default in disclosure on the part of the assessee, and it was not permissible under the law to reopen proceedings after four years against the wrong individual. He also contended, in the alternative, that even if any addition was to be made, it should have been restricted to ₹5,16,333, as per the valuation done by the Departmental Valuation Officer (DVO).

According to the bench of Annapurna Gupta and T.R. Senthilkumar, the reassessment proceedings against the Father of the minor were legally untenable. It held that once the minor’s income was clubbed with the mother’s return, any reopening or reassessment should have been directed at the mother, not the father.

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The Tribunal also criticized the AO for failing to verify the detailed evidence furnished by the assessee and proceeding mechanically with the reassessment. Consequently, the ITAT quashed the reassessment proceedings and deleted the addition made by the AO.

To Read the full text of the Order CLICK HERE

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