HUF not relative donor u/s 56(2)(vii) of Income Tax: ITAT:

HUF not relative donor u/s 56(2)(vii) of Income Tax: ITAT A search on the Adhunik Group led to scrutiny of the assessee’s financial affairs for AY 2015-16. Three additions were made: small cash gifts of Rs. 96,000, a gift of Rs. 5,84,000 from the husband’s HUF, and an alleged off-market commodity trading profit of Rs. 2,99,133. The CIT(A) upheld all additions. Before the Tribunal, the assessee argued that the Rs. 96,000 was already offered to tax, the HUF gift was exempt as the HUF represented a pool of relatives, alternatively under Section 10(2), and the commodity trading profit was genuine. The Revenue opposed these submissions, relying on statutory language and the absence of credible evidence. Main Issue: Whether the additions relating to cash gifts of Rs. 96,000, HUF gift of Rs. 5,84,000, and commodity trading profit of Rs. 2,99,133 were sustainable in law based on the evidence and statutory interpretation under Sections 56(2), 10(2) and 68. ITAT Ruled: The Tribunal deleted the addition of Rs. 96,000, noting that the assessee had already offered the amount to tax and no meaningful purpose The Tribunal held that under Section 56(2)(vii), an HUF cannot be treated as a “relative” donor for an individual. It relied on the reasoning in the earlier Gyanchand M. Bardia decision and emphasised that legislative amendments explicitly recognise HUF only as a donee, not a donor. However, the Tribunal accepted that Section 10(2) relief could be available if the assessee established that she was a member of the HUF and that the payment was made out of family income. Since no factual inquiry had been conducted on this aspect, the matter was remanded for reconsideration under Section 10(2). The Tribunal observed that off-market trades are legally permissible but placed a higher evidentiary burden on the assessee. It held that essential details such as trade dates, pricing, depository movement, and payment flow were not examined. The issue was therefore restored to the Assessing Officer for fresh verification, including validation of the PAN mismatch noted earlier. With these directions, the appeal was partly allowed. To Read Full Judgment, Download PDF Given Below