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The Income Tax Appellate Tribunal (ITAT) has recently held that a gift of Rs 20 lakh received by a taxpayer from his Non-Resident Indian (NRI) brother was not chargeable to the tax as the the assessee was the close relative of the donor.
“As such the gift from a brother is not chargeable to tax in the hands of the assessee being relative. Assessee has proved identity, creditworthiness and genuineness of the gift received as well as relationship with Donor,” ITAT- Mumbai bench of Prashant Maharishi (Accountant Member) observed on August 16.
“The amount of Rs 20,00,000/- received by the assessee clearly shows that the above amount is not the income of the assessee. Despite above information being available with the lower authorities, an addition is made to the total income of the assessee,” the bench added. It directed the Assessing Officer to delete the addition of Rs 20 lakh as it was gift received from his non-resident brother, a long-term resident of the UAE.
The bench passed an order by an assessee challenging an order passed by National Faceless Appeal Centre (NFAC) for Assessment Year 2021-22, wherein his appeal against rectification order passed by Central Procession Centre (CPC-Assessing Officer) was dismissed.
The assessee, involved in trading of plastic granules had filed his Income Tax returns in January, 2022, declaring a total income of Rs 19.88 lakh. However, his income was computed by CPC as Rs 40.29 lakh, which included Rs 39.88 lakh as business income and Rs 40,500 was taxed double as income from other sources.The addition was made citing a gift of Rs 20 lakh from his NRI brother.
He filed an application before the Assessing Officer seeking rectification under Section 154 of the Income Tax Act, which came to be rejected, aggrieved by which he approached NFAC. However, observing that the assessee had not discharged genuineness of the gift, the NFAC raised doubt on creditworthiness of the donor and dismissed his appeal, prompting him to approach ITAT Mumbai bench
The ITAT found that the appellant had already disclosed income from other sources being interest income of Rs 40,500, which was added once again by the CPC-IO, while processing his IT Return. Therefore, the same was required to be deleted from his total income.
The bench then referred to the audit report and noted that the appellant had clearly shown that the gift from his brother was excluded/exempted under Section 56(2)(x) of the Income Tax Act.
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