Income Tax Officer vs. Ratna Aggarwal [TU-DT-01-ITAT-2026]
Background of the Case
The Respondent, an individual, filed her return of income for Assessment Year 2018-19 declaring total income of Rs.3,40,540. The case was later reopened under Section 147 of the Income Tax Act, 1961 on the ground that the Respondent had received an immovable property valued at Rs.3,03,43,440 through a registered gift deed, which, according to the Appellant, did not fall within the definition of “specified relatives” under Section 56(2) of the Act.
During reassessment proceedings, the Respondent initially offered the value of the property to tax as “income from other sources” but subsequently filed a revised computation contending that the property was received pursuant to a family settlement and was therefore not taxable. The Assessing Officer rejected the claim and made an addition of Rs.3,03,43,440 under Section 56(2)(vii)(b) of the Act.
On appeal, the First Appellate Authority accepted the Respondent’s contention and held the transaction to be a genuine family settlement. Aggrieved by this finding, the Appellant preferred the present appeal before the ITAT.
Arguments by the Appellant (Revenue)
The Appellant challenged the order of the First Appellate Authority by contending that the alleged family settlement was a concocted story created only to bypass the provisions of Section 56(2) of the Act. According to the Appellant, since the donor did not fall within the statutory definition of “relative,” the value of the property was rightly taxable as income from other sources. The Appellant further argued that the registered gift deed clearly evidenced a transfer without consideration and, therefore, squarely attracted the deeming provisions of Section 56(2)(vii)(b) of the Act.
Respondent’s Response (Assessee)
The Respondent submitted that the immovable property was not received as a gratuitous gift but pursuant to a bona fide family settlement. It was contended that the property was transferred by her brother-in-law, Dr. Ravi Aggarwal, son of late Shri A.D. Aggarwal, in fulfillment of the dying wish of his father, who intended that a portion of his property should devolve upon the family of his brother, late Shri Sahdev Prasad Aggarwal, the father-in-law of the Respondent.
The Respondent further argued that the family settlement was entered into to recognize antecedent rights and interests of family members and that the registered gift deed was merely a formal document executed to perfect legal title. It was also submitted that the earlier declaration of the amount as income was made under erroneous professional advice, which was later rectified during the assessment proceedings.
Court Findings and Decision
The Delhi Bench of the ITAT upheld the order of the First Appellate Authority and dismissed the appeal filed by the Appellant. The Tribunal observed that although the Respondent initially offered the value of the property to tax, she had subsequently revised her claim during assessment proceedings, which was duly considered by the First Appellate Authority. The Appellant had not challenged the discretion exercised by the First Appellate Authority in admitting the revised claim.
The Tribunal further noted that the family settlement was duly explained before the Assessing Officer, but no adverse comment was made on its genuineness. The execution of the gift deed was held to be a mere formality to effectuate the family settlement and could not be treated as an independent taxable transfer.
The Tribunal also held that, in substance, the property was received from family members constituting a Hindu Undivided Family, and therefore, even otherwise, the deeming provisions of Section 56(2) were not attracted. Accordingly, it was concluded that no addition could be made in the hands of the Respondent.
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