Sri H.V. Suresh, Bangalore V. ITO, Bangalore

ITA 1114/BANG/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8774 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 23-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P DINESH
• Keywords: Capital asset; Period of limitation
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS.1114, 1115 & 1117/BANG/2009 ASSESSMENT YEAR : 2000-01 1) SHRI H.V. SURESH, BLOCK NO.5C, SEVANG NANDI GARDEN, ALAHALLI VILLAGE, UTTARAHALLI HOBLI, BANGALORE 560 078. 2) SMT. H.V. SUMAN, W/O. SRI M.S.R. MANJUNATH, FLAT NO.B-102, TEMPLE TREE APARTMENTS, JARAGANAHALLI, KANAKAPURA ROAD, 6 TH PHASE, J.P. NAGAR, BANGALORE 560 078. 3) SHRI H.V. MANJUNATH, NO.492, IST FLOOR, 4 TH MAIN, 7 TH CROSS, 3 RD PHASE, J.P. NAGAR, BANGALORE 560 078. : APPELLANTS VS. THE INCOME TAX OFFICER, WARD 4(3), BANGALORE. : RESPONDENT APPELLANTS BY : SHRI P. DINESH, ADVOCATE RESPONDENT BY : SHRI MANOJ KUMAR, ADDL.CIT(DR) ITA NOS.1114, 1115 & 1117 /B/09 PAGE 2 OF 9 O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE THREE APPEALS FILED BY THE ASSESSEES, SHR I H.V. SURESH, SHRI H.V. MANJUNATH AND SMT. H.V. SUMAN ARE DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) IN ITA NO.373,374,372/W-4 (3)/CIT(A)-II/07-08 DATED 9.10.2009 RESPECTIVELY FOR THE A.Y. 2000-01. 2. THE ISSUES ARISING IN THESE THREE APPEALS ARE SIMILAR AND, THEREFORE THEY ARE DISPOSED OF BY A COMMON ORDER FO R THE SAKE OF CONVENIENCE. 3. IN ALL THESE APPEALS, THE APPELLANTS HAVE RAIS ED SIX IDENTICAL GROUNDS WHEREIN GROUND NOS.1 & 6 ARE GENERAL IN NAT URE AND, THEREFORE, NOT CALLED FOR ADJUDICATION. IN GROUND NOS. 2 & 3, THE ASSESSEES ARE AGGRIEVED ON THE ISSUE OF REOPENING OF THE ASSESSMENTS AFTER THE PERIOD OF LIMITATION AND NON-COMPLIANCE OF THE CONDITIONS SET OUT IN SEC TION 151 OF THE ACT. IN GROUND NO.4, THE ASSESSEES ARE AGGRIEVED FOR BEING BROUGHT TO TAX UNDER THE HEAD CAPITAL GAINS WHICH AROSE ON ACCOUNT OF PARTITION AMONG THE MEMBERS OF THE FAMILY. IN GROUND NO.5, VARIOUS DEC ISIONS ARE CITED BY THE APPELLANTS IN SUPPORT OF THEIR CASE. 4. ALL THE THREE APPELLANTS ARE THE CHILDREN OF S MT. H.V. RAJALAKSHMI. THE APPELLANTS HAVE INHERITED JOINTLY A PROPERTY LEFT BEHIND BY THEIR FATHER WHO EXPIRED INTESTATE. SUBSEQUENTLY, T HE ASSESSEES RELINQUISHED/TRANSFERRED HIS/HER RIGHT IN FAVOUR OF THEIR MOTHER, SMT. H.V. RAJALAKSHMI, FOR A CONSIDERATION OF RS.3 LAKHS EACH . THE SAID SITE ITA NOS.1114, 1115 & 1117 /B/09 PAGE 3 OF 9 MEASURING 2800 SQ.FT. WAS ALLOTTED BY BDA TO THE AS SESSEES FATHER IN THE YEAR 1976, WHICH WAS SITUATED IN J.P. NAGAR IIND PH ASE, BANGALORE. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SMT. H.V. RAJALAKSHMI FOR THE A.Y. 2004-05, THESE F ACTS CAME TO LIGHT BEFORE THE REVENUE. THE REVENUE VIEWED THIS RELINQU ISHMENT OF RIGHT BY THE APPELLANTS AS TRANSFER AS PER SECTION 2(47), TH EREBY ATTRACTING SECTION 45 OF THE ACT AND CAME TO A CONCLUSION THAT INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS HAD ESCAPED ASSESSMENT. AS A RESULT, THE REVENUE REOPENED THE CASES OF THE ASSESSEES BY ISSUANCE OF NOTICE U/S. 148 OF THE ACT DATED 22.3.2007. IN RESPONSE TO THE NOTICES, THE ASSESSEES FILED THEIR RETURNS OF INCOME RESPECTIVELY DECLARING TAX PAYABL E UNDER CAPITAL GAINS TO BE NIL. SUBSEQUENTLY THE ASSESSEES THROUGH THEIR REPRESENTATIVE TAX CONSULTANT APPROACHED THE ADDL. COMMISSIONER OF INC OME-TAX, RANGE-4, U/S. 144A OF THE ACT, HOWEVER, THE LD. ADDL. COMMIS SIONER DISPOSED OF THE ISSUE BY HOLDING THAT THE ACTION INITIATED BY T HE ASSESSING OFFICER IS JUSTIFIED WITH A DIRECTION TO COMPLETE THE ASSESSME NT PROCEEDINGS AS PER LAW VIDE HIS ORDER DATED 19.12.2007. 6. THE LD. ASSESSING OFFICER AFTER ANALYZING THE ISSUES, CAME TO A CONCLUSION THAT RELINQUISHMENT OF RIGHT BY THE AS SESSEES FOR A CONSIDERATION OF RS.3 LAKHS EACH IN FAVOUR OF THEIR MOTHER AMOUNTS TO TRANSFER AS PER SECTION 2(47) OF THE ACT ATTRACTING CAPITAL GAINS TAX. THEREAFTER, THE LD. AO PROCEEDED TO COMPUTE THE CAP ITAL GAINS TAX AT RS.2,14,109/- FOR EACH OF THE ASSESSEES, AFTER ARRI VING AT THE INDEXED COST ITA NOS.1114, 1115 & 1117 /B/09 PAGE 4 OF 9 OF THE ASSET TO BE RS.3,43,565, AND ALLOCATING 1/4 TH SHARE AS COST OF THE ASSET TO EACH OF THE ASSESSEE. 7. AGGRIEVED BY THE ORDER OF THE LD. AO, ALL THE TH REE ASSESSEES APPEALED BEFORE THE LD. CIT(APPEALS). THE LD. CIT( APPEALS) DISMISSED THE GROUND TAKEN BY THE ASSESSEES U/S. 147 OF THE ACT A FTER ELABORATE DELIBERATION BY HOLDING THAT FROM A READING OF THE FOREGOING SECTION, IT IS SEEN THAT NOTICE U/S 148 CAN BE ISSUED WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR WITHIN SIX YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR. IN THE PRESENT CASE, THE ASSESSME NT YEAR UNDER CONSIDERATION IS 2000-01 AND AS SUCH THE PERIOD OF SIX YEARS WOULD EXPIRE ON 31/3/2007 BUT THE NOTICE U/S. 148 WAS ISSUED ON 22/3/2007 I.E. WELL BEFORE THE EXPIRY OF 6 YEARS FROM THE END OF THE AS SESSMENT YEAR 2000-01. THUS, THE NOTICE U/S. 148 WAS ISSUED WITHIN THE TIM E LIMIT AS PER THE PROVISIONS OF SECTION 149 OF THE ACT; HENCE, THERE IS NO MERIT IN THE APPELLANTS SUBMISSIONS AND THE SAME IS REJECTED. THE LD. CIT(A) ALSO HELD AGAINST THE ASSESSEES WITH RESPECT TO THE GROU ND TAKEN U/S. 151(2) OF THE ACT FOR THE REASON THAT, THE MATERIAL FACTS AVA ILABLE ON RECORD REVEALED THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2 000-01 WAS FILED ON 27/7/2000, DECLARING THE TOTAL INCOME AT RS.46,820/ -, SUBSEQUENTLY, THE RETURN OF INCOME WAS PROCESSED U/S. 143(1) OF THE A CT. 8. THE LD. CIT(APPEALS) ALSO ARRIVED AT A CONCLUS ION THAT THE RELINQUISHMENT OF RIGHT BY THE ASSESSEES IN FAVOUR OF THEIR MOTHER FOR A CONSIDERATION OF RS.3 LAKHS EACH IS TAXABLE UNDER T HE HEAD CAPITAL GAINS ITA NOS.1114, 1115 & 1117 /B/09 PAGE 5 OF 9 BY INVOKING SECTION 2(47) AND SECTION 45 OF THE ACT . THE LD. CIT(APPEALS) PLACED RELIANCE ON THE FOLLOWING CASE LAWS: (I) VANIA SILK MILLS P. LTD. V. CIT (1991) 191 ITR 647 (SC) (II) SMT. VIMLA LAL (1985) 143 ITR 16 (ALL) (III) CIT V. PATTABHIRAMAN (1987) 104 ITR 786 (MAD) (IV) DILIPCHINUBHA SHAH V. CIT (2002) 253 ITR 680 9. THE LD. AR SUBMITTED BEFORE US WITH RESPECT TO GROUND NOS.2 & 3 ON THE ISSUE OF REOPENING AFTER THE PERIOD OF L IMITATION AS FOLLOWS. (1) THE REVENUE ERRED BY REOPENING THE CASE U/S. 14 8/147 SINCE THE TIME LIMIT PRESCRIBED U/S. 149 OF THE ACT EXPIRES O N 31.3.2006 BEING THE END OF SIX YEARS PERIOD PRESCRIBED UNDER THE ACT. (2) THE REVENUE HAD NOT COMPLIED WITH THE PROVISION S OF THE ACT AS PROVIDED IN SECTION 151(1) WHERE AN ASSESSMENT UNDE R SUB- SECTION (3) OF SECTION 143 OR 147 HAS BEEN MADE, TH E ISSUANCE OF NOTICE U/S. 148 HAS TO BE MADE BY THE ASSESSING OFF ICER AFTER OBTAINING THE SATISFACTION FROM THE JOINT COMMISSIO NER ON THE REASONS RECORDED BY THE ASSESSING OFFICER, WHEN THE AO IS BELOW THE RANK OF JOINT COMMISSIONER. (3) THE ORDER SHEET RECORDING SATISFACTION U/S. 148 OF THE ACT AND THE NOTICE ISSUED U/S. 148 OF THE ACT ARE SIGNED BY THE SAME OFFICER IN THE RANK OF INCOME TAX OFFICER AND THEREFORE THE ASSESSMENT COMPLETED BASED ON SUCH NOTICE IS INVALID FOR NOT C OMPLYING WITH THE PROVISIONS OF 151 OF THE ACT. ITA NOS.1114, 1115 & 1117 /B/09 PAGE 6 OF 9 10. THE LD. DR ARGUED THAT THE REOPENING OF THE CASE U/S. 148 IS IN ORDER BECAUSE AS PER THE FINANCE ACT APPLICABLE TO ASSESSMENT YEAR 2000-01, PRESCRIBES A PERIOD MORE THAN SIX YEARS AN D THE ASSESSEES CASES FALL WITHIN THE TIME LIMIT AND MONETARY LIMIT PRESCRIBED UNDER THE ACT. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND MINUT ELY PERUSED THE MATERIALS ON RECORD. AS CONTENDED BY THE LD. D R, THE REVENUE IS WITHIN ITS REALM FOR REOPENING THE CASES OF THE ASSESSEES. THE ASSESSEES CASE FALL UNDER SECTION 149(II) WHICH STATES AS FOLLOWS: (II) IF FOUR YEARS, BUT NOT MORE THAN SEVEN YEARS , HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOU NTS TO OR IS LIKELY TO AMOUNT TO RUPEES FIFTY THOUSAND OR MORE F OR THAT YEAR; CONSIDERING THE MONETARY LIMIT AND THE TIME LIMIT P RESCRIBED UNDER THE ACT, THE ASSESSEES CASES CLEARLY FALL WITHIN THE AMBIT O F SECTION 149(II). THEREFORE GROUND NO.2 RAISED BY THE ASSESSEES IS DI SMISSED . HOWEVER, CONSIDERING THE GROUSE OF THE ASSESSEES WI TH RESPECT TO THE COMPLIANCE OF SECTION 151(2) OF THE ACT., THE REVEN UE HAS MADE A FAUX PAUS. SECTION 151(2) IS EXTRACTED HEREBELOW FOR RE FERENCE: (2) IN A CASE OTHER THAN A CASE FALLING UNDER SUB- SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSE SSING OFFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR THE IS SUE OF SUCH NOTICE. ON PERUSING THE PAPERBOOK PAGES 1 TO 14 SUBMITTED B Y THE ASSESSEE, WE CAME ACROSS ANNEXURE-A1 WHICH PERTAINS TO NOTICE U/ S. 148 AND ANNEXURE- A2 PERTAINING TO ORDER SHEET CONTAINING RECORDING O F SATISFACTION U/S. 148 OF THE ACT. BOTH THESE DOCUMENTS SIGNED BY INCOME TAX OFFICER, WARD 4(3), ITA NOS.1114, 1115 & 1117 /B/09 PAGE 7 OF 9 BANGALORE WHO INCIDENTALLY WAS ALSO THE ASSESSING O FFICER. SECTION 151(2) CLEARLY SPECIFIES THAT IN A CASE OTHER THAN FALLING UNDER SUB-SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSE SSING OFFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER. THEREFORE THE ASSESSEES SUCCEED ON THIS GROUND. 11. ON MERITS, WITH RESPECT TO GROUND NO.4 & 5, THE LD. AR SUBMITTED THAT THE APPELLANTS FATHER HAD EXPIRED INTESTATE SURVIV ED BY HIS WIFE AND THE THREE APPELLANTS. THE DECEASED FATHER OWNED A SITE IN HIS NAME. ONE OF THE BROTHERS OF THE APPELLANT HAD FILED A SUIT FOR PARTITION AGAINST THE MOTHER. THE ELDERS AND THE WELL WISHERS OF THE FAMILY INTER VENED AND A COMPROMISE WAS REACHED AND ACCORDINGLY THE CITY CIVIL COURT CO NCLUDED THE PROCEEDINGS AFTER HEARING BOTH THE PARTIES AND A DE CREE WAS AWARDED. AS PER THE DECREE, THE APPELLANTS GOT RS.3 LAKHS EACH AS THEIR SHARE IN TERMS OF CASH AND DIAMOND/GOLD/SILVER ARTICLES FROM THEIR MOTHER AND IN TURN THE APPELLANTS RIGHT IN THE PROPERTY WAS RELINQUISHED IN FAVOUR OF THEIR MOTHER. THUS, THE ENTIRE TRANSACTION IS A RESULT OF BONAFID E FAMILY SETTLEMENT ARRIVED AT AMONGST THE MEMBERS VOLUNTARILY WITHOUT ANY INDU CEMENT, FRAUD, COERCION OR UNDUE INFLUENCE IN ORDER TO AVOID FRICT ION, PROTRACTED LITIGATION AND TO MAINTAIN HARMONY AMONGST THE MEMBERS OF THE FAMILY. THE LD. AR CITED THE FOLLOWING CASE LAWS RELIED UPON BY HIM: (A) CIT V. KAY ARR ENTERPRISES & OTHERS (2008) 299 ITR 348 (MAD) (B) CIT V. R. PONNAMMAL (1987) 164 ITR 706 (MAD) (C) CIT V. AL. RAMANATHAN (2000) 245 ITR 494 (MAD) (D) KALE V. DEPUTY DIRECTOR OF CONSOLIDATION, AIR 1976 SC 807 (E) MATURI PULLAIAH V. MATURI NARASIMHAM, AIR 1966 SC 1836 (F) CIT V. AMRIK SINGH (2008) 299 ITR 14 (P&H) (G) CIT V. SRINIVASA SETTY (B.C.) (1981) 128 ITR 29 4 (SC) ITA NOS.1114, 1115 & 1117 /B/09 PAGE 8 OF 9 12. THE LD. DR SUPPORTED THE ORDER OF THE LD. AO AND THAT OF THE LD. CIT(APPEALS) AND CONTENDED THAT THE ASSESSEES B Y RELINQUISHING THEIR RIGHTS FOR CONSIDERATION IN FAVOUR OF THEIR MOTHER AMOUNT TO TRANSFER AS PER SECTION 2(47), ATTRACTING TAX UNDER THE HEAD CAPITA L GAINS AS PROVIDED U/S. 45 AND 48 OF THE ACT. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE PAPERBOOK SUBMITTED BY THE LD. AR CONTAINING 1 TO 1 4 PAGES. IT IS EVIDENT FROM THE FACTS OF THE CASE THAT THE ENTIRE TRANSACT IONS EVOLVED BETWEEN THE FAMILY MEMBERS WHO ARE HINDUS AND THAT TOO BETWEEN THE MOTHER AND HER CHILDREN. IT WAS ALSO NOT DISPUTED BEFORE US BY THE REVENUE THAT THE ENTIRE TRANSACTIONS HAVE TAKEN PLACE RESULTING FROM A CIVI L DISPUTE BETWEEN THE FAMILY MEMBERS. NO DOUBT THE APPREHENSION OF THE RE VENUE IS RIGHT THAT AS PER SECTION 2(47)(I) OF THE ACT, TRANSFER IN RELATI ON TO A CAPITAL ASSET, INCLUDES,- THE SALE, EXCHANGE OR RELINQUISHMENT OF THE ASSETS. HOWEVER THE REVENUE HAD LOST SIGHT OF SECTION 47 OF THE ACT., W HICH STATES AS FOLLOWS:- TRANSACTIONS NOT REGARDED AS TRANSFER- 47. NOTHING CONTAINED IN SECTION 45 SHALL APPLY TO THE FOLLOWING TRANSFERS:- (I) ANY DISTRIBUTION OF CAPITAL ASSETS ON THE TOTAL OR PARTIAL PARTITION OF A HINDU UNDIVIDED FAMILY; IN THE PRESENT CASE, BY THE DEMISE OF THE FATHER IN TESTATE, THE SPOUSE, SONS AND DAUGHTER INHERIT THE PROPERTY OF THE DECEASED. THE EXISTENCE OF A HUF CANNOT BE DENIED AS IT IS A CREATURE OF LAW AND NOT OF A CONTRACT. A HINDU IS VERILY BORN INTO A HUF. AS PER HINDU SUCCESSION ACT , ON THE DEMISE OF A MALE HINDU INTESTATE HIS SPOUSE AND CHILDREN BOTH M ALE AND FEMALE ARE ITA NOS.1114, 1115 & 1117 /B/09 PAGE 9 OF 9 ENTITLED FOR HIS ESTATE. IN SUCH A STATE OF AFFAIRS , THIS SETTLEMENT WAS ACHIEVED FOR THE BETTERMENT OF THE FAMILY. HENCE, A SIMPLE READING OF THE PROVISIONS OF SECTION 47(1) OF THE ACT IT IS ABUNDA NTLY CLEAR THAT TRANSFER ARISING OUT OF TOTAL OR PARTIAL PARTITION OF A HUF IS OUT OF THE AMBIT OF SECTION 45 OF THE ACT, AND THEREFORE, DOES NOT ATTRACT CAP ITAL GAIN TAX. THE CASE LAWS ON WHICH THE REVENUE PLACED RELIANCE UPON DO NOT RELATE TO THE FACTS OF THE CASES ON HAND AND, THEREFORE, ARE DISTINGUIS HABLE. 14. IN AN OVERALL VIEW OF THE FACTS AND CIRCUMSTAN CE OF THESE CASES, WE HAVE NO HESITATION TO HOLD THIS ISSUE IN FAVOUR OF THE APPELLANTS AND THEREFORE, THE ASSESSEES SUCCEED ON THEIR 4 TH & 5 TH GROUNDS. 15. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 30 TH SEPTEMBER, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.