Bhagwan Raghunath Pathare, Pune V. Income-tax Officer, Ward - 7(3), Pune

ITA 2082/PUN/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2386 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 03-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Keywords: Set aside; Capital Gains
• Section: 6; 54B; 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, PUNE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No. 2082/PUN/2017 : A.Y. 2012-13 Bhagwan Raghunath Pathare S.NO. 68, Dhole Patil Vasti Pune-Kharadi, Pune-411014 PAN; AAYPP3202D Appellant Vs. The I.T.O. Ward 7(3) Pune Respondent Appellant by : Shri Deepak Sasar Respondent by : Shri Rajesh Gawli Date of Hearing : 1105-2022 Date of Pronouncement : 12-05-2022 ORDER PER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER This appeal preferred by the assessee emanates from order of the ld. Commissioner of Income Tax (Appeals)- 5, Pune, dated 12-05-2017 for A.Y. 2012-13 as per the grounds of appeal on record. 2. The brief facts of the case are that the assessee is an individual and is engaged in the business of agriculture. E-return of income was filed declaring total income of Rs. 1,57,239/-. The case was selected for scrutiny under CASS and required notices issued and served on the assessee. In the year under consideration, the assessee had sold agricultural land at Kharadi, Pune and offered long term capital gain. This long term capital gains was only partly offered i.e. the claimed portion of his share in the land. The A.O in the absence of total or partial partition, did not agree to the apportionment of sale consideration and held that the same was not commensurate with the relevant provisions. She accordingly also did not allow the deduction claimed u/s 54B of the Income-tax Act, 1961 (hereinafter referred to as “the Act” for short) 2 ITA No.2082 of 2017 Bhagwan R. Pathare A.Y. 2012-13 3. The Assessing Officer observed from the Return of Income filed by the Assessee that the Assessee did not have any other income apart from long Term Capital Gain(LTCG) which was declared at Rs. 1,57,239/-. Besides this the Appellant had declared Net agricultural income for rate purpose at Rs. 2,00,000/-. In the computation filed along with the Return the Assessing Officer observed that the Assessee has shown full value consideration at Rs.74,19,494/- and deduction u/s. 54B at Rs. 61,50,169/-. The net balance being Rs.1,57,239/-. In response to the notice u/s. 142(1) & 143(2) the Assessee stated before the Assessing Officer that, out of the total consideration on sale of agricultural land situated at Survey No.67 at Kharadi Pune on 06.08.2011, he and his wife Latabai pathare had received consideration of Rs. 50,00,000/-. As there was a difference in the total consideration shown in the Return of Income and as claimed in response to the notices the Assessing Officer required the Assessee to reconcile the difference with supporting proof like mutation register, proof of agricultural activities, copies of Return for A.Y. 2010-11 & 2011-12, Bank Account statements and personal Balance Sheet. The Assessing Officer also required the Appellant Assessee to give a detail of how the sale consideration attributable to his share in Gat No. 67/8 admeasuring 17 Are was appropriated between the Assessee, his wife, his sons, son's wife and their children. Details were also called for by the Assessing Officer of Shri, Navnath B. Pathare and his wife and the apportionment of the sale consideration between them. The Assessee in response to the Assessing Officer's notices pointed out that he was governed as per the provisions of Sec. 6 of Hindu Succession Act and had a vested right to the property from the time of his conception as the same was joint Hindu Family property. It was also submitted that, the Assessee had agricultural income from land situated at Block No. 67 at Kharadi and from Block No. 68 Kharadi for which he had attached a copy of 7/12 extract and the sale details for reference. The Return copies/Bank Accounts was submitted stating that the Assessee had a 3 ITA No.2082 of 2017 Bhagwan R. Pathare A.Y. 2012-13 vested equal right in the land on the basis of inheritance and as a member of lineal descendents of Joint Hindu Family. The Assessee also submitted in detail the said Sec. 6 of the Hindu Succession Act 1956 and the method devolution under the Traditional Mitakshara law. 4 The Assessee moved the Jt. CIT with an application u/s 144A dt. 27-02-2015 for issuing directions in the matter of assessment under consideration. The said application has been reproduced by the A.O in the assessment order along with the copy of the directions issued by the Jt. C.I.T. The Jt. C.I.T. reiterating certain facts stated that, the 7/12 extract mentioned on the name of the assessee and did not contain the names of any other persons with whom he was seeking to share the tax liability of capital gain. The J.t. CIT also pointed out that the deed of conveyance dated 6-8-2011 mentioned only Shri Bhagwan Pathare as one of the vendors and did not have the names of any of the family members in whose hands the assessee had sought to share his taxability of Capital Gains. The names of the other parties were mentioned as confirming parties whereas the vendors are stated to be the owners of the said property in the said Deed. There is no mention, the Jt. (IT noted of any of the confirming parties as owner of the said property in the Deed. The Jt. OT held that, the application was found to be untenable and rejected the same. He directed the Assessing Officer, to frame the Assessment after taking into consideration the points raised by him and the ratio laid down by Hon'ble Supreme Court in the case of me. Dowell 7 co. Ltd. Vs CTO(1985) 154 ITR 148 on colourable devices and provisions of Income-tax applicable in the case. 5 The Assessing Officer noted that the solitary question for consideration was whether Shri Bhagwan Pathare was the sole owner of the land or whether his sons, daughter-in-law, grandsons and grand-daughters were entitled for sales consideration. The Assessing Officer observed from the record that the captioned land was owned by Shri. Bhagwan Pathare, Shri. Tukaram Pathare, 4 ITA No.2082 of 2017 Bhagwan R. Pathare A.Y. 2012-13 Shri. Sopan and legal heirs of Shri. Baban Govind Pathare. The Assessee sharing land was 17 Are out of 49 Are. The vendors shown in the sale Deed were Mr. Bhagwan, Mr. Tukararn, Mr. Sopan and Sushilabai Pathare and others. The Assessing Officer pointed out to the Assessee that, in absence of total or partial partition, apportionment of sale consideration was not commensurate with relevant provisions of the Act. The AR of the Assessee chose to reproduce Sec. 6 of the Hindu Succession Act but the AO states did not make out prima facie case to the effect that the Assessee's right in the sale consideration was not less than 1/3 rd . The Assessing Officer also observed that, the conveyance Deed named the Assessee as one of the vendors and other members to whom the consideration was paid was neither the owner or confirming parties to the conveyance deed. The Assessing Officer held the assessee‟s share in the sales consideration to be Rs. 2,62,58,480/-. The total consideration for the land was at Rs. 7,56,86,200/-. The A.O allowed the reinvestment to the extent of Rs. 48,33,750/-. 6. The assessee took the matter before the ld. CIT(A) and submitted detailed written submissions. The ld. CIT(A) after considering the written submissions of the assessee as well as the assessment order held as follows: “7.3. I have perused the material on record and the submission of the Appellant carefully. The Capital Gains on the sale of land have been shown by the Appellant only partly. The full consideration of Capital Gains of Rs. 7.56.96.200/- was apportioned by the Appellant suo moto between he himself his wife, sons, daughter in- laws and grandchildren. The Appellant claimed before the AO and also during Appellate Proceedings, that the land sold was an ancestral land and the other members had a vested right by birth as per Section 6 of the Hindu Succession Act, 1956. In light of the absence of total or partial partition, the AO did not consider the apportionment of sale consideration commensurate with the relevant provisions of the I.T. Act. Throughout the proceedings, though the Appellant did submit additional evidence in the form of a partition deed of 13-6-1994 and mutation deed the entry dated 4-9-1958, he was unable to bring on record any evidence to substantiate his claim of the land being ancestral land, The additional evidence is admitted to ensure there is no travesty of justice. I do not agree with the appellant’s contention that, sec. 6 of the Hindu Succession Act, 1956 grants a vested right to the members of his family without proving the land to be ancestral land. From a close perusal of the Mutation deed and the partition, it is seen that the partition has been effected between the Appellant and his father, brother, cousin and uncle. The Appellant has claimed that the land belonged to his grandfather thereby indicating that it was ancestral land. The claim of ancestral land remains unsubstantiated. Simply, because the land devolved from the grandfather does not make it ancestral property (land). The partition between the other members like the Appellant’s father, uncle, Appellant himself, his brothers and cousins in 1994 does not give support to the Appellant’s 5 ITA No.2082 of 2017 Bhagwan R. Pathare A.Y. 2012-13 claim of ancestral land. Similarly, the mutation deed is between the grandfather and his brother stating that the land is cultivated by the brother Shri Balu Maruti Pathare and therefore, the name of the grandfather Shri Govind Maruti Pathare should be deleted and the name of Balu Maruti Pathare should be entered. It was noted on the deed that, the same was made on the basis of statement recorded and kept in the file. A mutation deed does not prove the land to be ancestral land and thus, this also does not substantiate the Appellant’s claim of the land being ancestral land. Further, the mutation deed is for survey No. 68/8 and not for survey No. 67 which has been sold by the Appellant. Merely, the fact that the land developed from his grandfather to his father and uncle does not make it ancestral land. The mere claim without any evidence leads one to believe that the Appellant has made an attempt to use a colourable device to split the capital Gains liability. The Appellant has only emphasized on Section 6 on the Hindu Succession Act, 1956 without realizing the amendment to the Act brought about by the State of Maharashtra in the year 1995 and all India in the year 2005, which also includes the daughters as co- partners. The Appellant, it is stated has two daughters but has not clarified why their share was not demarcated. Even if presuming, but not accepting that the said land was ancestral land there could be no apportionment without a partition. In the Appellant's case there has been no partition either complete or partial by metes and bounds and therefore; the Appellant on record is the whole and sole owner of the said piece of land. It is also seen from record, that the 7/12 extract mentions only the name of the Assessee and does not contain the names of any other persons with whom the Appellant has been sharing his liability of taxability of Capital Gains. In the deed .of conveyance dated 06.08.2011, only the Appellant is mentioned as one ·of the vendors of the property. The names of other members of the family of the Assessee are mentioned in the list as confirming parties and the deed states the vendors.to be the owners of the said property. The deed does not mention any of the confirming parties to be the owner of the said property in the deed. The AD therefore, has correctly held that the total Capital Gains for his share of the sale proceeds is liable to be taxed in the hands of the Appellant. The action of the AO therefore is upheld. The Assessing Officer is directed to Tax the capital gains in the right hands i.e, of the Appellant. The AR of the Appellant has contended that, due to apportionment the other members have shown capital gains and suffered taxation. In view of this Appeal Order, the capital gains are being taxed in the hands of the Appellant. The concerned Assessing Officers are directed to revise their Assessments of the other members accordingly, to give effect to this order. The AO has also correctly allowed deduction only for that amount of investment which the Appellant has made u/s.54B.” 7. Before us, the ld. A.R submitted ample evidences to demonstrate that the said land is an ancestral property where the assessee, along with his two sons has offered 1/3 rd each in their returns of income. The A.O in this case has added the entire capital gain in the hands of the assessee alone though the ideal course would have been that the income should have been taxed in the hands of HUF but in this case since 1/3 rd has been declared in the respective return of the assessee and his two sons, it is not therefore, justified to include the entire capital gain in the hands of the assessee alone. We are of the considered view that the A.O should assess the capital gain at 1/3 rd as shown by the assessee and delete rest of the addition. In view thereof, we set aside the order of the ld. CIT(A) and restore the matter to the file of the A.O with a direction to give effect to our order as per terms aforestated. 6 ITA No.2082 of 2017 Bhagwan R. Pathare A.Y. 2012-13 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on this 12 th day of May 2022. Sd/- sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated, the 12 th day of May 2022 Ankam //// true copy /// Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CCIT, Pune 4. The CIT(A)- 5 Pune 5. D.R. ITAT „B‟ Bench 5. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune. 7 ITA No.2082 of 2017 Bhagwan R. Pathare A.Y. 2012-13 1 Draft dictated on 11-05-2022 Sr.PS/PS 2 Draft placed before author 12-05-2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 12-05-2022 Sr.PS/PS 7 Date of uploading of order 12-5-2022 Sr.PS/PS 8 File sent to Bench Clerk 12-05-2022 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order