K.Parameswari, CHENNAI V. ITO Non Corporate Ward 12(3), CHENNAI

ITA 2626/CHNY/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6432 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RANGARAJAN
• Keywords: Cost of acquisition; Reason to believe; Capital Gains
• Section: 143(3); 54F; 143(1); 64; 147; 148; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , ! ' , # '$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.2626/CHNY/2018 % &% /ASSESSMENT YEAR: 2009-10 SMT. K. PARAMESWARI, NO.3, RAMARAO STREET, T. NAGAR, CHENNAI 600 017. VS. INCOME TAX OFFICER, NON CORPORATE WARD 12(3), CHENNAI. [PAN: AAQPK 1350B] ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , / APPELLANT BY : SHRI PHILIP GEORGE, ADVOCATE )*'( + , /RESPONDENT BY : SHRI S. RANGARAJAN, JCIT - + .# /DATE OF HEARING : 09.01.2019 /0& + .# / DATE OF PRONOUNCEMENT : 18.02.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -13, CHENNAI (HEREIN AFTER CALLED AS CIT(A)) DATED 25.07.2018 FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) IN AS MUCH AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW AND CONTRAR Y TO THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.2626/CHNY/2018 (AY: 2009-10) :- 2 -: 2. REOPENING: 2.1. THE ORDER OF THE ASSESSING OFFICER AND THE COM MISSIONER OF INCOME TAX (APPEALS) ARE OPPOSED TO LAW IN AS MUCH AS THEY HAV E BOTH CONDESCENDED TO THE APPLICATION OF THE PROVISIONS OF SECTION 147 TO THE FACTS OF THE APPELLANTS CASE. 2.2. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE PROVISIONS OF SE CTION 147 WERE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE. 2.3. THE ASSESSING. OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THERE WERE NO REASON TO BELIEVE THAT INCOME HAD ESCAPED IN THE HANDS OF THE APPELLANT AS THE AP PELLANT WAS NOT LIABLE TO PAY ANY CAPITAL GAINS TAX IN VIEW OF THE PROVISIONS OF SECTION 64 OF THE INCOME TAX ACT. 2.4. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE INITIATION OF TH E PROCEEDINGS FOR REASSESSMENT IS INVALID, ILLEGAL, TIME BARRED AND V OID AB INITIO. 2.5. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS) IS UNDER STRICT OBLIGATION TO PROVE THAT A VALID AND P ROPER APPROVAL U/S. 151(1) WAS OBTAINED. 3. INCOME FROM LONG TERM CAPITAL GAINS: 3.1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE APPELLANT HAS RECEIVED A TOTAL SALE CONSIDERATION O F RS.2,74,75,000I- WHEN THE APPELLANT HAS RECEIVED ONLY A CONSIDERATION OF RS.1 CRORE AND HANDED OVER THE POSSESSION TO THE POWER OF ATTORNEY HOLDER IN THE A.Y. 2008-2009. 3.2. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILE D TO CONSIDER THE BANK STATEMENT FILED BY THE APPELLANT SHOWING THE RECEIP T OF THE CONSIDERATION OF RS.1 CRORE. 3.3. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILE D TO CONSIDER THAT THE APPELLANT IS NOT LIABLE TO TAX UNDER CAPITAL GAINS ON SALE BY THE PURCHASER/POA AND NOT ACCOUNTABLE FOR RS.1 ,74,75,0 00I-. 3.4. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILE D TO CALL FOR A REMAND REPORT FROM THE ASSESSING OFFICER AS THE ONUS IS ON THE REVENUE TO PROVE THAT THE APPELLANT HAD RECEIVED THE CONSIDERATION OF RS. 1,74,75,000/. 3.5. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT WHEN THE APPELLANT HAS RECEIVED THE ENTIRE SAL E CONSIDERATION UNDER THE SALE AGREEMENT, SUCH TRANSACTION BEING A PART PERFO RMANCE OF A CONTRACT AS SPECIFIED U/S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882 AND THE PROPERTY IS DEEMED TO HAVE BEEN TRANSFERRED TO THE PURCHASER (P OWER OF ATTORNEY HOLDER) TO WHOM THE POSSESSION WAS HANDED OVER ON R ECEIVING CONSIDERATION WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME T AX ACT, 1961. ITA NO.2626/CHNY/2018 (AY: 2009-10) :- 3 -: 3.6. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE TRANSFER HAPPENS ONLY ON REGISTRATION OF THE PROPER TY CONTRARY TO THE DEEMING PROVISION U/S. 2(47) OF THE INCOME TAX ACT, 1961. 3.7. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT NO TRANSFER TOOK PLACE IN THE FINANCIAL YEAR RELEVANT TO A.Y. 2008-2009. 3.8. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE APPELLANTS HUSBAND HAS NOT DECLARED THE LONG TERM CAPITAL GAINS ARISING IN THE CASE OF HIS WIFE U/S. 64(1) FOR A.Y. 2009-2010 WITHOUT APPRECIATING THAT THE APPELLANTS HUSBAND HAS ALREADY DECLARED THE LO NG TERM CAPITAL GAINS IN THE A.Y. 2008-2009. 3.9. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT AS PER THE PROVISIONS OF SECTION 64(1), THE AP PELLANT HAS NEITHER THE DUTY NOR THE OBLIGATION TO DECLARE THE INCOME FROM THE I MPUGNED SALE TRANSACTION IN HER HANDS. 3.10. THE COMMISSIONER OF INCOME TAX (APPEALS) GROS SLY ERRED IN NOT HOLDING THAT THE ENTIRE ASSESSMENT IS INVALID. 3.11. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRE D IN GIVING A DECISION IN RESPECT OF THE DEDUCTION U/S. 54F AS THE SAME DO ES NOT ARISE FOR DECISION IN THE ASSESSMENT OF THE APPELLANT THAT TOO WITHOUT GI VING PROPER NOTICE TO THE APPELLANT. 4. THE APPELLANT CONTESTS ALL THE FINDINGS OF FACT AND LAW AND ALL PRESUMPTIONS MADE AGAINST THE ASSESSEE BY THE INCOME TAX OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS). 5. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSI NESS OF DEALING IN FOOD-GRAINS. THE ORIGINAL RETURN OF INCOME FOR THE AY 2009-10 WAS FILED ON 15.04.2010 DISCLOSING INCOME OF RS. 2,64,300/- A ND THE SAME WAS REVISED ON 20.12.-2010 ADMITTING TOTAL INCOME OF RS . 3,54,300/-. THE SAID RETURN OF INCOME WAS ACCEPTED U/S. 143(1) OF T HE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO.2626/CHNY/2018 (AY: 2009-10) :- 4 -: 4. SUBSEQUENTLY, THE ASSESSING OFFICER (AO) HAS REC EIVED INFORMATION THAT THE APPELLANT SOLD IMMOVABLE PROPERTY SITUATED AT SURVEY NO.1088/2A3, MADHAVARAM VILLAGE, THIRUVALLUR TALUK FOR A CONSIDERATION OF RS. 2,74,75,000/-. BASED ON THIS INFORMATION, T HE AO FORMED AN OPINION THAT THE INCOME CHARGEABLE TO TAX FOR THE A Y 2009-10 HAD ESCAPED THE ASSESSMENT. ACCORDINGLY, ISSUED A NOTI CE U/S. 148 OF THE ACT ON 31.03.2016 CALLING UPON THE APPELLANT TO FIL E THE RETURN OF INCOME, IN RESPONSE TO THE SAID NOTICE, THE APPELLANT FILED LETTER DATED 25.05.2017 STATING THAT THE RETURN OF INCOME FINALLY FILED BE TREATED AS RETURN OF INCOME, IN RESPONSE TO NOTICE U/S. 148 OF THE ACT. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ITO, NON CORPORATE WARD-12(3), CHENNAI VIDE LETTER DATED 29.12.2017 PA SSED U/S. 143(3) OF THE ACT ADMITTED TOTAL INCOME AT RS. 65,01,780/-. WHILE DOING SO, THE AO BROUGHT TO TAX THE LTCG ON ACCOUNT OF SALE OF PROPE RTY AT MADHAVARAM VILLAGE AFTER ALLOWING DEDUCTION OF RS. 2,09,73,220 /- U/S. 54 OF THE ACT. THE AO HAD SET OUT THE FACTS RELATING TO THE ADDITI ON ON ACCOUNT OF SALE OF PROPERTY VIDE PARAS 6 OF THE ASSESSMENT ORDER. 5. THE BRIEF FACTS RELATING TO THE TRANSACTIONS OF SALE ON PROPERTY ARE AS UNDER: THE PROPERTY SITUATED AT SURVEY NO.1088/2A3 OF 1692 SQ. FT. WAS SETTLED IN FAVOUR OF THE APPELLANT BY HER HUSBAND S HRI K.KRISHNAN VIDE ITA NO.2626/CHNY/2018 (AY: 2009-10) :- 5 -: SETTLEMENT DEED DATED 30.12.2003. IT WAS CLAIMED TH AT THE SAID PROPERTY WAS SOLD BY AGREEMENT OF SALE ENTERED BETWEEN THE A PPELLANT AND ONE MS. AMUDHA FOR A CONSIDERATION OF ONE CRORE. ADMITT EDLY, THE AGREEMENT OF SALE WAS NOT REGISTERED BUT THE PROPERTY WAS FIN ALLY SOLD TO ONE SHRI MALAISAMY AND HIS WIFE SMT. USHA NANDHINI FOR A CON SIDERATION OF RS. 1,74,75,000/- VIDE DOCUMENT NO.6965 OF 2008 DATED 0 5.09.2008. THE SALE DEED WAS EXECUTED BY THE POWER OF ATTORNEY OF THE APPELLANT NAMELY MS. S. AMUDHA. BEFORE THE AO, THE APPELLANT ARGUED THAT THE PROPERTY WAS SOLD ON 11.03.2008 IN FAVOUR OF MS. AMUDHA FOR A CONSIDERATION OF RS. 1,00,00,000/-. THE CAPITAL GAINS, IF IT ALL, AR ISES ONLY IN THE YEAR 2008- 09 AND ALSO THAT SINCE THE PROPERTY WAS ACQUIRED VI DE THE SETTLEMENT DEED UNDER HER HUSBAND, BY VIRTUE OF THE CLUBBING P ROVISIONS ENACTED U/S. 64 OF THE ACT, THE SAME SHOULD BE ASSESSED ONL Y IN THE HANDS OF HER HUSBAND. THE AO REJECTED THE ABOVE CONTENTIONS AND HELD THAT SINCE AGREEMENT OF SALE ENTERED BETWEEN THE APPELLANT AND ONE MS. AMUDHA WAS NOT REGISTERED THERE WAS NO TRANSFER OF TITLE A ND THE TRANSFER OF PROPERTY TOOK PLACE ONLY IN THE YEAR 2009 I.E., ON THE EXECUTION OF SALE DEED WHICH IS REGISTERED ON 05.09.2008. FURTHER, T HE AO HELD THAT THE ENTIRE SALE CONSIDERATION OF RS. 2,74,05,000/- WAS RECEIVED BY THE APPELLANT HIMSELF AND AFTER ALLOWING AS EXEMPTION U /S. 54 OF THE ACT, THE COST OF THE ACQUISITION OF NEW HOUSE SITUATED AT NO .3, RAMA RAO STREET, T. NAGAR, CHENNAI HAD BROUGHT TO TAX BALANCE OF RS. 65,01,780/-. ITA NO.2626/CHNY/2018 (AY: 2009-10) :- 6 -: 6. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER PARTLY ALLOWED THE APPEAL BY DI RECTING THE AO TO COMPUTE THE LTCG ON SALE OF PROPERTY BY REDUCING IN DEXED THE COST OF ACQUISITION AS ON 01.04.1981. HOWEVER, HE CONFIRME D THE ACTION OF AO IN BRINGING TO TAX THE LTCG. BEING AGGRIEVED, THE APPE LLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 7. THE PRIMARY ARGUMENT OF LD. COUNSEL FOR THE APPE LLANT IS THAT THE PROPERTY TRANSFERRED WAS SETTLED IN FAVOUR OF THE A PPELLANT FOR HER HUSBAND SETTLEMENT DEED DATED 30.12.2003. THEREFOR E, IT IS URGED THAT BY SET VIRTUE OF PROVISIONS OF S. 64 OF THE ACT, TH E INCOME ARISING ON ACCOUNT OF TRANSFER OF THE PROPERTY SHOULD BE ASSES SED IN THE HANDS OF HER HUSBAND. ON THE OTHER HAND, THE LD. DEPARTMENTA L REPRESENTATIVE PLACED RELIANCE ON THE DECISIONS OF LOWER AUTHORITI ES. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. UNDISPUTEDLY, THE PROPERTY TRANSFERRED WAS SETTLED IN FAVOUR OF THE APPELLANT BY HER HUSBAND VIDE SETTLEMENT DEED W ITHOUT ANY CONSIDERATION. THE PROVISIONS OF S. 64 OF THE ACT PROVIDES THAT WHILE COMPUTING THE TOTAL INCOME ON INDIVIDUAL, THE INCOM E ARISING DIRECTLY OR INDIRECTLY TO THE SPOUSE OF SUCH INDIVIDUAL FROM TH E ASSETS TRANSFERRED DIRECTLY OR INDIRECTLY WITHOUT ADEQUATE CONSIDERATI ON OR OTHER THAN IN CONNECTION WITH AN AGREEMENT TO FILE APART, SHALL B E ASSESSED IN THE ITA NO.2626/CHNY/2018 (AY: 2009-10) :- 7 -: HANDS OF SUCH SETTLER. IN THE PRESENT CASE, IT IS N OT THE CASE OF THE APPELLANT THAT THE PROPERTY WAS SETTLED IN FAVOUR O F HER HUSBAND FOR ADEQUATE CONSIDERATION OR IN CONNECTION WITH THE AG REEMENT TO LIVE APART THEREFORE, THE CLAUSE (4) OF SUB S. (1) OF S. 64 OF THE ACT ARE DIRECTLY APPLICABLE TO THE APPELLANT. THEREFORE, THE INCOME ON LTCG ON ACCOUNT OF THE SALE OF THIS SUBJECT PROPERTY CAN BE ASSESSE D ONLY IN THE HANDS OF HER HUSBAND AND IT CANNOT BE TAXED IN THE HANDS OF THE APPELLANT. THERE IS NO NEED TO EMPHASIZE THE PRINCIPLE THAT THE INCO ME CAN BE TAXED IN THE HANDS OF RIGHT HANDS ONLY. THUS, IN THE LIGHT OF P LAIN PROVISIONS OF S. 64 OF THE ACT, WE HOLD THAT THE LTCG ARISING ON THE SALE OF SUBJECT PROPERTY CANNOT BE TAXED IN THE HANDS OF THE APPELLANT THERE FORE, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 18 TH DAY OF FEBRUARY, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' ) (INTURI RAMA RAO) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 18 TH FEBRUARY, 2019. EDN, SR. P.S + ).23 43&. /COPY TO: 1. '( /APPELLANT 4. - 5. /CIT 2. )*'( /RESPONDENT 5. 36 ). /DR 3. - 5. ( )/CIT(A) 6. 7% 8 /GF