A.P.Began HUF, CHENNAI V. ITO, CHENNAI

ITA 2702/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96435 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: GOPALSAMY CHOKKAPPAC A
• Section: 143(3); 54F; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.2702/MDS/2014 ( / ASSESSMENT YEAR: 2008-09) A.P.BEGAN HUF 14, VELLALA STREET, AYANAMBAKKAM, CHENNAI-602 102. VS INCOME TAX OFFICER, BUSINESS WARD-I(1), CHENNAI. PAN: AAGHB9504G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. GOPALSAMY CHOKKAPPA,C.A. /RESPONDENT BY : MR. JOE SEBASTIAN, CIT /DATE OF HEARING : 29 TH SEPTEMBER, 2015 /DATE OF PRONOUNCEMENT : 27 TH NOVEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX, CHENNAI-I, DATED 22.08.2014 FOR THE ASSESSMENT YEAR 2008-09 PASSED U NDER SECTION 263 OF THE ACT. THE ONLY ISSUE IN THE APPE AL OF THE ASSESSEE IS WHETHER THE CAPITAL GAIN SHOULD BE ASSE SSED IN THE HANDS OF THE LARGER HUF I.E .A.R.PANDURANGAN HU F OR IN THE CASE OF THE ASSESSEE A.P.BEGAN HUF. 2. BRIEF FACTS ARE THAT ASSESSEE BEGAN HUF CONSIST S OF KARTA SHRI A.P.BEGAN, HIS SPOUSE, SON AND DAUGHTER. AFTER 2 ITA NOS. 2702/MDS/2014 THE DEMISE OF A.R.PANDURANGAN, FATHER OF THE ASSESS EE THE ASSESSEE ALONG WITH HIS TWO BROTHERS A.P.OREE AND A.P.NAMBI AND THEIR SISTER SMT. NANGAI SOLD THE PRO PERTY WHICH STOOD IN THEIR FATHERS NAME LATEA.R.PANDURAN GAN AND SALE PROCEEDS WERE DISTRIBUTED AMONG THEMSELVES. TH E ASSESSEE HUF FILED RETURN OF INCOME FOR THE ASSESSM ENT YEAR 2008-09 ON 28.07.2008 ADMITTING TOTAL INCOME OF ` 72,598/- AFTER CLAIMING EXEMPTION UNDER SECTION 54F OF THE ACT OUT OF THE CAPITAL GAIN DISCLOSED BY THE ASSESSEE HUF ON T HE SHARE IN THE PROPERTY WHICH THE HUF GOT AROUND ` 63.09 LAKHS. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT ON 15.12.2010 ACCEPTING THE CAPITAL GAINS RETURNED BY THE ASSESSEE. IN THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER EXAMINED THE WHOLE TRANSACTION OF SALE OF PROPERTY AND DISTRIBUTION OF SALE PROCEEDS AMONG TH E SONS OF LATE A.R.PANDURANGAN AND ACCEPTED THE CAPITAL GAIN RETURNED BY THE ASSESSEE AND ALLOWED EXEMPTION UNDER SECTION 54F OF THE ACT AS CLAIMED BY THE ASSESSEE. 3. LATER, COMMISSIONER OF INCOME TAX-IV, CHENNAI IS SUED NOTICE UNDER SECTION 263 OF THE ACT STATING THAT SI NCE THERE IS NO PHYSICAL DIVISION OF PROPERTY AS PER RECORDS, TH E CLAIM OF 3 ITA NOS. 2702/MDS/2014 DIVISION OF SALE CONSIDERATION IS INCORRECT AS PER SECTION 171 OF THE ACT. THEREFORE, COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THIS ASPECT OF THE MATTER WAS NOT EXA MINED BY THE ASSESSING OFFICER AND SINCE THE TOTAL SALE CONS IDERATION OF THE LAND HAS TO BE ASSESSED IN THE HANDS OF ESTATE OF LATE A.R.PANDURANGAN, COMMISSIONER WAS OF THE VIEW THAT ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. ON 26.03.2013 COMMISSIONER PASSED ORDER UNDER SECTION 263 OF THE ACT CANCELLING THE ASSESSMENT ORDER DATED 15.12 .2010 PASSED BY THE ASSESSING OFFICER WITH A DIRECTION T HAT ASSESSING OFFICER SHALL PASS A FRESH ASSESSMENT ORD ER DISALLOWING EXEMPTION CLAIMED UNDER SECTION 54F OF THE ACT AND ARRIVE AT THE TOTAL INCOME AND TAX PAYABLE THER EON AS ACCORDING TO THE COMMISSIONER OF INCOME TAX LATE A.R.PANDURANGAN HAS TO BE ASSESSED AS THERE IS NO P HYSICAL PARTITION OF LAND IN VIEW OF THE PROVISIONS OF SEC TION 171 OF THE ACT. THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBU NAL AND THE CO-ORDINATE BENCH BY ORDER DATED 30.10.2013 IN ITA NO.1006/MDS/2013 REMITTED THE MATTER BACK TO THE FI LE OF THE COMMISSIONER TO CONSIDER THE ISSUE AFRESH BY CONSID ERING THE 4 ITA NOS. 2702/MDS/2014 EXPLANATION OF THE ASSESSEE IN ACCORDANCE WITH LAW FOR THE REASON THAT NO EXPLANATION WAS FILED BY THE ASSESSE E BEFORE THE COMMISSIONER AS NOBODY APPEARED IN THE PROCEEDI NGS BEFORE HIM. THE CO-ORDINATE BENCH FURTHER OBSERVED THAT SINCE THE FACT OF WHETHER LATE A.R.PANDURANGAN HUF WAS ASSESSED TO INCOME-TAX OR NOT IS NOT COMING OUT FRO M THE ASSESSMENT ORDER THUS THE MATTER WAS RESTORED TO T HE FILE OF THE COMMISSIONER OF INCOME TAX FOR FRESH CONSIDERAT ION. 4. IN THE PROCEEDINGS BEFORE THE COMMISSIONER OF IN COME TAX, THE ASSESSEE APPEARS TO HAVE FILED MEMORANDUM OF RECORDING ORAL PARTITION AND SUBMITTED THAT THE HUF OF LATE A.R.PANDURANGAN WAS NOT ASSESSED TO TAX AND SINCE IT IS NOT ASSESSED TO TAX PROVISIONS OF SECTION 171 HAVE NO APPLICATION. THE COMMISSIONER OF INCOME TAX DISBEL IEVED THE MEMORANDUM OF ORAL PARTITION SUBMITTED BY THE A SSESSEE HUF AND HELD THAT INCOME FROM SALE OF LAND SHOULD B E ASSESSED ONLY IN THE HANDS OF LATE A.R.PANDURANGAN HUF AND THEREFORE ASSESSEE IS NOT ENTITLED TO CLAIM EXE MPTION UNDER SECTION 54F OF THE ACT. THUS, COMMISSIONER O F INCOME TAX SET ASIDE THE ORIGINAL ASSESSMENT TO DO AFRESH IN VIEW OF HIS FINDINGS IN THE ORDER. 5 ITA NOS. 2702/MDS/2014 5. COUNSEL FOR THE ASSESSEE SUBMITS THAT VALIDITY O F PARTITION OF HUF CAN BE DETERMINED UNDER SECTION 17 1 ONLY, IF HAD IT BEEN A.R.PANDURANGAN HITHERTO ASSESSED. OT HERWISE PARTITION WILL ONLY BE SUBJECT TO COMMON HINDU LAW. COUNSEL SUBMITS THAT LATE A.R.PANDURANGAN HUF NEVER ASSESSE D TO TAX AND THEREFORE PROVISIONS OF SECTION 171 HAVE NO APPLICATION TO LATE A.R.PANDURANGAN ESTATE. PLACING RELIANCE ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF G.VASANTHA PAI VS.SPECIAL COMMISSIONER (LAND REFORM S) (1998 (II) CTC 272), COUNSEL SUBMITS THAT PARTITION CONSISTS IN DEFINING SHARES OF CO-PARCENERS IN THE JOINT PROPER TY AND A PHYSICAL DIVISION OF PROPERTY IS NOT NECESSARY. COU NSEL SUBMITS THAT EVEN AFTER CONCEDING THAT SECTION 171 IS NOT APPLICABLE BY THE LEARNED COMMISSIONER AT PARA 5 OF HIS ORDER, STILL HE HOLDS THAT INCOME SHOULD BE ASSESSE D IN THE HANDS OF ESTATE OF LATE A.R.PANDURANGAN HUF WHO PAS SED AWAY IN 2003. COUNSEL SUBMITS THAT CIT CONCLUDED T HAT LARGER HUF SUBSISTS, THEREFORE IT HAS TO BE ASSESS ED IN THE HANDS OF LATE A.R.PANDURANGAN. COUNSEL SUBMITS THAT SINCE LATE A.R.PANDURANGAN IS NOT ASSESSED TO TAX EARLIER , THE PROVISIONS OF SECTION 171 HAVE NO APPLICATION AND IN VIEW OF 6 ITA NOS. 2702/MDS/2014 THE MEMORANDUM OF ORAL PARTITION EXECUTED AMONG THE CHILDREN OF LATE A.R.PANDURANGAN DEMARCATING THE PERCENTAGE OF SHARE IN THE PROPERTY GAIN HAS TO BE ASSESSED IN THEIR HANDS AND THEREFORE THERE IS NO JUSTIFICAT ION IN HOLDING THAT GAIN HAS TO BE ASSESSED IN THE HANDS OF LATE A.R.PANDURANGAN ESTATE. 6. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDER O F THE COMMISSIONER IN DENYING EXEMPTION UNDER SECTION 54F OF THE ACT. 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE MATERIAL ON RECORD. THE COMMISSIONER OF IN COME TAX PASSED ORDER UNDER SECTION 263 SETTING ASIDE TH E ASSESSMENT DIRECTING THE ASSESSING OFFICER TO DISAL LOW DEDUCTION ALLOWED UNDER SECTION 54F OF THE ACT IN T HE HANDS OF THE ASSESSEE. THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT SALE PROCEEDS HAVE TO BE ASSESSED IN THE HANDS OF LEGAL HEIRS OF LATE A.R.PANDURANGAN. THE A SSESSEE IS ONE OF THE LEGAL HEIRS OF LATE A.R.PANDURANGAN W HO DISCLOSED CAPITAL GAINS ON HIS SHARE AFTER CLAIMING DEDUCTION UNDER SECTION 54F OF THE ACT. THE ASSESSING OFFICER WHILE 7 ITA NOS. 2702/MDS/2014 COMPLETING THE ASSESSMENT CALLED FOR DETAILS IN RES PECT OF CLAIM FOR DEDUCTION UNDER SECTION 54F AND CAPITAL G AINS REPORTED BY THE ASSESSEE HUF AND ACCEPTED THE EXEMP TION CLAIMED UNDER SECTION 54F OF THE ACT ON THE SALE PR OCEEDS REPORTED BY THE ASSESSEE HUF. 8. THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CAS E OF ADDL. CIT VS. P.DURGAMMA (166 ITR 776) CONSIDERED T HE SCOPE OF SECTION 171 OF THE ACT DEEMING HUF TO BE UNDIVIDED. THE HONBLE HIGH COURT HELD THAT PROVISI ONS OF SECTION 171 WILL APPLY ONLY TO A HUF WHICH HAS BEEN ASSESSED EARLIER. WHILE HOLDING SO, THE HIGH COURT OBSERVED AS UNDER:- THE FICTION THAT A JOINT FAMILY SHALL BE DEEMED TO CONTINUE, ENUNCIATED IN SECTION 171(1) OF THE INCOME-TAX ACT, 1961, IS FOR THE LIMITED PURPOSE OF ROPING IN CASES OF JOINT FAMILIES WHICH HAD HITHERTO BEEN ASSESSED. IT IS NOT POSSIBL E TO EXTEND THAT FICTION :BEYOND THE FIELD LEGITIMATELY INTENDE D BY THE STATUTE. THE FICTION IN SECTION 171(1) MUST NECESSARILY BE CONFINED TO THE PURPOSE FOR WHICH IT WAS SPECIFIED IN THAT SECTION AND FOR NO OTHER PURPOSE. THE EXPRESSION 'H ITHERTO ASSESSED' OCCURRING IN SECTION 171(1) IS SIGNIFICANT. IT MAKES 11 CLEAR THAT ONLY A HINDU UNDIVIDED FAMILY WHICH H AD SUFFERED TAX ASSESSMENT IN THE PAST COULD BE DEEMED TO CONTINUE TO BE A HINDU UNDIVIDED FAMILY TILL AN ORD ER OF PARTITION UNDER SECTION 171(1) IS RECORDED 9. IN THE CASE ON HAND, NO EVIDENCE HAS BEEN BROUGH T ON RECORD TO SUGGEST THAT LATE A.R.PANDURANGAN HUF HA S BEEN 8 ITA NOS. 2702/MDS/2014 ASSESSED. IN SUCH CIRCUMSTANCES, THE SALE PROCEEDS OF THE PROPERTY CANNOT BE ASSESSED IN THE HANDS OF LATE A.R.PANDURANGAN (HUF). WE ALSO SEE NO REASON TO DISBELIEVE THE MEMORANDUM OF ORAL RECORDING PARTITI ON FURNISHED BY THE ASSESSEE. THUS THE CONTENTIONS OF THE COMMISSIONER OF INCOME TAX THAT SALE PROCEEDS HAVE TO BE ASSESSED IN THE HANDS OF LATE A.R.PANDURANGAN (HUF) IS NOT SUSTAINABLE IN LAW. THUS, WE SET ASIDE THE ORDER O F THE COMMISSIONER OF INCOME TAX PASSED UNDER SECTION 263 OF THE ACT AND RESTORE THAT OF THE ASSESSING OFFICER S INCE THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 27 TH NOVEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .