Yashwant Ganesh Kulkarni, Pune V. Income-tax Officer, Ward - 3(2), Pune

ITA 2790/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9094 (ITAT-PUNE)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-03-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Gift; Opportunity of being heard; Principle of natural justice; Fair market value
• Section: 54F

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2790/PUN/2017 / ASSESSMENT YEAR : 2013-14 YASHWANT GANESH KULKARNI, 703, VARAD VASTU, MAYUR COLONY, KOTHRUD, PUNE 411 038 PAN : ABTPK8218J . /APPELLANT VS. INCOME TAX OFFICER, WARD-3(2), PUNE . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 26.03.2018 / DATE OF PRONOUNCEMENT: 26.03.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-3, PUNE, DATED 22-11-2017 FOR THE A.Y. 2013-14. 2. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITI ON OF RS.1,58,25,000/- MADE BY THE A.O. ON ACCOUNT OF SALE CONSIDERATION R ECEIVED BY ASSESSEE ON ACCOUNT OF SALE OF LAND WHICH WAS SUBJECT TO LON G TERM CAPITAL GAIN AND COMPUTATION WAS SUBMITTED BEFORE A. O. BOTH THE AUTHORITIES ERRED IN NOT CONSIDERING AND APPRECIATING THE SUBMISSIONS M ADE BEFORE THEM. THE ORDER OF ASSESSMENT AND THAT OF THE LD. CIT(A) BE S ET ASIDE FOR DENOVO CONSIDERATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE SALE OF RS. 1,58,25,000/- WHICH WAS THE ASSET O F THE HUF OF THE ASSESSEE ALSO BELONGED TO THE SAID HUF. THE AUTHORITIES WERE NOT JUSTIFIED IN TREATING THE SUBMISSIONS OF T HE APPELLANT AS 'AFTERTHOUGHT' TO DENY THE EXEMPTION CLAIMED U/S 54F OF THE ACT. THE STATUS OF HUF AS PER PERSONAL LAW OF THE A SSESSEE WAS NOT CREATED BY HIM BUT WAS OUT OF HIS STATUTORY RIGHTS. THAT CANNOT 2 BE DENIED TO IT. THE STATUS OF HUF BEING SEPARATE AND INDEPENDENT STATUTORY POSITION THE SAID HUF WAS ENTITLED FOR EXEMPTION U/S 54F OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ASSESSEE/APPELLANT AND HIS BROTHER RECEIVED SOM E PROPERTY AS PER PARTITION DEED EXECUTED ON 24-9-198 5 OF ANCESTRAL PROPERTY. AFTER THE DEATH OF HIS BROTH ER IN THE YEAR 20-7-2011 THE WIDOW OF LATE RATNAKAR, BROTHER OF TH E ASSESSEE, MADE GIFT OF THE PROPERTY THAT IS SUBJECT LAND ORIGINALLY BEING ANCESTRAL PROPERTY IN FAVOUR OF TH E APPELLANT. THE ASSESSEE SHOWED THIS SALE TRANSACTION IN HIS IN DIVIDUAL INCOME. THE INCORRECT DECLARATION OF THE STATUS THAT IS 'INDIVI DUAL' INSTEAD OF HUF DOES NOT OBLITERATE THE RIGHTFUL OWNERSHIP OF THE HUF. I N THE CIRCUMSTANCES AND SALE CONSIDERATION HAVING INVESTED IN THE RESIDENTI AL PROPERTY THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 54F AS CLAIM ED. IT BE ALLOWED ACCORDINGLY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LONG TERM CAPITAL GAIN WAS ASSESSABLE IN THE HA NDS OF HUF WITH STATUTORY INDEXATION OF THE COST OF ACQUISITIO N OF LAND TO BE ADOPTED FMV AS ON 1-4-1981. THIS LEGAL POSITION THOUGH BROUGHT TO THE NOTICE OF THE AUTHORITIES WAS IGNORE D. THE SERIOUS TYPE OF PREJUDICE IS CAUSED TO THE ASSESSEE . THE DIRECTIONS BE ISSUED TO AUTHORITIES BELOW TO FOLLOW THE CORRECT LEGAL POSITION BY SETTING ASIDE THE ASSESSMENT ORDE R. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE PROPERTY THAT IS SUBJECT LAND WAS GIFTED TO 'BO UNTY' OF THE HUF BY THE WIDOW OF RATNAKAR (SINCE DECEASED) AND A S PER THE HINDU SUCCESSION ACT, 1956 IT BECAME THE PROPERTY O F THE HUF. THE SALE OF LAND WAS OF THE HUF PROPERTY AND A CCORDINGLY THE LONG TERM CAPITAL GAIN BELONGED TO HUF. ITS INV ESTMENT IN THE RESIDENTIAL HOUSE WAS ENTITLED TO BE EXEMPTED U /S 54F OF THE ACT. IN VIEW OF THIS THE LD. CIT(A) WAS NOT JUS TIFIED IN CONFIRMING THE ADDITION OF RS. 1,58,25,000/- IN THE HANDS OF INDIVIDUAL STATUS. THE ADDITION BE DELETED. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE AUTHORITIES BELOW CONSIDERED ONLY THE LEGAL POS ITION EXISTENT ON THE STATUTE AFTER 01-04-2015. BEFORE AM ENDMENT THAT IS PRIOR TO 01-04-2015, THE ASSESSEE WAS ENTIT LED TO EXEMPTION U/S 54F EVEN IF HE OWNED MORE THAN ONE HO USE IN ADDITION TO NEW ASSET. THE LEGAL POSITION WAS NOT P ROPERLY APPRECIATED. IT BE HELD ACCORDINGLY. 7. THE APPELLANT CRAVES TO LEAVE, ADD/AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF FOOD P ROCESSING OF FRUITS AND VEGETABLES. ASSESSEE FILED THE RETURN O F INCOME DECLARING TOTAL INCOME OF RS.54,94,550/- AND REPORTED EARNING OF CAPITAL GAINS AND INVESTMENT OF THE SAME PARTLY IN THE NEW R ESIDENTIAL 3 HOUSE AT PRISTINE FONTANA, BAVDHAN, PUNE AND CLAIME D EXEMPTION U/S.54F OF THE ACT IN RESPECT OF SAID REINVESTMENT. CONTENTS OF PARA 7 OF THE ASSESSMENT ORDER ARE RELEVANT. AT TH E END OF THE ASSESSMENT PROCEEDINGS, THE AO DETERMINED THE INCOM E AT RS.1,50,94,550/-. IN THE ASSESSMENT, THE ALLOWABIL ITY OF EXEMPTION U/S.54F OF THE ACT WAS THE BONE OF CONTENTION. GIVING BRIEF FACTS OF THIS ISSUE, LD. COUNSEL FOR T HE ASSESSEE SUBMITTED THAT THE ASSESSEE OWNS A HOUSE AT VATSAL APARTMENT, MAYUR COLONY, PUNE AND THE SAME IS HELD IN THE NAME OF THE ASSESSEE-INDIVIDUAL. FURTHER, ASSESSEE ALSO HAS A SHARE OF PROPERTY IN THE FLAT LOCATED AT PRISTINE FONTANA, BAVDHAN, P UNE. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE SOLD AGRICULTURAL LANDS AT NASHIK FOR A SUM OF RS.1,58,25,000/-. OUT OF THE S AME, RS. 91 LAKHS WAS REINVESTED IN ANOTHER HOUSE AGAIN LOCATED NEAR MAYUR COLONY, PUNE (NEW ASSET). IN THE RETURN OF INCOME, ASSESSEE CLAIMED DEDUCTION U/S.54F OF THE ACT IN RESPECT OF THE INVESTMENT OF RS.91 LAKHS MADE IN THIS YEAR. HOWEVER, THE AO DENIED THE SAID EXEMPTION ON THE GROUND THAT ASSESSEE ALREADY OWNS M ORE THAN ONE RESIDENTIAL HOUSE OTHER THAN THE NEW ASSET. DI SCUSSION GIVEN IN PARA NOS. 6 AND 7 OF THE ASSESSMENT ORDER IS REL EVANT. AGGRIEVED WITH THE ORDER OF AO ASSESSEE FILED AN APPEAL BEFOR E THE CIT(A). 4. IN THE FIRST APPELLATE PROCEEDINGS, ASSESSEE MEN TIONED THAT HE IS A SHAREHOLDER IN THE RESIDENTIAL HOUSE AT PRI STINE FONTANA, BAVDHAN, PUNE AND THE SAID FLAT WAS PURCHASED OUT O F THE HUF FUNDS. THEREFORE, IT CONSTITUTES A HUF PROPERTY AND NOT OWNED BY THE ASSESSEE-INDIVIDUAL. THEREFORE, THE SAME SHOUL D NOT BE CONSIDERED AS ANOTHER HOUSE OWNED BY THE ASSESSEE. HOWEVER, CIT(A) REJECTED THE SAID SUBMISSION OF THE ASSESSEE AND PROCEEDED 4 TO CONFIRM THE SAME AS PER THE DISCUSSION GIVEN IN PARA NOS. 5.3.2 TO 5.3.5 OF HIS ORDER. 5. AGGRIEVED WITH THE ORDER OF CIT(A) THE ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL WITH THE GROUNDS EXTRACTED ABOVE. 6. DURING THE PROCEEDINGS BEFORE US, THE ISSUE RELATING TO THE OWNERSHIP OF THE FLAT AT PRISTINE FONTANA, BAVDHAN, PUNE W AS THE DOMINANT ISSUE IN THE DEBATE. IT IS THE CLAIM OF THE ASSES SEES COUNSEL THAT THE SAID RESIDENTIAL HOUSE IS NOT OWNED BY THE ASSE SSEE IN HIS INDIVIDUAL CAPACITY. THE FLAT IS REGISTERED IN THE NAME OF TH E ASSESSEE AND HIS WIFE BUT IN THEIR CAPACITY AS HUF. THE SAID FLAT WAS PURCHASED OUT OF THE HUF FUNDS. ELABORATING THE SAME, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE HUF HAS AGRICULTURAL LANDS A ND THE SAID AMOUNT GAVE RISE TO AGRICULTURAL INCOME. THE SAID HUF INCO ME WAS SHARED AMONG THE CO-PARCENERIES. OUT OF HUF INCOME, THE SAID INCOME WAS GIVEN BY HIS BROTHER-KARTHA BY DEPOSITING IN THE BAN K ACCOUNT OF THE ASSESSEE. THE SAME CONSTITUTES THE SOURCE FOR PUR CHASE OF THE FLAT AT PRISTINE FONTANA, BAVDHAN, PUNE. FROM THESE FACTS AND PERSPECTIVE, THE SAID FLAT DO NOT BELONG TO THE ASSESSEE INDIVIDUAL. THER EFORE, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S.54F OF THE ACT IN RESPECT OF THE INVESTMENT OF RS.91 LAKHS. 7. HOWEVER, BRINGING OUR ATTENTION TO THE CONTENTS OF PA RA NO.5.3.2 OF THE ORDER OF CIT(A), LD. DR FOR THE REVENUE SUBMITTED T HAT THERE ARE NUMBER OF LACUNAE IN THE ABOVE EXPLANATION OF THE ASSESS EE. THE FACTS ABOUT FURNISHING THE RETURN OF INCOME BY THE HUF, EARNING OF AGRICULTURAL INCOME BY HUF AND TRANSFERRING OF THE SAME TO THE BANK ACCOUNTS OF THE HUF, FACTS RELATING TO THE UNDERTAKING OF THE 5 AGRICULTURAL ACTIVITIES IN THE SAID HUF LANDS ETC., WERE NOT D EMONSTRATED BY THE ASSESSEE. THEREFORE, WHEN AN EXEMPTION IS CLAIMED , THE ONUS IS ON THE ASSESSEE TO DISCHARGE THE SAME BY FURNISHING THE CREDIBLE EVIDENCES/EXPLANATION IN SUPPORT OF HIS CLAIMS. 8. ON HEARING BOTH THE PARTIES ON THIS LIMITED ISSUE IF THE RESIDENTIAL HOUSE AT PRISTINE FONTANA, BAVDHAN, PUNE BELONGS TO THE ASSESSEE INDIVIDUAL OR HUF, AS MENTIONED IN THE COURT, WE FIND THIS ISS UE REQUIRES REMANDING TO THE FILE OF AO. LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT HE SHALL FILE RELEVANT DATA RELATING TO THE IS SUE DISCUSSED ABOVE BEFORE THE AO IN THE REMAND PROCEEDINGS. HE ALSO M ENTIONED THAT IN CASE ASSESSEE FAILED TO DO SO, THE AO MAY REPEAT THE ADDITIONS BY WAY OF DENIAL OF EXEMPTION U/S.54F OF THE ACT IN RESPECT OF THE NEW ASSET PURCHASED DURING THE YEAR UNDER CONSIDERATION. ACCORDIN GLY, WE REMAND THE ISSUE TO THE FILE OF AO AND SET ASIDE GROUNDS TO THE FILE OF AO FOR FRESH ADJUDICATION. NEEDLESS TO SAY, AO SHALL GRANT RE ASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANC E WITH THE SET PRINCIPLES OF NATURAL JUSTICE. THUS, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MARCH, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 26 TH MARCH, 2018 6 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-3, PUNE 4. CIT-3, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.