Dr. Amita Sen, New Delhi V. Addl. CIT, New Delhi

ITA 4972/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52516 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Deemed Gift on Purchase of immovable Property below Jantri value; Capital asset; Gift; Cost of acquisition; Wrong claim; Revised return
• Section: 131; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI SHAMIM YAHYA ITA NO. 4972/DEL/10 ASSTT. YR: 2006-07 DR. AMITA SEN, VS. ADDL. CIT, RANGE-41, B-111, SARVODAYA ENCLAVE, NEW DELHI. NEW DELHI. PAN/ GIR NO.AAXPS7276H ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI AJAY WADHWA RESPONDENT BY : MS. PRATIMA KAUSHIK SR. DR O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER D ATED 23-6-2010 RELATING TO A.Y. 2006-07. FOLLOWING GROUNDS HAVE BE EN RAISED: 1. THAT THE ORDER DATED 23-06-2010 PASSED BY THE L D. CIT(A)-XXVII, NEW DELHI IS BAD IN LAW AND ON FACTS. 2. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE A CTION OF THE ASSESSING OFFICER IN COMPUTING SHORT TERM CAPIT AL GAINS ON SALE OF FLAT AT VASANT KUNJ, NEW DELHI AT RS. 12,32 ,000/- AS AGAINST NIL DECLARED IN THE RETURN. 3. THAT THE ORDER OF LD. CIT(A) IS ILLEGAL AND DESE RVES TO BE SET ASIDE AS THE SAME HAS BEEN PASSED WITHOUT CONSI DERING AND APPLYING MIND TO THE VARIOUS ISSUES RAISED BEFORE H IM. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 2 2. BRIEF FACTS ARE THAT FOR A.Y. 2006-07 THE ASSESS EE FILED HER RETURN OF INCOME WHICH INCLUDED NIL CAPITAL GAINS IN RESPEC T OF A HOUSE PROPERTY FLAT NO. 6584, SECTOR-C, POCKET 6&7, VASANT KUNJ, N EW DELHI, SOLD FOR A CONSIDERATION OF RS. 17,00,000/-. NIL CAPITAL GAI NS WORKED OUT AS UNDER: SALE CONSIDERATION OF SOLD FLAT ON RS. 17,00,000/- TO SMT. SHAKUNTLA CHAWLA LESS: COST OF ACQUISITION . A) PURCHASE COST 12,00,000/- B) TRANSFER CHARGES & 92,400/- COMMISSION PAID C) COST OF IMPROVEMENT 4,08,590 RS. 17,00,990/- SHORT TERM CAPITAL GAINS (-) RS. 990/- 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A O ASKED THE ASSESSEE TO GIVE DETAILS IN RESPECT OF COST OF ACQUISITION; COST OF IMPROVEMENT; TRANSFER CHARGES & COMMISSION PAID. IN REPLY THE ASSESSEE CO NTENDED THAT THE PROPERTY IN QUESTION WAS ACQUIRED BY HER FROM HUSBA ND SHRI SUROJIT SEN BY A REGISTERED AGREEMENT TO SELL DATED 21-9-2004. THE A GREEMENT TO SELL WAS FOR A SUM OF RS. 12,00,000/- AFTER PAYING STAMP DUTY OF RS. 68,400/-. THE AMOUNT OF SALE CONSIDERATION OF RS. 17.00 LACS RECE IVED BY THE ASSESSEE FROM ONE MRS. SHAKUNTALA CHAWLA WAS DEPOSITED BY THE ASS ESSEE IN A BANK ACCOUNT, JOINTLY OWNED BY THE ASSESSEE WITH HER HUS BAND SHRI SUROJIT SEN ON 11-4-2005 ITSELF. THE DEPOSIT IS SAID TO BE RS. 21 LACS BY THREE CHEQUES. 2.2. AO THEN PROCEEDED TO ASK THE ASSESSEE AS TO WH Y THERE WAS EXTRA CREDIT OF RS. 4.00 LACS IN THE A/C. IT WAS REPLIED THAT THE BALANCE RS. 4.00 LACS REPRESENTED SALE PROCEEDS OF HOUSE-HOLD ITEMS OF VA SANT KUNJ HOUSE TO SMT. SHAKUNTALA CHAWLA. VIDE LETTER DATED 22-10-2008, TH E ASSESSEE FURNISHED THE LIST OF SUCH ITEMS. 3 2.3. THE AO SUMMONED SMT. SHAKUNTALA CHAWLA TO APPE AR AND PRODUCE PHOTOCOPIES OF ALL DOCUMENTS/ PAPERS RELATING TO T HE TRANSFER OF FLAT AND OTHER HOUSEHOLD ITEMS. IN RESPONSE, SMT. SHAKUNTALA CHAWLA APPEARED AND PRODUCED AGREEMENT TO SELL FITTINGS & FIXTURES DATE D 27-5-2005 FOR RS. 8 LACS, WHICH WAS SIGNED BY THE ASSESSEE AND WITNESSED BY H ER HUSBAND SHRI SUROJIT SEN. ACCORDING TO AO, THUS SMT. SHAKUNTALA CHAWLA P AID AN AMOUNT OF RS. 8 LACS FOR FITTINGS AND FIXTURES. THE AGREEMENT TO SELL FURTHER REVEALED THAT IT WAS AN AGREEMENT FOR SALE OF FIXTURES, FITTINGS AND WOOD WORK INSTALLED IN THE DDA FLAT NO. 6584, SECTOR-C, POCKET 6&7, VASANT KUN J, NEW DELHI AND THERE WAS NO MENTION ABOUT SALE OF ANY MOVABLE FURN ITURE OR HOUSEHOLD ITEMS. AO FURTHER INQUIRED FROM THE CONTRACTOR SHRI SURATH KUMAR MANGARAJ ALLEGED TO BE ENGAGED BY THE ASSESSEE TO CARRY OUT RENOVATION WORK. HE REPLIED HAVING NOT DONE ANY RENOVATION WORK FOR DR . AMITA SEN FOR VASANT KUNJ PROPERTY NOR ANY PAYMENT WAS RECEIVED IN FINAN CIAL YEAR 2005-06 EITHER BY CASH OR CHEQUE. THE CONFIRMATORY LETTER F ILED BY THE ASSESSEE WAS NOT SIGNED HIM. ASSESSEE WAS GIVEN OPPORTUNITY TO C ROSS-EXAMINE THE CONTRACTOR. ACCORDING TO AO, ASSESSEE DID NOT TURN UP ON THE APPOINTED DATE I.E. 31-10-2008 AT 3.00 PM FOR THE SAME. AO THUS HE LD THAT THE ASSESSEE HAD MADE A WRONG CLAIM ABOUT COST OF IMPROVEMENT. 2.4. THEREAFTER THE ASSESSEE VIDE HER FOLLOWING LET TER DATED 17-11-2008 RAISED A CLAIM THAT THE FLAT WAS IN FACT GIFTED BY HER HUSBAND SHRI SUROJIT SEN: THE FLAT AT VASANT KUNJ WAS PURCHASED BY THE HUSBA ND OF THE ASSESSEE SHRI SUROJIT SEN FOR A SUM OF RS. 27,00,00 0/- ON 14-09- 1998 AND THE SAME WAS TRANSFERRED TO THE ASSESSEE ON 21-09- 2004. THE TRANSFER TO THE ASSESSEE WAS DULY DISCLOS ED IN THE INCOME TAX RETURN FILED BY THE HUSBAND OF THE ASSES SEE. COPY OF THE PURCHASE DEED AND INCOME TAX RETURN ALONG WITH 4 COMPUTATION OF INCOME FILED BY SHRI SUROJIT SEN HAV E ALREADY BEEN SUBMITTED. THE AID FLAT WAS TRANSFERRED TO THE ASSESSEE FOR RS. 12,00,000/- WHICH WAS SHOWN AS THE PURCHASE COS T IN THE INCOME TAX RETURN FILED BY THE ASSESSEE. HOWEVER, S INCE THE SAID AMOUNT WAS NOT PAID BY THE ASSESSEE, THE SAME IS IN THE NATURE OF GIFT FROM THE HUSBAND TO THE WIFE AND IN CASE OF GIFT, COST TO THE PREVIOUS OWNER IS TO BE TAKEN AS COST OF ACQUIS ITION AT THE HANDS OF THE ASSESSEE. AS SUCH, COST OF ACQUISITION IN THE COMPUTATION OF CAPITAL GAIN OF THE ASSESSEE IS TO B E TAKEN AS RS. 27,00,000/- BEING COST TO THE HUSBAND OF THE ASSESS EE. 2.5. THE ASSESSEE IN SUPPORT OF HER NEW PLEA FILED A COPY OF THE RETURN OF INCOME OF HER HUSBAND SHRI SUROJIT SEN FOR A.Y. 200 5-06N WHICH CONTAINED NOTE THERE UNDER, AS REPRODUCED BELOW: NOTE DURING THE YEAR UNDER CONSIDERATION, UNDER THE FAMILY ARRANGEMENT, THE ASSESSEE HAS TRANSFERRED HIS FLAT NO. 6584 SFS- III, POCKET 6&7, SECTOR-C, VASANT KUNJ, NEW DELHI T O HIS WIFE FOR A SUM OF RS. 12,00,000/-. THE SAID RESIDENTIAL FLAT WAS PURCHASED BY THE ASSESSEE FOR RS. 27,00,000/-. HENC E THERE IS NO CAPITAL GAIN ON TRANSFER OF FLAT TO THE WIFE OF THE ASSESSEE, SUCH A REALIGNMENT OF INTEREST BY WAY OF EFFECTING FAMILY ARRANGEMENT AMONG THE MEMBERS DOES NOT AMOUNT TO TRANSFER UNDER CAPITAL GAIN. 2.6. AO EXAMINED THIS CLAIM OF ASSESSEE, HOWEVER, HELD THAT THE PLEA OF GIFT. FAMILY ARRANGEMENT OR FAMILY SETTLEMENT RAISE D BY THE ASSESSEE WAS NOT BONA FIDE ONE AND REJECTED THE SAME AS AN AFTER THO UGHT, BY OBSERVING AS UNDER: 3.19. IN KALE V. DEPUTY DIRECTOR OF CONSOLIDATION, AIR 1976 SC 807 QUOTED AT PAGE 497-98 IN CIT VS. A.L. RAMANA THAN (2000) 245 ITR 494 (MAD.), THE SUPREME COURT HAS LA ID DOWN THE PROPOSITION WHICH ARE THE ESSENTIALS OF A FAMI LY ARRANGEMENT:- 5 (1) THE FAMILY SETTLEMENT MUST BE A BONA FIDE ONE SO AS TO RESOLVE FAMILY DISPUTES AND RIVAL CLAIMS BY A FAIR AND EQUITABLE DIVISION OR ALLOTMENT OF PROPERTIES BETWE EN THE VARIOUS MEMBERS OF THE FAMILY. (2) THE SAID SETTLEMENT MUST BE VOLUNTARY AND SHOULD NO T BE INDUCED BY FRAUD, COERCION OR UNDUE INFLUENCE; 3.20. THE SAME PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT WERE REITERATED BY THE HONBLE MADRAS HIGH CO URT IN THE CASE OF COMMISSIONER OF GIFT TAX VS. D. NAGIRATHINA M (2004) 266 ITR 342(MAD.). 2.7. AO THEN ISSUED A SHOW CAUSE LETTER ASKING THE ASSESSEE AS TO WHY THE CLAIM OF FAMILY ARRANGEMENT MADE BY THE ASSESSEE BE IGNORED AND BE TREATED AS A SALE TRANSACTION BETWEEN HUSBAND AND WIFE. ASS ESSEE VIDE LETTER DATED 11-12-2008 REPLIED AS UNDER: AS SUBMITTED EARLIER, THE FLAT AT VASANT KUNJ WAS PURCHASED BY THE HUSBAND OF THE ASSESSEE SH. SUROJIT SEN FOR A S UM OF RS. 27,00,000/- ON 14-09-1998 AND THE SAME WAS TRANSFER RED AS A GIFT TO THE ASSESSEE ON 21-09-2004 AND THE AMOUNT S HOWN FOR TRANSFER FOR STAMP DUTY PURPOSES WAS RS. 12,00,000/ -. SINCE THE ASSESSEE HAS NOT PAID ANY AMOUNT TO SH. SUROJIT SEN , THE COST OF THE PREVIOUS OWNER NEEDS TO BE TAKEN AS COST OF ACQ UISITION AT THE HANDS OF THE ASSESSEE. THERE WAS FAMILY ARRANGEMENT UNDER WHICH THE SAID F LAT WAS TRANSFERRED. THIS WAS DULY MENTIONED IN THE COMPUTA TION OF INCOME FLED BY SH. SUROJIT SEN, COPY OF WHICH IS AL READY SUBMITTED TO YOU. THE ASSESSEE BEING DOCTOR BY PROF ESSION AND WITHOUT UNDERSTANDING THE LOGIC OF THE QUESTION WRO NGLY STATED IN THE STATEMENT RECORDED U/S 131 OF THE INCOME TAX ACT, 1961 THAT THERE WAS NO FAMILY ARRANGEMENT DURING THE FIN ANCIAL YEAR 2004-2005. MOREOVER INITIALLY YOUR QUESTION WAS FA MILY SETTLEMENT WHICH WAS CHANGED BY YOU WITH THE WORDS FAMILY ARRANGEMENT WITHOUT THE CONSENT OF THE ASSESSEE AN D SINCE THE ASSESSEE WAS IN AN HURRY TO GO TO RML HOSPITAL FOR SOME URGENT 6 SURGERY, SHE SIGNED THE SAME BELIEVING THE SAME TO BE TRUE AND CORRECT. 2.8. AO REJECTED THE ASSESSEES PLEA AS AN AFTER TH OUGHT, HOLDING THAT THERE WAS NO GIFT BY THE ASSESSEES HUSBAND IN HER FAVOUR - (1) THE GIFT MEANS A TRANSFER OF EXISTING MOVABLE OR IM MOVABLE PROPERTY VOLUNTARILY AND WITHOUT CONSIDERATION BY DONOR TO D ONEE. IN THIS CASE THERE WAS A CONSIDERATION OF RS. 12 LACS. (2) AS PER SEC. 123 OF THE TRANSFER OF PROPERTY ACT, A GIFT OF IMMOVABLE PROPERTY MUST BE EFFECTED BY REGISTERED INSTRUMENT. IN THIS CASE THERE WAS NO GIFT DEED BUT AN AGREEMENT TO SELL WHICH WAS REGISTERED. (3) THE IMPUGNED AGREEMENT TO SELL NAMED IT TO BE A SAL E-DEED AND NOT THE GIFT DEED. (4) THE ASSESSEES PLEA THAT THERE WAS NO ACTUAL PAYMEN T OF SALE CONSIDERATION OF RS. 12 LACS TO HER HUSBAND CANNOT BE VERIFIED. ACCORDING TO AO THE TRANSACTION TOOK PLACE ON 21-9- 2004 FALLING IN A.Y. 2005-06 AND HE WAS CONCERNED WITH ASSESSMENT F OR A.Y. 2006- 07, THEREFORE, HE HAD NO OCCASION TO EXAMINE THE BA NK ACCOUNTS OF THE ASSESSEE AND HER HUSBAND FOR A.Y. 2005-06 TO FIND O UT THE CONSIDERATION WAS PAID OR NOT BY CHEQUE. (5) ASSESSEE MIGHT HAVE PAID THE AMOUNT OF SALE CONSIDE RATION OF RS. 12 LACS TO HER HUSBAND BY CASH ALSO AND AO INFERRED TH AT THE AMOUNT OF RS. 12 LACS ONLY HAVE CHANGED HANDS IN ANY OTHER FO RM BETWEEN ASSESSEE AND HER HUSBAND. 2.9. AO REJECTING THE CLAIM AND CONTENTIONS RAISED BY THE ASSESSEE, MADE THE IMPUGNED ADDITION ON ACCOUNT OF SHORT TERM CAPI TAL GAINS AS UNDER: 7 SALE CONSIDERATION (RS. 17,00,000/-+ RS. 8,00,000/ -)=RS. 25,00,000/- LESS: COST OF ACQUISITION . A) PURCHASE COST 12,00,000/- B) TRANSFER CHARGES 68,000 RS. 12,68,000 SHORT TERM CAPITAL GAIN RS. 12,32,000/- 2.10. AGGRIEVED, ASSESSEE PREFERRED FIRST APPEAL. T HE CIT(A) AFTER REPRODUCING THE ORDER OF AO AND RECORDING THE ASSES SEES WRITTEN SUBMISSIONS CONFIRMED THE ORDER OF AO. AGGRIEVED, ASSESSEE IS BEFORE US: 5. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT: (1) THE FLAT IN QUESTION WAS OWNED BY HUSBAND OF THE AS SESSEE SHRI SUROJIT SEN, WHO PURCHASED THE SAME ON 14-9-1998 FO R A CONSIDERATION OF RS. 27,00,000/-. THIS FACT IS UNDI SPUTED AND SHRI SUROJIT SEN HAS SHOWN THIS AMOUNT IS HIS RETURN OF INCOME FOR A.Y. 1999-2000. RELEVANT DOCUMENTS IN THIS BEHALF HAVE B EEN FILED DURING THE COURSE OF ASSESSMENT. (2) THERE IS NO DISPUTE TO THE FACT THAT SHRI SUROJIT S EN PURCHASED THIS FLAT FOR RS. 27,00,000/- IN 1998. THE SAME WAS DECL ARED IN HIS RETURN OF INCOME FOR A.Y. 1999-2000. SHRI SUROJIT S EN WAS NOT KEEPING WELL AND DESIRED TO ENSURE THAT HIS WIFE DOES NOT FACE ANY DIFFICULTY IN RESPECT OF FLAT DURING HIS ILLNESS OR AFTER HIS DEATH. ON THE BASIS OF ADVICE AND CONSULTATIONS AND ACCORDING TO THE KNOWLEDGE WHICH HUSBAND AND WIFE POSSESSED, IT WAS DECIDED THAT THE HOUSE WILL BE GIFTED BY THE HUSBAND TO ASSESSEE . FOR STAMP DUTY PURPOSES AND TO AVOID REGISTRATION ISSUE, IT WAS DE CIDED AN AMOUNT OF RS. 12,00,000/- WILL BE SHOWN AS AGREEMENT TO SE LL. THE 8 TRANSACTION BETWEEN HUSBAND AND WIFE WAS DOMINANT B Y A GIFT. THUS WHATEVER BE THE NOMENCLATURE, THE TRANSACTION BETWEEN HUSBAND AND WIFE WAS ESSENTIALLY A FAMILY ARRANGEME NT AND NOT THE ACTUAL SALE AND PURCHASE AND NO CONSIDERATION PASSE D HANDS. THERE MAY BE SOME CONFUSION ABOUT THE METHODOLOGY ADOPTE D BUT THE FACT REMAINS THAT TRANSACTION BETWEEN HUSBAND AND W IFE WAS A FAMILY ARRANGEMENT, WHICH MAY BE INTERPRETED AS A G IFT OR AN AGREEMENT TO SELL. THIS, ACCORDING TO LEARNED COUNS EL, IS THE FACTUAL SITUATION THAT THERE WAS NEITHER ELEMENT OF SALE NO R ANY CONSIDERATION FLOWED. (3) THUS SHRI SUROJIT SEN TRANSFERRED THE AFORESAID FLA T TO THE WIFE ON 21-09-2004 AS A GIFT BUT INSTEAD OF MAKING GIFT DEE D, AS ADVISED IT WAS TERMED AS AN AGREEMENT TO SELL AND PURCHASE. THE CONSIDERATION AMOUNT OF RS. 12,00,000/- MENTIONED I N THE AFORESAID AGREEMENT WAS FOR THE PURPOSE OF STAMP DU TY, VALUATION AND REGISTRATION ONLY. SINCE IT WAS A GIFT FROM HUS BAND TO WIFE, THE APPELLANT DID NOT PAY ANY AMOUNT TO HER HUSBAND. (4) SHRI SUROJIT SEN, THE HUSBAND OF THE APPELLANT DISC LOSED THE INFORMATION ABOUT TRANSFER OF THE FLAT TO WIFE IN H IS RETURN FILED ON 8 TH SEPTEMBER, 2005 FOR THE ASSESSMENT YEAR 2005-06, W HICH IS PLACED AT P.B. PAGES 74 TO 76. (5) THE FOLLOWING NOTE HAS BEEN MENTIONED IN THE COMPUT ATION OF INCOME: DURING THE YEAR UNDER CONSIDERATION, UNDER THE FAM ILY ARRANGEMENT, THE ASSESSEE HAS TRANSFERRED HIS FLAT NO. 6584, SFS-III, POCKET &7, SECTOR-C, VASANT KUNJ, N EW DELHI TO HIS WIFE FOR A SUM OF RS. 12,00,000/-. THE SAID 9 RESIDENTIAL FLAT WAS PURCHASED BY THE ASSESSEE FOR RS. 27,00,000/-. HENCE THERE IS NO CAPITAL GAIN ON TRAN SFER OF FLAT TO THE WIFE OF THE ASSESSEE, SUCH A REALIGNMEN T OF INTEREST BY WAY OF EFFECTING FAMILY ARRANGEMENT AMO NG THE MEMBERS DOES NOT AMOUNT TO TRANSFER UNDER CAPIT AL GAIN. (6) THE ASSESSEE BEING A DOCTOR BY PROFESSION, TOOK THE HELP OF SOME TAX CONSULTANT TO FILE HER INCOME TAX RETURN. WHILE PREPARING THE INCOME TAX RETURN THE CONSULTANT INADVERTENTLY MIST OOK THE AMOUNT OF RS. 12 LACS AS PURCHASE COST OF THE FLAT AND CAL CULATED SHORT-TERM CAPITAL TAX, IGNORING THE FACT THAT IT WAS ACQUIRED FROM THE ASSESSEES HUSBAND BY WAY OF GIFT AND THE ASSESSEE HAD NOT PAID ANY AMOUNT TO HER HUSBAND. (7) A SUM OF RS. 4,08,590/- WAS INCURRED ON COST OF IMP ROVEMENT ON THE AFORESAID FLAT AND RS. 92,400/- WAS INCURRED ON TRANSFER CHARGES I.E. STAMP DUTY AND OTHER MISCELLANEOUS CHARGES. TH E FLAT WAS RENOVATED BY THE AFORESAID EXPENDITURE OF RS. 4,08, 590/- AS THE COST OF THE IMPROVEMENT. FOR THIS, NECESSARY CASH WITHDR AWALS WERE MADE FROM HER BANK ACCOUNTS MAINTAINED WITH STANDAR D CHARTERED BANK, NEW DELHI, STANDARD CHARTERED BANK, KOLKATA A ND BANK OF BARODA, NEW DELHI, SAME HAVE NOT BEEN DULY CONSIDER ED BY AO ON THE BASIS OF CONTRACTOR WHO WAS RELUCTANT TO FACE I NCOME-TAX PROCEEDINGS AND TOOK THE EASY WAY OUT BY DENYING TH E WORK. (8) THE LD. ADDL. CIT HAS WRONGLY STATED THAT THE ACQUI SITION OF FLAT BY THE APPELLANT FROM HER HUSBAND IS A TRANSFER WITHIN THE MEANING OF SECTION 2(47)(V) OF THE INCOME TAX ACT READ WITH SE CTION 53A OF 10 THE TRANSFER OF PROPERTY ACT, 1882. (9) AO DISALLOWED AMOUNT INCURRED ON COST OF IMPROVEMEN T TO THE TUNE OF RS. 4,08,590/- WHICH WAS A GENUINE EXPENDIT URE, WITHDRAWN FROM BANK. OBSERVATION OF AO THAT THE APP ELLANT RECEIVED RS. 8 LACS TOWARDS SALE PROCEEDS OF ITEMS OF FITTINGS AND FIXTURES IS NOT CORRECT AS APPELLANT HAS RECEIVED O NLY RS. 4 LACS IN HER ACCOUNT. (10) AO WAS NOT CORRECT IN HOLDING THAT THE FITTINGS AND FIXTURES AND WOODWORK HANDED OVER THROUGH A SEPARATE AGREEMENT TO SELL AND PURCHASE (FITTINGS & FIXTURES) WERE PART OF THE FLA T. BOTH THE TRANSACTIONS ARE INSEPARABLE AND THE CONSIDERATION RECEIVED ON SALE OF FITTINGS AND FIXTURES OF RS. 8 LACS AND FLAT HA VE TO BE TAKEN TOGETHER, WHICH WORKS OUT TO RS. 25 LACS. (11) THE APPELLANT INCURRED EXPENDITURE OF RS 4,08,5901 - ON THE COST OF IMPROVEMENT IN THE FLAT, NECESSARY CASH WITHDRAWALS WERE MADE FROM HER BANK ACCOUNTS MAINTAINED WITH STANDARD CHA RTERED BANK, NEW DELHI, STANDARD CHARTERED BANK. KOLKATA A ND BANK OF BARODA, NEW DELHI. IGNORING BANK STATEMENTS, LEARNE D ADDL. CIT DISALLOWED THE EXPENDITURE OF RS. 3,72,136/- ON THE TESTIMONY OF THE CONTRACTOR. SINCE ASSESSEE PAID THE AMOUNT BY WITHDRAWING IN CASH FROM BANK HE DID NOT ADMIT THE SAME DUE TO FEA R OF TAX PROCEEDINGS. THE BALANCE AMOUNT OF RS. 36,454/- (RS. 4,08,590- 3,72,136/-) WAS INCURRED ON OTHER MISCELLANEOUS IMPROVEMENT WORK IN THE FLAT. THE AMOUNT TOWARDS STAMP DUTY OF RS. 68,400/- 11 AND COMMISSION TOWARDS DOCUMENTATION AND OTHER CHAR GES TO THE TUNE OF RS. 24,0001- HAS BEEN INCURRED BY THE HUSBAND OF THE APPELLANT. COPY OF THE BILL GIVEN BY S.P.M CONTRACT S IS ON RECORD. BANK WITHDRAWALS AND CONTRACTORS BILL ON RECORD A ND THERE BEING ACTUAL IMPROVEMENTS, THERE IS NO JUSTIFICATION IN S UCH DISALLOWANCE. (12) DURING THE YEAR CONSIDERATION, THE APPELLANT MADE C ASH WITHDRAWAL OF RS. 3,59,8001-FROM DIFFERENT BANK ACCOUNTS. BESIDES, THERE IS A CASH WITHDRAWAL FROM THE BANK ACCOUNTS OF SHRI SURO JIT SEN TO THE TUNE OF RS. 5,28,6601- ( RS. 3,46,6601- FROM HDFC BANK AND RS. 1,82,0001- FROM HSBC BANK LTD. THE TOTAL WITHDRAWALS MADE BY BOTH OF THEM COMES TO RS. 8,88,4601- OUT OF WHICH RS.5,00,9901- HAS BEEN SPENT ON COST OF IMPROVEMENT AND THE BALAN CE AMOUNT OF RS. 3,87,4701- HAS BEEN SPENT BY THEM ON HOUSEHOLD EXPENSES WHICH IS ENOUGH FOR THEM AS THEIR FAMILY CONSISTS O F HUSBAND AND WIFE AND THEY HAVE NO CHILDREN. THE RESIDENTIAL ACC OMMODATION HAS BEEN PROVIDED BY THE COMPANY IN WHICH THE HUSBA ND OF THE APPELLANT IS EMPLOYED FOR WHICH RENT OF RS.20,000/- P.M IS PAID BY THE APPELLANT'S HUSBAND. STATEMENT SHOWING WITHDRAW ALS MADE BY ASSESSEE AND SHRI SUROJIT SEN, ARE ON RECORD WITH C OPIES OF BANK STATEMENTS. (13) LEARNED AO HAS WRONGLY OBSERVED THAT THE ISSUE OF 'FAMILY ARRANGEMENT' AND 'COST TO THE PREVIOUS OWNE R' WAS RAISED FOR THE FIRST TIME ON 17 TH NOVEMBER, 2008. THE COPY OF THE RELEVANT DOCUMENTS IN CONNECTION WITH THE TRANSFER OF FLAT WERE ENCLOSED WITH THE INCOME TAX RETURN FILED BY THE AP PELLANT AND HER 12 HUSBAND. THUS FULL DISCLOSURE WAS ON RECORD WITH NO TE OF THE COMPUTATION OF INCOME TAX FILED ALONG WITH THE INCO ME TAX RETURN OF SHRI SUROJIT SEN FOR THE ASSESSMENT YEAR 2005-2006. (14) THE APPELLANT VIDE LETTER DATED 17TH NOVEMBER, 2008 HAD SUBMITTED THAT THE FLAT AT VASANT KUNJ WAS PURCHASE D BY THE HUSBAND OF THE APPELLANT, SHRI SUROJIT SEN FOR A SU M OF RS.27 LACS ON 14TH SEPTEMBER,1998 AND THE SAME WAS TRANSF ERRED TO THE APPELLANT ON 21 ST SEPTEMBER, 2004. THE TRANSFER TO THE APPELLANT WAS DULY DISCLOSED IN THE INCOME TAX RETU RN FILED BY THE HUSBAND OF THE APPELLANT. THE SAID FLAT WAS TRANSFE RRED TO THE APPELLANT FOR RS. 12,00,000/- WHICH WAS WRONGLY SHO WN AS THE PURCHASE COST IN THE INCOME TAX RETURN FILED BY THE APPELLANT. BEFORE COMPLETION OF ASSESSMENT, AN ASSESSEE CAN FI LE DETAILS OF MISTAKES AND OMISSIONS IN RETURN, THE SAME HAVE BEE N EXAMINED BY AO. SINCE THE ALLEGED SALE CONSIDERATION WAS NOT PA ID BY THE APPELLANT, THE TRANSACTION WAS PURELY IN THE NATURE OF THE GIFT FROM THE HUSBAND TO THE WIFE. AS PER SEC. 49(1) IN CASE OF GIFT, COST TO THE PREVIOUS OWNER/ DONOR IS TO BE TAKEN AS COST O F ACQUISITION AT THE HANDS OF THE DONEE, WHICH IS UNDISPUTEDLY RS.2 7 LACS BEING COST IN THE HANDS OF HUSBAND OF THE APPELLANT. (15) THE LEARNED ADDI. CIT, PROPOSED TO IGNORE THE CLAIM OF 'FAMILY ARRANGEMENT' AND TREAT THE GIFT BETWEEN HUSBAND AND WIFE AS A SALE AND THE APPELLANT WAS ASKED TO FILE HER OBJECTIONS IF ANY TO THE SAID PROPOSAL. THE APPELLANT IN ITS REPLY DATED 11TH DEC EMBER 2008 FULLY ESTABLISHED HER CLAIM BY SUBMITTING THAT THE FLAT AT VASANT KUNJ WAS PURCHASED BY THE HUSBAND OF THE APPELLANT SHRI. SUROJIT SEN FOR A SUM OF RS. 27 LACS ON 14TH SEPTEMBER, 199 8 AND THE 13 SAME WAS TRANSFERRED AS GIFT TO THE APPELLANT ON 21 ST SEPTEMBER, 2004 AND THE AMOUNT SHOWN FOR TRANSFER FOR STAMP DU TY PURPOSES WAS RS. 12 LACS. SINCE THE APPELLANT HAS NOT PAID A NY AMOUNT TO SHRI. SUROJIT SEN, THE COST OF THE PREVIOUS OWNER N EEDS TO BE TAKEN AS COST OF ACQUISITION AT THE HANDS OF THE APPELLAN T. THERE WAS FAMILY ARRANGEMENT UNDER WHICH THE SAID FLAT WAS TR ANSFERRED. THIS FACT DULY MENTIONED IN THE COMPUTATION OF INCOME FI LED BY SHRI SUROJIT SEN. THE APPELLANT ALSO SUBMITTED THAT SHE BEING DOCTOR BY PROFESSION AND WITHOUT UNDERSTANDING THE LEGAL INTR ICACIES MISTAKENLY STATED IN THE STATEMENT RECORDED U/S 131 OF THE INCOME TAX ACT, 1961 THAT MERE WAS NO FAMILY ARRANGEMENT D URING THE FINANCIAL YEAR 2004-2005. (16) THE APPELLANT HAS NOT PAID ANY AMOUNT MENTIONED IN THE AGREEMENT TO SELL. ACCORDING TO THE SECTION 122 OF TRANSFER O F PROPERTY ACT, 'GIFT' IS DEFINED AS 'THE TRANSFER OF CERTAIN EXIST ING MOVABLE OR IMMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CON SIDERATION BY ONE PERSON, CALLED THE DONOR, TO ANOTHER, CALLED THE DONEE AND ACCEPTED BY OR ON BEHALF OF THE DONEE' (17) LEARNED ADDL. CIT WAS NOT JUSTIFIED IN CONCLUDING T HAT THERE WAS THAT THERE WAS NO OCCASION TO EXAMINE THE BANK ACC OUNTS OF THE APPELLANT AND HER HUSBAND TO FIND OUT WHETHER THE C ONSIDERATION WAS PAID BY CHEQUE OR NOT. THE BANK STATEMENTS FOR FINANCIAL YEAR 2004- 05 WERE EXAMINED BY THE ADDL. CIT BY GETTING THE SAME DIRECTLY FROM STANDARD CHARTERED BANK. BESIDES, THE I.T. RECORD WAS AVAILABLE WITH HIM. (18) THE LEARNED ADDL. CIT REJECTED THE CLAIM OF EXPENDI TURE OF RS.4,08,5901- INCURRED BY THE APPELLANT AS COST OF IMPROVEMENT 14 ON THE GROUND THAT NO SUCH EXPENDITURE HAS BEEN INC URRED. ON THE OTHER HAND, HE HAS CONSIDERED RS. 12 LACS AS CO ST OF ACQUISITION WHICH THE APPELLANT HAS NOT INCURRED/ P AID. (19) EVEN THOUGH BY MISTAKE OF THE TAX CONSULTANT, THE S AME HAS BEEN SHOWN AS A PURCHASE, THE NATURE OF THE TRANSACTION FACTUALLY REMAINS TO BE ONE OF GIFT BEING WITHOUT ACTUAL CON SIDERATION . FOR A TRANSACTION TO BE A VALID SALE, THERE HAS TO BE CONSIDERATION. IF THERE IS NO CONSIDERATION, THERE IS NO CONTRACT OR IN OTHER WORDS, NO SALE. (20) THE APPELLANT HAS STATED AND PROVED THAT THERE IS N O CONSIDERATION IN THE TRANSFER OF FLAT FROM THE HUSB AND TO THE APPELLANT AND IN SUCH A CASE, COST TO THE PREVIOUS OWNER I.E. RS. 27 LACS NEEDS TO BE TAKEN AS COST OF ACQUISITION IN THE HANDS OF THE APPELLANT. (21) AS PER CLAUSE (II) OF SUB-SECTION (1) OF SECTION 49 OF THE INCOME TAX ACT, 1961, IT IS PROVIDED THAT WHERE THE CAPIT AL ASSET BECAME THE PROPERTY OF THE ASSESSEE UNDER A GIFT OR WILL, THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. (22) AS PER SUB-SECTION 2(42A) OF THE INCOME TAX ACT, 1961, WHEREIN SHORT-TERM CAPITAL ASSET IS DEFINED, IT IS GIVEN THAT 'SHORT-TERM CAPITAL ASSET' MEANS A CAPITAL ASSET HE LD BY AN ASSESSEE FOR NOT MORE THAN THIRTY SIX MONTHS IMMEDI ATELY PRECEDING THE DATE OF ITS TRANSFER. AS PER CLAUSE ( B) OF EXPLANATION 1, IT IS PROVIDED THAT WHILE DETERMININ G THE PERIOD FOR 15 WHICH ANY CAPITAL ASSET IS HELD BY THE ASSESSEE, IN THE CASE OF A CAPITAL ASSET BECOMES THE PROPERTY OF THE ASSESSEE IN THE CIRCUMSTANCES MENTIONED IN SUB-SECTION (1) OF SECTI ON 49, THERE SHALL BE INCLUDED THE PERIOD FOR WHICH THE ASSET WA S HELD BY THE PREVIOUS OWNER REFERRED TO IN THE SAID SECTION. (23) SINCE THE APPELLANT HAS ACQUIRED THE AFORESAID ASSE T BY WAY OF GIFT WHICH IS COVERED U/S 49(1)(B) READ WITH 2(42A ) OF THE INCOME TAX ACT, 1961, THE CAPITAL GAINS SHALL BE ASSESSED AS LONG TERM CAPITAL GAIN AS THE PERIOD FOR WHICH THE ASSET WAS HELD BY THE PREVIOUS OWNER/HUSBAND SHALL ALSO BE INCLUDED IN CA LCULATING THE PERIOD OF HOLDING OF THE APPELLANT. (24) AS PER SUB-SECTION (III) OF SECTION 47 OF THE INCOM E TAX ACT, 1961, ANY TRANSFER OF A CAPITAL ASSET UNDER A GIFT OR WIL L OR AN IRREVOCABLE TRUST IS NOT A TRANSFER. THE ASSET ACQU IRED BY THE APPELLANT AS A GIFT FROM HER HUSBAND IS NOT A TRANS FER WITHIN THE MEANING OF SECTION 45 OF THE INCOME TAX ACT, 1961. SINCE THE TRANSFER HAS BEEN MADE WITHOUT CONSIDERATION, THE S AME IS IN THE NATURE OF GIFT AND IN SUCH A CASE, THE COST TO THE PREVIOUS OWNER SHALL BE THE COST OF ACQUISITION AT THE HANDS OF TH E APPELLANT. (25) IN THE CASE OF HIRA LAL RAM DAYAL VS. CIT (1980) 12 2 ITR 461 (PUNJAB & HARYANA ), IT HAS BEEN HELD THAT A REGIST ERED DOCUMENT HAS NO DOUBT EVIDENTIARY VALUE, BUT IT CAN NOT BE TAKEN AS CONCLUSIVE TO PROVE THAT THE TRANSFER HAS BECOME EFFECTIVE. THUS, WHERE THE ASSESSEE HAD EXECUTED A REGISTERED SALE DEED, PURPORTING TO SELL ITS FACTORY TO A SOCIETY BUT, IN ASSESSMENT PROCEEDINGS, IT CONTENDED THAT THE SALE WAS A SHAM TRANSACTION AND ALSO PRODUCED EVIDENCE TO PROVE THAT FACT, IT W AS HELD THAT 16 THE TRIBUNAL WAS NOT RIGHT IN IGNORING SUCH EVIDENC E ON THE GROUND THAT THE REGISTERED SALE DEED WAS A SACROSAN CT DOCUMENT. (26) IN THE CASE OF CIT V. RAMANATHAN (2000) 245 ITR 494 (MADRAS). IT HAS BEEN HELD THAT REALIGNMENT OF INTEREST BY WAY O F EFFECTING FAMILY ARRANGEMENT AMONG THE FAMILY MEMBERS WOULD N OT AMOUNT TO TRANSFER. (27) IN ANOTHER CASE OF CIT V. KAY ARR. ENTERPRISES )200 8) 299 ITR 348 (MADRAS), IT HAS BEEN HELD THAT REARRANGEMENT OF SHAREHOLDINGS IN COMPANY TO AVOID POSSIBLE LITIGATI ON AMONG FAMILY MEMBERS IS A PRUDENT ARRANGEMENT NECESSARY T O CONTROL COMPANY EFFECTIVELY BY MAJOR SHAREHOLDERS TO PRODUC E BETTER PROSPECTS AND ACTIVE SUPERVISION AND IN CASE OF SUC H ARRANGEMENT OF SHAREHOLDING IT CANNOT BE HELD THAT THERE IS TRANSFER OF SHARES LIABLE TO CAPITAL GAINS TAX. (28) RELIANCE HAS ALSO BEEN PLACED ON THE RATIO OF DECIS IONS IN THE FOLLOWING CASES: (I) NATIONAL CEMENT MINES INDUSTRIES 42 ITR 69 (S C); (II) BARIUM CHEMICALS 168 ITR 164 (AP); (III) SHALIMAR INDUSTRIES 98 TAXMAN 521 (CAL.); (IV) FAIRDEAL TRADES 327 ITR 34 (P&H). 5.1. IN RESPECT OF COST OF IMPROVEMENT AND FURNITUR E & FITTINGS, LEARNED COUNSEL FURTHER CONTENDS THAT: (I) THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCE EDINGS ALSO SUBMITTED LIST OF ITEMS HANDED OVER TO THE BUYER VI Z. SMT. SHAKUNTLA CHAWLA. SHE HAS DENIED FOR CERTAIN ITEMS. ON ONE HAND, 17 SHE SAYS THAT SHE HAS PAID RS. 8,00,000/- AND ON TH E OTHER HAND, SHE SAYS SHE AHS NOT RECEIVED THE ITEMS. THE LD. AO HAS NOT ASKED ANY QUESTION IN THIS REGARD. (II) THE ASSESSEE WAS ASKED TO FURNISH THE PROOF OF PURC HASE OF HOUSEHOLD ITEMS SUCH AS BILLS AND VOUCHERS ETC. IT WAS REPLIED BY THE APPELLANT THAT SINCE THESE ITEMS WERE OLD AND W ERE PURCHASED LONG BACK, THE BILLS/ INVOICES ARE NOT AVAILABLE WI TH THE ASSESSEE, HOWEVER BANK WITHDRAWALS WERE SHOWN. (III) SMT. SHAKUNTLA CHAWLA HAD EARLIER AGREED TO PAY RS. 8 LACS FOR THE ITEMS OF FITTINGS & FIXTURES, BUT AFTER BARGAINING, DID NOT PAY THE WHOLE AMOUNT. THE APPELLANT RECEIVED ONLY A SUM OF RS. 4 LACS VIDE CHEQUE NO. 030897 DATED 24 TH MARCH, 2005 DRAWN ON STANDARD CHARTERED BANK. NEW DELHI AND HAS NOT RECEIVED THE BALANCE TWO CHEQUES OF RS. 2 LACS EACH STATED TO BE DRAWN ON IN DIAN BANK, NEW DELHI-16, THE SAME IS VERIFIABLE FROM BANK ACCOUNTS . (IV) THE LEARNED AO WRONGLY OBSERVED THAT THE APPELLANT HAS RECEIVED RS. 8 LACS. A PERUSAL OF HER BANK ACCOUNTS WILL REV EAL THAT SHE HAS RECEIVED ONLY RS. 4 LACS. THE LEARNED ADDL. CIT HAS NOT OBTAINED THE COPY OF THE BANK STATEMENT OF THE VENDEE TO SUB STANTIATE THE PAYMENT OF RS. 8 LACS TO THE APPELLANT BEFORE MAKIN G THE ADDITION. 6. LEARNED DR ON THE OTHER HAND CONTENDS AS UNDER: (I) INCOME-TAX ASSESSMENT IS TO BE FRAMED ON THE BASIS OF RETURN FILED BY THE ASSESSEE. THE ASSESSEE HERSELF IN RETURN OF INCOME CLAIMED SHORT TERM CAPITAL LOSS, THUS ADMITTING THAT THE FL AT IN QUESTION WAS 18 PURCHASED BY HER FROM HER HUSBAND AND SOLD TO SMT. SHAKUNTLA CHAWLA. THE ASSESSEE HAS NOT FILED ANY REVISED RETU RN TO CHANGE HER CLAIM. (II) ASSESSEES CONTENTION THAT AN AMOUNT OF RS. 4 LACS WAS PAID BY ASSESSEE FOR RENOVATION AS COST OF IMPROVEMENT, WAS NEGATIVED BY THE CONTRACTOR. (III) THE ASSESSEES CONTENTION THAT ONLY RS. 4 LACS WERE RECEIVED BY HER AS SALE CONSIDERATION OF MOVABLES WAS FOUND TO BE I NCORRECT INASMUCH AS SMT. SHAKUNTLA CHAWLA STATED THAT SHE P AID AN AMOUNT OF RS. 8 LACS FOR THE FURNITURE AND FITTINGS EMBODI ED IN HOUSE PROPERTY. (IV) AO THUS ON VARIOUS COUNTS FOUND THAT THE ASSESSEES EXPLANATION SUFFERED FROM MANY FALLACIES. (V) AGREEMENT TO SELL WAS DULY REGISTERED AND THERE WAS NOT EVEN A WHISPER ABOUT THE GIFT, THEREFORE, THE PLEA OF GIFT RAISED BY ASSESSEE AMOUNTS TO AN AFTER THOUGHT. THIS PLEA OF GIFT/ FAM ILY ARRANGEMENT IS NOT WORTHY OF ACCEPTANCE INASMUCH AS BOTH HUSBAN D AND WIFE TREATED THE TRANSACTION AS A SALE AND NOT GIFT OR T HE FAMILY ARRANGEMENT. (VI) THERE IS NEITHER ANY DISPUTE NOR CONFLICT BETWEEN H USBAND AND WIFE WHICH PROMPTED THE FAMILY ARRANGEMENT. ALL THE FACT S INDICATE THAT THE PLEA BEING TAKEN BY THE ASSESSEE WAS BY WAY OF AN AFTER THOUGHT. RELIANCE IS PLACED ON THE RATIO OF DECISIO N IN THE CASE OF CIT VS. RAMANATHAN 245 ITR 494 (MAD.), FOR THE PROP OSITION THAT VALID FAMILY ARRANGEMENT SHOULD BE BONA FIDE AND S HOULD NOT BE INDUCED BY ANY FRAUD OR COLLUSION. AO RELIED ON THI S CASE LAW 19 WHICH IN TURN RELIES ON HONBLE SUPREME COURT JUDGM ENT IN AIR 1976 SC 807 IS RELIED ON. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. (I) THE FIRST ISSUE WHICH DESERVES TO BE DECIDED IS WHE THER THE PROPERTY RECEIVED BY THE ASSESSEE WAS BY WAY OF F AMILY ARRANGEMENT OR GIFT. THE PLEA OF LEARNED DR THAT ON CE THE ASSESSEE HAS MADE A CLAIM IN THE RETURN OF INCOME, SHE CANNO T CHANGE THE CLAIM UNLESS SHE FILES A REVISED RETURN. IT IS TRIT E LAW THAT THE AO AS A QUASI JUDICIAL OFFICER HAS A DUTY TO FRAME A JUST AND PROPER ASSESSMENT AND TO BRING TO TAX PROPER INCOME. IN TH IS COURSE IF SOME CLAIMS ARE MADE BY THE ASSESSEE, THOUGH NOT BY REVISED RETURN, THEY CANNOT BE BRUSHED ASIDE. CAPITAL GAINS WERE DISCLOSED BY THE ASSESSEE AND WERE TO BE TAXED IN ACCORDANCE WITH LAW. THE ASSESSEE IS ENTITLED TO POINT OUT MISTAKES, CORRECT IONS OR IMPROVEMENT IN ITS CLAIM. IN THIS CASE AO HIMSELF HAS EXAMINED THE CLAIM OF THE ASSESSEE AS TO WHETHER FLAT WAS AC QUIRED BY WAY OF FAMILY ARRANGEMENT/ GIFT. (II) IT IS NOT DISPUTED THAT THE HOUSE IN QUESTION WAS P URCHASED BY THE ASSESSEES HUSBAND FOR A SUM OF RS. 27,00,000/- WA Y BACK ON 14- 9-1998. THE AMOUNT OF PURCHASE WAS SHOWN BY HIM IN THE RELEVANT RECORD. THOUGH FLAT WAS TRANSFERRED AS A GIFT, SAME WAS NAMED BY ADVISE AS AN AGREEMENT TO SELL BETWEEN HUSBAND AND WIFE. THERE IS NO CONVEYANCE DEED AND THE SAID AMOUNT OF RS. 12 LA CS ALSO HAS NOT BEEN PAID BY THE ASSESSEE TO HER HUSBAND AS IT WAS NEVER INTENDED TO BE PAID. THE ARRANGEMENT WAS TO PROTECT THE INTEREST OF 20 THE ASSESSEE IN ANY ANTICIPATION OF SOME UNFORTUNAT E AND ADVERSE HAPPENINGS. (III) HONBLE SUPREME COURT IN NATIONAL CEMENT MINES (SUP RA) HAS HELD THAT IN ORDER TO ASCERTAIN THE REAL NATURE OF TRANSACTION CONDUCT OF PARTIES, SURROUNDING CIRCUMSTANCES AND DOCUMENTS ARE TO BE GIVEN A PROPER EFFECT AND MERE NOMENCLATURE GIVEN B Y PARTIES WILL NOT BE DECISIVE. IT HAS BEEN PLEADED THAT HUSBAND W ILL NOT AGREE TO SELL A PROPERTY PURCHASED IN 1998 FOR RS. 27 LACS IN VASANT KUNJ, NEW DELHI FOR A PALTRY SUM OF RS. 12 LACS IN 200 5. ASSESSEE PRODUCED RELEVANT RECORDS ABOUT NON-PAYMENT OF PURC HASE PRICE AS PROPER JUSTIFICATION, THE AO DECLINED TO LOOK INTO THESE FACTS WHICH WAS IMPORTANT. WHAT IS THE PAYMENT IN THE HANDS OF THE ASSESSEE WILL BE A RECEIPT IN THE HANDS OF HUSBAND AND BOTH BEING ASSESSED BEFORE AO FACT COULD HAVE BEEN VERIFIED FROM THE RE CORD. THUS ASSESSEES PLEA THAT AMOUNT OF RS. 12 LACS WAS NEVE R PAID BY THE ASSESSEE AS THE ARRANGEMENT WAS NOT A SALE/ PURCHAS E TRANSACTION EFFECTED WITHOUT ANY CONSIDERATION, REMAINS UNCONTR OVERTED. 7.1. OUR ATTENTION HAS BEEN DRAWN TO THE RETURN FOR A.Y. 2005-06 FILED BY ASSESSEES HUSBAND ON 8-9-05 I.E. MUCH PRIOR TO TH E DATE ON WHICH THE ASSESSMENT PROCEEDINGS IN ASSESSEES CASE STARTED. THE FIRST NOTICE U/S 143(2), ACCORDING TO AO, WAS ISSUED ON 16-7-2007. THUS EFFECTIVELY ASSESSEES HUSBAND FILED HIS RETURN OF INCOME FOR A .Y. 2005-06, TWO YEARS PRIOR TO IMPUGNED SCRUTINY PROCEEDINGS WHICH CLEAR LY MENTIONS THAT UNDER A FAMILY ARRANGEMENT ASSESSEE HAS TRANSFERRED HIS FLA T NO. 6584 FOR RS. 12 LACS AND THE PROPERTY WAS PURCHASED BY HIM FOR RS. 27 LA CS. SUCH REALIGNMENT OF 21 INTEREST BY WAY OF FAMILY ARRANGEMENT AMONG THE FAM ILY MEMBERS DOES NOT AMOUNT TO TRANSFER OR THE CAPITAL GAINS. 7.2. THE POINT IN QUESTION IS WHETHER ASSESSEES PL EA IS AN AFTER THOUGHT OR BONA FIDE CONDUCT. THE NOTE IN THE HUSBANDS RETU RN CLEARLY INDICATES THAT THE ATTRIBUTES OF FAMILY ARRANGEMENT VERY MUCH EXI STED IN THIS TRANSACTION. THEREFORE, WE ARE UNABLE TO AGREE WITH THE PREPOSIT ION THAT THE ASSESSEES PLEA ABOUT GIFT/ FAMILY ARRANGEMENT WAS AN AFTER T HOUGHT. 7.3. IN THE CASE RELIED ON BY THE AO HIMSELF IN HIS ORDER I.E. CIT VS. RAMANATHAN (SUPRA), REALIGNMENT OF INTEREST BY WAY OF EFFECTIVE FAMILY ARRANGEMENT WOULD NOT AMOUNT TO TRANSFER IF IT IS B ONA FIDE. HONBLE SUPREME COURT IN THE CASE OF NATIONAL CEMENT MINES INDUSTRY 42 ITR 61 HAS HELD THAT THE NAME OR NOMENCLATURE WHICH THE P ARTIES MAY GIVE TO TRANSACTION ABOUT THE SOURCE OF RECEIPT OR CHARACTE RIZATION OF RECEIPT WERE OF LITTLE USE. THE TRUE NATURE AND CHARACTER OF A TRAN SACTION HAVE TO BE ASCERTAINED FROM THE COVENANT OF THE CONTRACT IN TH E LIGHT OF THE SURROUNDING CIRCUMSTANCES. 7.4. HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. BARIUM CHEMICALS 168 ITR 164 (SUPRA) HAS HELD THAT THE WAY ASSESSEE TREATED THE PAYMENT IS NOT DECISIVE. TRANSACTION IS TO BE VIEWE D ON THE BASIS OF ITS REAL NATURE IMPLYING THEREBY CONDUCT, SURROUNDING CIRCUM STANCES AND RECORD. 7.5. LOOKING AT THE ENTIRE FACTS AND CIRCUMSTANCES, IT CLEARLY EMERGES THAT THE TRANSACTION BETWEEN HUSBAND AND WIFE WAS NOT A TRANSACTION OF AGREEMENT TO SELL IN ITS REAL SINCE. THE REASONS T O COME TO THIS CONCLUSION ARE: (1) ASSESSEES HUSBAND IN HIS RETURN OF INCOME, TWO YEA RS PRIOR TO THE SCRUTINY DESCRIBED THE TRANSACTION AS A FAMILY ARRANGEMENT, NOT LIABLE TO CAPITAL GAINS. 22 (2) THE AMOUNT OF SALE CONSIDERATION HAS NOT BEEN PAID BY THE WIFE TO HUSBAND AS MENTIONED IN THE SALE AGREEMENT, THER EFORE, THERE BEING NO REAL CONSIDERATION, THERE IS NO ELEMENT OF SALE IN THE TRANSACTION AS WRITTEN IN THE AGREEMENT. (3) WE ARE UNABLE TO ACCEPT THE CONTENTIONS THAT THE FA MILY ARRANGEMENTS ARE MADE ONLY IN THE CASES OF DISPUTES OR CONFLICTS AND THERE WAS CONSIDERATION OF RS. 12 LA CS INASMUCH AS A FLAT PURCHASED IN DELHI IN 1998 FOR RS. 27 LAC S CANNOT BE HELD TO BE SOLD FOR RS. 12 LACS. SUPPOSING WORST IS ASSUMED AGAINST ASSESSEE BECAUSE OF NOMENCLATURE I.E. AGRE EMENT TO SELL FOR RS. 12 LACS, STILL THERE IS A SUBSTANTIAL PARTIAL GIFT IN THE TRANSFER OF THE FLAT. ITS MARKET VALUE ON DATE OF G IFT FAR EXCEEDS THE AMOUNT OF RS. 12 LACS, THE DIFFERENCE AMOUNTS T O A GIFT. 7.6. THESE FACTS AND CIRCUMSTANCES CLEARLY LEAD TO CONCLUSION THAT THE AMOUNT OF CONSIDERATION WAS NOT PAID BY THE ASSESSE E TO HER HUSBAND AND IT WAS NOT INTENDED TO BE PAID ALSO. THE DOMINANT PURP OSE OF EXECUTING THE AGREEMENT TO SELL WAS TO ENSURE THAT THE WIFE BECOM ES THE BENEFICIAL RECIPIENT OF THE FLAT. 7.7. RELEVANT PART OF SEC. 49(1) OF THE I.T. ACT PR OVIDES AS UNDER: 49(1)- WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE (I) ON ANY DISTRIBUTION OF ASSETS ON THE TOTAL OR PARTI AL PARTITION OF A HINDU UNDIVIDED FAMILY; (II) UNDER A GIFT OR WILL; . .. 23 THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEME D TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED I T, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. 7.8. IN OUR VIEW, THERE BEING NO TRANSFER OF CONSID ERATION APROPOS THE AGREEMENT TO SELL, THE TRANSACTION IN TOTALITY OF C IRCUMSTANCES ASSUMES THE CHARACTER OF A GIFT. OUR VIEW IS FORTIFIED BY THE R ATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF NATIONAL CEMENT MINES INDUSTRIES (SUPRA), THAT A TRANSACTION IS TO BE ASCERTAINED ON THE BASIS OF ACTUAL FACTS, SURROUNDING CIRCUMSTANCES AND RECORD. THE NOMENCLATURE USED BY THE PARTIES IS NOT CONCLUSIVE. ASSESSEES HUSBANDS NOTE TWO YEARS PRI OR TO THE SCRUTINY ASSESSMENT AND THE SUBSEQUENT STATEMENT OF HUSBAND AND WIFE IN THE ASSESSMENT PROCEEDINGS, THE FACT THAT RS. 12 LACS W ERE NOT EXCHANGED AND RECORD LEAD TO THIS FACTUAL CONCLUSION. CONSEQUENT LY, WE ARE INCLINED TO HOLD THAT THE TRANSACTION IN QUESTION, BETWEEN HUSBAND A ND WIFE, WAS A TRANSACTION OF GIFT AND NOT A SALE OF PROPERTY. 7.9. CONSEQUENTLY, THE ISSUE OF CAPITAL GAINS IS TO BE REVIEWED IN THE LIGHT OF SEC. 49(1) AND 2(42A) AND IS TO BE HELD AS LONG TERM CAPITAL GAINS. AS PROVIDED, SECTION 49(1) COMES INTO PLAY AND THE COS T OF ACQUISITION TO THE OWNER OF THE PROPERTY WILL BE THE COST OF ACQUISIT ION FOR THE DONEE I.E. WIFE IN THIS CASE. IN OUR CONSIDERED VIEW THE ASSESSEES CLAIM IN THIS BEHALF IS TO 24 BE UPHELD IN THESE FACTS AND CIRCUMSTANCES. WE DIRE CT THE AO TO TREAT THE PURCHASE TRANSACTION IN THE HANDS OF THE ASSESSEE A S A GIFT FROM HUSBAND AND APPLY SEC. 49(1) WHILE CALCULATING THE LONG TERM CA PITAL GAINS IN THE HANDS OF THE ASSESSEE. 7.10. SINCE BY THIS FINDING, COMPUTATION OF CAPITA L GAINS AS ARRIVED AT BY THE AO WILL BE CHANGED, CONSEQUENTLY, WE SET ASIDE THE ISSUE OF COMPUTATION OF LONG TERM CAPITAL GAINS BACK TO THE FILE OF AO T O DECIDE THE SAME AFRESH IN VIEW OF ABOVE FINDINGS. WE ORDER ACCORDINGLY. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 05-08-2011. SD/- SD/- ( SHAMIM YAHYA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 05-08-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR