Shri. Indrajeet Ghorpade, Bangalore V. Assistant Commissioner of Income-Tax, 4(3)(1), Bangalore

ITA 61/BANG/2023

AI Insights

The case involves an appeal by Shri Indrajeet Ghorpade against the order of the National Faceless Appeal Centre (NFAC), which pertained to the assessment year 2016-17. The primary contention was regarding the incorrect assessment of capital gains tax on the sale of inherited property. The assessee argued that the tax was assessed on the total sale consideration rather than his individual share, and that deductions under section 54F for reinvestment in a residential property were unjustly denied. The Tribunal found merit in the assessee's arguments and remanded the matter back to the ACIT for a proper assessment in line with the legal provisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124474 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-03-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 05-02-2023
• Other Referred Cases: Collector, Land Acquisition vs. Mst. Katiji [1987] 167 ITR 471(SC), National Thermal Power Co. Ltd. Vs. CIT [1998] 229 ITR 383, Jute Corporation of India Ltd. Vs. CIT [187 ITR 688]
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 54F; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No. 61/Bang/2023 Assessment Year : 2016-17 Shri Indrajeet Ghorpade, No. 314, 7 th B Main, 4 th Block, Koramangala, Bangalore – 560 034. PAN: ADDPG7761N Vs. The Assistant Commissioner of Income Tax, Circle 4 (3)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Guruswamy H, ITP Revenue by : Smt. Priyadarshini Besaganni, Addl. CIT (DR) Date of Hearing : 23-03-2023 Date of Pronouncement : 27-03-2023 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against the order dated 24.11.2022 passed by the NFAC, Delhi for A.Y. 2016-17 on following grounds of appeal. Grounds of Appeal Tax effect relating to each Ground of appeal (see note below) 1. The impugned Order u/s. 250 of the Act dated: 24-112022 passed by the National Page 2 of 12 ITA No. 61/Bang/2023 Faceless Appeal Centre, Delhi is opposed to law, facts and circumstances of the case. 2. The Ld. CIT(A) has erred in not adjudicating Additional Ground No. 1 relating to the appropriate Status of the Appellant in which the Appellant is liable to be assessed for the Capital Gains arising out of the Sale of Inherited Property. 1,04,52,258/- 3. The Ld. CIT(A) has erred in holding that the amount of Rs. 8,74,00,000/- out of the total sale consideration of Rs. 16,50,00,000/- paid to M/s. Middleton Developers Ltd without appreciating the proper facts and circumstances of the case that the amount secured from Middleton Developers was utilised for the development of the Inherited property. 1,04,52,258/- 4. The Ld. CIT(A) has erred in not considering the Appellant's claim that a sum of Rs. 2,58,66,660/- is attributable to his 1/3rd Share and the remaining 2/3rd Share belonged to other two co-owners mentioned in the Sale Deed dtd: 10-02-2016 1,04,52,258/- 5. The Ld. CIT(A) has erred in not determining the quantum of Sale Consideration attributable to 1/3 rd Share of the Appellant out of the residual Sale Consideration acknowledged by all the three Vendors amounting to Rs. 7,76,00,000/- as reduced by Rs. 8,74,00,000/- paid to M/s. Middleton Developers Ltd at the instance of the Confirming Party M/s. Metrocorp in whose favour the Charge was created prior to the Sale Deed dated 10-02-2016. 1,04,52,258/- 6. The Ld. CIT(A) has erred in not appreciating the fact that the Appellant as per the Sale Deed dated 10-02-106 was paid only a sum of Rs. 5,50,00,000/- as against his UP Share of Rs. 2,58,66,660/- and the balance of Sale Consideration was attributable to the other two co-owners. 1,04,52,258/- 7. The Appellant craves leave to add, alter, amend and delete any of the grounds at the time of hearing. Total tax effect (see note below) 1,04,52,258/- Page 3 of 12 ITA No. 61/Bang/2023 2. Brief facts of the case are as under: 2.1 The Ld.AO passed the assessment order by making addition in the hands of the assessee by denying the deduction claimed u/s. 54F of Rs.5,03,89,327/- and treated the long term capital gain on the total consideration at Rs.10,24,12,285/-. 2.2 Aggrieved by the order of the Ld.AO, assessee filed appeal before the Ld.CIT(A). Before the Ld.CIT(A), assessee disputed the total consideration being assessed in the hands as against 1/3 rd share of Rs.5,50,99,998/- and the denial of the exemption u/s. 54. 2.3 The Ld.CIT(A) in para 4.5 of the impugned order, allowed assessee’s claim for the deduction admissible u/s. 54F of the Act. However, the Ld.CIT(A) did not consider the issue relating to the quantum of sale consideration attributable to the assessee of Rs.5,50,99,998/-. 2.4 Aggrieved by the order of Ld.CIT(A), assessee filed appeal before this Tribunal with a delay of 14 days. 2.5 An affidavit dated 06.02.2023 of assessee to the effect has been filed, wherein it is submitted that, the delay in filing the appeal was wholly and solely was on account of health grounds. It is submitted that, there was bonafide reason for the delay of 14 days in filing the appeal which may be condoned. 2.6 The Ld.AR also submitted that, there is no malafide intention on behalf of the assessee, in belatedly filing the present appeal before this Tribunal. In support, he placed reliance on the decision of Hon’ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji [1987] 167 ITR 471(SC). Page 4 of 12 ITA No. 61/Bang/2023 2.7 On the contrary, the Ld.DR though vehemently opposed the condonation petition filed by the assessee, however could not establish any malafide intention of assessee. 2.8 We have perused the submissions advanced by both sides in the light of records placed before us. 2.9 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non deliberate delay. We have to prefer substantial justice rather than technicality in deciding the issue. As observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors.(supra), if the application of the assessee for condoning the delay is rejected, it would amount to legalise injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Respectfully following the above view, we condone the delay of 14 days in filing the appeal before this Tribunal. 3. At the outset, the assessee has filed an application seeking admission of additional grounds that reads as under: “1. The Ld. AO has erred in completing the assessment on an INDIVIDUAL STATUS as against STATUS OF HUF without appreciating the facts that the sale of property which gave rise for Capital Gains liability was an ancestral property inherited by the legal heirs including the Appellant. 2. The Ld. AO has erred in holding a sum of Rs. 10,24,12,285/-as income from Capital Gains out of the sale consideration of Rs. 16,50,00,000/- without appreciating the fact that a sum of Rs. 8,74,00,000/- was paid to the confirming party m/s. Middleton Developer Ltd and the balance of Rs. 7,76,00,000/-was paid to the Vendors 1,2,3 and the Appellant's share was of Rs. Page 5 of 12 ITA No. 61/Bang/2023 2,58,66,666/- being one-third share attributable to the Appellant. 3. The Ld. AO was erred in not providing the deduction admissible U/s 54F of the Act without appreciating the fact the Appellant under the Law two years or three year as the case may be for re-investment and the return of income was filed admitting the Capital Gains in anticipation of investment made on 10-02-2018 in purchasing a residential property bearing No. 421-B25 in Block 25, 2" stage, RMV extension, Lottegollahalli having BBMP PID No. 100-768-421-B25, Bangalore measuring east to west 16.80 Mtrs and north to south 18.50 Mtrs in all measuring 310.80 Sq.Mtrs together with built-up area of residential of 3700 Sq.Ft consisting of ground and 1 st Floor.” 3.1 It has been submitted that no new facts needs to be considered in order to dispose of the additional grounds raised by the assessee. It is submitted that the additional grounds is a legal issue that goes to the root cause of the proceedings. The Ld.AR, thus prayed for the admission of additional grounds so raised by assessee. 3.2 On the contrary, the Ld.CIT.DR though opposed admission of the additional ground, could not bring anything on record which would challenge such a right available to assessee under the Act. We have perused the submissions advanced by both sides in light of records placed before us. 3.4 The Ld.DR did not object for the additional grounds being admitted. 3.4 We note that the additional grounds are directly connected with the main issue of disallowance and no new facts needs to be investigated for adjudicating the same. Another issues alleged by the assessee is a legal issue that does not require investigation of any facts. 3.5 Considering the submissions and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal Page 6 of 12 ITA No. 61/Bang/2023 Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional grounds raised by the assessee. Accordingly, the additional grounds raised by assessee stands admitted. 4. Ground nos. 2,3,4 and 5 are not pressed and accordingly dismissed as not pressed. 4.1 Now we will adjudicate Ground no. 6 along with additional grounds. It is submitted that the assessee is one of the Co-parceners of the Hindu Undivided Family, consisting of himself, his brothers, mother and sister. The property were originally owned by the ancestors of the assessee mentioned below i. Bhujanga Rao Yeshwanth Rao Ghorpade ii. Dattaji Rao Bhujanga Rao Ghorpade The property sold by the assessee and his family members was purchased by the ancestors named above from one Ms. Ahalya Bai Ramabhadran through a Registered Sale Deed dtd: 12-03- 1956 registered as a document bearing No. 78/1955-56 Book- I Volume 87 Pages 61 to 66 registered in the office of the District Registrar Bangalore. 4.2 It is submitted that the said property was measuring 21 Acres 15 Guntas situated in SY. No. 109, Doddagubbi Village, Bidarahalli Hobli, Bangalore East Taluk. The aforesaid Bhujanga Rao Yeshwanth Rao Ghorpade hsa died intestate on 03-06-1966 and upon his death the aforesaid property was succeded by only legal heir Late. Dattaji Rao Bhujanga Rao Ghorpade and the entire extent of land was registered in the name of Dattaji Rao Page 7 of 12 ITA No. 61/Bang/2023 Bhujanga Rao Ghorpade in revenue records vide IHC No. 41/1967-68. Therefore said Dattaji Rao Bhujanga Rao Ghorpade in his lifetime had sold major portion of the property and retained only property to an extent of 7 Acres 31. ¾ Guntas. The retained property was phoded and allotted New Sy. No. 109/1A2 in the name of Dattaji Rao Bhujanga Rao Ghorpade measuring 7 Acres 31.3/4 Guntas. 4.3 It is submitted that the said property measuring to an extent of 7 Acres 31. 3/4 Guntas was exclusively held by Dattaji Rao Bhujanga Rao Ghorpade, father of the assessee. The said Dattaji Rao Bhujanga Rao Ghorpade in his lifetime for the sake of protecting the property has executed a WILL dtd: 28-012008 in favour of Prathap Ghorpade, Indrajeeth Ghorpade. However the aforesaid property was owned by the following Legal heirs of Dattaji Rao Bhujanga Rao Ghorpade who demised on 28-05- 2010. i. Mrs. Chandravathi D Ghorpade (Wife — Vendor No. 1) ii. Mr. Kumar D Ghorpade (Son) iii. Mr. Prathap D Ghorpade (Son) iv. Mrs. Lalithadevi R Patankar (daughter — Vendor No. 2) v. Mr. Indrajeeth Ghorpade (son — Vendor No. 3) vi. Mr. Shailendra Ghorpade. (son) 4.4 It is submitted that, in Sale Deed on page 7 para 2, the recitals also state that the said property was succeeded by the above legal heirs after obtaining release deed from the other two brothers. Therefore the aforesaid property was jointly sold by the assessee along with his mother Smt. Chandravathi D Ghorpade Page 8 of 12 ITA No. 61/Bang/2023 and Sister Mrs. Lalithadevi R Patankar. The assessee being Vendor No. 3 had only 1/3 rd share in the aforesaid property. In view of the aforesaid facts and circumstances, the Ld.AR submitted that the property sold was succeeded by the assessee and his family members and the said property was jointly sold. The Ld.AR thus submitted that the assessee had only 1/3 rd share in the aforesaid property but for the sake of convenience he has received his share of consideration along with a part of the share of consideration of the other two vendors. 4.5 Further the Ld.AR submitted that without prejudice to the above submissions, it is further submitted that the aforesaid property was sold by the assessee as vendor No. 3 along with his mother as Vendor No. 1 and his sister as Vendor No. 2 for a sale consideration of Rs. 16,50,00,000/- out of which a sum of Rs.8,74,00,000/-was paid to Middleton Developer Pvt Ltd who was a consenting party for the Financial Assistance, availed and therefore the balance of consideration collectively paid to Vendor No. 1 to 3 was of Rs. 7,76,00,000/- in which the assessee had only 1 /3rd share irrespective of the amount received by him as per the recitals of the sale deed. It is submitted that the extra amount more than his 1/3rd share received by the assessee was attributable to the share of the other vendors and for the sake of convenience some extra amount was paid to the assessee more than his 1 /3rd Share. Thus the assessee's 1/3rd share of consideration amounts to Rs. 2,58,66,666/- and the same is exigible for capital gain tax subject to deduction admissible u/s. 54F of the Act. Page 9 of 12 ITA No. 61/Bang/2023 4.6 He submitted that the assessee on basis of the wrong professional advice has filed the return of income admitting capital gain of Rs. 5,20,22,958/- as against his share of Rs.2,58,66,666/- in the return of income filed on 15-03-2017, in anticipation of the reinvestment in acquiring a new asset being a residential house. The Assessee has not claimed the exemption u/s. 54F of the Act in the return of income for the reason that the sale consideration was not reinvested as on the date of filing the return of income (15-03-2017) but in the course of the assessment proceedings, the Assessee has claimed the deduction u/s. 54F of the Act in respect of the residential property purchased vide Registered Sale Deed dtd: 09-02-2018. But the AO hsa not allowed the deduction mainly on the ground that the proof of reinvestment in acquiring a new residential house was not produced by the Assessee. The contention of the AO was factually not correct since the assessment was made on 28-12- 2018 and the reinvestment was made on 09-02-2018 prior to the date of assessment and a copy of the Sale Deed was made available in the course of the assessment proceedings but unfortunately it was not considered by the AO. 4.7 He submitted that the Ld.AO has made a Gross mistake in computing the total income at Rs. 10,24,12,285/- as against the actual consideration received by the Assessee and his family members amounting to Rs. 7,76,00,000/-. The AO out of the guess work, suspicion and surmise had held that the assessee was liable for capital gain tax on a consideration of Rs. 10,24,12,285/-which was not received by the Assessee or his family members. The AO has considered the returned income of Page 10 of 12 ITA No. 61/Bang/2023 Rs. 5,20,00,000/- which was declared in anticipation of reinvestment and the same was allowable as a deduction u/s. 54F of the Act subject to reinvestment. However the AO has computed the income at Rs. 10,24,12,285/- consisting of income declared at Rs. 5,20,00,000/- and also deduction disallowed amounting to Rs. 5.04,12,285/-. The Assessee submits for the sake of argument without conceding to the computation of income made by the AO, the computation was made including the disallowance of deduction admissible u/s. 54F of the Act. The AO has erroneously made the addition of Rs. 5,04,12,285/- on the ground that the proof of reinvestment made was not made available to him. Even then the income computable for capital gains was only of Rs. 5,20,00,000/- and not Rs. 10,24,12,285/-. The Assessee submits herewith a copy of the Registered Purchase Deed dtd: 09-02-2018 and the investment made was of Rs. 5,01,04,390 /- inclusive of Stamp Duty of Rs. 26,34,040/-and registration fee of Rs. 4,70,350/-. The total re-investment made in purchasing a residential property bearing No. 421-B25 in Block 25 in 2nd Stage, RMV Extension Lottegolahalli, Comprised with New PID No. 100768-421-B25 assigned by the Bruhat Bangalore Mahanagara Palike (BBMP). The property so purchased was measuring east to west 16.80 mtrs and North to south 18.50mtrs in all measuring 310.80 sq.mtrs together with a built-up residential house measuring 3700 sq.ft consisting of Ground Floor measuring 2200 sq.ft and first floor measuring 1500 sq.ft. The reinvestment in acquiring a new residential house was made on 09-022018 prior to the date of assessment and the AO has not considering the assessee's claim admissible u/s. 54F Page 11 of 12 ITA No. 61/Bang/2023 of the Act. The assessee in view of the reinvestment is entitled for the deduction admissible u/s. 54F of the Act out of his 113rd Share of Sale Proceeds received on sale of Original Asset being the Lands measuring 7 Acres 31. 3/4 Guntas. In fact the Assessee has made investment of Rs. 5,01,04,390/-more than his 1/3 rd Share of Sale Proceeds utilising the sale proceeds of the other family members who also possess the right in the new property acquired since the sale proceeds realised were relate to the original property which belonged to all surviving co-parcenrs of HUF. Therefore the deduction disallowed by the AO was not in accordance with law and the Assessee is entitled for the deduction admissible u/s. 54F of the Act and the same may kildy be considered in adjudicating the Appeal in the interest of equity and justice. He also drew our attention to the copy of Sale Deed dtd: 10-02-2016 relating to the sale of Original Asset being lands measuring 7 Acres 31. ¾ Guntas. 4.8 On the contrary, the Ld.DR relied on the orders passed by the authorities below. 5. We have perused the submissions advanced by both sides in the light of records placed before us. 5.1 In the interest of justice, based on the above facts, we remand this issue back to the Ld.AO with the direction to go by the sale deed dated 10.02.2016 and to bring only the share of assessee for taxation in accordance with law for computing the capital gain. The assessee is directed to furnish all relevant details like computation of income filed by the assessee and also the co-owners for the year under consideration if any. Further, Page 12 of 12 ITA No. 61/Bang/2023 we make it clear that the share of income of assessee to be assessed under status individual only. 6. In any event, the claim of section 54F also needs verification by the Ld.AO which shall be carried out in accordance with law. The Ld.AO shall take necessary steps to compute the share of assessee based on the evidences filed in accordance with law. Accordingly, the additional ground nos. 2-3 & 3-6 of the main grounds raised by the assessee stands allowed for statistical purposes. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 27 th March, 2023. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 27 th March, 2023. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file By order Assistant Registrar, ITAT, Bangalore