Dnyaneshwar Pandharinath Talekar, Pune V. Income-tax Officer, Pune

ITA 877/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1651 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-08-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 11-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Assessee Lawyers: DEEPAK S SASSAR
• Keywords: Capital asset; Gift; Rectification of order; Principle of natural justice; Cost of acquisition
• Section: 54B; 56

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.877/PUN/2017 / ASSESSMENT YEAR : 2011-12 DNYANESHWAR PANDHARINATH TALEKAR, LOHEGAON, SANT NAGAR, DIST. PUNE 411 047 PAN : AGBPT8050G . /APPELLANT VS. THE INCOME TAX OFFICER, WARD-4(3), PUNE . / RESPONDENT ASSESSEE BY : SHRI DEEPAK S. SASSAR REVENUE BY : SHRI RAJESH GAWLI / DATE OF HEARING : 20.08.2018 / DATE OF PRONOUNCEMENT: 31.08.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-5, PUNE, DATED 30-11-2016 FOR THE ASSESSMENT YEAR 2011-12. 2. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED HERE AS UNDER : I. GROUNDS RELATED TO WRONG TREATMENT OF AGRICULT URAL LAND. 1. THE LD. AO HAS MADE MISTAKE BY TREATING THE LAND AS NON- AGRICULTURAL LAND TRANSFERRED BY THE ASSESSEE. 2. THE LD. AO HAS MADE MISTAKE OF FACTS OF THE AGREEME NT OF AGRICULTURAL LAND TRANSFER. 3. THE LD. AO HAS WRONGLY TREATED THE AMOUNT RECEIVED AS THE INCOME FROM OTHER SOURCES. II. DISALLOWANCE OF COST OF ACQUISITION & COST OF T RANSFER OF LAND 4. THE LD. AO HAS NOT ALLOWED THE COST OF ACQUISITION AND COST OF TRANSFER CLAIMED BY THE ASSESSEE. ITA NO.877/PUN/2017 DNYANESHWAR PANDHARINATH TALEKAR 2 III. GROUNDS RELATED TO NOT CONSIDERED THE PROVISI ONS OF THE ACT. 5. THE LD. AO HAS NOT PROPERLY APPLIED THE PROVISIONS OF SECTION 56 OF THE INCOME TAX ACT, 1961. 6. THE LD. AO HAS NOT PROPERTY APPLY PROVISIONS OF SEC TION 45 REGARDING CHARGEABILITY OF CAPITAL GAIN OF THE INCOME TAX ACT , 1961. IV. GROUNDS RELATED SECTION 54B INVESTMENT 7. THE LD. AO HAS MADE A MISTAKE BY NOT ALLOWING DEDUC TION U/S.54B OF THE INCOME TAX ACT, 1961. V. PROCEDURAL GROUNDS 8. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OR ALL THE ABOVE GROUNDS OF APPEAL. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT TH E ASSESSEE IS AN INDIVIDUAL AND FILED THE RETURN OF INCOME ON 01-08-2011 DECLA RING TOTAL INCOME AT NIL. DURING THE SCRUTINY ASSESSMENT, AO NOTICED THAT CERTAIN LANDS WERE SOLD AND THE ASSESSEE IS A CONSENTING PARTY ALONG WITH OTHERS. HOWEVER, THE SALE DEEDS INDICATE THAT THE ASSESSEE IS NO T THE OWNER OF THE LAND. THE ASSESSEES GRAND-MOTHER SMT. INDRAYANI TAJAN E IS THE LAND OWNER ON RECORDS AND REST OF THE FAMILY MEMBERS ARE T HE CONSENTING PARTIES. DETAILS OF THE LAND TRANSACTIONS ENTERED INTO BY THE ASSESSEE ARE GIVEN BELOW : SR. NO. NAME OF THE SELLER NAME OF THE PURCHASER DATE OF DOCUMENT CONSIDERATION RECEIVED 1 SHRI DNYANESHWAR PANDHARINATH TALEKAR AND OTHERS SHRI SANDEEP RASIKLAL SHAH AND OTHER TWO 02 - 06 - 201 0 1,85,00,000/ - 2 SHRI DNYANESHWAR PANDHARINATH TALEKAR AND OTHERS SHRI RAMESH SHAMRAO LOKARE 05 - 10 - 2010 1,37,00,000/ - ASSESSEE RECEIVED A SUM OF RS.46,75,000/- IN THESE TRANSA CTIONS. THE LAND IS NON-AGRICULTURAL IN NATURE AND IS SITUATED WITHIN THE LIMITS OF PIMPRI CHINCHWAD MUNICIPAL CORPORATION. THE AO NOTICED THAT THE LAND WAS NEITHER OWNED BY THE ASSESSEE NOR BY ANY SINGLE PE RSON. THE SAME WAS AN ANCESTRAL LAND PRESUMABLY OWNED BY SOME HUF IN THE PAST. THERE ITA NO.877/PUN/2017 DNYANESHWAR PANDHARINATH TALEKAR 3 IS NO CLARITY ON THIS CLAIM. AO OPINED THAT, IN SUCH CAS ES, THE AMOUNT RECEIVED NEED TO BE TAXED AS INCOME FROM OTHER SOURCES ONLY AND ACCORDINGLY DENIED THE BENEFIT OF SECTION 54B OF THE ACT. THEREFORE, IT IS CERTAIN THAT THE PROPERTY IS HELD IN THE N AME OF GRAND-MOTHER AND THE SHARE OF SALE CONSIDERATION RECEIV ED BY THE ASSESSEE IS NOT ENTITLED FOR BENEFIT U/S.54B OF THE ACT. THUS, THE A O TREATED THE SAID AMOUNT OF RS.46,75,000/- AS INCOME OF THE ASSESSEE A ND TAXED THE SAME ON PROTECTIVE BASIS UNDER THE HEAD INCOME FROM OTHER SOUR CES. 4. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE SAME. WHILE CONFIRMING THE SAID ADDITION MADE BY THE AO, CIT(A) GAV E DIRECTIONS FOR INITIATING NECESSARY ACTION FOR TAXING THE RECEIPTS IN TH E HANDS OF SMT. INDRAYANI TAJANE. THE DISCUSSION GIVEN IN PARA NOS. 4.6 T O 4.10 IS RELEVANT AND THEREFORE THE SAME IS EXTRACTED HERE AS UNDER : 4.6 I HAVE PERUSED CAREFULLY THE MATERIAL ON REC ORD AND THE CONTENTION OF THE APPELLANT. I FIND THAT, THE APPELLANT HAS CLAIM ED DEDUCTION U/S.54B FOR THE CAPITAL GAINS ON THE AMOUNT HE HAS CLAIMED TO H AVE BEEN RECEIVED BY HIM ON THE TWO TRANSACTIONS OF SALE OF AGRICULTURE LAND. THE AO HAS DEALT WITH THIS ISSUE BY NOT GRANTING HIM THE DEDUCTION O N THE GROUND THAT, THE LAND WAS NOT AN AGRICULTURAL ONE AS THE ASSESSEE WA S UNABLE TO GIVE ANY PROOF OF AGRICULTURAL ACTIVITY ON THE SAID LAND, IT FELL UNDER THE PIMPRI CHINCHWAD MUNICIPAL CORPORATION AND WAS SOLD FOR NO N-AGRICULTURAL PURPOSES. TO CONTROVERT THIS VIEW OF THE AO, THE AR OF THE APPELLANT HAS MADE LONG SUBMISSION RELYING ON THE 7/12 EXTRACT AN D SHETSHERA EXTRACT TO BUTTRESS HIS CLAIM, THAT THE LAND WAS AN AGRICULTUR AL LAND AND THEREFORE, THE APPELLANT WAS ENTITLED TO DEDUCTION U/S. 54B. 4.7 IN THE OTHER PART OF THE ASSESSMENT ORDER, THE AO DEALS WITH THE FACTS THAT THE AGREEMENTS TO SELL THE LANDS SHOWED THE AP PELLANT AS A CONSENTING PARTY AND THEREFORE, CHARGED THE ENTIRE AMOUNT OF R S.46,75,000/- AS HIS INCOME FROM OTHER SOURCES. THIS HAS BEEN COUNTERED BY THE APPELLANT BY SUBMITTING THAT, THE SAID OWNER OF THE LAND WAS HIS GRANDMOTHER AND MADE AN ALTERNATE CLAIM THAT, THE AMOUNT WAS NOT THE APP ELLANT'S INCOME IN SUCH A SITUATION THE SAME BE TREATED AS A GIFT WHICH IS NOT TAXABLE AS PER SECTION 56(2). 4.8 THE APPELLANT HAS CLAIMED IN THE SUBMISSION AN D DURING THE COURSE OF APPELLATE PROCEEDINGS THAT, THE LAND BELONGED TO TH E (SMT. INDRAYANI TAJANE) GRANDMOTHER OF THE APPELLANT WHO WAS THE SELLER OF THE LAND. A SHE COULD NOT CULTIVATE THE SAID LANDS DUE TO OLD AGE AND WIS HED THAT HER FAMILY MEMBERS WHICH INCLUDED TWO DAUGHTERS, SON-IN-LAWS A ND GRANDSONS TO BE HER HEIRS, THE LANDS WERE SOLD OFF . A PERUSAL OF THE SALE DEED INDICATES THE ITA NO.877/PUN/2017 DNYANESHWAR PANDHARINATH TALEKAR 4 NAME OF THE SELLER TO BE THAT OF THE GRANDMOTHER AN D THE REST OF THE FAMILY MEMBERS AS CONSENTING PARTIES. THE OTHER DOCUMENTS SUBMITTED DURING THE COURSE OF APPELLATE PROCEEDINGS LIKE THE 7/12, SHET SARA ALSO SUBSTANTIATE THE FACT THAT THE OWNER OF THE LAND WAS SMT. INDRAY ANI TAJANE. THE FACT HAS ALSO NOT DENIED BY THE APPELLANT. IT I S THUS VERY CLEAR THAT, THE APPELLANT WAS NOT THE OWNER OF THE L AND AND THEREFORE, NO CAPITAL GAINS COULD ACCRUE TO HIM, THEREBY THE QUESTION OF CLAIMING DEDUCTION U/S. 54B ON THESE GAINS DID NOT ARISE. THE CAPITAL GAINS WOULD ACCRUE TO TH E OWNER OF THE LAND AND NOT TO THE APPELLANT. THE AO HAS CORRECTLY DISALLOW ED THE DEDUCTION U/S. 54B ALBEIT FOR DIFFERENT REASONS. THE GROUNDS RELAT ING TO THIS ISSUE ARE DISMISSED. 4.9 THE ALTERNATE PLEA OF THE APPELLANT, OF TREATIN G THE AMOUNT RECEIVED BY HIM AS A GIFT IN THE HANDS OF THE APPELLANT CANNOT BE ACCEPTED DUE TO THE WANT OF ANY CONFIRMATION FROM THE DONOR OF THE SAID GIFT, GIFT DEED OR ANY DOCUMENT INDICATING EVEN THE GIFT IN CONTEMPLATION OF DEATH. THE APPELLANT CANNOT SUO MOTTO CLAIM THE AMOUNT TO BE GIFTED TO HI M. THE ALTERNATE PLEA IS THEREFORE D I SMISSED . 4.10 IT IS OBVIOUS FROM THE RECORDS THAT, THE AMOUN TS RECEIVED FROM THE SALE OF LANDS WERE SUO-MOTTO TAKEN TO BE THE CAPITAL GAI NS BY THE APPELLANT, OF THE APPELLANT . IN A TRANSACTION WHETHER THE GAINS ACCRUED ACTUALLY LIE IN HIS HANDS HAS TO BE DECIDED BY THE DOCUMENTATION, THE FACTS AND T HE NATURE OF THE TRANSACTION. THIS IS NOT THE CASE OF THE APP ELLANT. IT IS PROBABLY A VERY CRUDE AND A BASIC DEVICE USED BY HIM AND THE O THERS TO PROBABLY SPLIT THE CAPITAL GAINS RECEIVED IN VARIOUS LANDS W ITHOUT SUBSTANTIATING IT WITH ANY EVIDENCE OF OWNERSHIP. IN VIEW OF THE FACT THAT THAT APPELLANT IS NOT THE OWNER OF THE LANDS AND THEREFORE THE AMOUNT IN HIS HANDS IS NOT CAPITAL GAINS, THE AO IS DIRECTED TO TAKE NECESSARY ACTION, VERIFY AND RE- OPEN THE CASE, IF REQUIRED, OF THE OWNER OF THE LAN D IN WHOSE HANDS THE CAPITAL GAINS WOULD ACCRUE AND TAX THE SAME IN THE RIGHT HA NDS IN THE RIGHT YEAR.THE AO HAS TAXED THE AMOUNT OF RS.46,75,000/-IN THE HAN DS OF THE APPELLANT AS INCOME FROM OTHER SOURCES RECEI VED FOR BEING A CONSENTING PARTY. THE APPELLANT HAS HIMSELF ADMITTED TO HAVING RECEIVED THIS AMOUNT. IN VIEW OF THE FACT THAT THE APPELLANT IS NOT THE OWNER OF THE LANDS BUT HAS ADMITTED TO THE AMOUNT H AVING BEEN RECEIVED BY HIM, THIS AMOUNT OF RS.46,75,000/- IS CONFIRMED IN THE HANDS OF THE APPELLANT ON A PROTECTIVE BASIS. IN CASE THE ADDITION IS UNDISPUTED IN THE HANDS OF THE OWNER OF THE LAND THE AO MAY PASS THE NECESSARY RECTIFICATION ORDER TO DELETE THE PROTECTIVE ADDITION IN THE HANDS OF THE APPELLANT. THE GROUNDS OF APPEAL RAISED ARE ACCORDINGLY DISMISSED. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE PROPERTY BEING HELD IN THE NAME OF SMT . INDRAYANI TAJANE. THE ASSESSEE IS ONLY A POWER OF ATTORNEY HOLDE R. HE FURTHER SUBMITTED THAT, WITH HIS SHARE OF INCOME, THE AGRICULTURAL LANDS ARE PROCURED BY THE ASSESSEE AND THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.54B OF THE ACT. THE AMOUNT RECEIVED BY THE ASSESSE E IN CONNECTION WITH THE TRANSFER OF LAND, TO WHICH THE ASSESSEE IS A CLAIMA NT IN THE ITA NO.877/PUN/2017 DNYANESHWAR PANDHARINATH TALEKAR 5 CAPACITY OR INHERITOR TO THE PROPERTY, IS LEGALLY ELIGIBLE FOR CLAIM U/S.54B OF THE ACT. FURTHER, LD. COUNSEL ARGUED THAT THE ASSETS SOLD ARE T HE ANCESTRAL PROPERTY OR MAY BE AN HUF PROPERTY, AND IN SUCH CASE, ASSESSEE IS DULY ENTITLED TO HIS SHARE AS COPARCENER OF HUF. THEREFORE, DES PITE THE FACT HIS NAME DOES NOT APPEAR ON THE TITLE DEEDS, THE CLAIM OF T HE ASSESSEE IS VALID AND SUSTAINABLE. 6. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEAV ILY ON THE ORDERS OF THE AO/CIT(A). ACCORDING TO THE LD. DR FOR THE REVENUE, AT THE TIME OF SALE TRANSACTION, THE ASSESSEE IS NOT THE OWNER OF THE LAND. THEREFORE, THE INCOME EARNED IN CONNECTION WITH THE SALE T RANSACTION OF THE LAND IS TAXABLE IN THE HANDS OF SMT. INDRAYANI TAJA NE ONLY. TO THAT EXTENT, AS PER LD. DR, THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. THE FACT THAT ASSESSEE RECE IVED RS.46,75,000/- AT THE MOST CAN BE A GIFT RECEIVED BY THE ASSESSEE FROM HER GRAND-MOTHER SMT. INDRAYANI TAJANE, AND ON APPROPRIATION , THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S.54B OF THE ACT AS THE SA ME IS NOT RELATABLE TO THE AGRICULTURAL LANDS. OTHERWISE, HE RELIED ON THE ORDERS OF THE AO/CIT(A). 7. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE REVENUE. WE FIND ADMITTEDLY THERE IS NO DISPUTE ABOUT THE NON-APPEAR ANCE OF ASSESSEES NAME ON THE TITLE DEEDS OF THE LAND. THE SA ID LAND IS LEGALLY OWNED AT THE RELEVANT POINT OF TIME BY SMT. INDRAYANI TAJ ANE, THE GRAND- MOTHER OF THE ASSESSEE. ON SALE OF THE LAND, THE INCOME IF ANY IS NORMALLY TAXABLE IN THE HANDS OF SMT. INDRAYANI TAJANE ONLY AND NOT IN THE HANDS OF THE ASSESSEE. THEREFORE, TO THAT EXTENT, AND SUBJEC T TO THE OTHER ISSUES, ITA NO.877/PUN/2017 DNYANESHWAR PANDHARINATH TALEKAR 6 THE ORDER OF CIT(A) IS FAIR AND REASONABLE AND THE SAME DO ES NOT CALL FOR ANY INTERFERENCE. 7.1 HOWEVER, THERE IS ANOTHER ISSUE, I.E. WHETHER THE LANDS ARE ANCESTRAL IN NATURE. ASSESSEE CLAIMS THAT HE IS THE OWNER BY VIRTU E OF HIS BIRTH RIGHT IN THE SAID ANCESTRAL LANDS. WE FIND THERE IS NO CATEGORIC AL FINDING OF THE AO/CIT(A) ON THIS CLAIM OF THE ASSESSEE. THEREFORE, WE PROC EED TO REMAND THIS ISSUE FOR FRESH ADJUDICATION. 7.2 REGARDING THE ALLOWABILITY OF DEDUCTION U/S.54B OF THE ACT , WE FIND THE DEDUCTION IS ALLOWABLE ONLY IF THE AGRICULTURAL INCOME IS APPROPRIATED FOR ACQUIRING THE AGRICULTURAL LANDS AS PER THE CONDITIONS S PECIFIED IN SECTION 54B OF THE ACT. IN VIEW OF THIS, WE ARE OF THE OP INION THAT THE RECEIPT OF RS.46,75,000/- BY THE ASSESSEE CANNOT BE CONS IDERED AS AGRICULTURAL INCOME IN VIEW OF LACK OF OWNERSHIP IN THE HANDS OF THE ASSESSEE. HOWEVER, THE SAME IS SUBJECTED TO FINDING OF FA CT ON THE CLAIM OF ANCESTRAL LAND. IN EFFECT, THE GROUNDS RAISED BY THE ASSE SSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7.3 THEREFORE, WE ARE OF THE VIEW THAT THERE IS NEED FOR FINDING OF FACT ON THE CLAIM OF NATURE OF ANCESTRAL PROPERTY. OTHER ISSUES A RE CONTINGENT ON THE SAID FINDING OF FACT. HENCE, INSTEAD OF GIVING ANY FINDING, WE FIND IT APPROPRIATE TO REMAND THE ENTIRE ISSUE RAISED IN ALL THE GROUNDS TO THE FILE OF AO FOR FRESH ADJUDICATION. AO SHALL GRANT REASONABLE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER THE SET PRINCIPLES O F NATURAL JUSTICE. ASSESSEE IS DIRECTED TO FILE ANY DOCUMENT/EVIDENCE TO DEM ONSTRATE HIS CLAIM OF ANCESTRAL PROPERTY AND THE SAME SHALL BE ADMITTED IN THE INTEREST OF ADMINISTRATION OF JUSTICE. ITA NO.877/PUN/2017 DNYANESHWAR PANDHARINATH TALEKAR 7 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 31 ST DAY OF AUGUST, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 31 ST AUGUST, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-5, PUNE 4. THE PR.CIT-4, PUNE 5. , , SMC BENCH PUNE; 6. / GUARD FILE.