S.Umapathy, CHENNAI V. ITO, CHENNAI

ITA 906/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4263 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 12-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SREENIVASAN JICIT
• Assessee Lawyers: K B MURALIDHARAN CA
• Keywords: Sale consideration of property below Jantri Value; Gift; Cost of acquisition

Judgement Text

, D/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL D/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NO.906 /MDS./2017 ( / ASSESSMENT YEAR :2008-09) MR.S.UMAPATHY , 26/52,VAITHIYAR ANNAMALAI, STREET, MYLAPORE, CHENNAI 600 004. VS. THE INCOME TAX OFFICER, NON-CORPORATE WARD 19(4), CHENNAI 600 034. PAN ACEPU 1166 D ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : MR.K.B.MURALIDHARAN,C.A $% ! ' # / RESPONDENT BY : MR.V.SREENIVASAN, JICIT, D.R & ' ' ( ) / DATE OF HEARING : 19.06.2017 *+ ' ( ) /DATE OF PRONOUNCEMENT : 19.06.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-12, CHENN AI DATED 14.02.2017 PERTAINING TO ASSESSMENT YEAR 2008-09. ITA NO.906 /MDS/2017 2 2. THE ASSESSEE HAS RAISED SIXTEEN ELABORATE GROUN DS IN HIS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS WITH REGAR D TO CONSIDERING THE CAPITAL GAINS ON SALE OF A PROPERTY AT CHENNAI ON 12.10.2007 IN THE HANDS OF THE ASSESSEE, THOUGH THE IMPUGNED PROP ERTY BELONGED TO ASSESSEES FATHER. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, EMPLOYED AS A WELDER IN TAMIL NADU STATE TRANSPORT CORPORATION, CHENNAI. DURING THE FINANCIAL YEAR 2007-08, THE AS SESSEE ALONG WITH HIS FATHER AND OTHERS ENTERED INTO A SALE TRANSACTI ON FOR SELLING THEIR IMMOVABLE PROPERTY AT NEW DOOR NO.223/1, PERIYARPETTAI,CHOOLAIMEDU, CHENNAI 600 094 ON 12.10 .2007. ASSESSEE DID NOT FILE HIS RETURN OF INCOME FOR ASSE SSMENT YEAR 2008- 09 AND HE WAS TREATED AS A NON-FILER OF RETURN OF I NCOME. ACCORDING TO AO, THE ASSESSEE JOINTLY WITH OTHERS SOLD THEIR IMM OVABLE PROPERTY DURING THE FINANCIAL YEAR 2007-08 AND THAT THE CAPI TAL GAINS ARISING OUT OF THIS SALE TRANSACTION, WHICH IS CHARGEABLE TO TA X, ESCAPED ASSESSMENT , NOTICE U/S.148 WAS ISSUED AND THE SAM E WAS SERVED ITA NO.906 /MDS/2017 3 ON 28.03.2015. IN RESPONSE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 16.04.2015. 3.1 ACCORDING TO AO, THE ASSESSEE HAD RECEIVED A S UM OF ` 8 LAKHS TOWARDS HIS SHARE OF THE ABOVE PROPERTY VIDE CHEQUE NO.456541 DATED 11.10.2007, OUT OF TOTAL SALE CONSIDERATION O F ` 49,50,000/-. HOWEVER, THE MARKET VALUE OF THE PROPERTY WAS ASSES SED AT ` 51,81,000/- BY THE SUB-REGISTRAR FOR THE PURPOSE OF PAYMENT OF STAMP DUTY. ACCORDINGLY, THE AO WORKED OUT THE PROP ORTIONATE SALE CONSIDERATION FOR THE ASSESSEES SHARE U/S.50C OF T HE ACT. SIMILARLY, THE AO ENQUIRED ABOUT THE GUIDELINE VALUE OF THE SU BJECT PROPERTY AS ON 01.04.1981 FROM THE O/O. SUB REGISTRAR, KODAMBAK KAM AND FOUND OUT THAT THE VALUE OF THE PROPERTY AS ON 01.04.1981 WAS ` 40,000/- PER GROUND. ADOPTING THE ABOVE VALUE, THE AO DETER MINED THE COST OF ACQUISITION OF THE PROPERTY AT ` 52,333/- FOR THE TOTAL LAND ADMEASURING 3140 SQ.FT. ACCORDINGLY, THE AO ASSESSED THE TAXAB LE CAPITAL GAINS AT ` 7,90,730/- IN THE HANDS OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APP EAL BEFORE THE LD.CIT(A). ITA NO.906 /MDS/2017 4 3.2 DURING THE FIRST APPELLATE PROCEEDINGS, THE L D.A.R SUBMITTED THAT THE SUBJECT PROPERTY WAS INHERITED BY THE ASSE SSEES FATHER MR.M.SUBRAMANIAM, BY WAY OF A FAMILY SETTLEMENT FRO M HIS MOTHER MRS. JAGADAMBAL ON 09.05.1975, WHO IN TURN, HAD REC EIVED THE PROPERTY BY WAY OF FAMILY SETTLEMENT EXECUTED ON 26 .08.1965. FURTHER, THE LD.A.R CONTENDED THAT SINCE THE ASSESS EE HAD SIGNED THE SALE DEED, HE WAS ALSO THE CO-OWNER OF THE PROPERTY . THE AO DID NOT HAVE ANY MATERIAL TO PROVE THAT THE ASSESSEE IS A C O-OWNER OF THE PROPERTY. THE OTHER CONTENTION OF THE LD.A.R WAS TH AT THE SUBJECT PROPERTY HAVING BEEN SOLD BY THE ASSESSEES FATHER AND BEING AN INHERITED PROPERTY, THE LONG TERM CAPITAL GAINS SHO ULD HAVE BEEN TAXED IN THE STATUS OF HUF. BEING AN HUF PROPERTY, THE PURCHASERS HAD INSISTED THE MEMBERS OF THE HUF TO SIGN IN THE SALE DEED AS VENDORS. FURTHER, LD.A.R SUBMITTED THAT NO RETURN WAS EARLIER FILED IN THE STATUS OF HUF AS THERE WAS NO TAXABLE INCOME. 3.3 ON APPEAL, LD.CIT(A) ARRIVED AT A CONCLUSION THAT THE ASSESSEES CLAIM BEFORE THE AO THAT THE ASSESSEE HAD RECEIVED THE SALE CONSIDERATION OF ` 8 LAKHS ON BEHALF OF HIS FATHER, WAS NOTHING BUT AN AFTER THOUGHT TO ESCAPE THE RIGUORS OF TAXATION. AC CORDINGLY, THE ITA NO.906 /MDS/2017 5 LD.CIT(A) CONFIRMED THE ACTION OF LD. ASSESSING OFF ICER. AGAINST THE ORDER OF LD.CIT(A), NOW THE REVENUE IS IN APPEAL BE FORE US. 4. BEFORE US, LD.A.R SUBMITTED THAT THE A.O HAS W RONGLY CONCLUDED THAT SINCE THE ASSESSEE HAD SIGNED THE S ALE DEED, HE IS ALSO THE CO-OWNER OF THE PROPERTY. THE A.O. DID NOT HAVE ANY MATERIAL TO PROVE THAT THE APPELLANT IS A CO-OWNER OF THE PR OPERTY. THE AO HAD NOT CLAIMED THAT THE PROPERTY WAS PURCHASED OR FUND ED BY ASSESSEE. HENCE, THE CONCLUSION OF THE A.O. THAT THE ASSESSEE IS ONE OF THE CO- OWNERS IS WITHOUT ANY BASIS AND BAD IN LAW. ACCORDI NG TO LD.A.R, THE PROPERTY SOLD BY THE APPELLANTS FATHER OBTAINE D BY HIM FROM HIS MOTHER VIDE SETTLEMENT DEED DATED 09/05/1975 IS NOT AN INHERITED PROPERTY BUT OBTAINED UNDER FAMILY SETTLEMENT. THER EFORE APPELLANT COULD NOT HAVE INTEREST / RIGHT OVER PROPERTY BELON GING TO FATHER DURING THE LIFE TIME OF HIS FATHER. THE LD.A.R CONTENDED T HAT WHILE BOTH AO AND CIT(A) HAD RELIED ONLY ON A PORTION OF THE FACT S MENTIONED IN THE SALE DEED, THEY HAVE IGNORED MAIN FACT MENTIONED IN THE SALE DEED VIZ EVEN THOUGH FIRST VENDOR (M.SUBRAMANIAN) IS THE SO LE AND ABSOLUTE OWNER..... ITA NO.906 /MDS/2017 6 FURTHER, LD.A.R SUBMITTED THAT PROPERTY CO-OWNERSH IP DOES NOT MEAN JOINT INCOME TAX LIABILITY. THE SON HAS NOT INVESTE D; HE HAS MERELY SIGNED ALONG WITH OTHER AT THE REQUEST OF PURCHASER FOR THE COMFORT OF ALL INCLUDING HIS FATHER WHO HAD FAIRLY ENSURED A P ORTION OF THE CONSIDERATION AMOUNT GIVEN TO HIM AT THE TIME OF SA LE OF HIS (FATHERS) PROPERTY. THE AMOUNT RECEIVED BY THE APPELLANT, WHI CH IS PART OF THE SALE CONSIDERATION FIXED FOR THE PROPERTY OF FATHER , AT BEST COULD BE TREATED AS GIFT RECEIVED FROM HIS FATHER AND NOT OT HERWISE. WHAT EXISTS ON PAPER DOES NOT DETERMINE TAX LIABILITY. RIGHT TO TAX MEANS INCOME IS TAXED IN RIGHT HANDS. 4.1 THE LD.A.R SUBMITS AS ALTERNATE GROUND, THAT THE PROPERTY SOLD BY APPELLANTS FATHER BEING AN ANCESTRAL ONE, AT BE ST ACQUIRE, THE STATUS OF HINDU UNDIVIDED FAMILY PROPERTY. IN THE C ASE OF HUF PROPERTY, ALL THE MEMBERS OF THE FAMILY ARE COPARCE NERS HAVING THEIR INTEREST / SHARE OVER THE PROPERTY, BUT THE INTERES T OF THE RESPECTIVE MEMBERS ARE NOT DEFINED. UNDER HINDU LAW, THE RIGH TS OF THE MEMBERS GET CRYSTALLIZED ONLY ON PARTITION AMONGST THE MEMBERS OF THE FAMILY. BEING AN HUF PROPERTY, THE PURCHASERS H AD INSISTED THE MEMBERS OF THE HUF TO SIGN IN THE SALE DEED AS VEND ORS. ITA NO.906 /MDS/2017 7 ACCORDING TO A.O: I. THERE IS NO EXISTENCE OF HUF. 2. NO RETURNS WERE FILED BY THE HUF. 3. HENCE, THE SAME HAS BEEN TAXED IN THE APPELLANT S HAND. 4.2 THE LD.A.R SUBMITTED THAT A.O. DID NOT HAVE AN Y MATERIAL TO PROVE THAT THE PARTITION WAS MADE AMONGST THE MEMBE RS OF THE HUF AND THE PROPERTY VEST RECEIVED WITH THE APPELLANT A S CO-OWNER. THE AO HAD ERRONEOUSLY CONCLUDED THAT THE APPELLANT HAD HIS SHARE IN THE CONSIDERATION WHEN THE SALE DEED EXECUTED BY HIS FA THER DIDNT SPECIFY SO. THE CIT (A) HAD ERRED IN CONCLUDING THA T PROPERTY IN QUESTION COULD NOT PARTAKE THE CHARACTER OF AN HUF PROPERTY WHEN THE FACTS CLEARLY SHOW THAT PROPERTY WAS OBTAINED F ROM MOTHER BY APPELLANTS FATHER. THE A.O. HAD MADE AN ERRONEOUS CONCLUSION THAT THERE IS NO EXISTENCE OF HUF IN THE ABSENCE OF FILI NG OF RETURN IN HUF CAPACITY. 5. THE LD.D.R RELIED ON THE ORDER OF LOWER AUTHORI TIES. 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN MY OPINION, AS PER THE IMPUGNED SALE DE ED DATED 12.10.2007, THERE ARE SEVEN VENDORS IN TOTAL. IN AD DITION TO SHRI ITA NO.906 /MDS/2017 8 M.SUBRAMANIAM, HIS WIFE, HIS SONS AND DAUGHTERS, IN CLUDING THE ASSESSEE, WERE ALSO MENTIONED AS VENDORS IN THE SAL E DEED. MOREOVER, ALL THE VENDORS HAVE SIGNED THE SALE DEED ON EVERY PAGE. THE SALE DEED ALSO MENTIONS THAT THE SALE CONSIDERA TION OF ` 49,50,000/- HAS BEEN PAID MOSTLY BY CHEQUE AND PAY ORDERS. ONLY ` 7/- LAKHS WAS PAID BY MEANS OF CASH OUT OF THE TOTA L SALE CONSIDERATION OF ` 49,50,000/-. FROM THE CLAUSES OF THE SALE DEED, IT IS FOUND THAT THE FIRST VENDOR SHRI M.SUBRAMANIAM O BTAINED THE PROPERTY FROM HIS MOTHER, SMT.JAGADAMBAL, W/O SHRI MUTHUSWAMY NAICKER BY MEANS OF A SETTLEMENT DEED DATED 09.05.1 975. ON PERUSAL OF THE SETTLEMENT DEED DATED 9.5.1975, IT I S OBSERVED THAT SMT JAGADAMBAL HAD INHERITED THE PROPERTY FROM HER MOTH ER. SINCE, THE PROPERTY IN QUESTION WAS NOT FROM THE PATERNAL SIDE OF SHRI M,SUBRAMANIAM, I AGREE WITH THE FINDING GIVEN BY TH E LOWER AUTHROITY THAT IT COULD NOT PARTAKE THE CHARACTER OF AN HUF P ROPERTY. EVEN OTHERWISE, NOWHERE IN THE SALE DEED DATED 12.10.200 7, THE SUBJECT PROPERTY WAS DESCRIBED IN THE NOMENCLATURE OF HUF P ROPERTY. HENCE, THE CLAIM OF THE PROPERTY, BEING AN HUF, HAS BEEN R IGHTLY REJECTED BY THE ASSESSING OFFICER. ITA NO.906 /MDS/2017 9 6.1 ACCORDING TO LD.A.R, THE FOLLOWING CLAUSE IN THE SALE DEED TO SUPPORT HIS CLAIM THAT THE SUBJECT PROPERTY BELONGE D TO HIS FATHER FULLY BECAUSE IT WAS INHERITED BY HIM FROM HIS GRANDMOTHE R. THEREFORE, THE ASSESSING OFFICER COULD NOT HAVE HELD THE APPELLANT TO BE A JOINT OWNER OF THE ABOVE PROPERTY. EVEN THOUGH THE FIRST VENDOR IS THE SOLE AND ABSOLU TE OWNER OF THE PROPERTY, VENDORS 2 TO 7 HAVE ALSO JOINED AS VENDOR S AT THE REQUEST OF THE PURCHASERS FOR AN ABUNDANT CAUTION AND BETTE R SECURITY. IN MY OPINION, ONE CARDINAL PRINCIPAL OF CONSTRUING A DOCUMENT IS THAT IT SHOULD BE READ AS A WHOLE, ONE CLAUSE CANNOT BE READ TO THE EXCLUSION OF OTHER CLAUSES. IF THE ENTIRE SALE DEED IS GONE THROUGH, IT IS FOUND THAT IN ADDITION TO THE ASSESSEES FATHER SHRI M.SUBRAMANIAM, THE APPELLANTS MOTHER, THE ASSESSEE HIMSELF AND ALL HIS BROTHERS AND SISTERS HAVE SIGNED THE DOCUMENT A S JOINT OWNERS IN ADDITION TO THIS, THEY HAVE ALSO GOT SHARES OUT OF THE SALE CONSIDERATION. THE APPELLANT HIMSELF HAS RECEIVED R S.8 LAKHS OUT OF THE SALE CONSIDERATION. BASED ON THIS INFORMATION O NLY, THE DEPARTMENT HAS RE-OPENED THE ASSESSMENT IN HIS CASE AND HAS PASSED THE IMPUGNED ORDER. IT IS NOT DISPUTED THAT THE APPELLANT HAS RECEIVED A SUM OF RS.8 LAKHS VIDE CHEQUE NO. 456541 DATED ITA NO.906 /MDS/2017 10 11.10.2007 TOWARDS HIS SHARE OF SALE CONSIDERATION. THERE IS ALSO NO DISPUTE THAT AFTER DEPOSITING HIS SHARE OF SALE CON SIDERATION IN HIS OWN BANK ACCOUNT, THE APPELLANT HAS UTILIZED THE SAME F OR HIS OWN PURPOSE. IN FACT, IT HAS BEEN FOUND THAT THE APPELL ANT HAD PURCHASED A PLOT OF LAND IN HIS INDIVIDUAL NAME FOR RS.3,27,456 /- OUT OF THE SALE CONSIDERATION OF RS.8 LAKHS. AFTER HAVING ENJOYED T HE FRUITS OF SALE CONSIDERATION, IT DOES NOT LIE IN THE MOUTH OF THE ASSESSEE TO CLAIM BEFORE THE ASSESSING OFFICER THAT HE RECEIVED THE A MOUNT ON BEHALF OF HIS FATHER AND HE HAS NO RIGHT OR INTEREST IN THE S AME. 6.2 IT IS ALSO OBSERVED THAT THERE IS AMPLE PROOF TO THE EFFECT THAT THE APPELLANT HAD NOT ONLY RECEIVED A SUM OF RS.8 LAKHS TOWARDS HIS SHARE, BUT ALSO UTILIZED THE SAME FOR PURCHASING A PIECE OF LAND PROBABLY WITH A VIEW TO CLAIM DEDUCTION U/S.54 OR 5 4F OF THE ACT. IT IS ANOTHER MATTER THAT HE DID NOT CLAIM SUCH DEDUCTION IN THE RETURN, AS HE COULD NOT FULFILL THE OTHER CONDITIONS SUCH AS C ONSTRUCTING THE HOUSE THEREON WITHIN THE STIPULATED PERIOD. BE THAT AS IT MAY, THE FACT REMAINS THAT THE APPELLANT HAS BEEN MENTIONED AS ON E OF THE VENDORS IN THE SALE DEED EXECUTED ON 12.10.2007, AND HAS BE EN PAID RS.8 LAKHS, AS HIS SHARE OF SALE CONSIDERATION, WHICH HE HAD UTILISED FOR HIS ITA NO.906 /MDS/2017 11 OWN PURPOSES WITHOUT RETURNING IT TO HIS FATHER. HE NCE, THE APPELLANTS CLAIM BEFORE THE ASSESSING OFFICER THAT HE HAD RECE IVED THE SALE CONSIDERATION OF RS.8,00,000/ ON BEHALF OF HIS FATH ER, WAS NOTHING BUT AN AFTERTHOUGHT. 7. IN VIEW OF THE ABOVE, I DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE CIT(APPEALS) AND THE SAME IS CONFIRMED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 19 TH JUNE, 2017 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH JUNE, 2017 . K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF