VINOD NIHALCHAND JAIN,MUMBAI vs. ITO WARD 41(3)(4), MUMBAI

The appellant was in the process of seeking new representation, specifically a CA or counsel, to advise on the merits of the case and the appropriate course of action.

Due to the ongoing audit season, most Chartered Accountants were occupied, resulting in some delay in briefing the CA on the case details.

In light of the above, it is respectfully prayed that the delay of two weeks in filing this appeal may kindly be condoned.”

We find that the reasons stated by the assessee for seeking condonation of delay fall within the parameters for grant of condonation laid down by the Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. It is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee did not stand to benefit from the late filing of the appeal. In view of the above and having perused the affidavit, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the appeal by the assessee and we proceed to decide the appeals on merits.

In this appeal, the assessee has raised the following grounds: - “1. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming an addition of Rs.27,00,154/- made by the learned AO as Capital gains u/s.45. 2. In the facts of the Appellant’s case, it is most respectfully submitted that no such addition was tenable in the case of the appellant.”

The brief facts of the case are that the assessee is an individual and earned income from salary, capital gains on equity shares and mutual funds. As per the assessee, since the taxable income was below the basic exemption limit for the year under consideration, he did not file the return of income. Subsequently, on the basis of the information received that the assessee has sold immovable property, notice under section 148 of the Act was issued and proceedings under section 147 of the Act were initiated. As per the information received, the assessee, inter alia, during the year under consideration, sold the immovable property for a total consideration of Rs.54 Lakh. In response to the statutory notices issued during the re-assessment proceedings, the assessee submitted that the immovable property was originally purchased on 23.06.2004 by his brother, Shri Babulal Nihalchand Jain and the name of the assessee and his father was added to the property as joint owners out of natural love and affection. During the year under consideration, the property was sold on 19.09.2014 for a total consideration of Rs.54 Lakh, which was entirely credited to the bank account of the assessee’s brother. Thus, the assessee submitted that even though the property was purchased in the joint name, but the actual possession and the 100% right of the property belonged to his brother, as the whole consideration was paid by him at the time of purchase of the said property. In support of the aforesaid submission, the assessee also furnished the original purchase deed, bank statement of his brother highlighting the receipt of consideration in his account, Form 26AS stating that the TDS on the property has been fully deducted on the PAN of his brother, sale agreement, and the ITR along with computation for the year under consideration of his brother.

The Assessing Officer (“AO”) vide order dated 22.12.2023 passed under section 147 r.w. section 144B of the Act, disagreed with the submissions of the assessee and held that after the demise of the father, the said property belonged to the assessee and his brother and they have equal shares in the said property. The AO further held that there does not exist any family arrangement whereby the right to the property has been relinquished by the assessee prior to the sale. It was also held that though the amount of sale consideration of the property was received in the account of the assessee’s brother, however, half of the sale consideration, i.e., Rs.27 Lakh, legally belonged to the assessee as he had not relinquished his rights on the property. Accordingly, the amount of Rs.27 Lakh was added to the total income of the assessee as Long-Term Capital Gains under section 45 of the Act.

The learned CIT(A), vide impugned order, upheld the addition made by the AO and dismissed the ground raised by the assessee on this issue. The learned CIT(A), however, directed the AO to consider the cost of acquisition and cost of improvement, if any, and allow the deduction accordingly. The relevant findings of the learned CIT(A), vide impugned order, in this regard are reproduced as follows: -

1 As per the assessment order, the assessee had sold immovable property and the sale agreement deed was registered under the joint sub