PREMA,CHENGALPATTU vs. ITO, NCQ-22(1), TAMBARAM

in AY 2014-15, which fact was duly brought to the notice of the Ld.CIT(A) by filing all the relevant documents pertaining to such transfer of property. However, according to him, the Ld.CIT(A) brushed it aside on the specious plea that assessee didn’t file the relevant documents before the AO. According to the Ld.AR, it is trite law that first appellate authority has co-terminus powers as that of the AO and therefore, ought to have admitted the relevant evidences filed by the assessee, and if necessary, ought to have called for remand report under Rule 46A of Income-tax Rules, 1962 (hereinafter in short “the Rules”). However, according to the Ld.AR, the first appellate authority miserably failed to do his duty and hence, the impugned order of the Ld.CIT(A) is per se bad in law and need to be stuck down. The next plea of the Ld.AR is that the assessee had filed all the relevant evidences before the Ld.CIT(A) to prove that the to 2324/Chny/2024 (AY 2016-17) Smt. Prema transaction which the AO refers to re-open the assessment [i.e. sale of immovable property by assessee & ten (10) co-owners for a total consideration of Rs.9.08 Cr.] took place in AY 2014-15 and not in the relevant AY 2016-17 and to corroborate such a contention, the Ld.AR invited our attention to an affidavit filed by the assessee to show that the assessee in relevant year under consideration i.e. AY 2016-17 didn’t transfer any immovable property; and that the property in question was sold along with 10 other co-owners on 17.02.2014 i.e. in AY 2014-15; and that in the relevant AY 2016-17, since, assesee had only bank interest of Rs.21,100/-, which was far below the threshold limit to file the return of income, she didn’t file the RoI in AY 2016-17. Moreover, the Ld.AR brought to our notice that the assessee had placed before the Ld.CIT(A), contemporaneous evidences in the form of assessment orders in the case of two co-owners (assessee’s sister Smt. P.Yasodha as well as Shri Parthasarathy Varadhan) in whose cases, assessments had undergone scrutiny in respect of the very same transaction, i.e., their assessments for AY 2014-15 was re-opened and re-assessment were framed, wherein the AO had examined the same transaction in question [i.e. in respect of transfer/sale of schedule property situated at Vandalur Village of 1.71 acres by 11 co-owners to Mrs. R. Amudha for a sale consideration of Rs.9,08,95,000/- of which their shares/interest were Rs.46,71,613/- and Rs.1,40,14,840/- respectively]; However, the AO to 2324/Chny/2024 (AY 2016-17) Smt. Prema made additions in both their hands i.e. Smt. P.Yasodha, Long Term Capital Gain (LTCG) of Rs.81,46,406/- and in the hands of Shri.

Parthasarathy Varadhan, LTCG of Rs.82,41,338/-. And on appeal, the Ld.CIT(A)-10, vide order dated 24.09.2020 in the case of P.Yasodha, inter alia deleted the addition by holding that the land in question as not a capital asset within the meaning of section 2(14) of the Act being an agricultural land and hence, no tax would be liable from transfer of it and therefore, he deleted the LTCG of Rs.82,63,181/-. Likewise the Ld.CIT(A) was pleased to delete the addition of LTCG to the tune of Rs.81,46,406/- in the hands of Shri. Parthasarathy Varadhan. Thus, according to Ld.AR, the assessee was able to prove before the Ld.CIT(A) that property in question being an agricultural land was transferred in AY 2014-15, and therefore the question of capital gain doesn’t arise on the transfer of very same property. The Ld.AR also brought to our notice that the assessee had filed the following relevant documents before the Ld.CIT(A): a. Family Partition deed dated 15.12.2010 b. Revenue records of land kist paid, chitta and adangal copies, c. copy of general power of attorney executed d. savings bank account of the assessee e. computation of statement of income along with capital gain statement f. presence of well in the land, water resources for agricultural activity and EB connection g. certificate issued by revenue authority with respect to the distance between the agricultural land and the municipal limit h. document with respect to the population of the Tambaram Municipality nearest to Vandalur Village i. screen shot from the website of the Income Tax department, wherein it is stated that such land is an agricultural land as per section 2(14) of the Act. to 2324/Chny/2024 (AY 2016-17) Smt. Prema j. Assessment orders of assessee’s sister Smt. P.Yasodha as well as Shri Parthasarathy Varadhan k. Ld CIT(A)-10 order in both their cases i.e. assessee’s sister Smt. P.Yasodha as well as Shri Parthasarathy Varadhan.

Per contra, the Ld.DR supported the action of the 6.

Ld.CIT(A)/NFAC on the ground that the assessee didn’t produce relevant documents before the AO; and moreover, she didn’t file the RoI, therefore, the action of the Ld.CIT(A)/NFAC cannot be faulted; and hence, the Ld.DR doesn’t want us to interfere with the impugned action of Ld.CIT(A).

Chakrapani Naicker was one of the nine (9) successors/heir; and he passed away on 17.04.1995, leaving behind three (3) heirs (wife Smt. Dhanu, two daughters P. Yashoda and Prema/assessee). On 15.12.2010, the scheduled property was partitioned/divided as per the mutual understanding among heirs; and thus, the assessee’s father’s share (1/9th) devolved on the three heirs i.e. assessee, her mother and sister (Yasodha) in three equal parts. Thus, the assessee got 1/3rd share of 1/9th share of the undivided interest in the 1.71 acres of land at Vandalur Village. Later, the scheduled property was sold on 17.02.2014 to M/s. R. Amudha, for a consideration of Rs.9,07,95,000/- and thus, the assessee’s part of share was worked out at Rs.46,71,613/- i.e.1/3rd share of 1/9th interest in the immovable property.

7.1 Based on the transfer of the Scheduled property on 17.02.2014, the AO re-opened the case of assesse’s sister Smt P.

Yasodha, for AY 2014-15 and after enquiry made an addition of to 2324/Chny/2024 (AY 2016-17) Smt. Prema :: 8 ::

LTCG of Rs.81,46,406/- by order u/s. 143(3) of the Act dated 20.12.2019, which was deleted by the Ld.CIT(A) on 24.09.2020 by holding that the scheduled land in question to be an agricultural land by taking note of the relevant revenue records, etc., which action of the Ld.CIT(A) has not been agitated before this Tribunal which raise the presumption that the Department has accepted the impugned action of the Ld.CIT(A). Similarly, re-opening of assessment for AY 2014-15 was resorted to in the case of another heir of the property (i.e. brother of the assessee’s father) Shri.

Parthasarathy Varadhan and the AO made similar addition of LTCG of Rs.81,46,406/- by order u/s. 143(3)/147 of the Act dated 20.12.2019, which was also deleted by the Ld.CIT(A)-10, on similar reasoning as in the case of P. Yasodha (supra), wherein inter alia he reiterated that the scheduled land is not a capital asset within the meaning of section 2(14) of the Act; and he deleted the additions made by AO and the revenue has not challenged the action of Ld.CIT(A) even in his case. However, by passing the impugned order, the Ld CIT(A) dismissed the appeal.

7.2 The assessee is noted to have assailed the impugned action of the Ld.CIT(A)/AO by raising the following grounds: - to 2324/Chny/2024 (AY 2016-17) Smt. Prema i) The capital gain added in the hands of the assessee was earned in AY 2014-15 since, the scheduled property in question was transferred/sold on 17.02.2014 (AY 2014-15), and the Ld.CIT(A) failed to appreciate that the AO erred in re-opening the assessment on incorrect facts since the relevant documents were produced before the Ld.CIT(A) and even after that he brushed aside the same and didn’t given any findings on the facts of this issue. ii) Anyway, the addition of STCG in the hands of assessee is erroneous. iii) The share of assessee has been wrongly computed as if assessee had 1/11th of the share in the property i.e. the assessee received only Rs.46,71,613/- whereas the AO computed as if assessee has received Rs.82,63,181/- and after reducing adhoc 10% consideration of cost of acquisition has computed the STCG as Rs.74,36,863/-.

7.3 Having noted the aforesaid relevant facts, what emerges in the light of the assertion of assessee is that in the relevant AY 2016-17, the assessee had only ‘income from other sources’ i.e. interest- income of Rs.21,100/- and therefore, she didn’t file RoI u/s.139(1) of the Act; and that the allegation that in the relevant year she had transferred immovable land along with ten (10) owners for total sale consideration of Rs.9.08 Crs is on totally wrong assumption of fact; and therefore, the AO’s action to reopen the assessment of assessee for AY 2016-17, on the very same transaction of immovable property which happened on 17.02.2014 i.e. in AY 2014-15, is erroneous. We have come to such conclusion by firstly taking note of the information on the basis of which the AO has resorted to to 2324/Chny/2024 (AY 2016-17) Smt. Prema reopening of assessment of assessee for AY 2016-17, which information, he disclosed at para one of the assessment order, wherein the AO notes (in his own wordings) “the assessee has sold immovable property along with ten (10) other co-owners for a consideration of Rs.5,29,74,000/- on the market value of which as

per section 50C Rs.9,08,95,000/-“. And thereafter, he [AO] is noted to have framed the assessment by computing the assessee’s share out of the above sale consideration at Rs.82,63,818/- (Rs.9,08,95,000/11) and computed STCG of Rs.74,36,863/- from the transfer, Therefore, we find that AO has reopened the assessment for taxing an event which didn’t happen during the relevant year i.e. AY 2016-17, but in AY 2014-15 as discussed supra, which fact gets corroborated after having perused the contemporaneous evidences viz assessment orders as well as Ld.CIT(A) order in the case of assessee’s sister Smt P Yasodha and the other heir of the property (Shri.Parthasarathy Varadhan), we note that the property in question is the scheduled property at Vandalur Village was sold on 17.02.2014. Therefore, the capital gain if any would arise only in AY 2014-15 and therefore, the action of the AO to reopen the assessment for AY 2016-17 based on incorrect information would be bad in law. In order to reopen an to 2324/Chny/2024 (AY 2016-17) Smt. Prema :: 11 ::

assessment, the AO should have reason to believe, assessment of income as stipulated by Sec.147 of the Act. “Reason to believe” postulates foundation based on information and belief based on reason. In the present case, the foundation based on information is itself erroneous, therefore the foundation itself falls, so reopening of assessment is itself bad in law. For that we rely on the legal maxim “sublato Fundmento Credit opus” meaning in case a foundation is removed, the super-structure falls. In Badarinath v. Tamil Nadu AIR 2000 SC 3243, the Hon’ble Supreme Court held that once the basis of proceedings is gone, all consequential orders & acts would fall on the ground automatically which is applicable to judicial and quasi- judicial proceedings.

7.4 Our aforesaid finding stands corroborated on merits also by the relevant evidences placed before us and the Ld CIT(A); and having perused the assessment order as well as Ld.CIT(A) order in the case of assessee’s sister and the other heir of the property (Shri.Parthasarathy Varadhan), we note that the property in question i.e. the scheduled property at Vandalur Village was sold on 17.02.2014. Therefore, the capital gain if any would arise only in to 2324/Chny/2024 (AY 2016-17) Smt. Prema :: 12 ::

AY 2014-15 and therefore, the action of the AO to add STCG in the hands of assessee in the AY 2016-17 is erroneous.

7.5 Further, we find force in the submission of the Ld.AR that the AO/Ld.CIT(A) erred in even computing share of profit of the assessee by dividing the gross total consideration by eleven (11) because the gross sale consideration of Rs.9.08 crores was divided as per the mutual understanding between the heirs/co-owners of 1.71 acres of the immovable land at Vandalur Village, which action of the Ld.CIT(A) has been accepted by the Department as is evident from the fact that assessee’s sister Smt. P. Yasodha has undergone scrutiny u/s. 143(3) after re-opening u/s. 147 of the Act wherein the AO made somewhat similar addition of LTCG on the very same transaction of Rs.81,46,460/-; and on appeal, the Ld.CIT(A) is noted to have found that the AO erred in dividing the gross consideration of Rs.9.08 crores into eleven (11) heirs and computing the share of assessee at Rs.82,63,181/-, whereas her share was as per the partition-deed of 2010, and accordingly, was only Rs.46,71,613/-, which fact has been reproduced by Ld.CIT(A) at Page No.23 of his order dated 24.09.2020, wherein he noted that Smt. P.Yasodha (sister of the assessee in the present case) has to 2324/Chny/2024 (AY 2016-17) Smt. Prema received only the share of Rs.46,71,613/- (out of total consideration of Rs.9,08,98,000/-) details of which are noted as under:

STATEMENT OF INCOME

CAPITAL GAIN 1/12th share in sale of agricultural land at Vandalur village 1.71 acres on 17.02.2014 (The above said land is got by way of family Deed dated 15.12.2010) Total area sold 171.5 cents Total sale consideration 9,08,95,000 82,63,181.82 Less: Brokerage paid 18,17,900 Net Amount received 8,90,77,100 1,00,99,444.44 Share of Capital Gains 01.P. Lakshmanan 1,40,14,840 02.P. Mani 1,40,14,840 03.P. Varadga 1,40,14,840 04.C. Dhanam 46,71,613 05.J. Yasodha 46,71,613 Daughter’s of Chakrapani 06.S. Prema 46,71,613 07.P. Kumudavalli 1,40,14,840 08.P. Boopalan - 09.K. Neelavathi 20,00,000 10.S. Jeyaraman 20,00,000 Daughter & son of Devaki 11.Logaayaki 2,00,000 - Daughter of Parthasarathy 12.Kadambadi 1,48,02,900 - w/o P. Lakshmanan 8,90,77,099 Sale consideration of Yasodha’s share 4671613 Note: Since the assessee sold the land is in the Nature of agricultural land the assessee claims Exemption u/s. 2(14) of the Income tax Act ________ LONG TERM CAPITAL GAIN Exempt The assessee has purchased one vacant land At Vijay Avenue, Kayarambedu village, Chengalpattu Taluk, Kancheepuram Dist. on 29.04.2014 for 1097040 to 2324/Chny/2024 (AY 2016-17) Smt. Prema :: 14 ::

7.6 And the Ld.CIT(A) is noted to have found that land in question i.e. 1.71 acres sold on 17.02.2014 was an agricultural land, after examining the revenue records of land, kist paid, chitta and adangal copies and having examined the following documents himself by exercising his powers as that of first appellate authority u/s. 250(4) of the Act, as revealed from page 40 of Ld.CIT(A)-10 order dated 24.09.2020: a. Adangal issued by the Revenue Authority (scanned copy is reproduced in page nos. 18 & 19 above) b. Presence of well in the land – water resource for agricultural activity and EB connection (scanned copy is reproduced in pgae nos. 20, 21 & 22 above) c. Certificate issued by Revenue Authority with respect to the distance between the Agricultural land the municipal limit (scanned copy is reproduced in pgae no. 27 above) d. Document with respect to the population of the Tambaram Municipality nearest to Vandalur Village (scanned copy is reproduced in page no. 29 above) e. Screen shot from the website of the Income Tax department, wherein it is stated that such land is an agricultural land as per section 2(14) of the Income-tax Act, 1961 (scanned copy is reproduced in pgae no. 29 above). 7.7 And the Ld.CIT(A) gave a finding of facts as under: a. The land is categorised as punsai land, that is, dry land ready for cultivation. b. The land is situated above a distance of 8 kms from the nearest municipal limits and aerial distance of about 6.5 kms c. The population of the nearest municipality is 17,47,787 as per the 2011 census. d. Presence of well in the land – water resource for agricultural activity and EB connection. 7.8 And thereafter, the Ld.CIT(A) concluded as under:

6.10 As can be seen from the above, the appellant had produced the required documentary evidence from the Revenue authorities and other requisite documents that the land is not a capital asset within the meaning to 2324/Chny/2024 (AY 2016-17) Smt. Prema of Sec.2(14) of the Act and further, the tax utility tool of the Departmental website also reiterates the same. Further, it is stated that the AO has not adjudicated as to whether the land is an agricultural land or not as per the provisions of the Act. Further, the appellant has also successfully rebutted the contention of the AO for only partly accepting a composite proposal which is not legally tenable. In any case, the taxability or otherwise ought to be decided as per the provisions of the Act and not as per a letter submitted by the appellant. As the AO had not decided the issue on the merits of the case, as per the powers vested with CIT(A) u/s. 250(4), the issue is decided on the merits of the case. In view of the above factual and legal position, I am of the considered opinion that the AO is not justified in charging capital gain on a land which is not a capital asset within the meaning of 2(14) of the Act. Therefore, the addition of Rs.82,63,181/- under the head Long Term Capital Gain is hereby deleted.

7.9 Thus, we find that the Ld.CIT(A) in the case of co-owners as noted (supra) has held that no tax is leviable on the sale of agricultural land at Vandalur Village i.e. by the assessee’s sister and ten (10) other co-owners and deleted the LTCG computed in the hands of assessee’s sister to the tune of Rs.81,46,460/- for AY 2014-15, which decision of the Ld.CIT(A)-10 has been accepted by the Department. Similarly, in the hands of the brother of assessee’s late father i.e. Shri. Parthasarathy Varadhan, the AO had taken similar action and added Rs.82,41,338/- vide order dated 20.12.2019 which was also deleted by the Ld.CIT(A) by passing similar order on 24.09.2020, which has not been a subject matter of appeal before this Tribunal. to 2324/Chny/2024 (AY 2016-17) Smt. Prema :: 16 ::

7.10. In the light of the aforesaid relevant facts and discussion and taking note of the assessment order passed in the case of the present assessee, based on CIB information that the assessee has sold immovable property along with ten (10) other co-owners for a consideration of Rs.9,08,95,000/- and the assessee’s share out of the above was Rs.82,62,181/- (Rs.9.08 crores/11), the AO’s action perse of computing the STCG at Rs.74,36,863/- cannot be legally sustained for the simple reason that very same transfer of immovable property had been subjected to scrutiny after reopening the assessment in the case of assessee’s sister (Smt P.Yasodha) and other heir Shri Parthasarathy Varadhan and similar additions made by the AO in the hands of both persons have been deleted by the Ld.CIT(A)-10, which has been accepted by the Department.

7.11 Hence, the STCG computed on the transfer of property which took place on 17.02.2014 i.e. in AY 2014-15 in the relevant year i.e. AY 2016-17 is per-se erroneous and therefore, cannot be added in AY 2016-17. Therefore, considering the overall facts and circumstances of the case, the action of the Ld.CIT(A) brushing aside the relevant documents filed by the assessee cannot be countenanced and therefore, we set aside the impugned order of to 2324/Chny/2024 (AY 2016-17) Smt. Prema the Ld.CIT(A); and restore it to the file of the JAO for a limited purpose i.e. to examine the veracity of the assesse’s contention that she has not made any sale/transfer of any immovable property in the relevant year i.e. AY 2016-17; and if it is found that the assessee didn’t undertake any transfer/sale of immovable property in AY 2016-17, then no capital gain to be taxed in the hands of the assessee for AY 2016-17; and if it is found that the assessee along with ten (10) co-owners have sold immovable property for Rs 9.08 Crs, in AY 2016-17, then AO to assess the capital gains from such transfer of property in accordance to law; after giving opportunity to assessee.

: 9. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Chennai/Delhi, dated 11.07.2024 for the Assessment Year (hereinafter in short "AY”)

2016-17, wherein the Ld.CIT(A) has confirmed the penalty of Rs.21,24,260/- passed by the AO u/s.271(1)(c) of the Act for concealment of income. to 2324/Chny/2024 (AY 2016-17) Smt. Prema :: 18 ::

Therefore, we confirm partly the penalty, by restricting the penalty at Rs.10,000/- in place of Rs.20,000/-. Thus, assessee gets partial relief of Rs.10,000/-.

ITA No.2324/Chny/2024:

However, the main plea of the assessee is that there is no alleged transfer of any immovable property in AY 2016-17 and her taxable income was less than the threshold limit (i.e. she had earned only interest income of Rs.21,100/-), hence, she is not required to file the return and therefore, didn’t file the return of income u/s.139(1) of the Act. In this regard, we are of the view that penalty u/s.271F of the Act can be imposed only if the AO is able to show that assessee had in the first-place taxable income beyond the threshold to 2324/Chny/2024 (AY 2016-17) Smt. Prema limit, then only the fault can be attributed on the assessee for failure to file return of income u/s.139(1) of the Act. And since, we have set aside the assessment back to the JAO to find an answer to the said question, the penalty levied u/s.271F of the Act cannot be sustained and therefore, it is set aside back to the JAO and he is at liberty to take action in this regard after assessment is made as ordered (supra); Therefore, we set aside the impugned order of the Ld.CIT(A) and restore the same back to the file of the AO to take action after the assessment is made as directed for AY 2016-17 (supra).