RAVULA NARAYANA RAO,NELLORE vs. INCOME TAX OFFICER, WARD-2, NELLORE

Heard all these three assessees as well as the department through their respective learned representatives. Case files peruse

The captioned appeals filed by the assessees are found to be barred by 55 days’ identical delay in filing. They have moved their separate petitions seeking condonation of the delay. We heard that the impugned delay pertains to Covid-19 pandemic outbreak period only which stands condoned. These three main appeals are taken up for adjudication as on merits therefore. We make it clear that the appellants father herein had expired on 30.07.2010.

A combined perusal of all the three instant case files reveals that these assessees’ identical sole substantive grievance seeks to reverse both the learned lower authorities’ action adding long term capital gains of Rs.98,60,990/- each thereby treating them as legal representatives u/s 159(1) of the Act.

It is an admitted fact that all these three appellants herein namely Ravula Srinivasa Rao, Ravula Narayana Rao and Ravula Sudhakar Gowd are sons of the deceased assessee late Sri Ravula Ankaiah Gowd. They have two more brothers Ravula Dasaratha Ramaiah Gowd @ Dasaiah Gowd and Ravula Raveendra (stated to be a specially abled person). Since the instant lis requires us to adjudicate upon the sole substantive issue of applicability of section 159(1) assessments framed on all these three appellants, we confine ourselves to the relevant factual backdrop qua the instant issue only.

There is no dispute between the parties that the appellants’ father Shri Ravula Ankaiah Goud had sold the capital asset in issue on 16.04.2008 for Rs.7,55,00,000/- having S.R.O. price of Rs.7,83,56,500/-. This followed his registered Will dt.30.05.2008 bequeathing his remaining estate of 11 assets in favour of his grandsons Mr. Ravula Ajay and Ravula Arjun Goud, sons of Ravula Raveendra (supra). He had also appointed his son Sri Ravula Dasaiah Goud as guardian for execution of the Will. This registered Will forms part of the record before us. (Pages 56 to 59).

Now comes the sole issue regarding assessment of long term capital gains arising from the deceased assessee’s transfer of the asset dt.16.04.2008. We note at this stage that there is hardly any need for us to delve deeper into the relevant factual matrix. Suffice to say, the Revenue’s case in light of the assessment findings as well as the CIT(A)’s detailed discussion running into 73 pages is that these three appellants / sons of the decesased assessee have to be assessed as his legal representatives u/s 159(1) r.w.s. 2(11) of the code of Civil Procedure Code, 1908. We sought to know as to whether the assessment as well as CIT(A) findings have established in any clear terms that they represent the estate of the deceased assessee / father of the assessees or they could be termed as any person(s) “who intermedles with the estate of the deceased and where a party sue or sued in a representative character the person on whom the estate bequeaths on the death of the party so suing or sued”. There is no clear cut finding to this effect forthcoming either in the assessment or in the CIT(A)’s detailed discussion.

Mr. Goutam vehemently contended that the amount in question of Rs.7.55 crores had been withdrawn from the deceased assessee’s bank which leads to a presumption that all of his sons only would have utilized as they had no means to make both their ends meet.

We find no merit in the Revenue’s stand. We first of all make it clear that we are dealing with a tax statute whose provisions to be strictly construed in light of Commissioner of Customs Vs. Dilip Kumar (2018) 9 SCC Page 1 (FB) (SC). Coupled with this, a perusal of the deceased assessee’s “Will” make it clear that no estate has devolved upon these sons / appellants after death of their father. They have not succeeded to his estate after even on transfer of the impugned asset rather. It emerges that he had bequeathed a list of 11 assets in favour of his grandchildren form fifth son only who are not the appellants before us. We are of the opinion in these peculiar facts and circumstances that the learned lower authorities have erred in law and on facts in treating these three sons of the deceased assessee Shri Ravula Ankaiah Goud as legal representatives u/s 159(1) of the Act in absence of either establishing a clear trail of bank transactions of having received whole or part of the sale consideration or any immovable properties in their favour post their father’s death or the transfer of asset as the case may be. Case law V.V. Rama Rao Naidu Vs. CIT (1961) 42 ITR 80 (AP) holds that devolution of estate is favour of the legal representatives only makes him liable for assessment. These three assessees succeed in their respective cases on merits therefore. The impugned identical long term capital gains addition of Rs.98,60,990/- each in these three cases stands deleted. All other pleadings on merits or validity of re-assessment, if any; stands rendered infructuous.

These three assessees’ appeals i.e. to 306/Hyd/2020 are allowed in above terms. Their corresponding stay applications S.A.Nos.1 to 3/Hyd/2022 also follow the suit in very terms. A copy of this common order be placed in their respective case files.