ANAND SHAH,MUMBAI vs. ITO 13(1)(2), MUMBAI

In his appeal, assessee has raised the following Grounds of appeal :-

In order to appreciate the controversy in this appeal, the following discussion is relevant. In the course of assessment proceedings, the Assessing Officer noted that in terms of a sale agreement dated 22.02.2011 assessee alongwith his brother, Shri Gautam Navinchandra Shah had sold a property for a consideration of Rs.1.90 crores and the assessee had not declared any gain thereof. The Assessing Officer also noted that the said property was purchased vide purchase deed dated 30.09.2004 in the name of the assessee and his brother, Shri Gautam Navinchandra Shah. On being show-caused, assessee explained that the sale was effected by his brother and the entire amount of sale consideration was also fully received by the assessee’s brother, who had offered the same to tax in his return of income. The assessee also pointed out that through a Gift Deed, assessee had gifted his part of the ownership of the property to his brother and, therefore, at the time of sale, assessee’s brother was the complete owner of the sold property. The Assessing Officer did not accept the plea of the assessee by noticing that the Gift Deed was neither registered nor signed by the Donee, i.e. assessee’s brother and that the receipt for sale consideration at page 12 of the Sale Deed of the property was also signed by the assessee. For the said reasons, the Assessing Officer concluded that the assessee ought to have declared the Long Term Capital Gains on sale of the property to the extent of his share, which he determined at 50%. Accordingly, the Assessing Officer adopted the sale consideration of Rs.1.90 crores and after reducing the indexed cost of acquisition of Rs.47,79,994/-, computed the Long Term Capital Gains at Rs.1,42,20,006/- and brought to tax assessee’s share thereon of Rs.71,10,000/-. The assessee challenged the matter in appeal before the CIT(A) who has since upheld the stand of the Assessing Officer. Against such a decision of the CIT(A), assessee is in further appeal before us.

Before us, the learned representative for the assessee referred to the Paper Book wherein are placed the purchase deed dated 30.09.2004 as well as the sale deed dated 22.02.2011 evidencing the purchase and sale of the property in question. The learned representative pointed out that though in the purchase deed as well as the sale deed the name of the assessee appears, but in substance, the purchase was effected by assessee’s brother from his own sources and, therefore, even the sale consideration has been fully received by the assessee’s brother; a fact which is also emerging from the sale deed which prescribes that the consideration is to be paid to the assessee’s brother. In this context, the learned representative also pointed out that the bank account from where the money was paid to acquire the property and also the account in which the sale consideration has been deposited, is beneficially owned by the assessee’s brother and the incomes in this bank account have always been declared by the assessee’s brother over the years in his respective returns of income. In this context, the learned representative referred to pages 8 to 10 of the Paper Book wherein is placed the relevant pages of the bank statement belonging to the assessee’s brother from where the amounts have been paid for purchase of the property. The learned representative emphasised that though it was a joint bank account, but it has been fully accounted for only in the returns of income of assessee’s brother and not of the assessee. The learned representative pointed out that even the use and maintenance of the flat was done by assessee’s brother and, in this context, he referred to pages 12 to 20 of the Paper Book wherein is placed the maintenance receipts issued by the housing society, telephone bills and electricity bills, which are in the name of the assessee’s brother for the relevant period. The learned representative pointed out that though the assessee had signed the sale deed also, it was done on the insistence of the purchasers. The learned representative explained that the purchasers had insisted on assessee signing the deed and, for that matter, he referred to page 71 of the Paper Book wherein is placed a Declaration dated 12.04.2017 issued by the purchasers of the property. The assessee explained that this was an additional evidence, which was hitherto not before the lower authorities and prayed for its admission in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 as according to the assessee, the same is an independent piece of evidence which is relevant to decide the controversy and goes to support the plea of the assessee which has been asserted at every stage. The learned representative also referred to the computation of income of assessee’s brother for Assessment Year 2011-12 wherein the Long Term Capital Gain arising on sale of the flat and deduction claimed u/s 54 of the Act towards purchase of another new residential flat have been duly reflected. In sum and substance, the plea of the learned representative is that though the name of the assessee appeared in the purchase deed as well as in the sale deed, in effect, assessee had no beneficial ownership in the property and, therefore, no part of the capital gains accruing on the sale of the property could be assessed in the hands of the assessee.

On the other hand, the ld. DR appearing for the Revenue reiterated the stand of the lower authorities by pointing out that the purchase deed as well as the sale deed included the name of the assessee, and that even the bank account in question was in the joint names and, therefore, the Assessing Officer was justified in bringing to tax 50% of the Long Term Capital Gain in the hands of the assessee.

We have carefully considered the rival submissions. As the aforesaid discussion reveals, the crux of the controversy revolves around as to whether the gain arising on sale of the property, namely, Flat in Tardeo Court Housing Society can be partly assessed in the hands of the assessee? The case made out by the Revenue is that the agreement for purchase of the property dated 30.09.2004 reflects assessee alongwith his brother, Shri Gautam Navinchandra Shah as joint owners. Similar is the situation in the sale agreement dated 22.02.2011 in terms of which said property has been sold. On the first look, the plea of the Revenue appears to be quite potent; so however, the assessee has referred to various facts to justify his assertion that for all intents and purposes, the property was beneficially fully owned by assessee’s brother, and that his name was merely a technical formality. In support of the said assertion, the learned representative for the assessee has taken us through the bank statement through which the payments have been made to acquire the flat. Though the said bank account is also in the joint name with assessee’s brother, but what is sought to be emphasised is that all along, the transactions in this bank account have been offered for taxation in the hands of the assessee’s brother only. The assessee has also referred to the expenses incurred on the maintenance of the flat, electricity and telephone bills in the interregnum period of holding of the property to demonstrate that the flat was maintained by assessee’s brother alone. All these aspects have a critical bearing on evaluation of assessee’s plea that his name was included in the transaction only for technical consideration whereas, in sum and substance, the beneficial ownership of the property was always of assessee’s brother alone. It is also a fact that so far as assessee’s brother is concerned, he has declared the Long Term Capital Gain accruing on the sale of the property in his return of income. Pertinently, what is emerging from the orders of the authorities below is that the factual assertions of the assessee have been noted, but the same have neither been negated and nor put to verification at any stage. In our considered opinion, if the assertions of the assessee that the transactions in the relevant bank account, which has been used to acquire the property, have all along been declared in the income-tax returns of assessee’s brother, it would justify the stand of the assessee that he was not the beneficial owner of the property, and that the entire ownership of the property vested in assessee’s brother. Further, the circumstances in which assessee’s name appeared in the sale deed has also been sought to be justified on the basis of a confirmation issued by the purchasers, copy of which is placed at page 71 of the Paper Book. This piece of evidence was not before the lower authorities, but in our view, it is quite germane to decide the controversy and, therefore, we deem it fit and proper to admit the same. In terms of aforesaid discussion, we are inclined to hold that the say of the assessee that he is not the beneficial owner of the property has not been appropriately dealt with by the lower authorities inasmuch as the factual assertions made by the assessee deserve to be considered and appreciated appropriately. For instance, if the assessee is able to demonstrate before the Assessing Officer that the funds in the bank account used to acquire the property have indeed been declared by the assessee’s brother in his income-tax returns, it would imply that the said funds beneficially belonged to assessee’s brother which will enable the Assessing Officer to correctly comply with the provisions of Sec. 45(1) of the Act for the purpose of assessing the capital gains in the right hands. For the said purpose, and for enabling the Assessing Officer to appropriately consider afresh the assessee’s stand, we deem it fit and proper to remand the matter back to the file of the Assessing Officer. The Assessing Officer shall allow the assessee a reasonable opportunity to present his submissions and material in support of his stand and only thereafter, the Assessing Officer shall pass an order afresh on the issue regarding assessability of Long Term Capital Gain, if any, in the hands of the assessee, as per law.

In the result, the appeal of the assessee is treated as partly allowed for statistical purposes.