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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: D.T. GARASIA & SHRI N. K. PRADHAN
Per D.T. GARASIA, Judicial Member:
The above titled appeal has been preferred by the assessee against the order dated 01.03.2017 of the Commissioner of Income Tax (Appeals) 3, Mumbai [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
The effective Grounds of the appeal are as under: “1. To quash the reassessment which is based on presumption and surmises and without furnishing the reasons recorded for reopening. 2. To delete the market value of Rs.2,47,32,000/- adopted by the Assessing Officer u/s.50c.
3. To delete the addition of LTCG of Rs.63,19,167/- by overlooking the taxes paid by the co-owners on the same and therefore, double addition of the same income. 4. To delete the addition of LTCG of Rs.63,19,167/- by overlooking the taxes paid by the co-owners on the same at the same rate @20%+EC as applicable. 5. To delete the addition of LTCG of Rs.63,19,167/- without issuing notice u/s.133(6) or summons u/s.131. 6. To delete the addition of LTCG of Rs.63,19,167 on substantive basis instead of protective basis. 7. To allow the deduction of Rs.1,00,000/- u/s.80c.
2 A.Y.2012-13 8. to delete the interest charges u/s.234B & D and initiation of penalty u/s.271(1)(c).
The short facts of the case are as under:- Return of income declaring total income at Rs.20,43,813/- was filed on 19.03.2013. The assessee is engaged in the business of trading in salt and declared income from business of Rs.2,40,330/-, Long Term Capital Gain of Rs.15,73,301/- and Income from other sources of Rs.3,30,470/-. Notice u/s.148 was issued as the appellant failed to offered LTCG in its return of income and the AO adopted the stamp duty valuation of Rs.2,47,32,000/- u/s.50C(1) of the Act on sale of immovable property as against the sale agreement value of Rs.2,17,92,750/-. The appellant has also paid the stamp duty of Rs.14,65,600/-. The AO rejected the argument of the appellant that the property was an ancestral property and belonged to four individuals namely, Harishchandra Rawajibhai Patel, Sitaram Rawajibhai Patel, Gitaben Arjun Patel and Dhansukhbhai Rawajibhai Patel with the mutual consent of all the owners, the agreement of sale was made only in the name of the appellant. However, the reply of the appellant was rejected on the grounds that the amount of sale was credited in appellant’s a/c and agreement of sale is also made in the name of the appellant and provisions of section 50c are also attracted in this case. Therefore, the AO applied the provisions of section 50c and calculated long term capital gain at Rs.78,92,180/-.
Ground no.1 is not pressed.
The learned AR submitted that all 4 brothers that assessee and other 3 co-owners receive equal share in the sales proceedings of the said property because all had equal right in plot of land sold during the year. The property was in the name of the assessee, therefore sale deed was executed in his name. In the agreement itself that the said plot was ancestral property and all the four brothers were equally eligible to share ¼th share in the sales proceeds during the year. The Assessing Officer did not issue summons to co-owners before making any enquiry. The Assessing Officer had added whole Long Term 3 A.Y.2012-13 Capital Gain arising on the sale of plot in full without considering the fact that all 3 co-owners have shown their share of ¼ the LTCG in their respective returns. The learned AR relied upon the decision of Kishanchand Chellaram Vs. CIT [1980] 125 ITR 713, Ponkunnam Traders [83 ITR 508 & 102 ITR 366(Ker.], Prakash Chand Natha Vs. Commissioner of Income Tax (2008) 301 ITR 134 and P.C.Nahata [247 ITR 274 SC], S. Khader Khan Son [300 ITR 157 Madras] & Vinodkumar Solanki [233 ELT 157S.]. The learned AR relied upon the decision of the Jurisdictional High Court in case of Assistant Commissioner of Income Tax, Circle-3, Nagpur Vs. Kamlakar Moghe [2015] 64 taxmann.com 413. Learned AR relied upon the order of revenue authorities.
We have heard the rival contention of both the parties. Looking to the facts and circumstances of the case, we find that the assessee had shown the said property was an ancestral property belonging to four individuals namely, Harischandra Rawajibhai Patel, Sitaram Rawajibhai Patel, Gitaben Arjun Patel and Dhansukhbhai Patel. Due to fragmentation of law, the property was only in the name of the assessee and it was mutually agreed upon by them orally in the assessee to distribute the sale consideration and hence sale proceeds received of Rs.2,27,92,750/- was distributed amongst themselves equally. Each one has calculated his/her own capital gains and paid taxes and filed their returns individually. As the property was in the name of the appellant, the agreement for sale was also made in the name of assessee.
We have perused the documentary evidence produced before us the paper book on page no.37 wherein 7/12 abstract of the property was in the name of Shri Dhansukhbhai Patel. We have also verified that this original property was also held by Shree Palanji Godrej from them this property was transferred in the name of Shri Ravjibhai Patel, Shri Ganpatbhai Patel, Shri Sitarambhai Patel, Shri Arjunbhai Patel and Shri Harishchandrabhai Patel which Is on page 45 of the paper book. Page 49 of the paper book which 4 A.Y.2012-13 shows that due to fragmentation of law, the property was in the name of assessee. We find that survey no.156 hiss no.6, area H. are 17-60.0 & valuation 21-50 was purchased by Shri Ravjibhai Patel and his brothers on 20.02.1972. Thereafter, this property was distributed among the 7 members and Shri Dhansukhbhai became the registered part owner of the said property as per page no. 117-121. When the property was sold to Karamtaa Steel Pvt. Ltd. and assessee and two brothers and legal heirs of 4th brother are the co- owners. We also find from the sale deed wherein all the assessee and three brothers name are mentioned in the sale deed. Looking to the facts and circumstances of the case that AO is not justified in adding the Long Term Capital Gain in the hands of the assessee. Therefore, we are of the opinion that AO and CIT(A) are not justifying this.
We got support from the decision of Jurisdictional High Court in the case of ACIT vs. Kamlakar Moghe [2015] 64 taxmann.com 413 (Bombay) wherein it is held as under: “I. Section 48 of the Income-tax Act, 1961 - Capital gains - Computation of (Expenses in connection with transfer) - Assessee received a property with clause in his mother's will providing overriding title in favour of his three sisters - He paid certain amount to his sisters so that in future they should not claim any right in property - A family settlement was accordingly reduced into writing - Assessee, after sale of said property, claimed such amount under section 48 and reduced it while working out capital gains - Whether since assessee's sisters had a title in property and without their co-operation there could not have been any sale, amount paid to them would be considered as expenditure in connection with transfer of property and would be reduced while computing capital gain - Held, yes [Para 8] [In favour of assessee]”
Respectfully following the decision of Jurisdictional High Court, we allow the appeal of the assessee and restore this issue to the file of AO and is directed to verify whether the sale proceeds received of Rs.2,27,92,750/- was distributed amongst co-sellers of the property and co-sellers have filed their individual returns. The AO is directed to verify the same and allow the claim.
In the result, appeal is on this ground is allowed for statistical purposes.
5 A.Y.2012-13 11. Ground no.7 is related to deduction of Rs.1,00,000/- u/s.80C. In this respect, assessee did not file anything before us also, therefore we confirm the finding held by the Ld. CIT(A). In the result, appeal on this ground is dismissed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 16.11.2017.