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Facts
The assessee challenged an addition made by the AO and upheld by the CIT(A) on account of long-term capital gains (LTCG) on the sale of immovable property. The AO reopened the case and made the addition under Section 50C, as the sale consideration was less than the stamp duty value. The assessee contended that she was a nominal co-owner and her son, the actual owner, received the entire sale consideration and offered it to tax.
Held
The Tribunal noted that the sale consideration was received by the assessee's son, who had declared it in his return of income. The AO should have reopened the son's assessment for the difference between the sale price and the stamp valuation. The addition in the hands of the assessee was directed to be deleted.
Key Issues
Whether the addition for LTCG on sale of property is sustainable in the hands of the assessee when the sale consideration was received by her son and offered to tax by him? Whether the AO can make addition in the hands of the assessee based on stamp duty valuation when the actual sale consideration was received by the son?
Sections Cited
50C, 147, 144, 148, 153(6)(i), 153, 54F
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI OM PRAKASH KAND, AM & MS. KAVITHA RAJAGOPAL, JM Smt. Maya Mohan Desai
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2012-13.
The assessee has challenged the solitary issue of addition amounting to Rs.11,32,565/- towards long term capital gain (LTCG for short) u/s. 50C of the Act and has also challenged the validity of the assessment made u/s. 147/144 of the Act as being bad in law and time barred for the reason that the notice u/s. 148 of the Act was issued beyond the period of limitation.
(A.Y.2012-13) Smt. Maya Mohan Desai vs. ITO 3. The brief facts are that the assessee is an individual receiving family pension. The assessee had also filed her return of income during the year under consideration. The ld. Assessing Officer ('A.O.' for short) had reopened the assessee’s case vide notice u/s. 148 of the Act dated 30.03.2019 for the reason that the assessee has entered into a sale transaction of immovable property which was not disclosed by the assessee and duly recorded the reasons. The ld. A.O. passed the assessment order dated 26.12.2019 u/s. 144 r.ws. 147 of the Act by determining the total income at Rs.12,19,355/- by making an addition of Rs.11,35,565/- towards LTCG on sale of immovable property.
The assessee was in appeal before the ld. CIT(A) who vide order dated 01.03.2023 upheld the addition made by the ld. A.O.
The assessee is in appeal before us, challenging the order of the ld. CIT(A).
The learned Authorised Representative ('ld. AR' for short) for the assessee contended that the assessee being a senior citizen the only source of income was the family pension and the bank interest. The ld. AR further contended that the sale proceeds of the immovable property were entirely received by the son of the assessee who was the primary owner of the properties sold. The ld. AR further said that the assessee was merely a co-owner for name sake and have not received the sale consideration. The ld. AR prayed for deleting the impugned addition made by the lower authorities.
Per contra, the learned Departmental Representative ('ld.DR' for short) contended that purchase and sale agreement had both the assessee and the son’s name as co-owner of the properties sold. The ld. DR further stated that the assessee has executed the sale
(A.Y.2012-13) Smt. Maya Mohan Desai vs. ITO deed after receiving part of the sale consideration which she was entitled to as a co- owner. The ld. DR relied on the orders of the lower authorities.
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee had not filed her return of income during the year under consideration and based on the information obtained from the ITS details generated on the ITD system, the assessee has sold two residential properties along with her son Shri Ninad Desai who was the co-owner and the details of the said properties are tabulated hereunder:
Flat Date of Purchase price Date of Agreement Market value No. purchase including stamp duty sale value (Rs.) assessed by & registration stamp duty charges (Rs.) authorities (Rs.) 603 21.10.1999 6,07,231 31.03.2012 18,00,000 27,49,500 604 21.10.1999 2,87,405 31.03.2012 8,50,000 13,21,000 Total 8,94,636 26,50,000 40,70,500
The ld. A.O. observed that the properties sold by the assessee are less than the market value assessed by the stamp duty authority and thereby invoked the provision of section 50C of the Act. The ld. A.O. further observed that the son of the assessee Shri Ninad Desai had disclosed sale transaction of only one immovable property in his return of income. The ld. A.O. computed the LTCG of 50% of the sale consideration in the hands of the assessee as per the provision of section 50C(1) and 50C(3) where the market value of the property sold is more than the sale consideration recorded in the sale agreement and determined the LTCG at Rs.11,32,565/- being 50% of Rs.22,65,130/-. The ld. A.O. has also stated that the assessee has failed to substantiate by documentary evidence that her son Shri Ninad Desai has declared the entire sale consideration in his
(A.Y.2012-13) Smt. Maya Mohan Desai vs. ITO return of income. The ld. CIT(A) upheld the order of the ld. A.O. on the ground that the assessee had failed to furnish any evidence to substantiate her claim.
Heard the rival submissions. It is pertinent to peruse the documents furnished by the assessee to substantiate her contention that the entire sale consideration was received by her son and that the same was offered to tax in the return of income filed by the assessee’s son Shri Ninad Desai. The assessee in the paper book filed by her has furnished copies of the agreements for sale which are dated 31.03.2012 for Flat No. 603 and 604, 6th Floor, Marve Queen-II Co-operative Housing Society Ltd., Malad Marve Road, Marwani, Malad (W) for a sale consideration of Rs.18 lacs and Rs.8,50,000/- respectively. The assessee has also furnished the bank statement of Shri Ninad Desai which reflects payment of Rs.26,50,000/- on various dates specified below:
Sr. No. Dated Amount (Rs.) 1 12.08.2011 6,50,000 2 01.01.2012 6,50,000 3 31.01.2012 1,00,000 4 26.03.2012 1,00,000 5 26.03.2012 4,00,000 6 28.03.2012 2,50,000 7 30.03.2012 5,00,000 Total 26,50,000
The assessee has also furnished the income statement of her son which has computed the capital gain on sale of residential property on the total consideration of Rs.26,50,000/-. The assessee has also filed an Affidavit of Shri Ninad Desai declaring that the properties were acquired by him and that his mother was merely a co-owner for the sake of the convenience and that the entire sale consideration was received by him and part of it were invested in the capital gain bonds by him.
(A.Y.2012-13) Smt. Maya Mohan Desai vs. ITO 12. On perusal of the above mentioned documents, it is observed that the ld. A.O. has given a finding that Shri Ninad Desai has disclosed sale transaction of only one immovable property in his computation of total income which is factually wrong as we are aware that the total sale consideration for both the properties as per the sale agreement was Rs.26,50,000/- which has been declared by him in his computation of income. The ld. A.O. has invoked the provision of section 50C for the reason that the assessee and her son had sold the property for a lesser sale consideration than the value assessed by the stamp valuation authority. The ld. A.O. has also stated that the assessee was in receipt of the sale consideration which was received by her. This again is factually incorrect as it is evident that the total sale consideration as per the sale agreement was received by the assessee’s son in his bank account. The ld. A.O. has merely gone by the surmises that the assessee has received the sale consideration which is to be taxed in her hands. In the facts of the present case, there is no iota of doubt that the entire sale consideration has been received by the assessee’s son and the same was offered to tax by him in his return of income. The only issue in this case is that the assessee and the co- owner has sold the properties below the value adopted by the stamp value authority. We are of the view that as the entire sale consideration has been received and offered to tax by the assessee’s son, the ld. A.O. ought to have reopened the assessment of Shri Ninad Desai for the purpose of making an addition on LTCG for the difference amount between the sale price and the stamp valuation. The ld. AR has relied on the decision of the Tribunal in the case of Shri Jitendra V Faria vs. ITO (in vide order dated 27.04.2017) and Smt. Subbalakshmi Kurada vs. Asst. CIT (in ITA No. 2493/Bang/2019 vide order dated 08.05.2020) in support of the assessee’s claim. It is (A.Y.2012-13) Smt. Maya Mohan Desai vs. ITO observed that both the above mentioned decisions are factually different from that of the assessee’s case where the co-owners in these cases have declared 50% of the sale consideration to tax proportionately and the issue was only pertaining to the exemption claimed u/s. 54F. These decisions do not support the assessee’s claim in the present case.
Nevertheless, we are of the considered view that as the entire sale consideration has been declared by the co-owner namely the assessee’s son, in no case can the ld. A.O. make an addition in the hands of the assessee. We, therefore, direct the ld. A.O. to delete the impugned addition made in the hands of the assessee.
That being so, as the addition in the hands of the assessee is deleted, it is trite to assess the same in the hands of the right person, in the case of the assessee’s son Shri Ninad Desai for the reason that he has received the entire sale consideration in his name.
As the limitation for reopening the case of Shri Ninad Desai is generally barred, the Bench was of the view to invoke the provisions of section 153(6)(i) read with Explanation 2(b) to section 153 of the Act which provides for assessment or reassessment of any person in consequence of or to give effect to any finding or any direction given in an appeal or reference under this Act which inter alia extends the time limit for assessment or reassessment or recomputation. An interim order dated 22.12.2023 was passed by the Bench facilitating notice to Shri Ninad Desai to hear him on the issue of LTCG on the sale of properties either to be taxed in the hands of the present assessee or in the hands of Shri Ninad Desai. Sufficient opportunity of hearing was also provided in view of the principles of natural justice. It is observed that Shri Ninad Desai through ld. AR filed an Affidavit reiterating the fact that the entire sale consideration was received
(A.Y.2012-13) Smt. Maya Mohan Desai vs. ITO by him and thereby agreeing to be reassessed. On perusal of the said documents, we deem it fit to direct the ld. A.O. to reopen the case of Shri Ninad Desai by giving sufficient opportunity of hearing and to determine the total income on the merits of the case subject to the provisions of the Act.
In the result, the appeal filed by the assessee is dismissed with the above direction.
Order pronounced in the open court on 31.01.2024