What did the Tribunal hold?

The Tribunal held that capital gains from the property sale should not be taxed in the hands of the individual assessee as the property belonged to the partnership firm, which had already accounted for the sale and paid taxes.

The assessee, a partner in M/s. R.S Construction, transferred a property to the firm. The firm later sold the property, with the assessee executing the sale deed on its behalf, though the assessee's name was mentioned. The firm had already disclosed the sale and paid taxes.

What were the issues?

Whether capital gains arising from the sale of a property by a partnership firm can be assessed in the hands of an individual partner when the partner executed the sale deed but the firm had already disclosed and paid taxes on the sale.

I.T.O WD - 2(2), Hooghly. vs Shri Snehangshu Mondal., Hooghly | ITAT Kolkata 2016

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: Shri Mahavir Singh, & Shri M. Balaganesh

Heard together (2 matters)

ITA No. 55/Kol/2013

C.O No. 23/Kol/2013

Read from the judgment's own cause title. This page is filed under one of them.

This appeal of the revenue and cross objection of the assessee arise out of the order of the Learned CIT(A)-XXXVI, Kolkata in appeal no.301/CIT(A)- XXXVI/Kol/Wd. 2(2), Hg./2011-12/1445 dated 30-10-2012 for the assessment year 2009-10 against the order of assessment framed by the ld.AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

The only issue to be decided in this appeal is as to whether capital gain in respect of a property in the name of M/s. R.S Construction, a partnership firm, could be assessed in the hands of the assessee in the facts and circumstances of the case.

1 C-AM Shri Snehangshu Mondal

The brief facts of this issue are that the assessee is in individual and deriving income from marriage hall, income from partnership firm, income from supply of orders and income from other sources. The assessee is a partner in a partnership firm styled as M/s. R.S Construction. The assessee possessed a property, which was transferred to the said partnership firm, M/s. R.S Construction on 13-02-2006. The said property was sold by M/s. R.S Construction during the assessment year under appeal. The sale deed for the same was executed by the assessee for and on behalf of the said partnership firm. But in the sale deed the assessee’s name was mentioned. The said partnership firm had duly disclosed the sale of flats in its P & L account and paid taxes thereon in the assessment year under appeal. Since the name of the assessee was found in the sale deed, the ld.AO brought the capital gains arising out of the property to tax, in the hands of the assessee. On 1st appeal, the ld.CIT(A) after considering the submissions of the assessee and evidences available on record, deleted the impugned addition as made by the ld.AO. Aggrieved, the revenue is in appeal before us.

The ld.DR vehemently supported the order of the ld.AO in making the impugned addition. In response to this, the ld.AR argued that the Addl. District Sub-Registrar had duly given a certificate to the District Registrar to this effect, which was available in the assessee’s paper book at page 5, wherein it has been categorically mentioned that name of Sri Snehangshu Mondal, ( the assessee herein) has been inadvertently and erroneously shown in the sale deed instead of stating that assessee had signed on behalf of M/s. R.S Construction, a partnership firm. He also argued that the partnership firm had duly disclosed the business income in its return of income arising out of sale of the subject mentioned flats and paid the taxes thereon. While this is so, assessing the same as capital gains in respect of the same property in the hands of the assessee would only result in double taxation and accordingly prayed before us for confirmation of the order of the ld.CIT(A).

2 C-AM Shri Snehangshu Mondal

We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find from page 5 of the paper book a letter of Addl. District Sub-Registrar, Chunsurah, Hooghly dated 26- 09-2011 addressed to the District Registrar, Chinsurah, Hooghly, which is reproduced herein below for the sake of convenience:- “Government of West Bengal Office off the Addl. Dist. Sub-Registrar, Chinsurah P.O. - Chinsurah, Dist. - Hooghly.

Memo No. 393 Date ... 26.09.2011

To The District Registrar, Hooghly, P.O Chinsurah, Dist. Hooghly.

Sub:- Sri Snehangsu Mondal, Slo Sri Sisir Mondal of Sarojini Kamarpara Road, P.O. & P.S. Chinsurah, Dist. Hooghly. PAN AEKPM 8540H. ********** Sir,

With reference to the letter of Sri Snehangsu Mondal dated 23/09/2011 on title above subject as addressed to you and as per your instruction on that letter. I have the honour to inform you that Name of Sri Snehangsu Mondal has inadvertently and erroneously been shown as the seller or the purchaser himself but Sri Snehangshu Mondal had sold and purchased those properties on behalf of the R.S. CON STRUCTION, a Partnership Firm.

Yours faithfully, Sd/- Addl. Dist. Sub-Registrar Chunsurah, Hooghly

Memo No. 393(2) Date 26.09.11 Copy forwarded for information and taking Necessary action to:- 1) Sri Snehangshu Mondal S/o Sri Sisir Mondal,

3 C-AM Shri Snehangshu Mondal

Sarojini Kamarpara, P.O & P.S Chinsurah, Hooghly.

2) Sri Utpal Chakraborty, I.T.O. Ward - 2(2}, Hooghly, 3rd Floor, Room No. 309, AAYKAR BHAWAN, KHADINA MORE, G.T. Road, Chirisurah, Hooghly.

Sd/- 26/09/11 Addl. Dist. Sub-Registrar Sadar, Hooghly.” In these

We find that the ld.CIT(A) had deleted the impugned addition by observing as under:- The appellant filed written submissions dated 14/05/2012 and 09/07/2012 along with Paper Books. In the written submissions the appellant submitted that the flats were constructed by partnership firm namely ".S. Construction". Copies of Balance Sheet, Profit & Loss account and Bank Statements were filed. The appellant also filed a letter from Additional District Sub Registrar, Chinsurah Hooghly dated 26.09.2011 (Memo No.-393) in which it is mentioned that R.S. Construction, the partnership firm are the seller of the flats. The appellant submitted copy of few conveyance deeds. The Assessing Officer also verified the Assessment records of R.S. Construction for the A.Y. 2006-07, 2007-08 & 2008-09. Addition made by the assessing officer as unexplained investment leads to double taxation in the hands of partnership firm as well as partner.

Considering the facts of the case, 'addition' made by .the Asses-sing Officer as unexplained investment amounting to R').42:41,8001- is not taxable. Therefore the whole addition of Rs.42,41 ,8001- is deleted. “

From the aforesaid observation, we find that the factual finding given by the ld.CIT(A) that the sale of flats have been duly reflected in the Income-tax returns of the partnership firm, M/s. R.S Construction. In view of the said certificate issued to the District Registrar, Chinsurah, Hooghly by the Addl. Dist. Sub-Registrar, Chinsurah, Hooghly, we find that the assessee had executed the sale deed only on behalf of the said partnership firm and not in his individual capacity. We find making of an addition in respect of sale of subject mentioned property would only result in double taxation by way of addition. We also find that none of these findings have been 4 C-AM Shri Snehangshu Mondal controverted by the revenue before us. Hence, we find no infirmity in the impugned order of the ld.CIT(A) in deleting the addition made by the ld.AO in this regard. We uphold the same. Accordingly, the grounds raised by the revenue are dismissed.

The assessee has filed cross objection [no.23/Kol/2013], which only supports the order of the ld.CIT(A).

In the result, the appeal of the revenue and cross objection of the assessee both are dismissed as stated above. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 02 - 03 - 2016

I.T.O WD - 2(2),HOOGHLY., HOOGHLY vs. SHRI SNEHANGSHU MONDAL., HOOGHLY

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