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Income Tax Appellate Tribunal, KOLKATA BENCH “C” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश/O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is arising out of order of Commissioner of Income Tax (Appeals)-XX, Kolkata in appeal No.132/CIT(A)-XX/Wd- 35(3)/2008-09/Kol dated 09.04.201. Assessment was framed by ITO Ward- 35(3), Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 10.11.2008 for assessment year 2006-07.
The assessee has raised the following grounds of appeal-: “1. For that the Ld.CIT(A) was not justified in not considering the improvement cost of the property.
2. For that upon facts and circumstances of the case the Ld. CIT(A) was not justified in holding the assessee as the full owner of the property instead of 50% owner.”
Kamala Prasad Shah (HUF) v. ITO Wd-35(3) Kol. Page 2 3. First we take up the issue raised in ground No. 2 by assessee in this appeal is that Ld. CIT(A) erred in holding the assessee as the full owner of the property instead of 50% owner.
3.1 Before carving out the specific issue, let us understand the brief history of the case. In the present case the assessee i.e. M/s Kamla Prasad Shah is a HUF represented by the Karta Mr. Kamla Prasad Shah. There is another HUF i.e. M/s Santosh Kumar Shah which is represented by Karta Mr. Santosh Kumar Shah. Both Mr. Kamla Prasad Shah and Santosh Kumar Shah are real brothers. Here before us the case is of M/s Kamla Prasad Shah (HUF) for the AY 2006-07. The assessee M/s Kamla Prasad Shah (HUF) along with another HUF i.e. M/s Santosh Kumar Shah (HUF)has inherited the land and property from his fore-fathers in the form of gift. Both the HUF are the owners in the said property in equal ratio i.e. 50% each. It means both the HUFs are the equal owners of the said property which was gifted by the father of the Karta’s. The assessee has given a power of attorney to the Karta i.e. M/s Santosh Kumar Shah (HUF) being the co-owner of the property for the limited purpose of selling the property. The said co-owner, M/s Santosh Kr. Shah, HUF has sold the property for a consideration of ₹20,01,380/- which was received by both the owners of the property in their respective hands directly i.e. Rs. 1000690.00 each. As the property was inherited from the fore-father and they acquired the property prior to 01.04.1981 so the cost of the acquisition of the property shall be the value as determined as on 1.4.1981. Accordingly the value for the cost of acquisition works out Rs. 2.77 lac only.
3.2 Now coming to the specific facts of the case that assessee in the present case is a Hindu Undivided Family (HUF) and has income from “other source and capital gains”.The assessee, during the year, has sold the property and received the consideration of his share in the property i.e. 50% share in the property. But the AO observed that the assessee is 100% owner of the property because of the following reasons :
Kamala Prasad Shah (HUF) v. ITO Wd-35(3) Kol. Page 3 1) Total seven sales deed were executed and on every sale deed the name of seller was written as Mr. Santosh Kumar shah in the capacity of authorized power of attorney holder of Sri Kamla Prasad shah. 2) On every sales deed the name of the seller was written as Mr. Kamla Prasad Shah. 3) On every sales deed it was written that Sri Kamla Prasad shah has appointed Mr. Santosh Kr. Shah as agent.
Now on the basis of above the AO held the assessee as the 100% owner of the property and taxed the capital gain accordingly by taking the sale consideration as stamp value for registration.
Aggrieved, assessee preferred appeal before Ld. CIT(A) who upheld the action of AO by observing as under:- “4-2. I have considered the submission of the appellant, perused assessment order as well as the remand report sent by the Assessing Officer. In view of the facts and circumstances of the case as mentioned in the para 4-1, I agree with the report of the Assessing Officer as well as the discussion made in the assessment order. There cannot be a different view on the issue that Shri Kamala Prasad Shah (HUF) was the only and sole owner of the properties. Therefore, whatever sale consideration derived from sale of these properties belonged to Shri Kamala Prasad Shah (HUF) only. With this view, I am inclined with the stand taken by the Assessing Officer, therefore, appeal of the appellant on this ground is dismissed.”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
Shri S.M.Surana, Ld. Authorized Representative appearing on behalf of assessee and Shri Amitabha Choudhuri, Ld. Departmental Representative appearing on behalf of Revenue.
We have heard rival contentions of both the parties and perused materials available on record. Ld. AR submitted paper book which is running Kamala Prasad Shah (HUF) v. ITO Wd-35(3) Kol. Page 4 pages 1 to 93 and also filed Sale Deed of the said property in question. Ld. AR submitted that said property was inherited from father, Lt. Shri Bajarang Lal Shah (HUF) being the legal heirs of their fore-father and both were having equal share of the property. The present assessee (HUF) has just given a power of attorney to his co-owner for the limit purpose to sale the property and it was given because a person holding equal portion of 50% in a property cannot sale 1% share of that property in question. Therefore, for the purpose of making transaction before Sub-Registrar, the power for the purpose of selling and registration of document to Shri Sanatosh Kumar Shah and payment for sale of said property was received in equal ratio by both the legal heir of their forefathers. Ld.AR drew our attention at page 86 of the paper book wherein payment received by seller of the said property was recorded.
On the other hand, Ld. DR vehemently relied on the orders of authorities below.
From the aforesaid discussion, we find that AO has treated assessee as the owner of 100%, however, ownership was limited to the extent of 50% besides this AO did not allow the expense incurred by assessee for the improvement of the said land and building and which was duly recorded in assessee’ balance-sheet for the financial year 1986-87. We have also found copy of Power of Attorney given by M/s Kamla Prasad Shah, HUF to Shri Santosh Kumar Shah which is placed on page 81 of the paper book. We also find that payment was received by both co-owner of the property in equal ratio. Therefore, in our considered opinion, assessee is the equal owner of 50% of said property. Considering the facts and circumstances, we reverse the order of authorities below and ground raised by assessee is allowed.
The issue raised in ground no. 1 by the assessee in this appeal is that Ld. CIT(A) erred in confirming the order of the AO that the assessee was not entitled for the improvement cost of the property.
Kamala Prasad Shah (HUF) v. ITO Wd-35(3) Kol. Page 5 10.1 The assessee did not claim the cost of improvement and indexation thereon in his original computation filed with the return. But later the assessee realized his mistake and filed the revised computation of income claiming the benefit of cost of improvement and indexation thereon. But the AO rejected the claim of the assessee by stating that the assessee is not entitled to take the benefit based on revised computation of income. The assessee has also not filed revised income tax return.
10.2 Aggrieved, assessee preferred appeal before Ld. CIT(A) who upheld the action of AO by observing as under:- “5-1 I have considered the submission of the appellant, and perused the assessment order. The appellant in the course of appellate proceeding has given the working of computation of capital gain through which he has given the details of amount spent for improvement on these properties. Year wise break-up for cost of improvement was given but no supporting bills/vouchers to substantiate their claim on account of expenses incurred for improvement was produced before me as well as before the Assessing Officer. It is the fact that this expenditure has been claimed by the appellant by filing revised return and not in the original return. This fact makes it clear that there was as such no expenditure incurred by the appellant but the same was shown after thought to reduce his tax liability. Under these facts and circumstances of the case, the appellant’s plea is not tenable and hence the appeal on this ground is dismissed.”
10.3 Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us.
We have heard rival contentions of both the parties and perused the materials available on record. Before us the ld. AR submitted that cost of acquisition in the balance-sheet of the owners was shown as NIL because it was inherited property. However, certain expenses were incurred by assessee in the improvement of said land and building which is reflecting from the balance-sheet file by assessee and same is placed at page No.1 to 52 of the paper book. All these balance sheets submitted by the assessee in the form of paper book for our reference begin from the assessment year 1984-85 to Kamala Prasad Shah (HUF) v. ITO Wd-35(3) Kol. Page 6 assessment years 2004-05. The ld. AR claimed that said balance-sheet was duly filed before I.T. department. The ld. AR further prayed that the assessee is entitled for the benefit of cost of improvement under the provisions of capital gain of the Act. On the other hand the ld. DR relied on the authorities below.
From the aforesaid discussion we find that the assessee could not claim the benefit of cost of improvement as specified under the Act due to the ignorance of the law. However the assessee revised the computation of income at the time of assessment under section 143(3) and claimed the benefit of the cost of improvement. But the AO disallowed the claim of the assessee as the assessee failed to file the revised return of income. It was further observed by the AO that mere submitting the revised computation of income does not entitle the assessee to claim the benefit of that which was submitted in the return of income. However in our view the assessee raised a point which was legally allowed to the assessee. Besides the assessee has submitted sufficient documents before us which proves that the assessee has incurred the cost of improvement on the property. In the interest of justice & fair play, we deem it fit to restore the file to AO with the direction to allow the assessee the cost of improvement and pass fresh order as per law. This ground of assessee’s appeal is allowed for statistical purpose.
In the result, assessee’s appeal is partly allowed for statistical purpose. Order pronounced in the open court 20/01/2016 Sd/- Sd/- (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp �दनांकः- 20/01/2016 कोलकाता । Kamala Prasad Shah (HUF) v. ITO Wd-35(3) Kol. Page 7