Smt. S.K. Pushpa, Davangere v. ITO, Davangere

ITA 1438/BANG/2008 | 2004-2005
Pronouncement Date: 23-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 143821114 RSA 2008
Assessee PAN EYEAR2005A
Bench Bangalore
Appeal Number ITA 1438/BANG/2008
Duration Of Justice 2 year(s) 3 month(s) 13 day(s)
Appellant Smt. S.K. Pushpa, Davangere
Respondent ITO, Davangere
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 23-03-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2004-2005
Appeal Filed On 10-12-2008
Judgment Text
PAGE 1 OF 15 ITA NO.1438/BANG/2008 1 IN THE INOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NO.1438/BANG/2008 (ASST. YEAR 2004-05) SMT. S K PUSHPA D.NO.38 SMANURU VILLAGE DAVANGERE. -APPELLANT VS THE INCOME TAX OFFICER WARD-2 DAVANGERE. - RESPONDENT APPELLANT BY : SHRI S VENKATESAN C.A. RESPONDENT BY : SHRI PRABHAKAR REDDY ADDL. CIT O R D E R PER P MADHAVI DEVI : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) HUBLI DATED 1/8/2008 FOR THE ASST. YE AR 2004-05. 2. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO THA T THE ASSESSEE IS LIABLE TO PAY CAPITAL GAINS TAX IN HER INDIVIDUAL CAPACITY. IN ADDITION TO THIS THE ASSESSEE HAS ALSO CHALLENGED THE ORDER OF THE CIT(A) IN HOLDING THAT THE NOTICE U/S 148 OF THE AC T ISSUED ON THE ASSESSEE IS VALID IN LAW. PAGE 2 OF 15 ITA NO.1438/BANG/2008 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND IS A HOUSEWIFE WITH NO OTHER SOURCE OF INCOME. DURING THE RELEVANT ASST. YEAR THE ASSESSING AUTHORITY RECE IVED INFORMATION FROM THE NATIONAL HIGHWAY AUTHORITY OF I NDIA (NHAI) THAT THE ASSESSEE HAS RECEIVED COMPENSATION OF RS.2 1 96 274/- ON 7.6.2003 AND 2.7.2003 ON ACCOUNT OF ACQUISITION OF LANDS AT SURVEY NOS.169/2A 5C AND 5D ADMEASURING 15246 SQ FT AT SH AMANUR VILLAGE DAVANGERE MUNICIPALITY. CONSEQUENT TO THE SAID INFORMATION THE AO ISSUED A NOTICE U/S 142(1) ON 15.2.2005 CALL ING FOR THE RETURN OF INCOME FOR ASST. YEAR 2004-05. IN RESPONS E TO THE SAID NOTICE THE ASSESSEE FILED A RETURN ON 31.3.2005 D ECLARING A TOTAL INCOME OF RS.45 000/- IN HER INDIVIDUAL STATUS. TH E ASSESSEE DID NOT DECLARE CAPITAL GAINS ARISING FROM THE ACQUISIT ION OF LANDS BY NHAI IN THE RETURN FILED BY HER ON 31.3.2005. THE A O OBSERVED FROM THE COPY OF PARTITION DEED AND ASSESSEES LETTE R DATED 17.8.2005 THAT THE LANDS WERE ACQUIRED BY LATE CHAN NAPPA I.E. THE FATHER-IN-LAW OF THE ASSESSEE AND FATHER OF SHRI S K LINGARAJ AND HE DIED INTESTATE ON 14.7.1971. BY FOLLOWING THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V CHANDER SEN 161 ITR 370 WHEREIN IT WAS HELD THAT THE HUF OR SELF ACQUI RED PROPERTY OF FATHER WHO DIED INTESTATE DEVOLVES TO THE SON AND IT TAKES THE CHARACTER OF INDIVIDUAL PROPERTY AND NOT HUF PROPERT Y THE AO HELD THAT THE ABOVE LANDS AT SHAMANUR HAS DEVOLVED TO SH RI S K LINGARAJ IN HIS INDIVIDUAL STATUS AND HENCE THE SAME IS NOT HUF PROPERTY. HE OBSERVED THAT MR. S K LINGARAJ ALSO DIED INTESTA TE AND HENCE THE PROPERTY HAS DEVOLVED ON SMT. S K PUSHPA IN HER INDIVIDUAL PAGE 3 OF 15 ITA NO.1438/BANG/2008 3 STATUS ONLY AND NOT IN HUF STATUS. HE FURTHER OBSER VED THAT SMT. S K PUSHPA HAS RECEIVED THE ENTIRE CONSIDERATION AN D EVEN AS PER THE FAMILY PARTITION DEED THE AMOUNT OF RS.20 LAKHS DEPOSITED WITH G S MANJUNATH HAS BEEN ALLOTTED TO HER ONLY AND THE SOURCE FOR THE ABOVE DEPOSIT IS SALE CONSIDERATION RECEIVED FROM N HAI. HE ALSO OBSERVED THAT AS PER THE KHATHA EXTRACT ALL THE LA NDS AFTER ALIENATION ARE STANDING IN THE NAME OF SMT. S K PUS HPA AND HENCE SHE IS THE OWNER OF ALL THE ABOVE PROPERTIES AS LE GAL HEIR OF SHRI S K LINGARAJ. THEREAFTER HE CONSIDERED THAT THE LANDED PROPERT IES ARE SITUATED WITHIN THE MUNICIPAL LIMITS OF DAVANGE RE AND HENCE THEY ARE CAPITAL ASSETS AS DEFINED IN SECTION 2(14) OF THE I T ACT AND CONSEQUENTLY PROFITS DERIVED FROM THE ACQUISIT ION OF THE ABOVE LANDS ARE LIABLE FOR CAPITAL GAINS IN THE HANDS OF SMT. S K PUSHPA IN HER INDIVIDUAL STATUS. SINCE THE ABOVE LANDS WERE ACQUIRED BEFORE 1/4/1981 HE ESTIMATED THE FAIR MARKET VALUE AS ON 1/4/1981 AT RS.1/- PER SQ FT AND COMPUTED THE CAPITAL GAINS AT RS.21 25 685/-. HE THEREFORE ISSUED A NOTICE U/S 148 OF THE I T ACT WHEREIN THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE SAID INCOME SHOULD NOT BE CHARGED TO TAX. 4. THE ASSESSEE OBJECTED TO THE SAME STATING THAT THE PROPERTY BELONGS TO THE ERSTWHILE JOINT FAMILY OF SHR I S K LINGARAJ AND HENCE HAS TO BE TAXED ACCORDINGLY. THE AO WAS HOWEVER NOT CONVINCED AND RELYING ON THE DECISION OF THE HONBLE SUPREME COURT PAGE 4 OF 15 ITA NO.1438/BANG/2008 4 IN THE CASE OF CHANDER SEN CITED SUPRA HE HELD THA T SMT. PUSHPA IS THE OWNER OF THE LANDS. FURTHER HE OBSERVED THAT T HERE WAS ORAL PARTITION OF LAND ON 31.3.2004 WHICH IS REDUCED TO WRITING ON 31.3.2005 AS PER WHICH THE SAME CONSIDERATION RECE IVED FROM NHAI WAS ALLOTTED TO SMT. PUSHPA AND AS THE ERSTWHI LE PARTITION WAS BEFORE THE END OF THE FINANCIAL YEAR 2003-04 HE HELD THAT IT IS ALLOTTED TO SMT PUSHPA AND SHE IS LIABLE TO PAY CAP ITAL GAINS TAX. 5. THE OTHER OBJECTION OF THE ASSESSEE IS THAT THE ENTIRE CONSIDERATION CANNOT BE TAXED IN HER HANDS ALONE AN D THAT HER DAUGHTER AND SONS ARE ALSO THE JOINT OWNERS AND IT SHOULD BE TAXED IN THE HANDS OF AOP. THE AO REJECTED THIS OBJECTIO N ALSO BY HOLDING THAT AS PER THE ORAL PARTITION THE ASSESSE E IS THE OWNER OF LAND AND IS ENTITLED TO RECEIVE FURTHER COMPENSATIO N AND ALSO INTEREST AND THUS LIABLE TO TAX IN HER INDIVIDUAL C APACITY ONLY. 6. THE AO THUS REJECTED THE OBJECTION BY A SPEAKIN G ORDER DATED 30/10/2006 AND PROCEEDED TO ASSESS THE INCOME OF THE ASSESSEE AND ARRIVED AT THE TOTAL INCOME TAX PA YABLE INCLUDING SURCHARGE INTEREST U/S 234A AND 234B OF THE ACT AT RS.7 09 160. 7. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A). 8. BEFORE THE CIT(A) THE ASSESSEE HAD CHALLENGED THE VALIDITY OF THE ISSUE OF NOTICE U/S 148 OF THE ACT A ND ALSO ON BRINGING THE ENTIRE CAPITAL GAINS TO TAX IN THE HAN DS OF THE ASSESSEE PAGE 5 OF 15 ITA NO.1438/BANG/2008 5 WHILE IN FACT THE ASSESSEE WAS ONLY THE DE-FACTO MA NAGER OF THE JOINT FAMILY UPON THE DEATH OF HER HUSBAND AND THE P ROPERTY OF THE HUSBAND BELONGED TO THE ERSTWHILE JOINT FAMILY OF TH E ASSESSEES HUSBAND. 9. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO ON THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND TH E ITO WARD- 2 DAVANGERE SUBMITTED A REPORT WHICH WAS ALSO SUP PLIED TO THE ASSESSEE. IN THE REMAND REPORT THE AO ALMOST DEFE NDED THE ASSESSMENT ORDER AND NO NEW FACTS WERE STATED. WHIL E THE ASSESSEE OBJECTED TO THE REMAND REPORT STATING THAT WHEN HER HUSBAND DIED INTESTATE THE PROPERTY DEVOLVED AS A J OINT PROPERTY AMONGST ALL THE LEGAL HEIRS AND SINCE THE ASSESSEE S CHILDREN WERE MINORS AT THE TIME OF HIS DEATH THE ASSESSEE ACTED AS A CARE TAKER AND ONCE THE CHILDREN BECOME MAJORS THE HUF WILL C OME INTO EXISTENCE ONCE AGAIN. 10. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE THE CIT(A) ALSO TRIED TO DISTINGUISH THE FACTS OF HER CASE WITH THAT OF THE FACTS IN THE CASE OF CHANDRASEN (CITED SUPRA) AND SUBMITTED THAT CAPI TAL GAINS TAX CANNOT BE LEVIED ONLY IN RESPECT OF SMT. PUSHPA SINC E SHE IS 1/4 TH SHAREHOLDER OF THE PROPERTY AND HER DAUGHTER AND TWO SONS ARE ALSO LIABLE FOR 1/4 TH SHARE EACH. 11. THE CIT(A) HOWEVER CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHANDRASEN CIT ED SUPRA AND PAGE 6 OF 15 ITA NO.1438/BANG/2008 6 VARIOUS OTHER DECISIONS CONSIDERED BY THE HONBLE SU PREME COURT AND HELD THAT THE PROPERTY OF THE DECEASED SHRI S K LINGARAJ IS HELD BY HIS WIDOW SMT. S K PUSHPA AND HER MINOR CHIL DREN AND MANAGEMENT OF PROPERTY IS TAKEN CARE OF BY SEPARATE S ET OF LAWS BUT FOR THE PURPOSE OF CAPITAL GAINS SUCCESSION OF PROPERTY IS NECESSARY TO BE CONSIDERED. HE THEREFORE DIRECTED T HE AO TO ASSESS 1/4 TH SHARE OF THE ASSESSEE AND ALSO ASSESS ANOTHER 3 SH ARES IN THE HANDS OF HER 3 CHILDREN FOR WHOM SMT. S K PU SHPA IS A GUARDIAN TILL THE AGE OF MAJORITY. HE ALSO DIRECTE D THE AO TO VERIFY ONCE AGAIN WHO ARE ALL THE CLASS-I LEGAL HEIR S AS PER CHAPTER II SCHEDULE-1 OF HINDU SUCCESSION ACT AS AMENDED I N THE YEAR 2005 AND DECIDE THE SHARE OF THE APPELLANT AND THER EAFTER COMPUTE THE CAPITAL GAIN. THUS HE PARTLY ALLOWED T HE APPEAL. 12. AGGRIEVED THE ASSESSEE IS IN SECOND APPEAL BE FORE US. 13. AS REGARDS THE LEGAL GROUND THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT ONCE THE AO HAS ISSUED A NOTICE U/S 142(1) OF THE I T ACT AND THE ASSESSEE HAS FILED HE R RETURN OF INCOME THE AO SHOULD HAVE COMPLETED THE PROCEEDING S U/S 143(3) AND CANNOT REOPEN THE ASSESSMENT U/S 147 OF THE I T ACT AND THEREFORE THE INITIATION OF PROCEEDINGS U/S 147 RW S 148 IS NOT VALID. 14. ON THIS LEGAL POINT THE LEARNED DR SUBMITTED THAT THE NOTICE U/S 142(1) OF THE ACT DIRECTING THE ASSESSEE TO FILE THE RETURN OF INCOME FOR THE ASST. YEAR 2004-05 WAS ISSU ED ON 15.2.2005 AND THE RETURN OF INCOME WAS FILED ON 31. 3.2005. HE PAGE 7 OF 15 ITA NO.1438/BANG/2008 7 SUBMITTED THAT UNDER THE ACT THE NOTICE U/S 143(2) CAN BE ISSUED WITHIN 12 MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME WAS FILED AND THEREFORE THE TIME LIMIT TO I SSUE NOTICE U/S 143(2) WAS TILL 31.3.2006. HE SUBMITTED THAT AS TH E TIME FOR ISSUANCE OF NOTICE U/S 143(2) HAS EXPIRED THE AO H AD NO OPTION BUT TO ISSUE NOTICE U/S 148 ON 13.4.2006 AND THEREFORE THE PROCEEDINGS U/S 148 RWS 147 WERE VALIDLY INITIATED. 15. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE RIVAL CONTENTIONS WE FIND THAT THE ONLY QUESTIO N BEFORE US ON THIS LEGAL ISSUE IS WHETHER THE AO HAD THE NECESSAR Y TIME FOR COMPLETING THE PROCEEDINGS U/S 143(3) AND ALSO WHET HER HE CAN INITIATE PROCEEDINGS U/S 148 AFTER THE EXPIRY OF THE TIME LIMIT PRESCRIBED FOR COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. AS SEEN FROM SUB-SECTION (2) OF SECTION 143 OF THE I T ACT AND THE PROVISO TO CLAUSE (II) THEREAFTER NO NOTICE UNDER CLAUSE (II) SHALL BE SERVED ON THE ASSESSEE AFTER THE EXPIRY OF 12 MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE RETURN IS FURNISH ED. AS THE LEARNED DR HAS CLEARLY ESTABLISHED THAT THE NOTICE U /S 148 WAS ISSUED AFTER THE END OF 12 MONTHS FROM THE END OF T HE FINANCIAL YEAR IN WHICH RETURN OF INCOME WAS FILED WE ARE SAT ISFIED THAT THE PROCEEDINGS U/S 143 WERE NOT PENDING BEFORE THE ISS UANCE OF SUCH NOTICE. 16. TAKING NOTE OF THE PROVISIONS OF SUB-SECTION ( 1) OF SECTION 148 AND CLAUSE (B) OF THE FIRST PROVISO THE REUNDER IT CAN BE PAGE 8 OF 15 ITA NO.1438/BANG/2008 8 SEEN THAT A NOTICE U/S 148 CAN BE ISSUED AFTER THE EXPIRY OF 12 MONTHS SPECIFIED IN THE PROVISO TO SUB-SECTION (2) OF SECTION 143 BUT BEFORE THE EXPIRY OF TIME LIMIT FOR MAKING THE A SSESSMENT RE- ASSESSMENT OR RE-COMPUTATION AS SPECIFIED IN SUB-SE CTION (2) OF SECTION 153 EVERY SUCH NOTICE REFERRED TO IN THIS C LAUSE SHALL BE DEEMED TO BE A VALID NOTICE. SUB-SECTION (2) OF SE CTION 153 PROVIDES THAT NO ORDER OF ASSESSMENT RE-ASSESSMENT OR RE- COMPUTATION SHALL BE MADE U/S 147 AFTER THE EXPIRY O F ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE NOTI CE U/S 148 WAS SERVED. IN THE LIGHT OF THE ABOVE WE HOLD THAT TH E NOTICE U/S 148 WAS VALIDLY ISSUED BY THE AO. ACCORDINGLY GROUND NOS .2 AND 8 ARE REJECTED. 17. AS REGARDS THE OTHER GROUNDS OF APPEAL I.E. 3 TO 7 ARE CONCERNED THE LEARNED COUNSEL FOR THE ASSESSEE REI TERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 18. IT IS THE CASE OF THE ASSESSEE THAT THE PROPER TY OF SHRI S K LINGARAJ DEVOLVED ON THE SURVIVING FAMILY M EMBERS OF SHRI LINGARAJ I.E. HIS WIDOW AND THREE CHILDREN AND THER EFORE THE CONSIDERATION RECEIVED FROM NHAI IS TO BE TAXED IN THE HANDS OF THE HUF OR IN THE HANDS OF AOP AS JOINT OWNERS OF T HE PROPERTY WHILE IT IS THE CASE OF THE REVENUE THAT SMT. PUSHP A IS THE SOLE OWNER OF THE PROPERTY AND THEREFORE SHE IS LIABLE F OR THE CAPITAL GAIN TAX. EVEN OTHERWISE EVEN IF IT IS CONSIDERED TO BE THE JOINT PAGE 9 OF 15 ITA NO.1438/BANG/2008 9 FAMILY PROPERTY THE LEARNED DR PLACED RELIANCE UPON THE DIRECTION OF THE CIT(A) THAT THE ENTIRE TAX HAS TO BE ASSESSE D IN THE HANDS OF THE ASSESSEE AS THE DEFACTO MANAGER OF THE MINOR CHILDREN. IN SUPPORT OF THEIR CONTENTIONS BOTH THE ASSESSEE AS WELL AS THE LEARNED DR HAVE FILED VOLUMINOUS PAPERS AND ALSO TH E PROCEEDINGS BEFORE THE ACQUISITION AUTHORITIES I.E. NHAI TO DEM ONSTRATE THEIR POINTS OF VIEW. 19. HAVING CONSIDERED ALL THE MATERIAL ON RECORD WE FIND THAT IN THE PROCEEDINGS OF THE ADMINISTRATIVE OFFIC ER OF THE TALUK OFFICE DEVANGERE THE LANDS ARE SHOWN IN THE NAME OF S K ANANTH AND S K PRADEEP AND THE KHATHA STOOD IN THE NAME OF S K HIRIYAMMA I.E. GRANDMOTHER. SINCE THE GRANDMOTHER O F SHRI S K ANANTH AND SHRI S K PRADEEP IS DECEASED IT WAS REQ UESTED TO PASS AN ORDER STATING SMT. S K PUSHPA WIFE OF SHRI S K LINGARAJ WHO IS ALSO THE MOTHER OF S K ANANTH AND S K PRADEEP TO BE THE GUARDIAN. THE ADMIN. OFFICER HAS PASSED AN ORDER STATING THAT AS PER THE REPORT OF THE VILLAGE ACCOUNTANT SMT. HIRIYAMMA WAS GUARDIAN FOR MINORS S K ANANTH AND S K PRADEEP AND ON HER DEATH THE NAME OF SMT. S K PUSHPA IS ENTERED AS GUARDIAN FOR MINORS I N THE KHATHA AND PAHANI BEING THE REVENUE RECORDS AS THE MINOR BY GUA RDIAN FOR THE LANDS MENTIONED IN THE MARGIN. 20. THUS IT CAN BE SEEN THAT INITIALLY AFTER THE D EATH OF MR. CHANNAPPA HIS WIFE SMT. HIRIYAMMA WAS HELD TO B E THE OWNER OF THE PROPERTY AND ON HER DEATH THE PROPERTY DEVOLV ED ON THE PAGE 10 OF 15 ITA NO.1438/BANG/2008 10 MINOR SONS OF SHRI S K LINGARAJ AND SMT. PUSHPA IS HELD TO BE THE GUARDIAN OF THE MINORS. AS SEEN FROM THE COPY OF LE TTER OF ADVICE DATED 23.4.2002 ISSUED BY THE COMPETENT AUTHORITY LA ND ACQUISITION DAVANGERE THE KHATHEDAR OR OCCUPANTS ARE MENTIONED AS S K ANANTH AND S K PRADEEP MINORS BY GUARDIAN MO THER S K PUSHPA JOINTLY. HOWEVER FROM THE AWARD NOTICE DATE D 11/3/2003 WHICH IS ADDRESSED TO SMT. S K PUSHPA THERE WAS A REQUEST TO SUBMIT THE RELEVANT DOCUMENTS IN THE OFFICE OF THE COMPETENT AUTHORITY AND COLLECT THE COMPENSATION AMOUNT. SIM ILARLY FROM THE LETTER DATED 7.4.2005 ISSUED BY THE OFFICE OF COMPET ENT AUTHORITY LAND ACQUISITION THE ADDITIONAL COMPENSA TION AWARD NOTICE IS GIVEN TO SMT. S K PUSHPA ALONE STATING TH AT SHE IS ENTITLED TO COLLECT THE ADDITIONAL COMPENSATION ALONG WITH I NTEREST. 21. IT IS IN THE LIGHT OF THESE TWO SUBSEQUENT LET TERS WHEREIN SMT. PUSHPA IS ADDRESSED IN HER INDIVIDUAL CAPACITY THAT THE REVENUE HAS COME TO THE CONCLUSION THAT THERE WAS O RAL PARTITION BETWEEN THE FAMILY MEMBERS OF MR. S K LINGARAJ EVEN PRIOR TO THE ACQUISITION OF LAND AND IT WAS DECIDED THEREIN THAT THE LAND BELONGS TO SMT. S K PUSHPA AND ACCORDINGLY THE COMPENSATION RECEIVED FROM NHAI WAS ALLOTTED TO SMT. S K PUSHPA AND SHE A LONE WAS ELIGIBLE FOR THE ADDITIONAL COMPENSATION ALSO. 22. THE AO HAS RELIED UPON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CHANDRASEN TO COME TO THE CONCLUSION THAT SHRI S K LINGARAJ ACQUIRED THE PROPERTY IN HIS INDIVIDUAL STATUS PAGE 11 OF 15 ITA NO.1438/BANG/2008 11 ON THE DEATH OF HIS FATHER INTESTATE AND UPON HIS D EMISE HIS WIFE SMT. PUSHPA ALSO HAS ACQUIRED THE PROPERTY IN HER IN DIVIDUAL CAPACITY. LET US SEE IF THE FACTS OF THE CASE BEFO RE US ARE SIMILAR TO THE FACTS OF THE CASE BEFORE THE HONBLE APEX CO URT. THE FACTS IN THE CASE OF SHRI CHANDRASEN ARE AS FOLLOWS :- ONE RANGI LAL AND HIS SON CHANDER SEN CONSTITUT ED AN HUF. THIS FAMILY HAD SOME IMMOVABLE PROPERTY AND A B USINESS CARRIED ON IN THE NAME OF KHUSHI RAM RANGI LAL. IN OCTOBER 1961 THERE WAS A PARTIAL PARTITION IN THE FAMILY BY WHICH THE BUSINESS WAS DIVIDED BETWEEN THE FATHER AND THE SON AND THEREA FTER IT WAS CARRIED ON BY A PARTNERSHIP CONSISTING OF THE TWO. THE FIRM WAS ASSESSED TO INCOME TAX AS A REGISTERED FIRM AND THE TWO PARTNERS WERE SEPARATELY ASSESSED IN RESPECT OF THEIR SHARE O F INCOME. THE HOUSE PROPERTY OF THE FAMILY CONTINUED TO REMAIN JOIN T. ON 17 TH JULY 1965 RANGILAL DIED LEAVING BEHIND HIS SON CH ANDER SEN AND HIS GRANDSONS I.E. THE SONS OF CHANDER SEN. HIS W IFE AND MOTHER PREDECEASED HIM AND HE HAD NO OTHER ISSUE EXCEPT CH ANDER SEN. ON HIS DEATH THERE WAS A CREDIT BALANCE OF RS.1 85 043/- IN HIS ACCOUNT IN THE BOOKS OF THE FIRM. FOR THE ASST. YEA R 1966-67 CHANDER SEN WHO CONSTITUTED A JOINT FAMILY WITH HIS OWN SONS FILED A RETURN OF HIS NET WEALTH. THE RETURN INCLUDED TH E PROPERTY OF THE FAMILY WHICH ON THE DEATH OF RANGILAL PASSED ON TO C HANDER SEN BY SURVIVORSHIP AND ALSO THE ASSETS OF THE BUSINESS WH ICH DEVOLVED UPON CHANDER SEN ON THE DEATH OF HIS FATHER. THE S UM OF RS.1 85 043/- STANDING TO THE CREDIT OF RANGI LAL W AS NOT INCLUDED IN PAGE 12 OF 15 ITA NO.1438/BANG/2008 12 THE NET WEALTH OF THE FAMILY OF CHANDER SEN ON THE G ROUND THAT THIS AMOUNT DEVOLVED ON CHANDER SEN IN HIS INDIVIDU AL CAPACITY AND WAS NOT THE PROPERTY OF THE ASSESSEE-FAMILY. THE WTO DID NOT ACCEPT THIS CONTENTION AND HELD THAT THE SUM OF RS. 1 85 043/- ALSO BELONGED TO THE ASSESSEE FAMILY. ON APPEAL THE AAC ACCEPTED THE ASSESSEES CLAIM IN FULL AND HELD THAT THE CAPITAL IN THE NAME OF RANGILAL DEVOLVED ON CHANDER SEN IN HIS INDIVIDUAL CAPACITY AND AS SUCH WAS NOT TO BE INCLUDED IN THE WEALTH OF THE A SSESSEE-FAMILY. 23. AS REGARDS THE INTEREST PAID ON THIS CAPITAL HE DIRECTED THAT THE SAME SHOULD BE ALLOWED AS DEDUCTI ON. THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL WHO D ISMISSED THE SAME AND THE REVENUE FURTHER WENT IN APPEAL BEFORE THE HONBLE HIGH COURT. 24. THE HONBLE HIGH COURT WAS OF THE VIEW THAT UN DER THE HINDU LAW WHEN A SON INHERITED SEPARATE AND SELF AC QUIRED PROPERTY OF HIS FATHER IT ASSUMED THE CHARACTER OF JOINT HI NDU FAMILY PROPERTY IN HIS HANDS QUA THE MEMBERS OF THE FAMILY BUT TAKING INTO CONSIDERATION THE MODIFIED SECTION 8 OF THE HI NDU SUCCESSION ACT 1956 IT WAS HELD THAT CHANDER SEN WAS THE ONL Y HEIR AND THEREFORE THE PROPERTY WAS TO PASS TO HIM ONLY. 25. AGAINST THIS FINDING OF THE HIGH COURT THE RE VENUE PREFERRED AN APPEAL BEFORE THE HONBLE SUPREME COUR T AND THE HONBLE SUPREME COURT TAKING INTO CONSIDERATION VA RIOUS DECISIONS OF VARIOUS HIGH COURTS HAS COME TO THE CONCLUSION THAT THE SUMS PAGE 13 OF 15 ITA NO.1438/BANG/2008 13 STANDING TO THE CREDIT OF RANGI LAL BELONGS TO CHAN DER SEN IN HIS INDIVIDUAL CAPACITY AND NOT THE JOINT HINDU FAMILY AN D THE INTEREST OF RS.23 330 WAS AN ALLOWABLE DEDUCTION IN RESPECT OF THE INCOME OF THE FAMILY FROM THE BUSINESS. 26. WHEN THE FACTS OF THE CASE BEFORE US ARE COMPA RED TO THE FACTS OF THE CASE BEFORE THE HONBLE SUPREME CO URT WE FIND THAT THE FACTS ARE ENTIRELY DIFFERENT. IN THE CASE OF CHANDER SEN THERE WAS A PARTITION BETWEEN THE FATHER AND THE SO N DURING THE LIFE TIME OF THE FATHER HIMSELF AND THEREFORE THE SEPARATE PROPERTY OF THE FATHER WHEN IT DEVOLVED UPON THE SON ; IT WAS HELD TO BE HIS INDIVIDUAL PROPERTY. BUT IN THE CASE BEFORE US THERE WAS NO SUCH PARTITION BETWEEN MR. CHANNAPPA AND SHRI S K L INGARAJ. MR. CHANNAPPA DIED INTESTATE AND THEREFORE THE PROPERT Y DEVOLVED UPON HIS CLASS-I LEGAL HEIRS AND AFTER THE DEATH OF SHRI S K LINGARAJ THE PROPERTY DEVOLVED UPON ALL HIS CLASS I LEGAL HEIRS JOINTLY. IT IS ONLY UPON THE PARTITION OF THE JOINT HINDU FAMILY PROPERTY THAT EACH INDIVIDUAL GETS HIS/HER PROPERTY I N THEIR INDIVIDUAL STATUS. COMING TO THE FACTS OF THE CASE BEFORE US THE PROPERTY WAS SOUGHT TO BE ACQUIRED BY NHAI IN 2002 ON WHICH DATE THE PROPERTY WAS HELD JOINTLY. EVEN AS PER THE NOTICES ISSUED BY THE GOVT. THE MINORS AND THE ASSESSEE WERE SHOWN AS THE OWNERS OF THE LAND. THUS AS ON THE DATE OF ACQUIS ITION OF LAND I.E. ON 23.4.2002 THE LANDS WERE HELD JOINTLY BY ALL THE LEGAL HEIRS OF SHRI S K LINGARAJ I.E. THE ASSESSEE AND HER THREE C HILDREN. BUT THE ENTIRE AMOUNT OF COMPENSATION HAS BEEN PAID TO SMT. S K PUSHPA. PAGE 14 OF 15 ITA NO.1438/BANG/2008 14 AS OBSERVED BY US IN THE ABOVE PARAGRAPH THE OWNER SHIP OF THE LAND ON THE DATE OF AWARD OR ON THE DATE OF PAYMENT OF COMPENSATION FOR THE ACQUISITION OF LAND IS IMPORTA NT TO DECIDE THE ISSUE AS TO IN WHOSE HANDS THE INCOME IS TO BE ASSE SSED WHETHER IT IS THE HUF OR THE INDIVIDUAL ASSESSEE. ADMITTEDLY A ND NOT DISPUTED BY THE REVENUE ALSO ON THE DATE OF ACQUISITION OF L AND THE ORAL PARTITION HAS NOT BEEN ENTERED INTO LEAVE ALONE BE ING GIVEN EFFECT TO. EXCEPT STATING THAT THERE WAS PARTITION EVEN B EFORE ACQUISITION OF LAND THE REVENUE HAS NOT BEEN ABLE TO PROVE THE DATE ON WHICH THE PROPERTY DEVOLVED ON SMT. S K PUSHPA. THE REVEN UE IS ONLY RELYING ON THE DECISION OF THE APEX COURT IN THE CAS E OF CHANDER SEN (CITED SUPRA) AND THE CIRCUMSTANTIAL EVIDENCE I N SUPPORT OF ITS CONTENTION. WHEN THE PROPERTY IS IN THE HANDS OF AL L THE LEGAL HEIRS JOINTLY AS HUF THEN IT IS ONLY THE HUF WHICH IS LIA BLE TO TAX AND NOT THE ASSESSEE IN HER INDIVIDUAL CAPACITY. IF THE PROPERTY HAD IN FACT DEVOLVED ON THE ASSESSEE IN HER INDIVIDUAL CAP ACITY THEN IT WOULD NOT FORM PART OF HUF PROPERTY AND THERE WAS NO NEED OF TAKING IT INTO CONSIDERATION IN THE PARTITION DEED. SINCE IT WAS PART OF THE COMMON KITTY OF THE HUF IT FORMED PART OF T HE PARTITION DEED AND ULTIMATELY ALLOTTED TO SMT. S K PUSHPA. SI NCE SHE HAS BEEN ALLOTTED THIS MONEY AND ALSO THE ADDITIONAL COM PENSATION AND INTEREST SHE MIGHT HAVE BEEN EXCLUDED FROM ALLOTME NT OF SOME OTHER PROPERTY OF HUF. THUS IT CANNOT BE SAID THAT SHE IS THE ONLY BENEFICIARY OF THE COMPENSATION RECEIVED FROM NHAI. ACCORDINGLY WE SET ASIDE THE ORDERS OF THE CIT(A) AND THE AO. PAGE 15 OF 15 ITA NO.1438/BANG/2008 15 27. AS REGARDS GROUND NO.10 LEVY OF INTEREST U/S 2 34A AND 234B OF THE ACT IS CONSEQUENTIAL IN NATURE AND HENC E NO ADJUDICATION IS CALLED FOR. 28. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (A MOHAN ALANKAMONY) (P MADH AVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMB ER THE ORDER PRONOUNCED ON WEDNESDAY THE 23 RD DAY OF MARCH 2011 AT BANGALORE. COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) THE CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. MSP/18.3 BY ORDER ASST. REGISTRAR ITAT BANGALORE.