Shri Prakasgh J. Intwala, Surat v. The Income tax Officer, Ward-3(1),, Surat

ITA 2692/AHD/2006 | 2001-2002
Pronouncement Date: 23-04-2010 | Result: Dismissed

Appeal Details

RSA Number 269220514 RSA 2006
Assessee PAN AACPI8977E
Bench Ahmedabad
Appeal Number ITA 2692/AHD/2006
Duration Of Justice 3 year(s) 4 month(s) 16 day(s)
Appellant Shri Prakasgh J. Intwala, Surat
Respondent The Income tax Officer, Ward-3(1),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 23-04-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 23-04-2010
Date Of Final Hearing 13-04-2010
Next Hearing Date 13-04-2010
Assessment Year 2001-2002
Appeal Filed On 07-12-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.2692/AHD/2006 A. Y: 2001-02 PRAKASH J. INTWALA 303 RONAK APARTMENT ADARSH SOCIETY ATHWALINES SURAT PA NO. AACPI 8977E VS THE INCOME TAX OFFICER WARD -3(1) AAYAKAR BHAVAN MAJURAGATE SURAT (APPELLANT) (RESPONDENT) APPELLANT BY SHRI HARDIK VORA AR RESPONDENT BY SHRI M. C. PANDIT DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II SURAT D ATED 26 TH OCTOBER 2006 FOR ASSESSMENT YEAR 2001-02 ON THE FOLLOWING GROUND : 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT THE LEARNED CIT(APPEALS) HAS ER RED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING AUDITION OF RS.7 92 276/- FOR ALLEGED LONG TERM CAP ITAL GAIN AGAINST RS.1 55 840/- SHOWN BY ASSESSEE IN RETURN O F INCOME. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL ON RECORD. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1 23 930/-. THE ASSESS EE ALSO SHOWED LONG TERM CAPITAL GAINS OF RS.1 55 840/-. THE AO FOUND T HAT THE ASSESSEE SOLD VARIOUS PLOTS OF LAND FOR TOTAL CONSIDERATION OF RS .15 10 000/- THESE PLOTS OF LAND WERE PURCHASED DURING THE YEARS 1980-81 TO 1983-84 THE ITA NO.2692/AHD/2006 PRAKSSH J. INTWALA 2 PURCHASE PRICE OF WHICH WAS RS.1 81 033/-. AFTER IN DEXATION THE CAPITAL GAINS FROM SUCH SALES WORKED OUT TO RS.7 79 800/-. THE ASSESSEE HOWEVER OFFERED A SUM OF RS.1 55 840/- BEING ONE F IFTH OF THE CAPITAL GAINS. ON FURTHER SCRUTINY THE AO FOUND THAT ALL TH E PIECES OF LAND HAD ACTUALLY BEEN PURCHASED BY THE ASSESSEE HIMSELF AND SUBSEQUENTLY HE INTRODUCED HIS WIFE HIS SON AND TWO DAUGHTERS AS J OINT OWNERS. THE AO WAS OF THE VIEW THAT THE ENTIRE CAPITAL GAINS SHOUL D BE TAXED IN THE HANDS OF THE ASSESSEE. PROCEEDINGS U/S 148 OF THE IT ACT WAS ACCORDINGLY INITIATED. IN THE COURSE OF RE-ASSESSMENT PROCEEDIN GS IT WAS CONTENDED BY THE ASSESSEE THAT AT THE TIME WHEN THE LAND WAS SOLD THERE WERE FIVE CO-OWNERS. THE DAUGHTERS WERE MINOR AND THEIR SHARE OF CAPITAL GAINS HAD BEEN INVESTED IN RESIDENTIAL HOUSE PROPERTIES A ND THEREFORE WAS EXEMPT U/S 54F OF THE IT ACT. THE OTHER CO-OWNERS H AD PAID THEIR SHARE OF CAPITAL GAIN TAXES. THE AO REJECTED THE EXPLANAT ION OF THE ASSESSEE AND WAS OF THE VIEW THAT THE ASSESSEE HAD INTRODUCED OT HER FAMILY MEMBERS AS CO-OWNERS FOR THE PURPOSE OF REDUCING THE INCIDE NCE OF CAPITAL GAIN TAX IN HIS HANDS. NONE OF THE ALLEGED CO-OWNERS HAD PAI D ANY CONSIDERATION TOWARDS THE PURCHASE. ALL THE PLOTS WERE PURCHASED BY THE ASSESSEE. THEREFORE THE ENTIRE CAPITAL GAIN SHOULD HAVE BEEN TAXED IN THE HANDS OF THE ASSESSEE AFTER TAKING INDEXATION COST IN DIFFER ENT YEARS OF PURCHASE/ACQUISITION. THE AO AFTER REDUCING THE IND EXED COST DETERMINED THE CAPITAL GAINS IN THE HANDS OF THE AS SESSEE AT RS.7 92 276/-. 4. THE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A). SAME SUBMISSIONS WERE REITERATED. THE LEARNED CIT(A) CON SIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL ON REC ORD DISMISSED THE APPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 5 OF T HE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 5. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAD HIMSELF PU RCHASED ITA NO.2692/AHD/2006 PRAKSSH J. INTWALA 3 SEVEN PLOTS OF LAND DURING THE YEARS 1980-81 TO 198 3-84. THE TOTAL CONSIDERATION PAID BY HIM WAS RS.1 81 033. SUBSEQUENTLY HE INTRODUCED HIS WIFE HIS SON AND T WO MINOR DAUGHTERS AS CO-OWNERS. WHEN THE LAND WAS SOLD TH E ASSESSEE CLAIMED TO HAVE EARNED CAPITAL GAINS TO TH E EXTENT OF ONLY 1/5 TH OF THE TOTAL GAIN WHILE THE OTHER CO-OWNERS ALSO DECLARED 1/5 TH EACH IN THEIR RESPECTIVE HANDS. I AM IN AGREEMENT WITH THE AO HAT THIS WAS A DEVICE ADOPTED BY THE ASSESSEE TO BIFURCATE THE CAPITAL GAINS IN THE HAND S OF FIVE CO- OWNERS SO AS TO REDUCE THE INCIDENCE OF CAPITAL GA INS TAX IN HIS OWN HANDS. THE POINT TO NOTE HERE THAT AFTER A CQUIRING THE LAND THE ASSESSEE HAS NEITHER LEGALLY GIFTED THE L AND NOR WILLED IT IN THE NAMES OF HIS FAMILY MEMBERS. THIS MEANT THAT THE OWNERSHIP OF THE LAND CONTINUED TO BE IN HIS HA NDS AND THEREFORE WHEN THE PLOTS WERE SOLD THE CAPITAL GA INS WOULD ARISE ONLY IN HIS HANDS AND NOT IN THE HANDS OF ANY FAMILY MEMBER. CONSEQUENTLY THE AO WAS FULLY JUSTIFIED IN ASSESSING THE ENTIRE CAPITAL GAINS IN THE HANDS OF THE ASSESSEE AFTER INDEXING THE COST OF LAND FOR THE D IFFERENT YEARS IN WHICH THEY WERE PURCHASED. THE ADDITION OF THE SUM OF RS.7 79 800 AS CAPITAL GAINS IN THE HANDS OF THE ASSESSEE IS THEREFORE SUSTAINED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T AS PER THE FAMILY ARRANGEMENT ONLY THE ASSESSEE INTRODUCED OTHER 4 CO -OWNERS IN THE PROPERTIES INCLUDING HIS WIFE SON AND DAUGHTERS. H E HAS SUBMITTED THAT TAXES HAVE BEEN PAID ON CAPITAL GAIN IN THE OTHER C ASES AND FOR DAUGHTERS INVESTMENT HAD BEEN MADE IN PROPERTIES. THEREFORE INCOME IS EXEMPT. HE HAS REFERRED TO PB 12 AND 13 TO SHOW THAT THE PR OPERTIES WERE ORIGINALLY PURCHASED BY THE ASSESSEE BUT LATER ON N AMES OF OTHER CO- OWNERS HAVE BEEN ENTERED INTO THE REVENUE RECORD. H E HAS THEREFORE SUBMITTED THAT ADDITION SHOULD NOT BE MADE IN THE H ANDS OF THE ASSESSEE. IN THE ALTERNATIVE CONTENTION HE HAS SUBM ITTED THAT SINCE THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAINS OF RS.1 55 840/- IN THE RETURN OF INCOME THEREFORE TO THAT EXTENT THE ADD ITION MAY BE REDUCED. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT MODE OF TRANSF ER OF PROPERTIES IS ITA NO.2692/AHD/2006 PRAKSSH J. INTWALA 4 INVALID AND ILLEGAL. THEREFORE THERE IS NO TRANSFE R TO THE ALLEGED CO- OWNERS. HE HAS RELIED UPON THE FINDINGS OF THE AUTH ORITIES BELOW AND SUBMITTED THAT THE NAMES OF THE OTHER CO-OWNERS WER E ENTERED INTO THE REVENUE RECORD BY LETTER ONLY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT ALL THE PIECES OF THE LAND HAD BEEN PURCHASED BY THE ASSESSEE HIMSELF AND SUBS EQUENTLY THE ASSESSEE HAD INTRODUCED HIS WIFE HIS SON AND TWO D AUGHTERS AS JOINT OWNERS THEREBY CLAIMING OWNERSHIP OF THE PROPERTIES TO THE EXTENT OF ONE FIFTH. THE ASSESSEE FILED COPIES OF THE DOCUMENTS W HEREBY NAMES OF THE OTHER CO-OWNERS HAVE BEEN ENTERED IN THE REVENUE RE CORD. ENGLISH TRANSLATION IS FILED AT PB -12 AND 13 WHICH SHOW TH AT THE ASSESSEE HAS WRITTEN ONE LETTER TO THE REVENUE AUTHORITIES TO EN TER THE NAMES OF HIS FAMILY MEMBERS IN THE REVENUE RECORD ALONG WITH HIS NAME IN RESPECT OF THE ABOVE PROPERTIES. SINCE LAND IS INVOLVED IN ISS UE THEREFORE THE ORDINARY CIVIL LAW WOULD APPLY AND THE IMMOVABLE PR OPERTIES WOULD BE TRANSFERRED THROUGH VALID DOCUMENTS ONLY WHICH SHO ULD ALSO BE REGISTERED AS PER LAW. THE LEARNED COUNSEL FOR THE ASSESSEE COULD NOT EXPLAIN AS TO WHAT WAS THE MODE OF TRANSFER OF THIS LAND TO THE FAMILY MEMBERS OF THE ASSESSEE. NOTHING IS EXPLAINED AS TO HOW THE NAMES OF THE FAMILY MEMBERS WERE ENTERED INTO THE REVENUE RE CORD WHETHER IT WAS THROUGH SALE AGREEMENT TO SELL OR BY WAY OF GIFT. IN THE ABSENCE OF ANY VALID DOCUMENT ON RECORD IT CANNOT BE BELIEVED THA T THE ASSESSEE VALIDLY TRANSFERRED THE IMMOVABLE PROPERTIES TO THE REST OF HIS FAMILY MEMBERS. SINCE THE ASSESSEE PURCHASED ALL THE PROPERTIES TH EREFORE THERE IS NO QUESTION OF TREATING THE PROPERTIES SUCCEEDED BY TH E ASSESSEE BY WAY OF INHERITANCE OR SUCCESSION. SINCE THE PROPERTIES IN QUESTION WERE SELF ACQUIRED PROPERTIES OF THE ASSESSEE THEREFORE NO VALID FAMILY SETTLEMENT/ARRANGEMENT COULD BE MADE TO TRANSFER TH E IMMOVABLE PROPERTIES TO THE FAMILY MEMBERS. AS NOTED ABOVE T HE ASSESSEE HAS ITA NO.2692/AHD/2006 PRAKSSH J. INTWALA 5 WRITTEN A LETTER TO THE REVENUE AUTHORITIES TO ENTE R THE NAMES OF HIS FAMILY MEMBERS IN THE REVENUE REGISTER WOULD SHOW T HAT THE ASSESSEE HAD NO INTENTION TO TRANSFER THE IMMOVABLE PROPERTI ES TO ANY OF HIS FAMILY MEMBERS. THE AUTHORITIES BELOW WERE THEREFORE JUS TIFIED IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE IS ONL Y LIABLE FOR ONE FIFTH SHARE OF THE CAPITAL GAINS FOR THE PURPOSE OF TAXAT ION. THE ENTIRE CAPITAL GAINS HAVE BEEN RIGHTLY TAXED IN THE HANDS OF THE A SSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT SIN CE THE TAX HAVE BEEN PAID IN THE OTHER CASES I.E. WIFE OF THE ASSESSEE A ND SON OF THE ASSESSEE THEREFORE THERE IS NO QUESTION OF REDUCING THE INC IDENCE OF CAPITAL GAIN TAXATION IN HIS HANDS. THE ASSESSEE HAS HOWEVER FA ILED TO NOTE THAT THE AO MUST TAX THE RIGHT PERSON AND THE LEGITIMATE TAX SHOULD BE RECOVERED FROM THE RIGHT PERSON ALONE. MERELY BECAUSE TAX ON THE CAPITAL GAINS HAS BEEN PAID BY OTHER CO-OWNERS HAS NO GROUND TO SET A SIDE THE ORDERS OF THE AUTHORITIES BELOW. WE ARE FORFEITED IN OUR VIEW BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ITO VS CH. ATC HAIAH 218 ITR 239 (SC) IN WHICH IT WAS HELD THAT UNDER THE PRESENT ACT THE INCOME- TAX OFFICER HAS NO OPTION LIKE THE ONE HE HAD UNDER THE 1922 ACT. HE CAN AND HE MUST TAX THE RIGHT PERSON AND THE R IGHT PERSON ALONE. BY RIGHT PERSON IS MEANT THE PERSON WHO IS LIABLE TO BE TAXED ACCORDING TO LAW WITH RESPECT TO A PARTICULA R INCOME. THE EXPRESSION WRONG PERSON IS OBVIOUSLY USED AS THE OPPOSITE OF THE EXPRESSION RIGHT PERSON. MERELY BECAUSE A WRONG P ERSON IS TAXED WITH RESPECT TO A PARTICULAR INCOME THE ASSESSING OFFICER IS NOT PRECLUDED FROM TAXING THE RIGHT PERSON WITH RESPECT TO THAT INCOME. (SEE PP.2430G H 244A). 7. CONSIDERING THE ABOVE DISCUSSIONS AND MATERIAL O N RECORD WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW WERE JUSTIFI ED IN TAXING THE ENTIRE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE IN ACCORD ANCE WITH LAW. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) .WE CONFIRM HIS ITA NO.2692/AHD/2006 PRAKSSH J. INTWALA 6 FINDINGS AND DISMISS THE APPEAL OF THE ASSESSEE. HO WEVER WE DIRECT THE AO TO TAKE INTO CONSIDERATION THAT ONCE THE ASSESSE E HAS SHOWN LONG TERM CAPITAL GAINS OF RS.1 55 840/- THE SAME SHOUL D BE REDUCED FROM THE COMPUTATION OF INCOME BY GIVING BENEFIT TO THE ASSESSEE. THE AO AFTER VERIFYING THIS FACT MAY MAKE SUITABLE AMENDMENT IN THE COMPUTATION OF INCOME. WITH THE ABOVE OBSERVATION THE APPEAL OF TH E ASSESSEE IS ACCORDINGLY DISMISSED. 8. AS A RESULT APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 23-04-2010. SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 23- 04-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD