ITO WD 21(1)(1), MUMBAI v. DILIP VRAJLAL SHAH, MUMBAI

ITA 3891/MUM/2012 | 2009-2010
Pronouncement Date: 08-04-2014 | Result: Dismissed

Appeal Details

RSA Number 389119914 RSA 2012
Assessee PAN AAQPS1274G
Bench Mumbai
Appeal Number ITA 3891/MUM/2012
Duration Of Justice 1 year(s) 10 month(s) 7 day(s)
Appellant ITO WD 21(1)(1), MUMBAI
Respondent DILIP VRAJLAL SHAH, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 08-04-2015
Date Of Final Hearing 19-03-2015
Next Hearing Date 19-03-2015
Assessment Year 2009-2010
Appeal Filed On 01-06-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA (JM) . . ./ I.T. A. NO. 3881 / MUM/20 1 2 ( / ASSESSMENT YEAR : 20 0 9 - 10 ) INCOME TAX OFFICER WARD 21(1)(4) ROOM NO.606 6 TH FLOOR C - 10 PRATYAKASHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI . / VS. SHRI RAJU V SHAH SHOP NO.7 KAILASH CHS LTD . JUHU CHURCH ROAD JUHU MUMNBAI - 400049 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAQPS1274G ./ I.T.A. NO.3891/MUM/2012 ( / ASSESSMENT YEAR :2009 - 10) INCOM E TAX OFFICER WARD 21(1)(1) ROOM NO.603 6 TH FLOOR C - 10 PRATYAKASHKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI. / VS. SHRI DILIP VRAJLAL SHAH PROP OF M/S ELECTRONIC ENTERPRISES A/302 KAILASH CHS LTD. JUHU CHURCH ROAD JUHU MUMNB AI - 400049 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. :ABGPS5513B / A SSESSEES BY SHRI LOV KUMAR / RE VENUE BY SHRI VIPUL J SHAH / D ATE OF HEARING : 19 .3 . 201 5 / DATE OF PRONOUNCEMENT : 8 . 4 . 201 5 ITA 3881 & 3891 / MUM/201 2 2 / O R D E R PER B.R. BASKARAN (AM) BOTH T HE APPEAL S FILED BY THE REVENUE ARE D IRECTED AGAINST THE SEPARATE ORDER S DATED 1 4.3. 201 2 PA SSED BY LD CIT(A) - 32 MUMBAI AND T HEY RELATE TO THE ASSESSMENT YEAR 200 9 - 10. SINCE THE ISSUE URGED IN BOTH THE APPEALS IS IDENTICAL IN NATURE AND FURTHER SINCE THEY ARISE OUT OF COMMON SET OF FACTS THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE ONLY I SSUE URGED IN BOTH THE APPEALS IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE LONG T ERM C APITAL G AIN (LTCG) ARISING ON SALE OF IMMOV ABLE PROPERTY IS NOT ASSESSABLE IN THE HANDS OF THE ASSESSES IN THEIR INDIVIDUAL STATUS . 3. THE FACTS RELATING THERETO ARE THAT THE ASSESSING OFFICER RECEIVED AIR INFORMATION SHOWING THAT THESE TWO ASSESSES HAVE JOINTLY SOLD AN IMMOVABLE PROPERT Y ALON G WITH OTHERS. HOWEVER IT WAS SEEN THAT THEY HAVE CLAIMED THAT THE PROPERTY BELONGED TO THEIR RESPECTIVE HUF AND ACCORDINGLY DECLARED THE LTCG IN THE RETURNS OF INCOME FILED BY THE RESPECTIVE HUF . THE AO NOTICED THAT THE AGREEMENT WAS ENTERED INTO BY ASS ESSES IN THEIR INDIVIDUAL NAMES AND THEY HAVE ALSO GIVEN THE PERMANENT ACCOUNT NUMBERS PERTAINING TO THEIR RESPECTIVE INDIVIDUAL STATUS. ACCORDINGLY THE AO HELD THAT THE PROPERTY SHOULD BE CONSIDERED AS BELONGING TO THEM IN THEIR RESPECTIVE INDIVIDUAL ST ATUS AND HENCE THE LTCG ARISING ON SALE OF IMMOVABLE PROPERTY IS ASSESSA BLE IN THEIR INDIVIDUAL STATUS AND NOT IN THE STATUS OF HUF. ACCORDINGLY T HE AO ASSESSED THE LTCG IN THE HANDS OF BOTH THE ASSESSEES IN THEIR INDIVIDUAL CAPACITY. IN THE ITA 3881 & 3891 / MUM/201 2 3 APPELLATE PR OCEEDINGS THE LD. CIT(A) WAS CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEES THAT IMMOVABLE PROPERTY SOLD BY THEM BELON GED TO THEIR RESPECTIVE HUF. ACCORDINGLY HE DELETED THE LTCG ASSESSED IN THE HANDS OF THESE ASSESSES IN THE IR RESPECTIVE INDIVI D UAL CAPACITY. AGGRIEVED BY THE ORDER S PASSED BY THE LD CIT(A) THE REVENUE HAS FILED THESE APPEALS BEFORE THE TRIBUNAL. 4 . WE NOTICE THAT THE LD.CIT(A) HAS DELETED THE ASSESSMENT OF LTCG WITH THE FOLLOWING OBSERVATIONS IN THE CASE OF SHRI RAJU V SHAH : 3 .3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE ARGUMENTS PUT FORWARD BY THE ID. AR. IT IS SEEN THAT THE PROPERTY AT VILLAGE ERANGAI MADH ISLAND MUMBAI ADMEASURING ABOUT 34 000 SQ.YD. WITH STRUCTURE THEREON TO M/S. SAI SHIV FILMS PVT. LTD. (SIC. SOLD ) ON 25 - 7 - 2008 FOR ACTUAL CONSIDERATION OF RS.3 25 00 000/ - THOUGH THE STAMP VALUE ADOPTED BY REGISTERING AUTHORITIES WAS 8 33 91 000. I HAVE GONE THROUGH THE SALE AGREEMENT & DOCUMENTS PLACED BEFORE ME. IT IS SEEN THAT THE PROPERTY WAS ANCESTRAL PROPERTY RECEIVED BY VRAJLAL TRIBHOVANDAS SHAH HUF ON 14 - 7 - 1962 FROM THE COURT RECEIVER OF THE HIGH COURT OF BOMBAY IN PURSUANCE OF SUIT NO. 1175 OF 1946. ON GOING THROUGH THE SUIT IT IS SEEN THAT THE PLAINTIFFS HAD MADE IT CLEAR THAT THE PROPERTY BELONGED TO JOIN T FAMILY OF TRIBHOVANDAS LALCHAND WHICH READS AS UNDER : - THE PLAINTIFFS PRAY FOR A DECLARATION THAT THE PROPERTIES BELONGING TO THE JOINT FAMILY OF TRIBHOVANDAS LALCHAND. IT IS ALSO SEEN THAT THE SAID PROPERTY WHICH WAS OWNED BY VRAJLAL TRIBHOVANDAS S HAH HUF AND THERE WAS A PARTITION OF VRAJLAL TRIBHOVANDAS SHAH HUF ON 16 - 10 - 1979 WHICH IS EVIDENCED BY THE DEED OF PARTITION DATED 10 - 3 - 1981 DULY REGISTERED WITH THE SUB - REGISTRAR OF BOMBAY. THESE FACTS OF PARTITION OF VRAJLAL TRIBHOVANDAS SHAH HUF ARE MEN TIONED ON PAGE 2 OF THE SALE AGREEMENT ALSO WHICH WAS BEFORE THE AO ALSO. THUS THE FACT OF OWNERSHIP OF PROPERTY ORIGINALLY BY VRAJLAL TRIBHOVANDAS SHAH HUF TILL DATE OF PARTITION CANNOT BE DENIED NOR HAS THE SAME BEEN DISPUTED BY THE AO THOUGH ALL THE FA CTS WERE BEFORE HIM ALSO. THUS AS PER THE HINDU LAW AND INDIAN SUCCESSION ACT THE INHERITED PROPERTY AFTER PARTITION OF ORIGINAL HUF WOULD DEVOLVE ON THE SMALLER HUFS OF THE RECIPIENT COPARCENERS ONLY AND NOT IN INDIVIDUAL CAPACITY. ANY HUF PROPERTY THAT IS DIVIDED ON PARTITION RETAINS ITS CHARACTER AS A JOINT FAMILY PROPERTY AND AS SUCH IN THE HANDS OF RECIPIENT THE SAME ITA 3881 & 3891 / MUM/201 2 4 WILL BE HUF PROPERTY OF RECIPIENT. SINCE THE RECIPIENT HAD NOT CONTRIBUTED TO THE ACQUISITION OF THE INHERITED PROPERTY HE CANNOT B E THE SOLE OWNER OF THE PROPERTY FOR THE SHARE RECEIVED BY HIM ON PARTITION OF HUF EVEN IF HE WISHES TO BE SO BE SO BECAUSE THE OTHER FAMILY MEMBERS OF RE CIPIENTS ALSO HAVE RIGHT IN THE INHERITED PROPERTY. THUS CONSIDERATION RECEIVED FOR RELEASE OF INTER EST IN THE JOINT FAMILY PROPERTY WOULD ALSO HAVE JOINT FAMILY PROPERTY CHARACTER WITH THE RESULT THAT ANY INCOME FROM ANY INVESTMENT THERE FROM CAN ONLY BE TREATED AS JOINT FAMILY PROPERTY. IT WAS SO HELD IN CIT V/S. P. N. SRINIVASA RAO 232 ITR 730 (KER.). IT IS NOTED THAT THE ASSESSEE BEING SON OF VRAJLAI TRIBHOVANDAS SHAH WAS A COPARCENER IN VRAJLAL TRIBHOVANDAS SHAH HUF AND HE WAS MARRIED ALSO. SO THERE EXISTED A VALID HUF OF THE APPELLANT ON WHOM THE INHERITED PROPERTY WOULD HAVE DEVOLVED. THUS AS PER T HE PREVAILING LAW IT IS THE APPELLANT'S HUF WHICH HAS LEGAL RIGHT OVER THE PROPERTY AND NOT THE APPELLANT IN INDIVIDUAL CAPACITY AND THE SAID PROPERTY AT NO POINT OF TIME BECAME THE INDIVIDUAL PROPERTY OF APPELLANT. THE APPELLANT NEVER PAID ANY CONSIDERAT ION FOR ACQUIRING THE PROPERTY AND HENCE FOR THIS REASON ALSO THE INHERITED PROPERTY COULD NOT HAVE BECOME HIS SOLE PROPERTY. THIS IS FURTHER SUPPORTED BY THE FACT THAT PROPERTY TAX BILL ISSUED BY BMC FOR ALL YEARS TILL FY 2007 - 08 STILL MENTIONS THE NAME O F THE OWNER OF PROPERTY SITUATED ON THE SAID LAND AS 'VRAJLAL TRIBHOVANDAS SHAH & HIS BRANCH'. THUS IT IS CLEAR THAT IT IS THE APPELLANT'S HUF WHO HAD DOMINION OVER THE PROPERTY IN WHICH HE HAD THE RIGHT TO ENJOY AND TO DO WITH IT AS HE PLEASES. THE ABOVE FACTUAL POSITIONS HAVE NOT AT ALL BEEN DISPUTED BY THE AO. ONCE THE APPELLANT WAS NOT OWNER THERE CAN BE NO CHARGE OF CAPITAL GAINS ON THE APPELLANT. THE AO HAS SIMPLY MADE ADDITION IN HANDS OF APPELLANT IN INDIVIDUAL CAPACITY JUST BECAUSE THE WORD HUF WA S NOT MENTIONED IN THE SALE AGREEMENT. THE AO IN MY OPINION HAS NOT LOOKED INTO SUBSTANCE OF THE AGREEMENT AND ALSO TO OTHER RELEVANT FACTORS WHICH INDICATED THE OWNERSHIP OF PROPERTY IN HANDS OF HUF ONLY. SINCE THE APPELLANT WAS KARTA OF THE APPELLANT'S HUF IT WAS ONLY HIM WHO WAS REQUIRED AS PER THE LAW TO SIGN ANY DOCUMENT ON BEHALF OF HUF AND MERE ABSENCE OF WORD HUF IN THE AGREEMENT OR MENTIONING OF HIS IN DIVIDUAL PAN WOULD NOT CHANGE THE TAXABILITY FROM HUF TO INDIVIDUAL IF THE TRANSFER AS PER INT ENT AND SUBSTANCE WAS BEING MADE BY HUF. THE NATURE OF A RECEIPT OR A TRANSACTION WOULD NOT BE DETERMINED ONLY BY THE NOMENCLATURE GIVEN BUT BY SUBSTANCE OF THE COVENANTS AND ACTUAL THE CIRCUMSTANCES OF THE TRANSACTIONS AS HELD IN NATIONAL CEMENT MINE IN DUSTRIES 42 ITR ITA 3881 & 3891 / MUM/201 2 5 69 77(SC) PADAMJEE R KADAMBANDE 195 ITR 877(SC) 191 ITR 173(PAT). THE EXPLANATION OF LD AR THAT IT WAS ONLY A VENIAL TYPOGRAPHICAL ERROR THAT THE WORD HUF REMAINED TO BE MENTIONED IN THE AGREEMENT SEEMS TO BE BONAFIDE. THERE CANNOT BE ANY ATTEMPT FOR AVOIDANCE OF TAX BY DISCLOSING THE LTCG IN HANDS OF HUF AND NOT IN INDIVIDUAL CAPACITY AS THE TAX RATES AND OTHER DEDUCTIONS AVAILABLE FOR HUF AS WELL AS INDIVIDUAL ARE SAME. THE AO HAS ALSO ACCEPTED THE FACT THAT PROFIT ON SALE OF THE PROPER TY HAVE BEEN SHOWN IN THE RETURN OF INCOME OF APPELLANT'S HUF. THE APPELLANTS HUF HAD ALREADY FILED ITS RETURN DISCLOSING THE LTCG FOR 1/4 TH SHARE FOR AY 2009 - 10 HUF ON SAME DAY WHEN THE INDIVIDUAL RETURN WAS FILED WHICH SUGGESTED THAT ALL ALONG THE SAID P ROPERTY WAS TREATED AS HUF PROPERTY ONLY AND THERE WAS NO ELEMENT OF ANY AFTERTHOUGHT BY DISCLOSING THE LTCG IN HANDS OF HUF NOR ANY ADDITIONAL BENEFIT COULD HAVE ACCRUED TO APPELLANT BY DISCLOSING LTCG IN HANDS OF HUF AND NOT IN INDIVIDUAL CAPACITY. EVEN OTHERWISE ALSO ANCESTRAL OR SELF - ACQUIRED PROPERTY CAN BE IMPRESSED WITH THE CHARACTER OF JOINT FAMILY PROPERTY BY THROWING INTO THE COMMON HOTCH - POT AS HELD IN DAMODAR KRISHNAJI NIRGUDE 46 ITR 1252 (BORN). THUS BY SHOWING THE PROPERTY IN BALANCE SHEET OF HUF IN EARLIER YEARS IT WAS CLEAR THAT THE SAID PROPERTY WAS THROWN INTO COMMON HOTCH - POT OF HUF AND HENCE THE SAME BELONGED TO HUF ONLY. THUS MERELY BECAUSE IN THE DEED OF CONVEYANCE THE MENTION OF KARTA OF HUF WAS NOT MADE AND INDIVIDUAL PAN OF KARTA(AP PELLANT) WAS MENTIONED THE OWNERSHIP OF THE PROPERTY WHICH REALLY BELONGED TO THE HUF WILL NOT CHANGE TO BE INDIVIDUAL PROPERTY DUE TO SUCH TECHNICAL ERRORS. THE AO HAS TAXED THE CAPITAL GAINS IN HANDS OF INDIVIDUAL BUT HE HAS NOT MENTIONED AS TO WHAT HA PPENS TO THE LTCG ALREADY OFFERED B Y HUF. IN VIEW OF THESE FACTS OF THE CASE THE LTCG ON SALE OF PROPERTY CAN NOT BE BROUGHT TO TAX IN HANDS OF APPELLANT IN INDIVIDUAL CAPACITY AS THE SAME IS ASSESSABLE IN HANDS OF HUF ONLY AS PER THE PROVISIONS OF THE ACT . ACCORDINGLY I DIRECT THE AO TO DELETE THE EFFECTIVE ADDITION OF RS 1 85 71 300 MADE IN THE HANDS OF THE APPELLANT. 5 . IDENTICAL ORDERS HAVE BEEN PASSED BY LD CIT(A) IN THE HANDS OF SHRI DILIP VIRAJLAL SHAH. A PERUSAL OF THE ORDER OF LD.CIT(A) WOULD SHOW THAT THE FIRST APPEL LATE AUTHORITY HAVE CLEARLY BROUGHT OUT THE FACT AS TO HOW THE ASSESSES HEREIN HAD INHERITED THE PROPERTY . IT IS SEEN THAT HUF OF THE ITA 3881 & 3891 / MUM/201 2 6 ASSESSEES FATHER HAS OBTAINED THE PROPERTY UNDER A COURT ORDER AND IT HAS BELONGED TO THE ASSE SSEES FATHERS HUF. THEREAFTER THERE WAS A PARTITION BETWEEN THE MEMBERS OF HUF AND THUS THE ASSESSES HEREIN HAD RECEIVED THEIR RESPECTIVE SHARE IN THE IMPUGNED PROPERTY. THE LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEES HEREIN WERE MARRIED AT THAT POINT OF TIME. A CCORDINGLY THE LD CIT(A) HAS C O ME TO THE CONCLUSION THAT THE IR RESPECTIVE SHARE IN THE PROPERTY ACTUALLY BELONG ED TO THE HUF STATUS OF THE ASSESSEE S . ACCORDINGLY THE LD CIT(A) HELD THAT THE ASSESSES HAVE ENTERED INTO SALE AGREEMENT IN T HEIR RESPECTIVE NAMES ON BEHALF OF THEIR RESPECTIVE HUF. UNDER THESE SET OF FACTS THE LD CIT(A) HELD THAT GIVING WRONG PERMANENT ACCOUNT NUMBER (I.E. PERMANENT ACCOUNT NUMBER OF INDIVIDUAL STATUS) WOULD NOT MAKE THE ASSESSEES AS OWNER OF PROPERTY IN THE I R INDIVIDUAL STATUS . ON THE BASIS OF THE DISCUSSIONS MADE BY US ABOVE WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT THE IMPUGNED PROPERTY BELONGED TO THE HUF STATUS OF THE ASSESSES AND ACCORDINGLY WE ARE OF THE VIEW THAT HE WAS JUSTIFIED IN DIRECTING THE AO TO DELETE THE ASSESSMENT OF LTCG IN THE INDIVIDUAL STATUS OF THE ASSESSEES. 6 . IN THE RESULT BOTH THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH APRIL 2015 8 TH APRIL 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ITA 3881 & 3891 / MUM/201 2 7 MUMBAI: 8TH APRIL 2015 . . . ./ SRL SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CON CERNED 4. / CIT CONCERNED 5. / DR ITAT MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER TRUE COPY (ASSTT. REGISTRAR) /ITAT MUMBAI