2022 (5) TMI 1422 - AT - Income Tax

Capital gain - Co-ownership - capital gain arising from the said sale as chargeable to tax in the hands of the assessee as well as the said brothers and sister in respect of their respective 1/4th share in the individual capacity - main contention raised by the assessee is that no consideration whatsoever was received by the assessee on transfer of her share in the immovable property in question - HELD THAT - As noted by CIT(A) in this regard in her impugned order Capital Gain Tax in respect of her shares was duly charged in the hands of sister of the assessee namely Arunaben K. Patel. Similarly the share of other two owners capital gain was chargeable to tax in their hands in their individual capacity and direction to this effect was given by the learned CIT(A) vide her impugned order to the AO. Although the DR in reply to a query raised by the Bench has submitted that he has no information about any action being taken in the hands of other two co-owners namely Naginbhai G. Patel and Narsinhbhai G. Patel we find merit in the contention of the learned Counsel for the assessee that there is no basis whatsoever to assess their share of capital gain in the hands of the assessee even on protective basis. DR has not been able to rebut or controvert this position. We therefore find no infirmity in the impugned order of the learned CIT(A) deleting the addition made by the AO in the hands of the assessee on protective basis on account of share of other co-owners in the capital gain as the same was clearly chargeable to tax in their respective hands in individual capacity. The same is accordingly upheld dismissing the appeal of the Revenue. Main contention raised by assessee is that no consideration whatsoever was received by the assessee on transfer of her share in the immovable property in question - There is also nothing on record to show that the property in question was transferred by Shri Ganpatbhai K. Patel to Shri Hamad Ali on 15.07.2000 within the definition of Section 2(47) of the Act. The said property is actually transferred within the meaning of Section 2(47) of the Act only on 29.07.2011 when the sale deed was executed and registered; and as clearly mentioned in the sale deed the transferors were the assessee and other three co-owners being the legal heir of Shri Ganpatbhai K. Patel. Shri Hamad Ali had joined the said sale deed only as confirming party and received certain amount out of total consideration as stated therein. As regards the contention of the learned Counsel for the assessee that no consideration was received by the assessee on sale of her share in the immovable property it is observed that a sum of Rs.53, 26, 000/- was already received by Shri Ganpatbhai K. Patel in the past from Shri Hamad Ali and the said amount was adjusted against the sale consideration agreed between the parties as per sale deed dated 28.07.2011. As specifically mentioned in Clause 12 of the sale deed the party of the second part i.e. assessee and other co-owners being sellers had agreed to give credit for the said amount as the amount paid up by the party of the first part i.e. purchaser on the execution of sale deed. In our opinion it therefore cannot be said that there was no consideration received by the assessee and the other co-owners on transfer of property vide sale deed dated 28.07.2011. Computation of capital gain arising from transfer of her share in the property - CIT(A) in her impugned order passed in assessee s case has duly taken note of the order passed in the case of Smt. Arunaben K. Patel dated 20.07.2016 to uphold the order of the Assessing Officer in assessing the capital gain arising on transfer of her share in the property on substantive basis she completely overlooked quantification of capital gain as made by her counterpart in the case of Smt. Arunaben K. Patel. After going through the relevant observations/findings recorded by the learned CIT(A) in the case of Smt. Arunaben K. Patel the appellate order we find that the computation of Long Term Capital Gain arising from the transfer of property by the assessee and other co-owners has been done correctly by him after taking into consideration all the relevant aspects including the valuation adopted under Section 50C of the Act break-up of consideration of the property as paid to Shri Hamad Ali as the confirming party etc.. We therefore modify the impugned order of the learned CIT(A) on this issue and direct the Assessing Officer to recompute the capital gain arising from the transfer of her share of property as assessable in the hands of the assessee as computed by the learned CIT(A) in the case of Smt. Arunaben K. Patel other co-owner of the property. Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Validity of reassessment under Section 147 of the Income-tax Act, 1961.
2. Taxability of Long Term Capital Gain (LTCG) in the hands of the assessee.
3. Protective assessment of capital gain in the hands of the assessee for shares of other co-owners.

Detailed Analysis:

1. Validity of Reassessment under Section 147 of the Income-tax Act, 1961:
The reassessment was initiated based on information that the assessee had sold an immovable property but had not declared the capital gain from the sale. The Assessing Officer (AO) issued a notice under Section 148 of the Act after recording reasons for reopening the assessment. The assessee contended that there was no escapement of income and thus the reassessment was bad in law. However, the Tribunal upheld the reassessment, observing that the AO had valid reasons to believe that income had escaped assessment.

2. Taxability of Long Term Capital Gain (LTCG) in the Hands of the Assessee:
The property originally belonged to Shri Ganpatbhai Kevaldas Patel and was sold after his death by his legal heirs, including the assessee. The AO computed the LTCG by adopting the sale price as per the provisions of Section 50C of the Act. The assessee argued that she did not receive any consideration and merely signed the sale deed to complete the transaction initiated by her father. The Tribunal noted that the sale transaction was completed in the Assessment Year (AY) 2012-13, and the property was transferred as per Section 2(47) of the Act when the sale deed was executed and registered on 29.07.2011.

The Tribunal upheld the CIT(A)'s decision to tax the assessee's share in the LTCG but directed the AO to recompute the capital gain by considering the assessee's share as 1/4th instead of 1/3rd, as the property was inherited equally among four legal heirs.

3. Protective Assessment of Capital Gain in the Hands of the Assessee for Shares of Other Co-owners:
The AO had assessed the capital gain of other co-owners in the hands of the assessee on a protective basis. The CIT(A) deleted this addition, reasoning that each legal heir should be taxed for their respective share. The Tribunal agreed with the CIT(A), noting that the capital gain should be taxed in the hands of each co-owner in their individual capacity and there was no justification for taxing the shares of other co-owners in the hands of the assessee on a protective basis.

Conclusion:
The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal. It upheld the reassessment proceedings and the taxability of the LTCG in the hands of the assessee but directed the AO to recompute the capital gain considering the assessee's share as 1/4th. The protective assessment in the hands of the assessee for the shares of other co-owners was deleted. The Tribunal's decision was pronounced on 11th May 2022 at Ahmedabad.