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2018 (3) TMI 581

his regard, we observe that certain amounts have been transferred from her account to that of her husband Shri Raghuram P Nambyar and others; but that the said transfers were for the purpose of construction of the residence, is not supported or corroborated by any bills to prove the assessee's claim that they were utilized for construction. - No documentary evidence in this regard has been placed either before the authorities below or before us. This being the factual position i.e. that Smt. Veena Nambyar is not the owner of the said property, the authorities below have (i) rightly rejected her claims for exemption under Section 54F and 54EC and (ii) correctly brought the entire LTCG arising on sale of the said property in the hands of the assessee Shri Raghuram P Nambyar. In this factual matrix of the case, as discussed above, we are of the view that there is no merit in the claims put forth by the assessee in this regard and dismiss the same. - Reopening of assessment - Held that:- At the stage of initiation of proceedings it is not necessary that escapement of income need be established, but there should be formation of belief by a reasonable person based on relevant ma .....

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HAL 2nd Stage, Indiranagar, Bangalore-560 038 vide registered sale deed dt.8.12.1986 from one Dr. R. Syed Umar for a consideration of ₹ 13 lakhs. Subsequently, a residential property was constructed thereon in the financial year 1991-92 and thereafter both these assessees i.e. husband and wife, resided therein. After sometime, the said property was let out and the assessees both husband and wife declared 50% of the rent received from tenants in their respective hands in their returns of income from Assessment Year 1993-94 onwards. 2.2 The said property in the name of Raghuram Nambyar was sold to one Sri S. Venkata Ramanan vide registered sale deed dt.30.6.2008 for a total consideration of ₹ 7,04,00,000. The Long Term Capital Gains ( LTCG ) on sale of the aforesaid property was computed at ₹ 6,00,90,049 after claiming indexation and was offered @ 50% of the LTCG thereof at ₹ 3,00,45,025 in each of the hands of the husband Shri Raghuram P Nambyar and wife Smt. Veena Nambyar. The assessees claimed reinvestment of the capital gains by purchase of new properties. Smt. Veena Nambyar, purchased a residential property at Mantra Espana , Kariammanagrahara Village, Va .....

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yar, being aggrieved by the order of assessment dt.27.12.2011 for Assessment Year 2009-10, preferred an appeal before the CIT (Appeals) - 4, Bangalore which was dismissed by the learned CIT (Appeals) holding that Since the issue of taxability of capital gains offered by the assessee in the hands of Smt. Raghuram P Namabyar is yet to be finalized by the Assessing Officer and the final outcome in appeal is not clear, the action of the Assessing Officer is confirmed on protective basis subject to the outcome in the case of Sri Raghuram P Nambyar in the higher appellate stages. 2.6 In the case of Sri Raghuram P Nambyar, the assessment proceedings for Assessment Year 2009-10 was initiated by the Assessing Officer under Section 147 of the Act, in view of the fact that the Assessing Officer in the case of the wife Smt. Veena Nambyar, held that the appropriation of LTCG on sale of the said property equally between both spouses @ 50% each was incorrect as the purchase and sale of the same was in the name of Sri Raghuram P Nambyar only and therefore the LTCG arising from sale thereon was to be assessed in his hands alone. Therefore, having declared only 50% of the LTCG in his hands, income o .....

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erly considering the fact and circumstances of the case, submissions of the appellant and the law applicable. 3. The assessing officer had in any case, erred in assessing the Long term capital gain earned on sale of residential house held jointly by the appellant as well as the wife of the appellant in the hands of appellant only and the learned CIT(A) has erred in confirming the same. On the facts and circumstances of the case and the law applicable, the action of authorities below being totally erroneous both on facts and law is to be disregarded. 4.1 In any case and without further prejudice, the authorities below have erred in: a) Not appreciating the fact that the property sold was held by the appellant and the wife of the appellant jointly. b) Not appreciating the fact that the rentals received from letting of aforesaid property were offered to tax in equal proportion in the hands of both appellant as well as appellant s wife and same had been accepted by the department itself. c) Holding that the appellant was the sole/absolute owner of the residential property and appellant s wife had not invested in acquisition of residential property. The conclusions / observations of aut .....

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sessment year under the facts and circumstances of the case. 5. The learned CIT (Appeals) is not justified in law in upholding the disallowance of the claim of exemption under Section 54EC of the Act of ₹ 50,00,000 invested in the REC Bonds under the facts and circumstances of the case. 6. The learned CIT (Appeals) is not justified in law in upholding the disallowance of the claim of exemption made by the ld. Assessing Officer under Section 54 of the Act of ₹ 1,68,75,427 invested in the purchase of the new residential property at Mantri Espana under the facts and circumstances of the case. 7. The learned CIT (Appeals) is not justified in law in not allowing the further claim of exemption under Section 54 / 54F in respect of the sum of ₹ 20,00,000 deposited into the capital gains account of the appellant opened in a nationalized bank under the facts and circumstances of the case. 8. The learned CIT (Appeals) is not justified in law in holding that the appellant is not eligible to claim deduction under Section 54 of the Act under the facts and circumstances of the case. 9. Without prejudice the learned CIT (Appeals) ought have given the benefit of claim of exemption .....

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earnings and savings. It was also submitted by the assessees that the rent received from letting out the said property was also equally shown in their respective hands as income from house property in the earlier year and the same has been accepted by the Department. Therefore, according to the assessees, their intentions were that the said property was a joint property and both of them having equal share therein, are both co-owners thereof. It is the assessee's contention that merely because in the purchase deed dt.8.12.1986 and sale deed dt.30.6.2008, under which the said property together with house constructed thereon was sold was only in the name of Sri Raghuram P Nambyar, it does not take away the 50% right in the ownership and enjoyment of the property sold from Smt. Veena Nambyar. In this regard, it was submitted that the authorities below have not considered that the intention of the parties to the sale deed was that both the husband and wife were to jointly sell the aforesaid property along with house thereon and therefore immediately thereafter, Sri Raghuram P Nambyar, the husband made over 50% of the sale consideration i.e. ₹ 3,00,45,025 to the account of his .....

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ver, in the assessment for Assessment Year 2007-08 in case of Smt. Veena Nambyar, the Assessing Officer has not considered the issues of joint ownerships of the aforesaid property, therefore the assessee's contention that Department has accepted her joint ownership of the property is incorrect. It was further argued that the assessee Smt. Veena Nambyar was a citizen of Malaysia when the property was purchased in 1986 and as per law permission of the RBI is required for her to acquire or hold or transfer or dispose by sale any immovable property situated in India and it has not been established with any documentary evidence to the effect that such permission was obtained by her in respect of the purchase of the aforesaid property. In this factual situation of the matter, Smt. Veena Nambyar cannot enjoy the benefits of ownership of the aforesaid property, such as receiving rent, earning profits on disposal of the same and the attempt of the assessees, if accepted, would amount to achieving in the present indirect manner what the law never ever intended to grant to Smt. Veena Nambyar in the first place. Thus it is clear and evident that no title on the said property can be conferr .....

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have suo moto offered rental income equally in their returns of income, does not confer ownership in the aforesaid property on Smt. Veena Nambyar. As per the recitals in the purchase and registered sale deeds of the aforesaid property, Shri Raghuram P Nambyar alone is the sole legal owner of the said property to the exclusion of all others, including his wife Smt. Veena Nambyar whose name does not appear in the capacity of owner / co-owner in either the purchase or sale deed of the aforesaid property. Ownership has to be considered from the recitals of the relevant documents and not from any stated intention or claim made which is legally unsustainable. In this factual matrix of the cases on hand, we find no merit in the assessee's contentions that Smt. Veena Nambyar had 50% ownership in the aforesaid property and was therefore entitled to claim and be allowed exemption under Section 54 and 54 EC of the Act. 4.3.2 AS regards the reliance placed by the assessees on the decision of the Hon'ble Apex Court in the case of Poddar Cements P. Ltd. (supra), it is true that the settled position for the purposes of offering income under the head Income from House Property for the pur .....

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3 of Paper Book) filed before the authorities below were also placed before us in an attempt to show that Smt. Veena Nambyar had contributed equally to the purchase of the aforesaid vacant site No.1088, HAL II Stage, Indiranagar, Bangalore vide Registered Purchase Deed dt.8.12.1986. In our view, this claim is factually and legally untenable as at that time, admittedly, the assessee Smt. Veena Nambyar was a Malaysian citizen employed in Saudi Arabia and could not have purchased any property in India without the permission of the Reserve Bank of India (RBI). No such permission of the RBI as required by law has been placed before the authorities below or us. In this factual and legal matrix of the case, we uphold the view of the authorities below that Shri Raghuram P Nambyar alone is the purchaser and sole legal owner of the said property as confirmed by the recitals in the registered purchase and sale deeds. 4.3.5 It was also urged that the assessee Smt. Veena Nambyar and her husband Shri Raghuram P Nambyar had contributed funds equally to the construction of the residence on the aforesaid property. On a perusal of the entries in Andhra Bank Accounts cited by the learned Authorised R .....

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Raghuram P Nambyar, had escaped assessment due to the fact that, in spite of his being the sole owner of the property purchased on 8.12.1986 and sold on 30.6.2008 as per the recitals in the registered deed, he had offered only 50% LTCG in his hands and incorrectly offered the remaining 50% LTCG in the hands of his wife Smt. Veena Nambyar. In our view, there was tangible material before the Assessing Officer to form the reason to believe that income of the assessee had escaped assessment. At the stage of initiation of proceedings it is not necessary that escapement of income need be established, but there should be formation of belief by a reasonable person based on relevant material. In our view, the Assessing Officer has succinctly set out the facts of the case and recorded the reasons leading to the formation of belief that income of the assessee liable to tax had escaped assessment for Assessment Year 2009-10, with due application of mind, following the prescribed procedure as contemplated by the Act and in consonance with the decisions of various Hon'ble Courts. In this factual and legal matrix of the case as discussed above, we do not find any infirmity with the procedure .....

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