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TMI Blog2025 (3) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... without jurisdiction and not sustainable both on facts and in law. 3. The CIT (Appeals) -18, Chennai failed to appreciate that issue of validity of the search assessment order on the facts of the case being open for questioning at every stage, the search assessment was passed without jurisdiction as well as time barred inasmuch as further ought to have appreciated that the lack of seized material would vitiate the search assessment order completely. 4. The CIT (Appeals)-18, Chennai erred in sustaining the addition of Rs. 6, 48, 31, 420/- as Long-term Capital Gains and a sum of Rs. 4, 74, 82, 926/-as Short-term Capital Gains in the computation of taxable total income without assigning proper reasons and justification. 5. The CIT (Appeals) -18, Chennai failed to appreciate that settlement deed dated 05.03.2010 entered between the late appellant and his brother, Mr. Rajarathinam for the mutual exchange of 30 properties for 55 properties respectively wrongly construed as transfer of property / extinguishment of rights on such immovable properties for the purpose of computing Capital Gains on such transfer, the consequential computation of LTCG & STCG on various facets was wrong, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 153C of the Act was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law. 12. The CIT (Appeals) -18, Chennai failed to appreciate that the entire re-computation of taxable total income in the invalid search assessment order was wrong, erroneous, incorrect, invalid, unjustified and not sustainable both on facts and in law. 13. The CIT (Appeals) -18, Chennai failed to appreciate that there was no effective/proper opportunity given before passing the impugned order and ought to have appreciated that any order passed in violation of the principles of natural justice is nullity in law. 14. The Appellant craves leave to file additional grounds/arguments at the time of hearing. 3.0 The brief facts of the case are that the assessee is an individual and was Partner of certain concerns of Saravana Store Group. The Search & Seizure action u/s. 132 of the Act was conducted in the business premises and residence of the assessee on 18.08.2011 notice u/s. 153C of the Act was issued by the AO on 23.07.2013 and in response the assessee filed reply on 22.10.2013 stating that the original return filed may be treated as the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer". 6. On perusal of the submissions made by the assessee the ld. CIT(A) deleted the capital gain on transaction of family settlement by allowing the appeal of the assessee in his order dated 13.04.2014 by observing as under: "....6.2. I have perused the assessment order, grounds of appeal, written submissions and the family partition deed dt. 20.2.2010 in this regard. It is seen that the appellant along with his brothers have purchased certain properties jointly. Due to family arrangement, both the brothers agreed to partition the properties by way of settlement deed. The appellant by way of settlement dated 5.3.2010 has given certain properties to his brother Shri S. Rajaratnam as Gift. Similarly, Rajaratnam has also given certain properties to the appellant. But the AO has imposed Capital Gain tax by stating that the settlement deed made out by his brother, Shri Rajaratnam in favour of the appellant falls under "Transfer" as per section 2(47) of the Act. Thus, imposed STCG and LTCG on the difference between the Guideline value and value shown in the books. In the instant the first question to be addressed is whether property jointly purchased by brothers partitioned byway ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no difference between the Gift and Settlement u/s. 49(1)) of the Act. While adjudicating this, the Tribunal placed reliance 'on Sec. 122 of the -Transfer of Property Act, 1882 and also from the Cochin Bench of Tribunal in the case of ACIT Vs. Anjana Mohan (2013) 36 CCH 0008(Cochin) and also Redington (India) Ltd. Vs. JCIT reported in 40 CCH 527 (Chennai). 15. In view of this, in our opinion the artificial distinction made by the lower authorities with reference to the Gift and Settlement is not appropriate and we are of the opinion that for the purpose of -Sec.49(1)(i), there is no difference between the gift and settlement and in the present case, the settlement made with the assessee's brother Mr. S. Rajaratnam and there cannot be any capital gains on this count. The ground raised by the Revenue is dismissed. 16. In the result, the appeals of assessee in [ITA No.985, 986, 987 & 988/16 and the appeal of Revenue in 1038/16 are partly allowed for statistical purposes, and the appeal of Revenue in 1037/Mds./16 is dismissed." 8. Aggrieved by the order of the Chennai Tribunal, the revenue preferred an appeal at Hon'ble High Court of Madras. On perusal of the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n agreement wherein all the family members mutually workout the mode of distributing the wealth amongst themselves. Undeniably all the parties to the settlement or well related to each other and have valid legal claim over the disputed assets. ii) The settlement deed was executed in order to avoid family disputes and in consequence of family arrangements. The settlement arrived at between the co-owners/brothers were Bonafide. Therefore, the settlement of joint holding properties between brothers would not fall under "transfer" as defined in section 2(47) of Act. iii) The properties received under gift would not attract tax. The transactions of settlement of properties clearly falls under gift to relatives and it would not attract tax. Even settlement of properties amongst various co-owners would not be covered by section 4(1)(c) of the Gift Tax Act. iv) The section 2(24) of the Indian Stamp Act 1899 reads "settlement" means any non-testamentary disposition, in writing, of movable or immovable property made a) In consideration of marriage; b) For the purpose of distributing property of the settler amongst his family or those for whom desires to provide or for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erusal of the submission made by the assessee the ld. CIT(A)-18, Chennai confirmed the additions made by the AO in respect of the capital gains on transactions of the settlement by passing an order dated 12.01.2024 as detailed below: "....16. ln view of the foregoing, the findings in this case are summarized below:- i) The assessee had transferred his holding in respect of 30 properties to his brother and his brother transferred 55 properties to the assessee. The assessee also paid an amount of Rs. 17 crores to his brother. The impugned properties in this case are not joint family properties and they were held by two individuals (though closely related) in their names with distinct shares. ii) The assessee affirmed that the properties are held by them without any dispute and are on freehold. iii) No evidence has been produced by the assessee to show that there was some dispute or even possibility of any future dispute. No evidence has been produced that the properties are under any dispute. Hence, the claim that it is case of family arrangement has not borne out of facts of the case. iv) The deed of family partition has been drawn in respect of individual properties of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.CIT(A) the assessee preferred an appeal before us. The ld. AR for the assessee assailed the action of the ld. CIT(A), stated that the ld.CIT(A) have erred in interpreting the settlement/gift among the brothers of properties as transfer as per the provisions of the Act and confirming the action of the AO. The ld.AR reiterated the submissions made before the ld.CIT (A) in the second round of appeal and submitted a paper book containing 309 pages consisting of written submission made before the ld.CIT(A) after remanded the case by the Hon'ble Madras Court, copies of judicial precedents relied by the assessee, copy of settlement deed by S.Yogarathinam to S.Rajarathnam, settlement deed by S.Rajarathnamto S.Yogarathinam, death certificate of S.Yogarathinam, Legal heir certificate of S.Yogarathinam, copies of financial statements of S.Yogarathinam and S.Rajarathnam and the Journal Extract for list of properties settled between parties on 05.03.2010. Further, the ld. AR argued that the 'gift' includes settlement as per the erstwhile Gift Tax Act, 1958 and Section 2(xii) of the same Act defines gift of movable or immovable property by means of transfer while the transfer of the property i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee by deleting the addition made on account of capital gains. 11. Per contra, the ld. DR supported the orders of the AO and that of the ld. CIT(A) and prayed for confirming the same. 12. We have heard rival contentions perused the material available on record and gone through the orders of the authorities below. The impugned order of ld.CIT(A) was passed in consequent to the decision of Hon'ble Madras High Court in the first round proceedings in TC Appeal No.234 of 2018 dated 08.07.2020 filed under Section 260A of the Act by the revenue against the this Tribunal order dated 15.03.2017 in ITA No.1037/MDS/2016. 13. The Hon'ble High Court vide their judgement at para 25 had set aside the order of First Appellate Authority rendered in the first round of proceedings as well as the decision of this Tribunal in remanding the matter to the file of the First Appellate Authority for a fresh consideration of the issues emanating from the assessment order dated 31.03.2014 passed in terms of Section 153C r.w.s 143(3) of the Act. 14. The impugned order passed by the ld.CIT(A) in the remand / 2nd round of proceedings had squarely summarised the entire issues for adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tamp duty. However, the gift transaction that had occurred between relatives (Brothers in the present case) should be reckoned as settlement so as to reckon the same as not a transfer for the purpose of settlement in Section 2(47) r.w.s 45/48 of the Income Tax Act, 1961. This above fact could not be disputed by the ld. DR when the same was brought to their attention. 21. This Tribunal is of an opinion that attempt of the ld. CIT(A) in clubbing both the settlement deeds (one by the assessee in favour of the brother and the other by the brother in favour of the assessee) was legally erroneous for the consequential erroneous conclusion reached by further reckoning the transaction as exchange for the purpose of justifying the levy of Capital Gains tax. 22. We find force in the argument of the Ld. AR that transaction of settlement between the assessee and his brother for preventing future disputes and transaction of settlement between the brother and the assessee executed simultaneously is to be considered as independent transactions by the stamp duty authority and hence in the light of the stamp duty authority reckoning the deeds as settlement deeds not as exchange, the presumption o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angement, the validity of the family arrangement is not be judged with reference to whether the parties who raised disputes or rights or claims in certain properties had in law any such right or not. The members of a joint family may, in order to maintain peace and bring about harmony in the family, enter into a family arrangement and if the arrangement is entered into bonafide and the terms thereof are fair, courts will normally give assent to such an arrangement rather than avoid it. Even if a party to the settlement has no title under the arrangement but the other party relinquishes all his claims or titles in favour of such a person and acknowledges him to be the sole owner, then the antecedent title must be assumed, and the family arrangement will be upheld. 29. Therefore, respectfully following the decision of the jurisdictional High court decision, we cannot agree with the ld.CIT(A) for taxing the settlement deeds of the assessee with his brother considering it as 'transfer' under section 2(47) of the Act and hence we are inclined to delete capital gains added by the AO. 30. Hence, in the present facts and circumstances of the case and respectfully following the various ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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