Ramanlal C.Patel, Ahmedabad vs Department Of Income Tax

I.T.O., Ward-7(2), Ahmedabad Appellant

Vs.

Shri Ramanlal C. Patel 19, Moti Park Society, Satellite, Ahmedabad Respondent

PAN: ASGPP1914J

अपीलाथ क ओर से /By Appellant : Shri M. K. Singh, Sr. D.R. ू यथ क ओर से/By Respondent : Shri S. N. Divetia, A.R. सुनवाई क तार!ख/Date of Hearing : 25.02.2015 घोषणा क तार!ख/Date of Pronouncement : 13.03.2015 ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 2

ORDER

PER SHAILENDRA KUMAR YADAV, J.M:

This appeal has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-VI, Ahmedabad, dated 02.06.2011 for A.Y. 2008-09 on the following ground:

"1) The Ld. Commissioner of Income tax (A) has erred in law and on facts in directing the Assessing Officer to treat the Assessee's share in the property sold during the year, as 1/18th, instead of 1/6th determined by the Assessing Officer on the basis of Form 6A dated 08/11/1983."

2. Assessee is individual and derives income from pension and from other sources. Assessing Officer in assessment order has observed as under:

"During the year under consideration the assessee filed his return of income with showing pension income. Income from other sources alongwith income of long term capital gain on sale of urban agriculture land of Rs. 38,05,558/- against which the assessee invested Rs. 36,00,000/- in bond issued by national highway authority of India and claimed deduction u/s. 54 EC of Rs. 35,30,058/- ( duly restricted) after taking benefit of indexation from 1980-81. On verification of submission made by the assessee, Sale deed of the land it is notice that during the F.Y. 2007-08 the assessee with others had sold urban Agriculture Land of Rs. 6,85,00,000/-. The assessee has requested to furnish the abstract of 7/12 in respect of sold land. The AR. of the assessee vide his letter dated 26.10.2010 submitted the copy of-sale deed as well as copy of 7/12 and also Form NO.6 i.e. the proof of ownership of the said land. The Form ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 3

no 7/12 of the F.Y. 2006-07 generated through software of the Govt. of Guj'araf dated 07.08.2010 vide Sr. NO.3274052 and abstract of form 6 which was registered on 19.03.2007 vide Registry No. 6697 (Copies are forming part of the order hence enclosed with the assessment order). It is also noticed by the undersigned that Smt. Diwaliben Chunilal, W/o. Shri Chunilal Devidas was expired on 8.10.1992. After that, Shri Chunilal D. Patel, father of the assessee, who was expired on 10.5.2004. Due to the death of his father Late Shri Chunilal D. Patel on 10.5.2004 the assessee received the said property in inheritance. If is also established from the Form - 6, submitted by the assessee that, the ownership of the said property was of among the five persons. In 7/12 the same things was reproduced. On deeply scrutinize it is seen that, there was differences in form No.6, copy 7/12 and sale deed as mentioned hereunder.

S.NO. Name Name mention in Name mentioned mentioned in copy of 7/12 i.e. in the sale form No.6 name of the deed i.e. name i.e. Names agriculturists of the seller of the persons inheritances 1 Sh.Ramanlal Sh. Chunilal Sh.Ramanlal Chunilal Devidas Chunilal 2 Sh.Chimanlal Sh.Ramanlal Sh.Chimanlal Chunilal Chunilal Chunilal 3 Sh.Baldevhai Sh.Chimanlal Sh.Baldevhai Chunilal Chunilal Chunilal 4 Sh.Ratilal Sh.Baldevhai Sh.Ratilal Chunilal Chunilal Chunilal 5 Smt. Sh.Ratilal Smt. Vimalaben Chunilal Chandrikaben Chunilal Alias Minalben Jagdishkumar 6 N.A. Smt. Diwaliben N.A. Chunilal ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 4

From the above it is crystal clear from the sale deed that, the assessee along with four other persons was the owner of the said land after the death of the father of the assessee i.e. after 10.5.2004. In short, the owner of the said land is only 5 (Five) persons according to the sale deed and therefore, total sale consideration is distribute among only in the 5 (Five) persons. Moreover, according to the section 48(iii) of the Income Tax Act the assessee is entitle for the benefit of the indexation from the date of holding the property by the assessee i.e. F.Y. 2004-05. It is also noticed that assessee has taken indexation for the year 198I i.e. from the date of acquisition of property by the previous ower i.e. not accordance with the under section 48(iii) of the Act. This said query raised during the course of hearing and detailed discussion made with the A.R. of the assessee. Thereafter the undersigned has issued show caused issued on 15.11.2010..................................

In response to the aforesaid show-cause, which was received by the assessee 18.11.2010, nobody is attended nor taken any adjournment on that date. Thereafter, one more opportunity letter dated 29.11.2010 have been issued to the assessee which was returned to the office of the undersigned with remarks "LEFT" by the postal authority. Though the earlier notices as well as the show caused notice dated 15.11.2010 which were served upon him on the address mentioned on the return of income filed by the assessee for the A.Y. under consideration. The inspector of this office has been deputed for the service of the aforesaid notice which has been served accordingly. However, the assessee vide his submission dated 02.12.2010 which have been received by this office on 02.12.2010 in which the assessee asked for the adjournment for 3 to 4 days which has been granted and the hearing is reaffixed on 08.12.2010. In response to the said notice the asses sees vide his reply dated 09.12.2010 which have been submitted in the tapal of the office of the undersigned is reproduced as under: -

ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 5

The assessee has not denied for the proposed addition as per the sec. 48(iii) on which the show caused issued. The assessee is only objected in his reply dated 09.12.2010 regarding the year of acquiring the property and for that, the assessee now submitted further evidences like Form N0.6 dated 08.11.1983 vide entry No. 2940. In the said evidence, it is mentioned that, the assessee's name with the block number i.e. 308 C (308 ) is entered vide aforesaid form from 08.11. 1983. So considering the reply of the assessee and also evidence thereon, the year which was mentioned in the show caused for indexation is 2004-05 instead of 1983- 1984. If is very much clear from the assessee's reply dated 09.12.2010 that the assessee agreed for the proposed addition in regards to sec. 48(iii). In the section 48(iii) it is clearly mentioned for the application of the indexation. In section 48(iii), it is mentioned that, "Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981 which ever later" So there should not be any controversy in this regard as in this case the assesses held the property for the first time after the registered of Form NO.6 dated 08.11.1983 vide entry No. 2940,. So the indexation would be applied from the first year of the property in which it was held by the assessee i.e. 1983-1984 and not from the 1980-81 as taken by the assessee.

Therefore, the indexation claimed by the assessee has been restricted as under :-

Working of indexation on L T.C..G is as under:

Rs.(50,0001- ***) x 551/116 = Rs.2,37,500/-

Total Amount of the property after applying the 'indexation as above Rs. 2,37,500/-

Less: Cost of indexation shown by the assessee Rs. 2,75,500/-

The excess deduction claimed by the assessee ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 6

Rs. 38,000/-

Therefore, the made an addition of ~38,000/-. on account of excess deduction claimed by the assessee as a cost of indexation and added back to the assessee's total income. Penalty proceedings u/s. 271(1)(c) r.w.s. 274 of the .I.T. Act, is initiated for furnishing inaccurate particulars of income and concealing the income thereon.

Now come to the second point that is of the ownership of the sale land. The assessee himself partly agreed in the aforesaid letter in his working given under Alternative Computation, about the query raised by the undersigned. Here, assessee has when another stands that, amount of Rs. 1,13,95,000 received by him as well as his family members out of the total sale consideration Rs 6,85,00,000/- . Now, here once again assessee tries to hide the facts of the sale deed and also the ownership of the land. As mentioned earlier and information gathered from the collector office by issuing notice u/s. 133(6) of the IT. Act through the inspector working in the office of the undersigned as well as from the sale deed it is very much cleared that, the ownership of the land is of only 5 (Five) persons. So the amount received on sale of the land is distributed among them only as per the proportionate shares. The assessee has having the share of 1/6th in the said property. So the assessee has taken plea .that, the amount received from the total sale proceeds and invested by his family members are exempted u/s. 54 of the I.T Act is not correct, as the ownership of the property is belongs only to the assessee and not of his family members. So, the distribution' of the amount, amongst the family members before the making payment of LT.C.G. is not correct as per the Income fax Act. Moreover, the assessee shown the amount of sales consideration is a/so wrong. Looking to the share of the assessee in the land, the assessee has been received of Rs. 1,14,16,667/-( 1/6th share of Rs..6,85,00,000/-) where in the reply the assessee mentioned that he alongwith his family members has received Rs. 1,13,95,000/-, ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 7

Therefore, there is no doubt about the share of the assessee in the sale property ie 1/6th share. Where the assessee has having one sixth (1/6th) share in the sale then there will not be any dispute regarding the amount received by him of Rs.1,14,16,667/- out of the total sale consideration of Rs.6,85,00,000/-. So the assessee 'trying to avoid the tax liabilities of capital gain, arise from the said sale consideration by Inserting the family members who are not actually the share holder of the said property. So the addition, regarding the amount received due to the said transaction, comes to 1,14,16,667/-, after considering the reply of the assessee and' evidences thereof is added to the total income of the assessee instead of the addition proposed in the show caused dated 15.11.2010 i.e. of Rs. 1,37,00,000/-. Penalty u/s, 271(1)(c) of the I.T. Act has been initiated separately on this ground as the assessee is frequently changed his stands. The assessee has also furnished the in accurate particulars of the income by way of either shown payment to confirming party without any basis or introducing family members and shown the payment to them out of the received sale consideration to minimize the tax liabilities on the capital gain."

4. Matter was carried before the First Appellate Authority, wherein various submissions were made on behalf of assessee, which are as under:

"As regards the issue relating to the share of the appellant in the property sold, it is submitted that the appellant had 18th share as against 1/6th assessed by the Assessing Officer. It is not disputed by the AO that the property sold was ancestral in nature it devolved to the appellant and his brothers from their forefather. Even, the extract of record of right in Form No.6 (See P.19-20) it is evident that the said property was ancestral and vide Entry 2974 dated 10.8.1982, the names of the appellant and his three brothers and their mother were entered. The share of the appellant at is as claimed on the ground that being ancestral property, the appellant's share was divided being ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 8

an HUF property of his branch and names of two sons of the appellant, i.e., Shri Jagdishbhai and Shri Shaileshbhai were entered vide Entry No.4263 dated 17.2.1994. Thus, the property under consideration was being held by the appellant along with his two sons since Feb'1994 and as such the share of the appellant came to be 18th. It will be appreciated that the said land being ancestral property, each coparcener had share in this property and upon division, the 1/6th share was divided between the appellant and his two sons in accordance with the principles of Hindu Law. Thus, the appellant had rightly claim 18th share in this property. If may be noted that both the other co-owners, Shri Jagdish Patel and Shri Shailesh Patel are assessed to fax and have filed their return of income for A.Y. 2008-09 declaring the capital gain in respect of this property. The copy of statement of income with ack Are enclosed herewith.

As regards the quantifications of capital gains, the appellant submits that AO has allowed exemption u/s 54EC in respect of investment in NHAI Capital Gains Bond for Rs. 36 lakh, however, when the entire 1 /6th share is to be taxed by AO in the hands of the appellant, the exemption claimed u/s 54 by the said two co-owners should also be allowed to the appellant. Shri Jaddish Patel has claimed investment in house property and CGS Bank Deposit, aggregating to Rs. 35,30,058 whereas Shri Shailesh Patel has claimed exemption u/s 54 and investment in NHAI totaling to Rs. 35,22,833/-. The same is evident from the computation of income enclosed. As a result, the computation of capital gains made by AO would get revised as under:

Total sale consideration Rs. 1,14,16,667

Less; Exemption u/s 54EC (Self) Rs. 36,00,000 Exemption u/s 54 (Jagdish) Rs. 30,17,000 CGS Bank (Jagdish) Rs. 7,17,000 Exemption u/s 54 (Shailesh) Rs 29,55,050 Exemption u/s 54EC (Shailesh) Rs. 7,00,000 ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 9

Rs.1,10,53,383 Rs. 3,63,284 Less: Cost of indexation as per AO Rs. 2,37,500 Rs. 1,25,784

In view of the above, the taxable capital gains worked out by AO, requires to be modified. Needless to state that the above working has been given without prejudice to the appellant's contention that his share is 18th and indexation is to be made from the year of acquisition of the previous owner.

Having considered the same, CIT(A) has granted relief to the assessee by directing Assessing Officer to treat assessee's share in property during assessment year 1/18th instead of 1/6th determined by Assessing Officer.

4. Same has been opposed on behalf of Revenue inter alia submitted that CIT(A) was not justified in directing the Assessing Officer to treat the assessee's share in property sold during year as 1/18th instead of 1/6th determined by Assessing Officer on the basis of Form 16 dated 08.11.1993. Accordingly, order of CIT(A) be set aside and that of Assessing Officer be restored. On other hand learned Authorized Representative supported the order of CIT(A).

4.1 After going through rival submissions and material on record we find that Assessing officer increased the long term capital gains computed by assessee on two counts-

ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 10

i. Assessing Officer did not allow benefit of indexation from 01-

04-1981 and assessee's share which was claimed to be 1/18th was assessed as 1/6th. Issue before us with regard to share of assessee only. Assessing Officer assessed assessee's share in property 1/6th instead of claimed by him at 1/18th. Stand of assessee has been that it was an ancestral property jointly held by other brothers and family members. Assessee submitted the details of complete family along with authorities evidencing the owners of property and assessee's share. However Assessing officer went by deed of convenience in which five persons names were mentioned as second party and next- generation co-owners were mentioned as third-party confirming the deal. On this basis alone, Assessing Officer treated assessee's share at 1/6 as against 1/18 declared by assessee. As Assessing Officer ignored following facts while reaching above conclusion -

i. in relevant 7/12 record for agricultural land with revenue officer, name of assessee along with his two sons namely- Jagdish Ramanlal and Sailesh Ramanlal were there since 21.06.2005 much before the sale of property in question. This was an evidence of ownership of assessee along with his two sons. In view of above, the share of property in the name of assessee's sons cannot be treated as assessee.

ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 11

ii. name of assessee's sons along with sons of assessee's

brothers are mentioned in conveyance deed as party on the third part confirming the deal.

iii. payment of sale consideration is separately made to each of the co-owners including assessee's sons. Assessee only received 1/18th of total consideration received on transfer.

iv. assessee's both the sons have declared the capital gain on account of transfer of this land in respect of their 1/18 share. Therefore it is clear that the share of assessee is only l/18th and remaining 1/12 is of his two sons which is duly reflected in their income tax records.

4.1 Since assessee along with his sons had 1/6 share, Assessing Officer taxed the entire share in his hand without considering the share of his sons ignoring the fact that they had received their share of payment and reflected the sale consideration in their respective returns. The land records establish the fact that assessee along with his sons were equal owners in the said property as discussed above. The land records including the assessee's sons was of 2005 which is much prior to transfer, therefore, Assessing Officer was not justified in ignoring this evidence. Moreover, assessee's sons have disclosed their income from sale of this property in their respective tax returns including same in assessee's hand would result in double taxation. Considering these facts and ITA No. 2008/Ahd/11 A.Y. 08-09 [ITO vs. Shri Ramanlal C. Pate l] Page 12

circumstances, CIT(A) was justified in directing the Assessing Officer to treat the disclosed capital gain 1/18th share. This reasoned finding CIT(A) needs no interference from our side. We uphold the same.

5. As a result, appeal filed by the Revenue is dismissed.

Pronounced in the open Court on this the 13th day of March, 2015.

Sd/- Sd/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 13/03/2015 True Copy S.K.SINHA

आदे श क ूितिल'प अमे'षत / Copy of Order Forwarded to:-

1. राजःव / Revenue

2. आवेदक / Assessee

3. संबिं धत आयकर आयु0 / Concerned CIT

4. आयकर आयु0- अपील / CIT (A)

5. 'वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड9 फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।