Satish Deshpande, Mumbai vs Assessee

Dr. Satish Deshpande, 17-207, Ramkrishna Nagar, S. V. Road, Khar (W), Mumbai - 400 005. PAN : AJMPD4320L .... Appellant

Vs.

Income Tax Officer, Ward- 1(2), Nashik. .... Respondent

Assessee by : Mr. Nikhil Pathak / Suhas Bora Department by : Mr. Santosh Kumar Date of hearing : 04-02-2015 Date of pronouncement : 30-03-2015

ORDER

PER G. S. PANNU, AM

The captioned appeal by the assessee is directed against the order of

the Commissioner of Income Tax (Appeals)-II, Nashik dated 13.01.2012

which, in turn, has arisen from an order dated 31.12.2009 passed by the

Assessing Officer u/s 143(3) of the Income-tax Act, 1961 (in short "the Act")

pertaining to the assessment year 2006-07.

2. In this appeal, assessee has raised the following Grounds of Appeal :-

"1. On the facts and in the circumstances of the case and in law the CIT (Appeals) erred in confirming the assessment of capital gain made by the Assessing Officer, in the appellant's individual hands. The same is not assessable in the appellant's hands and may be deleted.

2. On the facts and in the circumstances of the case and in law the CIT (Appeals) erred in confirming the Assessing Officer assessing the entire capital gain in the hands of the appellant individually. The appellant was not the sole owner of the property, and there were 10 legal heirs among whom the sale proceeds were distributed. This stance is contrary to the facts of the case, and not as per the applicable provisions of the Act.

2 ITA No.455/PN/2012 3. On the facts and in the circumstances of the case and in law the CIT (Appeals) erred in confirming the Assessing Officer assessing the entire capital gain in the hands of the appellant, when as per 7/12 extracts, the ownership vests in the three members.

4. On the facts and in the circumstances of the case and in law the CIT (Appeals) erred in confirming and the learned Assessing Officer erred in estimating the market value of the land as at Rs.3,66,100/-. The appellant prays that the same may be enhanced and the addition reduced to that extent. The appellant craves leave to add, alter, modify any or all grounds of appeal."

3. At the time of hearing, the Ld. Representative for the assessee

submitted that in so far as the Ground of Appeal Nos.2 and 4 are concerned,

the appellant does not wish to press the same. Accordingly, the Ground of

Appeal No.2 and 4 are dismissed as "Not Pressed".

4. In the residual Ground of Appeal, the dispute relates to income by way

of capital gains of Rs.18,41,483/- assessed in the hands of the assessee with

respect to the sale of property at Mhasarul, Tal. Nashik admeasuring 5.50

acres. It was found that assessee sold the said agricultural land in terms of a

Sale Deed dated 24.12.2005 for a total consideration of Rs.7,00,000/-.

However, by applying section 50C of the Act, the Assessing Officer treated the

value for the stamp valuation purposes as the full value of consideration for

computing capital gains, such value being Rs.36,61,000/-. Assessee carried

the matter in appeal before the CIT(A) challenging the assessment of capital

gains on various Grounds. The plea of the assessee was that it was an

ancestral property which was originally owned by one Shri Trimbak Hari

Deshpande and on his death on 15.05.1937, it was transferred by inheritance

to his 4 sons and 3 daughters. However, by mutual understanding the

property was transmitted in the name of one of the sons only, Shri Vinayak

Trimbak Deshpande (being the father of the assessee). After the death of Shri

Vinayak Trimbak Deshpande on 16.03.1993, it was claimed by the assessee

that the said property was inherited by assessee along with his brother, Shri

Ajit V. Deshpande and sister, Sau. Asha Narhar Dani. Assessee submitted 3 ITA No.455/PN/2012

that his brother and sister prepared a General Power of Attorney (GPA) and

transferred the rights to the assessee. In this background, assessee pointed

out that though the property was sold by him for Rs.7,00,000/-, but after

deducting expenses on sale the balance consideration was remitted to all the

9 legal heirs, whereby assessee received only Rs.1,50,000/-. Assessee also

enclosed a confirmation from the other set of legal heirs to justify such

distribution of the sale consideration. On this basis, it was canvassed that the

entire capital gains was not assessable in the hands of the assessee. The

CIT(A) has rejected the aforesaid plea of the assessee and instead confirmed

the action of the Assessing Officer in treating capital gain of Rs.18,41,483/- as

assessable in the hands of the assessee alone. The following discussion in

the impugned order of the CIT(A) is relevant :-

"6. I have carefully considered the assessment order, submissions of the appellant and the remand report. A perusal of GPA dt.24/12/2005 given to the appellant by his brother Shri. Ajit Vinayak Deshpande and sister Smt. Asha Narhar Dani in regard to the land in question (2.20 hq at Mhasarul, Tal.Nashik) reveals that the appellant was the sole beneficiary of the sale proceeds of the above referred land. He had shown the sale proceeds of Rs.7 lac in his balance sheet also. He, however, did not offer capital gain tax in the return of income filed by him on 22/05/2006. During the assessment proceedings he did not produce the confirmations of the various persons to whom he has claimed to have given part of the sale proceeds. The appellant has also not filed any comments on the remand report of the A.O. In view of the above the confirmations filed by the appellant before me cannot be admissible u/r 46A of the IT Rules. All these confirmations seem to have been obtained after the finalization of the assessment order on 29/12/2009 but before filing appeal on 03/02/2010 (some of the confirmations are dated 18/02/2010, 04/02/2010, 11/02/2010). In view of the above, appellant's claim that he recovered only Rs.1.5 lac is not sustainable and hence rejected. The AO has rightly invoked the provisions of sec 50C to compute capital gain. His calculation of capital gains of Rs.18,41,483/- does not require any interference. The same is confirmed."

5. Against the aforesaid, the Ld. Representative for the assessee has

raised a singular plea before us. According to the appellant, only 1/3rd of the

share in the capital gain on sale of property is assessable in the hands of the

assessee as the property was inherited by assessee along with his brother

and sister in equal proportion. It has also been canvassed that the General 4 ITA No.455/PN/2012

Power of Attorney dated 24.12.2005 executed by the assessee's brother and

sister only empowers the assessee to finalize the sale transaction in respect of

the above property but it does not give him a right over the property more than

his share inherited from his father i.e. 1/3rd. The Ld. Representative also

pointed out that clause (8) of the Sale Deed dated 24.12.2005 executed by the

assessee also makes a mention that the consideration of Rs.7,00,000/- paid

by the purchaser to assessee included the share relating to the other co-

owners of the property, namely, assessee's brother, Shri Ajit V. Deshpande

and assessee's sister, Sau. Asha Narhar Dani. The Ld. Representative

pointed out that the aforesaid position was also canvassed by the assessee

before the CIT(A) but there is no finding on this aspect though all the aforesaid

material was on record before the lower authorities.

6. On the other hand, the Ld. Departmental Representative appearing for

the Revenue has referred to the discussion made by the CIT(A) in para 6 of

his order, which we have already reproduced in the earlier part of this order

and is not being repeated again for the sake of brevity. In nutshell, the Ld.

Departmental Representative has referred to the observation of the CIT(A)

that the General Power of Attorney dated 24.12.2005 vested the assessee as

the sole beneficiary of the sale proceeds of the land in question.

7. We have carefully considered the rival submissions. Ostensibly,

assessee was initially aggrieved with the action of the Assessing Officer in

assessing a sum of Rs.18,41,483/- as capital gain on various counts. So

however, before us the only grievance projected is that the only 1/3rd of the

capital gain be assessed in the hands of the assessee, being his share in the

property inherited from his father, Shri Vinayak Trimbak Deshpande. In this

context, we have perused the Sale Deed dated 24.12.2005 executed by the

assessee and the other two co-owners whereby the impugned property has 5 ITA No.455/PN/2012

been sold for a total consideration of Rs.7,00,000/-. The recital of the Sale

Deed itself makes it clear that assessee executed the Sale Deed on his own

behalf and as a General Power of Attorney holder on behalf of other two co-

owners, namely, Shri Ajit V. Deshpande and Sau. Asha Narhar Dani, his

brother and sister. Clause (8) of the Deed also makes is clear that the total

consideration of Rs.7,00,000/- was paid by the purchaser to the assessee

which included the share of consideration of the other two executants, i.e.

assessee's brother and sister. The aforesaid material on record clearly

suggests that capital gain on sale of the aforesaid property can be assessed in

the hands of the assessee only to the extent of his share being 1/3rd share.

The CIT(A), on the other hand, has stated that the General Power of Attorney

dated 24.12.2005 given to the assessee by his brother and sister with regard

to the impugned amount shows that assessee became the sole beneficiary of

the sale proceeds of the land. Therefore, as per the CIT(A), amount has been

rightly assessed by the Assessing Officer. In our considered opinion, having

regard to the contents of the General Power of Attorney dated 24.12.2005, a

copy of which is on record, the aforesaid finding of the CIT(A) is untenable.

The General Power of Attorney has been executed by the assessee's brother

and sister in his favour only to finalize the sale transaction with Shri Sunil

Kisanrao Bagul, the purchaser of the property in question. In view of the

aforesaid fact-position, which emerges from the material on record, we

therefore find ample force in assessee's plea that capital gain be assessed in

his hands to the extent of his share in the property, being 1/3rd share. Thus,

we set-aside the impugned order of the CIT(A) and direct the Assessing

Officer to re-work the capital gains in the hands of the assessee in accordance

with the aforesaid finding. Needless to say, the Assessing Officer shall allow

the assessee a reasonable opportunity of being beard before quantifying the

capital gains assessable in the hands of the assessee as per law. 6 ITA No.455/PN/2012

8. In the result, the appeal of the assessee is partly allowed.

Order pronounced on 30 th March, 2015.

Sd/- Sd/- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 30 th March, 2015. Sujeet

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT(A)-II, Nashik; 4) The CIT-II, Nashik; 5) The DR "B" Bench, I.T.A.T., Pune; 6) Guard File. By Order //True Copy// Assistant Registrar I.T.A.T., Pune