2016 (1) TMI 460 - HC - Income Tax

Revision u/s 263 - as per CIT(A) entire capital gain out of sale is required to be assessed in the hands of the assessee - incorrect assumption of facts by AO that five other claimed co-owners had legal rights in the property and these legal rights were transferred by the subject sale of flat, renders order of AO as erroneous - ITAT quashed CIT(A) revision orders - Held that - All the co-owners have signed on the sale deed. All these co-owners had been showing rental income arising out of above flats in their respective returns of income and share in above property had been shown by the co-owners in respective returns of wealth. From this, it has been proved beyond doubt that the assessee is only 1/6th share holder in the sale consideration which has been property taxed in the hands of the assessee to that extent. It was found for a fact that in the hands of all other co-owners 1/6th of the profit from sale of this house have been accepted by the same A.O. and the ld. CIT has not revised their accepted assessment orders. It is also found that on the basis of very same facts the A.O. has taken possible which has to be accepted as correct and, therefore, we do not find any error in this finding of the A.O. We are not in agreement with the ld. CIT s finding that entire capital gain out of sale is required to be assessed in the hands of the assessee alone - Decided in favour of assessee

Summary

Issues:
1. Interpretation of Section 260A of the Income Tax Act, 1961 regarding the appeal against the order of the Income Tax Appellate Tribunal.
2. Determination of whether the assessment order was erroneous and prejudicial to the interest of revenue.
3. Assessment of ownership and tax liability on the sale of a property jointly owned by multiple individuals.

Analysis:

Issue 1:
The appeal was filed by the revenue under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal. The substantial questions of law raised included the correctness of the Tribunal's decision regarding the order being erroneous and prejudicial to the revenue's interest.

Issue 2:
The assessment order passed by the Assessing Officer under Section 143(3) of the Act was challenged as erroneous and prejudicial to revenue by the Commissioner of Income Tax. The Commissioner set aside the order and directed a fresh assessment, which was later restored by the Tribunal. The Tribunal found that the co-owners had beneficial interests in the property, and the capital gains were properly taxed in the hands of the assessee. The Tribunal's decision was upheld, dismissing the appeal by the revenue.

Issue 3:
The case involved the sale of a property jointly owned by the assessee with other family members and HUF. The assessee claimed only a 1/6th share in the property, which was accepted by the Assessing Officer. The Tribunal found that all co-owners had contributed to the property and had been declaring rental income and wealth share accordingly. The Tribunal concluded that the capital gains were correctly assessed in the hands of the assessee, and the CIT's revisional order was cancelled.

The Tribunal's decision was deemed reasonable and justified, leading to the dismissal of the appeal. The delay in refiling the appeal was also addressed, with the application for condonation of delay disposed of accordingly.