2015 (9) TMI 1690 - AT - Income Tax

Long Term Capital Gain - Year of assessment - ancestral property - property has been jointly held by all the family members - HUF of the assessee has not filed return of income - assessee along with other co-owners has sold an ancestral property purchased by his Grand-father - partial share of the assessee in the sale consideration - HELD THAT - Admittedly, the conveyance deed was executed on 31.3.2008 and the same was registered under the Registration Act on 1.7.2008. On a perusal of the conveyance deed, we notice that the possession of the property was also given to the buyers on 31.3.2008 and the assessee along with other co-owners have received the entire consideration before 31.3.2008. Hence, we agree with the contentions of the assessee that the impugned property has been transferred during the year relevant to the assessment year 2008-09 and hence AO was not justified in assessing the same in AY 2009-10. As A.R submitted that the registration of deed on 1.7.2008 was only a formality and upon the registration of the deed, the conveyance would date back to the date of execution of the deed we find support to the contentions of the assessee in the decision rendered in the case of M. Shyamala Rao 1998 (4) TMI 113 - ANDHRA PRADESH HIGH COURT as observed that the registration of the conveyance deed relates back to the date on which the agreement for sale was executed in favour of the buyer by the owner. In view of the above, the capital gain, if any, is assessable in AY 2008-09 only. Whether the capital gain can be assessed in the hands of the assessee herein in his individual capacity - assessee has contended before the AO that the property belongs to the HUF and what he has received is only a share from the HUF - HELD THAT - We notice that the tax authorities have rejected the claim on the reasoning that the HUF has not filed return of income and hence the capital gain should be assessed in the individual hands. In our view, the approach of the tax authorities cannot be uphold in view of the decision in the case of Ch.ATCHAIAH 1995 (12) TMI 1 - SUPREME COURT wherein held ITO can, and he must, tax the right person and the right person alone. By right person, we mean the person who is liable to be taxed, according to law, with respect to a particular income. Merely because the HUF of the assessee has not filed return of income, the assessing officer cannot assess the capital gain in the hands of the assessee in his Individual status. Since the property has been jointly held by all the family members, the same cannot be said to belong to the assessee in his individual status. In fact, the conveyance deed wasl also executed jointly by all the co-owners. AO was not correct in law in assessing the share of the assessee as capital gain in the individual status. - Decided in favour of assessee.

Summary

Issues:
Assessment of Long Term Capital Gain in individual capacity, Year of assessment, Cost of acquisition determination, Assessment in HUF vs. individual capacity.

Analysis:
1. Year of Assessment: The Appellate Tribunal considered the date of execution of the conveyance deed, possession of the property, and completion of registration formalities to determine the year of assessment for capital gains. It was held that the property was transferred during the year relevant to the assessment year 2008-09, and thus, the assessing officer erred in assessing it in AY 2009-10.

2. Assessment in HUF vs. Individual Capacity: The Tribunal analyzed the claim that the property belonged to the HUF and the assessee received only a share from the HUF. The tax authorities had rejected this claim due to the HUF not filing a return of income. However, citing the decision in Ch. Atchian case, the Tribunal emphasized that the assessing officer must tax the right person liable according to the law. As the property was jointly held by family members and the conveyance deed was executed jointly, the Tribunal concluded that the capital gain should not be assessed in the individual status of the assessee.

3. Cost of Acquisition Determination: The Tribunal addressed the issue of determining the cost of acquisition for the capital gain calculation. While the AO had taken the cost as NIL due to inheritance, the CIT(A) estimated the market value as on 1.4.1981 at Rs. 1 Lakh. The Tribunal found no basis for this estimation and directed the assessing officer to delete the assessment of capital gains made in the hands of the assessee.

4. Conclusion: Considering the above discussions, the Tribunal set aside the order of the CIT(A) and directed the assessing officer to delete the assessment of capital gains in the hands of the assessee. The appeal of the assessee was allowed, and the judgment was pronounced on 2nd Sept 2015.