2017 (2) TMI 794 - AT - Income Tax

Capital gain - rights of the assessee as well as other legal heirs - assessmnet as legal heir - individual share in property - receipt of earnest money - Held that - The assessee filed the original return in which she had shown the transaction of property under question but later on filed the revised return and try to apprise the Revenue Authorities that she is not a sole owner of the said property and having discussed the details of the legal heirs and other relevant information relating to her deceased husband, it was incumbent upon the Assessing Officer to bring on record all the legal heirs of to assess the impugned capital gain, rather than restricting it in the hands of Mrs. Manjeet Kaur. We have minutely gone through the documents as it reflects from the facts that the assessee have received the earnest money from the Punjab Co-operative House Building Society, Mohali, but there is no document which reflects that earnest money have been distributed among the legal heirs or not even otherwise this required to be invested that whether the assessee had shown herself as sole and exclusive owner of the properties under consideration and/or having any testamentary documents to claim exclusive ownership with rights to take care, deal and disposed off the property under question. We feel it appropriate that the ld. CIT would have taken into consideration of the actual amount received as an earnest money for taxation purposes. Finally as the instant case requires elaborate discussion with regard to the rights of the assessee as well as other legal heirs qua entitlement /rights/ obligation/liabilities of individual and as the order passed by the ld. CIT is erroneous to the extent that he has considered the complete amount including unpaid and unrealized also as notional capital gain, therefore, in our considered opinion, this is fit case to be remanded to the file of the ld. Assessing Officer for deciding afresh while considering the documents pertaining to the sale deed, agreement, society documents, relinquishment deeds etc. and other documents submitted by the other legal heir and/or claim of the Assessee as well the applicability of the same in the instant case and also while considering the Sec.159 and 168 of I.T. Act and Hindu Succession Act etc to which the Assessee and legal heirs are subjected. - Decided n favour of assessee for statistical purposes.

Issues Involved:
1. Legality of assessing the nominee as the sole legal heir.
2. Taxation of notional capital gain.
3. Reading the Joint Development Agreement (JDA) in totality.
4. Overlooking judicial authorities.
5. Exemption under Section 54F.
6. Taxation of capital gain in the hands of the society.
7. Principle of mutuality in transactions.
8. Charging of interest under Sections 234A and 234B.
9. Initiation of penalty under Section 271(1)(c).
10. Overall legality and factual correctness of the order.

Issue-wise Detailed Analysis:

1. Legality of Assessing the Nominee as the Sole Legal Heir:
The appellant argued that the deceased's nominee could not be assessed as the sole legal heir, excluding other legal heirs. The tribunal agreed, emphasizing that under Sections 159 and 168 of the Income Tax Act and the Hindu Succession Act, all legal heirs are entitled to their respective shares. The Assessing Officer (AO) should have included all legal heirs in the assessment.

2. Taxation of Notional Capital Gain:
The appellant contended that the CIT(A) erred in confirming the taxation of notional capital gain by considering the transfer of land on the date of the JDA execution. The tribunal noted that the CIT(A) failed to consider the actual receipt of the sale consideration and the conditions of the JDA. The tribunal referenced the Punjab & Haryana High Court's judgment in C.S. Atwal vs. CIT, which held that no capital gain tax is applicable if the mandatory requirements of Section 53A of the Transfer of Property Act are not met.

3. Reading the Joint Development Agreement (JDA) in Totality:
The appellant argued that the JDA should be read in its entirety to determine the accrual of capital gain. The tribunal found that the CIT(A) did not properly consider the JDA's full context, leading to an erroneous conclusion about the transfer date and capital gain accrual.

4. Overlooking Judicial Authorities:
The appellant claimed that the CIT(A) overlooked various judicial authorities. The tribunal agreed, noting that the CIT(A) failed to consider relevant case laws and judicial precedents that could have influenced the decision.

5. Exemption under Section 54F:
The appellant argued that the exemption under Section 54F should have been allowed. The tribunal noted that the appellant failed to provide necessary documentary evidence to support the claim. The CIT(A) was justified in rejecting the exemption due to the lack of proof of compliance with Section 54F requirements.

6. Taxation of Capital Gain in the Hands of the Society:
The appellant contended that the capital gain should be taxed in the hands of the society, not the individual member. The tribunal found that this argument was not sufficiently substantiated and upheld the CIT(A)'s decision.

7. Principle of Mutuality in Transactions:
The appellant argued that the principle of mutuality should apply, exempting the transaction from taxation. The tribunal found that the CIT(A) rightly rejected this claim, as the transactions did not meet the mutuality principle criteria.

8. Charging of Interest under Sections 234A and 234B:
The appellant challenged the interest charged under Sections 234A and 234B. The tribunal noted that this issue is consequential and does not require separate comments.

9. Initiation of Penalty under Section 271(1)(c):
The appellant argued that the initiation of penalty under Section 271(1)(c) was incorrect. The tribunal found that the CIT(A) was justified in initiating penalty proceedings due to the appellant's failure to disclose accurate particulars of income.

10. Overall Legality and Factual Correctness of the Order:
The appellant claimed that the order was against the law and facts. The tribunal found that the CIT(A)'s order was erroneous in considering the complete amount, including unpaid and unrealized amounts, as notional capital gain. The tribunal remanded the case to the AO for fresh consideration, taking into account all relevant documents, legal provisions, and judicial precedents.

Conclusion:
The tribunal allowed the appeal for statistical purposes, remanding the case to the AO for a fresh decision, ensuring all legal heirs are considered, and the actual receipt of sale consideration and compliance with legal provisions are properly evaluated.

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