2018 (3) TMI 581 - AT - Income Tax

Benefits of exemptions u/s 54F and 54 EC - Held that - On a perusal of the entries in Andhra Bank Accounts cited by the learned Authorised Representative of the assessee, Smt. Veena Nambyar in this regard, we observe that certain amounts have been transferred from her account to that of her husband Shri Raghuram P Nambyar and others; but that the said transfers were for the purpose of construction of the residence, is not supported or corroborated by any bills to prove the assessee s claim that they were utilized for construction. No documentary evidence in this regard has been placed either before the authorities below or before us. This being the factual position i.e. that Smt. Veena Nambyar is not the owner of the said property, the authorities below have (i) rightly rejected her claims for exemption under Section 54F and 54EC and (ii) correctly brought the entire LTCG arising on sale of the said property in the hands of the assessee Shri Raghuram P Nambyar. In this factual matrix of the case, as discussed above, we are of the view that there is no merit in the claims put forth by the assessee in this regard and dismiss the same. Reopening of assessment - Held that - At the stage of initiation of proceedings it is not necessary that escapement of income need be established, but there should be formation of belief by a reasonable person based on relevant material. In our view, the Assessing Officer has succinctly set out the facts of the case and recorded the reasons leading to the formation of belief that income of the assessee liable to tax had escaped assessment for Assessment Year 2009-10, with due application of mind, following the prescribed procedure as contemplated by the Act and in consonance with the decisions of various Hon ble Courts. In this factual and legal matrix of the case as discussed above, we do not find any infirmity with the procedure adopted by the Assessing Officer in initiating proceedings under Section 147 of the Act. Interest u/s 234B and 234C - Held that - Charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon ble Apex Court in the case of Anjum Ghaswala & Others (2001 (10) TMI 4 - SUPREME Court) and we, therefore, uphold the action of the AO in charging the assessee the said interest. AO is however directed to recompute the interest chargeable under Section 234B and 234C of the Act while giving effect to this order.

Summary

Issues Involved:
1. Ownership of the property and taxability of Long Term Capital Gains (LTCG).
2. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act.
3. Entitlement to exemptions under Section 54 and 54EC of the Income Tax Act.
4. Charging of interest under Sections 234B and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Ownership of the Property and Taxability of LTCG:
The central issue was whether Smt. Veena Nambyar and her husband, Shri Raghuram P Nambyar, had equal ownership in the property at No.1088, HAL II Stage, Indiranagar, Bangalore, and whether both were entitled to claim benefits from the transfer of the property, such as exemptions under Sections 54F and 54EC of the Income Tax Act. The authorities found that the property was solely owned by Shri Raghuram P Nambyar, as evidenced by the purchase and sale deeds, which did not mention Smt. Veena Nambyar as a co-owner. The tribunal upheld this finding, stating that merely declaring rental income equally in their returns does not confer ownership on Smt. Veena Nambyar. Consequently, the entire LTCG from the sale of the property was taxable solely in the hands of Shri Raghuram P Nambyar.

2. Validity of the Reopening of Assessment:
Shri Raghuram P Nambyar contended that the conditions precedent for issuing a notice under Section 148 were absent, making the reopening of the assessment invalid. The tribunal found that the Assessing Officer had properly recorded reasons for initiating proceedings under Section 147, based on the material indicating that Shri Raghuram P Nambyar had incorrectly offered only 50% of the LTCG in his hands. The tribunal concluded that there was tangible material to form a belief that income had escaped assessment, and the reopening of the assessment was valid.

3. Entitlement to Exemptions under Sections 54 and 54EC:
Smt. Veena Nambyar claimed exemptions under Sections 54 and 54EC, arguing that she had equal ownership in the property. The tribunal rejected this claim, noting that she was not a legal owner of the property as per the purchase and sale deeds. The tribunal also dismissed the argument that her contributions to the purchase and construction of the property conferred ownership, as there was no documentary evidence to support these claims. The tribunal upheld the authorities' decision to deny her the exemptions and to tax the entire LTCG in the hands of Shri Raghuram P Nambyar.

4. Charging of Interest under Sections 234B and 234C:
Shri Raghuram P Nambyar contested the charging of interest under Sections 234B and 234C. The tribunal upheld the charging of interest, citing the Supreme Court's decision in Anjum Ghaswala & Others, which held that the charging of interest is consequential and mandatory. The Assessing Officer was directed to recompute the interest while giving effect to the tribunal's order.

Conclusion:
The appeals of both assessees for the Assessment Year 2009-10 were dismissed. The tribunal concluded that the property was solely owned by Shri Raghuram P Nambyar, and the entire LTCG from its sale was taxable in his hands. The reopening of the assessment was valid, and the exemptions claimed by Smt. Veena Nambyar were rightly denied. The charging of interest under Sections 234B and 234C was upheld.