2021 (4) TMI 209 - AT - Income Tax

Reopening of assessment u/s 147 - undisclosed capital gain - AIR information that assessee has sold a piece of land and the income is chargeable to the extent of capital gain has escaped from assessment - sale of said land assessee along with other co-owners received consideration - as per purchase deed, share of both the co-owners was 50% but in the transfer deed/sale deed assessee has shown consideration of 25% along with other co-owner - The assessee calculated capital gain on 1/4th of consideration - HELD THAT - CIT(A) confirmed the action of AO by taking view that when no specific share was mentioned in the purchase deed, the share of co-owners are equal. On the death of one of the co-owners, three legal heirs became owners of the property along with surviving co-owner with their cumulative share which cannot be more than 50%. CIT(A) further held that the total income as defined in section 2(45) of the Act is to be computed as per provision of the Act. The income is taxable in the hand of the person to whom it belongs. A literal interpretation of the provisions leads to the conclusion that a right person is liable to pay tax on his income and no option is available to tax income in the hands of person other than one in whose hands it is taxable. There is no ambiguity in sect ion 2(45) of the Act that only a right person is liable to pay tax on his income and no option is available to tax income in the hand of person other than whose hands it is taxable. The Income Tax is leviable only on the real income and not on any hypothetical or on presuming income. The appellant before the Lower Authorities has clearly by placing documentary evidence in the form of sale deed, copy of sale consideration and by confirmation by co-owner has proved that assessee has received only 25% of the sale consideration. In our view, the AO as well as the ld. CIT(A) wrongly presumed that in absence of the specific share in the purchase deed the assessee was having 50% share. Income Tax is leviable only on the real income which the assessee has proved beyond doubt that assessee has received only 25% of the sale consideration, thus, the grounds of appeal raised by assessee are allowed.

Summary

Issues:
1. Determination of ownership share in property for tax assessment.
2. Interpretation of legal provisions regarding income tax liability on property sale.

Analysis:
1. The appeal concerned the ownership share in a property sold by the assessee, where the Assessing Officer (AO) determined the share based on an assumption due to lack of clarity in the purchase deed. The AO calculated capital gain considering equal 50% share for the assessee and legal heirs of the co-owner, leading to a tax assessment under section 144 r.w.s. 147 of the Act.

2. The appellant contended that only 1/4th of the sale consideration was received, supported by documentary evidence including the sale deed, bank passbook, and affidavits from co-owners confirming the same. Despite this, both the AO and the Commissioner of Income Tax (Appeals) upheld the 50% share assumption due to the absence of specific share mention in the purchase deed.

3. The Tribunal analyzed the case, emphasizing that income tax is leviable only on the actual income received by the assessee. Referring to section 2(45) of the Act, it was clarified that tax liability is on the rightful owner of the income, and there is no provision to tax income in the hands of another person. The Tribunal found the assessee's evidence conclusive in proving the receipt of only 25% of the sale consideration, contrary to the assumed 50% share.

4. Ultimately, the Tribunal allowed the appeal, ruling in favor of the assessee based on the established evidence of receiving only 25% of the sale consideration. The judgment highlighted the importance of determining tax liability based on actual income received, rejecting presumptions or hypothetical assessments. The decision was pronounced on 23.03.2021, granting relief to the appellant in the tax assessment matter.