2009 (12) TMI 111 - HC - Income Tax

Offences under sections 276AB read with 269UC and 269UL(2) purchase of immovable property by central government individual agreement entered into by husband and wife in respect of their individual shares - In the considered view the immovable property dealt with by accused Nos. 1 and 2 have been purchased by them under two different sale deeds and the same has been shown in their respective income-tax returns. Here, individual agreements have been entered into by accused Nos. 1 and 2 with accused No. 3 in respect of their individual shares. Therefore, the property that has been dealt with under the sale deed executed by accused Nos. 1 and 2 is not a single unit but two different undivided shares Held that there is no violation of section 269UC

Summary

Issues Involved:
1. Alleged violation of Section 269UC of the Income-tax Act, 1961.
2. Alleged violation of Section 269UL(2) of the Income-tax Act, 1961.
3. Legal obligation to file Form No. 37-I under Rule 48L of the Income-tax Rules, 1962.
4. Misconception regarding ownership and sale of property as a single unit.

Detailed Analysis:

Issue 1: Alleged violation of Section 269UC of the Income-tax Act, 1961

The petitioner, accused in EOCC No. 177 of 2005, sought to quash proceedings for alleged violations of Section 269UC of the Income-tax Act, 1961. The respondent's complaint alleged that the transfer of immovable property valued over Rs. 25 lakhs was executed without adhering to the legal obligation of filing Form No. 37-I. The petitioner argued that since his property was sold for Rs. 15 lakhs through a separate registered sale deed, there was no violation of Section 269UC. The court noted that the complaint was based on the assumption that the property was a single unit valued at Rs. 30 lakhs, but it was actually two separate undivided shares sold by two different individuals.

Issue 2: Alleged violation of Section 269UL(2) of the Income-tax Act, 1961

The complaint also alleged that the transfer of property was done without obtaining a no-objection certificate from the Appropriate Authority, as required under Section 269UL(2). The petitioner contended that this provision was not applicable since the transaction value was below Rs. 25 lakhs. The court found that the individual undivided shares were dealt with separately, and thus, the requirement for a no-objection certificate did not apply.

Issue 3: Legal obligation to file Form No. 37-I under Rule 48L of the Income-tax Rules, 1962

The respondent argued that both transferors and the transferee had a legal obligation to file Form No. 37-I within the statutory time limit. The petitioner maintained that the property was sold as separate units valued below the threshold, and therefore, the obligation to file Form No. 37-I was not triggered. The court observed that the prosecution's case was based on the erroneous assumption that the property was a single unit, whereas it was actually two distinct transactions.

Issue 4: Misconception regarding ownership and sale of property as a single unit

The court noted inconsistencies in the complaint regarding the ownership and description of the property. While the complaint suggested that the accused were owners of the entire property, other parts of the complaint acknowledged that the accused owned and sold undivided shares. The court emphasized that the sale of individual undivided shares by two different legal entities (the accused) could not be clubbed together to form a single unit for the purposes of the Income-tax Act. The court referenced the Supreme Court decision in Appropriate Authority v. Smt. Varshaben Bharatbhai Shah [2001] 248 ITR 342, which dealt with co-owners transferring property rights. However, the court found that the facts of the present case were different, as the property was not a single unit but two separate undivided shares.

Conclusion:

The court concluded that the complaint proceeded on a misconception that the property was a single unit, whereas it was actually two separate undivided shares sold by different individuals. The legal principle from the Supreme Court decision was not applicable to the facts of this case. Therefore, the criminal original petition was allowed, and the complaint in EOCC No. 117 of 2005 was quashed.