2018 (4) TMI 332 - AT - Income Tax

Reopening of assessment - addition of unexplained deposits in the bank account in the hands of the sons and daughter-in-law - capital gain on sale of land - sharing of the sale consideration among all the legal heirs of late Shri Bhawara @ Bhura - cost of acquisition determination - Held that - We find that the relinquishment deed was executed as per their family arrangement and mutual understanding so that the family of the daughters of late Shri Bhawara @ Bhura and Smt. Dhapu Devi Meena would not claim the amount in future and therefore, the sole purpose of executing relinquishment deed was to avoid the future dispute/litigation in respect of the share in the land. Thus, the relinquishment deed made it possible to share and distribute the sale consideration among the mother and sons excluding the daughters. Since, one of the sons expired therefore, the wife of the son is representing as legal heirs of the appeal. Accordingly, all sons and mother have shared the sale consideration received on transfer of the land in question and the deposit in bank account of the assessees is from amount received being represented as sale consideration. Hence, we find that the non acceptance of the explanation of source as well as the sharing of the sale consideration by these assessee by the authorities below is not proper and justified. Accordingly, in view of the above facts and circumstances of the case we admit the additional amount raised by the assessee. These 7 assessee mother, sons and daughter-in-law have shared the sale consideration in equal share therefore, the matter requires afresh consideration for assessing the capital gain in equal shares in the hands of the 7 assessee out of which 5 assessee are before us. Accordingly, we set aside these matters to the record of the Assessing Officer for fresh adjudication of the same by consideration the capital gain in the hands of these assessee in equal shares as well as considering the other claims of the assessee as per law. The other issues in these appeals are also accordingly stand set aside to the record of the AO. Since, the AO is required to consider the cost of acquisition as per fair market value as on 01.04.1981 therefore all other claim of index cost and other deductions are also required to be considered by the AO. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Assessment of capital gain on sale of agricultural land and deposits in bank accounts, Cost of acquisition determination, Sharing of sale consideration among legal heirs, Deduction under section 54F for construction of new residential house.

Analysis:
1. Assessment of Capital Gain: The AO reopened the assessment to assess capital gain from the sale of agricultural land and deposits in bank accounts. The AO assessed the capital gain and deposits in the hands of the widow and sons/daughter-in-law. The CIT(A) confirmed the capital gain and deposits in the hands of the widow, rejecting the contention of equal shares among legal heirs. However, the Tribunal found merit in the additional grounds raised by the assessees. The cost of acquisition was wrongly taken as nil, contrary to provisions. The Tribunal held that the capital gain should be assessed among all legal heirs who shared the sale consideration, not just the widow.

2. Cost of Acquisition Determination: The Tribunal noted that the AO failed to consider the fair market value of the land as on 01.04.1981 for determining the cost of acquisition. The Tribunal emphasized the importance of considering relevant provisions of the Income Tax Act and fair market price for accurate cost determination. The additional grounds raised by the assessees regarding the cost of acquisition were admitted and upheld.

3. Sharing of Sale Consideration: The assessees contended that the sale consideration should be shared among all legal heirs, not just the widow. The Tribunal observed that a relinquishment deed was executed by sons and daughters in favor of the widow to facilitate the sale. As the sale consideration was shared among the mother and sons, the capital gain had to be assessed in the hands of all legal heirs who inherited the land and shared the sale proceeds equally. The Tribunal found the explanation of the source of deposits in bank accounts reasonable, as they were from the sale consideration.

4. Deduction under Section 54F: The assessees also raised the issue of deduction under section 54F for construction of a new residential house. The Tribunal set aside the matters to the AO for fresh adjudication, instructing consideration of capital gain in equal shares among the legal heirs and other claims of the assessees, including deductions under section 54F. The AO was directed to consider the fair market value for cost of acquisition and other deductions as per law.

In conclusion, the Tribunal allowed all appeals for statistical purposes, setting aside the matters to the AO for fresh adjudication in accordance with the directions provided regarding the assessment of capital gain, determination of cost of acquisition, sharing of sale consideration among legal heirs, and consideration of deductions under section 54F.