2019 (4) TMI 1513 - AT - Income Tax

Income of the HUF or individual assessee - Capital gain assessment - Whether ownership of the property in question was vested in the name of HUF ? - property transferred by four co-owners - estimation of value of property as on 01.04.1981 - proof that HUF as owner of the property - transfer the ownership of the property - HELD THAT - As obvious from Sale deed that the property in question was undisputedly transferred by four co-owners and not by any HUF or its Karta. Therefore, we do not find any justification to disregard the conclusion reached by the ld. authorities below that four co-owners of the property including the assessee had transferred their asset and therefore, the capital gain, whatsoever, earned of his share, shall be taxable in the hands of the assessee. No cogent evidence is placed on record to establish that the ownership of the impugned property vested with the said HUF. Once, there is complete lack of evidence of ownership of property in the name of HUF, there is no need to prove the partition of HUF as per section 171 of the IT Act and as such the plea of assessee in this regard does not hold good. The ld. AR of the assessee could not be able to discard the findings reached by the ld. CIT(A) in the impugned order. We, therefore, are not inclined to interfere with the impugned order. Accordingly, the appeal of the assessee deserves to be dismissed.

Issues Involved:
1. Ownership of the property and its assessment status.
2. Validity of treating the property as belonging to individuals versus HUF.
3. Application of Section 50C of the Income Tax Act.
4. Valuation of the property for capital gains calculation.
5. Handling of penalties under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Ownership of the Property and Its Assessment Status:
The primary issue was whether the property sold belonged to the Hindu Undivided Family (HUF) or to the individual co-owners. The assessee claimed that the property was HUF property, consistently reflected in the income tax and wealth tax records of M/s Raj Nath Seth (HUF). The Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] rejected this claim, noting that the sale deed listed the property as sold by four individuals without any reference to HUF ownership. The Tribunal upheld this view, emphasizing that the sale deed and the affidavit from the purchaser indicated individual ownership.

2. Validity of Treating the Property as Belonging to Individuals versus HUF:
The assessee argued that the property should be assessed as HUF property, as it had been in previous assessments. However, the AO and CIT(A) found no conclusive evidence supporting this claim. The Tribunal noted that the property was sold by individuals, and the sale proceeds were deposited in individual bank accounts. The Tribunal agreed with the lower authorities that the claim of HUF ownership was an afterthought and lacked credible evidence.

3. Application of Section 50C of the Income Tax Act:
Section 50C was invoked due to the discrepancy between the sale consideration declared by the assessee and the circle rate used for stamp duty purposes. The AO referred the matter to the valuation officer, who estimated the property's value at ?29,51,900/-. The Tribunal found that the AO correctly applied Section 50C and considered the valuation officer’s report to determine the capital gains.

4. Valuation of the Property for Capital Gains Calculation:
The assessee disputed the valuation, arguing that the property was on rent and the fair market value was not accurately determined. The Tribunal noted that the valuation officer had considered the rental status in the valuation. The Tribunal upheld the AO’s calculation of the capital gains based on the valuation officer’s report, which included the indexed cost of acquisition and the sale consideration.

5. Handling of Penalties under Section 271(1)(c) of the Income Tax Act:
The assessee contended that the CIT(A) did not adjudicate the grounds related to penalties under Section 271(1)(c) properly. The Tribunal found that the CIT(A) had dismissed these grounds as premature, noting that the penalty proceedings were separate from the assessment of capital gains. The Tribunal agreed with this approach, indicating that the penalty issue did not need further adjudication at this stage.

Conclusion:
The Tribunal dismissed the appeals, affirming the findings of the lower authorities that the property was owned and sold by individuals, not the HUF. The capital gains were correctly calculated based on the valuation officer’s report, and the application of Section 50C was justified. The handling of penalties under Section 271(1)(c) was deemed appropriate, with no need for further adjudication at this stage.

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