2022 (8) TMI 379 - AT - Income Tax

Revision u/s 263 - Capital gain on property of the respective HUFs or respective individual assessee's - Assessee not entitled to exemption u/s. 54F as allowed by the AO - whether the plot/s of land (capital asset) sold by the assessees belonged thereto, as claimed by the Revenue, or to the HUFs of which the respective assessees are members (as spouse of their husbands), as claimed by the assessee? - CIT(A) has held it to be the property of the respective HUFs, so that no capital gain arises and, consequently, is assessable in the hands of the two individual assessees, being the wives of the respective kartas, who are brothers - HELD THAT - There is nothing to indicate that the agricultural land was held by BMB as a family property. In fact, the division of land, and which admittedly included his self-acquired land as well, is stated to be divided amongst three parties to avoid any family dispute. There is nothing to show that the family was living jointly, i.e., as a family. There is in fact no reference to any other property in the document, and also nothing to show that it was the only property held by the family. There is in fact no whisper of the Hindu Undivided Family (HUF) (or even family) in the said partition deed. There is again nothing to show that the income from the said property (or any other income) was being returned as family income, i.e., either of the larger family, or even the smaller families of the two sons, i.e., post partition. There is nothing to show of any procedure in its respect having been followed, and at any stage; nay, of the property or income therefrom being returned as family property, either before or after the partition, which in that case would be partial. Was it followed by any subsequent partition, as indeed the share retained by father, which would in that case be of the larger HUF, may have been partitioned, also dividing any other assets of the erstwhile larger HUF, complying with s. 171, to which reference, drawing a blank, was made during hearing. That is, there is no evidence on record as to either the existence of the larger HUF or its subsequent partition. As explained by the Apex Court in CIT v. Seth Govindram Sugar Mills 1965 (3) TMI 24 - SUPREME COURT coparcenership is a necessary qualification for the managership of a joint family. A Hindu female is not a coparcener and has no legal qualification to become the manager (karta) of a joint Hindu family. The foregoing is stated to merely clarify the legal position even as there is, as afore-stated, nothing on record to exhibit that the property under reference is the joint family property. Merely because land is divided, with a view to avoid family dispute, by the father between himself and his two sons, would not by itself make it a family property. No case, either on facts or in law is made out. To us, it is no more than a father dividing his property, self-acquired as well as that bequeathed to him by his father, between his two sons, also retaining a part for himself (5.45 acres). In short, the claim is without basis and wholly unproved; in fact, fatuous. All that the assessee was required to produce was the sale deed, the primary document evidencing the transfer, and which would itself bear out the owner of the property, as well as the status in which the assessees, where so, had executed the sale deed. As afore-stated, the property is, as we see it, the individual property of the two brothers, S1 S2. This also explains as to why SB, the widow and legal heir of S1, executed the sale deed and, accordingly, returned the capital gain per her return, and also why, JB, despite notice u/s. 148(1) to her, did not. The assessee s claim in this respect is accordingly dismissed. Deduction u/ss. 54B 54F - claim u/s.54-B, the same has been denied on the ground that the capital asset sold a residential plot/s and not agricultural land - As the assessee having sold 19 (18) residential plots to various persons, the list of which forms part of the assessment order dated 03/07/2013. That is, an admitted fact, to the legal implicatons of which we shall revert later. As regards the claim u/s. 54-F, the same is again not admissible inasmuch as what has been purchased is not a residential plot, but agricultural land, and which also explains the claim for deduction u/s. 54-B by SB per her return filed on 10/04/2013 in response to notice u/s. 148(1) dated 21/11/2012. This is, again, not denied at any stage, including before us, even as a bald claim/denial, without material in support, would be to no consequence. There is nothing on record to suggest either the conversion of land, i.e., for residential purposes, or even of construction of a residential house, much less its completion within the time frame provided u/s. 54-F. In other words, the assessee s claim is wholly without any factual basis and, accordingly, merits dismissal. We may though clarify that the (plots of) land sold falling to the share of JB is, as held by us, the property of S2 (Bhaskar Bhattacharya), the capital gain could only be assessed in his hands. That being the case, the question of exemption u/s. 54B or 54F to the assessee (JB), his wife, does not arise. The assessees having sold residential plots, i.e., by plotting the agricultural land, the same can only be regarded as an adventure in the nature of trade. The date of conversion of the erstwhile agricultural land into a residential land or, in its absence, seeking permission for plotting or otherwise applying for civic amenities, viz. water, sewerage, electricity, etc., or, in its absence, the commencement of plotting itself, could be regarded as the date of conversion of the erstwhile capital asset into a business/trading asset. The stamp value on this date would stand to be deemed as the consideration in terms of s.45(2), and capital gain computed accordingly. This deemed consideration would then have to be appropriated over the number of plots, and business income computed on the basis of plots sold, with the balance being carried over at cost as a trading asset. No income, either as capital gain or business income, would however stand arise in case of JB, the investment by her in agricultural land, purchased along with SB, only representing an application of income, and no title thereto. The money invested by her, to the extent sourced from the sale of the residential plots, could be regarded as either a gift or a loan from her husband, Bhaskar Bhattacharya, to her or, in alternative, an investment by him benami in her name. There is, it needs to be appreciated, nothing on record to show that what stands sold by her is in her own right. The matter, accordingly, shall go back to the file of the AO to compute the capital gain and business income , where and to the extent assessable. We found the assessee s claim of the land sold as belonging to the HUF/s as being both factually unproved and legally not maintainable. This disposes the assessee s COs. As regards the claim of it being a case of double taxation; the same income being also taxed in the hands of the HUFs, the same is not maintainable. Firstly, there is nothing on record to show so, with, in fact, as also afore-noted, it was the Revenue which was in appeal before the Tribunal, whose appeals before it stood dismissed u/s. 268A, and not recalled, as was the case for the assessees in the instant case. That apart, it is only where the same income is taxed twice in the case of an assessee, that it qualifies to be regarded as double taxation. In fact, even here, it is trite that income has to be taxed for the right year, and it being taxed in another year furnishes no ground for it being not taxed in the year in which it is assessable (refer CIT v. Chunilal V. Mehta Sons (P.) Ltd 1971 (8) TMI 4 - SUPREME COURT - As regards it being taxed in the hands of HUFs, which claim to be valid would have to be, firstly, for both the additions and, two, also exhibit the denial of deduction u/s. 54B/54F. Two, it is only the right person who is to be taxed, and merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income See CH. ATCHAIAH 1995 (12) TMI 1 - SUPREME COURT .

Summary

Issues Involved:
1. Ownership of the property and assessment of capital gains.
2. Eligibility for exemptions under sections 54B and 54F of the Income Tax Act.
3. Validity of additions made by the Assessing Officer (AO).
4. Double taxation claims by the assessee.

Issue-wise Detailed Analysis:

1. Ownership of the property and assessment of capital gains:
The primary issue was whether the plots of land sold belonged to the individual assessees or to the Hindu Undivided Families (HUFs) of their respective husbands. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the land belonged to the HUFs, based on a partition deed dated 30/08/1974. However, the Tribunal disagreed, stating there was no evidence to prove the land was HUF property. The Tribunal noted the absence of any order under section 171 of the Act, which is necessary to recognize a partition of HUF property. The Tribunal concluded that the land was the individual property of the husbands (S1 and S2) and not of the HUFs, making the capital gains assessable in the hands of the individual assessees.

2. Eligibility for exemptions under sections 54B and 54F:
The assessees claimed exemptions under sections 54B and 54F. Section 54B allows exemption for capital gains from the sale of agricultural land if the proceeds are used to purchase agricultural land. Section 54F allows exemption if the proceeds are used to construct a residential house. The Tribunal found that the land sold was residential plots, not agricultural land, disqualifying the assessees from claiming exemption under section 54B. Furthermore, the Tribunal noted that the assessees had purchased agricultural land, not residential plots, disqualifying them from claiming exemption under section 54F as well.

3. Validity of additions made by the Assessing Officer (AO):
The AO made additional assessments on the grounds that the sale proceeds were invested in the names of the wives of the respective kartas and that there was a discrepancy between the net consideration and the fresh investment. The Tribunal upheld these additions, noting the lack of evidence to support the assessees' claims. The Tribunal directed the AO to recompute the capital gains and business income, considering the correct legal position and the facts of the case.

4. Double taxation claims by the assessee:
The assessees claimed that the same income was taxed twice, once in their hands and once in the hands of the HUFs. The Tribunal found no evidence to support this claim. It clarified that income must be taxed in the hands of the right person and in the correct year. The Tribunal dismissed the assessees' cross-objections, noting that the claim of double taxation was not maintainable as there was no record of the same income being taxed twice.

Conclusion:
The Tribunal partly allowed the Revenue's appeals and dismissed the assessees' cross-objections. It directed the AO to recompute the capital gains and business income, taking into account the correct ownership of the property and the ineligibility for exemptions under sections 54B and 54F. The Tribunal emphasized the importance of taxing the right person and in the correct year, dismissing the claims of double taxation.