2022 (8) TMI 1185 - AT - Income Tax

Validity of Reassessment order passed against the dead person - HELD THAT - We find that the assessee has not produced any evidence to prove that the legal heirs have intimated the AO about the demise of the assessee except for an affidavit which authorises one of the legal heirs of the assessee, Shri Dnyaneshwar Shankar Ghorpade to represent the appeals before the ITAT on behalf of the other legal heirs of the assessee. Apart from this, the assessee has failed to substantiate the fact that inspite of intimation, the AO has erred in passing the assessment order on the deceased person. In this case, during assessment proceeding, assessee was alive, notices were served on him and he replied, but before passing of the order, assessee has passed away. So it is not the case that notices have not been served on assessee. This ground of appeal warrants no merit and is hereby dismissed. Capital gain on sale of part of TDRs received by the assessee from Kulgaon-Badlapur Municipal Council (KBMC) as compensation on compulsory acquisition of assessee s agricultural land - lower authorities have rejected the contention that the said short term capital gain was exempt under section 10(37) - HELD THAT - Ingredients of the provision manifest that the land which is transferred should have been used for agricultural purpose two years immediately preceding the date of transfer and that the acquisition by the government bodies should have been compulsory acquisition. In the present case in hand, the assessee has failed to produce any documentary evidence to show that the land was used for agricultural purpose nor has he proved that the acquisition was compulsory. The assessee has also failed to prove the same before us as well as before the lower authorities. We do not find any justification in holding that the assessee is eligible for exemption as per the provisions of section 10(37) - Therefore, we do not find any infirmity in the decision of the lower authorities. The grounds raised by the assessee is dismissed. AO adopting the assessable value of land over value of stamp duty - cost of acquisition of TDR received by the assessee in consideration of the surrender of the said land to KBMC instead of fair market value of the TDR while computing capital gain on sale of TDR - HELD THAT - We hereby direct the Assessing Officer to calculate the cost of acquisition for the purpose of deduction by following the decision in the case of Atul G Puranik 2011 (5) TMI 576 - ITAT, MUMBAI - Additional ground No.2 is partly allowed.

Summary

Issues Involved:
1. Addition made on account of capital gain on the sale of TDRs.
2. Rejection of exemption under section 10(37) of the I.T. Act.
3. Assessment order passed in the name of the deceased person.
4. Adoption of assessable value of land over the fair market value for computing capital gain.

Detailed Analysis:

1. Addition Made on Account of Capital Gain on the Sale of TDRs:
The assessee filed returns for AYs 2013-14 and 2014-15, declaring total income at Nil. The case was selected for scrutiny, and the assessment order was passed under sections 143(3) r.w.s. 147 of the I.T. Act. It was observed that the assessee sold TDR of 2,684.74 sq.mtrs for Rs.1,41,62,000/- during AY 2013-14. The Assessing Officer (AO) alleged that the assessee failed to offer this for short-term capital gain and made an addition of Rs.1,24,97,449/-, rejecting the claim that it was exempt under section 10(37). The AO made this addition on the ground that the holding period of TDR was less than 3 years, thereby attracting short-term capital gain. The Ld.CIT(A) confirmed this addition, and the assessee appealed.

2. Rejection of Exemption Under Section 10(37) of the I.T. Act:
The assessee argued that the land surrendered to KBMC was urban agricultural land and that the acquisition was compulsory, qualifying for exemption under section 10(37). The provision requires that the land be used for agricultural purposes for two years preceding the transfer and that the acquisition be compulsory. The assessee failed to provide documentary evidence to prove the land's agricultural use or compulsory acquisition. The Tribunal found no justification in holding that the assessee is eligible for exemption under section 10(37) and upheld the decision of the lower authorities.

3. Assessment Order Passed in the Name of the Deceased Person:
The assessee's legal representative contended that the assessment order should be quashed as it was passed in the name of the deceased person, who passed away on 28/07/2018. The Ld.DR argued that there was no record of the legal heirs intimating the AO about the demise. The Tribunal observed that the assessee was alive during the assessment proceedings, notices were served, and he replied. The Tribunal found no merit in this ground and dismissed it.

4. Adoption of Assessable Value of Land Over Fair Market Value for Computing Capital Gain:
The assessee raised an additional ground regarding the AO's adoption of the assessable value of land (Rs.62 lakhs) as the cost of acquisition of TDR instead of the fair market value. The Tribunal directed the AO to calculate the cost of acquisition for deduction purposes by following the decision in the case of Atul G Puranik vs ITO. This additional ground was partly allowed.

Conclusion:
The Tribunal dismissed all the appeals, upholding the lower authorities' decision on the addition made for short-term capital gain and the rejection of exemption under section 10(37). The Tribunal also found no merit in the argument that the assessment order was passed in the name of the deceased person. However, it directed the AO to recompute the cost of acquisition for TDR.