2023 (6) TMI 610 - AT - Income Tax

Reopening of assessment u/s 147 - Taxability of capital gains in the capacity of a Legal Representative of deceased assessee mother - co-ownership in property - one of the co-owners is solely picked out - real owner v/s nominee in property of deceased assessee mother - assessee replied stating that his original return of income filed may be treated as return filed in response to the notice u/s 148 - HELD THAT - As rightly observed by the CIT(A), the status of the assessee is obfuscated from the inception. AO recorded the reasons that the assessee had to account for the capital gains in the capacity of a Legal Representative of his mother and as a matter of fact, the notice under section 148 also reads the same. But in all the communication, the PAN of the assessee is referred to the PAN in his individual capacity. In these circumstances, the assessee seems to justify his request to treat the original return of income as the return of income in response to section 148 notice. Even if AO passed the assessment order by showing the assessee as the Legal Representative of late Smt. V. Rajyalakshmi, but he considered the return of income filed with PAN of the assessee LR and took into consideration the professional income returned by the assessee. In these circumstances, we find it difficult to hold that the learned CIT(A) committed any error. In the reasons recorded themselves show that the assessee is not the sole Legal Representative of late assessee and according to the reasons there is another brother - Hon'ble Madras High Court in the case of CIT vs. Muthukarupan 2006 (9) TMI 140 - MADRAS HIGH COURT upheld the findings of the Tribunal that it would be travesty of justice if one of the co-owners is solely picked out and an enhanced income for the same property is attributed in his hands. Decided against revenue.

Summary

Issues involved:
The issues involved in the judgment are related to the assessment of income in the case of an individual who received sale consideration as a legal representative of a deceased person, the validity of re-opening assessment proceedings, and the attribution of income from a property sale to the individual.

Assessment of income as a legal representative:
The case involved an individual, a practicing advocate, who received sale consideration as a legal representative of a deceased person. The Assessing Officer issued a notice under section 148 of the Income Tax Act to the individual in his capacity as a legal heir. The individual contended that he received the amount as a nominee, not as a legal representative, and challenged the addition of the sale consideration in his hands. The Commissioner of Income Tax (Appeals) agreed with the individual, holding that the assessment had to be made in the hands of the legal heirs as representative-assessees, making the assessment invalid in the eye of the law.

Validity of re-opening assessment proceedings:
The individual argued that since re-opening proceedings were initiated against him as a legal representative and not as an individual, it was impermissible to assess the alleged income of the deceased person in his individual capacity. The individual further contended that there were other legal heirs involved, and it would be unjust to attribute the entire enhanced income to him alone. The Tribunal referred to relevant case law and held that attributing enhanced income solely to one co-owner would be a travesty of justice, especially when there were multiple legal heirs involved. The Tribunal found no irregularity in the findings of the Commissioner of Income Tax (Appeals) and dismissed the appeal.

Attribution of income from property sale:
The Tribunal examined the reasons recorded by the Assessing Officer, which indicated that the individual had to account for capital gains as a legal representative of the deceased. However, the communication referred to the individual's PAN in his individual capacity, leading to confusion regarding his status. The Tribunal noted that the sale deed showed multiple vendors and other legal representatives, emphasizing that attributing the entire amount to the individual alone was unjust. Citing relevant case law, the Tribunal held that it would be a travesty of justice to attribute enhanced income to one co-owner when others were involved. Consequently, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and dismissed the appeal.