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TMI Blog2021 (12) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... on Act 1956 as Mitakshra coparcenary as the same was not the property of his ancestor as they were only the tenant of land and not the owner. Therefore, in our considered view any income arising from the sale of such land is taxable in his individual capacity as he was the owner of the said land. AO dropping the assessment proceeding under section 147 of the Act against the HUF is not prejudicial to the interest of the Revenue as the land in question is not the property of HUF. Hence, the HUF is not liable to capital gain on transfer of such land. Here, it is pertinent to note that in order to set aside the order of the AO u/s 263 it must proved that the order of the AO is erroneous as well as prejudicial to the interest of the Revenue. For sake of understanding if an order of the AO is erroneous but not prejudicial to the interest of the Revenue or vise-versa then power under section 263 of the Act cannot be invoked - we set aside the order of the learned Pr. CIT passed under section 263 of the Act. Hence ground of appeal of the assessee is allowed. Reopening of assessment u/s 147 - amount of capital gain as shown represents the income from other sources - As none of them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the separate orders of the Learned Commissioner of Income Tax(Appeals) Ahmedabad arising in the matter of assessment order passed under s. 143(3) r.w.s 147 of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2006-2007. First we take up ITA No.1338/Ahd/2016 for A.Y. 2006-07 2. The present issue raised by the assessee involves different assessee for the same assessment year under consideration. The impugned issue is arising from single transaction of sale of land property. For the purpose of adjudication, we are taking the facts of the case of Ramnikbhai N Patel (HUF) bearing ITA No. 1338/AHD/2016. 3. The fact goes like this. There were three chunks of land bearing survey nos. 182, 183 185 admeasuring 56050 Sq. Meters which were sold by Shri Ramnikbhai N. Patel to the extent of his interest of 1/4th for consideration of ₹ 3.5 crores vide sale deed dated 29th October 2005. In the sale deed, the son, wife, daughter and daughter in-law of Shri Shri Ramnikbhai N. Patel were confirming party as part of third part of the sale deed. Accordingly, all the 5 members of the family of Shri Ramnikbhai N Patel divided sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration received by the family members for ₹ 70 lacs on transfer of family property is assessable under the head income from other source and not as income under the head capital gain. Thus, the AO reopened the assessments of all the family members namely Shri Ramnikbhai Patel being seller and Shri Chirag R Patel, Niruben R Patel, Shefali R. Patel and Mallika Chiurag Patel being confirming party by issuing notice under section 148 of the Act. Subsequently, the AO finalized the assessment by assessing the receipt of ₹ 70 lacs in the hands of all the members as income from other sources. 3.4 Simultaneously, based on above letter from ld. CIT (A)-XVI Ahmadabad to CIT-V, Ahmadabad recorded reason to believe that sale consideration of ₹ 3.5 crores on transfer of land is taxable in the hand of Ramnikbhai N Patel HUF. Thus, the notice under section 148 of the Act dated 22-03-2013 was issued in the name of Ramnikbhai N Patel (HUF) for escapement of capital gain on sale of property for ₹ 3.5 crores. During the proceedings under section 147 of the Act, it was submitted that there was no HUF in existence in the name of Ramnikbhai N Patel HUF or assessed any t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a permanent tenant from 1944. After death of Shri Nathalal Patel as on 20th June 1964 his legal heir Shri Ramnikbhai Patel, Jayedra Patel, Ambalal Patel, and Champaben Patel applied for their name to register as tenant which was ultimately accepted as tenant in equal proportion by entry number 1290 in the records of 7/12 extract maintained by the Revenue. Thus they became permanent tenant in individual capacity. Subsequently, the Gujarat Govt. enacted Gujarat Devasthan Inam Abolition Act 1969 w.e.f. 15th November 1969. 3.8 Thus by virtue above said Act and section 32 read with section 88E of Bombay Tenancy and Agricultural Land Act 1948 all the tenant of Inam agricultural land became the deemed owner of such the lands. Therefore, after enactment of the Gujarat Devasthan Inam Abolition Act 1969 Shri Ramnikbhai Patel and other heir of Nathalal Patel whose names were recorded as tenant as per entry No. 1290 applied for occupancy right which was granted by the order of Mamlatdar dated 29th March 1989 w.e.f. 15th November 1969. Thus, the land was acquired by Shri Ramnikbhai Patel in his individual capacity and not as property of HUF. Thus, the proceeds from the transfer of such la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s free from all encumbrances. The provisions of section 32 of The Bombay Tenancy and Agricultural Land Act 1948 reads as under: [1] [(1)] On the first day of April 1957 (hereinafter referred to as the tillers day ) every tenant shall,[2] [subject to the other provisions of this section and the provisions of] the next succeeding sections, be deemed to have purchased from his landlord, free of all encumbrances subsisting thereon on the said day, the land held by him as tenant, if,- (a) Such tenant is a permanent tenant thereof and cultivates land personally; (b) Such tenant is not a permanent tenant but cultivates the land leased personally; and 5.4 However, the Inam land of trust and public religious worship places were exempted from the provision of The Bombay Tenancy and Agricultural Land Act 1948 vide section 88B of the said Act which reads as under: [1] [(1) Nothing in foregoing provisions except sections 3, 4B, 8, 9, 9A, 9B, 9C, 10, 10A, 11, 13 and 27 and the provisions of Chapters VI and VIII in so far as the provisions of the said Chapters are applicable to any of the matters referred to in the sections mentioned above shall apply, (a) to lands hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15th November 1969 Shri Ramnikbhai N Patel was tenant of the land bearing survey number 182, 183 and 185 for his 1/4th Share in the lands. Thus, Shri Ramnikbhai become the deemed owner which was also confirmed to him by the court of Mamlatdar and Krishi Panch Taluka City Ahmadabad vide order dated 17th March 1989 under section 32G of the Bombay Tenancy and Agricultural Land Act 1948 w.e.f 15th November 1969. Thus Shri Ramnik became the owner of the impugned land in his personal capacity and not as HUF. 5.8 At the time of dictation, a question also struck to our mind whether the impugned land was an ancestral land which was inherited by the assessee from his forefathers. On perusal of the above discussion, we find that there was the tenancy right held by the forefather of the assessee including Shri Nathabhai Patel. The same tenancy right was transferred on the demise of Nathabhai Patel to his legal heirs in their equal proportion i.e. 1/4th to each as discussed above. Thus what was received by Shri Ramnikbhai Patel was the tenancy right that too to the extent of his share of 1/4th which can also be deemed as partition. However, on a later date by virtue of the Gujarat Devasthan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as prejudicial to the interest of the Revenue. For sake of understanding if an order of the AO is erroneous but not prejudicial to the interest of the Revenue or vise-versa then power under section 263 of the Act cannot be invoked. In holding so, we draw support and guidance from the judgment of Hon ble Supreme Court in case Malabar Industrial Co. Ltd. vs. CIT reported in 243 ITR 83, wherein the Hon ble court held as under: A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1). 5.12 Thus, in view of the above discussion and following the judgment of the Hon ble Supreme Court (supra) we set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings. 7.2 Before parting, it is also pertinent to note that we have given a finding that the impugned land belong to assessee. Thus, the whole of the consideration on transfer of land for ₹ 3.50 crores is income of the assessee. In other words, the sale consideration of ₹3.50 crore was not supposed to be divided and the entire amount should have been brought to tax in the hands of the assessee. Therefore, the division of income among the family members namely Niruben Patel, Chirag Patel, Shefali Ptael and Mallika Patel are not as per the provisions of law. However, the undoubted fact is that the Revenue has not disputed this datum either under the provisions of section 143(1) or under section 147 of the Act i.e. the entire amount of sale consideration of ₹ 3.50 crores has to be brought to tax in the hands of the assessee. Thus the question arises, whether we can improve the case of the revenue in the appeal before us. The answer stands in negative. It is also for the twin reasons being the Revenue is not aggrieved in the appeal before us and amount of dispute before us is only for ₹ 70 lakh. 7.3 The appeal was filed by the assessee for the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided under the provisions of section 48 of the Act. In this connection we note that, the Hyedrabad Tribunal in the case of ITO vs. Uppal Venkata Rao reported in 83 ITD 273 involving identical facts and circumstances has held that the cost paid for ₹528 to the Revenue department does not represent the cost of acquisition of the assets. The relevant extract of the order is reproduced as under: After perusing the relevant provisions relating to the matter in dispute, it was to be held that the present appeal filed by the revenue deserved to be dismissed, because the assessee in the disputed land was protected tenant at the relevant time in pursuance of the A.P. (Telangana) Tenancy and Agricultural Lands Act, 1950, the assessee was declared as a protected tenant and ownership rights to the extent of 60 per cent of share in the land by virtue of the above enactment without payment of any consideration and in respect of the remaining 40 per cent share in the land, the ownership rights were conferred upon him by virtue of the A.P. (Telangana) Abolition of Inams Act, 1955 without payment of any consideration and the amount of ₹ 1,272 paid to the RDO in 1983 in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys in filing the appeal by the assessee before us. Now the controversy arises for our adjudication whether the wrong advice of the consultant to the assessee is reasonable and sufficient cause for condoning the delay. 10.1 In this regard we note that the Hon ble Madras High Court in the case of Sreenivas Charitable Trust v. Dy. CIT reported in 280 ITR 357 has held that : 3. The Supreme Court in Vedabai v. Shantaram Baburao Patil [2002] 253 ITR 798held as under: In exercising discretion under section 5 of the Limitation Act the Courts should adopt a pragmatic approach. A distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days. Whereas in the former case the consideration of prejudice to the other side will be a relevant factor so the case calls for a more cautious approach but in the latter case no such consideration may arise and such a case deserves a liberal approach. No hard and fast rule can be laid down in this regard. The Court has to exercise the discretion on the facts of each case keeping in mind that in construing the expression sufficient cause , the principle of advancing substantial justice is of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the appeal before us. However, the Revenue has not filed any counter-affidavit to deny the allegation made by the assessee. 10.4 It is also important to note that Hon ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down certain principles for considering the condonation petition for filing the appeal which are reproduced hereunder: (1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had been prosecuting other remedies, the time taken by those proceedings should naturally be taken while determining the question whether the assessee had sufficient cause for not presenting the appeal in time. Therefore, the revenue was not right in submitting that the appeal filed under section 17 was an appeal against the original order of assessment under the Act, which was passed about 20 years ago, as it was evident that the appeal was against an order of rejection of relief by the assessing authority. Thus, though the Tribunal's view that there was no question of limitation in such cases, was not correct yet the AAC was right in condoning the delay and entertaining the appeal. 11.1 From the above we note that the Hon ble Madras High Court in the above case was pleased to condone delay for 20 years approximately by holding that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. 11.2 The delay in the instant case is just of 377 number of days which cannot be considered to be inordinate or excessive in comparison to the delay of 7330 days approximately. 11.3 In view of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories. Accordingly, we are of the view that all the assessee is not subject to tax on the income which they have offered to tax under the bona fides believe. 12.3 We also note that the Hon ble Supreme Court in the case of Maneklal Aggarwal vs. DCIT reported in 84 taxmann.com 116 has held that the income has to be taxed in the hands of the right person. The relevant extract is reproduced as under: 4. Going by the nature of transaction, a clear finding of fact is arrived at by the authorities below that a devise was made by the appellant herein to show lesser income at his hand and because of this reason only he purportedly entered into a lease agreement with his wife, son and daughter-in-law in respect of the aforesaid property of which he is paying by letting them at a very nominal rates and allowing his family members to sub-let the same at a much higher rents. In these circumstances, these findings of fact cannot be interfered with in the present appeals. It has been held by this Court in ITO v Ch. Atchaiah[1996] 218 ITR 239/84 Taxman 630, that the Assessing Authority has a right to tax the rightperson . Once it is found that the income in fact belongs to the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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