Devendra Kumar Shroff Vs ITO (ITAT Kolkata)
We note that the immovable property which is in issue was initially owned by Smt. Bakul Rani Bose. And we note that Smt. Bakul Rani Bose bought the property by Indenture of Sale on 18.11.1949 from one Smt. Chitralekha Choudhrani (refer page 89 of paper book). Thereafter, the property was sold by Smt. Bakul Rani Bose to the assessee on 15.04.1976, which fact is seen from perusal of page 90 of paper book. The deed of conveyance mentions the fact that the land was purchased by the assessee vide Indenture of sale 15th day of April, 1976 made between Bakul Rani Bose and the assessee and was registered with the Additional District Sub Registration Office, Cossipore Dum Dum and Recorded in Book No. 1, Volume No. 48, pages 78 to 85, and the AO erred in making a factual finding that the property was purchased on 25.04.2000. And since the land was acquired before 01.04.1981, as per the provisions of the section 55(2) clause (b), the cost of acquisition of the land to the assessee or the fair market value of the land as on 01.04.1981, at the option of the assessee, could be taken to be the cost of acquisition of the land. We note that the Fair market value of the land was determined by the Certified Valuer Rs.8,30,000/- , which was taken to be the cost of acquisition by the assessee in his revised computation of income. It is noted that the valuation report received from such Valuer was furnished before the AO and is attached herewith in pg. nos. 136-144 of paper book. Thus, we are of the opinion that the computation of indexed cost of acquisition by the AO, taking the cost of acquisition at the cost price of 15.04.1976 without considering the provisions of section 55(2) clause (b) and taking the base cost inflation index at 406 is bad in law and we direct that Rs. 8,30,000/- must be taken as the cost of acquisition instead of Rs.1,122/-.. So we order accordingly.
ITAT Remand Back Case to Verify Capital Gain Chargeability
The issue under consideration is whether capital gain applicable when assessee as guarantor remitted consideration from sale of land to bank (lender) for squaring up loan liability of a third party (borrower)?
ITAT states that, in the instant case, they need to ascertain the facts as to firstly whether the sale of the property has been made directly by the SBI and the sale consideration was appropriated to the loan amount; or secondly whether the assessee has got the property sold and the buyer has deposited it directly to the SBI and thereafter the SBI appropriated it to the loan amount. On ascertainment of facts, it is revealed that the assessee’s case falls in the second category, then it is application of money of the assessee for repayment of loan and then the question of diversion of fund at the source by overriding title will not apply. However, if the facts of case falls in the first category then it would be case of diversion of fund at the source by over-riding title and the decision of CIT vs. Smt. Thressiamma Abraham (supra) would be applicable. Be that as it may be. It is observed that a vide letter dated 26.05.2007, SBI has written to the buyer of the property M/s. Svarna Infrastructure & Builders Pvt. Ltd (supra) to deposit the full value of the consideration with SBI, SSI Branch, Bhowanipore before signing the conveyance deed. However, the Facts are not clear. It is not clear from the document as to whether the SBI conducted the sale by Public Auction and then consideration money was deposited by the buyer directly with the bank; or the sale of property was carried out by the assessee and the sale consideration was deposited by the buyer in assessee’s account as per the SBI’s instruction or in the account of M/s. PPPL. From the discussion supra, it is needless to say that if the assessee has got the sale of property and consequently, if the money was routed through the bank account of the assessee before being finally appropriated towards the dues of M/s. PPPL, there cannot be diversion of income by overriding title and in that fact situation, capital gains tax liability would arise in assessee’s hands. In the interest of justice, ITAT, therefore, ITAT remand this issue back to the file of the A.O. for the limited purpose to verify the correct facts on the lines stated by them as above.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal preferred by the assessee is against the order of the Ld. CIT(A)-11, Kolkata dated 30.12.2015 for AY 2008-09.
2. At the outset, the Ld. Counsel for the assessee prayed before the bench for admission of the following additional grounds of appeal:
“1. For that on the facts and in the circumstances of the case, the Ld. AO erred in passing of the order u/s. 147/143(3) dated 18.12.2013 without issuing the statutory notice u/s. 143(2), and as such the reassessment order passed by him is bad in law and void ab initio.
2. For that the reassessment order dated 18.12.2013 is bad in law and is liable to be quashed in the absence of recording of “reasons to belief”.”
3. Since we note that the aforesaid additional grounds are purely legal in nature, we admit the same and had directed the department to produce the assessment records of the assessee to adjudicate the legal issue. Today when the assessment records were produced by the department (on the date of hearing), the Ld. AR inspected the assessment records and does not want to press the aforesaid legal issues. So, we dismiss these legal issues raised before us.
4. Coming to the main grievance of the assessee which is against the action of Ld. CIT(A) in confirming the action of AO in making addition of Rs.1,25,42,334/- as Long Term Capital Gain (hereinafter LTCG) from sale of property when, according to assessee, there was diversion of income due to overriding title.
5. Briefly stated facts of the case as emanating from the assessment order passed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) are that in this case notice u/s. 142(1) was issued calling for submission of return, since the assessee did not file his return of income for this assessment year. The said notice u/s. 142(1) was served upon the assessee on 25.03.2010. In response, the assessee filed the return of income for the AY 2008-09 which was received by the office of the AO on 04.05.2010. In the said return the assessee had shown a total income of Rs.58,974/-. On perusal of the return of income furnished by the assessee it was found by the AO that the assessee has shown income from salary of Rs.1,50,000/- which was received from M/s. Pragati Printers Pvt. Ltd. (hereinafter called as “M/s. PPPL”). Assessee had filed the following computation of income sheet along with the return of income filed, which is reproduced by the AO in the assessment order as under:
