Case Law Details

Case Name : Sushila Devi Meena Vs ITO (ITAT Jaipur)
Appeal Number : ITA No. 419/JP/2016
Date of Judgement/Order : 04/04/2018
Related Assessment Year : 2006-07
Courts : All ITAT (6156) ITAT Jaipur (148)

Sushila Devi Meena & Ors. Vs ITO (ITAT Jaipur)

Conclusion –

Capital gain to be assessed in the hands of all the legal heirs who have inherited the land and also shared the sale consideration. Cost of acquisition has to be determined by considering relevant provisions of the Act as well as the fair market value of the land as on 01.04.1981.

Facts –

AO reopened the assessment to assess the capital gain arising from sale of agricultural land in the hands of the assessee which was inherited by the assessee on death of her husband.

Assessee submitted that the land was inherited by 7 legal heirs on death of Shri Bhawara (assessee’s husband), likewise, the sale consideration was shared between the 7 legal heirs and hence assessee submitted that capital gain if any arising from the sale of land has to be assessed in the hand of legal heirs who have shared the sale consideration. However, AO contended that since the relinquished deed was executed by the sons and daughter in favour of assessee, subsequent sale would be treated as sale by assessee only.

Further, AO took cost of acquisition of the land as NIL to which assessee submitted that the land was acquired by the ancestor prior to 01.04.1981 and hence cost of acquisition shall be deemed as per fair market value of land as on 01.04.1981.

Held –

Once, the sale consideration was shared among the mother and 6 sons being co-owner of the land in question and excluded the daughters then long term capital gain arising from sale of land in question is required to be assessed in the hands of 7 legal heirs who have inherited the land and also shared the sale consideration in equal share.

AO has applied the cost of acquisition of the land at nil without considering the provisions of the Income Tax Act in respect of the asset which was acquired by the assessee as under succession/ inheritance and previous owner the land had acquired the agricultural land prior to 01.04.1981.

FULL TEXT OF THE ITAT JUDGMENT

These are five appeals by the assessees who are family members: mother, three sons and one daughter-in-law arising from Smt. Sushila Devi Meena and others vs. ITO separate orders of ld. CIT(A) all dated 26.02.2016 for the assessment year 2006-07.

2. The assessment in these cases were framed by the AO u/s 147 r.w.s. 144 of the Act. The Assessing Officer has reopened the assessment by issuing notice u/s 148 of the Act to assess the capital gain arising from sale of agricultural land in the hands of Smt. Dhapu Devi Meena and the deposits in the bank accounts of the sons/daughter in law of Smt. Dhapu Devi Meena. In the reassessment the AO assess the capital gain arising from sale of agricultural land in the hands of Smt. Dhapu Devi Meena and the income on account of deposits made in the bank accounts of the sons and daughter in law of Smt. Dhapu Devi Meena. The assessees challenged the action of the AO before the ld. CIT(A) and contended that the agricultural land in question was inherited by all the assessees on death of Shri Bhawara @ Bhura in the year 2004 and thereafter the land in question was sold vide sale deed dated 11.08.2005 for a consideration of Rs. 1,76,34,000/-. Since, there was no response to the notice issued u/s 142(1) of the Act the AO also made addition in the hands of Smt. Dhapu Devi Meena on account of unexplained deposits in bank account of Rs. 32,95,345/-. However, it was contended before the ld. CIT(A) that all the legal heirs of late Shri Bhawara @ Bhura were heaving equal shares in the land in question and therefore, the sale consideration was also received in equal shares. Since, there was relinquishment deed dated 14.06.2005 prior to the transfer of the property, therefore, the ld. CIT(A) did not accept this contention of the assessee and confirmed the entire capital gain in the hands of Smt. Dhapu Devi Meena widow of Late Shri Bhawara @ Bhura. The additions made by the AO on account of unexplained deposits in the bank account was also confirmed by the ld. CIT(A) in the hands of the sons and daughter-in-law and the explanation of the assessees that the deposits were made out of the sale proceeds of land in question was not accepted.

3. Before the Tribunal, the assessee challenged the addition made by the authorities below and also filed additional grounds which are common in these appeal as under:-

“4) Under the facts and circumstances of the case and under the law, the learned A.O. grossly erred in ignoring Sales Receipts of the Agricultural Land i.e. Sales consideration received by the appellant, ignoring Sec. S and Sec. 10 of the Hindu Succession Act, 1956, read with Sec. 4, 45 and 4S of the Income Tax Act, 1961. This is in connection with the matter of her mother-in-law Dhapu Devi Meena (PAN: BZSPD1376G)

4.1) Under the facts and circumstances of the case and under the law, the learned A.O. has admitted that the agricultural land in question was ancestral and still, the Ld. AO has not divided the gross sale proceeds amongst the six sons and the widow appellant. By compulsion of law, the sons had legal and valid right to receive the property and the sale consideration thereof.

4.2) Under the facts and circumstances of the case and under the law, the widow assessee was, by law, bound to divert the gross receipts under Sec. 8 and Sec. 10 of the Hindu Succession Act, 1956, as the cost of transfer, read with Section 4, 45, 47, 48 (mode of computation) of the Income Tax Act, 1961.

5) Under the facts and circumstances of the case and under the law, the Appellant Assessee was entitled for the Fair Market Value as cost of acquisition of the said agricultural land, which was acquired before 01/04/1981. The Learned A. O. has not calculated the Cost of Acquisition, which is against the principles of natural justice.

6) Under the facts and circumstances of the case and under the law, the learned A.O. has not allowed the deduction under section 54F in respect of construction of new residentia l house. ”

Thus, the assessees raised the issue that the cost of acquisition was taken by the AO at nil whereas when the land was acquired by the ancestor prior to 01.04.1981 then, as per provisions of section 48 to 49 of the Income Tax Act the cost of acquisition shall be deemed as per the fair market value of the land as on 01.04.1981. Further, the additional grounds is also raised regarding the sharing of the sale consideration among all the legal heirs of late Shri Bhawara @ Bhura and therefore, the capital gain if any arising from the sale of the land has to be assessed in the hands of the legal heirs who had shared the sale consideration.

4. We have heard the ld. AR as well as the ld. DR on the additional grounds raised by the assessees. We find that the AO has applied the cost of acquisition of the land at nil without considering the provisions of the Income Tax Act in respect of the asset which was acquired by the assessee as under succession/ inheritance and previous owner the land had acquired the agricultural land prior to 01.04.1981. Therefore, we find substance and merit in the additional ground raised by the assessee so far as the cost of acquisition has to be determined by considering the relevant provisions of the Act as well as the fair market price of the land as on 01.04.1981. As regards the issue of assessing the capital gain in the hands of the legal heirs who have inherited the agricultural land in question instead of in the hand of only the widow of late Shri Bhawara @ Bhura there was a relinquished deed by the daughters and sons of late Shri Bhawara @ Bhura in favour of Smt. Dhapu Devi Meena whereby released their rights in land to facilitate the sale of the land vide sale deed dated 11.08.2005. It is pertinent to note that apart from the sons, the daughters of late Shri Bhawara @ Bhura have executed relinquishment deed dated 14.06.2005 but the sale consideration has been shared by the widow and 6 sons. Therefore once, the sale consideration was shared among the mother and 6 sons being co-owner of the land in question and excluded the daughters then long term capital gain arising from sale of land in question is required to be assessed in the hands of 7 legal heirs who have inherited the land and also shared the sale consideration in equal share. We further note that the amount which is shared by these 7 legal heirs of late Shri Bhawara @ Bhura is duly reflected in their respective bank account. The transaction of sale of land and the amounts deposited in their respective bank account of these persons/assessees are contemporaneous. Thus, once the amount deposited in the bank account and the sale transactions in question are at the same point of time and there is no other source of income then the explanation of the assessee that the amount deposited in the respective bank accounts is nothing but their shares in the sale consideration received on transfer of agricultural land in question. The ld. DR has raised the contention that once sons have signed and executed the relinquishment deed along with the daughters of late Shri Bhawara @ Bhura in favour of their mother then the subsequent sale would be treated as the sale by only one assessee Smt. Dhapu Devi Meena. We find that the relinquishment deed was executed as per their family arrangement and mutual understanding so that the family of the daughters of late Shri Bhawara @ Bhura and Smt. Dhapu Devi Meena would not claim the amount in future and therefore, the sole purpose of executing relinquishment deed was to avoid the future dispute/litigation in respect of the share in the land. Thus, the relinquishment deed made it possible to share and distribute the sale consideration among the mother and sons excluding the daughters. Since, one of the sons expired therefore, the wife of the son is representing as legal heirs of the appeal in ITA No. 419/JP/2016. Accordingly, all sons and mother have shared the sale consideration received on transfer of the land in question and the deposit in bank account of the assessees is from amount received being represented as sale consideration. Hence, we find that the non acceptance of the explanation of source as well as the sharing of the sale consideration by these assessee by the authorities below is not proper and justified. Accordingly, in view of the above facts and circumstances of the case we admit the additional amount raised by the assessees.

5. These 7 assessees mother, sons and daughter-in-law have shared the sale consideration in equal share therefore, the matter requires afresh consideration for assessing the capital gain in equal shares in the hands of the 7 assessees out of which 5 assessees are before us. The details of these legal heirs are as under:-

Total amount of sale consideration is Rs. 1,77,41,000/-

Widow (mother) Dhapu Devi 25,34,429/-
Son1 Arjunram 25,34,429/-
Son2 Nemichand 25,34,429/-
Son 3 Jagdish 25,34,429/-
Son4 Mannalal 25,34,429/-
Son5 Prabhudayal 25,34,429/-
Son 6 Madanlal 25,34,429/-

Accordingly, we set aside these matters to the record of the Assessing Officer for fresh adjudication of the same by consideration the capital gain in the hands of these assessees in equal shares as well as considering the other claims of the assessees as per law. The other issues in these appeals are also accordingly stand set aside to the record of the AO. Since, the AO is required to consider the cost of acquisition as per fair market value as on 01.04.1981 therefore all other claim of index cost and other deductions are also required to be considered by the AO. Accordingly, all these appeals are set aside to the record of the Assessing Officer in the above terms.

In the result, all the appeals of the assesses are allowed for statistical purposes.

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