Shrikant Ghanshyam Shah Vs Int Tax Ward (ITAT Mumbai)
ITAT Mumbai held that capital gain tax inadvertently paid by the wife needs to be refunded with interest and the same needs to be recovered from the assessee as the same transaction cannot be charged to tax twice.
Facts- AO received information from Income Tax Officer that assessee has sold two immovable properties during the year under consideration amounting to ₹.1,33,40,000/- and ₹.2,32,18,150/-. He observed that assessee has offered capital gain tax on transaction of ₹.2,32,18,150/- but did not offered the transactions of ₹.1,33,40,000/- in his return of income. Accordingly, he issued notice u/s.148 of Income-tax Act, 1961.
Assessee had stated that due to some error while submitting the return of income, one of the property sold by the assessee has been declared in his wife return and all the relevant taxes were paid in her account.
AO rejected the submissions made by the assessee and proceeded to make the addition in the hand of the assessee and accordingly, passed the draft Assessment Order u/s. 144C(1) of the Act. DRP sustained the addition. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Held that since the assessee has brought on record that the assessee’s wife has paid the relevant tax in her return of income it shows that even though by mistake the assessee has remitted the relevant tax on this transaction. However, we observe that the income was not declared by the original person and paid the relevant tax by the proper person. We are of the view that the same transaction cannot be charged to tax twice. Therefore, in our considered view in order keep the record straight and also agreeing the line of argument put forth by the tax authorities, we are directing the Assessing Officer who is aware of the fact that assessee has declared the relevant transaction in the hands of the assessee’s wife, therefore we direct the Assessing Officer to intimate the Assessing Officer [Income Tax Officer – Ward – 16(2)(4)] of the assessee’s wife i.e. Purnima Shrikant Shah [PAN BJKPS 6068J] to revise the assessment in case assessment has been already completed or initiate the proceeding of re-assessment and reject the capital gain declared by her in her return of income and initiate the refund along with interest till this date and as soon as the refund is initiated the present Assessing Officer may initiate the recovery of demand arising out of the assessment in the present case.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (DRP-2), Mumbai – 3 [hereinafter in short “Ld. DRP”] dated 13.12.2022 for the A.Y.2013-14.
2. Brief facts of the case are, assessee filed its original return of income on 28.01.2014 declaring total income of ₹.3,09,96,140/-. Subsequently the Assessing Officer received information from Income Tax Officer, Ward – 5(2)(3), Ahmedabad that assessee has sold two immovable properties during the year under consideration amounting to ₹.1,33,40,000/- and ₹.2,32,18,150/-. He observed that assessee has offered capital gain tax on transaction of ₹.2,32,18,150/- but did not offered the transactions of ₹.1,33,40,000/- in his return of income. Accordingly, he issued notice u/s.148 of Income-tax Act, 1961 (in short “Act”) on 08.03.2021 and served on the assessee through ITBA portal. The Assessing Officer has reproduced the reasons for reopening in Assessment Order, it is on Page 1 to 3 of the Assessment Order. In response assessee has filed his return of income on 20.04.2021 declaring the total income of ₹.3,09,96,140/-. Accordingly, notices u/s. 143(2) and 142(1) were served on the assessee.
3. In response to the above notices assessee had stated that due to some error while submitting the return of income, one of the property sold by the assessee has been declared in his wife return and all the relevant taxes were paid in her account. After considering the above reply the Assessing Officer issued show cause notice on 15.03.2022. In response assessee had continued to make the submissions that assessee has failed to declare the same in his return of income, however, the same source of income was already declared in his wife account and paid all the relevant taxes, therefore, there is no loss to the revenue by relying on certain judicial pronouncements. After considering the submissions of the assessee, Assessing Officer rejected the submissions made by the assessee and proceeded to make the addition in the hand of the assessee and accordingly, passed the draft Assessment Order u/s. 144C(1) of the Act.
4. Aggrieved with the above order, assessee filed objections before Ld.DRP and before Ld. DRP assessee had filed detailed submissions. After considering the detailed submissions, Ld. DRP dismissed the ground raised by the assessee and also discussed the issue of who has to sign the objections for filing the objection before Ld. Ld. DRP, since assessee has not signed the objections but the same was signed by the authorised representative. Apart from that Ld. DRP has rejected the submissions made by the assessee that there is no loss to the revenue and all the due taxes were paid by wife of the assessee and whatever case laws relied by the assessee were distinguished by the Ld. DRP and Ld. DRP has relied on decision of the Hon’ble Supreme Court and by distinguished the case law relied by the assessee in the case of Dhansukh Rawajibhai patel v. ACIT in ITA.No. 2802/Mum/2017 dated 16.11.2017, wherein Ld. DRP has sustained the addition made by the Assessing Officer with the observation that the tax has to be levied on the right person on whom the tax is leviable.
5. Aggrieved, assessee is in appeal before us raising following grounds
in its appeal: –
“1. The learned ITO Int Tax Ward-4(2)(1), Mumbai erred in passing order dated 2-1-2023 w’s 147 r.w.s 144C[13] and adding ₹.1,17,02,181 – in respect of Long Term Capital Gains on the sale of property.
2. In the facts and the circumstances of the case and in law, the Honorable DRP erred in confirming the addition proposed by the AO amounting to Rs. 1.17.02.181/-in respect of Long Term Capital Gains on the sale of property.
3. In the facts and the circumstances of the case and in law, the learned ITO Int Tax Ward- 4(2)(1), Mumbai erred in reopening the assessment u/s 148
a. Only on the basis of borrowed satisfaction based on the information received from ITO Ward 5(2)(3), Ahmedabad.
b. Even though return was not processed us 143(1) as mentioned in Para no. 1 at page no. 1 of the Draft Assessment Order.
4. In the facts and the circumstances of the case and in law, the learned ITO Int Tax Ward- 4(2)(1), Mumbai erred in making the addition of LTCG amounting to Rs. 1,17,02,181/-in respect of property sold vide Sale deed no. 355 of 2013 registered with Sub-Registrar, Sanand (Gujarat) by Overlooking the fact that
a. the same LTCG amounting to Rs. 1,17,02,181/- in respect of property sold vide Sale deed no. 355 of 2013 registered with Sub-Registrar, Sanand (Gujarat) was already offered for tax in the hands of Mrs. Purnima Shrikant Shah, wife of the Appellant for AY 2013-14.
b. same tax is paid in the hands of the wife of the Appellant as was payable in the hands of the Appellant
c. there is no loss to the revenue since same tax is paid in the hands of the wife of the Appellant.
d. The said addition tantamount to double addition of same income in the hands of the Appellant even though the same is already taxed in the hands of the wife of the
e. Neither the Appellant nor his wife has claimed any tax benefit us 54F, 54EC etc
f. Rate of tax on LTCG is a flat rate applicable to the Appellant as well as to his wife and thereby works out to exactly identical figure.
g. The time limit for revising return of the wife of the Appellant had already lapsed by the time the reassessment was initiated by the ITO Int Tax Ward 4(2)(1), Mumbai.
h. This was inadvertent error committed by the erstwhile common CA of the Appellant and his wife without any intention to save the taxes.
i. The assessee & the wife are Non-Residents for more than 20 years & has no knowledge of Indian Tax Laws.
5. In the facts and the circumstances of the case and in law, the learned ITO Int Tax Ward- 4(2)(1), Mumbai erred in passing assessment order u/s 147 rws 144C[13] even though section 144C(15)(b) clearly postulates twin conditions, viz, variation proposed by TPO under Transfer pricing and non-resident/foreign company and in this case no variation in Transfer Pricing was proposed.
General: –
