Case Law Details
Vinod Nihalchand Jain Ltd. Vs ITO (ITAT Mumbai)
No Capital Gains When Assessee Is Only Legal Joint Owner & Not Beneficial Owner
Assessee is an individual who did not file the return of income since the taxable income was below the basic exemption limit for the year under consideration . Notice u/s 148 was issued and proceedings u/s 147 were initiated on the basis of the information received that the assessee has sold immovable property. Assessee submitted that the immovable property was originally purchased by his brother and the name of the assessee and his father were added to the property as joint owners out of natural love and affection. The property was sold for a total consideration of Rs.54 Lakh, which was entirely credited to the bank account of the assessee’s brother. Thus, the contention of the assessee was that, even though the property was purchased in the joint names, the actual possession and the 100% right of the property belonged to his brother, as the whole consideration was paid by him at the time of purchase of the said property. Assessee also furnished the original purchase deed, bank statement of his brother highlighting the receipt of consideration in his account, Form 26AS stating that the TDS on the property has been fully deducted on the PAN of his brother, sale agreement, and the ITR along with computation for the year under consideration of his brother.
Assessing Officer (AO) vide order passed u/s 147 r.w. sec 144B, disagreed with the assessee & held that after the demise of the father, the said property belonged to the assessee & his brother & they have equal shares in the said property. AO further held that there does not exist any family arrangement whereby the right to the property has been relinquished by the assessee prior to the sale. It was also held that though the amount of sale consideration of the property was received in the account of the assessee’s brother, however, half of the sale consideration( Rs.27 Lakh), legally belonged to the assessee as he had not relinquished his rights on the property. Accordingly, the amount of Rs.27 Lakh was added to the total income of the assessee as Long-Term Capital Gains u/s 45.
On appeal, though the assessee argued that he was not the beneficial owner of the said immovable property, CIT(A) noted that the father of the assessee died without leaving any will or testamentary behind him & leaving the assessee & his brother as his legal heirs & that the sale deed was executed by both the brothers . CIT(A) upheld the addition made by the AO & dismissed the ground raised by the assessee on this issue, however, directing the AO to consider the cost of acquisition/improvement, if any.
Before the Mumbai Tribunal, assessee contended that the property, though was purchased in the joint names, the actual possession & 100% rights of the said property belong to his brother & the entire consideration was also paid by him at the time of purchase of the said property. Assessee placed reliance on the statement of bank account of proprietary concern of assessee’s brother. Further, in order to purchase the property, the assessee’s brother also availed home loan, which was entirely discharged by the assessee’s brother. The residential flat was shown as a fixed asset in the Balance-sheet of the assessee’s brother. The entire amount of sale consideration, i.e. Rs. 54 Lakh, was not only received in the bank account of the assessee, but the assessee’s brother also declared the same in his return of income & also claimed benefit of exemption u/s 54F of the Act by purchasing another house property. The assessee also filed an affidavit executed by his brother, wherein the assessee’s brother has admitted that the entire payment for the purchase of the said property was made by him & that his father& the assessee had not contributed anything towards the purchase of the property, therefore, they do not have any beneficial interest in the said property.
Considering the facts & circumstances of the case & evidences, Tribunal held that once the assessee’s brother has paid the entire purchase consideration for the purchase of the property & was in actual possession & had 100% right over the said property, even though assessee’s name was mentioned in the purchase deed as one of the joint owners, the consideration received on the sale of the said property cannot be added in the hands of the assessee once his brother has declared the entire consideration in his return of income for the year under consideration. Tribunal noted that assessee’s brother was the sole owner of the property for all practical purposes & assessee’s name appears to have been added only out of natural love & affection and that the assessee is not a beneficial owner of the said property.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed the present appeal against the impugned order dated 19.08.2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the Assessment Year 2015-16.
2. The present appeal is delayed by 45 days. Along with the appeal, the assessee has filed the application seeking condonation of delay submitting as follows: –
“The captioned appeal has been filed with a delay of approximately Five weeks, for which the following reasons are respectfully submitted:
1. The appellant was in the process of seeking new representation, specifically a CA or counsel, to advise on the merits of the case and the appropriate course of action.
2. Due to the ongoing audit season, most Chartered Accountants were occupied, resulting in some delay in briefing the CA on the case details.
3. In light of the above, it is respectfully prayed that the delay of two weeks in filing this appeal may kindly be condoned.”
3. We find that the reasons stated by the assessee for seeking condonation of delay fall within the parameters for grant of condonation laid down by the Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag Vs. MST Katiji and others: 1987 SCR (2) 387. It is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. In the present case, the assessee did not stand to benefit from the late filing of the appeal. In view of the above and having perused the affidavit, we are of the considered view that there exists sufficient cause for not filing the present appeal within the limitation period and therefore, we condone the delay in filing the appeal by the assessee and we proceed to decide the appeals on merits.
4. In this appeal, the assessee has raised the following grounds: –
“1. In the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming an addition of Rs.27,00,154/- made by the learned AO as Capital gains u/s.45.
2. In the facts of the Appellant’s case, it is most respectfully submitted that no such addition was tenable in the case of the appellant.”
5. The brief facts of the case are that the assessee is an individual and earned income from salary, capital gains on equity shares and mutual funds. As per the assessee, since the taxable income was below the basic exemption limit for the year under consideration, he did not file the return of income. Subsequently, on the basis of the information received that the assessee has sold immovable property, notice under section 148 of the Act was issued and proceedings under section 147 of the Act were initiated. As per the information received, the assessee, inter alia, during the year under consideration, sold the immovable property for a total consideration of Rs.54 Lakh. In response to the statutory notices issued during the re-assessment proceedings, the assessee submitted that the immovable property was originally purchased on 23.06.2004 by his brother, Shri Babulal Nihalchand Jain and the name of the assessee and his father was added to the property as joint owners out of natural love and affection. During the year under consideration, the property was sold on 19.09.2014 for a total consideration of Rs.54 Lakh, which was entirely credited to the bank account of the assessee’s brother. Thus, the assessee submitted that even though the property was purchased in the joint name, but the actual possession and the 100% right of the property belonged to his brother, as the whole consideration was paid by him at the time of purchase of the said property. In support of the aforesaid submission, the assessee also furnished the original purchase deed, bank statement of his brother highlighting the receipt of consideration in his account, Form 26AS stating that the TDS on the property has been fully deducted on the PAN of his brother, sale agreement, and the ITR along with computation for the year under consideration of his brother.
6. The Assessing Officer (“AO”) vide order dated 22.12.2023 passed under section 147 r.w. section 144B of the Act, disagreed with the submissions of the assessee and held that after the demise of the father, the said property belonged to the assessee and his brother and they have equal shares in the said property. The AO further held that there does not exist any family arrangement whereby the right to the property has been relinquished by the assessee prior to the sale. It was also held that though the amount of sale consideration of the property was received in the account of the assessee’s brother, however, half of the sale consideration, i.e., Rs.27 Lakh, legally belonged to the assessee as he had not relinquished his rights on the property. Accordingly, the amount of Rs.27 Lakh was added to the total income of the assessee as Long-Term Capital Gains under section 45 of the Act.
7. The learned CIT(A), vide impugned order, upheld the addition made by the AO and dismissed the ground raised by the assessee on this issue. The learned CIT(A), however, directed the AO to consider the cost of acquisition and cost of improvement, if any, and allow the deduction accordingly. The relevant findings of the learned CIT(A), vide impugned order, in this regard are reproduced as follows: –
“4. The only issue involved in this case is addition of Rs.27,00,000/- in respect of sale of immovable property.
4.1 As per the assessment order, the assessee had sold immovable property and the sale agreement deed was registered under the joint sub registrar with sale consideration of Rs. 54,00,000/-. The AO held that though the whole sale consideration of Rs. 54,00,000/- was received by his brother Sri Babulal Nihalchand Jain in his bank account, yet the half of the said sale consideration of Rs. 27,00,000/-is belonged to the assessee as the assessee had not relinquished his rights on the property prior to sale of the said property. Therefore, the same is added to the total income of the assessee as long term capital gain u/s. 45 of the IT Act.
4.2 During the course of appellate proceedings, it is submitted by the appellant the above mentioned immovable property was originally purchased on 23.6.2004 by Shri Babulal Nihalchand Jain (Brother of assessee) and out of natural love and affection name of the assessee i.e. Shri Vinod Nihalchand Jain and Shri Nihalchand Sukhlallji Jain (father of the former two) was added to the property as joint owners. Even though the property was purchased in the joint name but the actual possession and 100% rights of the said property belongs to Shri Babulal Nihalchnad Jain as the whole consideration was being paid by him. Since the whole consideration was paid by the assessee’s brother (Shri Babulal Jain) the assessee Shri Vinod Nihalchand Jain was not the beneficial owner of the said immovable property. Further, no deduction on account on indexed cost of acquisition and the improvement of the said property as the details of any evidence on the expenditure incurred has not been provided which is incorrect, wherein the details of purchase cost, stamp duty, registration expenses paid (indexed cost of acquisition of Rs. 28,05,909/- in computation sheet of assessee’s brother.
4.3.1 I have gone through the grounds of appeal submissions of the appellant and the assessment order. Shri Nihalchand Sukhlalji Jain died without leaving any will or testamentary behind him and leaving the joint owners and confirmation parties as his legal heirs. During the F.Y. 2014-15 the impugned immovable property was sold by Shri Babulal Nihalchand Jain, brother of the assessee for S. 54,00,000/- and both the parties the assessee and his brother has executed the sale deed being joint owners. The AO rightly observed and held at page 4 of the assessment order that * the property belonged to the demised father and the said property was sold on 19.9.2014 and both the sons Sri Babulal Nihalchand Jain and Sri Vinod Nihal Chand jain (assessee) have equal share on the said sold property. Upon sale, sale deed was entered into by both the brothers”. Since the sale deed was executed by both the parties, the capital gain on the sale consideration is to be taxed in both the hands. Therefore, the Assessing officer has rightly computed the taxable capital gain in the hands of the appellant. Under the circumstances and in view of the foregoing facts, I am of the opinion that no interference is required in the assessment order. Hence, the addition is upheld.
4.3.2 However, the appellant has brought to the notice that the AO has not considered the cost of acquisition and brokerage paid while computing the capital gain. In this connection, the AO is directed to obtained the details for the cost of acquisition and cost of improvement, if any and allow the deduction accordingly. Appellant gets part relief. The ground of appeal is partly allowed.”
Being aggrieved, the assessee is in appeal before us.
8. We have considered the submissions of both sides and perused the material available on record. In the present case, the impugned addition is made in the hands of the assessee on account of the fact that the assessee along with his brother, sold a property on 19.09.2014 for a total consideration of Rs.54 Lakh. As per the Revenue, since the assessee was the joint owner of the property along with his brother, therefore, 50% of the total consideration is taxable in his hands as Long-Term Capital Gains.
9. On the other hand, as per the assessee, the immovable property was originally purchased on 23.06.2004 by his brother and out of natural love and affection, the name of the assessee and his father added was added to the property as joint owners. As per the assessee, the property, though was purchased in the joint name, but the actual possession and 100% rights of the said property belong to his brother and the entire consideration was also paid by him at the time of purchase of the said property. In this regard, during the hearing, the learned AR placed reliance on the statement of bank account of proprietary concern of assessee’s brother, which forms part of the paper book from pages 5-48. The learned AR further submitted that in order to purchase the property, the assessee’s brother also availed the home loan, which was entirely discharged by the assessee’s brother. Thus, it was submitted that even though the property was purchased in the joint name, however, the actual possession and 100% rights of the said property belong to the assessee’s brother. In order to support the aforesaid submission, reference was also made during the hearing to the balance-sheet of the assessee’s brother as on 31.03.2005, wherein the residential flat was shown as the fixed asset. It was further submitted that after the sale of the said property, during the year under consideration, the amount of sale consideration, i.e. Rs. 54 Lakh, was not only received in the bank account of the assessee, but the assessee’s brother also declared the same in its return of income filed for the assessment year 2015-16 and also claimed benefit of exemption under section 54F of the Act by purchasing another house property. The return of income filed by the assessee’s brother, forming part of the paper book from pages 50-53, was referred in this regard. In order to substantiate the aforesaid submission, the assessee has also placed on record an affidavit executed by his brother on 10.06.2025, which forms part of the paper book from pages 54-56, wherein the assessee’s brother has admitted that the entire payment for the purchase of the said property was made by him and his father and brother had not contributed anything towards the purchase of the property, and therefore, they do not have any beneficial interest in the said property. During the hearing, the learned AR submitted that there is no income tax proceeding in the hands of his brother for the year under consideration, and thus, it can be safely assumed that the sale consideration of Rs.54 Lakh and exemption thereon under section 54F of the Act claimed by the assessee’s brother has been duly accepted by the Revenue in his hands.
10. Having considered the facts and circumstances of the present case as supported by various evidences placed on record by the assessee, we are of the considered view that once the assessee’s brother has paid the entire purchase consideration for the purchase of the property and was in actual possession and had 100% rights over the said property, in such circumstances, even though assessee’s name was mentioned in the purchase deed as one of the joint owner, the consideration received on the sale of the said property cannot be added in the hands of the assessee once his brother has declared the entire consideration in his return of income for the year under consideration. Therefore, we do not find any basis in making the addition on account of Long-Term Capital Gains in the hands of the assessee in the facts and circumstances of the present case, when assessee’s brother was the sole owner of the property for all practical purposes and assessee’s name appears to have been added only out of natural love and affection. Therefore, we are of the considered view that the assessee is not a beneficial owner of the said property. Accordingly, the addition under section 54 of the Act made in the hands of the assessee is deleted. Accordingly, the grounds raised by the assessee are allowed.
11. In the result, the appeal by the assessee is allowed.
Order pronounced in the open Court on 12/03/2025
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