Case Law Details

Case Name : Janak Kanakbhai Trivedi Vs Income Tax Officer (Gujarat High Court)
Appeal Number : R/Tax Appeal No. 842 of 2018
Date of Judgement/Order : 16/07/2018
Related Assessment Year :
Courts : All High Courts (4419) Gujarat High Court (383)

Janak Kanakbhai Trivedi Vs ITO (Gujarat High Court)

It is the case of the appellant that the impugned ancestral property was actually acquired by the HUF of the appellant and that actually by mistake the appellant has given his individual PAN number at the time of execution of the sale deed. It has been argued that the property has been inherited by the appellant however under the Hindu Law the same is an HUF property. The arguments of the appellant have been examined and found to be totally untenable. The argument of the appellant that under the Hindu Law ancestral property devolves upon an HUF are unfounded since under the Hindu Law the ancestral property devolves upon the male lineal ancendants and upon the widow and daughter of the persons holding such ancestral property. The main lineal ancedant has the option to hold such property in his individual ownership or in his HUF. Facts of the case clearly indicates that in the instant case the sale deed shows that the appellant as an individual, and not in the capacity of the karta of the HUF, was the owner of the property since he has executed the sale deed in that capacity. The sale deed nowhere shown that the appellant was signing the conveyance deed as karta of his HUF. The same is evidenced by the fact that the PAN used was that of the appellant as an individual and not of his HUF. It is pertinent to note at this stage that the appellant has been filing the return of income of his HUF and hence no argument can be taken that the HUF was not having a PA No. It is equally pertinent to note from the facts of the case that admittedly returns of income of appellants HUF has been filed in the past and the impugned property has not been shown in such returns as property belonging to the HUF. The intention of the appellant thus are very clear that he always wanted to show the impugned property as belonging to him in his individual capacity and not as belonging to his HUF. The argument of AO that the sale proceeds of the impugned property were deposited into the bank account held by the appellant in his individual capacity which shown that the property was always held as an individual property are also found to be correct. In case the property was belonging to the HUF, then firstly the appellant should have signed as karta of the HUF secondly should have used the PANo. of the HUF and thirdly should have deposited the sale proceeds in the bank account of the HUF as the HUF was having a separate bank account. Thus, in view of the above facts of the case it is concluded that the AO has not made any mistake of law or facts in assessing LTCG arising from the impugned property in the hands of the appellant as an individual.

FULL TEXT OF THE HIGH COURT JUDGMENT / ORDER IS AS FOLLOWS:

1. Feeling aggrieved and dissatisfied with the impugned order passed by the learned Income Tax Appellate Tribunal dated 30.11.2017 passed in ITA No.418/Ahd/2014 for Assessment Year 2009-10, by which the learned Tribunal has dismissed the said appeal preferred by the assessee and has confirmed the order passed by the learned CIT (Appeals), by which the learned CIT (Appeals) upheld the Assessing Officer’s action, the assessee has preferred the present appeal with the following proposed questions of law:-

[1] Whether on facts Tribunal has substantially erred in law in confirming taxation of long term capital gain on sale of immovable property at Rs.20,63,888/- in the hands of the appellant when the ancestral inherited property is owned, sold and the taxed in the hands of the appellant HUF?

[2] Whether on facts and in law, mistake of mentioning PAN of the appellant instead of the HUF in the sale deed results into chargeable capital gain in the hands of the appellant on sale of inherited immovable property owned by the appellant HUF?

[3] Whether on facts and in law, the Tribunal has substantially erred in confirming the taxation of long term capital gain on sale of immovable property owned by HUF in the hands of the appellant though consideration is received by the HUF and the same is reflected in the return of the HUF?

[4] Whether on facts and in law, the appellant can be substantially assessed to tax on long term capital gain on sale of immovable property when the same is already assessed finally in the hands of the HUF?

2. The facts leading to the present appeal in nutshell are as under:-

2.1 That the assesse filed return of income for Assessment Year 2009-10, declaring total income at Rs.2,36,600/-. The same was processed under Section 143(1) of the Income Tax Act. The case was selected for scrutiny and notice under Section 143(2) of the Act was issued. That during the course of assessment proceedings, as per the AIR information received from Sub-registrar officer to RUVA, Bhavnagar, it was found that the assessee had sold the immovable property being survey no.3117, plot No.1877, admeasuring 1448.54 sq. mtrs. along with structure standing thereon for consideration of Rs.1,69,00,000/-. On verification of the accounts, it was found tat the assessee has not shown income from capital gain arising out of sale of the above property and therefore, show cause notice dated 01.10.2011 was issued to the assessee requiring him to explain why capital gain arising out of sale of the above property should not be computed and added to the total income of the assessee. In response to the same, the assessee submitted that capital gain arising out of the aforesaid sale was shown in the case of assessee’s HUF and the said property belonged to HUF. However, considering the material on record, the learned Assessing Officer did not accept that the property belonged to HUF. Considering the material on record and the surrounding circumstances, the Assessing Officer held that the property belonged to the assessee, who sold the same and therefore, capital gain arising out of sale of the above property was required to be computed and added to the total income of the assessee. Accordingly, he framed the assessment order and added capital gain in the total income.

2.2 Feeling aggrieved and dissatisfied with the assessment order, the assessee preferred appeal before the learned CIT (Appeals). The learned CIT (Appeals), by cogent reasons and speaking order, dismissed the appeal and the same has been confirmed by the learned ITAT. Hence, the assessee is before this Court with the aforesaid proposed questions of law.

3. Shri Darsan Patel, learned Advocate appearing on behalf of the appellant-assessee has reiterated what was submitted before the learned CIT (Appeals) and the learned Tribunal and has submitted that as such, the property belonged to the assessee’s HUF and even sale consideration was deposited in the bank account of the assessee’s HUF. It is also submitted that even out of the sale consideration, tax free bonds were purchased by HUF.

4. Heard Shri Darsan Patel, learned Advocate appearing on behalf of the appellant-assessee at length.

5. At the outset, it is required to be noted that the learned CIT (Appeals), by giving cogent reasons in paras-5.1 and 5.2, has upheld the order passed by the Assessing Officer, by which the property sold was held to be owned by the assessee and not the assessee’s HUF. Paras-5.1 reads as under:-

“5.1 The 3rd ground of appeal is regarding the action of the assessing officer in holding that long term capital gains has arisen in the hands of the appellant in his individual capacity and not to his HUF and thus making an addition of Rs.20,63,888/-. The assessing officer has discussed this issue in detail in paras 2.1 to 2.5 of the assessment order. In brief the assessing officer made in the impugned addition because in the sale deed appellant was shown as a seller in his individual capacity, PAN number used in the sale deed was that of the individual, sale proceeds were deposited into the appellant’s bank account held in individual capacity et cetera.

5.2 I have carefully considered the arguments taken by the assessing officer, submissions made by the appellant and the material available on records. It is the case of the appellant that the impugned ancestral property was actually acquired by the HUF of the appellant and that actually by mistake the appellant has given his individual PAN number at the time of execution of the sale deed. It has been argued that the property has been inherited by the appellant however under the Hindu Law the same is an HUF property. The arguments of the appellant have been examined and found to be totally untenable. The argument of the appellant that under the Hindu Law ancestral property devolves upon an HUF are unfounded since under the Hindu Law the ancestral property devolves upon the male lineal ancendants and upon the widow and daughter of the persons holding such ancestral property. The main lineal ancedant has the option to hold such property in his individual ownership or in his HUF. Facts of the case clearly indicates that in the instant case the sale deed shows that the appellant as an individual, and not in the capacity of the karta of the HUF, was the owner of the property since he has executed the sale deed in that capacity. The sale deed nowhere shown that the appellant was signing the conveyance deed as karta of his HUF. The same is evidenced by the fact that the PAN used was that of the appellant as an individual and not of his HUF. It is pertinent to note at this stage that the appellant has been filing the return of income of his HUF and hence no argument can be taken that the HUF was not having a PA No. It is equally pertinent to note from the facts of the case that admittedly returns of income of appellants HUF has been filed in the past and the impugned property has not been shown in such returns as property belonging to the HUF. The intention of the appellant thus are very clear that he always wanted to show the impugned property as belonging to him in his individual capacity and not as belonging to his HUF. The argument of AO that the sale proceeds of the impugned property were deposited into the bank account held by the appellant in his individual capacity which shown that the property was always held as an individual property are also found to be correct. In case the property was belonging to the HUF, then firstly the appellant should have signed as karta of the HUF secondly should have used the PANo. of the HUF and thirdly should have deposited the sale proceeds in the bank account of the HUF as the HUF was having a separate bank account. Thus, in view of the above facts of the case it is concluded that the AO has not made any mistake of law or facts in assessing LTCG arising from the impugned property in the hands of the appellant as an individual. The action of the ld. A.O. Is therefore confirmed and the ground of appeal raised is dismissed.”

6. So far as submission on behalf of the assessee relying upon pages 27 to 28 of the paper book that the sale consideration was deposited in the HUF’s bank account is concerned, it is required to be noted that the same has been dealt with and considered by the learned Tribunal I para-3. Learned Counsel appearing on behalf of the assessee before the learned Tribunal has specifically stated that the statement of the bank account produced on pages-27 and 28 of the paper book does not seem to be that of the HUF’s bank account.

7. There are concurrent findings of facts recorded by all the authorities below on appreciation of evidence and consideration of surrounding circumstances, viz. (I) that the same was executed by the assessee in his individual capacity and not as ‘karta’ of the HUF, (II) that in the same deed, PAN of the assessee in his individual capacity has been given and not PAN of the HUF, (III) that in the earlier years, property in question was not shown as owned by the HUF in the return of HUF and (IV) that the sale consideration has not been deposited in the HUF’s bank account.

8. We are in complete agreement with the view taken by the learned Tribunal. No substantial question of law arises. The present appeal deserves to be dismissed and it is accordingly dismissed.

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