Sale of Land of HUF after Death of Karta is assessable in HUF’s hand

Assessing Officer has not disputed the fact that Sh. Amarchand had expired on 15.05.1995 and there was no occasion to sell the land by him in his individual capacity. It is also not in dispute that the land was sold by Sh. Babu Lal along with his 3 brothers and his mother Smt. Chunni Devi. The Coordinate Bench in its order dated 25.03.2011 has given a finding of fact which has not been disputed by the either side and in fact the said decision of the Coordinate Bench has been relied upon by both the parties. As noted above, the Coordinate Bench has confirmed the finding of fact as given by the ld. CIT(A) that the agricultural land sold in question belonged to the HUF consisting of Sh. Sukhdev and his mother and 3 brothers. Therefore, what has been sold was ancestral agricultural land which belongs to the HUF and it has been brought to tax in the hands of HUF after the death of Sh. Amarchand. There is no partition of HUF and there is no finding of any partition given by the Assessing Officer u/s 171 of the Act. After the death of Sh. Amarchand, HUF continues to exists and represented by his elder son Sukh dev who became the Karta of HUF and the other coparceners are Smt. Chunni Devi wife of Late Sh. Amarchand, and Sh. Babu Lal, Sh. Ganpat lal and Sh. Netrapal, all sons of Late Sh. Amarchand. Though the HUF is still known as M/s Amarchand HUF, in essence, it is the HUF which consists of Sh. Sukh dev as Karta and coparceners are Smt. Chunni Devi, Sh. Babu Lal, Sh Ganpat lal and Sh. Netrapal. The assessment, therefore, has rightly been done in the name of HUF consisting of abovesaid persons. In light of above, we do not see any infirmity in the order of the Assessing Officer in bringing to tax the long capital gains arising on account of sale of agricultural land in the hands of the HUF consisting of Sh. Sukh Dev, Smt Chunni Devi, Sh. Babu Lal, Sh. Ganpatlal and Sh. Netrapal.

FULL TEXT OF THE ITAT JUDGMENT

ORDER

PER SH. VIKRAM SINGH YADAV, A.M.

This is an appeal filed by the assessee against the order of ld. CIT(A)- III, Jaipur dated 21.03.2016 wherein the assessee has taken the following grounds of appeal:

“1. That on the facts and in the circumstances of the case, the Learned Assessing Officer as well as Learned CIT(A)-III, Jaipur have grossly erred in treating Sh. Amarchand HUF as sole owner of agricultural land so sold, whereas the name of Sh. Amarchand was removed from Jamabandhi on his death. The land was inherited by the wife of Sh. Amarchand & his four sons. Thus question of land belonging to Sh. Amarchand does not arise. Thus assessment completed in the name of Sh. Amarchand HUF & confirmed by the Learned CIT(A) deserves to be quashed.

2. That the learned Assessing Officer Ward 7(2), Jaipur has grossly erred in law as well as in facts in completing assessment u/s 147/143(3) of the I.T. Act, 1961 in the status of HUF of M/s Amarchand and also confirmed by the Learned CIT(A)-III, Jaipur, whereas the sale proceed of agricultural land belonged to respective HUF of Sh. Babulal, Sukhdev, Ganpat Lal, Netrapal & Smt. Chunni Devi and as such assessment so completed deserves to be cancelled.

3. That on the facts & in the circumstances of the case, the Learned Assessing Officer Ward 7(2), Jaipur has grossly erred in completing assessment u/s 147/143(3) of the I.T.Act, 1961 in the status of HUF of Late Sh. Amarchand & confirmed by the Learned CIT(A)- III, Jaipur, whereas after death of Sh. Amarchand, the name of Sh. Babulal, Sukhdev, Ganpat Lal, Netrapal & Smt. Chunni Devi have been entered in the Jamabandhi on 14.05.1996 & name of Late Sh. Amarchand was removed. Therefore the agricultural land so sold belonged to respective HUF of Sh. Babulal, Sukhdev, Ganpat Lal, Netrapal & Smt. Chunni Devi in her individual capacity. Thus assessment completed in the name of M/s Amarchand (HUF) deserves to be cancelled. 

4. That on the facts and in the circumstances of the case the Learned Assessing Officer Ward 7(2), Jaipur has grossly erred in treating the two sale proceed of agricultural land at Rs. 19875000/- (15778000 + 4097000) belonged to M/s Amarchand HUF & confirmed by the Learned CIT(A)-III, Jaipur, whereas the sale proceeds had been received by the respective HUF of Sh. Babu Lal, Sukhdev, Ganpat Lal, Netrapal & Smt. Chunni Devi in her individual capacity and also accepted by the Sub-Registrar, Sanganer, Distt. Jaipur as per details given below. Had there been any doubt about share received by the respective HUF, the Sub-Registrar would not have registered the documents.

Thus assessment completed in the name of M/s Amarchand HUF deserves to be cancelled. 

5. That on the facts and in the circumstances of the case, the learned Assessing Officer Ward 7(2) Jaipur has totally over ruled on the findings of the Learned CIT(A)-III, Jaipur as well as Hon’ble Members of ITAT Bench, Jaipur and confirmed by the Learned CIT(A), Jaipur, whereas the than Honourable CIT(A)-III, Jaipur had held that agricultural land, undisputedly belonged to the HUF and not to the appellant in his capacity as an individual. Therefore assessment completed in the name of M/s Amarchand HUF deserves to be quashed.

6. That on the facts and in the circumstances of the case, the Learned Assessing Officer Ward 7(2), Jaipur has wrongly determined that no division of Khasara No. was made in revenue records, whereas the name of the five persons viz Sh. Babu La., Sukhdev, Ganpat Lal, Netrapal & Smt. Chunni Devi have been mentioned and according to these facts, while executing sale deed of agricultural land, the sellers had been received their equal shares of money by way of bankers cheque. Therefore, the Learned Assessing Officer Ward 7(2), Jaipur has wrongly completed assessment u/s 147/143(3) of the I.T.Act, 1961 in the name of M/s Amarchand HUF and confirmed by the Learned CIT(A), Jaipur, whereas Sh. Amarchand was expired long back i.e. on 15.05.1995 and land in question was inherited by Smt. Chunni Devi wife of Late Sh. Amarchand & his four sons & their names were entered in jamabandhi on 14.05.1996. Therefore the assessment so completed is contrary to the facts on record, hence deserves to be cancelled.”

2. The brief facts of the case are that land at Khasra No. 13 to 18, 25 and 26 of village Thikariya, and land at Khasra No.380, 391, 406 of village Prithvisinghpura alias Naiwala was jointly sold by Sh. Sukhdev S/o Late Amarchand, Smt. Chunni Devi w/o of Late Sh. Babu Lal, Ganpat lal and Netrapal, all sons of Late Amarchand, during the year under consideration. The assessment proceedings in cases of Smt. Chunni Devi, Sukhdev and Babu lal were completed in the individual capacities by the Assessing Officer. These individual cases were taken up in appeal before the ld CIT(A) and thereafter, before the Coordinate Bench during the appellate proceedings. It was argued in those appellate proceedings that the agricultural land sold was ancestral land and inherited by the individual appellants from Late Amarchand who had inherited the same from his father Sh. Nand Ram and the agricultural land thus belongs to the HUF and not to the individual appellants. The said contentions of the individual appellants were accepted and the relevant findings of the Coordinate Bench in case of Sh. Shukh dev, son of Late Amarchand in ITA No. 747/JP/2010 dated 25.03.2011 is as under:

“8. After considering the orders of the AO and ld. CIT(A) and written submissions of the assessee, we find no infirmity in the finding of ld. CIT(A) Findings of ld. CIT(A) have been recorded in para 2.4 at pages 4 & 5 of his order are as under:-

“2.4. I have carefully considered the facts of the case and submissions of ld. A/R. I have also gone through the various details/documents filed by the ld. A/R in support of his submissions and the remand report thereon received from the ld. AO. On perusal of the same, it is seen that the source of the deposits of Rs. 39,75,000/- on 8.2.2006 in the appellant’s bank account was the 1/5 th share out of the sale proceeds of the agricultural land sold by the appellant, along with his mother and three brothers (as detailed in para 2.2.1 above) and the said agricultural land, undisputedly, belonged to the HUF and not to the appellant in his capacity as an individual. Further, I find that the amount of Rs. 8,19,400/- in respect of which the ld. AO has made a separate addition of Rs. 8,14,200/-as long term capital gain, was included in the aforesaid amount of Rs. 39,75,000/- which was deposited on 8.2.2006, in the appellant’s bank account. Therefore, on these facts, both the additions i.e. of Rs. 39,75,000/- and of Rs. 8,14,200/- are not sustainable in the appellant’s case. Consequently, the AO is directed to delete those additions. However, as mentioned earlier, there is no dispute regarding the fact that the agricultural land sold, in question, belonged to the HUF (of the appellant and his mother and three brothers) and, therefore, the AO may like to examine the possibility of taxing the long term capital gains arising, on account of sale of aforesaid agricultural land, in the hands of the concerned HUF.”

These findings are findings of fact which do not require any interference, therefore, the order of ld. CIT(A) is liable to be confirmed. For the sake of clarification, the ground of the department in accepting additional evidence is liable to be rejected as the ld. CIT(A) has accepted the additional evidence by affording reasonable opportunity to the AO and the AO has fairly accepted that the claim of assessee is reasonable. Therefore, we do not understand why this ground is raised by the department. With this observation, the order of ld. CIT(A) is confirmed.”

3. Similar findings has been given by the Coordinate Bench in case of Sh. Babu Lal s/o Late Amarchand in ITA No. 770/JP/2010 dated 13.04.2011.

4. Here, it is noted that the Coordinate Bench has confirmed the finding of the ld. CIT(A) that the agricultural land in question which has been sold belongs to the HUF consisting of Sh. Sukh dev and his mother and 3 brothers and it has been confirmed by the Coordinate Bench that AO make like to examine the possibility of taxing the long term as capital gains arising on account of sale of the aforesaid agricultural land in the hands of the concerned HUF consisting of Sh. Sukh dev and his mother and 3 brothers.

5. Pursuant to the above orders passed by the ld. CIT(A) and the Coordinate Bench, the assessment in case of the HUF (known as M/s Amarchand HUF) was take up by issuance of notice u/s 148 and thereafter the assessment was completed u/s 147 r.w.s 143(3) of the Act.

6. During the course of assessment proceedings, the AR of the assessee submitted before the AO a copy of death certificate of late Sh. Amarchand and submitted that Sh. Amarchand who has expired on 15.5.1995 has no occasion to sell the agricultural land during the subject year under consideration and subject proceedings initiated against Late sh Amarchand deserves to be dropped. In our view, it is here that the confusion has arisen in the mind of the appellant. The assessment proceedings has been initiated in the hands of HUF known as Amarchand HUF and has not been initiated in the individual capacity of late Sh Amarchand. Here, we refer to the observation of the Assessing Officer who has rightly appreciated the concern rather confusion of the appellant as noted above and his findings are as under:

“The reply of the A/R of the assessee has been considered carefully. The contention that the land was not sold by Sh. Amarchand in the year 2005- 06 has no debate as Sh. Amarchand had passed away in the year 1995. The A/R himself accepted that the land was sold by Sh. Babu Lal Verma along with his three brothers and his mother Smt. Chunni Devi and this land was their ancestral HUF agricultural land.

3. As the land sold was claimed to ancestral one and belong to the HUF and was in possession of their father Sh. Amarchand and who also inherited this property from his father Sh. Nandu Ram, hence it is clear that the land in question was the inherited property of M/s Amarchand HUF. After the death of Sh. Amarchand as no physical division of the land in question was made amongst the coparceners i.e. Sh. Sukhdev (S/o late Sh. Amarchand) & Sh. Chuni Devi (W/o late Sh. Amarchand), Sh. Babu lal, Sh. Ganpat lal and Sh. Netrapal (all sons of late Sh. Amarchand) although the Namantaran of the land in question was made in the revenue record but specific division of Khasra (s) in respect of this land was not made and all the Khasras were combindly owned by all the sellers. As no physical division of the land was made, the same remains the property the combined HUF of all the sellers i.e. four brothers and their mother i.e. M/s Amarchand HUF. Further, no evidence in respect to any division of M/s Amarchand HUF was submitted, hence in the light of above facts it is held that the land bearing Khasra number(s) 13 to 18, 25 to 26, 380, 391, 406 of village Thikariya and Prithvisinghpura alias Naiwala was actually the property of M/s Amarchand HUF which were sold by all the members of the HUF combined after the death of Sh. Amarchand.”

7. The AO has therefore held that after the death of Sh. Amarchand, the property continues to a property belonging to the HUF and since there is no partition of HUF and as the same has been sold jointly by all the surviving members of the HUF, the same was subject to hands in the hands of the HUF. The HUF which is brought to tax is represented by Karta Sh. Sukhdev and consisting of other members namely Smt Chuni Devi, Sh. Babulal , Jeevanal and Netrapal. Though the HUF is still called and represented as Amarchand HUF but after his death, he was no more (and could not be) the karta/ co parcener/ member of the HUF. We do not see any infirmity in the order passed by the AO.

7. Having said that, let’s examine the findings of the ld CIT(A) which are under challenge before us which are contained at para 4.3 of her order which is reproduced as under:

“4.3 I have carefully considered the facts of the case, findings of the AO and submission of the appellant. All grounds of appeal are relating to issue relating to completion of assessment in name of Amarchand HUF liable to be taxed for capital gain on sale of ancestral land having capital gain of Rs. 19744130/-.

In this case originally the order was passed in the name of individuals-

1. Sh. Jeevanlal

2. Babulal

3. Sukhdev

4. Chunnidevi

5. Netrapal

In the case of Sukhdev etc., CIT(A) held that subject land belonged to HUF. Since it is inherited from forefathers. These orders were confirmed by ITAT with direction that AO can take remedial action in hands of HUF as per law. Accordingly the AO reopened case of Amarchand HUF by issuing notice. Amarchand HUF was the owner of the land and all the individuals stated above being co parceners and HUF members. On the death of Amarchand, the eldest son Sukhdev became Karta.”

“Therefore, it is clear that land was not partitioned. No mutation was made. All are jointly holding the land inherited through farthers HUF. Therefore completion of assessment in hands of Amarchand HUF is hereby held as proper in accordance with order of Hon’ble ITAT, Jaipur. Action of the AO is therefore upheld. “

8. None appeared on behalf of the assessee, however, written submissions dated 02.12.2016signed by Mr. Narendra Kr. Goswami, Advocatewas submitted at the Registry and which have been duly considered by us. In its written submission, it is noted that the assessee has reiterated it contention which have been raised before the lower authorities. The Ld. AR submitted that the name of Sh. Babu Lal, Sukh dev, Ganpat Chand, Netrapal and Smt. Chunni Devi were entered in Jamabandhi on 14.05.1995 and name of Late Sh. Amarchand was removed from the Jamabandhi and therefore, the question of land belonging Sh. Amarchand does not arise. It was further submitted that from the perusal of the sale deeds, it is revealed that name of Late Sh. Amarchand HUF has not been mentioned in the sale deed as the seller whereas name of Sh. Babu Lal along with their 3 brothers and name of Sh. Chuni Devi have been mentioned as the seller of the agricultural land and the sale proceeds have also been received through cheques by Sh. Babu Lal and his brother as well as his mother Sh. Chuni Devi. It was further submitted that the agricultural land so sold belonged to the respective HUF consisting of Sh. Babu Lal, Sh. Sukh dev, Sh. Ganpat Chand, Sh. Netrapal, Sh. Chuni Devi and the assessment in the name of Late Sh. Amarchand HUF has been framed incorrectly and wrongly confirmed by CIT(A). It was further submitted that the status of Sh. Babu Lal and Sukh devas that of HUF has already been confirmed by the ITAT, Jaipur Bench vide order dated 25.3.2011 in ITA No. 770/JP/2010.

9. Ld. DR is heard who has relied on the order of lower authorities.

10. We have heard the ld. DR and also gone through the written submission filed by the ld. AR and other material available on record. As we have noted above, the Assessing Officer has not disputed the fact that Sh. Amarchand had expired on 15.05.1995 and there was no occasion to sell the land by him in his individual capacity. It is also not in dispute that the land was sold by Sh. Babu Lal along with his 3 brothers and his mother Smt. Chunni Devi. The Coordinate Bench in its order dated 25.03.2011 has given a finding of fact which has not been disputed by the either side and in fact the said decision of the Coordinate Bench has been relied upon by both the parties. As noted above, the Coordinate Bench has confirmed the finding of fact as given by the ld. CIT(A) that the agricultural land sold in question belonged to the HUF consisting of Sh. Sukhdev and his mother and 3 brothers. Therefore, what has been sold was ancestral agricultural land which belongs to the HUF and it has been brought to tax in the hands of HUF after the death of Sh. Amarchand. There is no partition of HUF and there is no finding of any partition given by the Assessing Officer u/s 171 of the Act. After the death of Sh. Amarchand, HUF continues to exists and represented by his elder son Sukh dev who became the Karta of HUF and the other coparceners are Smt. Chunni Devi wife of Late Sh. Amarchand, and Sh. Babu Lal, Sh. Ganpat lal and Sh. Netrapal, all sons of Late Sh. Amarchand. Though the HUF is still known as M/s Amarchand HUF, in essence, it is the HUF which consists of Sh. Sukh dev as Karta and coparceners are Smt. Chunni Devi, Sh. Babu Lal, Sh Ganpat lal and Sh. Netrapal. The assessment, therefore, has rightly been done in the name of HUF consisting of above said persons. In light of above, we do not see any infirmity in the order of the Assessing Officer in bringing to tax the long capital gains arising on account of sale of agricultural land in the hands of the HUF consisting of Sh. Sukh Dev, Smt Chunni Devi, Sh. Babu Lal, Sh. Ganpat lal and Sh. Netrapal.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced in the open court on 31/03/2017.