B.R. Baskaran, Accountant Member - The assessee has filed this appeal challenging the order dated 3.3.2014 passed by the ld. CIT(A)-25, Mumbai and it relates to the assessment year 2009-10.
2. The assessee is agitating the assessment of Long Term Capital Gain of Rs.6 lakhs in his hands.
3. We heard the parties and perused the record. The facts relating to the issue are stated in brief. The AO received information that the assessee has sold an immovable property for a sum of Rs.31 lakhs on 1.7.2008. When enquired about the same it was noticed that the assessee along with other co-owners has sold an ancestral property purchased by his Grand-father and the share of the assessee in the sale consideration came to Rs.6 lakhs. Before the AO, the assessee contended that the capital gain is assessable in the hands of his HUF. However, the AO held that the capital gain is assessable in the individual capacity. Since the assessee has inherited the ancestral property, the AO took the cost of acquisition as NIL. Accordingly, the AO assessed the entire amount of Rs.6 lakhs in the hands of the assessee. The ld. CIT(A) also confirmed that the capital gain is assessable in the individual capacity. However, the ld. CIT(A) held that the cost of acquisition should be taken as the market value as on 1.4.1981. The Ld CIT(A) estimated the market value of the property as on 1.4.1981 at Rs.1.00 Lakh and held that the assessee would be entitled to indexation benefit proportionate to his share on the value of Rs.1 lakh. Still aggrieved, the assessee has filed this appeal before us.
4. The ld. Counsel submitted that the conveyance deed of the property was executed on 31.3.2008 and the possession of the property was also given on that date and hence the capital gain, if any, is assessable in the assessment year 2008-09 and not during the year under consideration. He submitted that the registration of the property was only a formality to be complied under the Registration Act. Accordingly he submitted that the conveyance deed though registered under the Registration Act belatedly on 1.7.2008, it will date back to the date of execution of conveyance deed, i.e., 31.3.2008. The ld. Counsel also submitted the capital gain, if any, is not assessable in his individual hands, since the assessee has received only his share from the HUF. Alternatively, the ld. Counsel submitted that the capital gain should be computed by adopting the market value as on 1.4.1981 on the basis of valuation report furnished by the assessee. He submitted that there is no basis with the ld. CIT(A) for estimating the market value as on 1.4.1981 as Rs.1 lakh.
5. On the contrary, the ld. DR submitted that the assessee has not declared capital gain in the hands of HUF and hence the assessee should not make such a claim at this stage. He further submitted that the conveyance of the property would get concluded only upon completion of registration formalities, which in this case got completed on 1.7.2008. Accordingly he submitted that the capital gain is assessable during the year relevant to the assessment year 2009-10. With regard to the market value as on 1.4.1981, the Ld. DR submitted that the ld. CIT(A) was fair enough to estimate the value of property at Rs.1 lakh.
6. We have heard the rival contentions and perused the record. Admittedly, the conveyance deed was executed on 31.3.2008 and the same was registered under the Registration Act on 1.7.2008. On a perusal of the conveyance deed, we notice that the possession of the property was also given to the buyers on 31.3.2008 and the assessee along with other co-owners have received the entire consideration before 31.3.2008. Hence, we agree with the contentions of the assessee that the impugned property has been transferred during the year relevant to the assessment year 2008-09 and hence the assessing officer was not justified in assessing the same in AY 2009-10. The Ld A.R submitted that the registration of deed on 1.7.2008 was only a formality and upon the registration of the deed, the conveyance would date back to the date of execution of the deed. We find support to the contentions of the assessee in the decision rendered by the Hon'ble Andhra Pradesh High Court in the case of M. Syamala Rao v. CIT [1998] 234 ITR 140, wherein the Hon'ble High Court observed that the registration of the conveyance deed relates back to the date on which the agreement for sale was executed in favour of the buyer by the owner. In view of the above, the capital gain, if any, is assessable in AY 2008-09 only.
7. The next question is whether the capital gain can be assessed in the hands of the assessee herein in his individual capacity. We notice that the assessee has contended before the AO that the property belongs to the HUF and what he has received is only a share from the HUF. However, we notice that the tax authorities have rejected the claim on the reasoning that the HUF has not filed return of income and hence the capital gain should be assessed in the individual hands. In our view, the approach of the tax authorities cannot be uphold in view of the decision of Hon'ble Supreme Court in the case of ITO v. Ch. Atchaiah [1996] 218 ITR 239/84 Taxman 630, wherein the Hon'ble Apex Court has observed as under:—
"He (here the ITO) can, and he must, tax the right person and the right person alone. By right person, we mean the person who is liable to be taxed, according to law, with respect to a particular income."
Hence, merely because the HUF of the assessee has not filed return of income, the assessing officer cannot assess the capital gain in the hands of the assessee in his Individual status. Since the property has been jointly held by all the family members, the same cannot be said to belong to the assessee in his individual status. In fact, the conveyance deed was also executed jointly by all the co-owners. Accordingly we are of the view that the assessing officer was not correct in law in assessing the share of the assessee as capital gain in the individual status.
8. In view of the above, we do not find it necessary to address the other contentions urged by the assessee.
9. In view of the foregoing discussions, we set aside the order of the Ld CIT(A) on this issue and direct the assessing officer to delete the assessment of capital gains made in the hands of the assessee herein.
10. In the result, all the appeal of the assessee is allowed.