The same income cannot be taxed twice by two different people
Fact and issue of the case
This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 09.09.2022 for the A.Y.2009-10
Brief facts of the case are, assessee filed its return of income on 18.01.2010 declaring total income of ₹.3,31,080/-. The case was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee. In response Authorised Representative of the assessee attended and submitted the relevant information as called for
During the assessment proceedings, Assessing Officer observed that assessee has declared income from capital gains of ₹.3,29,300/-, income from rent of ₹.2,22,000/- and income from other sources of ₹.31,626/-being interest from Bank. Further, Assessing Officer briefly narrated the background of the case that during A.Y. 2009-10, the assessee and his wife, Mrs. Likhiya Dilip Kanath, jointly purchased a property in Chandivali in the year 2005 in the ratio of 50:50 for ₹.22,50,000 plus registration. Subsequently, they sold the said property in A.Y.2009-10 for a consideration of ₹.59,00,000/- and computed long term capital gain of ₹.32,65,191/-. Therefore, the Capital Gain arising out of it was to be availed by both the parties in 50:50 share. However, the assessee’s wife claimed the entire Long Term Capital Gain in her hand and claimed deduction u/s. 54 of ₹.32,65,191/-. However, while finalizing the assessment proceedings for A.Y. 2009-10 in the case of assessee’s wife, the erstwhile Assessing Officer has allowed 50% deduction i.e., to the extent of ₹.16,32,595/-
While finalizing the assessment proceedings for A.Y. 2009-10, the erstwhile Assessing Officer of assessee’s wife took 50% of capital gain in the hands of the assessee from sale of residential premises and added the same to the total income of the assessee without allowing deduction u/s.54 of the Act for investment made in new residential property, by stating that the assessee’s share in the said property is 50% and balance 50% belongs to assessee’s husband. Subsequently in assessee’s wife appeal CIT(A) allowed 50% of the capital gain as deduction u/s. 54 of the Act for investment in purchase of new residential flats in the hands of the assessee’s wife. However, the Department has filed an appeal before the ITAT against the order of CIT(A) and that appeal is pending in the case of assessee’s wife
Observation of the court
Considered the rival submissions and material placed on record, we observe from the record that the joint property purchased by the assessee along with his wife was sold and the whole income out of the same was declared by assessee’s wife and also investment of the sale consideration in the new property and claimed the deduction u/s. 54 of the Act by the assessee’s wife. However, the erstwhile Assessing Officer of the assessee’s wife has disallowed 50% of the deduction claimed by the assessee’s wife capital gain was u/s. 54 of the Act considering the fact that it is a joint property. However, in subsequent appellate proceedings the claim of assessee’s wife was granted by the Coordinate Bench and the relevant findings of the Coordinate Bench are given below
We have carefully considered the rival submissions. The whole controversy revolves around the manner in which the CIT(A) has disposed off the assessee’s Grounds before him. Notably, the assessee was aggrieved with the denial of deduction u/s 54F of the Act and the non-consideration of the entire Capital Gains in the hands of the assessee herself. In this context, we find that the findings of the CIT(A) is contained in para 3.3 of the order. While the CIT(A) clearly brings out, at the beginning of his findings, that the entire Capital Gains was liable to be considered in the hands of the assessee and so also the corresponding deduction u/s 54F of the Act, he thereafter makes a discussion in the penultimate portion, which we have reproduced above
In our considered opinion, the discussion in the penultimate portion of the order does not distract from the initial findings of the CIT(A) that the entire Capital Gains was to be assessable in the hands of the assessee herself because the purport of the discussion in the penultimate portion of the order was merely to point out that the exercise carried out by the Assessing Officer was a tax-neutral exercise. Therefore, in our considered opinion, what emerges from the decision of the CIT(A) is that the Long Term Capital Gain is assessable in the hands of the assessee, and so also the corresponding deduction u/s 54F of the Act. Pertinently, the order of the CIT(A) has not been appealed against by the Revenue. So, however, for the present we are concerned with the additiona l Ground now sought to be raised by the assessee before us, which we have reproduced hereinabove. Pertinently, the additional Ground arises from an action taken in the hands of assessee’s husband, which is not the subject matter before us. Thus, we are not in a position to evaluate the validity of the action of the Assessing Officer in the case of assessee’s husband. Thus, we decline to adjudicate the additional Ground of appeal
Respectfully following the above said decision, the whole income earned by assessee’s wife has brought to tax and therefore separately same income cannot be brought to tax in the hands of the assessee. It is settled position of law that income cannot be taxed in the hands of two persons. Therefore, the proceedings initiated in the case of assessee is bad in law. Accordingly, the ground raised by the assessee is allowed
In the result, appeal filed by the assessee is allowed
Order pronounced in the open court on 17th April, 2023
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Dilip-Divakaran-Kanath-Vs-ITO-ITAT-Mumbai-2
