The Tax Publishers2022 TaxPub(DT) 0233 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 263

Land in question was acquired by Ramnikbha N. Patel in his individual capacity for his 1/4th interest and not as family property. As such land was not devolved to him as per section 6 of the Hindu Succession Act, 1956 as Mitakshra coparcenary as the same was not the property of his ancestor as they were only tenant of land and not the owner. Therefore, any income arising from the sale of such land was taxable in his individual capacity as he was the owner of said land. In view of the above, AO dropping assessment proceeding under section 147 against HUF was not prejudicial to the interest of the revenue as the land in question was not the property of HUF. Hence, the HUF was not liable to capital gain on transfer of such land. Therefore, order passed under section 263 was set aside.

Revision under section 263 - Erroneous and prejudicial order - Pr. CIT alleged assessment in wrong hands -

Pr. CIT passed order under section 263 holding that order of AO dropping the proceeding under section 147 was erroneous insofar prejudicial to the interest of revenue for the reason that property in question was an ancestral property inherited by Ramnikbahi Patel from his forefather. Thus, such ancestral property was property of HUF of Shri Ramnikbhai, and such HUF was liable to pay tax on account of income arose from sale of such property. However, AO without proper verification of the fact dropped the assessment proceeding under section 147.Held: Land in question was acquired by Ramnikbha N. Patel in his individual capacity for his 1/4th interest and not as family property. As such land was not devolved to him as per section 6 of the Hindu Succession Act, 1956 as Mitakshra coparcenary as the same was not the property of his ancestor as they were only tenant of land and not the owner. Therefore, any income arising from the sale of such land was taxable in his individual capacity as he was the owner of said land. In view of the above, AO dropping assessment proceeding under section 147 against HUF was not prejudicial to the interest of the revenue as the land in question was not the property of HUF. Hence, the HUF was not liable to capital gain on transfer of such land. Therefore, order passed under section 263 was set aside.

Relied:Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2006-07


INCME TAX ACT, 1961

Section 253(5)

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