2021 (6) TMI 315 - AT - Income Tax

Tribunal sets aside CIT(A)'s findings, directs AO to re-adjudicate issues.

ACIT, Circle – 22 (1), Mumbai Versus M/s. Asian Chemical Industries

The Tribunal allowed the revenue's appeal for statistical purposes, setting aside the CIT(A)'s findings. The AO was directed to re-adjudicate the issues ... Capital gain computation - whether the income on sale of property is assessable in the hands of co-owners, whereas the agreement has been renewed by AOP - Adoption of Fair market Value(FMV) determined by the DVO and the assessee was provided opportunity to file objections - Whether the CIT(A) has power to value the property as on 1-4-198 - HELD THAT:- On perusal of the assessment order, these aspects were never dealt before the A.O. whereas the A.O. has only considered the sale consideration and applied the DVO value. The Ld.CIT(A) has observed that the income from the property and capital gains related to the property has to be allocated and computed in the hands of the Co-owners and not in the hands of the assessee. We find that the assessee has raised the contentions that it is an A.O.P and the three co owners shares are determined and there is a mistake occurred in the hands of the assessee in offering the income instead of in the hands of three co owners of the property. The assessee can not rectify the claim by filling a revised computation of income, but as per the observations in the case of Goetze (india) Ltd [2006 (3) TMI 75 - SUPREME COURT] the assessee has to file the revised return of income for such claims before the A.O.But the assessee chooses to file revised computation of income and not revised return of income. We find that the CIT(A) has considered the claim of the assessee and observed that the gains on sale of property shall be allocated among the co-owners. But the point to be considered that the three co-owners have not filed their return of income offering the gains on sale of the property. Further the CIT(A) is not a appellate authority for the three co owners and therefore the CIT(A) findings are not accepted. The assessee should file the revised return of income as per the ratio of the supreme court decision and then the Assessing officers has to determine/assessee the total Income. We set aside the findings of the CIT(A) in this ground of appeal and restore entire disputed issue to the file of the Assessing officer to adjudicate a fresh and the assesses shall file the revised return of income. A.O. shall not be influenced by the observations in the CIT(A) order. A.O. should independently also verify that the income is offered in the hands of the Three Co-owners - assessee should be provided adequate opportunity of Hearing and shall co operate in submitting the information and we allow the grounds of appeal for statistical purpose. Fair Market Value(FMV) to be adopted and the valuation of property as 1-4-1981, we are of the substantive opinion that the assessee can make claims before the Assessing officer. Since we have restored the disputed issues to the file of the Assessing officer as discussed above, we are of view that these two issues are also restored to the file of the assessing officer to consider and adjudicate on merits and allow the grounds of appeal of the revenue for statistical purpose. Issues Involved:1. Assessability of income from the sale of property in the hands of co-owners versus the Association of Persons (AOP).2. Allocation and claim of deduction of income from house property.3. Adoption of Fair Market Value (FMV) determined by the District Valuation Officer (DVO).4. Valuation of the property as of 01.04.1981.Issue-Wise Detailed Analysis:1. Assessability of Income from Sale of Property:The core issue revolves around whether the income from the sale of property should be assessed in the hands of the co-owners or the AOP. The CIT(A) held that the income arising from the sale of the property should be allocated among the co-owners, as the property ownership is shared among three members with defined shares. The CIT(A) relied on judicial decisions and Section 26 of the Income Tax Act, which stipulates that income from property owned by co-owners should be assessed in their respective hands. However, the Tribunal noted that the assessee did not file revised returns reflecting this allocation and emphasized the necessity of filing revised returns as per the Supreme Court's decision in Goetze (India) Ltd vs. CIT. Consequently, the Tribunal set aside the CIT(A)'s findings and directed the AO to adjudicate afresh, ensuring the co-owners file revised returns.2. Allocation and Claim of Deduction Income from House Property:The CIT(A) observed that the assessee's revised computation of income should be considered to avoid double taxation. The original return incorrectly included the sale proceeds of galas as advance rent, which was included in total income as income from house property. The CIT(A) directed that the income from property and capital gains should be allocated among the co-owners. However, the Tribunal instructed that the AO should verify that the income is offered in the hands of the three co-owners, and the assessee should file revised returns accordingly.3. Adoption of Fair Market Value (FMV) Determined by DVO:The AO adopted the FMV of Rs. 5,19,27,500/- determined by the DVO, as the assessee did not file objections during the valuation process. The CIT(A) disagreed with this valuation, considering the legal hurdles with tenants and the age of the industrial galas. The Tribunal noted that the CIT(A) did not have the authority to value the property without referring to the DVO and restored this issue to the AO for fresh adjudication, allowing the assessee to present its claims.4. Valuation of Property as of 01.04.1981:The CIT(A) adopted the valuation method for the property as of 01.04.1981, which the revenue disputed. The Tribunal observed that the CIT(A) should not have valued the property without referring to the DVO, as it violated Rule 46A. The Tribunal restored this issue to the AO to consider and adjudicate on merits, ensuring the assessee can present its claims before the AO.Conclusion:The Tribunal allowed the revenue's appeal for statistical purposes, setting aside the CIT(A)'s findings and directing the AO to re-adjudicate the issues afresh. The assessee is required to file revised returns, and the AO must independently verify the income offered in the hands of the co-owners. The AO should also re-evaluate the FMV and the valuation of the property as of 01.04.1981, considering the assessee's claims.