Property transfer under HUF partition denied section 47(i) exemption due to lack of immovable assets in partition deed

ITAT Indore rejected assessee's claim that property transfer under HUF partition was exempt under section 47(i), finding the partition deed showed only movable assets and no immovable property in HUF. The tribunal also rejected the family settlement claim raised for the first time during proceedings, holding it would upset lower authority proceedings. However, regarding the assessee's sale of 1/6th share in father's 1/3rd partnership interest for Rs. 1,80,00,000 to brothers, ITAT held this actual transaction with consideration attracted capital gains tax. The tribunal allowed deletion of unexplained cash deposits addition, accepting assessee's cash book showing sufficient balance for bank deposits.

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Issues Involved:
1. Addition of Rs. 2,53,98,000/- as capital gain.
2. Addition of Rs. 33,27,700/- as unexplained investment under section 69 of the Income Tax Act.

Detailed Analysis:

Ground No. 1: Addition of Rs. 2,53,98,000/- as Capital Gain

1. Background Facts:
- The assessee filed a return for AY 2012-13 declaring an income of Rs. 2,87,160/-.
- The case was selected for scrutiny, and the AO determined the total income at Rs. 2,90,19,565/- after making certain additions.
- The assessee appealed against the additions, which were upheld by the CIT (A).

2. Assessee's Arguments:
- The property belonged to HUF and was a case of partition, excluded from transfer u/s 47(i).
- The property was inherited from the father and sold to family members as part of a family settlement.
- The sale consideration was reinvested in properties, claiming exemption u/s 54/54F.

3. AO's Findings:
- The property was received by the assessee in an individual capacity.
- The sale deed was executed in the individual name and PAN of the assessee.
- The AO invoked section 50C and adopted the stamp duty valuation for computation of capital gain.
- Rejected the claim of exemption u/s 54/54F.

4. CIT (A)'s Decision:
- Upheld the AO's order, confirming the addition of Rs. 2,53,98,000/- as capital gain.

5. Tribunal's Analysis:
- The assessee executed a sale deed in favor of his brothers, receiving a consideration of Rs. 1,80,00,000/-.
- The claim of partition of HUF was unproved as the partition deed only mentioned movable property.
- The claim of family settlement was introduced late and was not substantiated by earlier proceedings.
- The partnership law does not support the assessee's claim as the firm continued after the father's death, and the property remained in the firm's books.
- The assessee's transaction was a de facto sale, attracting taxability.

6. Conclusion:
- The tribunal rejected the assessee's claims and upheld the addition of Rs. 2,53,98,000/- as capital gain.

Ground No. 2: Addition of Rs. 33,27,700/- as Unexplained Investment

1. Background Facts:
- The AO made an addition of Rs. 33,27,700/- as unexplained cash deposits in the bank account.
- The CIT (A) confirmed the AO's observation.

2. Assessee's Arguments:
- The assessee submitted a cash book during the assessment proceedings, showing entries of cash inflow and outflow.
- The cash book included entries of cash withdrawals from the bank and salary received from M/s Bhagirath Coach.
- The assessee claimed that the sources of cash deposits were adequately explained.

3. Tribunal's Analysis:
- The tribunal reviewed the cash book and found that the assessee had sufficient cash balance for the deposits.
- The AO's observation that the assessee did not make any submission was incorrect.
- The Ld. DR could not contradict the submissions made by the assessee.

4. Conclusion:
- The tribunal found the addition unwarranted and deleted the addition of Rs. 33,27,700/-.

Final Order:
- The appeal was partly allowed, with the addition of Rs. 2,53,98,000/- upheld and the addition of Rs. 33,27,700/- deleted. The order was pronounced in open court on 18.01.2024.

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