Independent property transfers cannot be clubbed into one transaction for Chapter XX-C or prosecution under tax law

Independent transfers of separate undivided shares by distinct co-owners cannot be clubbed into one transaction merely because the transferee is common or the transferors are spouses. The court applied a substance-over-form approach but held that it does not permit aggregation of two separate sale deeds evidencing separate holdings and separate transfers. Because the complaint treated the accused inconsistently as owners of the whole property while also acknowledging individual undivided shares, the basis for invoking Chapter XX-C and prosecution under section 276AB failed, and the criminal proceedings were quashed.

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Issues: Whether two separate sales by two distinct co-owners of their individual undivided shares could be clubbed as one transaction to attract Chapter XX-C of the Income-tax Act, 1961 and prosecution under section 276AB.

Analysis: The complaint proceeded on an inconsistent footing, at one place treating the accused as owners of the entire property and at another acknowledging that each held and sold only an individual undivided share. The governing principle is that the real subject of transfer and the apparent consideration must be examined in substance, but that principle does not permit clubbing of independent transfers made by distinct assessees in their individual capacity. Where two separate sale deeds evidence two separate holdings and two separate transfers, the transactions cannot be treated as a single unit merely because the transferors are husband and wife or because the purchaser is common. The cited precedent was held inapplicable because it involved a different factual setting of co-owners transferring the same property as one transaction.

Conclusion: The two sales were independent transfers by separate assessees and could not be aggregated; therefore, the provisions relied upon for prosecution were not attracted and the complaint was liable to be quashed.

Final Conclusion: The petitioners obtained quashing of the criminal proceedings on the ground that the alleged tax evasion case rested on an impermissible clubbing of separate property transfers.

Ratio Decidendi: Independent transfers of separate undivided shares by distinct owners cannot be aggregated into a single transaction for attracting Chapter XX-C or the penal provision, even if the transferee is common.

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