Entire Capital Gain to be Taxed in Assessee’s Hand If It Was Found That Other Sellers Were Controlled Puppets | ITAT

Case Details: Deputy Commissioner of Income-tax v. T.G. Chandrakumar - [2023] 152 taxmann.com 623 (Cochin-Trib.)

Judiciary and Counsel Details

• • Sanjay Arora, Accountant Member & Sandeep Gosain, Judicial Member
  • Smt. J.M.Jamuna Devi, Sr. DR for the Appellant.
  • C.B.M. Warrier, FCA for the Respondent.

Facts of the Case

A search under section 132 was conducted in the case of a group wherein an agreement for the sale of land was found and seized. Assessee and four other persons were party (Seller) to such agreement. Considering it as escapement of income, an assessment under section 153C was initiated on all the sellers.

Contending that all four persons are closely related to assessee and it was assessee who negotiated the sale of land on behalf of everyone, the Assessing Officer (AO) held that the other four persons were men of little or no means and that they were neither interested in the land nor earned any share of profit. Accordingly, AO decided to tax entire Capital Gains in the hands of the assessee and made additions.

Opined that all four persons were identifiable as supported by the relevant documents, the CIT(A) deleted the additions made by AO. Aggrieved by the order, AO filed an appeal to the Cochin Tribunal.

ITAT Held

The Tribunal held that the assessee was the owner of the land, executor of its sale, and beneficiary of sale proceeds, and other sellers were puppets controlled by the assessee. It was also observed that all four sellers were closely associated with the assessee. They were employees of the assessee’s or his son’s concerns.

The other sellers also lacked the capacity to purchase land. It was also found that the agreement was valid, and its cancellation as well as the defect leading thereto, were completely unevidenced. Therefore, revenue was justified in considering the assessee as the beneficial owner of the land and the assessment of capital gains in the assessee’s hands was also justified.

List of Cases Referred to

• • T.G. Chandrakumar v. Dy. CIT [IT Appeal No. 504 (Coch) of 2017, dated 19-11-2019] (para 4.2)
  • CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC) (para 6.1)
  • Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) (para 6.2)
  • Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) (para 6.2)
  • CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC) (para 6.2)
  • ITO v. Rattan Lal [1984] 16 Taxman 25/145 ITR 183 (SC) (para 7.1)
  • Jamnaprasad Kanhaiyalal v. CIT [1981] 6 Taxman 61/130 ITR 244 (SC) (para 7.1)
  • National Thermal Power Co. Ltd. v. CIT [1998] 97 Taxman 358/229 ITR 383 (SC) (para 7.2)
  • CIT v. Balbir Singh Maini [2017] 86 taxmann.com 94/251 Taxman 202/398 ITR 531 (SC) (para 7.2).