Income Tax Appellate Tribunal - Cochin
Income-Tax Officer vs S. Kumaraswamy Reddiar And Sons on 31 December, 1990
Equivalent citations: [1991]39ITD247(COCH)
ORDER
G. Santhanam, Accountant Member
1. This is an appeal by the revenue. The dispute is about the cost of the property at Alwaye which was subsequently sold for a consideration of Rs. 2 lakhs. In the original assessment the capital gains was computed as follows:
Cost as on 1-4-1964 as per decree in OS No. 73 of 1968 of the Sub-Court Rs. 1,35,000 Duty payable and brokerage Rs. 15,000
------------
Rs. 1,50,000
Less : Sale proceeds Rs. 2,00,000
Less: 41(2)profits Rs. 20,373
------------ Rs. 1,79,627
------------
Rs. 29,627
Capital gains chargeable
to tax Rs. 18,472
or
Rs. 18,470
------------
Later on, notice under Section 148 was issued on the ground that the computation of the cost of the Alwaye property taken at Rs. 1,50,000 was erroneous and the cost as per Section 49(1)(ii) was only Rs. 53,310 and the reassessment was completed on that basis. It is against this assessment that the assessee appealed to the CIT (Appeals). The CIT (Appeals) has narrated the facts leading the case before us at great length. One Shri Kumaraswamy Reddiar left a registered will dated 14-9-1966 by which one of the properties at Alwaye was given to Smt. Kamalamma who had been living with Shri Kumaraswamy Reddiar for a very long time. Shri Reddiar died on 10-7-1968. Even before his death he executed another will dated 22-9-1967. This will is in Tamil. After narrating that he had handed over the document relating to the Alwaye property to Smt. Kamalamma, Shri Reddiar indicates that the properties have been enjoyed by him with his sons as belonging to the HUF and even after his death his sons would continue to enjoy these properties in the same manner. Provisions were made for the distribution of some amounts to the daughters of Shri Reddiar and also to the treatment of certain deposits in business as belonging to his daughter-in-law exclusively. After the demise of Shri Reddiar, Smt. Kamalamma filed a suit alleging that the later will dated 22-9-1967 was not the last will the testament of Shri Kumaraswamy Reddiar and that she was entitled to the property at Alwaye. Subsequently, the issue was settled by compromise between the parties and the compromise was recorded in the Court proceedings. In terms of this compromise decree Smt. Kamalamma had to be paid a sum of Rs. 1,35,000 towards her claim in the properties of the deceased. Accordingly she was paid that amount on receipt of which she released her interest in the Alwaye property and held herself to be completely free of any rights and obligations arising under any document subject to the condition that the legal heirs of Shri Kumaraswamy Reddiar would meet from out of their resource any proportionate estate duty relatable to the Alwaye property. It is in this view of the matter that the CIT (Appeals) upheld the claim of the assessee that the cost of acquisition must be taken at Rs. 1,35,000 representing the amount paid to Smt. Kamalamma.
2. The departments objections are that Smt. Kamalatnma was not the wife of the deceased Shri Kumaraswamy Reddiar, that she had no title to the property and in fact did not get any title under the will dated 14-9-1966 as the executant was alive at that point of time.
3. The assessee's case is that the amount was paid at any rate to perfect the title, it was paid through the Court on account of a claim arising under the will dated 14-9-1966 and also because of a dispute about the later will dated 22-9-1967 and the compromise was a family arrangement and the fact that Kamalamma was living with the deceased Kumaraswamy Reddiar was not in dispute and her claim cannot be dismissed as a claim from a stranger and the whole arrangement was a family arrangement to ward off protracted litigation and to get a better price for the Alwaye property and, therefore, the original assessment was completed on a sound basis and that there, was no need to revise the original assessment.
4. The department's allegation that Smt. Kamalamma is not the wife of Shri Kumaraswamy Reddiar because she was only living with him though for many years together and therefore she did not get any title to the Alwaye property, is to be stated only to be rejected in the light of the decision of the Supreme Court in the case of Badri Prasad v. Dy. Director of Consolidation AIR 1978 SC 1557, wherein Their Lordships held as follows :
For around 50 years, a man and a woman, as the facts in this case unfold, lived as husband and wife. An adventurist challenge to the factum of marriage between the two, by the petitioner in this special leave petition, has been negatived by the High Court. A strong presumption arises in favour of wedlock where the partners have lived together for a long spell as husband and wife. Although the presumption is rebuttable, a heavy burden lies on him who seeks to deprive the relationship of legal origin. Law leans in favour of legitimacy and frowns upon bastardy. In this view, the contention of Shri Garg, for the petitioner, that long after the alleged marriage, evidence has not been produced to sustain its ceremonial process by examining the priest or other witnesses, deserves no consideration. If man and woman who live as husband and wife in society are compelled to prove, half a century later, by eyewitness evidence that they were validly married, few will succeed. The contention deserves to be negatived and we do so without hesitation. The special leave petitions are dismissed.
5. Having regard to the facts of the case as narrated by the CIT (Appeals) and as evidenced by the wills dated 14-9-1966 and 22-9-1967 and having regard to the fact that the Alwaye property suffered from disputed title and the assessee had to pay Rs. 1,35,000 to Smt. Kamalamma in order to perfect the title, we hold that the CIT (Appeals) was justified in holding that the computation in the original assessment indicating capital gains at Rs. 18,472 was right and does not call for any interference. The revenue's appeal is dismissed.
6. The CIT (Appeals) while disposing of the appeal has held that as the assessee had acquired the property within 36 months of its sale, the character of the property would be a short term asset and not a long term asset and the gain has to be reckoned as short term capital gains. Further, he remarked that the learned representative does not have any objection to this treatment.
7. In the cross objection the assessee submits that his learned representative does not remember to have acquiesced before the CIT (Appeals) in the treatment of the gains as short term capital gains. Another contention is that there was no information in the possession of the ITO justifying jurisdiction under Section 147(b) of the IT Act. Though the assessee has specifically challenged the reassessment under Section 147(b) of the IT Act, the CIT (Appeals) has not disposed of that ground of appeal. However, on merits, he had upheld the claim of the assessee. From the facts narrated in the reassessment order it would appear that the ITO at the time of making the original assessment was aware of the dispute between the assessee and Smt. Kamalamma as the order has got obvious reference to the decree of the Sub-Court and to the estate duty payable on the property which was also a subject matter of compromise between the assessee and Smt Kamalamma. Therefore, it cannot be held that materials were not before the ITO when he made the original assessment. From this, an inference can be drawn that the reassessment was triggered by change of opinion on the same set of facts which the revenue is not entitled to do. Thus, the objection of the assessee against reassessment under Section 147 (b) is upheld. In the view we take on the reassessment proceedings, we hold that it is not open to the CIT(A) to convert the originally assessed long-term capital gains into short-term capital gains even on the basis of acquiescence on the part of the assessee, if any. The cross objection is allowed.