ITO vs. Dr. Vandana Bhulchandani (ITAT Mumbai)

The AO in the course of assessment proceedings, on the basis of AIR information observed that the capital gains on sale of the said property in the period under consideration was not disclosed in the assessee’s return of income. The explanation put forth by the assessee, that though the assessee’s name appeared as one of the joint owners, the investment in the said property was made entirely by her husband out of his account; was reflected in his personal Balance Sheet from acquisition till disposal and the STCG arising on sale therefrom was disclosed in his return of income for the relevant period, was brushed aside by the AO. The AO was of the view that since the assessee’s name appeared in the agreement, she was liable to be taxed for 50% of the STCG arising from sale of the said property, observing that since the assessee’s husband had set off the STCG on sale of the said property against sale of some shares, the entire arrangement was done with the intention to avoid payment of legitimate taxes. The CIT(A) allowed the appeal. On appeal by the department to the Tribunal HELD dismissing the appeal:

(i) On an appreciation of the facts on record, we notice that the AO, after reopening the assessee’s case for A.Y. 2005-06 for the purpose of examining, inter alia, the investment in the said property, has in the order of assessment dated 30.11.2012 not disputed the fact that the assessee has not purchased the said property, but rather that the same was purchased by the assessee’s husband, Shri Arjun Bulchandani, out of his own funds. Revenue has also not been able to controvert the factual finding rendered by the learned CIT(A), after examining documents and copies of bank statements, etc. placed before him, that even though the assessee is shown as the co-owner of the said property, the source of funds for investment in purchase of the said property is by the assessee’s husband and that the property was reflected in his Balance Sheet from the period relevant to A.Y. 2005-06 (i.e. 31.03.2005) till its sale, after which the STCG arising thereon was admittedly disclosed by the assessee’s husband in his return of income. In this factual matrix of the case, we concur with the finding rendered by the learned CIT(A) that the entire STCG arising on sale of the said property is to be assessed in the hands of Sri Arjun Bulchandani, the assessee’s husband and not in the assessee’s hands and consequently uphold his direction to the AO to delete the addition of Rs. 45,38,254/- on account of 50% STCG arising on sale of the said property.